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Thursday, July 30, 2009


Who is Greg Craig?

According to Mary Anastasia O'Grady in her Monday "Americas" Column in the WSJ,
http://online.wsj.com/article/SB10001424052970203609204574312363465346516.html, White House Counsel Greg Craig is most likely President Obama's most influential advisor on Latin America. That is a pretty scary prospect given Mr. Craig's known leftist proclivities and his history (he was the lawyer in the Elian Gonzalez case who advocated the forced return of the 7 year old boy to Cuba).

This explains in large part the Administration's 180 degree policy error in the Honduras affair. This week, the Administration symbolically terminated the ambassadorial privileges of four of the leading figures in the Honduras government, including the Court Justice who determined that former President Zelaya should be arrested. The continuing support for Zelaya and US pressure on the interim government of Mr. Micheletti is a source of embarrassment and shame to all Americans who believe in liberty and the rule of law (which Zelaya was about to subvert when he was forcibly removed from the country in his pajamas).

When Craig and Obama throw our lot in with Communist thugs like Castro, Chavez, Morales and Ortega instead of true advocates for democracy, you have to wonder about their political philosophy.


Just when it seemed that the health care "reform" bill could fade to oblivion, the Blue Dog Democrats and the moderate Republican types (Grassley and Snowe), claiming to have won compromise and cost reduction, breathed new life into it. Of course, "progressive" Democrats (socialists, really) were apoplectic about the replacement of a public insurance option with non-profit co-ops in the bill, but the reality is that the bill would put the camel's nose in the tent and it is still a very bad bill. The conservative (for Democrats) blue dogs always give in at the end, exchanging their votes for what prove to be meaningless concessions. So it should not come as a surprise that the fight goes on, even in the face of cascading poll numbers for health reform efforts.

Defenders of private health insurance and freedom to choose medical services need to continue to communicate and keep the pressure on during the Congressional recess. Congressmen in contested districts need to know that a vote for socialization of our medical system means the end of their terms in office in November, 2010 .


Meanwhile, whatever the problem, Dems in both the Congress and in the high - tax state legislatures all seem to have the same solution. Tax the top 1% of the people, surtax them, find their foreign accounts and put them in jail, curtail their bonuses, etc. You'd think the executive class was a bottomless pit of money. But how are we supposed to reinvigorate the economy if we reduce bonuses and salaries, tax employment at small businesses, curtail conventions and business entertainment, etc.?

The musings portfolio is up about 13% this year, and we are now only about 20% from our peak, but it's no thanks to the politicians of this country who have exactly the wrong answers. If they actually get their way and turn the US into a Peoples' Republic, that will be my signal to sell it all and give up investing. Our formula can work under capitalism, but I don't have an investing strategy that works under no growth socialism.

We reported previously how bank regulators, particularly the FDIC, were pressuring community banks to raise excess capital or face being shut down. One of our stocks, HNBC, missed its June 30 capital raising deadline as expected, but we continued to buy in the face of the threat, warning all the time that this was a very high risk strategy. Our last such buy, for our IRA was at the ghastly low price of 4.14 on July 13.

On over the weekend, HNBC received a takeover offer from another one of our stocks, FNFG, for 5.50 in stock. So we sold those 500 shares on Monday, getting 5.26. We'll keep the rest of the shares (a loss position by the way) and take more FNFG stock. In its earnings report this week, HNBC reduced its good will asset by enough to take its book value down to 5.50 a share in line with the takeover offer.

On July 22, we sold 100 shares from the IRA of Lubrizoil (LZ) at 53.75. The shares were purchased on 9/15/03 at 33.46. Then on 7/27, we sold 100 shares of JM Smuckers (SJM) from the IRA at 50.62, a small gain on shares purchased 1/19/04 for 46.22. We will keep selling into this rally until our cash reaches its 20% target allocation.

Tuesday, July 21, 2009


A Great Fifty Something - Tom Watson

Tom Watson has always epitomized the best in golf - a really great player and competitor who always carried himself with dignity and class, popular with spectators and fellow competitors, a good and available interview for the media, a stickler for the rules (his occasional tiffs with Gary Player over rules interpretations were legendary), and an athlete who avoided controversy away from the golf course. He did not use his sports celebrity to advance dubious political causes or for other kinds of self aggrandizement. He simply performed, consistently and fairly. So it was natural for everyone, and I mean everyone, to get caught up in Watson's brilliant and unlikely run at the British Open Championship last week, that saw him make a truly unlucky bogey on the 72nd hole to fall into a playoff he then lost to a fellow American in the prime of his career, Stewart Cink.

The Golf Channel interviewed the greats who competed against Watson in his prime about the tournament, notably the Big 3, Nicklaus, Palmer and Player. As usual, Nicklaus hit the right note, talking about how much he wanted Tom to win, the disappointment that he didn't but the awesome accomplishment in coming so close at age 59. I thought Palmer largely missed the point, repeatedly saying how awful and sorry he felt for Watson that he had lost. Perhaps Gary Player, of all people, who had the most testy relationship with Tom, had the best perspective. He said it was a credit to the talents of the senior golfers on the Champions Tour that their games remained at such a high level that they could still compete, and that we should all take joy and heart in Watson's accomplishment, and not be despondent about the result.

That seemed right to me. Sure, it would have been cause for quite a celebration if Watson had parred number 72 (or if Cink hadn't birdied) but I never expected him to hold the lead and to me, the being there and performing as well as he did, even on that last unlucky hole was the point. It doesn't matter to me that he didn't win. Seeing a legend from my generation leave another reminder of his greatness, after all these years, a hip replacement, etc. was enough.

By the way, one trend I am noticing in sports that I like very much is the return of some modesty and admiration for fellow competitors. When Muhammad Ali exploited the gimmick of self promotion, including his reveling in victory over prostrate opponents, predicting knockout rounds, etc. it was a novelty and fun, a rebellious slap at the mores of an older tradition. All of the copycats since have grown quite tiresome and offensive, since they usually lack his playfulness and humor.
It's good to see and hear winning athletes praise their opponents and admit that there is more than a measure of luck involved in winning.

One of the lasting impressions of Sunday's finish for me will be the flash picture of Watson's playing partner, Matt Goggin, waiting on the last green and joining in the applause as Watson strode up the fairway to the cheers of the huge gallery. Goggin had made sure to reach the green early so that Watson would have that spotlight to himself.

There is simply no sport like golf and no people like golfers.


Hillary Clinton may not be reminding anyone of Henry Kissinger as Secretary of State, but she is bringing back memories of the late Ron Brown. In case she hasn't done that for you, Ron Brown was perhaps the most effective of Bill Clinton's administration's inner circle as Secretary of Commerce. He basically rewrote the playbook for that job, promoting opportunities for American business around the world.

While Mrs. Clinton failed miserably on her trip to India in forging an agreement about carbon control (which I attribute to the good sense of her Indian counterparts more than to any lack of negotiating ability on her part), she did succeed at clearing the way for US companies to build two new and much needed nuclear power plants in India and for our military industrial complex to supply billions of dollars of weapon systems to our largest democratic ally. All in all, a really great result from my point of view.

In other good news from the Administration, it appears that the Obama all or nothing campaign to promote a health overhaul bill, a cap and trade bill, and card check in the first 200 days is all coming a cropper. The American people are finding change you can believe in to be change they don't really like and they are getting the word to Congress. All those rookie and third year Dems from competitive districts have realized that their Congressional careers will be very short ones if they go along with Obama so everything is getting put off. That will only give opponents of these changes more time to press their points.

We knew it was going to be a long four (or eight) years with the teleprompter reader-in-chief at the helm but now it may be a little dull too. And that's fine with me.


On Monday, we sold 300 shares of Books a Million (BAMM) out of the IRA at 9.70 (purchased on 11/19/08 at 2.20. Well be selling tomorrow too. This run has us up a little more than 9% year-to-date now so we are a bit short of our targeted cash allocation. We'll count it as cash, but since cash is yielding nothing right now, we also bought a $50,000 New York State Thruway Bond, triple tax free for me, with a 2.5 percent coupon (we had to pay a little premium for it taking the effective yield a little south of 2%). It's short money, only two years, so for allocation purposes, we can treat it like a money market investment.

Many of our stocks have yet to really rally though, so we are just patiently waiting to see which one will be the next BAMM - like performer. In the meantime, we got a small dividend increase from Lindsay (LNN), a decent earnings report from PCP which the Street did not like for some reason, and some bank earnings reports that we are studying pretty carefully.

Thursday, July 16, 2009


Secret CIA Plan Involved Spying - Dems Aghast

So it finally came out. The info that the CIA withheld from Congress was not the news about "torture" as Ms. Pelosi would have had us believe, but it was about a plan, never implemented to target Al Queda leaders for assassination.

So, Pelosi is still a liar. At least we got that resolved.

Now about this shocking secret plan, isn't this what everyone thought the Bush Administration was doing for the last 7 years? Didn't I see President Bush in Manhattan on September 13th or whatever, 2001, screaming into a bull horn, vowing to get the guys who knocked our buildings down? How was he supposed to do that, issue subpoenas for them to appear in Court?

The shocking news in all this of course is that the assassination strategy was never implemented. Surely, we all thought that the CIA as well as the armed forces were spending every business day trying to get bin Laden in their gunsights and fill him with lead. But it turns out that the Bush Adminsitration wasn't so inept they couldn't find him, it was that they weren't even trying!! This has to come as a gross insult to all those who knew and loved anyone who died on 9/11/2001.

Of course, when Leon Panetta came to run the CIA and found this still to be in the planning stage, he immediately aborted it. I guess this administration just has to abort everything of any value - they can't help themselves.

The Social Democrats in Congress haven't said a word on that score however. The affront to their way of thinking is that the Administration drummed up the possibility of such a strategy without disseminating the information to them. While they were at it, they might as well have phoned up bin Laden and given him fair notice too.

Reading all of this, one can only shrug, try to maintain composure, weigh all of the issues, and then scream at the top of one's lungs, "WHAT THE #!@& IS GOING ON WITH ALL THESE SCHMUCKS AND PUTZHEADS IN WASHINGTON? Isn't there anyone with a functionally operating brain?"

Apparently, the new Administration is no more gifted than the old one or than Congressional leaders. Hillary and Barrack, after being summarily turned down by the (now illegitimate) government of Iran relative to their offer to "negotiate" concerning Iran's nuclear program, have given them until September to come to the bargaining table. That should have the Mullahs shaking in their collective sandals. I wonder what happens if they turn us down again. I know what happens if they agree to talk. Nothing.


Meanwhile, though no one can explain to me exactly what a health bill will accomplish or why the new system will be better, we seem still headed in that direction since it's fairer. It is only fair that instead of the majority of people enjoying access to high quality care, we should spend a lot more money so that all of us have occasional access to mediocre care. My main concern is that the process of passing this bill will make me sick, and I won't be able to find a solvent doctor or hospital to make me well again.

Somehow, this has become Obama's highest priority. The irony is that after his time in office is over, when America's smoker - in - chief inevitably becomes ill, the incredible health system Americans have evolved that has turned some of the scourges of past generations into chronic diseases many of us live with, will no longer be around.


Just when everyone was predicting disaster for the market, and a retest of the March lows, we went off on a high-spirited rally that even has the perma-bears making ambivalent cooing noises at stocks. After selling most of May and into early June, we have been mainly on the buy side since, so the timing of the rally was friendly, attributable to the formula we follow here, not to any sixth sense I might have. This week, we bought 500 shares of Harleysville National (HNBC), a zero buy, at 4.14 and not for the faint of heart. Yesterday, we bought 700 shares of Frozen Food Express (FFEX) at 3.44. Though neither of these buys are in the money yet, that is not surprising since our market orders move the market on these thinly traded stocks and we don't really get bargain prices. But we are very patient.

By the way, we have watched in amazement as Books A Million climbs higher and no, it doesn't bother me to have already sold 1100 shares during this rally. The formula is designed to take profits a little at a time, so we don't lose sleep about not catching the top. Frankly, I hope it just keeps running. We will probably take more profits next week.

And here is a new feature! You can see the Redwavemusings portfolio of common stocks in all its glory on Bloomberg.com. Go to Personal Finance, click on Portfolio Tracker, enter User Name - redwave72 and password - musings. You will see five portfolio's which are really just the musings portfolio in alphabetical order. Please don't edit or change the data. (Unfortunately, I cannot restrict this to view only).

Tuesday, July 07, 2009


Joe Biden Can't Help Himself

I am imagining someone in the Administration, probably Chief of Staff Emanuel or maybe even the President, sends Vice President Biden a weekly reminder to engage brain before mouth, but as we all know, good old Joe just can't help himself, so the truth, at least as he perceives it,is always a threat to come out. When he served on the Senate Judiciary Committee, this usually took the form of baiting conservative nominees so no one thought much about it, but now when Joe makes the rounds of the Sunday morning TV news shows, what slips out is a barely softened version of what we're all thinking, namely that this administration, despite believing that it has assembled the smartest people in the world, is actually run by a bunch of klutzes and worse.

So Joe in recent days has talked about how the administration misjudged how bad the economy that they "inherited" really was (inherited from whom - the last Democratic Congress?), and how the stimulus is not really getting out there so maybe we will need another stimulus package, and maybe McCain's idea about taxing health benefits wasn't so bad (yes it was), and if the Israeli's choose to take out the Iranian nuclear facilities, that's their decision and they could just go ahead, etc., etc.

The other thing I have noticed is that people of all political stripes, even many who voted for Obama are griping out loud. It's Obama the socialist, Obama blowing it on foreign policy everywhere, Obama not sticking to his liberal guns, etc. Man, he must feel almost as beaten up as Sarah Palin! But, unfortunately, liberals never resign, they tough it out even when they're caught red handed, government "service" is their life you know.

As for Sarah, I think she just needs to make some money, and to stop spending it defending herself against all of these politically motivated and absurd lawsuits. Besides, hiding out in the boonies of Alaska is no way to get rich, famous and powerful. If John McCain hadn't ferreted her out to boost his flagging campaign, no one would know who she is.

Meanwhile, the embarrassment that is our stance on Honduras continues, despite the prevailing national sentiment that we are on the wrong side. When will Mrs. Clinton and her boss have their epiphany and realize that they are in bed with Communists and thugs on this one?

I feel a little like Bob Dole in 1996 these days. Where is the outrage? Yes I hear it among the folks in my circles, but do the masses in the minority communities who overwhelmingly voted for Obama see the error of his ways yet? I doubt it. What needs to happen, and I know this goes against the grain of the typical apolitical American, is that the outraged among us simply have to make our voices heard. Blogging and commenting and e-mailing on the internet is helpful, but there is no substitute for communications - letters, e-mails, phone calls - to your Congressmen, Senators, and the White House. People have to go on record that they want us to line up with the new democracy in Honduras, not the would be dictator who tried to abrogate the country's constitution, that we need to do more than make idle threats about sanctions with respect to North Korea and Iran, that we don't want to spend billions, even trillions, to replace our current health care system with one that rations care in the false hope of "insuring everyone," that we oppose card check and cap and trade, that we want to see more than models as proof that global warming is man made before we determine that carbon is a pollutant, that we want school choice instead of monopoly public schools that fail to teach, and that before we begin stimulus 2, we should fix stimulus 1, where only 10% of the authorized funds have been deployed. How about applying less of the stimulus to infrastructure projects we can't get off the ground and more to helping small business put people back to work?

But if Congress and the Administration don't hear our outrage, they will proceed down their socialist path with impunity. The social democratic cycle of success - keeping minorities poor, pretending to play robin hood for their benefit to win their votes and retain power, giving them fish instead of teaching them how to fish, - will continue. The Administration hopes to bring universal health insurance, cap and trade, etc. to a vote within the next six months. The time for clear expression is now.


Outside the US, the socialist retreat continues. Bulgaria is the latest to throw out its leftist government in favor of a center right party. I wonder if Obama wakes up every morning wondering why everyone else in the world is out of step.

I know Karl Malden was not everyone's cup of tea as an actor. He played every role intensely, probably a carry over from his early days on the legitimate stage. I always thought he was an underrated actor who made everyone else he worked with better, and quite a number of the stars he worked with won various awards, indicative of that quality. His performance in Patton, I thought really grounded and contrasted with George C. Scott's bravura performance in the title role and allowed him to go as far over the top as he wanted. He could also play the heavy - remember him as Jimmy Pearsall's father in Fear Strikes Out. In my book, he was a workmanlike actor, often a forgettable second banana, who made every movie he was in that much better.


The market is giving us a pretty good correction, reversing much of the spring advance, and threatening to retest the lows. We'll see. On July 1, we sold 300 more shares of Books A Million (BAMM) out of the IRA at 7.12, all purchased in November of last year for 2.20. Yesterday, we were active in the preferreds. We traded out of Citigroup (C.PR.S), selling all of our 6% preferred for 12.84 (400 purchased in August of 2004 for 24.46, 200 last January for 14.75), the loss not helpful since it was in the IRA. We bought 300 shares of an ING preferred (ISP) for 14.57 and 400 shares of an Aegon preferred (AEH) at 14.00. The idea is to remove the threat of Citigroup imploding while still maintaining most of the risk in financials at a similar price but diversifying out of the US. Also, CitiGroup made an almost incomprehensible offer to exchange the shares for Common stock, which I would not want to own. It's possible that the conversion of other preferreds would have made my preferred shares that much more secure, but where the Government is converting, I don't trust them to honor the preferred status if financial trouble hits. Especially after what happened to owners of secured Chrysler debentures. So the easiest thing was just to trade out of the name. It only hurt for a second and now I feel much better with the shares I traded into.

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