Monthly Archive for February, 2009

Page 2 of 3

Can the News Get Crummier? (That’s a Rhetorical Question)

Posted on February 17, 2009, 11:29 pm. Closed

Last week I paid very close attention to the markets and the news. On news of government intervention of any sort, the markets plunged or the markets rallied (at exceedingly opportune times). Several times I took profits on my two primary trading vehicles (SRS, which is double-short U.S. real estate, and FXP, which is double-short China) when my stops were triggered and I reentered positions at lower prices. My trading account was still 100% short at market close on Friday. Needless to say, I feel pretty darn good about my trading account, but I’m still staring at losses with my long-term account. I haven’t yet gotten around to reevaluating my long-term holdings, whether or not to add to them or to switch into stocks that are even more undervalued.

As for today, on a technical level, it seems S&P broke through resistance. Chances are increasing that the DJIA will retest Novemeber lows and then fall below 7k and the S&P will fall below 700. I feel that investors and traders are now more psychologically conditioned and prepared to take the market lower simply because they have become accustomed to seeing the DJIA in the 7000s and the S&P in the 700s. Traders and technical analysts (see Slope of Hope and Maoxian) see the S&P at 650-660 as the next large resistance level.

I remember hearing the word “capitulation” a LOT during October and November. “Capitulation” nearly replaced “change”, which had the number one spot on my list of “Words I Never Want to Hear Again.” I suspect “capitulation” might soon reenter the vocabulary of the buffoons on CNBC, unless they’re not too busy talking about bailouts, nationalizations, and car czars.

Not One House Member Has Read the Democrats’ Trillion-Dollar Spending Bill

Posted on February 13, 2009, 4:55 pm. Closed

This is pretty damn outrageous to me. It’s like a doctor who does not read the patient’s chart and medical history and then performs surgery blindfolded. I can’t think of a better analogy, so feel free to help me out if you want.

A Slew of Klarman 13Ds

Posted on February 12, 2009, 11:29 pm. Closed

Seth Klarman filed a bunch of 13Ds today. I haven’t gone through them all yet, but there are two filings in which I’m most interested.

First, Klarman has increased his stake in Exterran Holdings (EXH), an energy services company, by 70%. Klarman now owns 7.62% of the outstanding shares.

Second, Klarman has reduced his holding in Linn Energy (LINE), an energy MLP, by about 25%. Klarman still owns about 6.95% of the oustanding shares.

Things That Go Up in a Down Economy

Posted on February 12, 2009, 11:10 pm. Closed

Kotke calls attention to things that go up in a down economy:

Marginal Revolution has been posting an ongoing series of posts on countercyclical assets: things are doing well even though the economy as a whole is struggling. The latest example is that shoe repair shops are doing a booming business. One Florida cobbler’s repair volume is up 50%.

Some other examples are increasing activity on Second Life, cocoa futures, unusual pets, gold coins and wine, evangelical churches, tasers, high end prostitutes, beer, and household safes. Sounds like a hell of a party.

I would also add the repossession business to the list.

Munger on How To Restore Confidence

Posted on February 12, 2009, 9:11 am. Closed

Charlie Munger had an editorial in the Washington Post yesterday. I bet it’s quite easy to get an editorial in a paper when you own 21% of it! Anyways, Munger feels the key to restoring confidence is new legislation that will stamp the sins and follies of the past:

Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed — mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.

Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.

However, legistlators are having a tough time working together in a bipartisan way. Munger seems to be worried about this apparent fact. But the petty bickering in Congress seems to be in relation just to a stimulus package. I believe that once the fools in Congress start to work on comprehensive reform legislation, legislation that completely reworks and strengthens the regulations governing the financial industry, the American public will begin to see some true bipartisanship.

DOW Set to Close Beneath 8000 For Second Day in a Row

Posted on February 11, 2009, 3:44 pm. Closed

I’m not sure if other people think will think this is significant or not, but this could be the first time since last  November that the DOW will close beneath 8,000 for two days in a row. My feeling is that this will be another psychologically important event. When traders, retail investors, and institutional investors realize that DOW sub 8k is more and more a reality, I think they will begin to worry about DOW sub 7k and that is where we will go. If the DOW closes beneath 8k today, this will dramatically increase the odds that the DOW will dip below 7k within the next year.

Taxpayers Stuck With Bear Stearns Losses

Posted on February 6, 2009, 8:32 am. Closed

Remember way back when the government brokered a deal for JP Morgan to take $30 billion of Bear Stearns assets? JP Morgan was responsible for only the first $1.15 billion in losses while the government was responsible for everything beyond that.

Bloomberg reports that the central bank’s Board of Governors wrote in a Dec. 29 report to Congress that it didn’t expect “any net loss to the Federal Reserve or taxpayers” from the Bear Stearns holdings. Looking at the chart now, it seems like taxpayers will be on the hook for a lot of money. Currently, taxpayers are down $3.07 billion.

Hedge Fund Activism and SPACs

Posted on February 5, 2009, 10:06 pm. Closed

The Harvard Law School Corporate Governance Blog posted an article on how some hedge funds are pressuring SPACs to liquidate before making an acquisition. The article cites Phil Goldstein’s investment in TMI as an example and also asks whether TMI will be the first in a wave of forced-liquidations of SPACs:

Is TMI a forerunner of a wave of forced-liquidations of SPACs? Or is this just another example for Phil Goldstein’s detractors to cite when they say that he’s only interested in his own pocketbook and doesn’t care how his actions affect value for other shareholders?

It’s obvious that Goldstein wants his money out of TMI – whether because he has better things to do with it, or because he doesn’t believe that TMI will be successful even if a merger is completed. Consent solicitations can be quick and painless or long and drawn out (under state law, Goldstein has 60 days to reach 50%).

I think this will serve as an interesting test-case: if Goldstein is successful early, it may trigger a wave of copy-cat liquidation solicitations (by other hedge funds) at other SPACs. Perhaps, though, “copy-cat” isn’t exactly the right word, because such a wave might be an indicator that Goldstein is in fact representing the feelings of other hedge fund SPAC shareholders – that while the SPAC seemed like a great investment vehicle a year ago, today’s market conditions are just too tough. Hedge funds recently hammered by the market may see this as an easy way to get their cash back.

MarketWatch’s Mutual Fund Manager of the Year is a Buffett Follower

Posted on February 5, 2009, 8:33 am. Closed

MarkertWatch’s Mutual Fund Manager of the Year is a Buffett follower:

Deysher, manager of Pinnacle Value Fund, trolls the same ponds where Buffett is fishing, but he focuses on shares of small-cap and microcap companies with the cheap valuations and solid business characteristics that hook bargain-hunters.

And so no one misses the connection, Pinnacle Value’s Web site links to Berkshire Hathaway Inc.’s Internet home page and Buffett’s folksy-but-frank shareholder letters.

…

Deysher’s eye for the little details has kept Pinnacle Value at the top of its small-cap value category most of the time since its April 2003 launch. That made a big difference in 2008, when the average small-cap value fund tumbled 32%. Pinnacle lost ground last year too, but its 16.9% decline left shareholders — including Deysher — with almost twice as much money in their accounts as they would have had in many rival funds.

More Ackerman Goodness

Posted on February 4, 2009, 10:26 pm. Closed

I found an even better clip of Ackerman berating the SEC officials. Enjoy.