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Thursday, July 24, 2008

 

Dog Days Musings

Summer in New York - what Mayor John Lindsey used to call Fun City - is in some ways the best of the seasons, despite the fairly steady diet of heat and humidity. One fun thing to do is to go see a big time concert in Central Park, which I did for the first time last night. The headliner was Mark Knopfler, a prominent figure in the Musings list of top ten guitarists (ever), playing with a few of his erstwhile Dire Straits tourists and others. The show combined enough new songs, recent solo hits, and of course those old Dire Straits goodies (Romeo and Juliet, Sultans of Swing, etc.) to keep the large but well-behaved crowd floating on air for a solid two hours. Knopfler's low register vocals are what they are, but they are distinctive and beautifully set off the clear, upper register guitar tones that are what his fans come to hear. All in all, a more than satisfying show in a spectacular setting.

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With Barack touring the world, trying to look at least a little Presidential, the pundits continue to express frustration and confusion concerning the election race, which frankly doesn't even officially start until the conventions. I guess most of them are frustrated because they don't yet see the clear path to an Obama victory in what everyone figures to be a Democratic year. If anyone bothered to poke under the hood, they would see instantly why no one can figure out what Obama really stands for. Take Iraq. He has moved from a position of rapid withdrawal to a 16 month phase - out depending on conditions, in effect the same as what the Dems would describe as the Bush/McCain position. Yesterday, the headlines were about Obama's suddenly strong anti-terror stand. On the surge, which he voted against, he is now strangely silent, since he was so clearly wrong. That, I understand. Politicians are taught to ignore their own mistakes and that's fine, but for some reason it was such a crime that President Bush would not admit error. On issue after issue, Obama, as he learns about reality, is adopting more responsible positions, to the frustration of his zany liberal base.

We now have the Dems in Congress avoiding a vote on extending the ban on off-shore drilling (because they know they will lose). It goes on and on - we have only a few years to see the rehabilitation of George Bush on the issues that really mattered (though there were plenty he blew).

So it is no wonder that McCain hangs in, since he is an authentic, if uninspiring candidate. One wonders if Obama will retain the enthusiasm of his youthful base if he continues down this road. If they don't turn out, this election will be another cliffhanger.

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It looks like Musings was (belatedly) right on the price of oil after all. After running past our expected top of $135, briefly hitting $145, oil has retreated to the 120's and what we are reading about is the demand collapse, which is what prompted our call in the first place. The combination of the high cost of driving and looming recession (worldwide?) has the demand side spooked. Hopefully housing can bottom within 6-9 months or so, and then we can have some kind of economic recovery.

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Lots of news about the stocks on our buy/hold list. It is earnings season, after all. ADCT is suffering from overcapacity for the umpteenth time. Great earnings report for AXYS. Also BG. Those small banks (smaller than regionals) that never relaxed their mortgage lending standards to ridiculous levels continue to perform, including BMTC and FNFG. DOV had good earnings, but not enough impact on shareholder equity. Good report for ECL. GE found a new source of equity capital - you're never too big to tap good sources of green. Somehow, the small truckers are doing a great job juggling their higher costs - good reports from USAK and KNX. LDG appeared on a short list of acquisition candidates in the WSJ, but I've been waiting an awful long time already. I think LNN has had its correction and might have another run in it. PFE is getting better press, but somehow it became an income stock. Looks like the merger of SIRI and XM will finally be approved, but not before the FCC extorted another $20 million from them. TMO was up a nickel despite today's general wreckage - it should have another run-up too. You would think that since copper topped out, we could get a recovery in WLVT.OB, but so far, no good.

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On Bastille Day, I bought 400 shares of Marine Max (HZO), the leading player in the beleaguered boating business, at 5.32. Then on 7/16, I bought 100 shares of Quanta Services (PWR) at 31.48, which Cramer then mentioned favorably this week. This was for the IRA - it is a recommendation from the full service broker, and I think another one that will turn out well. On Monday, we came back with a purchase of 300 shares of Boyd Gaming (BYD) at 9.30, a "zero buy" that looked positively brilliant until today. Yesterday, I executed the first sale in a month-and-a-half, selling 100shares of Petroquest (PQ) at 21.67. Obviously, we missed the top pretty badly but we have plenty of shares left. These were purchased at 4.93 on 7/28/04. Love them quads!

The obligatory disclaimer - neither Redwave Musings nor its author are registered investment advisors, nor do they pretend to know anything about much of anything. Especially stocks. The ones mentioned here may not be suitable for readers (or the writer).

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