Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present. -- Marcus Aurelius

ChartZ and Table Zup!

A New Post Has Appeared On My Website @ The "Reforming A Pension Plan From The Outside" page.

I'm way busy and I wish I could post at length, but it ain't happenin'.

I have gone to 75% cash in the 401. The short version is;

This time it's different

We're about a quarter of the way into a consumer and housing led long and HOPEFULLY shallow recession. We came through a mostly jobless recovery and we're falling from no great height. As long as you aren't a realtor, mortgage broker, or SUV salesman.

Low inventory levels, cautious capital expenditures, the offshoring of manufacturing, and world wide growth are keeping corporate and business activity afloat or in some cases, on fire. And, as long as you don't work in real estate, housing, or Detroit, jobs probably can be kept. Your dicretionary cash may be pretty sparse once you've filled the tank and bought groceries, but life goes on.

The economy is sucky in some spots and surprisingly strong in others.

The same with the market.

Government statistcs on inflation and jobs lie.

Stocks are up on low volume. Up is good. Low volume is not.

We're in a bear market bounce. we're up nicely but downside risks loom large.

I'm 25%/75% stocks/cash based on caution and distrust.

I'm careful. I wanna keep what I got and when I do let my cash out, it's onna short leash. There will come a fabulous time to go back to 95% stocks. It ain't now.

October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February."

-- Mark Twain

ChartZ And Table Zup!

Updated 5/5

So... Got my '07 pension statement and I'm distinctly unimpressed. I work across from too many participants in other locals and other trades who have a lot more to show for a lot less money contributed for a lot less years. But then you know that. Hell, check out the benefit rate earned in the mid 80's on this year's defined benefit statement. It was over $100 for a number of years. Also check out the rates earned in the 90's... especially 1996. In 1996 we earned $40 pension credit for a year's work. That's 1/3rd what we earned in 1984. And today we still earn a skosh less than what we earned in 1984. Is that totally reasonable? I'd have to see it to believe it....Wait, I DID see it. I just don't believe it
So what I gotta do is clear to me. I gotta work the money in my 401a extra hard 'cuz there was too much opportunity lost over too many years in both the defined benefit and the defined contribution not to...


Check dis out....CLICKONNIT






The first chart is first of the year to the most recent bottom. Below are posts explaining why and how we got there. BUT, something kinda unexpected happened after that. The Fed did not slash interest rates to the bone, cratering the dollar, and setting up the next bubble. Instead, they cut interest rates just about as much as the currency markets could handle and then started exchanging treasuries for toxic paper from everyone that they thought were worth saving.

So..... the daily market volume has been anemic in the extreme 'cuz the big money is standing by waiting to see what happens. The quick money has been buying and selling and the dumb money has been buying, both together driving the market up a wall of worry and burying the shorts on low volume squeezes. As posted below, I'm exremely cautious and I've got a coupla three years profit to protect. But the recent runnup is a trend... but it's a mature trend that has risen without much of a break or consolidation, and it's approaching resistance. So, do I chase the market after it's already made it's move, or do I sit out the rest of the move and hope the rest of the move is measured in days, not years? Trends persist far longer than is reasonable or expected... and the market works to pull in all the innocents and suckers so the smart guys can load them up and then pull the rug out from under them.... What to do?

I used to think I was indecisive, but now I'm not so sure....

Tomorrow I might put a little more money back to work in the good funds, not much mind you. No more money than I can get out in a day or three if I tick the top.... or I might not cuz it's late in the rally and there will be a better time to buy.. I'll let you know.

http://bigpicture.typepad.com/comments/ ... check.html

http://bigpicture.typepad.com/comments/ ... trend.html

UPDATE;

I've gone from 7% stocks to 30% stocks this afternoon. We'll see....

Chartz and Table Zup.

"The market is not a sofa, it is not a place to get comfortable."

Jim Cramer

You know about clickin' on these....right?




an' this




The first chart is what I, in part, dodged by going/being ready to go to cash when the multi year upcycle/debt and mortgage bubble bull market ended in Nov 07-Jan 08. You make money if your investments go up, or if your investments hold their own as everybody else's goes down. That said, is the upturn in the 401a fundz that started in mid March a bear market rally or a dead cat bounce off a short term bottom, interupting a multyear downtrend? Or is showing clear sailing up and away now that we've corrected and hit THE longterm bottom?

I suspect that there is more ugly to follow. So I got a plan for it in place; big time cash in the 401a Met Life GIC for the foreseeable future. But I'm also readin' an' chartin' to see what actually happens when the future gets here. If I'm wrong about predictin' the future, that means being ready to bail on one plan and put another in place, if that's what's called for.

The second chart shows two 401a stock fundz that I've identified as really dumb places to put my money. I've made money anytime I didn't put money in these two fundz. The chart also shows the performance of a 401a bond fund that illustrates that if you don't check things out, you can match limited upside performance with significant downside risk and get exactly that in a really short time.

The second chart also shows the performance of the ultimate fear fund, the American Funds US Gov Securities Fund. I've got a huge proportion of my 401a currently in the Met Life GIC. That is a bet, nothing more or less, that Met Life won't blow up. It is based on the ongoing Fed bailout of the overleveraged financial system. My position in the GIC is owning an x dollar promise from Met Life to pay me x dollars on demand, and nothing else. I believe that the Fed sees that Met Life not keeping that promise to me as the financial equivalent of nuclear winter. So I believe that the Fed WILL see that a Met life default won't happen...... well, prolly won't happen.

On the other hand, a position of x dollars in the US Gov Securities Fund is owning x dollars of the securities of a financial entity with huge financial and real estate assets, guns, soldiers, police, tanks, bombers, and a treasury with the right to tax and print money. THAT'S a SAFE place to put your money.

But the US Security Fund doesn't pay much. In the 80's, when things got REALLY bad, I had my cash in a US Gov Securities Money Market fund where the average maturity of the holdings (100% US gov securities) was under a week. That's as close to cash in hand as you get and payed just about as much. Been there, done that. So I'm in the GIC because it earned 4.75% last year vs the Fed Security Fundz' 1.2%. I'm rollin' the dice 'cuz I'm not that scared yet. YMMV cuz' we only share certain goals/mindsets/risk vs rewards tolerance etc...

See ya at the hall....

"Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless."

Milton Friedman

I don't make this up about your government lying to you. Check this out...

http://bigpicture.typepad.com/comments/ ... ng-ec.html

AND

http://bigpicture.typepad.com/comments/ ... sions.html

AND

http://www.nytimes.com/2008/04/19/business/19chart.html

Anyway...

ChartZ and Table Zup.

http://www.sfgate.com/cgi-bin/article.c ... 106LQH.DTL

Local inflation...


So I'm short of time lately, but here's what I got....

The market has looked like hammered dog shit this year.

Check out the 401 mutual funds and other stock charts.

For the last three years, I've been riding stocks up in my 401a.

In January I started to step to the side and told some co workers about it. They bailed out into the GIC and they look real smart/lucky. I tried to pick up the last few pennies in front of the steam roller and I'm a little flatter for the experience, but I've done good since 9/04.

There is smoking ruin at the banks and financial companies, and it's much worse than you've been lead to believe. The Fed finally figured it out and has let the markets and companies know that;

1) They will engineer a coverup as needed. Bear Stearns didn't go bankrupt and have to open their books to a judge, The Fed gave(loaned) JP Morgan enough money to buy them over the weekend. The public didn't see the books. There's more, but time and space....ya know. Anyway, the Fed will keep the banking system afloat until they've earned/written off enough over a long enough period of time to put the problems in the rear view mirror.

2) They will shift the burden of paying for it onto the public by engineering inflation. Money will be printed to paper it over.

You HAVE read the links above, right? Got it?

Business is gonna suck. Hugely over leveraged credit blew up this year. Read prior posts below... So these credit cowboy guys are gone. Some hedge funds/banks/SIV's etc were levered up 5 to 30 times. A billion dollars was behind as much as 30 billion of loans and business. Thirty billion of loans is left suspended as the billion dollars is vaporized. Even if the Fed turns a blind eye/floats/postpones/papers over these loans, ya ain't gonna have the credit cowboys anymore to support new loans. Welcome to deleveraging.

Ya got roughly 3 million too many homes (1 million of them empty) to get rid of. Whose gonna throw good money after bad when the bank examiner may come knocking?

Get used to houses going for so little that even a recently singed loan officer has gotta realize that there is little risk to a loan.

Energy and food are getting bought away from us by the rest of the world as the dollar falls. The rest of the world has figured out that the printing presses are gonna go 24/7.

Well, it's bad. But not without hope. This is not a manufacturing/inventory issue like we used to have. No wholesale layoffs in manufacturing; that happened years ago. There's WAY better inventory control; this is the other side of computer based inventory control/just in time manufacturing. What jobs we have are in parts of the economy that MAY stay good.

The dollar's cheap, we're able to export big time to the rip roaring material and manufacturing economies elsewhere. I own Catapiller in an IRA. They reported earnings last week. WAHOO!!!!

'Sides, I'm a pipefitter and the oil companies got bucks, like in '75 and the early 80's. Been there/done that, it worked out pretty well.

So. here's the way I'm gonna play it. Certain stocks will do well. Others will suck bigtime. Markets will be REAL volatile. There will be a year long or multi year bear market as things work themselve out. There will be vicious bear market rallys as the boyz in the pits stampede the rubes when everybody gets comfortable on the downslope. We'll go down for three weeks/months into a big hole and a two/ten day rally will get us halfway out of the hole. And then we'll go down again.....

Sounds like the safest play is cash in the 401a to me. I'll keep what I got saved/made. I'll worry about making more money when the market starts going up on more than short covering panics and dead cat bounces. Or I'll try to make some money in my trading account where I don't have rapid trading restrictions and I can look for things like oil trusts, MacDonalds, and CAT.

Of course I could be wrong. It's hard to predict the future and you can't always be right. Maybe it's straight up from here starting now/three/six months from now. It's not a financial sin to be wrong when you try to put a strategy in place for the future. The sin is committed by staying wrong when the future gets here and isn't what you've expected it to be.

Stay tooned...

The ultimate result of shielding men from the effects of folly is to fill the world with fools.
--Herbert Spencer

Chartz and Table Zup!!

Been gone. Not Long Gone. Just work and taxes and personal stuff. And a 95% cash position frees up the mind and shoulders remarkably effectively. If that 95% doesn't square with what you see on my 401 worksheets, itz cuz I've got a pair of IRA's and a trading account as well as a 401a. They are each way cash. And the 401 is gonna get cash heavy too.
CHECK THESE OUT; CLICKON 'EM





Gary Dvorchak at Realmoney.com notes that if you invested $1000 in the Russell 1000 Growth Index (American growth stocks) in 1999, you'd have $947 today. He notes that this is BEFORE the big 2000 run up for a real, fair, no cheatin' view of what big cap American passive growth stocks investing looks like.

My chart service allowed me to look at the Russell 1000 Mutual Fund and the S&P 500 Fund from May 26th 2000 to now. Same thing. A lot of exposure to risk and breaking even or looking like a turd in a punch bowl to show for it. Gary also looks at what you'd have if you just picked out great stocks of great companies like Intel, Motorola, EMC, AIG, and Microsoft. That's the second graph. Gary says that there are times when "Buy great stocks of great companies and hold them or buy the stock market because long term, stocks do really well." just doesn't work. See our experience with McMorgan Funds. If you are gonna work for 100 years, and retire for 10, buy the market. That's a long enough "long term" and short enough retirement for you to ignore your retirement money. If you aren't going to work for 100 years and retire for 10, ya GOTTA watch what's happening. That's why I've taken care of business for myself since 9/04 and why I'm protecting what I got to show for my work. Check out my worksheets. THAT'S WHAT I'M TALKIN' ABOUT....

Speaking of going down in flames, look at the first chart for the time period of 2000 to 2003. That's what a bear market looks like. The trend is down and periodically it gets overdone. Someone yells "Fire" in the crowded theater and everybody blows out short positions and loads up on stocks. Ya get a vicious bear market rally that gets the serial bottom callers foaming at the mouth. The sharp guys short stocks to retail buyers, the little guys load up, the boyz at the pits jam the market down and cover the shorts with stock that the retail investor blows out at a loss.. And then the bear market that was in progress, continues down.

I spend a lotta time reading arcane investment stuff in order to learn enough to avoid doing stupid things and to occasionally do the right thing. It's way too much and way too dynamic for me to synopsize here on a regular basis. But I'm not shy about telling you what I'm doin' with my retirement money based on what I think. And that's to be BIG TIME and going bigger in cash for the 401a.

I reserve the right to try to pick up pennies in front of steamrollers in my trading account, but that's because don't race motorcycles anymore and I fill my quota o' crazy in a different way. That's not food and shelter money for when I'm old that I'm riskin'....

Consistency is the last refuge of the unimaginative.
-- Oscar Wilde


Chartz and Table Zup

I'm going to continuing from last week's entry about what happened and what I'm doing and why... Stay tooned

"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed into hopelessly unproductive works."

John Stuart Mill,

Charts and Table Zup...

Time to do the deed;
Way past actually;

Here's whatzup;

UPDATED 3/23

The dotcom crash happened. Lots of smart guys with money took a big hit, but they had money left over that they needed to do something with. Alan Greenspan never saw anything unpleasant that couldn't be papered over with more money and lower rates so he flooded the market with liquidity and squashed rates JUST LIKE HE ALWAYS DID. There was money to loan everywhere almost for free. The post dotcom recession was almost played out when 9/11 happened. Lower rates and more money was an easy answer. Rates gor down to 1% for the banks and 0% for me. The economies of Brazil, Russia, India and China (BRIC) started to take off. They had resources, and educated populations and the need to develop. Worldwide, other nations realized that once the BRIC nations joined the US as economic super powers, they would be reduced to economic and political footnotes. So they kicked it up and the world finds itself with a multitude of nations in a race to develop from a resource and labor rich economies into a modern comsumption based societies. Now everyone was joining in the new millenium economic revolution. So there was money everywhere for free, and there was worldwide development leading to worldwide consumption and it was gaining speed.

So individuals in the US started to borrow cheap money to buy a house or to refinance their homes and take money out and spend it or invest it. Financial markets have a component called velocity. A financial entity loans out all its money in real estate 30 year loans, gets fees, and collects payments. New money like new deposits make new loans possible, but existing mortgages lock money up until they are paid off in 30 years or when the current mortgage is replaced when a owner moves or dies. you make money, then you wait. There is little velocity. So what if you could unlock the money by selling the mortgage? Then you could loan the money out again, get another round of fees, sell the mortgage and do it again. Money velocity is hugely multiplied. Every house sale now longer locks up capital for longer than a few months. The money starts to slosh around and chase assets higher. Housing valuations took off.

But who ya gonna sell the mortgages to? Enter the rich guys burned by the dotcom crash but with money to invest. These guys want 15+% a year with perfect safety. How ya gonna sell these guys a buncha 6% mortgages? Here's how. You give the appearance of diversifying for safety. You package a buncha mortgages from different areas and different quality together. Prime mortgages in Detroit, subprime from San Diego, Alt A mortgages from Key Largo. See, they all can't go down at the same time. Ya got a $100 mil package of mortgages that yield 6% overall with the prime giving you security and the subprime giving you the 9% pizazz. Default rates are low 'cuz ya got a lotta money chasing prices higher. Can't make the mortgage? Refi at a higher price and lower rates and take money out. Defaults are an opportunity to resell the property at a higher price and charge a new round of fees. These are can't lose assets for 5 years. So why not leverage these "can't lose" assets to boost the yield; Use the $100 mill package of mortgages as collateral to borrow another $100 mil. Buy some more mortgages. And some GMAC paper, and some Winnabago paper, and some Harley Davidson paper. Leverage those loans to buy some more mortgages and some....... Now ya got $100 mil holding $300 mil of paper yielding 18% on the original $100 mil cash investment and paying only 15%, just in case. You also sell these packages to pension plans and to municipalities and anyone who would otherwise buy a bond.

The only problem with this is, "What if the assets held drop?" Ya got $100 mil of cash backing up $200 mil of loans. That's a 1:2 leverage. If the $300 mil of assets drops 15%, that $45 mil of money evaporated. That's almost half the actual money backing up the holdings. If I was the source of the loan, I'd want to see $50 mil more in cash to replace what was lost and I'd ask to see $100 mil of the portfolio sold to reduce the leverage from 3:1 to 2:1. Say it takes selling 40% of the portfolio to sell $100 mil rather than 33% 'cuz it's not worth what it used to be.. Now the investors find themselves not with a one time payment of $100 mil to get 15% return on a SAFE investment, but having paid $100 mil plus $50 mil to keep a $150 mil portfolio afloat that pays 10% and furthermore is the source of rumors of defaulting, suspending payments or cutting the payout to 5% or lower. The call goes out to "GET ME OUTA HERE", and the market is flooded with inventory that can be bought ever cheaper the longer you wait. Think death spiral.




To be continued this week as time and circumstances permit.....

Charts and Table Zup... The table's got issues but I'll fix it later....

CLICKIT!!

Bear Stearns. I owned some in an IRA account last year at around $150 a share. I bought it cheaper. It traded down to $30 Friday and BSC was sold to JP Morgan this weekend for about $2 a share. That's one seventy fifth what it was worth 10 months ago and one fifteenth what it was worth Friday. It's not a sale, it's a liquidation and some kind of under the table guarantee of debt. Gonna be a bloody market on Monday....BSC loaned a huge amount of their and other peoples money to heavily leveraged funds who've gone belly up. The question is who and how many Ibanks, funds or banks are going down with them....

The non government bonds in the pension funds will probably get hammmered at least temporarily. The stocks will crater. By now you will know what you should have done.

I'm;
75% GIC Met Life
16% going to 10% in RERFX, I was in the offshore fund as a weak dollar play. Offshore markets collapsing this evening. It sounded like a good idea at the time and was in theory. But it wasn't much at risk, I pulled some out last week, and I'm looking for the all clear to go back in at some point. That points way way closer than it was Friday....

I'm tellin' ya what I'm doin' but I'm too busy and it is moving too fast for me to find the time to tell you why. So it goes. Too many hours trying to get the job done to tell the story. Soon....

3/18/08

CLICKIT!!!!!



TREMENDOUS UPWARD MOVEMENT, EXPLODING UP, WAHOOO!!!!

That gets us up to where we were a week ago....

"Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment."

--Buddha

CLICKIT!!!!!



March Eleventh 08
"ROCKET UPSIDE FABULOUS DAY!!!!
AKA plain ol' short squeeze...
Made it all the way back to even w/ five days ago. Still inna hole....



Still all in GIC. Even sold some more tag end stock funds. More after the upcoming weekend.

"No emergency can justify a return to inflation. Inflation can provide neither the weapons a nation needs to defend its independence nor the capital goods required for any project. It does not cure unsatisfactory conditions. It merely helps the rulers whose policies brought about the catastrophe to exculpate themselves."
-Ludwig von Mises




More on Tom Dowd...

http://en.wikipedia.org/wiki/Tom_Dowd

http://mixonline.com/mag/audio_creams_sunshine_love/

More to come...


http://www.cnn.com/2008/LIVING/personal ... index.html

I run on the road long before I dance under the lights.

-- Muhammad Ali

Chartes and Table Zup!

Check back at the end of the weekend.....Still big time in the GIC. Stay tooned.

"Don't wait for extraordinary opportunities. Seize common occasions and make them great. Weak men wait for opportunities; strong men make them."

-- Orison Swett Marden


Charts and Table Zup!

CLICKIT!!!!


A 25% swing in 5 months.
Pretty impressive.
Was this THE subprime correction?
Is a support level being put into place?
Is this the establishment of a long term trading range?
is this the launcing pad for the next move up?
Or is this only the first serious crack in post dotcom recovery?
Is this a one time opportunity, or the final warning?
What do I think and therefore, what will I do?
Good questions all.


More to come this weekend...like;

http://www.nytimes.com/2008/02/17/busin ... vCvYfe6W8Q

http://www.reuters.com/article/ousiv/id ... 1920080217

http://www.reuters.com/article/hotStock ... 2920080215

http://www.ft.com/cms/s/9ba3c422-dd6e-1 ... fd2ac.html

http://www.nytimes.com/2008/02/17/busin ... wanted=all

http://www.ogj.com/display_article/3202 ... hief-says/

Yee HAHH!!!!
http://bigpicture.typepad.com/comments/ ... me-re.html

http://matrix.millersamuel.com/?p=1430

http://bigpicture.typepad.com/comments/ ... are-f.html

http://blogs.wsj.com/marketbeat/2008/02 ... -timeline/

http://www.ft.com/cms/s/0/bb7e80c8-d58c ... ck_check=1

http://bigpicture.typepad.com/comments/ ... w-wea.html

Very clear. Very significant.
http://www.slate.com/id/2184488

Again Very Clear.
http://www.bankstocks.com/article.asp?t ... id=9881648











Hint. I'm still all cash in the 401a, but I'm weighing the possibilities...

After all, what is your host's purpose in having a party? Surely not for you to enjoy yourself; if that were their sole purpose, they'd have simply sent champagne and women over to your place by taxi.

P.J. O'Rourke


Chartses and Table Zup

The newly revised 401a management site appears to be an all new shell over the original apparatus. It does not light my fire, but it works just fine.

I'm all cash on the 401a (again). I tried to play the dead cat bounce of last week this week and I was too late. I paid a rapid trading fee on one fund and triggered trading restrictions on two others to get back to the all cash position, and the price was cheap. Here's what I ended up with, YTD.

CLICK THIS!!


Between what I lost and what I paid, it was a major owie. I'm major pissed at myself; I know I gotta be aggressive when the time is right. Like 9/13/04 until 9/07. I did that part OK. And.... looking at the chart above, I haven't done too bad so far this year. But I could have done better. So it goes.

Radical shit from the WSJ...Who'd a thunk? How will it affect the pension plan?
http://online.wsj.com/article/SB1202433 ... inion_main

http://www.businessweek.com/magazine/co ... 384407.htm

http://www.iht.com/articles/2008/02/08/business/yen.php

http://www.iddmagazine.com/issues/2008_ ... =thestreet

http://www.iddmagazine.com/issues/2008_ ... =thestreet

http://bloomberg.com/news/marketsmag/mm ... tory2.html


I'll lay out what I'm thinking about the near and far future of my 401a sometime this week.

Stay tooned. Stop in every so often....

"Most of the time I don't have much fun. The rest of the time I don't have any fun at all."

Woody Allen

Charts and Table Zup!!!!

Like the freaks and bros at Haight and Masonic used to say, "This is some good shit." Worked(s) for me...

http://www.thestreet.com/story/10400657 ... s-you.html

http://money.cnn.com/2008/01/28/news/ne ... 2008012909

http://bigpicture.typepad.com/comments/ ... secto.html

http://harpers.org/archive/2008/01/hbc-90002258

The Subprime Crisis
The latest bubble to pop, with potentially calamitous results, is the subprime mortgage market.

The U.S. mortgage crisis has been labeled a “subprime mortgage crisis,” but subprime mortgages were only a sideshow that appeared late, as the housing-bubble credit machine ran out of creditworthy borrowers. The main event was the hyperinflation of home prices. Risks are embedded in price and lurk as defaults. Even after the faith that supported a bubble recedes, false beliefs continue to obscure cause and effect as the crisis unfolds. . .

The housing bubble has left us in dire shape, worse than after the technology-stock bubble, when the Federal Reserve Funds Rate was 6 percent, the dollar was at a multi-decade peak, the federal government was running a surplus, and tax rates were relatively high, making reflation—interest-rate cuts, dollar depreciation, increased government spending, and tax cuts—relatively painless. Now the Funds Rate is only 4.5 percent, the dollar is at multi-decade lows, the federal budget is in deficit, and tax cuts are still in effect. The chronic trade deficit, the sudden depreciation of our currency, and the lack of foreign buyers willing to purchase its debt will require the United States government to print new money simply to fund its own operations and pay its 22 million employees.

http://www.marketwatch.com/News/Story/S ... &lsn=9


http://www.thestreet.com/s/what-investo ... 1545.html?

http://www.bloomberg.com/apps/news?pid= ... YXs8I&

http://online.barrons.com/article/SB120 ... 26743.html

http://online.barrons.com/article/SB120 ... 26743.html

http://bigpicture.typepad.com/comments/ ... tated.html

http://bigpicture.typepad.com/comments/ ... e-day.html

http://online.wsj.com/public/article/SB ... in_tff_top

http://news.yahoo.com/s/cmp/20080130/tc ... Ffq5EE1vAI

S&G's...
check out the bottom of the comments....

http://bigpicture.typepad.com/comments/ ... ht-ja.html

I 'll be writting what I'm doin' w/ my 401a all this week.... Stay tooned.

Nothing is safer or more effective than cash in a poor market.

Reverend Shark

My mind starts relaxin' when I start seein' pictures o' Jackson.

Little Richard

Charts and Table Zup

More to come later this weekend.

In the meantime....From Barry Ritholtz' blog @ http://bigpicture.typepad.com/comments/

To wit, a fraudulent series of losses led to a major European bank unwinding a huge trade: Societe Generale Reports EU4.9 Billion Trading Loss....

SG's $7.1 Billion dollar unwinding led to panicked futures selling on Monday and Tuesday. (The market reacted to SG's sales by moving away from them; The more you have for sale and HAVE to dump NOW, the lower the offers. You never know what the loss is until you actually unwind it.Joe Facer)

Société Générale rushed to unwind those trades during Monday’s market plunge, and trading in those futures contracts soared to record levels. The bank’s abrupt reversal contributed to a decline that snowballed into an avalanche of sell orders around the world, some traders said. The ensuing turmoil helped prompt the Federal Reserve to orchestrate the surprise cut in interest rates announced Tuesday...

I have little doubt that Société Générale’s unwinding of those positions absolutely pressured indexes worldwide, And wouldn’t it be embarrassing if the Fed had to make one of the biggest emergency rate cuts ever because of some rogue trader?

From John Mauldin's E Newsletter; JohnMauldin@InvestorsInsight.com.

Granted, fears of a recession in the United States and continuing worries about the spread of the subprime mortgage collapse were also responsible for the market downdraft in the last 10 days. But Mr. Ritholtz argued the rapid move by Société Générale to close out tens of billions in futures positions might have been a major factor in pushing an already nervous market into an outright panic

First, for years one of my central premises has been that we have to remember that when a normal human being is elected to the board of the Fed, he is taken into a secret room where his DNA is altered. Certain characteristics are imprinted. Now, he does not like inflation and hates deflation even more. He sees his role as making sure the financial market functions smoothly. He does not care about stock prices when thinking about rate cuts.

Then what was the reason for the cut if not stock prices? Why an inter-meeting cut much larger than the market was expecting next week, just seven days later? What was so urgent that we needed a shock and awe rate cut a week early?....

I believe the monoline insurance companies like Ambac and MBIA are in worse shape than most realize, the counter-party risk in the $45 trillion Credit Default Swap market is much worse than we realize, and the exposure by various banks to their problems is much larger than currently understood. The Fed understands this, and realizes that they have been behind the curve but need to catch up. Let's go back and look at this quote from my letter just last week:

"If you are a bank or regulated entity, and you have mortgage-backed securities that have been written by a AAA monoline company, you can carry that debt on your books as AAA. But as the companies get downgraded, you have to write down the potential loss. Quoting from a recent note from Michael Lewitt:

" 'MBIA's total exposure to bonds backed by mortgages and CDOs was disclosed to be $30.6 billion, including $8.14 billion of holdings of CDO-squareds (CDOs that own other CDOs, or mortgages piled on top of mortgages, or, to quote Jeff Goldblum's character in Jurassic Park again, 'a big pile of s&*^'). MBIA was being priced as a weak CCC-rated credit when it issued its bonds last week; it is now being priced for a bankruptcy. MBIA's stock, which traded just under $68 per share last October, dropped another $3.50 this morning to under $10.00 per share.

" 'The bond insurers' business model is irreparably broken. In HCM's view, it will be all but impossible for these companies to raise capital at economic levels for the foreseeable future and certainly in enough time to work out of their current difficulties. The performance of MBIA's 14 percent bond issue will prove to have been the death knell for this business. The market needs to come to the realization that the so-called insurance that these companies were offering is not going to be there if it is needed. The fact that these companies were rated AAA in the first place will remain one of the great puzzles of modern finance for years to come.'

"You can bet that the $8 billion in CDO-squareds is gone. It is a matter of time. MBIA's market cap is about $1 billion [it is now at $1.74]. Current shareholders will be lucky if they only get diluted 75%."

Think this through. MBIA is still rated AAA. Ratings downgrades are just a matter of time. Banks that raised $72 billion to shore up capital depleted by subprime-related losses may require another $143 billion should credit rating firms downgrade bond insurers, according to analysts at Barclays Capital.

Banks will need at least $22 billion if bonds covered by insurers, led by MBIA Inc. and Ambac Assurance Corp., are cut one level from AAA, and six times more than that for downgrades by four steps to A, as Paul Fenner-Leitao wrote in a Barclays report published today. Barclays' estimates are based on banks holding as much as 75% of the $820 billion of structured securities guaranteed by bond insurers. (Source: Bloomberg)...

But what if the above-mentioned monolines are downgraded to junk, as was ACA when it could not raise capital? As the downgrades on various mortgage assets and the CDOs continue to increase, the ability of the monolines to deal with the problems is going to come under increasing question. The losses at major banks could be much worse than $122 billion if they are downgraded to the same junk level that ACA was.

Again from Barry Ritholtz' BLOG
Quote of the Day: Ackman on MBIA
Friday, January 25, 2008 | 01:30 PM
in Corporate Management | Credit | Derivatives

Bill Ackman asks if Fitch Ratings should really have a Triple AAA rating on MBIA:

Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace? Can this possibly make sense?

Ouch!

And that is just the credit default swaps (CDSs) from the monolines. What about the trillions that are guaranteed by banks and hedge funds? There are a total of $45 trillion CDSs outstanding.

No one is really sure who owes what and to whom, and what is the risk that there may be no one to pay that CDS when it comes due? The entire mess is going to have to be unwound in the coming quarters. It may take a year or more.

I think the concern that there is the potential for a much worse credit crisis than we are currently experiencing is what is driving the Fed...

Here is how I think the next few quarters are going to play out. Each new downgrade triggers more losses at financial institutions. You don't write down a bond insured by MBIA as AAA until there is actually a write-down. And then you do, and announce it at the end of the quarter. Along with the rest of the losses caused by new downgrades. We are going to see massive write-offs every quarter by the same financial institutions that have already written off $100 billion. We are only in the beginning innings.

There are very serious suggestions that several extremely large banks (and not just in the US), of the "too big to be allowed to fail" size, technically have negative equity. With each announcement of a new massive write-off, we will see yet another large capital investment announced as well.

And every time it happens, the market is going to be disappointed. And continuing disappointment is what keeps a bear market intact. Couple that with earnings disappointments from companies with exposure to consumer spending, and you have a recipe for a bear market that could linger for awhile.

Time will add clarity. I don't think I'll like the picture, regardless.... but clarity helps with dealing with it.

"The market is not a sofa, it is not a place to get comfortable."

Jim Cramer


Hard lessons; Too real. If you can't handle raw emotion and raw words, don't click the link below.

http://highprobability.blogspot.com/200 ... -life.html

Hard lessons already learned and put into action; I had carried a synthetic 100% short S&P 500 and QQQ for more than a week in my trading account as a hedge for my longs. I closed it out on Friday just in case the Fed eased over the weekend and the market opened up 300 on me Tuesday. I was on the opposite side of the table from this guy and I missed making a pile of money in 5 minutes. Still, it was a lot easier dealing with a missed opportunity than it would have been dealing with a huge loss. You control your risk and backstop everything.

THE WORLD IS WHAT IT IS, NOT WHAT YOU WOULD LIKE IT TO BE.
Things change....

http://www.theglobeandmail.com/servlet/ ... uested=all

http://www.nytimes.com/2008/01/27/magaz ... wanted=all

http://www.reuters.com/article/blogBurs ... YRoUoOjnxK

http://www.bloomberg.com/apps/news?pid= ... cJlQ0&

http://www.sfgate.com/cgi-bin/article.c ... s.mmorford


I know what I want to do with my 401a. Stay tooned...

Checkout what it looks like from November 07 to now. You can see how fabulous today was .....if your eyes are good. CLICKIT!!!!

IT'S 9:00 PM MONDAY EVENING AND THE INTERNET

NEWS AND FINANCIAL SITES ARE TALKING EITHER A

MAJOR DOWNDRAFT OR A WORLD WIDE CRASH IN

THE MORNING. I'M 93% CASH AND NOT BY ACCIDENT.

STAY TOONED.

"It is not the critic who counts, not the man who points out how the strong man stumbles or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again because there is no effort without error and shortcomings, who knows the great devotion, who spends himself in a worthy cause, who at the best knows in the end the high achievement of triumph and who at worst, if he fails while daring greatly, knows his place shall never be with those timid and cold souls who know neither victory nor defeat"

Theodore Roosevelt

Charts and Table Zup.

I've put my money where my mouth is since mid 2001. You know how that came to pass from reading my website. For the last six years I've spent my money and time learning the important lessons about how to plan and invest for my future. I feel I've I've earned the right to value highly my opinion on what to do with my 401a. If you value my opinion and want it for a damn sight less than it cost me, stay tooned.

I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market, all stocks go down and in a bull market, they go up.

Jesse Livermore


The short version is that I'm over 90% in the GIC (Met Life) and as little in stocks as the rules allow. I'm also staying out of bonds, although I may start to build a position in one of the bond funds while avoiding the other; see below, and CLICKONNIT!!!!




Charts and tables are up later than usual this week and commentary will be posted as time allows. like now....

http://www.nytimes.com/2008/01/12/busin ... ref=slogin

http://bigpicture.typepad.com/comments/ ... ecess.html

http://www.bloomberg.com/apps/news?pid= ... fer=invest


http://www.nytimes.com/2008/01/20/magaz ... gewanted=1
Check out page 8, eighth paragraph. and Cramer @ http://www.youtube.com/watch?v=rOVXh4xM-Ww
I took a trip to Bass lake with my family down Highway 99 through the newly built up Central Valley. I saw auctions for homes and cars on billboards along the way. People don't lose homes without losing their cars and maxing out their home equity and credit cards on the way down. See prior posts on the COFGBLOG on foreign banks/hedge funds cratering on MBS's. I've been through these things since the 70's and the internet allows me to be much better informed this time around.

http://www.nytimes.com/2008/01/20/busin ... oref=login This time the nightmare is real. It's not selling the rubes what only they will buy (Japanese and Rockerfeller Center and Pebble Beach and the yen), this time it is the Chinese and oil exporters and our dollars. Get used to it.

http://bigpicture.typepad.com/comments/ ... rty-r.html
Pay attention to Barry's "Apprentice Investor" series on his blog. His is one of the few blog links on my blog and he has an open invitation for a ride up the coast on his next trip out west. His concerns for the economy are mine.

http://www.bloomberg.com/apps/news?pid= ... 61sYU&
A glimpse behind the cutain... but not behind the curtain behind the curtain.....

http://www.reuters.com/article/reutersE ... 4420071106
If Muni bonds go down, is my pension fund(s) and it's investments somewhere in the chain reaction?

http://www.nakedcapitalism.com/2008/01/ ... lking.html

http://bigpicture.typepad.com/comments/ ... heeee.html

http://www.bloomberg.com/apps/news?pid= ... Z8wwg&
Only 43% of the retail space destined to come online this year is justified?

http://www.mises.org/story/1568


It was a grandkids kinda weekend, ya know. Ya gotta have priorities. See ya at the track.

There is nothing that will benefit your portfolio more than avoiding losses when the market is acting poorly. If you can keep from incurring losses in your portfolio as the market falls, you avoid the very unproductive task of recouping losses once the market is more favorable.

James “Reverend Shark” DePorre


Chartses and Table Zup...

The markets are a stinking pile of crap. Therefore, so's the 401a. I've long known what I hadda do when the time came and I've long known it would come. And I'm already 90% done doin' it.

Get Serious. It Ain't Rocket Science. Know What Ah Mean, Vern?

Any Questions? If ya ain't clear on what I'm doin', then see my wesite 401 allocation and below!!!!!!.

http://www.sfgate.com/cgi-bin/article.c ... mp;sc=1000

http://bigpicture.typepad.com/photos/un ... utlook.gif

http://tonto.eia.doe.gov/oog/info/twip/twipprint.html

http://www.economist.com/finance/displa ... d=10498937

http://money.cnn.com/2008/01/11/news/co ... 2008011115

http://money.cnn.com/2008/01/11/news/co ... 2008011115

http://money.cnn.com/2008/01/11/news/co ... 2008011115

http://bloomberg.com/news/marketsmag/mm ... tory2.html

http://www.economist.com/finance/displa ... d=10498907

http://www.ft.com/cms/s/5a5419aa-bd47-1 ... ck_check=1

UPDATE!!!! MAXIMUM CASH AS OF WED EVENING!!!!!

CLICKONNIT!!!!

This is clear enough to me.

=== UPDATED 1/8/08 ===


Lindsey Campbell; What do you do to fix the economy?

Barry Ritholtz; I don’t know that the economy needs fixing. What do you do to fix night? You wait and it becomes day.


Chartses and Table Zup! Looks like night is fallin'. Here's some of what I'm payin' attention to.....

http://www.slate.com/id/2181184

http://www.bloomberg.com/apps/news?pid= ... Yb7wU&

http://www.reuters.com/article/marketsN ... 104?rpc=44

http://bigpicture.typepad.com/comments/ ... 18000.html

http://www.nytimes.com/2008/01/06/business/06count.html

http://www.realestatejournal.com/buysel ... 04-ip.html

http://www.businessweek.com/magazine/co ... 083770.htm

http://lifehacker.com/339474/top-10-obs ... rch-tricks

http://www.slate.com/id/2181282

http://www.bloomberg.com/apps/news?pid= ... iHo4wg_Kak

http://www.nytimes.com/2008/01/05/busin ... ref=slogin

http://www.reuters.com/article/ousiv/id ... 04?sp=true



So's........iffen ya look at the charts and tables on my webpage, you see that ever since I've had something to work with (9/04), I've done pretty well. If I see twice the nominal B/P fund ROR (rate of return) at the end of the year, I'm feelin' allright. This year I had it.... an' I lost it. I started to feel bummed out until I took a closer look at why. The first three quarters of the year, it was because on dips that I saw as hazardous to my money, I bailed out on the way down and I didn't get back in until I saw proof that things really weren't goin' down for the count. That cost me losses on the way down and gains on the way up. That is part of the cost of my investment strategy;

Stay heavily exposed in stocks when the market and the funds are goin' up.
Watch for signs that the trend is over and practice selling during times of uncertainty and on corrections.
Reinvest after short term uncertainty and corrections have run their course.
Be prepared to go more sold and stay sold when the short term uncertainty and corrections turn out to be the real deal.

Insurance ain't always cheap. But you can't be aggressive without having a plan in place for when the danger greatly outweighs the potential gains. And what use is a great plan if you've never practiced putting it into action? Now there is big time bearosity all over everywhere and the bearishiousness every place else is thick enough to walk on.

This may finally be the time to lock up the gains that I made when times were good and hunker down to keep 'em. Gotta have the wherewithal for when times get better investmentwise. Last week I went from 20% cash equivalent to 36% cash equiv, on my way to around 60% cash equiv this week. Stay tooned.
If I'm wrong and I miss some upside...again...Oh Well. I'll buy back in. If this IS the real deal, it's not like I'm not prepared.

80% CASH (GIC) AS OF THIS EVENING. IT'S A BEAR MARKET AND THE PRIMARY DIRECTION IS DOWN. CAPITAL PRESERVATION IS THE FIRST PRIORITY. MAKING MONEY ON BOUNCES IS A DISTANT SECOND PRIORITY.

See ya at the track.

The price one pays for pursuing any profession or calling is an intimate knowledge of its ugly side.
-- James Baldwin


Chartses and Table Zup!!!

Off work 'till Jan 2nd. I'll be thinkin' thoughts and prolly I'll write about it here sometime this weekend........Until then;


http://www.nytimes.com/2007/12/02/world ... ref=slogin


http://www.iht.com/articles/2007/07/30/business/sub.php

Facts do not cease to exist because they are ignored.

Aldous Huxley

Chartz and Table Zup!!!!

Check out the entry below. My 401 figures are suspect and so are yours. The explanation is below. The numbers should be good to go by next year.....

Maybe something else here sooner or later...

Like this:

http://www.businessweek.com/magazine/co ... op+stories

http://www.washingtonpost.com/wp-dyn/co ... 00088.html

When the market starts acting as poorly as this one has, market participants start looking for ways to protect themselves from further losses. The two most talked-about alternatives are buying so called "safe" stocks and hedging....

In a bear market, there really is no such thing as a safe or defensive stock. The logic behind most of these stocks is that certain businesses, such as food, are not affected by the economic cycle. Hence those stocks will hold up better than others.

The problem is that they may have better relative strength, but in a poor market they are still likely to go down....

For a mutual fund that is forced to be invested at all times, that is a benefit, but for the individual investor it is not nearly as good as being in cash. Just keep in mind when the market is acting poorly that almost all stocks will suffer, and there is no requirement that you need to be invested...

Hedging is another approach to staying in the market when things get rough. The idea is to short an index in sufficient quantities that the gains from the short will offset the losses you incur on the long positions you continue to hold...

If you are an individual investor who isn't managing huge sums, you should avoid these complicated approaches to being defensive and simply sell down some long positions. It's safer and easier and can be quickly undone...

Nothing is safer or more effective than cash in a poor market.

Cut and pasted from Rev Shark at www.Realmoney.com

I can't short or hedge in the 401 as it is configured now. Neither do I have a "safe, defensive" fund. So whereas "My Cash Wuz Nothin' But Trash" in a bull market, now it's money in the bank in a bear market. "My Mind Starts Relaxin' When I Start Seein' Pictures of Jackson."

Long old Rock 'n Roll.....


Chartzes and Table Zup!!

More to come. Prolly this weekend...Check it out!!!

NOTE
My data looks wonky and if you are spread out among different funds, your's does/will too. Here's why...

For those who are unclear on what happened; the typical mutual fund has one portfolio of stocks/bonds but many different classifications. Some investors pay a load (commission) upfront, some pay it later on sales, some pay a higher commission, some pay a lower commision, etc. Some of the holders of the fund have to pay taxes on capital gains and appreciation on sold positions and some don't. Pension funds tend to use the institutional classification shares of the fund and so probably, most likely, pretty much everyone in this "r or x " classification fund, like 342 members, is in a nontaxable income/capital gains situation. But maybe not everyone. To make the whole thing easier and somewhat transparent, especially given that taxable and nontaxable entities may be in every class of fund, every year about this time, the fund takes the capital gains and dividends made over the past year out of each account in each classification, subtracting the value from the NAV (net asset value). So the price per share takes a hit. In the next coupla three or four days after, they rebate the capital gains/dividend taken out of each account back into the same account but in shares instead of dollars, at the price that the fund was when they subtracted the cap gains... After it is all over, you have the same amount of money but in more shares of a less expensive fund and the goverment and you have the capital gains/dividend number reported in terms of a dollars/shares number if you indeed have to pay taxes on it. For the 401a, it ain't no big thing. You pay no taxes, you do nothing. For the taxable accounts, they use the cap gains/dividend number to report. Note it and stay cool. But it'll get your heart pumping the first time you see it, until you look at the calender. Expect to see it happen once in each fund, providing there are indeed capital gains to report

Calamos share price took a hit a week ago as they deducted capital gains/dividends. My account balance took a hit too. Then they paid me the gains and all was well. Now it's American Fundz turn and EuroPacific shares price took a hit as they deducted $3.63 from the price. It'll be paid out to shareholders next week. Watch for this to happen to various fundz between now and Jan 1st.

http://www.washingtonpost.com/wp-dyn/co ... 01522.html

http://longorshortcapital.com/lame.htm

http://www.signonsandiego.com/news/busi ... tlook.html

http://www.rgemonitor.com/blog/roubini/232729


Here's where I'm at... Check out the stock charts on my website. We've had the new funds for a little over three years, since late 2004. Hell, we got them about two years late. A bull market started in 2002 and we were stuck with the McMorgan crap. Life has been good ever since with the new fundz. Load up the stocks and ride the slope up. But nothing goes forever. I think the end is here. I've gone to cash a number of times for short periods over the last two years when I thought things got dicey. I did alright, but things turned out OK and I got back into stocks big time an' quick. Here we go again. Is this time different? I know how to get defensive with the 401. I've done a number of times. And I know how to correct it when it's the wrong move to make. So I'm going to start to go to cash like I've done before. I'll watch for signs that it is the wrong move and I'll undo the move quick if/when it makes sense to me to do so. But if things turn to shit long term, getting heavy cash is Just Alright With Me. And I'll expect short, vicious, bear market rallys to appear if/when we get a confirmed bear market. And I'll take advantge of them if I can. I'm in the game for the long haul and ya play what's dealt. Fifteen to twenty percent average gains per year over three years in a bull market is pretty cool. Let's see what I can do if/when they change the game over to bear...

"Democracy is the theory that the common people know what they want, and deserve to get it good and hard."
-- H.L Mencken

Chartesses and table Zup.

There's money being made and lost all the time all around us. With the 401a, we're no longer just spectators, we've turned into participants. An' I'm particpatin' away. Check out my charts and tables and tell me what's not to like about what I'm doin'.

But have no fear. Losing money is still an exciting spectator sport we can all participate in. With a significant but still unpublished amount of the union's fixed income assets in mortgages, I can hardly wait to see how things come out.

There's more to come. Check the blog out once or twice a week.....


Especially check out da Greenberg and Calculated Risk links....

http://www.bloomberg.com/apps/news?pid= ... mw9VQ&

http://www.time.com/time/business/artic ... 10,00.html

http://bigpicture.typepad.com/comments/ ... an-se.html

http://www.sfgate.com/cgi-bin/article.c ... amp;sc=958

http://www.sfgate.com/cgi-bin/article.c ... e=business

http://blogs.marketwatch.com/greenberg/ ... n-insider/

http://calculatedrisk.blogspot.com/2007 ... reeze.html

http://www.bloomberg.com/apps/news?pid= ... MhEko&

http://www.spinner.com/2007/06/26/video ... ya-boogie/

"The market is not a sofa, it is not a place to get comfortable."

Jim Cramer

Chartz and Table Zup.

End O' The Year and I'm head down and headed home WFO. Four weeks to go, there are a lot of money managers who got caught leanin' the wrong way through all the volitility this year, and that spells opportunity in the market as the year winds up. It's been a year with a lotta hair onnit and I've been both lucky and smart. I've got a cushion of good results and a suspicion that the underperforming managers mentioned above are gonna gun stocks hard into the end of the year if they get the slightest opportunity. The subprime/"subslime" mortgage crisis and the aging of the market cycle looks to put a lotta Wall Street guys lookin' for work next year or looking for a position in a reorganized/merged organization. They ain't gonna fall into a real estate agent/mortgage specialist jobs if their's goes away. A good last month/yearly bonus would protect a job/grubstake the search for a new one. Smells like race fuel exhaust fumes in the morning to this crusty ol' racer.

AND I've got some numbers on the Structured Investment Vehicle/MBS/CDO embroglio that'll be worth relating to 342's Two Pension/Health and Welfare/Apprenticeship Trust Funds. See ya at the end of the weekend....

Which is now.

http://www.nytimes.com/2007/11/30/busin ... tadel.html

http://www.bloomberg.com/apps/news?pid= ... NumEnGUQng

http://www.bloomberg.com/apps/news?pid= ... XVr9s&

http://www.bloomberg.com/apps/news?pid= ... 9Os9FYyqX0

http://www.investorsinsight.com/otb_va_ ... tionID=619

http://www.realestatejournal.com/buysel ... lomon.html

http://money.cnn.com/2007/11/24/magazin ... /index.htm

http://www.cnbc.com/id/22005529/for/cnbc

http://www.reuters.com/article/ousiv/id ... 5020071202

So, here's how I read it. The financial markets partied hard on the real estate bubble and pushed it too far just like they always do. They created a lot of speculative mortgage backed paper, hid it behind ratings that turned out to be bogus, leveraged it out the wazoo, and sold it to their best clients. That would include pension funds and other trust funds. When the music stops there are always patsies, late comers, and the guys throwin' the party gettin' caught. You know what I'm talkin' about. The guy in Modesto with a $700,000 house on $1400 a month income, etc. Citibank, with a huge bridge loan/lending commitment to customers who'd posted MBS's as the security, that Citibank made good on and ended up getting stuck with merchandise that they couldn't move. E Trade and Countrywide buried under toxic mortgages. And the Trust Funds with a quarter to a half of their fixed income portfolios in morgage backed securities.

Arabian petro dollars moved in to toss Citibank a life line for a high rate convertable bond.

A hedge fund with a vulture fund track record picked up all of E Trades mortgage portfolio for 26 cents on the dollar.

Freddie Mac plans to issue $6,000,000,000 in preferred stock to maintain reserves as it expects to have to meet a ton of defaulted mortgage claims.

There's going to be mergers and buyouts as companies get out from under and write off the worst of the crap. There's going to be political posturing about keeping people in their homes.

Two things concern me. The first is the riff about Wells Fargo reserving for bad HELOCs. Those things are secured by homes and are effectively second mortgages. Some of them were used for down payments and mortgage payments. There are more shoes to drop in the mortgage space. Even in the best of times there are foreclosures on houses and cars. The Fed will gun the economy to keep people in jobs while the real estate market revalues. But the real estate sector will crater.

The second thing is mortgages in 342 Trust funds. How exposed is 342 and what can be/is being done to keep us up with the big money trying to maneuver out from under in the same space? We're not gonna be the last to find out again and holding the bag a la our McMorgan equity investments after the crash of 2000 are we? Ya think?

From John Maudlin's "Outside the Box" above....

Who's Holding the Bag?
One of the uncertainties about risk in this complex system results from the unprecedented degree of financial leverage placed on real economy capital structures. Never before have we entered a downturn of an economic cycle with so much paper riding on the fortunes of companies known to have such poor credit quality. Those left holding the bag will be the sellers of CDS (the insurers), owners of CDOs, financial guarantors of CDOs, and may include another link in the food chain.[xix] Regardless, in the aftermath of the subprime mess, no one will fess up to holding politically toxic securities before they must. In short, the separation of risk production and risk taking makes any definitive assessment of risk in this market unattainable.

When subprime mortgage losses surfaced in February and again over the summer, the success of structured finance in dispersing risk was more than offset by the exceedingly high degree of risk taken across the globe. Not only did direct participants like subprime mortgage originators meet their demise, but also U.S. investment banks, European insurance companies, Chinese state-owned institutions, hedge funds promising a low risk profile, and even money market mutual funds suffered write-downs on their balance sheets.

Unfortunately for our financial system, the magnitude of risk in corporate credit is a multiple of that in subprime mortgages. Each written CDS exchanges a risk that cannot be eradicated no matter how broadly aggregate risk is dispersed. Sinking valuations of CDOs and a commensurate leverage unwind could trigger a vicious cycle of financial losses. By implication, the problems that might ensue could make the subprime mortgage problem look like a walk in the park.

I cannot be sure these assertions are true, but I suspect that it would be just as difficult to provide evidence that they are not. I have listened to arguments against systemic risk, suggesting that the double counting of CDS, matched books of investment banks, and increasing sophistication of risk management techniques make the eye-popping numbers of notional risky debt larger than they seem. Nevertheless, I remain skeptical. We've seen similar movies before, and they don't end well.


Smart guys make money. Here's a riff about a really smart guy....


http://www.washingtonpost.com/wp-dyn/co ... 00135.html

True genius resides in the capacity for evaluation of uncertain, hazardous and conflicting information.

-- Winston Churchill

Chartz and Table Zup.

Click onna charts below....
What the charts are and what it suggests to me latter this weekend...

OK, it's later....







The first chart is of banks Bank of America, Citibank,and Wells Fargo, mortgage originator Countrywide Financial, and full service financial/broker E Trade Financial.

What we're lookin' at is the kick in the crotch of the subprime/credit crunch of May and August.

Countrywide and E Trade are drowning in mortgage debt. Citibank is bowed under way too much mortgage debt and some other credit issues. Bank of America screwed up a good thing by buying a sizeable chunk of Countrywide a coupla months ago, effectively buying into the mortgage disaster. Wells Fargo, a bank that is well run and is currently not deeply involved in the mortgage crisis, is none the less operating in an industry under the strain of mortgage debt. All of these banks, even Wells Fargo, are NOT able to operate as freely as in the past. There is a credit crunch goin' on and it'll cramp the style of the survivors. A recession is looking more likely by the day.

The second chart is of Ginne May and Freddie Mac, the Government Sponsored Entities (GSE) that purchase, package, sell and guarantee timely payment of principal and interest on federally guaranteed mortgages and loans. These charts show that the market thinks something very bad is about to happen to these private mortgage insurers/corporations. Think of a currently healthy insurer doing a lot of business in Florida and Louisiana during the beginning of an expected to be horrible hurricane season. The market says Incoming!!!!

The third chart is of the two bond funds currently available to 342's 401a plan. Note how well they track together until August, about the time that the smart money figured that the game was up in mortgages. The US government bonds appreciated after August as money moved into them, driving up prices. The nongovernment (more corporate and mortgage securities) fixed income fund fell as people bailed out. This is a trend that may affect fixed income securites in the pension funds, Health and Welfare Trust Fund, and the Apprenticeship Trust Fund. in other words; your money. Stay tooned.

I've been rethinking my 401a strategy. I gotta fair grip on how to play it. But there are some bigger fish to fry and everything in due course...o'course. Read about it here; Check out my asset allocation tables, chartz, and maintain a high degree of toonosity.

See ya at the track.

It's all fun and games until someone gets hurt.
-- Mom

Chartses and Table Zup

Check it out. CLICKONNIT!



Either the Calamos Fund blew up and lost 10% of it's value in one day.... or it paid off its Capital Gains and the money that disappeared in share prices on Friday will reappear in shares on Monday. A quick look tells me that they did just that on this week last year. THAT ain't no big thing. THIS is...

SAN FRANCISCO (AP) -- Evoking Depression-era memories, Wells Fargo & Co. President John Stumpf on Thursday became the latest banker to predict continuing difficulties in the U.S. housing market as risky mortgages made to overextended borrowers disintegrate into large loan losses.

Speaking at an investment conference in New York, Stumpf said the current real estate conditions are the worst he has experienced during his 30-year career. He then punctuated his gloomy assessment by harking back to the deepest downturn of the 20th century.

"We have not seen a nationwide decline in housing like this since the Great Depression," he said.

http://money.cnn.com/2007/11/15/real_es ... /index.htm

The question is... What am I gonna do about it?

Stay tooned....

"Concern should drive us into action and not into a depression. No man is free who cannot control himself."
-- Pythagoras

Chartes and Table Zup!!!!

Check out the chart...CLICKONNIT!!!



We had a good year goin' until we had the March subprime/economy hiccup. Then we had a good year goin' until we had the August subprime/economy hiccup. Then we launched off the half point interest rate/discount rate cut of August 15th and had a good year goin' again. What happened this week should look familiar. (Hint; Subprime/economy) The question in front of us is "Will we go up again for the third time? Or is this going down for the third time and stayin' down?"

Other questions...

This is a mortgage thing. Am I right that we have way too much of the money in our Health and Welfare Trust Fund, Apprenticeship Trust Fund, and Defined Contribution Pension Trust Fund invested in mortgages? Are YOU exposed to this is the 401a?

What does it mean that the mortgages are insured? We've watched the progression of housing from "a pause in growth" to "going down in flames". This weekend we are seeing million dollar Vallejo homes auctioned off with starting bids in the $400K range. We've watched the mortgage originators (Countrywide et al)going down in flames. We've seen way too leveraged hedge funds vomiting out mortgage backed securities and closing the doors. Are the mortgage insurers facing a Katrina like Tsunami of claims? Will it overwhelm them? If the mortgage insurers come up short, are we dependent on the PBGC for our pension benefits? Check out the last page of my site for more info on THAT.

Banks are writing down much of their exposure to recent mortgages to near zero because they want to get out from under the falling piano. They have investors and an industry that demands that they move and move NOW when things get dicy. And it appears that the problem is growing faster than they can move. The Financial Times estimates $40 billion in additional exposure at risk. Worst case figures are estimated at $250 billion total.

And we have Local 342. I've reviewed some recent records. I suspect that we may be exposed to a substantial amount of mortgage backed securities. Are we REALLY aware of it? Are we taking someones uncorroberated word that everything is OK? Are we moving on it if it is a problem? Will we be the last to move? Will we be left holding the bag?

In 2003 I got way concerned about the money our pension fund had in stocks. Jesus, was I right to be concerned. Today, I'm concerned about our exposure to the mortgage market. I sense a pattern here....

DON'T GET CAUGHT UP IN THE "SUBPRIME RIFF".

There are also the "Alt A" mortgages (nondoc on good credit), prime mortgages with a second mortgage or a "home equity line of credit" (HELOC) on top, mortgages with job loss behind them, and second and third "investment" home mortgages. These are all possible falling pianos and a possibile recession is the triggering event.

Billions of dollars are evaporating from the economy as real estate values evaporate. Is the $250 billion worst case estimate accurate? The headlines keep getting worse.... Can all this money disappear, can all the associated jobs and industry fade without precipitating the economy into a recession? Luckily, I got a jump on it this time. I'll keep an eye on this and write about here....

Bummer....

http://www.nytimes.com/2007/11/09/busin ... ref=slogin
http://bigpicture.typepad.com/comments/ ... -wors.html

Oh, yeah. if you can't face losing a lot of money without laughing about it, you may not be able to hang with me...Clickonnit!!!!

http://www.youtube.com/watch?v=SJ_qK4g6ntM
http://www.youtube.com/watch?v=axAjb6fDsPY
http://www.youtube.com/watch?v=NAt311OlM7U

See ya at the track.

A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort.
--Herm Albright

Chartzes and table Zup...

Workin' hard to get my Ira's 'n 401 to perform this year in a bidirectional market. It take as much guts as it does brains. Risk vs reward and ya can't surf the investment oceans without gettin' soaked occasionally. And if'n it all works out, the thrill counteracts the chill. Works for me in the long run. Which for me is different from what you think it is. For me, the long run is what you end up with after all the short runs are tallied up.

I've gotten my nose bloodied good learning how to handle my money. Most of the mess was caused by learning why I couldn't just rely soley on putting my money down on something someone identified as a good investment "in the long run", having faith, "taking pain", and hanging on. Successful investing is more complicated than that. If I was dialed in to what was really happening; if I had access to a lot of raw economic data, if I ground the data up myself, if I knew about all the executive suite strategic initiatives, if I had ongoing measures of the success of execution of the initiatives, and if I knew the course changes being put into place at the lower levels of the companies, I could invest for the long run as most everyone understands it. Provided I could change my mind about staying with it at any moment.

Most everyone understands the long run as they would like it to be. You buy once, you stay put, and that's all there is to it. Ya just gotta believe and hang on. I'd have to see it everyday to believe in it. Enron, Microsoft, Apple, Google, Worldcom,and General Electric have had their believers. All of the believers made money. Some of them made a lot of money and still have it. Some of them only made a little money. All the believers lost at least some money and some of them lost all of it. Faith based investing is really hard and dangerous.

It's hard for some people with less faith to believe there are one decision stocks so they are more comfortable looking for one decision investment advisors or mutual funds. Life should be so easy. My life ain't 'cuz I've done the due diligence and looked over the edge. Check out the COFGBLOG Essay pages, the chart pages and the Fund Alarm pages of my site.

There are long term trends. If you can identify them, you can ride them and make some money. The sooner you can identify the end of the trend, the more money you can keep. The sooner you can bail out an investment that was a mistake, the less money you lose. The sooner you get comfortable with playing hardball with your money; grinding out the profits and exterminating losses, the better your results. The key word is soon. Soon is not about faith, it is about getting something done in not much time. Put together successful day, weeks, and months all in a row, a lot of short measures of time, and all of a sudden, ya got a long run.

So I went with the trend in the long run one week, at at time. The charts and tables say it all. Now I'm leery of a trend break, and whereas I weighted some of the 401 fundz pretty heavily, now I gotta weigh weighing heavily in the GIC.

Want some clarity about the past? Check out the Fund Alarm tables and the charts page. There is a pretty important tale to be told there.

Stay Tooned.

Chartz and Tables Zup!!


There's the stock market and also the market of stocks. We've had some great days in the indexes and individual stocks...but a lousy month in the same stocks prior to many of the great days. It's a serious traders' market where you can scalp serious profits if you are a serious trader. But I'm busy doing tool installs and building a paycheck and racking up hours for the medical plan and 401. So I've reviewed the charts, looked at the year's results so far, declared victory and moved mostly to the sidelines 'cuz I don't like what I see. I started Monday at 20% stocks and I'm adding another 10% stocks to that because my preferred mode of operation is WFO. And for me here and now, 30% stocks/70% cash IS WFO. And I've always got the door in sight.

I'll let you know how it works out......

UPDATE!! It works out PFG...

I'm up to 50% stocks and wondering WTF is going on. Granted the market pays attention to what it thinks is important and it has a mind of it's own. Still, at some point, stocks, will go down. I just don't know when.... So I'm makin' money being in stocks and I'm also halfway out the door too soon and too many times this year. But that's how you make it and keep what you make. So I'm stickin' with what got me here...

I'm toast. It was a super full three day weekend. It was back to the track for a heat check Monday. I wanted to see if I still had the fire inside. Do I sell all the sport bikes and buy a Goldwing w/ an awning and refrigerator 'cuz I'm old? Or do I buy a new ultragnarly crotchrocket sportbike to keep a promise to myself? Besides, my apprentice was talking silly about about riding fast onna street and I ain't gonna put up wid dat.

So I booked us both for the California Superbike School at Sears Point. His first time and my 7th. I ran a tank fulla sour gas outa my 929 on Sat and flogged for 14 Hrs straight Sunday doing what I shoulda had done already. (Just like a real race weekend.) That includeds taking the old tires off the wheels hunkered down on the garage floor with a pair of tire irons and putting the new tires back on in an hour and a half. I got most but not all the stuff done and loaded the bike up with a new Ohlins, fresh unbroken in race tires, and brand new brake pads.

Before I left for the track Monday AM, I lightened up up the 401 to 50% stocks. I pulled the max from each American Funds that the trading restrictions allowed, and half the position in Calamos cuz I could. The American funds dictate what I have to do there and I suspect that Calamos is big in Apple. The order executed after the market closed Monday. I done well as of Tues PM. I cut my exposure to a risky time in the market and still maintained some exposure to some upside. Which we got.... but...

The CSS has a VERY structured curriculum. My first track session was two gears and no brakes. The new SP layout (I last raced in '99) is significantly different. Being an ex racer and being used to scrubbing in my tires on the warm up lap, I got it done easily in the half dozen tiptoe laps of the first session and I got a rough reading on the new sections at the same time. As I started out on my second session, two gears and light brakes this time, the bike felt so goddamned good going up into Turn Two that I dialed it up and started looking for who I used to be right then and there on my out lap. It started to come back a little at a time.... When I got into the pits after the second session, the chief instructor walked past and said, "Joe! You looked like a crusty old racer out there!" I walked past a group of guys my age and one spun around and pointed his finger at me and said, "You! You're that fast guy!" I immediately denied it.

The day was a perfect indian Summer day and I got closer to who I used to be each session. I had a string of totally dialed laps in the last session. The fire inside no longer rages, but it's still hot to the touch. I'm still the COFG! See ya at the track.

Stay tooned about the 401.....

UPDATE!!!!!!!!!!!

I'M SET TO GO TO 95% CASH THURSDAY AFTERNOON...STAY TOONED...