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Tuesday, March 30, 2010


Denver Musings

Six nights in Denver was about enough, thank you, though I had mixed feelings by the end of a journey that admittedly got off to a shaky start. Landing in a snow storm around 8 PM, the plane sat outside the terminal for about 45 minutes waiting for a gate to be vacated (and probably shoveled), then it was another hour before my checked bag somehow found its way to me. Never did get an explanation for that, so we'll just say that when there are less than favorable conditions, this huge airport is not staffed for its level of traffic. This shortfall was again in evidence on the return trip when it took well over an hour to navigate the lines for the boarding pass kiosks and then security. Barely made the plane home.

Anyway, to conclude the inbound adventure, with bag in hand, I made my way to the taxi cab line only to find it to be considerably more than lengthy, with an empty cab pulling up reliably about every 15 minutes or so. Realizing that was a hopeless cause, I accepted the invitation of one of the shuttle bus drivers looking for passengers heading downtown, breaking one of my cardinal travel rules (always take a cab, NEVER share a van). Since we stopped at nearly every hotel in Denver before getting to mine (the last stop of course) and since we were creeping through the snow at no more than 15 miles per hour, it was about midnight when I finally checked in. Of course, neither the restaurant nor room service was available at that hour, so I staggered to the hotel bar (usually, staggering is in the direction away from the bar!) for a refreshing vodka (I usually avoid alcohol on flights) and some trail mix, the nearest thing to food in the hotel. There wasn't much open outside the hotel either, and I sure wasn't in the mood to go walking in the snow. The bartender was really looking to close too, so bed became the best (and only) option.

So, I was not in a mental state to fall in love with Denver after that initial impression, but I have to admit it has its charms, though you need to know where to look. One interesting thing is that you really can't see the mountains from downtown unless you go up to some sky bar or hospitality suite. At least in Salt Lake City, the mountains are a constant presence. So lining up Denver's negatives versus positives, I would have to say:


The airport
The moribund convention center
Too much of downtown is also downright moribund
The trolleys are a mortal danger to pedestrians, running almost silently, and very close to the curb
The so-called 16th street mall is basically a collection of every franchise and chain pub bar/restaurant there is
Prices of food, drink, and necessities in the hotels would make you believe you are in NY, SF or Chicago. Believe me, you're not.
Friendly service is spotty at best. Many of the servers and bartenders were as surly as New York's or worse.
Like a lot of mountain areas, the weather is somewhat unpredictable. Two days after it snowed, it was sunny and 70.


Pretty good steakhouses, especially Ellway's (yes, John's)
Pretty good ales on tap in most places
El Chapultepec, a true dive where the jazz is quite good. We saw a quintet led by veteran Freddie Gonzales that featured an excellent bassist, Mark Diamond. Legend has it that this was a favorite haunt of Jack Kerouac and Neal Cassady. It is right by Coors Field.
The scantily clad young waitresses at The Tilted Kilt.
Coyote Ugly at the mall. A little too young for me, but a fun bar, with some very competitive beer pong.
The air. It really is fresh. I never felt oxygen deprived. In fact, given the lack of smog, we probably enjoyed more of the life sustaining gas than usual.
The downtown area off 14th St. As attractive as the rest of downtown is repulsive.

So, when I revisit, I will simply have to review this post and I'll know better what to do and what to avoid.

Most amusing item at the meeting was the state Insurance Commissioners' belated comprehension that Health Reform (which many had boosted) presents an existential threat to their authority (and their budgets). Just imagine, the feds in power grab mode and assigning unfunded mandates to the states! Gee, who would have thought it?

That 400 share block of Newpark Resources we sold on St. Patrick's Day for 5.61 had been purchased on 8/2/04 for 6.12. On March 22nd, we bought 400 shares of AWC @ 6.05 a value buy. The next day, we sold another 600 share piece of FSI International (FSII) at 3.64. These were purchased on 9/12/07 for 2.50. Today, we sold 100 shares of Standex International (SXI) at 26.45, bought on 5/18/09 for 10.30. We have taken a few small losses this year, buy basically are piling up gains in accordance with the belief that tax rates will only go up from here until Republicans are back in charge.

Sunday, March 21, 2010


Competition for March Madness

The moguls at CBS must be wringing their hands this afternoon as one of the big weekends they count on for ratings and profits runs into unexpected competition from an unexpected source that normally produces tedious programming at best - Congress! So the guys at C-Span will have the attention of the public but sadly, since they are non-profit, no ad time to sell.

I kind of think the Dems may have reached the point where they have enough commitments from their caucus to "vote yes if you absolutely need me" so that beyond Pelosi's Cheshire grin (aped to perfection by Stony Hoyer on today's Meet the Press), they can measure off a small majority for the vote which will take place sometime before midnight. There is only a minor chance that something could happen to upset their applecart, and in that case, they will devise some pretext for scrapping the vote and slinking out of DC, with a promise to bring it back (however unlikely). The most likely banana peel for Dems to slip on would be some expectation that even 50 Senate "reconciliation" votes are not there.

But more likely is passage of the Senate bill by the House with some 216-218 votes, cementing the termination of Congressional tenure for 50 Democrats or more in that House come November.

I hope while you're on site, you get a chance to read the comment to our last post made by "Rufus T. Firefly" which makes many good points in spite of disagreeing with some of the post. Whatever the plausible merits of the Health bill might be, they are beside the point of what is actually going on here, and why this has been a partisan political fight from the beginning. The Dems grab for 17 per cent of the economy, similar to 1994's effort, is about recruiting and expanding public sector SEIU members who would have a major stake in expanding government revenues, Democratic politics, and fundraising (from union dues) to support both. This is simply about using socialist policies and programs to solidify political power through a sophisticated feedback loop. It is more subtle than what Chavez does in Venezuela, but with similar goals and outcomes. Now do you understand the left's otherwise incomprehensible crush on Chavez and others of his ilk?

In fact, this explains the disappointment of the MoveOn.org crowd with the bill, since Dems were forced to delay the public option. Make no mistake that it is still the intent of Dems to add a public option and take private enterprise (not just insurers) out of the health care business. Pelosi has said as much in speeches to the party's base. The current bill is "just a starting point."

It also explains the right's bid to use the Tea Party movement to galvanize opposition to the bill and rehabilitate the GOP. And that's working.

On the merits, everyone knows the CBO numbers are fictional and that there is no effort being made to control costs. Just the opposite. For a preview of the Federal fisc in a few years, just take a look at the fiscal condition in New York, California, New Jersey, Illinois, and any of a number of other broken states that tried to do more and provide a bigger safety net than they could really afford.

In fact, that's the bottom line. Sure, it would be nice if health insurance were an entitlement (health care already is, no one is refused care, though there may be limits) but it is not affordable. (Why are so many people uninsured anyway? Because for many the calculus is that they should risk going without, even if they would prefer to be covered. This goes for medicaid eligibles too. Many who could sign up simply don't). Over the years, we have learned that Medicare as constructed really isn't affordable either. Social Security was affordable as originally constructed (but we on the right would have constructed it differently) but not with the benefit package that has evolved. When GWB challenged the third rail and proposed to fix that system, he was brutally pilloried for his partial privatization plan.

The Obama socialist ethic is deeply imbued in the Community Organization work he did before he became a legislator. If you listen carefully to the left wing of the Democratic party in Congress, the class warfare drumbeat is constant for socialist entitlements. This is a cultural and political agenda, borne of frustration with a capitalist system that is admittedly difficult to negotiate for those starting with a smaller bankroll. However, ours is the only system that offers the mobility to overcome that handicap. If EU style socialism, with cradle to grave government support is so great, why isn't there a flock of emigres from the US to Europe, or even to Canada? Why do we have immigrants flowing here in a constant stream, legal or otherwise, whether government benefits are available or not? We all know the answer - this is where the opportunity is, the chance for a better life. But it won't be for our descendants if they gravitate to socialist solutions.

I'd like to believe that someday, Thomas Sowell will be revered and remembered rather than Jesse Jackson or Al Sharpton or Ralph Nader. Thomas Who? His writings point the way to a better life for today's challenged youth, but chances are, few have heard of him or ever read his writings.

Unfortunately, I'm not very bullish on the future of our younger generation. While there are exceptional kids in every generation, too much of today's youth seems more than willing to accept a mediocre outlook, rely on entitlements, and get by. They have absorbed 12 years of ceaseless brainwashing in the public schools by unionized teachers and textbooks that subtly, and sometimes not so subtly, promote liberal causes and standards of thinking. They just don't seem driven enough to me and capitalism thrives on drive. They don't even seem that interested in what's going on and how it affects their future. They have a vague idea that things aren't setting up well for them, but somehow that's not their fault and they don't think they can impact it. I hope I'm wrong. Either way, they will get the government they deserve.

That's what makes the elections of 2010 and 2012 so important. The boomers and X generations will have a short window to dominate the electorate, and they constitute the last generations where the public schools were still used as an assimilation tool to promote the republican form of democracy in America, the Constitution, scientific methods free from political influence, and the paramount importance of achievement as the surest road to a better life. If 2010 is just about anti-incumbency, it's about nothing. That's just exchanging the current set of bums for a new set. If it's about a broken state like Massachusetts turning to a Scott Brown, that's something that could make a difference.
One amusing thing noted in the poltical nonsense that passes for Sunday morning news shows is the Dems' insistence that their bill does not do what it plainly does- provide for a government takeover of health care and insurance. They blame the bill's image on the fear tactics used by their Republican opponents. But can this really be the case? Are they actually saying that somehow their oratorical greats like Obama, Kennedy, Rockefeller and Waxman have been outdebated by the likes of Cantor, Ryan and (shudder) Boehner and McConnell?

We raised some drinking money on St. Patrick's Day selling 400 shares of Newpark Resources (NR) at 5.61. We'll have the purchase info on that little block for the first post after Denver. On the 19th, we bought 25 more shares of Con Ed preferred (ED.PR.A) for the IRA at 89.25, More de-risking.

We're off to Denver on Tuesday to baby sit the insurance commissioners and try to keep them from doing any more mischief. Maybe, we can find a friendly computer out there for a post.

Monday, March 15, 2010


Special Ides of March (birthday) Edition

The Dems have really turned up the health care reform heat on their lawmakers so the bill from hell that upwards of 60% of America does not want simply won't die. Supposedly, they are aiming for a vote by Friday, and you'll know they have the votes in the House if they actually bring it to the floor. No way the Conference is going to make its members walk the plank in a losing cause. Still, there is no vote yet, a fair amount still uncommitted, and some may be waiting on the CBO to produce its latest scoring. Can you imagine the pressure on those people? Still it's hard to score when the bill is a moving target, which it is as negotiations among Dems continue.

If this passes the House, the pressure shifts back to the Senate to pass the reconciliation adjustments. Funny thing, for all the talk, there is no guarantee they will do so.

All of this for what amounts to be an economy stifling tax increase in the first four years before any benefits take effect. If the Dems take the beating I expect in November, the President might have to veto a repeal bill in January 2011. As Mark Levin says, what gets passed by reconciliation can be repealed by reconciliation. Of course, the Dems will have plenty of seats with which to sustain the veto but that will only serve to sustain GOP momentum through 2012. Repeal could be signed in January 2013 by President Pawlenty or Romney and the exchanges and subsidies will still not have taken effect.

Still, I am not sanguine about this prospect. The economy and the stock market abhor uncertainty and we are looking at years of it if this bill becomes law. That is why I have been, and will continue to take risk out of the musings portfolio, steadily.

Some have said that the GOP force fed us Medicare Part D (prescription drug benefit) so why shouldn't Dems go ahead with this budget busting health plan? I merely point out that for those who think the GOP got away with their strong arm tactics for part D, the answer is that the liberal media gave the GOP no credit for the program but did saddle them with blame (reasonably) for the fiscal impact. The GOP lost the House pretty quickly thereafter. So Dems are looking at a real disaster this November. I think they could lose 50 seats minimum.


So while all this is going on, the Obama Administration decides this is a good time to pick an argument with our only true ally in the Mideast, Israel. This is because a mid - level Israeli bureaucrat picked the wrong time to announce the next step toward new settlements in East Jerusalem, just as VP Biden landed to promote talks between Israel and Palestinians. It's too bad the Veep was embarrassed, but really, he's been embarrassing all of us for long enough, so I have little sympathy. To pour gasoline on the fire, the Obama people cajoled Secretary of State Clinton into making critical remarks about Israel's bad behavior, presumably to add weight to Biden's kvetching.

Of course, there is very little basis for peace talks between Israeli's and Palestinians. It is typical of this administration's foreign policy to push for talks without any game plan for success. Meanwhile, they are astonished as each side pursues its tactical objectives. Sort of like Claude Rains learning of gambling taking place at Rick's casino.


With a sense of perfect timing, while all this was going on, Senator Dodd decided today would be a good day to drop his new version of financial services regulatory reform on an unsuspecting public. This version was written exclusively by Democratic committee staffers, Dodd having decided that talks with GOP Senator Corker had "broken down." So this puts the GOP in a position where they will have to oppose the proposal because of process, not because of content. Since there are now 41 GOP Senators, Mr. Dodd may find that he is unable to overcome a filibuster when he gets to the floor. Happy retirement, Senator.


Today marks the start of a new campaign undertaken by redwavemusings and that is to demand the resignation of Attorney General Eric Holder. If you care to understand the importance and appropriateness of this demand, read today's WSJ op ed by Debra Burlingame (sister of a 9/11 pilot) and Thomas Joscelyn called Gitmo's Indefensible Lawyers. I guarantee your hair will stand up when you piece Mr. Holder's associations with terrorism's defenders together with his insistence on civilian trials (in process of being countermanded by this all too frequently embarrassed administration). The URL is http://online.wsj.com/article/SB10001424052748704131404575117611125872740.html?mod=WSJ_hp_mostpop_read.

I guess I have a few issues today.

We'll save my many other news issues for the next post. I should be spending time like the rest of America doping out my NCAA Tournament bracket, but I'll pass, thanks. I just haven't followed college basketball like when I was younger, so for me, predicting anything about this event would just be luck. I will watch the games though. My assumption is that it will be Kentucky versus somebody in the final. I know more about the girls, where the two best teams are presumably Connecticut and Tennessee, like usual. Even I know Connecticut hasn't lost a game since some time in 2008, I guess.


We've been selling stocks into this great rally, which has favored just the kind of small, high risk stocks we love to average down. Last Tuesday, we sold 700 shares of FSI International (FSII) at 2.95 (600 purchased 7/11/07 at 3.10, 100 purchased 9/12/07 at 2.50). We also sold 200 Marine Max (HZO) at 11.61 (purchased 11/10/08 at 1.54). Nothing wrong with the occasional 7 timer. On Thursday, the tender offer was completed for Home Diagnostics, which should have meant that my last 400 shares went at 11.50 (purchased 4/20/09 at 6.16).

Monday, March 08, 2010


Road Trip

There's March Madness and March travel. I am off to Albany, NY or as we fondly call it here in the Empire State, the Corruption Capital. There I will meet with numerous legislators and their staffs and go through the motions of promoting our trade group agenda when we all know that no one could possibly be paying any attention, until the unelected and soon to be ousted Governor is gone. From Albany, I'll be flying to Phoenix to spend the balance of the week with other interested parties from our industry as we observe and comment on the mainly ineffectual and short term insurance Commissioners (there are notable exceptions, by the way) trying to keep up with fast moving and impactful international accounting developments. This is preliminary to the National meeting in Denver that begins March 24.

In other words, this is a superb opportunity to do a fair amount of airplane reading, though not such a good opportunity for blogging (hence, the back to back postings). But I do have some things to comment on, light and not so light, though not much time since I still have to pack and make the 6:05 train tomorrow morning. So here goes.


I predicted (to my wife) that Cablevision and ABC would find a way to return Channel 7 to the airwaves by five minutes before curtain for the Oscars, and they missed that deadline by about 17 minutes. So, many of us missed the opening monologue, probably the highlight of the show. Steve Martin did nail more than a few good one liners over the course of the evening, but what Alec Baldwin thought he was doing out there is a mystery to me - he looked like he was impersonating Peter Boyle doing Frankenstein most of the time. I had told lots of people that this would finally be a win for Jeff Bridges, well known to be one of my faves, and we were not disappointed. Of course, I have not seen any of the movies yet, but I'll get to them when they hit HBO.


Saturday night, Mrs. Redwave and I went to see the 70's Soul Jam and it more than lived up to expectations. There was a certain poignancy to the evening since singer Ron Banks of the Dramatics had passed away unexpectedly last Thursday, and this was their first show without him (over some 37 years). Nevertheless, the four surviving members (I think only two originals at this point) had a terrific set of about 50 minutes to resume the show after intermission.

Carl Carlton had been the opening act, entering to his big hit "Everlasting Love" and doing one or two others. Mrs. RW seemed shocked by his early exit but I quickly pointed out that in this field, Mr. Carlton was merely a warm-up act. So it was, as the Chi-Lites, after covering a couple of Temptations songs, and doing a couple of their up-tempo numbers, launched into their two great ballads, "Oh Girl" and "Have You Seen Her." So we were to intermission after only about 45 minutes of bracing music.

No matter. After the rousing Dramatics set, the clear stars of the show entered, Philadelphia's Stylistics, with an outstanding set that lasted nearly an hour and included all of their monster hit gooey ballads as well as a song off their new CD.
As one of them said, "if you guys left the house with things a little out of order, we'll have everything back in place by the time we finish."

Now we paid $60 dollars a ticket for this show and sat in the 5th row in Westbury's Theatre in the Round with the rotating stage. I paid $180 for my ticket to Clapton and Beck at MSG. I enjoyed both evenings but guess which I would prefer to do over again tomorrow. We'll be looking for the Soul Jam again next year, that's for sure.


On the jazz scene, we've got Bill Charlap's trio in the midst of a two week run at Dizzy's Cola Club, and this week, John Pizzarelli leads a group at Birdland. Next week, it's an outstanding group led by the best drummer around today, Lew Nash, at Birdland. You can't go wrong at any of these shows.


The Dems seem intent on a suicide mission on health care, but the votes are still really up in the air. One thing is clear - whether they pass it or not, the Dems really own this bill, and Pelosi and Reid can make that argument to wavering party members, namely that they might as well pass it since they are going to pay in November regardless. Which begs the question, doesn't anybody really care about doing the right thing for the country anymore?

My prediction now is that the Dems will lose worse than they did in 1994. Some may think it's too early to say, but really it's not. The fact is, given the 21st century dynamics of elections, it is already pretty late in the game. Here's why.

If you look at the NY Senate race, appointed Senator Gillibrand should be an easy mark even in this notoriously blue state. However, it is very concerning that Republicans have not fielded a strong candidate yet. Blakeman is running, but he's a "who's he?" candidate. Meanwhile, Pataki and others who could win easily remain resolutely on the sidelines.

Frankly, if I wasn't so busy with a job, bridge, and this damn blog, I might make the run. Trouble is, a candidate like I would be should have been out there 2 or 3months ago, getting the exposure, raising the money, and making the case, town by town, county by county. That's just not happening (it is happening in the governor's race where Rick Lazio is brewing a Scott Brown type surprise). In other words, except for a name candidate, it's already too late! In fact, candidate filing deadlines are already coming up in many states.

Though the GOP is underperforming in that particular race, in most places around the country, the GOP is recruiting excellent candidates, some mounting primary challenges, while the Dems either have a hopeless incumbent or worse, a no-name liberal in the same position the GOP is in in NY. Couple that with the fact that wild horses won't keep conservatives and angry independents from the polls this November, while Dem voters will have to be airlifted to the polls, and the stage is set for a slaughter of epic proportions.

Furthermore, don't believe that the anger is directed equally against incumbents of both parties. It's just not so. Witness Governor Perry's performance in the Texas primary and the near certainty of his re-election. The anger is directed at fiscal profligates and thieves. Conservatives will benefit, and they are almost all Republicans.

In this regard, Senator Bunning may be a screwball but the Dems will find that the public is surprisingly sympathetic to his old fashioned filibuster. They won't be able to make hay over his delay of ever more federal spending, no matter how beneficial they believe the programs to be.

Friday, March 05, 2010


Health reform nose counting

Well,this Monday's resignation of his seat by Rep Massa (D-NY) will reduce Pelosi's count by one vote for the Health bill at a time when she is having some difficulty drumming up 216 votes. So now people are starting to understand that we may never even get to reconciliation (50 plus the Veep) in the Senate. What people haven't spent any time on is the difficulty Reid would have if it did get that far. I don't think 50 Senate votes are at all secure, so the Health Reform bill, though off life support, is still on the very critical list.

After all Senator Byrd is very ill on and off and his vote can't really be counted on. I think Lieberman will be back in play, and so will Sen Lincoln of Arkansas. That would take Dems down to 56, and my guess is that there are easily six or more blue dogs who would abandon ship at the slightest provocation.

So, sooner or later, the Administration is going to have to face facts. They may not be able to get a bill done, and there will be no point in taking a vote that amounts to political suicide for half their party. And still, the stage will be set for a major thrashing in 2010 that I now believe will be bigger than the 1994 rout.


One thing you haven't read much about here is the Winter Olympics, for the simple reason that I watched very little of it. I did see Neil Young perform at the closing ceremony, which was enjoyable (I can only imagine the young athletes wondering who that old relic is) and I thought the men's gold medal game was outstanding, the best hockey game I've seen in years. The flow of the game is so much better with limited or no commercials, the way it used to be when NHL games took only two hours. Both teams played great and it was somehow fitting that Sid the Kid got the gamer. I didn't see the women's final, but reportedly that was a good game as well.

Otherwise, I thought NBC managed to put more schmaltz and human interest than anything else in its broadcast. Of course they had fertile ground, with the Georgian slider dying in practice, the Canadian figure skater losing her mother and everything. But it did get tiresome for me and I hardly watched. It must have been murder for true Olympics fans over 17 days. Frankly, I got more wound up watching Jim and Pam have a baby on The Office the other night.


Tonight we're going to Westbury to see the 70's Soul Jam, and I have to admit I'm a little excited. I've seen the Stylistics and the Chi-Lites on TV a few times, particularly on those TJ produced PBS shows, but never in person. Sadly, some of the original personnel has gone on to the eternal bandstand, but it's great that these acts continue to keep their songs and arrangements alive, just like the Big Bands from the Swing Era. Also on the bill, The Dramatics and Carl Carlton.

Tax time is coming, our next to last under the Bush tax rates and all upper income tax payors should be well into planning for 2011. Unlike the tax strategies we have been used to, the idea now is to accelerate income and capital gains and defer deductions and losses to when they will be more useful. It's a good time to transfer qualified money to non-qualified accounts or do a Roth conversion. Of course, individual considerations may override the general strategy. In particular, individuals, even in middle income brackets, need to consider their vulnerability to the dreaded alternative minimum tax.

So much of the political folderol concerning tax rates, deductions, capital gains and losses etc. ignores the impact of the AMT and therefore mischaracterizes the real world impacts. For many upper income payors, the lower Bush rates have been mostly offset by the AMT, and the expiration of those rates will also have less impact than people think. However, from the standpoint of macroeconomics, the increase in capital gains rates is likely to have a very deleterious effect on the economy.

On March 1, we bought 500 shares of Great Lakes Dredging (GLDD) for the IRA at 4.52. On Wednesday we sold 400 shares of Newpark Resources (NR) from the IRA at 5.42. 300 were purchased at 7.40 on 3/13/06 and 100 at 5.81 on 7/28/06. On Friday, we sold 100 shares of Standex (SXI) at 25.73, purchased on 7/12/04 at 25.80. These all represent small losses due to first in, first out treatment when, in fact, we sold both above our average cost per share, since later purchases were at lower prices. Time for our periodic disclaimer: neither redwavemusings nor its author are investment advisors. The transactions reported here are for that purpose only and do not imply that the securities mentioned are suitable for other investors, or for anyone (even me).

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