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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.

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