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Tuesday, November 24, 2009


Climate ChangeGate!!

Regular musings readers have long known that I am a global warming skeptic. That is,
I question whether the climate simulation models used by scientists to finger man - made activities as the cause of global warming prove anything about the real world. In fact, I question whether the data even show anything unusual about the alleged warming trend and whether it is anything that couldn't be explained by random variation, or if it is simply within the limits of the various natural heating and cooling trends the earth has been subjected to throughout recorded and pre-recorded history. I also question whether carbon dioxide, a naturally occurring gas, should have ever been implicated as a greenhouse gas. Not being a scientist, my skepticism is based only on what I read and what logic tells me about the theories suggested and the proof offered.

With the perspective of a comparative instant in time (by geological standards), we naturally believe that the conditions we have known are ideal and best for our evolving planet. But why is that so? It is natural for us to feel that the receding glaciers of the arctic constitute some cataclysm, but is it the case? If we were born during the ice age, when it was natural for a glacier to extend across the North Shore of what is now Long Island, and we got to the end of that Ice Age, wouldn't we have been similarly concerned to see that glacier recede? For that matter, what will man think if(s)he is still around when the next ice age gets going?

I have previously pointed out the political aspect of this debate, and especially the proclivity by the climate change community to heap scorn on the skeptics and make overt use of political propaganda to do so (as with the Al Gore documentary). I find that in polite conversation with people who fancy themselves fans of the environment, skepticism is typically met with derision.

But now we have proof, not of global warming, but of a concerted, purposeful effort by the climate change science lobby to blackball the skeptics, bury data that doesn't conform to their own predisposed theories, and shut off debate. The hacking of e-mail systems used by the global warming crowd has led us to e-mails in which these activities are laid bare for all to see. So now it is incontrovertible that complaints by climate skeptics that they were being politically subverted weren't merely paranoia. In my opinion, this returns the controversy to square one. Let's review the whole science of climate change before taking action on cap and trade or any other anti - carbon, anti industrial hooey. And let's do it out in the open, away from the UN and other politically dominated sponsors, and use real data instead of models.

And if we find that man is warming the earth, let's work with it. Surely, we can find positives and negatives in climate change. After all, why are man's activities any less "natural" than any other earth creature. When the orangutan threw a banana peel at Cosmo Kramer, setting off a brouhaha, the zoo keeper demanded that Kramer apologize to the "innocent primate." But that's what I am too was the essence of the Kramer response, and it's true.


Well, as usual and as predicted here, the Blue Dog Democrats all caved allowing the health care reform bill (i.e. the "Break the Bank Once and For All Act") to go to the Senate floor on a strict party line vote. Don't worry though, say Senators Nelson, Lincoln, Landrieux, Lieberman, et al, we might still ultimately vote against ending the debate we allowed to start. Well, maybe Senator Lieberman will do the right thing, but I don't hold out much hope for the rest. If he does come through, that should end the Connecticut Independent's ties to the party that once nominated him for VP and we will see him run as a Republican if he does try to get re-elected.

Meanwhile, Dems are lining up in circular firing squad formation over the abortion and public option questions, so it is high time for the GOP to formalize its more reasonable proposals to fix our current system into an alternate bill. This would include real tort reform, opportunity to purchase out-of-state and national plans, incentives for HSA and other consumer driven approaches, concerted efforts to sign up the uninsured for Medicaid where they qualify and low cost, high deductible insurance where they don't. Also, make insurance plans guaranteed renewable and require non-profit blues to cover pre-existing conditions, in effect making them analogous to the assigned risk pools common in auto insurance. Why is this so difficult?


When I saw Nicholas Payton last summer at Dizzy's, where he cameo'd as one of Marion McPartland's "friends," I was so impressed by his confident, assured playing that I promised myself to see him the next time he headlined in New York. That time was last week at Birdland, where I visited on Friday night to hear the Nicholas Payton Sextet, scene of a completely sold out house I might add. At $40 a head music charge, that crowd still got a bargain. Playing with an outstanding rhythm section that featured both a drummer and an exceptional percussionist, as well as a singer (Payton sang as well), Payton played with the confidence and maturity he seems to have gained after touring as part of the Blue Note All Stars last winter and spring. At times playing with a cool sound reminiscent of Miles Davis, at other times firing red hot but all the while maintaining a perfect tone, Payton has the speed and power you don't hear from too many trumpets these days. His confidence was further evidenced by the challenging, yet satisfying selection of tunes and his willingness to leave the spotlight to the rhythm section as appropriate.

So it appears the heir to Pops, Dizzy, Little Jazz, Brownie, and Miles has at last arrived and taken his rightful position at the center of the bandstand. We'll let musings readers know when and where Payton's next NY gig will be so you can join the fun.


It's not good when a jet is in free fall, but we have a whole team of them swooning in the Meadowlands these days and the picture is not pretty. I will get a chance to watch the piper cubs in person this Sunday, my first visit to Giants Stadium coming just in time before it faces the wrecking ball. The wreck of a team I will be watching is the story though. I have only one suggestion for our young but rapidly aging and emotional head coach and that is when you have a rookie quarterback, however talented, who is this lost, it would be well to let him watch for a while from the sideline and let the number two guy play a game. Sometimes, that's all a young QB needs to see the big picture a little better and slow the game down some. Then when he gets back out there, I guarantee he will do better and stop throwing so much TO THE OTHER DAMN TEAM! Of course, I would prefer Sanchez not sit out THIS week.


And it looks like some lucky reader will soon be our 3000th visitor, perhaps a dubious honor, but a distinction nonetheless. For that, the fortunate number 3000 will receive our sincere thanks and hearty congrats.

As promised last time, the purchase information on our GIFI sale was that we bought it 11/17/2004 for 19.30, giving us a hard won profit of a couple hundred bananas or so. We'll take it, after all we've been through. On Thursday, we bought 100 shares of FLIR for 29.7593, a "zero buy" of course. Yesterday, we bought 25 shares of Consolidated Edison preferred (ED.PR.A), also for the IRA, at 89.00. Dig, we must, to find these preferred issues and diversify away from financials.

Tuesday, November 17, 2009


Holder v KSM in NYC

First a coda on Bruce. While in Hollywood, Fla on business last week, I saw a colleague who is known to be a late 40 something fan of The Boss, so I hit him with a "Guess where I was Saturday night?" "Where were you?" "MSG to see the Springstein concert."
"I was there too," he said somewhat surprisingly (he lives in Virginia). "And Sunday night too!" Totally unable to top that, I settled for a conversation about where we sat and bragged that I already had tickets for Mark Knopfler in May. That made a little impression anyway. Much easier to be a jazz buff, let me tell ya.


Speaking of which, my favorite of the current trumpeters, Nicholas Payton is at Birdland this week. This one comes with a dead solid guarantee. If you like jazz at all, you'll love this show.

Another funny thing from Florida was a conversation I had with two Texans that somehow got around to the cool manner those folks have of expressing themselves and Texas style humor. Naturally, I referenced the memorable golf novel by Dan Jenkins, Dead Solid Perfect, setting off an immediate exchange of quotes from the book. Such as telling your cute ex-wife that she had "never been an unplayable lie," etc. That could have gone on for quite a while but luckily (or sadly) a Guinness front moved in and the conversation moved on.

The controversy that erupted this week involves the decision by the Obama Administration and Attorney General Holder to try KSM and four other 9/11 plotters in civilian court in Gotham City. Of course, it had been the Bush Administration's plan to try them before a military tribunal before executing them, but not until we had waterboarded all the useful information from them. That sure seemed like a good plan to me, but this administration is determined to be the anti-Bush so they naturally had to change it.

It's interesting that while they talk a little bit about the rule of law, mostly this really is about being the anti-Bush. The response of the Administration and Dems in Congress to the predictable criticism from the right has been basically, don't worry, we're just going to show what a fair legal system we have before we execute them. They are still prejudging the case and assuring us that the ultimate form of justice will be carried out.

This defense is totally unresponsive to the legitimate criticisms of the civilian approach. Namely, that the terrorists will use the trial to showcase their political beliefs, that the evidence presented will provide Bin Laden with vital information regarding our intelligence about Al Queda (as occurred when the Blind Sheik was tried), that much of the evidence may be disqualified in civilian court because of the way it was obtained, that civilian courts are reluctant to mete out the ultimate punishment, and that the civilian process takes way too long, will be very expensive (consider the security challenges), and bears the possibility that an inept prosecution could lose the case!

This is one case where it may be hard to follow the sequence uttered by the antagonist judge in one of Jimmy Stewart's memorable westerns - "first we'll give him a fair trial, then we'll hang him."


Meanwhile, the machinations surrounding the re-regulation of our financial markets continue, with never-ending mischief apparently the order of the day. Following the Rube Goldberg approach taken by Congressman Barney Frank in his earlier proposal that featured expanding the Federal Reserve's regulatory power, we now have the new proposal from Senator Dodd, even more draconian, that creates a new agency and totally curtails the Fed's regulatory role, confining them to the equivalent of a monetary corner a la a misbehaving Dennis The Menace. And somehow, Frank comments favorably on the Dodd proposal even though it is the polar opposite of his own. While all this is going on, the tag team of Bernanke and Treasury Secretary Gaithner continue feeding the system with a seemingly endless supply of dollars, eventually to be all but worthless, I imagine. Of course, the promise is to someday rein all this liquidity in, maybe in 2011 or 12, but in the meantime, stock, gold, commodities, even energy work their way up. The saying on the Street now is ABC (anything but cash), while public companies that have been hoarding cash all year scramble to figure out what to do with it.

Yet we are told not to worry about inflation since unemployment will stay at 10% (charming thought, that) or more through much of 2010, keeping a lid on prices. Professor Milton Friedman must be rolling in his grave at the inept understanding of economics even by people we call professional economists. They apparently still haven't learned that while prices of specific goods react to supply and demand pressures, and will be restrained by the lack of consumer spending, inflation (that is, the impact on the general price level and the value of the dollar) is a monetary phenomenon, and with so much credit (much of it public now) and so much liquidity, the dollar must ultimately swoon. This may follow a brief period of declining prices because of the poor economy, but that is a head fake.

And it will be exceedingly difficult for the Fed to remove the punch bowl without triggering more unemployment.


So what is a simple old individual investor to do in the face of such irrationality and incompetence? Ignore the predictions (even my own) and listen to the market, and the way we do that is to try to stay around 20% cash. So last Wednesday, we bought 100 shares of Quanta (PWR) for the IRA at 21.30. This is our wind play (well, a purer wind play than GE). Yesterday, we sold 200 shares of AmerisourceBergen (ABC) at 24.84, doubling the size of our normal order since it went through the full service broker (FSB). These were long held shares, purchased 11/15/2001 at 13.77. We still have a bunch left, as you will be able to see once I update the musings portfolio on Bloomberg.com. Today, we sold 100 shares of the ever popular Gulf Island Fabrication (GIFI) out of the IRA for 21.65. We'll give you the purchase information in the next post on that lot.

By the way, FSB, a regular musings reader, reports that the Goldman Sachs preferred issue we bought last week for the IRA has a variable rate dividend and is a perpetual (no maturity date). This is in contrast to most preferreds, including other G-S issues that have an expected maturity and/or call date, and a fixed dividend. Those issues are yielding more currently since Bernanke is keeping rates so low and so are the Europeans (variable rates are often tied to LIBOR).

Time for our periodic disclosure and disclaimer: neither redwavemusings nor its author are investment advisors and the issues and transactions recorded here are for posterity and the prurient interest of our readers, and are not to be considered investment advice. They are not receommendations and may not be suitable for individual readers, or anyone else.

Monday, November 09, 2009


The Boss at MSG

For a completely unique experience, I got it into my head to see Bruce Springstein Saturday night at Madison Square Garden, despite the fact that the show (and Sunday's also) was a total sellout. No matter, it was also a chance to become a first time user of Stubhub. With respect to that service, I found the on-line, secondary market for event tickets a refreshing oasis of old fashioned capitalism, with prices and ticket availability changing in predictable ways as concert time neared. I could have chosen Sunday tickets for a much more reasonable price, but I was determined to go Saturday, waited for a semi-decent value for a seat facing the stage (rather than behind it), and finally pulled the trigger about 2 and a half hours before advertised concert time, which turned out to be 3 and a half hours before the first chord rang out.

Then it was a simple matter to take the train into the City, get over to the Stubhub office and pick up my ticket - fast, clean convenient, no muss, no fuss. Much better than going the scalper route at the Garden, where there were plenty of would-be ticket buyers but hardly any sellers. My ticket cost about double face value, all in, and that was about as good as I should have expected.

Having never seen Bruce perform before, except on TV at the Super Bowl, I was a blank slate expectation-wise but was quickly filled in by my seat neighbor, an architect from Binghamton, NY who was seeing Bruce for the third time on THIS TOUR! I think he must be getting burned out because he showed little or no energy during the show, in contrast to the other 19,998 fans who were singing, dancing, jumping, fist pumping fanatics throughout. About the second song in, Bruce did "Hungry Heart," a banal but familiar tune that even I knew, followed closely by the wonderful "Prove it All Night" but then there followed a dozen and a half rather unfamiliar songs, a few of which I loved, but more of them simply overwhelmed me with their high volume (heavily distorted, especially early on) pyrotechnics, many not especially tuneful. The ones I liked were really great, and I think Bruce, like most talented singers at his age, is better on the ballads (or what passes for a ballad in a Springstein show). Unfortunately, Bruce didn't stop to name or banter about any of the tunes (completely unnecessary for the other 19,999 diehards), and in fact, didn't really stop between songs, simply counting the next one in over the closing chord of the last. If he needed a drink of water or a new guitar, the band just kept rolling that last chord until he was ready. Therefore, it was never really quiet enough for me to even ask my acquaintance to the left for a song title, embarrassing as that might have been.

When we got back to more familiar territory, there was a very spirited rendition of "Glory Days", "Dancing in the Dark," and of course a raucus "Born To Run" where Bruce had help from at least 19,000 who actually knew all the words! The three hour plus show was closed fittingly with a brilliant cover of Jackie Wilson's "Higher and Higher." I say fitting because Mr. Wilson was the high energy act of his day. That was one thing the E Street Band never lacked Saturday night - energy - and a happy and exhausted crowd left, many no doubt looking forward to the next tour.


Saturday night's health care vote in the House, following a marathon all day "debate" on the floor, gave Nancy Pelosi and the liberal wing a chance to show off their bona fides for the base and win a preliminary round (if barely). Pelosi also used the event to give a pass to some of the Blue Dogs to show off their independence and vote no, though only on the condition that the bill would not be defeated. Republicans played into her hands by appeasing their anti-abortion base, attaching an amendment that made it safe for enough Blue Dogs to vote yes to give Pelosi the win.

Now it goes to the Senate where things get even more complex since the magic number will be 60, not 218. Hawks like Howard Dean threaten to use the Budget Reconciliation process to pass the bill with 50 votes, but in fact, that process is too awkward to use for this bill, where if it passes, there would be an exhaustive conference committee process to square the bill with the House version, followed by re-votes.

So there are two possible outcomes. In one scenario, the Dems somehow cobble together 60 votes for a bill with no public option that looks surprisingly like the GOP alternative proposals in some respects (except without tort reform). Squaring the bill with the House version gets put off until next year with a very uncertain result. The other scenario is where the Dems force a vote on the fillibuster of the Reid bill, knowing they will lose but hoping to depict the GOP in the 2010 elections as the party of "NO."

So I am still hopeful that this horrible idea for the government to take over another one-sixth of the economy will come to naught. We will see. Obama and the Dems' base are awfully determined. But the more I read about what's actually in the bill, the less I understand why ANYBODY is in favor. Perhaps more people just need the facts. As it is, polls are showing that the majority of the public is either undecided or against.

We have said before that while our health system is by far the world's best, there are things that can and should be done within the system to improve and expand access. This can be a bi-partisan effort. Unfortunately, the Dems are less interested in that than they are determined to expand the public (unionized) sector at any cost.


Predictably, Zelaya opted out of the settlement he agreed to when it became clear that he would not be restored to the Presidency by the Honduran legislature. Look for this dispute to peter out as the election on November 29 takes center stage. Give great credit to the interim government and the people of Honduras for standing up to the world to defend their freedom. And a cheery salute to Hillary for seeing who the good guys were, in the face of the leftists in her own State Department and the Administration.

On Friday, we bought 100 shares of NVE Corp (NVEC), a new name, at 38.53. This along with FLIR, were my picks from this year's Forbes listing of the best 200 small, publicly traded companies. Today, we bought 100 shares of Goldman Sachs preferred (GS.PR.D), also for the IRA, at 20.70. The hardball players at GS are not my favorite people, so I had to do a little nose holding when I put this order in, but I needed some new preferred names, since we are buying so much of that type of stock. Frankly, quality preferred's are not such a big universe, and the energy preferred's are largely trading at par, too high to buy with hyperinflation a threat.

Tuesday, November 03, 2009


That's No Lady, It's Bill's Wife!

Just who is that person in the Hillary costume? The last two weeks, the Secretary of State, who had been allegedly marginalized by the Obama White House foreign policy "experts," has emerged to provide some adult supervision for the administration and correct some of its most flagrant policy blunders. On Honduras, a settlement was reached with the interim government (much to the consternation of State Department careerists and our hapless, incompetent ambassador) that returns the decision regarding ousted President Zelaya to the Honduras Supreme Court and its Congress. The predictable result is that Zelaya will not be returned to power, but more importantly, the election scheduled for later this month will be recognized by the US and the OAS as legitimate.

On Afghanistan and Pakistan, Clinton prevailed upon Abdullah to give up his challenge to Karzai, cementing his own reputation and simultaneously stabilizing the government. Clinton also pointedly criticized our Pakistani allies for not doing enough to smoke out Al Queda leadership hiding within its borders. That sort of straight talk has been missing since virtually the beginning of our involvement.

On Israel/Palestine peace talks, Mrs. Clinton became the first Obama administration official to NOT throw the Israeli leadership under the bus on the settlements issue, making it clear that we actually know which side is really interested in a lasting settlement and a two state solution.

On Iran, with the deadline for serious movement long since passed, Clinton made it clear that the policy of engagement will not be followed blindly for much longer.

All of this is welcome news, though it would certainly be more helpful if the Obama administration did some straight talking with the American people and its political base about the importance of wiretapping in preventing recent terrorist plans from coming to fruition, the ongoing role of Guantanamo, and other of the Bush policies that were actually correct and which they are still following. But don't hold your breath.


The three races I was really following and hoping for conservative victories have yielded two winners, and one race that still hasn't been called, though Mr. Hoffman is behind in NY's 23rd CD. More on that race in a minute.

The Virginia landslide was partly a function of the Republican candidate being simply much better than his opponent, but it also demonstrates how the energy has shifted since a year ago. Youth and minorities are not engaged, but conservatives are over-the-top engaged. They will be energized by the off year victories; look for money and volunteer hours to gravitate to conservative candidates for 2010.

Lest anyone think this is a fluke, take note that it appears the GOP is also winning statewide races big in Pennsylvania, another state thought to have turned true blue.

In New Jersey, the Corzine campaign ran one of the nastiest batch of TV ads in recent memory. Obama came to the state several times, as did Biden et al. For, their trouble, they lost by over a 100,000 votes to a mediocre campaigner, albeit with an excellent, squeaky clean record. Christie won despite being massively outspent and despite being the target of Corzine's bare knuckle tactics. This will be good for New Jersey, though the state's problems are a massive challenge for anyone. But tonight, we wish good riddance to Mr. Corzine.

As for the 23rd in New York, much has been made about how the Republican party is no longer safe for moderates, that internecine squabbling will result in too small a tent, etc. Frankly, I think this is just Democrats and the liberal media spinning one more thing when, in fact, there are philosophical divisions in both parties and always have been. Just wait til you see how the Dems go at it on health care. They are, in fact, the past masters of the circular firing squad.

The original handpicked candidate, Dede Scozzofaza, or whatever her name was, misrepresented herself by calling herself a Republican, just like Olympia Snowe, Arlen Spector (til he crossed), et al. It's OK for Republicans to disagree from time to time, but when you are off the reservation on so many core issues and can still call yourself a Republican, then the term has no meaning. It just becomes a label for determining which party you caucus with.

When I was in high school and we had elections for class officers and students' council, we had a green and a red party. Neither stood for anything, and I can't remember how you came to be in one or the other, but each party nominated a candidate. Green and red were the school colors, and that's about all there was to it (no, it wasn't the communists versus the environmentalists).

Well, with the Republican candidate in the 23rd, she might as well have been in the red party as the GOP. So Republican voters decided to dump her in favor of the Conservative party. With the handwriting on the wall, Dede followed form and ultimately supported the Democrat Owens, and she will now presumably be forced to cross the aisle in the NY Assembly. I predict that like Senator Spector, her political career is on life support.

In any event, it looks like Owens will squeak by Hoffman, a result that is unfortunate, but I believe merely proves that Republicans will do better when they have first had a primary (this special election did not have a primary opportunity) and sorted out the ideological preferences of their candidates.

One piece of bad news today is that Royal Bank of Scotland's agreement with the FSA
apparently includes a suspension of the preferred stock dividend for at least two years. We knew this was a possibility and took a calculated risk in buying the depressed stock and will now continue to hold it. Since it is trading at about a third of par, timely resumption of the dividend will actually make us just about whole. On October 27, we sold 200 shares of Avocent (AVCT) which is being taken over soon. We took 24.92 per share from the arbitrageurs and that saved a few dollars versus the fee our discount broker charges for packaging up tender offers. We'll sum up the profits and losses on Avocent once the rest of the shares go in the takeover. On Friday, we bought 50 shares of J. P. Morgan preferred (the old Bear Stearns issue) for the IRA at 44.10. Today, we bought 200 shares of Ceradyne (CRDN) for the IRA at 15.96, a value buy.

This market continues to look vulnerable and shaky. Handle with care.

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