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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.

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