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Saturday, August 30, 2008


Miss a Week and Get These VP Candidates?

The only explanation I can think of is that neither Obama nor McCain actually want to be President, they just like to campaign. They both go into the tank, vet all these possibilities, we wait for the puffs of smoke, and this is what they come up with?

Joe Biden is far from the worst U.S Senator, although his often snide attitude is not very pleasant theater when Judiciary Committee hearings make it to TV. It is acknowledged that he has done considerable, though often flawed, thinking on foreign affairs, and he has shown courage dealing with health and family issues throughout his life (he overcame brain aneurysms and lost a wife and child in an auto accident).

Having said that, he delivers no state of any value to the campaign effort (the Dems will win Delaware anyway, and his PA roots are long forgotten), he has no executive experience, he is very much a Washington insider in a year when the electorate wants anything non-Washington, and his national campaign record is exclusively one of failure (two quickly aborted tries for the Dems nomination).

So McCain counters with the first term Governor of Alaska, Sarah Palin, former small-town Mayor, beauty queen, and high school basketball star. Ms. Palin enthusiastically rises to meet the challenge despite the burden of a young family of five children including a 4 month old child with special challenges. Alaska is a state which if McCain were to lose, the election would not be close, so it can't really matter that an Alaskan is on the ticket. Ms. Palin is a very popular governor so her limited executive experience is helpful but unless she has recently taken her kayak across the Bering Sea for a visit to Russia, she has zero international credentials. This undercuts one of the GOP's main attack lines against Obama, particularly since the GOP candidate is 72 and the possibility of succession by his VP must at least be considered.

One can only assume that the opportunity to exploit the Obama campaign's fallout with Hillary was irresistible, since the McCain campaign could have reached out to Governor Pawlenty of Minnesota, putting that state in play, possibly increasing their advantage in Wisconsin, and gaining a more experienced executive. The youthful Ms. Palin may prove to be every bit the rock star that Obama is, but one has to believe that both candidates underachieved in the category of VP selection, which is less important in and of itself than for what it says about the judgment of the candidates at the top of the tickets.


Maybe I am in the minority, but to me, the Dems convention was relentlessly boring, scripted to a fault, and revealing of a party whose socialist tendencies seem to be taking over. The succession of everyday speakers bemoaning the failure of the Federal social net to come to their aid fast enough or strongly enough was nearly as nauseating as the Clinton's trying their best to look like they were making nice to Mr. Obama (and each other). If anyone thinks that Bill and Hillary will be out there enthusiastically beating the Obama drums this fall, I've got a bridge that's for sale.

We'll see if the GOP can do any better this week. I wonder if there will be any rational summarization of the achievements of the current administration. The big lie, successfully banged into everyone's head the last eight years by the media and Dem leaders, is that the Bushies stole the election(s) and didn't do anything right once elected, and worse, maneuvered the country into a war of revenge. Everyone since Hitler knows that the secret to making people believe the big lie is to repeat it often enough until it is accepted truth. You see the same approach in Iran's campaign against Israel. The GOP would do well to provide the upside of the last administration, and there is considerable upside to talk about (victory in Iraq, no terrorist incidents since 9/11, speedy recovery from the recession the Clintons left behind, Federal revenue increases after the tax cuts, particularly from the top 1-5% of earners, low unemployment throughout, etc.). They would also do well to discuss the failures (swollen Federal expenditures, weaker dollar, twin deficits, open seats in the Federal judiciary etc.) and assign sufficient blame to Congress where warranted.

The McCain speech should remind everyone of his courage and of his history of independent and ethical decision making. He should be forthright about his determination to advance the interests of U.S. and Democracy around the world.

By all indications, this election figures to be another cliffhanger, to be decided in two or three key states.


Interesting that College Presidents favor lowering the drinking age to 18, if not lower. This blog, over two years ago, proposed that the drinking and driving ages be switched, lowering the drinking age to 16 and raising the driving age to 21. It would be a much safer world if kids learned to drink before learning to drive, instead of the other way around.


I am also proposing that the Dems rename their party to the Social Democrats, or something more befitting their philosophy of socialist redistribution. Though they are couching their proposals in conservative vocabulary, as befitting the post - Reagan era, their ideas all seem aimed at minimizing the private sector while expanding the public sector. And in the name of "fairness," which trumps incentives in their view, there does not seem to be any end to their appetite for tax policy that redistributes wealth, that stymies business while enabling unions, that increases our risk while enriching the plaintiff bar, etc.

To illustrate, I offer the following imaginary interview between a Man of the Street (MOTS) and a Young Dem (YD) organizer trying to register and recruit Obama voters:

YD: Hi, I'm trying to register new voters who might support Barack Obama with their vote this November. You look like you're having a tough time right now, what do you think?
MOTS: I really don't have much time for politics...
YD: But your vote is so important this year, we can make change that matters, you can make your life better...
MOTS: What's going to change?
YD: Mr. Obama will be giving you a tax cut
MOTS: I don't work at the moment, so I don't pay no taxes.
YD: Your job was probably transferred overseas but that doesn't matter, you will still get a tax cut in the form of a tax credit. The Government will send you a check!
MOTS: That sounds good. I guess, I can use a check if I can find a place to cash it somewhere, but where's that money coming from.
YD: That's simple - we're going to raise the taxes for the rich fat cats who got all the tax cuts from Bush.
MOTS: Well OK, as long as they keep work' and keep payin,' I guess I can take their money...
YD: Damn right! Why should they have all the money?
MOTS: Well I can use some, I'll tell you that. Just one thing I worry about is that those rich guys will turn around some day and decide they ain't workin' no more since all their extra money goes for taxes. Then where will my tax credit come from?
YD: Don't worry, those rich pricks never have enough, they'll keep working.
MOTS: Well OK, but I don't know, it sounds a little bogus to me, I don't know about this votin' thing.
YD: Well, what about health insurance? Don't you want health insurance? Mr. Obama will get everyone health insurance.
MOTS: Well, I don't know what I'm going to do with insurance but it sounds pretty good.
YD: Well what do you do when you get sick?
MOTS: Nothin' unless I have to go to the emergency room at the hospital...
YD: Well now you won't have to wait until it's an emergency, you can see a doctor before you get sick.
MOTS: If I'm not sick, how do I know when to go see the doctor? Anyway, if I go to the doctor, don't I have to pay?
YD: That's why insurance is important, you pay only a little, the insurance pays the rest.
MOTS: Guess I need it then. Those rich guys gonna pay for my insurance too?
YD: You bet, the Government will pay out of the tax increase for the wealthy.
MOTS: All I can say is they better keep makin' big money, those rich guys or there be no emergency room, no health insurance, and no tax credits.
YD: Don't worry, they love to work. So are you registered?
MOTS: In Michigan where I used to live
YD: And you're going back there to vote? we could really use your vote there in Michigan, it's a swing state, not like NY.
MOTS: You crazy?
YD: Well, we could get you an absentee ballot...
MOTS: You are crazy.
YD: OK, how would it be if we had one of our people go to the polls there and vote using your name?
MOTS: Nah, I can call my cousin back home, he could take care of it.
TD: Sure. Thanks anyway, good luck.
MOTS: Let me know when that credit's comin' OK?


On Aug. 19, I bought 200 shares of Ladish Co. (LDSH) at 26, a 0 buy and a new name recommended by my full service broker. On 8/20, I bought 100 shares of Belden (BDC) at 38.63 for my IRA. On 8/25, I sold 100 shares out of my Longs Drug position for 73.31, 1.81 above the tender offer price. This has occurred because the hedge funds think they can find a buyer to pay more than CVS has offered, a doubtful prospect if you ask me. These were purchased on 2/18/03 for 15.21. We still have 300 left. On 8/27. we added 100 shares of Loews (L) at 41.87, a value buy.

Thursday, August 14, 2008


Hot Buttered Soul Star

The news that Isaac Hayes passed away this week at 65 was another reminder, not really needed, that my generation's icons have begun leaving the scene. Ike Hayes was a star whose talent actually exceeded his considerable fame. He was an effective vocalist with a deep voice that reeked sex, a style later parodied by Barry White. He was a talented keyboardist, having played with Stax sensational house band, Booker T and the MG's, backing immortals like Otis Redding (that's Ike on piano on "Try a Little Tenderness"). He was a sensational record producer, though his choices sound a little over the top in some cases now. Hayes was a good songwriter too, and his album cuts feature excellent compositions as well as great covers.

I'll never forget my first hearing of Ike Hayes and the impression it made. In the very early 1970's, I did a 3 hour late night weekly disk jockey show on our college radio station, WHRC. My show featured mainly oldies, mostly soul, since I wanted to do something a little different and at the time, everyone was playing the great current rock bands. I had quite a few regular listeners both on our campus and at Bryn Mawr College. One Monday night, I brought my records up to the station studio for my show and arrived as the DJ before me was cuing up her last record. She was a black student from Bryn Mawr and the record she played was the Hayes version of "By The Time I Get to Phoenix," a Jimmy Webb song that usually made me wince because the hit Glen Campbell version was so insipid.

The Hayes version, which runs almost 19 minutes, starts with one of his famous rap setups (talking over the rhythm section, not rap as we know it today) and then glides into this beautiful, emotional rendition, a perfectly lush production. Hayes had the insight to enhance and exploit the improving stereophonic capabilities of the day, and the instrumentation contrasted beautifully with his deep baritone. I was totally blown away and I think it was the first time I ever really heard and understood the emotional power of Webb's lyric. "Who is this" I asked and she handed me the album jacket (remember those?). Of course, it was Hot Buttered Soul, Hayes' breakthrough second album that also included a creative and effective cover of the Bacharach - David tune "Walk On By" (made famous by Dionne Warwick) and a Hayes composition 20 years ahead of its time, "Hyperbolicsyllabicsesquedalymistic."

The follow up album, The Isaac Hayes Movement was more of the same, 3 very good cuts, and an unfortunately overproduced version of the Beatles' "Something," and then later came "Shaft," the peak of Ike's commercial success. By that time, he had laid the foundation for disco, an achievement that some came to regret. But Hayes incredible versatility - rivaling Billy Preston and maybe even Gil Evans - had assured his legacy.


Anyone who ever studied Russian history knows that the recent incursion, albeit provoked, into Georgia is as natural as breathing for that country. Russian paranoia is a trait that goes back to the earliest Czars, and the Russians have always felt it necessary to dominate the neighboring countries who provide a buffer against Germany and the other Western powers. Nevertheless, it is all very troubling since Putin has spent the last few years dismantling the private sector and minimizing democracy and liberty. The challenge for the West in dealing with Russia has always been where to draw the line and how to support the nationalist tendencies of the Balkan states without making Russia feel threatened. When we talk about expanding NATO and moving our missile defenses east, that is exactly what makes the Russians go nuts. I am afraid this is a crisis that probably cannot end well for the nation of Georgia.


We got not one, but two takeovers announced this week in our portfolio. First, I2 Technologies (ITWO) will end a mostly ill-fated investment that started out very well. I should have quit while I was ahead. The tax deduction will come in handy. and because of the takeover, the loss will not be as big as it could have been.

The other takeover, Longs Drugs (LDG), was the subject of speculation in a recent post, but this is a stock I have held for years on takeover speculation. The price, about 71.50, will give us a very nice gain. CVS is making the purchase in cash - I will take the cash thank you, as I have no interest in continuing the investment by buying CVS.

Of course, Sirius finally closed on XM, as reported previously, and I am a little more hopeful than the Street that this one can turn out well. We'll see.


On Monday, I sold 200 more shares of Petroquest (PQ) at 17.66, purchased on 9/8/04 for 4.30. Then yesterday, we sold the last 100 shares of Axsys Tech (AXYS) from the IRA at 76.00. These were purchased on 5/17/06 for 16.05, a recommendation from my full service broker, who really earned his keep on this one. All of my remaining shares in this stock now are in his account, and the taxman will share if I sell any of those.

Thursday, August 07, 2008


Straight Talk on Drilling

John McCain famously opposed oil drilling in the Alaskan Wildlife Nature Preserve, one of his not infrequent maverick positions as an otherwise conservative Republican. But now, he is leading the charge for drilling in the shelf areas off the coasts, a no-brainer really, that has suddenly become a strong GOP issue because of the Obama campaign's stubborn opposition in the fact of $4.50 per gallon gasoline. That this is also the unwavering position of Congressional Democrats hasn't yet made its way to the polls for those races, but it will.

So finally, there is a dent in the apparently untouchable dominance of Dems in 2008, as evidenced by McCain already closing the gap with Obama. With oil tumbling to $120 a barrel (we called the top here at $135, a little premature but you get the idea), the question is how low will it go and will gas prices come down fast enough to defuse the issue?

I don't pretend to know, but I don't think oil will make a real stand above $100 per barrel, as demand drops off the table, not only in the U.S.A. but surprisingly, around the world. The laws of supply and demand have not been repealed after all. Even $100 oil will take gasoline only a little below $4 but not enough to level out demand. I think people will continue to limit driving as long as gasoline is above $3 or so. This is bad news for Dems, until they find a way to change their position on drilling.

That they recognize this is evident from the Pelosi/Reid decision to avoid allowing the issue to come to the floor of their respective houses before the recent recess.

So the McCain folks finally have a popular position on an issue important to the electorate, and to leverage their momentum, it's high time to put the straight talk express back on the road, and forthrightly discuss the McCain positions on trade (free trade is good for us and our trading partners), immigration (secure the borders, but don't overly restrict the movement of labor to this country), taxes (keep the Bush tax cuts, pursue a philosophy of low taxes and restraint on government spending), and the environment/growth (pursue reasonable environmental goals but recognize the trade offs with economic growth, making decisions accordingly). All of these positions will be unpopular with someone; maybe the left, maybe the GOP base, whatever. The point is that the favorable McCain image was built on being honest with us and taking positions that reflect conviction and courage. That is the image and behavior that can win this election, and help Republicans avoid complete disaster in the Congress.

Even the many who hate the Iraq war, and did so from the beginning, know that McCain was right on the war strategy and that the surge he recommended effectively won the war. It has made Obama's only international issue irrelevant. Doesn't it seem kind of hilarious to hear Obama call for a surge in Afghanistan? I guess he figures if it worked here, it might work there. The fact is that on international politics, Obama has no clue, and is simply moderating his position to follow events. As he does, he loses credibility and reinforces the GOP message that he is not experienced enough for the job.

If we are not even to the conventions, and Obama has already peaked, the Dems may be looking at another Dukakis scenario (though history rarely repeats). No surprise to Musings readers, but it will be a shock to the media and their friends in the MoveOn.org crowd, and we may see signs of panic next month.


I think the Olympics start tomorrow. Not that we're going to watch, but it's a fact that's good to know in case it comes up in polite conversation.


On Monday, I bought 100 shares of Belden (BDC) a new name that came from my full service broker, who really knows the kind of value orientation I appreciate (low price to book; low or no leverage). The price was 36.97. This was a zero buy that would also qualify as a value buy, just like L did. Yesterday, I bought 1428 shares (72 did not execute) of CardioDynamics (CDIC) at 1.40 on a limit order, a success in this case (a market order would have gone for at least 1.45). I now own one-tenth of 1% of this little company. No 13(d) required yet. Too bad the stock has been such a dog.

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