Category: Articles

Some thoughts before we vote tomorrow….I can’t wait until this thing is over..

A Note. These are observations. I am not saying that people who may or may not think this way are “right or wrong”, I am saying that this is a thought process based on my observations. You can vote for a candidate for whatever reason you want. I don’t care. It is your vote, cast it as you so choose. The media will attempt to explain it all to us and I am simply placing my two cents in the ring since I have not heard it said yet..Take them for what you will..

1- Race:
An Obama loss will have nothing to do with his race. If it really did, he would not even be sitting where he is right now. A racist society, or one with a “race issue” would not have allowed an Obama candidacy to even develop much less get to its present state. He does not need to win to prove the US is “not racist”. His existence as a serious candidate is proof of that. Now, the argument can be made that certain folks will not vote for him because of race. That is true. It is also true that millions are voting for him simply because of it. The existence of racists in a society does not make the society itself racist. The implication that it does means that any society or class of people is defined by its lowest element. Since we reject that in classes of people, we cannot extrapolate that to a society as it is the sum of those very people. It is the action of the society as a whole that defines it. The fact that society is on the precipice of possibly electing a leader from a minority class of it mandates that a large portion of the majority must vote for that candidate. That eliminates the argument the society is inherently racist. Were is so, the minority candidate would not stand even a remote chance.

If we have to have the race commentary (we do since it will be all that it is talked about after), let’s break it down to simple math. We know well in excess of 90% of African American’s (is that still the proper vernacular?) are voting for Obama based on votes cast in the primaries. This crushes the percentage of any other election for any candidate the group has voted for. The only conclusion is that they are voting for him simply due to his race. Isn’t that the very thing Martin Luther King tried to avoid? Wasn’t the quote “I hope one day men are judged by the content of their character, not the color of their skin”? Is voting “for” anyone because of the color of their skin any less racist that voting “against” one due to it? Or is not mentioning it simply the acceptable rationalization?

Oprah Winfrey can tell us all day long that Obama is right for America and she believes in him. But, if we are being honest, really honest, we all know why Oprah backs him. Oprah has been silent on politics until now. No candidate for public office before has caused her to speak out. No subject, no legislation and no gender has caused her public backing of a candidate. Yet she backs Obama. Fine, but lets just come out and give us the real reason. His race. If that is the reason she wants him there, fine. She can vote for whomever for whatever reason she wants, let just not try and pretend he is that unique. He has no special policy or unheard of idea that make him unlike any other politician that has run during her public life. He does have one thing.

I find very little difference between folks who refuse to vote for person “a” because of their race or gender and those who will only vote for “a” because of their race or gender and aren’t honest enough to admit it. Either way you dragging MLK’s “Dream” through the mud.

This is the “Race Issue” of this election, not what the media would try and have us believe..

2- Electoral College:
It really does not matter if 99% of those living in NY or California vote for Obama, he will still only get the 86 electoral votes those states offer. It really does not matter if Obama wins the popular vote, you only need 1 more vote than the other guy to get the electoral votes. In this way the college works exactly the way the framers meant it to. It moderates the influence one group from one area has over the whole. For more on it and its origins, read here

3- Taxes:
This summer Obama said he would raise capital gains taxes. Then he said he wouldn’t. Then he said 95% of people get a tax break. Then he said people under $250k would. Then Joe Biden said people under $150K would. Now his adviser Bill Richardson said people under $120k will. Call it the “incredible shrinking tax break”. People in the current environment has no problem with “rich folks” getting a tax increase. The problem is that the definition of rich has been plummeting recently and now encompasses those who just aren’t. People see it for what it is and will think twice about voting for a candidate with a fluctuating definition of who deserves to pay more. These voters will have a last minute change of heart and no polls will reflect it.

4- MSM.
We American’s know a snow-job when we see it. Every poll taking at every levels says the same thing. The media has treated Obama with kid gloves. This isn’t a GOP vs Dem thing, this goes back to Dems vs Dems saying it when the issue was one of their own, Hillary. It is just acceptable now that it is the “other guy” we are talking about. What happens is people, feeling that they are not getting the straight story from the MSM go looking for it in other places. They begin to discount and distrust what is said from the MSM. The easiest place to find alternative information is the internet. Here is where that hurts Obama. We all know about political information on the internet and it questionable veracity. When people do their own research and find negative information on Obama, it is viewed as “this is what the media is hiding from us” and looked at more truthfully, providing a negative effect for Obama. When the same information is seen about McCain, the effect is negligible as we have already heard it from the MSM and this cause it to be discounted. Whether what is being said is true or not is immaterial, it is the perception of the information that leads to it acceptance or ejection.

Again, right or wrong, is irrelevant, is what it is. The media, in it zeal to effect the outcome, hurts its own cause. If anyone thinks the average voter has forgotten CBS’s “National Guard forged document” story in 2004 that cost Dan Rather his career and that is not the lens most people put any media report through, is living in denial.

5- The “Undecided”:
They aren’t. They just want pollsters to leave them alone. They are the un-ideological masses in the middle. They tend to lean center-right. They are social liberal and economic conservatives. They are the group that most identifies with Palin and her family. They are also the group most sensitive to the attacks on her children, her clothing and her “inexperience”. They are the group who can’t understand how a Governor has less experience than a 2 year Senator. They are also the group not thrilled with politicians and like someone who reminds them of themselves. The hockey mom, mom of a “challenged” kid, mom of a unwed pregnant daughter, mom of five, dedicated wife….they like that. Where the media sees “black eyes” , they see themselves, their neighbor, their sister. When the MSM attacks her, they attack them. This causes the gut reaction of “circling the wagons” and an innate sense protection. This will sway their vote.

6- Divided government.
The electorate has done a decent job over the years not giving one group a blanket mandate. They will do so again this year. This means either of two things. The congressional races do not go the way the pundits say they will, OR Obama loses. We know congressional democrats will raise taxes. We know we don’t want that. We also know if we vote in Ohio we cannot affect a vote in Wisconsin for Congress. How can we assure government is divided? Vote for McCain.

7- Polls
People are now playing games with pollsters. They are meaningless. George Bush trailed both Gore and Kerry late in October only to win. Bush trailed in “exit polls” in several states only to win them also. Both parties have found a way to game pollsters in order to keep races looking tight to keep voters coming out for their candidate. For this reason, polls are not only worthless, they may actually be a counter indication. If a organization thinks they may be losing or have a razor thin margin, they will make the exit polls reflect a negative outcome to keep their folks coming out and the others to stay home. We know it happened in Florida in 2000 and Ohio in 2004, no reason to think anything has changed.

My prediction?

Obama beats McCain in the popular vote and losses the election…..

I would also be shocked if there was not a legal challenge somewhere to whatever outcome there is..

It will give the media years of angst about the electoral college and enable them to try an re-write the constitution. The Constitution was purposely set up to eliminate as best it could government by a few, a whim, or emotion. It does a very good job or that. The electoral college also does a great job of not minimizing smaller states and their minority of the population. It matters and is important, it forces all views and needs to be considered.

Then again, if Obama wins in a landslide……never mind…

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As much as I do tend to disagree with Rogers on his doomsday scenario, he is right about the bailout, I still think hew is off on the degree.

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Can’t we just call it quits n this? It been over a year now..

The Blackstone (BX) IPO in June of 2007 was the peak of the Private Equity market.

Dealbook has a nice take on it. This is not the time for an IPO. Doing so now, looks just a little bit desperate. It also must make potential investors think twice about KKR. Why has it taken so long?

Either do it or don’t, but enough is enough..

Disclosure (“none” means no position):None
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I really wish I had discovered Grant years ago…From a FT interview.

Part 1

Part 2

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The “Black Swan” author made a killing in October…

The WSJ Reports

To execute its strategy, Universa buys far-out-of-the-money “put” options on stocks and stock indexes. These are bets that the market will see a sharp, sudden downturn. They become extremely valuable in a market decline of 20% or more in a one-month period.

When times are good, such options are cheap and Universa gobbles them up, taking small losses along the way. When the market makes a quick, steep turn south, as it has recently, Universa’s positions gain value as investors scramble to protect themselves in the downturn by buying puts. The strategy, which keeps more than 90% of assets in cash or cash equivalents such as Treasury bonds, either breaks even or loses small amounts in most months while waiting for periodic, infrequent spikes in volatility.

Here’s an example of a trade the fund made recently. In late September, when the Standard & Poor’s 500-stock index (.INX) was trading around 1200, Universa purchased put options that would pay off if the index fell to 850 by late October. Since such a plunge was considered highly unlikely, such options cost only 90 cents. On Oct. 10, those options cost $60 as the S&P 500 tumbled sharply. Universa sold most of its position in the high-$50 range.

Universa also purchased a number of puts on financial stocks, such as Goldman Sachs Group Inc. In late July, it paid $1.29 apiece for options on American International Group Inc., the insurance giant that by September was on the brink of bankruptcy. The puts were priced to pay off if AIG dipped below $25 a share by September. Universa eventually sold them for about $21 apiece.

Recently Taleb tried to make a point to an economist. You’ll notice his frustration?

The Book:


Disclosure (“none” means no position):
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Best Fed Chairman we have had to date….bears listening to.

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Felix, should you moronically (on their part) “be allowed to seek other opportunities” from Portfolio, feel free to contact me. I can’t offer a salary, benefits or nearly as much exposure…BUT, I can offer you the title of your choice and my gratitude, you can’t put a price on that??!!>>

On the Virtue of Hiring Bloggers:
Thanks very much to Tyler and Brad for the kind words; I hope to be here for a while yet. But Tyler also makes an interesting point about blogonomics:

Media, like new library books, are being hurt by the downturn and the slowing of advertising dollars. I fear that the non-independent blogosphere may be in for a bit of a financial bloodbath. So often the bloggers were an “investment in long-term name and image” rather than a profit center.

There’s no doubt that ad dollars are going to be harder to come by in the coming quarters. Websites are getting better and more popular, but that also means inventory is rising faster than ad budgets. And with financial-services advertising providing the backbone of many websites, the consolidation and budget cuts in that industry will hit us content providers very hard.

It’s also true that if you put a blogger on payroll, it’s not going to be easy for a startup site to cover that payroll from selling ads against the blogger’s pageviews alone — especially now that bloggers make just as much money as regular journalists, and a good ad sales person costs much more still.

But if you are going to invest in your own editorial content, bloggers are often a very smart way to go. They’re lean, since they need very little editing and often work from home. They build a reliable readership: in a world where loyal readers are defined as those who visit five times a month or more, blogs often get readers coming back more than once a day, especially if and when the comments streams get lively. And, yes, they’re cheap, compared to any other original content. On a dollars-per-word or even on a dollars-per-pageview basis, it’s hard for other forms of editorial content to compete with bloggers.

If you’re a monthly magazine like, say, the Atlantic, and you want people to visit your website, you need something to draw them in. You can buy traffic, of course — but unless those bought visitors come back, that’s going to get very expensive very quickly. It’s generally preferable to build something great instead, so that people want to visit regularly. And one relatively easy way of doing that is to hire some good bloggers. (When I say “relatively easy”, I mean that it’s easier than most of the alternatives, not that it’s easy.)

On the other hand, there’s no law which says that every major magazine has to have a hugely popular website if it is to be a success. Yes, you have to have some kind of web presence. But elaborate websites don’t come cheap, and if you’re in a cutting-back mode and websites aren’t your core competency, then those websites — bloggers and all — can quite find themselves on the chopping block much more quickly than they ever anticipated.

ORIGINAL POST

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From the site:
“At Wayzata Investment Partners, our experience in the alternative investment market is reflected in the structure of our investment vehicles: a family of long-term funds. A private equity and hedge fund strategy serve as the cornerstones of our investment activities.

Focusing on opportunities in undervalued debt, equity and assets, our team has brought success to institutional investors for more than 15 years. Today total assets under management are over $5 billion.”

Wayzata now owns 17 million shares or 13.5% of Owens corning (OC) up from 7 million in the June SEC Filing. It is the fund’s largest holding.

Why OC? Here are some thoughts

Disclosure (“none” means no position):Long OC
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Ok, first the Op-Ed by the NY Times resident (or heads) socialist, then a response..

First the Op-Ed:

The long-feared capitulation of American consumers has arrived. According to Thursday’s G.D.P. report, real consumer spending fell at an annual rate of 3.1 percent in the third quarter; real spending on durable goods (stuff like cars and TVs) fell at an annual rate of 14 percent.

To appreciate the significance of these numbers, you need to know that American consumers almost never cut spending. Consumer demand kept rising right through the 2001 recession; the last time it fell even for a single quarter was in 1991, and there hasn’t been a decline this steep since 1980, when the economy was suffering from a severe recession combined with double-digit inflation.

Also, these numbers are from the third quarter — the months of July, August, and September. So these data are basically telling us what happened before confidence collapsed after the fall of Lehman Brothers in mid-September, not to mention before the Dow plunged below 10,000. Nor do the data show the full effects of the sharp cutback in the availability of consumer credit, which is still under way.

So this looks like the beginning of a very big change in consumer behavior. And it couldn’t have come at a worse time.

It’s true that American consumers have long been living beyond their means. In the mid-1980s Americans saved about 10 percent of their income. Lately, however, the savings rate has generally been below 2 percent — sometimes it has even been negative — and consumer debt has risen to 98 percent of G.D.P., twice its level a quarter-century ago.

Some economists told us not to worry because Americans were offsetting their growing debt with the ever-rising values of their homes and stock portfolios. Somehow, though, we’re not hearing that argument much lately.

Sooner or later, then, consumers were going to have to pull in their belts. But the timing of the new sobriety is deeply unfortunate. One is tempted to echo St. Augustine’s plea: “Grant me chastity and continence, but not yet.” For consumers are cutting back just as the U.S. economy has fallen into a liquidity trap — a situation in which the Federal Reserve has lost its grip on the economy.

Some background: one of the high points of the semester, if you’re a teacher of introductory macroeconomics, comes when you explain how individual virtue can be public vice, how attempts by consumers to do the right thing by saving more can leave everyone worse off. The point is that if consumers cut their spending, and nothing else takes the place of that spending, the economy will slide into a recession, reducing everyone’s income.

In fact, consumers’ income may actually fall more than their spending, so that their attempt to save more backfires — a possibility known as the paradox of thrift.

At this point, however, the instructor hastens to explain that virtue isn’t really vice: in practice, if consumers were to cut back, the Fed would respond by slashing interest rates, which would help the economy avoid recession and lead to a rise in investment. So virtue is virtue after all, unless for some reason the Fed can’t offset the fall in consumer spending.

I’ll bet you can guess what’s coming next.

For the fact is that we are in a liquidity trap right now: Fed policy has lost most of its traction. It’s true that Ben Bernanke hasn’t yet reduced interest rates all the way to zero, as the Japanese did in the 1990s. But it’s hard to believe that cutting the federal funds rate from 1 percent to nothing would have much positive effect on the economy. In particular, the financial crisis has made Fed policy largely irrelevant for much of the private sector: The Fed has been steadily cutting away, yet mortgage rates and the interest rates many businesses pay are higher than they were early this year.

The capitulation of the American consumer, then, is coming at a particularly bad time. But it’s no use whining. What we need is a policy response.

The ongoing efforts to bail out the financial system, even if they work, won’t do more than slightly mitigate the problem. Maybe some consumers will be able to keep their credit cards, but as we’ve seen, Americans were overextended even before banks started cutting them off.

No, what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.

Where to start. First the gov’t spending argument. How does gov’t get the money Mr. Krugman wants to so merrily spend? Right, from either us or our employers. In the article he claims to reduction in consumer spending is the cause of the current condition we are in. He even goes as far as to say that further reductions in it will cause even more pain as it further will reduce economic activity.

So, how then will the gov’t get this money to spend? Increased taxes. But wait, Paul. Didn’t you just say that us consumers need to spend more in order to avoid further economic deterioration? How will taking more of our money in taxes accomplish that? What about our employers? How will taxing them at a higher rate cause them to hire more of us so we can then spend more?

Do you have a plan for the gov’t to go to Sears (SHLD) to buy washers and dryers or Wal-Mart (WMT) for cleaning supplies?

Now, we all know that 2/3 of all economic activity involves you and me spending the money our employers pay us (or we make ourselves). If one wants to stimulate the economy, doesn’t it make common sense to stimulate the largest portion of it?

Why would we want to stimulate the largest, slowest and most inefficient portion of the economy? If we want the largest effect from any effort, it doesn’t seem like increasing taxes or increasing the deficit is the best way to go.

The problem here is that there is no easy, quick fix. If that is true, then let’s do what we know works.

Capital gains taxes. The only tax action I am aware of that has a 100% effect is the lowering or increasing of the capital gains tax. Lowering it has always lead to increased tax revenue (more profits) and raising them has always lead to a decrease (lower profits). Even those sitting on large losses in stocks this year only get to write off $3k of those losses against gains. The result of this is that if an investor who had a $10k gain earlier in the year but has lost $20k in the last couple months can only write off $3k against income, meaning $7k in income will still be taxed even though there was a loss in excess of it.

Let losses be losses and gains be gains…

Raise the write-off limit to $10k or more and let them lower their taxable income, increase the returns they get next spring. Lower the tax rate on them from 15% to 5% (and have both candidates ensure it stays there) and stop the slide in stocks that is happening as investors fear it will almost double next year.

Lower it and money floods back into stocks, raising values, 401K balances, IRA balances etc. A consumer that sees their retirement savings increasing will be less prone to hoard more money for it and far more prone to spend it.

Gov’t cannot spend us out of this. Gov’t spending in inherently wasteful and inefficient and comes at a cost to other, more efficient forms.

Do I agree that more stimulus checks are a waste? Yes. Gov’t needs to just stop….stop. This problem was years in the making and cannot, no matter what is attempted be solved quickly….it just can’t.

Now, Krugman does not specifically say a tax increase is needed. He is smart enough to stop short of saying that. But, if anyone can find me an example of when he embraced tax cuts, lets me know because I have not seen it.

Just my two cents…….

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Home prices have fallen every month since Jan. 2007…

So, what does it mean? Housing will NOT rebound until late next year at the earliest. If you are thinking about buying home builders like Centex (CTX), KB Homes (KB) or Toll Brothers (TOL), I would think twice as the fundamentals of their industry do not look to improve anytime soon. With 20% of the market effectively sidelined, it does not bode well for those hoping to sell them new homes.

Disclosure (“none” means no position):None
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