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Thursday, April 28, 2011


5,000 Hits!

If 3000 hits is a sure fire ticket to baseball's Hall of Fame, I doubt that 5000 blog hits qualifies for much other than perseverance, or maybe just a big mouth. Whatever, thanks to all loyal, and even occasional, redwavemusings readers for taking our weekly blog to a new milestone. And still, there's lots more to say!

Thank goodness, that birther controversy is resolved! We were all on tenterhooks for that solution. Imagine, it took a lowlife like Donald Trump to embarrass the President into requesting the long form certificate from Hawaii to finally put that nonsense to rest.

So the question is begged, why did Mr. Obama keep us waiting two years to do something that could have been done in days, if not hours. And the answer, like everything else that this incompetent administration does, seems to involve a political calculus. As long as the GOP lunatic fringe and the Tea Party folks were intent on keeping the issue alive, Obama's handlers calculated that it was helping him. However, they became concerned that a full-fledged windbag like Trump might make Romney and other serious candidates look reasonable by comparison. Once that concern emerged, the decision was made that the issue was becoming a liability and needed to be terminated. So the birth certificate was promptly produced.

This just adds to the growing perception that the President and his advisors have little if any interest in anything beyond holding power, and will do whatever is politically expedient. That continues to translate to poor poll numbers for a president whose connection to the people is remarkably poor considering his rhetorical gifts.
A good example of political expedience over substance is the characterization of the Ryan Plan by the President, particularly with respect to the MediCare proposals. In blatant demagoguery, the President has played the Mediscare card, characterizing Ryan's Plan as a dismantling of MediCare. In fact, MediCare is already dead as a real health program, as anyone knows who has tried to help an aged parent negotiate the minefield that has become geriatric medicine. You get what you pay for, and since doctors are so poorly paid by medicare/medicaid, it is showing in their services, if you can get them to see elderly patients at all.

More to the point, ObamaCare does basically the same thing as the Ryan proposal, except that it rations care through MediCaid (to where it shunts most Medicare patients) using state and federal bureaucracies, while RyanCare rations through private insurance gatekeepers. The difference is that RyanCare has the potential to control costs while ObamaCare will inevitably balloon them.

The point is that to get effective care, people will have to spend their own money outside the government directed program, as Canadians do today. But even if you have those resources, this will be illegal under ObamaCare. At least private options will be available under RyanCare. Also, under RyanCare, government won't be perpetrating a hoax.

The Bernanke press conference yesterday made history since for the first time, the Federal Reserve Chairman sidestepped questions asked directly by the press, revealing nothing new, just as he does in his quarterly reports to Congress. No matter the mode of disinformation, the Federal Reserve continues on its path of debasing the U.S. dollar, choosing inflation over a sound currency, and perpetrating the myth that we can achieve full employment and a vibrant economy by means of monetary policy tools. In fairness, the Fed will never do the right thing as long as Congress forces the dual mandate of full employment and low inflation on it. Bernanke seems to have settled on an inflation target of 2% annually as ideal for achieving the employment goal. But this locks us into halving the dollar's value every 36 years, or at least twice during the average life span. I don't call that low inflation, and it won't buy us much employment either as long as we have an administration and Congress that pursue stupid fiscal, trade and regulatory policies. The Phillips curve was dead and buried long ago.

Professor Milton Friedman had it right. The best "Fed" would be a computer that used open market operations to grow the money supply at a reasonably low fixed rate year in and year out. Next best solution would be (as proposed by Steve Forbes) for the Fed to peg the price of gold or a basket of commodities. As long as we populate the Fed with "geniuses" who think they can manage the economy, we will have a pendulum that swings from boom to bust. Very few can achieve the record Alan Greenspan did, and frankly, he left the Fed with a mess waiting to happen.

The report is that Fatah and Hamas are making peace so Palestine can proceed to become a state. However, all the hard negotiations still have yet to begin. One thing for sure - there can be no Palestinian state without a commitment to Israel's right to exist, and we're not hearing that yet.

Seemed kind of surprising,, but in these parts there was as much or more excitement generated by the first round of the NHL playoffs than the NBA playoffs. This even though all the local teams safely made quick exits. But the hockey series were uniquely exciting for first rounders.

Of course, once baseball starts, that captures my attention, especially when the Mets start playing like humans. We can only hope it lasts.

You may recall from our last post that we sold 100 shares of the Genesee and Wyoming RR (GWR) on 4/21 for 59.58. We had paid 25.70 on 11/29/06. On 4/25, we sold 100 shares of Littlefuse (LFUS) at 59.99, for which we had paid 25.63 way back on 11/13/2000, before this blog was a twinkle in my eye. The next time someone tells you capital gains tax rates are too low, consider how much of the gain on this trade was merely inflation. Yesterday, we sold 100 shares of Ceradyne (CRDN) for 47.92 from the IRA, after paying 15.96 on 11/3/09. Triples within 18 months are great inflation fighters. For this one, I can thank Full Service Broker who made the recommendation.

We'll return to the buy side, however, briefly, tomorrow.

Thursday, April 21, 2011


Poker Blues, Trump, and other Outrages

For those who think the big news of the week was the S&P downgrade of the outlook for Treasury debt or the plummeting of Obama's and Trump's poll numbers, or the royal wedding preparations or the latest collapse by the Knicks, Mets, Rangers, etc. the answer is no, those are only the second tier stories. The real outrage was the closing of on-line poker's most popular websites. In a fit of Puritanical cleansing, the Justice Department determined that the off-shore headquarters of on-line poker vendors should not prevent them from being closed to U.S. customers, nor did it prevent legal action against their U.S. based owners and promoters. Previously, Justice had settled for making it as difficult as possible for U.S. customers to deposit funds to their on-line accounts, a mere inconvenience for the truly dedicated gamesman.

I understand there are lots of downsides to on-line poker. How do you prevent cheating, how can minors be prevented from playing, what about gambling addiction, etc.? I get all that. And I also get that anti-poker policy has been conducted by both of the last two administrations. But this administration has a uniquely paternal aspect to it, they just think they know better all the time and it's particularly irritating. Worst, they seem to have a bias against anything that has to do with business or the economy. ESPN is going to have a lot of commercial time to sell for its World Series of Poker telecasts this summer.

On the other hand maybe the casinos will benefit if players actually have to appear in person in order to pursue their (a)vocation.

On that note, we should consider that the quasi public leach on the New York horse racing industry, OTB, has closed shop in New York City and is nearing the end in Nassau County as well based on recent reports. Good riddance. Have you ever been near one that didn't have you looking for a place to wash your hands, and maybe your feet? But the real problem with OTB was that it took bettors away from the tracks. OTB advocates naively believed their customers were taken from illegal bookies, but the bookies survive on sports betting, not racing. Meanwhile, the combination of OTB and high takeouts (17% for straight wagering and up to 25% for exotic bets) killed bettors and with them the sport. OTB made the takeouts worse, adding a 5% surcharge to the takeout, plus breakage.

Next to that, the poker rake is all but insignificant.

So New York killed the golden goose that was thoroughbred and harness racing. Today, a track is lucky to attract 10,000 people to even a good card, even with slot machines, bets on out of town races, and all the other "attractions" they've added. There was a time when every broadcast sports report included the results from the tracks, but no more. To revive racing, give OTB a decent burial and reduce all takeouts to 11%. The dumb politicians will never do that though.

As to the other stories, let's establish right away that Donald Trump is about as serious a candidate for President as Sarah Palin, which is to say he's not serious at all. I even question whether he's really a Republican. He is however, a tireless self promoter and his "candidacy" is just another chapter. By the way, since when is wealth an attribute for a would-be Presidential candidate? And is Mr. Trump even wealthy? Sure, he controls lots of assets, but he also owes lots of money. His companies have made excellent use of the bankruptcy statutes, and the one intelligent thing The Donald does is insist that his contracts omit a personal responsibility clause. He may be the biggest blowhard in the Western World. Which is a shame since by all reports, his father was an outstanding businessman and a gentleman.

Then there's our President, who seems to feel it's ethically OK to spend the next 20 months of his term campaigning, travelling largely at taxpayer expense while he does his fundraising and speaking. Meanwhile, the rigors of campaigning seem to be more wearing than the job of being President, judging by Obama's surliness recently toward reporters, opponents, even voters. No wonder his popularity is plummeting and 44% of voters already are determined to vote against him (versus 37% inclined to vote for him). In other words, against "none of the above," Obama is behind.

Of course, another reason for his lagging numbers could have something to do with the overall cruddy job he's doing.

Obama's speech presenting his budget deficit ideas was a real joke and went over like a lead balloon with everyone except the hopelessly leftist progressives. First of all, in contrast to the Ryan Plan, there was not a single new idea, his main brainstorm being that we should let the Bush tax cuts for the wealthy expire. That refrain is getting a bit tiresome and as loyal musings readers know, it would make little difference since we're all subject to the AMT anyway.

So it amounted to yet another campaign speech, and a distasteful one at that. Also stupid timing since Obama will need GOP help to raise the debt limit. Too bad there is so little adult supervision in this administration.


On 4/13, we bought 100 shares of our little conglomerate, Kaydon Corp. (KDN) for 38.09, a value buy. On 4/15, our limit order to sell our last 120 shares of Lubrizoil (LZ) at 134.25 executed, as we knew it would in due time. We had bought 100 shares on 4/5/04 for 32.18 and 20 shares on 12/13/10 for 106.22. Also on 4/15, we bought 100 shares of IDT Corp. (IDT), a new name for 27.59. This was always a telecommunications company, but they now have become an energy play as well. Its subsidiary Genie Energy is developing a huge shale oil project in Israel of all places. You think they're going to have any problem with regulators over there?
Too bad we didn't discover this little tidbit a year ago when IDT was bottoming in single digits. On 4/18, we bought 15 shares of the SPDR Gold ETF (GLD) at 145.22. Yesterday, we bought 100 shares of Thermo Electron (TMO) at 55.41, a value buy. Today, we sold 100 shares of our railroad stock, GWR at 59.58. We'll have the profit numbers on that transaction in the next post.

Wednesday, April 13, 2011


We Get Letters, Stacks and Stacks of Letters

Perry Como fans (are any of you loyal readers old enough to remember him?) might remember that his weekly variety TV show featured a regular segment where he sang fans' requests that had arrived in the mail. All of a sudden, redwavemusings is receiving fan mail in the form of comments. We're happy to lead off this week by answering the questions posed by anonymous commenter's.

"A couple of questions, first when will the Mets teach Parnell how to pitch or give up on him? He is killing the team and the season has just started. Next, what do you think of the Knicks chances against the Celtics? Finally, investing, any opinion about Jim Cramer? I have been watching him on tv for some time now and have considered buying his books. What do you think of his advice (not showmanship)"

Bobby Parnell has a great arm but I think he holds the ball too tight and therefore his fastball has no movement. Big league hitters can handle straight fastballs - the velocity doesn't matter. His career success will depend on his ability to learn to add some movement to his pitches while still controlling them. Too much natural talent to give up on just yet.

I don't think pitching coach Dan Warthen is getting much in the way of results so far. There are too many walks, way too much nibbling, and the pitchers who are not strikeout pitchers (pretty much everyone but Parnell) don't seem to know how to change speeds and pitch to contact. We'll give him a little more time, but so far, not good.

As for the Knicks Celtics series, you have to make Boston the favorite, but since the Knicks have finished the regular season so well, and it looks like the new additions are jelling, the series should be very competitive and entertaining. For the Knicks to win, they have to get it done in 6 games. I don't see them winning a seventh game on the Parquet Floor.

Longtime readers will remember I used to quote Jim Cramer quite a bit, and newer readers can find those quotes if they're willing to make a diligent search through the archives. I haven't been watching him much recently. However, I still feel you can learn quite a bit by watching him. What? The importance of research and coming to your own opinion about economic trends and stocks. Understanding what makes stocks move in either direction. Realizing that markets are about fundamentals, though technical analysis is useful in providing perspective. The importance of management. The importance of taking profits (ringing the register). Why investing in individual stocks has certain advantages over fund investing.

Where Cramer and I part company is mainly that I think his focus is too short term for most individuals. Cramer is more patient than a lot of the analysts you see on TV, but 6 months is about the extent of his working time horizon. This is not true in every case. He will keep a stock that's doing well on his buy list for much longer. But if he believes that a positive move is unlikely in the next six months, he'd rather put his money elsewhere. This is a natural tendency arising from his days as a hedge fund investor.

Most individuals should expect to hold a stock for a minimum of a year and should be willing to be more patient than Jim.

I must confess that I have not read his books and can't tell you anything about them, but my assumption is that they must be entertaining and informative.

"I wonder if you care to comment about Rory's collapse in the Masters and about Showalter's Birds of Baltimore? I seem to recall a prior post wherein you announced that you were a fan of that moribund franchise."

Rory McElroy played superbly for 54 holes at the Masters, had a shaky front nine on Sunday, then hit it to the wrong zip code off the tenth tee and never recovered. Golfers often have fragile psychs. The difference between world class play and professional mediocrity is alarmingly small. It is a good sign that Rory bounced back from a similar disaster at the British Open. It is a bad sign that it has now happened twice.

Tom Watson went through similar trials early in his career, and many gave up on him way too soon. He ultimately became a dominant player. If I had to bet, I would say that Rory will have a good career and win majors. But we should remember that Sergio still doesn't have one, and Colin Montgomery never won one. The difference is that neither of them were reliable putters, while Rory is a good putter.

The Orioles are my American League team, certainly not as dear to my heart as the Amazins, but I do follow them. It has been a very lean decade or so for Birds fans. Management is important in baseball as everything else, and Buck is the real deal. I expect the Birds will overachieve this year, but they play in a most challenging division. I'll be very happy with 85 wins, which should be good for third or fourth in the brutal AL East.


We've now got the Ryan plan and some kind of budget idea from the President though one could hardly call it a plan. A good idea of where the battle line might be drawn is illustrated by this exchange from the liberal blog The Reality Based Community that took place the last two days. I'll let readers guess who Redwave72 might be.

Courage and Seriousness - Jonathan Zasloff

Turns out that although Paul Ryan budget plan cuts $4.3 trillion dollars in spending, mostly for the poor and middle class, it also cuts taxes– mostly for the very wealthy — by nearly $4.2 trillion dollars, leaving only $155 billion in deficit reduction over ten years. You could get that just by cutting farm subsidies in half each year (Ryan lets ag subsidies off very lightly).

But it’s a very courageous and serious plan.

kathleen says:
April 12, 2011 at 8:08 pm
No surprise there. Ryan knows who butters his toast.

Every action on the part of Republicans is intended to destroy the middle class. Keeping wages low is a PRIMARY aim and the reason they don’t really care about the unemployment rate, and those in the (formerly) middle class don’t deserve health care, or clean air/water/food, or good schools, or any say in their working conditions, or pensions, or any leisure time, or really anything at all no matter how hard they work. They don’t even care about us as “consumers” (an offensive term), because there are plenty of consumers elsewhere. Their intent is to thin the herd.

Once you view all Republican actions through this reality, it ALL makes perfect sense.

SamChevre says:
April 13, 2011 at 5:32 am
That press release is not the clearest on the proposed tax cuts.

I wasn’t aware that the Ryan plan proposed any cuts from current levels (not the future pop-up levels but actual current levels) of tax; what am I missing?

Redwave72 says:
April 13, 2011 at 8:37 am
Sam is correct, the plan is not yet that granular. The Ryan Plan does propose cutting certain rates in exchange for elimination of numerous deductibles, many of which are of limited or no value to middle income taxpayers. This was in the spirit of the proposals made by the Obama Deficit commission, whose work product Ryan opposed only because it did not go far enough to cut the deficit. Ryan’s staff expects the tax provisions of his Plan to score fairly neutral; their major impact is to simplify the code and to reduce government mangling of the code to influence behavior. Fact is, unless the AMT is changed or eliminated, there will be no tax reductions. If you did your own taxes instead of farming it out to some accountant or mindlessly entering your data into some software, black box package, you would know that. For anyone whose taxes Obama would increase, the AMT is and has long been the country’s tax system, and its rate, not the nominal rates that are politicized, are what we pay. Lowering the nominal rates simply transfers more of the taxpayer’s burden from the 1040 or Schedule D pigeonhole to the Form 6251 (AMT) pigeonhole without really changing the amount due. Increasing the rate will have the opposite effect. So go ahead, Mr. Obama. Kill the Bush tax rates! I didn’t get much of a cut when they went in, and i won’t get much of an increase if they go out.

Of course, middle income payors will get hurt if they are not on the AMT (those who live in states with low or no state income taxes). And those are the people you progressives supposedly care about! It’s annoying to be your enemies but downright fatal to be your friends!

So, in fact, Mr. Zasloff’s budget analysis of the Ryan plan is not even representative of it. But we are used to that kind of partisanship and sloppiness here.

As for Kathleen’s “reality,” this would only make sense to a seriously paranoid personality. I suggest she allow folks to explain their own motives. Maybe she should simply ask them why, and then make the effort to listen and accurately comprehend the response.

Jonathan Zasloff says:
April 13, 2011 at 9:29 am

“Ryan’s staff expects the tax provisions of his Plan to score fairly neutral”

Stop it! Stop it! You’re killing me! That’s so good, you should take it on the road. But thanks for playing.

Redwave72 says:
April 13, 2011 at 12:06 pm
If you trot on down to the library and read today’s WSJ lead editorial, you will see the same thing:

“This overhaul is not even a tax cut – the instructions are to design a reform that is revenue neutral. It would hold tax receipts to their post-World War II average of between 18% to 19% as a share of the economy. The liberal claim that this means a tax cut for the wealthy is based entirely on the fact that marginal tax rates would decline, even though the loopholes (to be closed) primarily benefit higher income taxpayers.”

Full disclosure – I commented before I saw the Journal editorial. Which indicates that careful reading of the proposal combined with an understanding of the tax code is likely to lead to similar analytical conclusions.

A more honest criticism from the left would be that the 18-19% target does not fund the priorities you believe in, like PPACA. At least that would be a true statement and would set up a serious debate that deals with our actual policy differences, as opposed to the silly pejoratives and dishonesty of the class warfare misrepresentations.

On 4/6, we bought 200 shares of US Truck (USAK) at 13, a zero buy. On 4/8, we sold 100 shares of Amerisource Bergen (ABC) at 40.75. We bought the shares on 11/15/01 at 13.77. On 4/11, we bought 100 shares of ING Preferred (ISP) for the IRA at
21.26. Today, we bought 100 shares of Kaydon (KDN), a value buy at 38.09.

Monday, April 04, 2011


Havin' Fun Now

There have been so many great games, battles that came down to the wire in this year's NCAA tournament, it is very difficult to keep any perspective about it. With 64 teams, and maybe 15 or 20 actually believing it's possible to go all the way, the tournament is coming down to sort of a lottery. I can tell you there weren't many brackets that had this final four. The Butler UConn game is about to start, and I think we are looking at a toss-up since both teams are so good at pulling games out.

Even on the girls' side, we have had three upsets in the final eight - Notre Dame over Tennessee and UConn, and Texas A&M over Stanford. That leaves another toss-up tomorrow night. Forced at gun point to pick winners, I would have to go with UConn in the boys and A&M in the girls.

And now that the Knicks have made the playoffs, a huge step forward for our moribund pro basketball franchise, baseball is finally under way. My beloved and often hapless Mets didn't win many road series last year, but they have started off with 2 of 3 in Florida, and now move on for a sterner test in Philly. However, they do there, I like the team. The starting pitching will be better than anyone thinks, and the lineup is surely better with Thole and Davis a bit more experienced, Reyes and Beltran back if not 100%, and some bench players in Murphy, Harris, Hairston and Duda. The major weakness looks to be in long relief, a spot a lot of teams could use help with. The Mets have the misfortune to play in a pretty good division, but a strong second would not be a surprise to me, and that puts you in contention for a wild card.


Speaking of good things, last night's Academy of Country Music Awards show on CBS was a lot better than your average monotonous self congratulations fest. Among the highlights - Carrie Underwood's pairing with Steven Tyler for one of her songs and then an Aerosmith classic; a very nice tune by comeback star Sara Evans; Reba being Reba and singing as well as ever; Darius Rucker singing with the developmentally challenged kids; and finally, the great medley by Zac Brown with James Taylor. And how nice that Taylor Swift's fans put her over the top for Entertainer of the Year over Miranda Lambert who deservedly won everything else. I know Country is not a pure medium anymore, but that was a fast moving, fun three hours.

The Obama re-elect campaign is officially started with a fundraising goal of $1 billion. Republicans need a candidate. With Romney and Pawlenty the only really serious viable candidates so far, one wonders if someone can convince one of the aggressive governors, Christie, Daniels, or Kasich, to jump in before it's too late. All would prefer making the run in 2016.

For pure courage, you have to admire Rep. Ryan, Chair of the House Budget Committee, and the one man in Washington ready to take on the real budget busting entitlements. If you think Social Security is the Third Rail of politics, wait til you see what Ryan has ready for Medicare overhaul!

The reclamation of George W. Bush's reputation continues. This from Der Spiegel, Feb.7 (reprinted by WSJ): Suddenly it seems everyone knew all along that Mubarak was a villain and the U.S., who supported him until recently, was even worse. However, it was actually former President George W. Bush who always believed in the democratization of the Muslim world and was broadly ridiculed by the Left for his convictions...Everyone was sure - without knowing any Muslims - that the Western model of democracy could not be applied in a backward society like Iraq. Everyone knew that the neo-conservative belief in the universal desire for freedom and progress was naive nonsense...


I returned to the tournament bridge scene Friday and Sunday, and have to admit it was more fun than I remembered. For whatever reason, I am more comfortable at the table, and that starts a virtuous cycle involving more competent play. For two days, the master point haul was about 6 and a half points, mostly gold.

We now count our LZ holding as a cash equivalent, given that Berkshire's closing of the Lubrizoil acquisition is a certainty in my mind. I don't think the questionable stock purchase by a Berkshire officer will upset the deal, and so I am holding out for 134.25, not willing to leave more than 75 cents per share on the table for the arbs. Eventually, my limit order will execute.

Otherwise, we continue to be active. On 3/16, we bought 20 shares of TIP at 109.80. Inflation hedges are the rage, for good reason. On 3/18, we bought 400 shares of Tat Technology (TATT) for the IRA, a value buy at 5.42. On 3/21, we 50 shares of Expeditors International (EXPD) a zero buy at 48.37. On 3/23 we bought 25 shares of Con Ed Preferred (ED.PR.A) for the IRA at 92.41. On 3/30 we bought 600 shares of Frozen Food Express (FFEX), a value buy at 3.45.

Then we switched to the sell side. On 3/31, we sold 100 shares of CRDN from the IRA at 44.85. These shares were purchased on 4/14/08 for 33.18. On 4/1, we sold 200 shares of Conrad (CNRD) at 14.16. They were purchased on 2/19/05 for 2.25. That was when Conrad moved to the pink sheets to avoid the exchange rules that required compliance with Sarbanes Oxley. My kind of management. Today, we sold 300 shares of Petroquest (PQ) from the IRA for 9.30 that were purchased on 4/22/09 for 2.91. So important to take profits.

Time for our periodic disclaimer: Redwavemusings and its author are NOT investment advisors and the securities mentioned here are not recommendations, only a record of my transactions. Such securities may not be suitable for readers, or anyone else.

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