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Sunday, October 30, 2011


Halloween Edition

Fine weather we had here on the east coast yesterday. Wind, cold, and sleet made for a truly miserable pre-Halloween preview of winter. In New England and upstate New York, the snow stuck, reminding some of us of the famous Halloween snow storm that hit Minneapolis about 15 years ago.

Otherwise, we have had a delightful October. In fact, since Hurricane Irene made her unwelcome visit, things have felt more like late summer than fall. But while the leaves were very late in changing, if they had changed at all, a lot are on the ground now.
Of course, it was pretty nippy in St. Louis for the last two games of the World Series, and a memorable event it was. I have to admit to feeling some regret that the Rangers couldn't get the last out in game 6 and win their first title. I thought their manager did very well in handling his staff that game and had every reason to believe that his closer could hold a two run lead in the ninth. But that's a problem with today's game, in my opinion. You don't depart from the formula, and that says your eighth inning guy gets that inning and your closer finishes. Frankly, I didn't think Feliz had been all that sharp in the Series.

It made sense for Ron Washington to play to nail it down in game six with the lead, but if you are going to do that, you have to go right down the line with it. To me that meant going longer with Holland, who I thought still had good stuff in the eighth even though he was touched for a homer and a single. He looked comfortable, had only thrown 23 pitches, and likely could have finished the eighth and perhaps started the ninth. That would have allowed Adams and Feliz to come in later, if at all.

The point is that once you bring in Holland, he is no longer available to start a game 7. So to me, once you bring him in, you bite the bullet and go as far as he can take you to get to Feliz. If he takes you the rest of the way, so much the better and you simply explain to Feliz why he didn't pitch in between swigs of champagne.

I realize this is not the current book for managers. They kowtow to closers who feel slighted if they don't get the automatic call for the ninth inning. So be it, but closers are losing too many big games, if you ask me.

Having said that, that game six goes down as one of the great post season classics that I would happily sit through again on tape some day. That puts it up there with my other favorite amazing games, the 55 Dodgers, winning game 7 thanks to Sandy Amaros' catch in Yankee Stadium's left field corner, the Pirates winning a 10-9 thriller in 1960's game 7 on the Mazeroski homer after the Yankees rallied to tie, the 1962 Yankee win in game 7 when Bobby Richardson caught McCovey's scorched liner for the last out with the tieing run on third, the 1969 Mets win on Tommy Agee's two great catches, the Mets winning the game 6 marathon over Houston in the 1986 NLDS and rallying to win game 6 against the Red Sox the same year, and the Cardinals dramatic win in game 7 over the Mets in 2006, when Endy Chavez great catch kept the Mets in the game.

I really have mixed feelings watching Netflix implode. Long time readers will recall we took gas on Blockbuster, and its downward slide was accelerated by Netflix' aggressive pricing and adaptation to a business model that made Blockbusters' retail brick and mortar stores obsolete.

So we got that, but in fact, it now appears that Netflix pricing was simply predatory. With Blockbuster in bankruptcy, Netflix has inflicted substantial price increases on its customers, and its business model doesn't seem so attractive with profitable pricing. Netflix shareholders have already gotten their comeuppance, but that is not doing former Blockbuster shareholders any good.

The fact is that while the various anti=trust regulators make life miserable for companies trying to merge, they are less interested in protecting competitors from predatory pricing strategies, which arguably should be their main concern. Mergers often strengthen the remaining competitors and can benefit consumers. Consumers did not benefit from Netflix destruction of its rival.

So is it sour grapes or do BBI holders have a real beef? The fact is that there were plenty of reasons to ditch BBI, even ignoring Netflix actions. As soon as BBI was spun out of its parent and forced to borrow to pay a special dividend, we knew something was up, and could have sold to minimize the losses. So there are lots of villains in this piece and BBI holders had a chance to control the damage. Nonetheless, this was one of those stituations where corporate America did a lot less than its best.

So this week, it's back to National Harbor, MD for a week of meetings in proximity to the nation's capitol. I am not excited, but there's no way out. Maybe I can play bridge one night if I can keep the schedule open.

One might have thought that I got my fill of bridge in Danbury at the Regional last weekend, playing six sessions in three days, but the fact is that my game is slowly improving, and bridge is one of those games that is exponentially more enjoyable the better you play. Not that, like golf, it can't be enjoyed at almost all levels of play, but when you are pretty much oblivious to what's really going on with a hand, you kind of miss a lot.

In Danbury, I played part of the event with a visitor from Nova Scotia who was seeking her last few gold points to achieve Life Master before going in for cataract surgery. So it was a thrill for her and satisfying for me to finish fifth overall in the event and get the points she needed. There are people who play every day professionally, and I can see the satisfaction they can derive from helping their clients achieve their bridge goals. (Yes, there's a whole other world out there playing cards that you probably didn't know about.) But I'm not quite ready for that yet.

Still with the aforementioned weather turning lousy, I expect to attend a number of tournaments this winter; I already have my gold points, but need some others to get to Life Master status myself.

Thanks to the rally following Europe's latest phony bailout, we're back to about even for the year on the market, and have another decent profit taking opportunity. On 10/21, I bought 1800 more shares of Hauppauge Digital (HAUP), a value buy at
1.15. Please don't confuse "value" with safety. On 10/24, I sold 100 shares of Fastenal (FAST) at 35.46. We paid 19.52 on 6/26/06. Then we made two sales on
10/28. First was 200 shares of Conrad (CNRD) at 14.90, a nice profit from the 1.30 we paid on 4/26/05. Then we sold 100 shares of Quanta (PWR) at 21.55, accepting a loss on those shares since we paid 31.48 on 11/6/08.

Thursday, October 20, 2011


A Smattering of Gibberish

Here's financial journalist Charles Gasparino in the New York Post on the Occupy Wall Street wackos: "Rather than heading uptown to the homes of people like Jamie Dimon, the protesters should be marching south - way south - to protest the Washington lawmakers who gave us the jobs-killing Dodd-Frank financial reform."

Another interesting view came from David Moore, CEO of Moore Holdings, and a trustee for several NYC charities, in a WSJ op ed: "Walking down New York's 55th Street near Park Ave., our group of 7 men in suits and ties was approached by a panhandler asking for money. 'Here are a bunch of Wall Street guys,' he said straight out. 'Give me some money.' All except one kept walking, ignoring the panhandler as we typically do, as instructed by "experts." Yet over the last 30 years of living in the city, I often have disregarded this advice , and so once more, I gave instinctively. I pulled out a dollar, handed it to the man, smiled and resumed walking. But next came a revelation. 'A dollar?' the man shouted. 'You Wall Street fat cats! This is what the problem is with this country. Take your damn dollar.' With that, he threw it on the sidewalk.

"Apparently, street charity now has a minimum. Where did this script - and its concomitant anger - come from? Like most people I know, I think President Obama's tax increases on the wealthy would make sense if we believed he was sincere about - and could be successful at - reforming Washington's spending...Instead, his attacks on Wall Street bankers, oil companies, jet manufacturers, and millionaires and billionaires are inflaming both sides and placating no one...The president's incendiary message has now reached the streets...His complaints that rich people must pay their fair share have now goaded some of our society's most unfortunate, including one who felt compelled to refuse money because it was not enough. President Obama has become the 'Great Divider" instead of the 'Great Uniter' we all hoped he would be..."

But the beat goes on. Senate Democrats proposed this week a bill to send $35 billion to state and local governments to retain and rehire teachers and other public sector workers. I guess this would be Stimulus 3 or 4. But the usual approach - money to the public union friends of Dems to be recycled in the form of campaign contributions to Dem candidates - would do nothing to actually help the economy. That would just be another $35 billion we don't have poured down the rathole. Luckily, the GOP is now in charge at the House, and the bill will never be taken up there.

And in case you have any doubt that this administration is really different in its reckless spending approach, consider the following statistics. Over the last 5 fiscal years, federal revenues have been reasonably stable, varying from a high of $2.6 trillion in 2007 to a low of $2.1 trillion in 2009. But look at spending - $2.6 trillion in 2007 ( a nearly balanced budget), $3.0 trillion in 2008 (bailout year), $3.5 trillion in both 2009 and 2010, and $3.6 trillion in 2011. That increased the deficit from 0.2 in 2007, 0.5 in 2008, 1.4 in 2009, and 1.3 in 2010 and 2011. That has taken the deficit from 1.2% of GDP in 2007 to 10% of GDP in 2009, and 8.6% in 2011.

Now, President Bush was infamous for never vetoing a spending bill, so he was hardly a fiscal tightwad. But he looks like Scrooge compared with Obama, who has added over $4 trillion to the national debt in only three years. So if it looks like Republicans won't compromise on these matters, consider who they are dealing with. We don't want compromise, we want to stop spending money we don't have. And that's a perfectly reasonable position.

At Birdland last night, young clarinetist Pete Martinez (from Brooklyn, NY) sat next to me between sets and we talked about how it was I discovered jazz and became a fan. And we both agreed that the jazz scene, perhaps unlike anywhere else, is so alive and vibrant in NYC, and how all the clubs are doing pretty well. Later in the evening, I learned that drummer and bandleader Tommy Igoe, who leads the Birdland big band on Friday evenings, has had to relocate to San Francisco (for his wife's job) but does return to lead the band two Fridays out of each month. Whether he is in town or not, the show goes on each Friday, still drawing full houses. And Tommy will be there to lead the band New Year's Eve, and in fact will be the headline act at Birdland all that week. It's such a rare moment when you can see a great house band in its home club at peak form, and we should never be surprised when such nirvana ends prematurely. All the more reason to make plans to see the big band, preferably with Tommy some Friday evening soon.

After Birdland, I strolled over to the Satie hotel on 5th and 36th, which has a beautiful bar, perhaps as nice as the one at the Royalton (called '44'). What Satie also has is jazz, virtually every night of the week starting at 8 PM most nights. Often, the music is solo piano, but last night I heard quite a good trio. Really a pleasant new find for even casual jazz fans.

And in sports, the world series is on, with National League wild card St Louis hitting stride with perfect timing, playing the Texas Rangers, who make a return trip to the Fall Classic. I wonder if now, we can finally dump this idea that the All Star Game should be played for the World Series home field advantage. This year, we have the distasteful result that a wild card team has the odd home game in the Series. I find that offensive, and believe that we should go back to alternating home field advantage between the leagues or giving home field to the team with the better record.

I'm sure many haven't noticed, what with basebnll and football dominating the scene, but the NHL has started its regular season. And lo and behold, my Islanders are winning (albeit, at home). Of course goaltender Rick DePietro continues history's longest vacation, but no matter, we are scoring plenty of goals during his injury absence. Maybe hockey can be fun again. As they say, lots of good seats are available. And with our millionaire and billionaire basketball players on strike, locked out, or whatever, we might actually be interested in what's happening on the ice.

We used the rally to do some selling. First, we sold 100 shares of Newmont Gold (NEM) at 64.81. We had paid 46.15. for 50 on 11/6/06 and 45.29 for 50 on 11/22/06. On 10/14, we sold 100 shares of Standex (SXI) at 36, for which we paid 28.125 way back on 3/10/97 when stock prices were still quoted in eighths. Then on 10/17, we sold 100 shares of NVE Corp (NVEC) from the IRA for 68.11, purchased for 38.53 on 11/16/09. Today, the Street did not like NVEC's earnings report and took the stock down a bunch; the psychic pleasure of selling before that happened is tempered by the fact that I still own 200 shares. But this was a classic overreaction by the Street - the earnings were really not bad. Yesterday, we returned to the buy side, with the IRA picking up 100 shares of Hartford Preferred (HIG.PR.A) at 21.83.

We have quite a few new readers, so here comes the obligatory disclaimer. Neither redwavemusings nor its author are investment advisors, the transactions recorded here are not recommendations, and the securities mentioned here may not be suitable for anyone, and that includes me!

Sunday, October 09, 2011


Special Columbus Day issue

What to make of these goofy demonstrations called Occupy Wall Street, parroted by similar efforts in Chicago and a couple of other cities? We can start with a couple of fairly obvious observations. First, this seems to be a progressive and populist answer to the Tea Party. It is similarly obscure in its message, perhaps more confusing and disjointed. What we are hearing is an anti-corporatist, anti banking, radicalism. On the one hand, it seems to have elements descended from the days of William Jennings Bryan's pro-silver inflationists. Some of it is a misguided and mis-informed attempt to put the lessons of the academic left into political practice. Then there is the pro-unionist element, bringing to mind the socialist early days of the union movement.

Whatever it is, establishment Dems are having the same trouble figuring out how to react to it as establishment Republicans had with the Tea Party. Some are focusing on what they have in common with the group, and others are looking the other way, hoping they won't be associated with them. Seems to me those are the more politically astute. Thinking back to 1968, and especially 1972, the behavior of left wing activists was an existential problem for Hubert Humphrey. Putting down the demonstrators in Chicago at the convention probably assured Nixon's narrow victory. In 1972, the public was repulsed by the Democratic convention, taken over by leftists and all manner of minorities with points to prove but no governing strategy. The result was that Nixon won a landslide, despite running perhaps the least ethical campaign ever.

I wonder how the anti-Wall Street crowd is playing to the states that will decide the 2012 election, especially among crucial independent voters. I am talking about Florida, Ohio, Wisconsin, Pennsylvania, Nevada, Missouri, Iowa, West Virginia for starters. My guess is that the answer is that the longer this goes on, the better for the GOP candidates.

I'm not surprised the Jets come home from their long road trip 2-3. Now it's time for Rex to cut out the braggadocio, cancel the Super Bowl reservations, and get down to the business of objectively assessing the talent and making needed changes. This team really needs help in the trenches where most games are actually won and lost.

The Giants had to be very disappointed in losing at home to Seattle, proving again that nothing in pro football can be taken for granted. This game was murder on suicide pool players. Fortunately for the Giants, the Eagles turning from Dream Team into Nightmare Team means Big Blue can stay in the division title chase.

Then there's baseball. We warned that the Tigers Yanks series was a tossup, and that the Tigers were the hotter team. Somehow, I will never understand the inability of the Yankees' organization and their fans to keep things in perspective. You would think that losing that series (after 5 very competitive games) branded their season a failure the way they reacted. In my opinion, the Yankees overachieved, winning the division going away with only half a starting rotation of any quality, and with a rapidly fading set of players in Rodriguez, Teixera, Posada, etc. They were carried by Cano, Granderson, Sabbathia, Mo, Robertson and a resurgent Jeter, and got surprising performances by Nova, and Martin. The Red Sox proved you can a high payroll and not have the best team. The Yankees will always have a very high payroll, probably the highest the next few years given what they are committed to for A-Rod and Jeter and what Cano is going to earn. Winning championships will still be a matter of doing it on the field, and considerable luck is involved with winning three short series in the playoffs. Yankee fans need to embrace winning the division title in 2011 and having the league's best record. The 162 game season has always been the truest performance indicator.

Then there are my Mets. Most people would say that their big off-season challenge would be to sign Jose Reyes, and that it's a no-brainer. Here's the truth. You'd like to have him back, but as a speed burner, his prime is only going to last a few more years. If you have to sign him for 7 or 8 years, you are going to seriously overpay. If you don't sign him, you will lose some but less than you think with the developing Tejada, whose bat continues to improve, and whose defense is only a cut under Reyes and will also improve. That would also open up second base for Turner.

If it sounds like I am mentally prepared to lose Reyes, let's just say that I am OK with it going either way. Maybe the best would be to sign him and trade him after two years, just before he really slips. But I expect someone to offer him too much money for the Mets to match.

The Mets really need to upgrade at catcher and in center field. My strategy would be to convert David Wright to center field, where he is just fast enough to play (and that gets him away from his increasingly shaky play at 3rd base), opening up third for Murphy, and allowing you to trade Pagan for the best catcher he would bring.


Lots of passings recently. I don't have much to say about Steve Jobs that isn't already being said. Just as intriguing a figure was Al Davis, the Oakland Raiders owner and former coach who was a leading figure in the success of the American Football League, and who always marched to his own drummer. Sometimes that drummer's beat was quite a bit off, and the Raiders had lean times as well as good times. Davis could be impulsive and manipulative; famously, he moved the team to Los Angeles, then back to Oakland. But he was one of those guys who would figure in any comprehensive history of pro football, to my mind, the best way to determine a Hall of Famer.

Less well know was golfer Dave Hill. Though a superb pro with a great record, Hill was perhaps best known for his brutal assessment of U.S. Open venue Hazeltine in Minnesota. Though on his way to a second place finish in that event, Hill's assessment was that the course "lacked only 80 acres of corn and a few cows to be a good farm." Many of his competitors shared the same opinion, but had the propriety to keep their mouths shut. Hill never did, but had a successful career, winning 13 official PGA Tour titles. His brother Mike was never a success on the big tour but went on to dominate the Senior Tour for several years.

Last week, I had the good fortune to play golf with Steve Garvey, the former Dodger and Padre. Garvey always had the reputation of being such a nice guy, that it was a little much and people didn't believe it. The truth is, his good guy reputation is deserved, and I think it's just genuine. At some point, the veterans committee should reverse an injustice and put Garvey in the Hall. How could you write a history of baseball and not mention Garvey, his part in the Dodgers longtime infield (with Cey, Lopes and Russell), his long consecutive game streak, his winning ways wherever he played? His numbers are a lot better than a bunch of guys already in too.

On 9/30, we bought 1000 shares of Frozen Food Express (FFEX), a nice trucking company going through another of its cyclical downturns. This was a zero buy, highly speculative at 2.13. On 10/3, we bought 15 shares of the Gold ETF (GLD), also for the IRA, at 161. On 10/6, we bought 100 shares of Devon Energy (56.32), a value buy. Finally on 10/7, we acted on the decision not to retain the Home and Security spin off from Fortune Brands (FBHS), selling 300 shares, half in the IRA, for 12.60. We are still trying to determine the cost basis, but I think we came about even on these. We'll keep BEAM, the shares representing the spirits business of Fortune on the buy/hold list.

Today, we bought another 1100 shares of FFEX at 1.93. We warn you not to try this at home. These shares can still get cheaper.

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