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Wednesday, September 26, 2012


Special Day of Atonement Issue

So I'm home today, atoning for a year's worth of sins ( a process that's hard to complete in only 24 hours) and took a break to watch Mahmoud Ahmadinejad's UN speech.  Iran's President went through the usual drill of blaming the world's ills on rich, capitalist, zionist loving, nuclear armed, aggressor states exploiting the world's poor, non-aligned  countries, ruining the environment and causing horrible weather in those poor countries by burning fossil fuels (imported from Iran?), etc.  Of course, most of those capitalist plutocrat nations, including the U.S., were boycotting the speech, having heard it more than enough times.  Anyway, for the last five or ten minutes (he was already 15 minutes over his time limit) of his address, the Islamic Republic's leader embarked on a discussion about how everything would be set right when the "savior" appeared.  He would come with Jesus Christ and some others not identified (presumably including the Prophet, himself) and their resurrection would usher in a messianic age of peace and love.  After several more minutes of describing this future Garden of Eden, he wrapped up, bid the delegates goodbye, and then accepted the handshakes and well wishes of the Secretary General and others seated with him, to the polite applause of those remaining in the audience.

When Ahmadinejad left, the two men with the Secretary General spoke among themselves presuming they were out of range of the C-Span microphones.  Fortunately they were not.  One with a British accent was heard to say with characteristic understatement to the Sec. Gen., "Quite an unusual speech."  (Mumbled response).    Then, "Good to hear that the Savior will make everything well."

 For those concerned about current polling, it is certainly cause for concern, but pollsters themselves are not disinterested, and one needs to consider the sources.  It can certainly help your candidate by showing him or her in the lead.  Also, even if the organizer of the poll is not so biased, the folks doing the polling may well be.  That's why college polls, like Quinnipiac, for example, need to be taken with a grain of salt.  Some polls, if you look at Realclearpolitics.com, actually disclose their biases, like PPP (a Dem poll).  Washington Post? Are you kidding?  Have you read that paper recently?  It's even left of the New York Times!

The only polls I really count on for accuracy are those of Rasmussen and Gallop.  In particular, even though Mr. Rasmussen has a Republican bias, his polling has been uncannily accurate  for a long period of time.  Alone among the pollsters, he seems able to identify likely voters and gauge the components of what will actually be the electorate.  And unlike the Dem leaning polls, he is showing the contest to be a virtual dead heat, both nationally and in the swing states.  So this is no time to be discouraged. 

And though the Romney campaign has been portrayed by the media as a virtual gaffe machine, the media bias has caused them to really be over the top.  For example, Yahoo ran a story yesterday that Romney's regret (after Ann Romney's plane made an emergency landing) that plane windows can't be rolled down in an emergency indicated that he was somehow ignorant of cabin pressurization necessary at 30,000 feet,  But of course, the Governor was referring to an on the ground emergency capability, one that could easily be locked down during flight.

By the way, to call Yahoo a "news service" of any kind is a misuse of the term.  Believe me, unless Yahoo is reprinting a wire story (from Reuters or AP), you might as well read The National Enquirer.
So readers want to know the Redwave position on taxes.  Is there any circumstance where taxes should be raised?  Which taxes, and on whom?  We have discussed this in bits and pieces over the years, but never comprehensively.  So here goes.

There are two ways to look at taxes, from the standpoint of the macro economist, and from the standpoint of a tax writing committee where you get into the gory details.  Let's look at the macro view first.

Federal taxes are a huge problem area, because everyone wants to feed at the revenue trough but no one wants to pay.  It's common for state representatives to brag about how much more federal spending they bring back to the district than the district contributes in taxes.  Is it a wonder then that the Federal Government is chronically in deficit?

Historically, there is a tendency for federal revenues to come in about 19% or so of GNP.  I would view that as a stasis point, that says we are in a nice equilibrium.  To my way of thinking, that should be enough to cover the constitutional powers assigned to the federal government: providing for the common defense, regulating interstate commerce, international diplomacy, the duties and expenses of Congress, the Administration and Federal Courts, maintenance of federal highways, lands and parks, etc.  To those we have added, for better or worse, certain welfare benefits: social security, Medicare, Medicaid (shared with the states), and now (God help us), PPACA.

Obviously, the Federal Government has grown into something of a leviathan, as each of these functions have expanded to cover anything with the slightest connection.  Congress, especially when controlled by Dems, and the Courts have generally cheered and enabled these expansions.  To the chagrin of true conservatives, too many Republicans, including Bush 43 did little or nothing to oppose these expansions.  Hence the Tea Party movement.  It was Ronald Reagan's great insight that holding federal revenues to 20% or less of GNP could force the spenders to rein in their plans since they could not be funded at some point except by deficits.  He ran his own deficits because he met a pressing need to restore our defense capability, which had been neglected during the Carter years.  This was a reasonable investment, since it effectively bankrupted the Russians first, who could not keep up, and ended the Soviet Union.  But it did mean that we incurred deficits during the Reagan years, despite rapidly increasing GNP and federal revenues.  He did not like that aspect, considering it a necessary evil.  The idea promoted by Democrats that Reagan would be aligned with moderate Republicans today is utter nonsense.  He would be a Tea Party leader for sure.

When tax collections soar into the twenties, or shrink through the teens as a percentage of GNP, we are in an outlier situation that needs to be addressed.  Today, we are running something like 15-16% of GNP, so federal collections are too low.  At the same time, The Obama administration is spending something like 24% of GNP and that's way too high.  Budgetarily, we are in the worst of all worlds.

The fact that we need to increase tax collections does not mean that the system in place must be changed, but it could mean that.  We all know that in a slow economy, both tax collections and GNP go down.  My view is that before we know how much to address tax rates, there are obvious things that need to be fixed.  First, as I have discussed before many times, and as I wish Governor Romney would propose, there is absolutely no good reason why hedge fund managers pay long term capital gains rates on their share of clients' gains.  They are not risking their own money, this income looks and smells like a commission or bonus, and should be taxed at ordinary income rates.  That's a fair piece of change, probably more than raising rates on the top two per cent, who will get an almost equal reduction in tax through the AMT mechanism.  Going from 15 to 39% for equity managers dwarfs their AMT liabilities.

Second, we need to end this goofy partial payroll tax holiday that lowered social security withholding.  It is stimulating nothing, because most workers don't feel it, but its cumulative impact on the fisc is powerful.  Third, the IRS must do a better job auditing small business proprietor's income.  I am all for small business, they are the job creators, etc. etc.  But we all know business owners who pay virtually all their personal and family expenses out of the business, deduct them as business expenses, and don't take that cost as personal income.    Then, they brag they have no income and pay no taxes.  Yikes!  The government is losing billions in unreported income, withholding and all the rest. 

So tax compliance is a big deal in the shortfall.  Tax simplification has potential too, both in terms of reducing deductions and corporate welfare, as well as improving compliance.   Whatever we decide to do in addition, the overall target should be no more than 19% of GNP. 

As far as individual changes, I actually favor lowering the corporate tax rate (since it is taxed twice) and keeping dividends at 15% on individual returns.  I think it would also be helpful to allow corporations to repatriate their foreign earnings without a tax penalty.  That will actually gain revenue since whatever the corporation does with the repatriated funds is likely to generate tax.  I think the investment tax inserted in PPACA is an economic disaster, and will not generate net revenue;  whatever it generates will be offset by slowing the economy.  We may get a bump in 2013 revenues since if Obama is re-elected, I expect, investors to load up on gains in 2012, and even move large amounts from qualified to non-qualified accounts in order to take advantage of 2012 rates.  These revenues will simply be taken out of future year collections. 

I agree with Governor Romney that it is actually unfair to target the top brackets for a higher proportion of income taxes, since they already pay for the bulk of government already.  In his case, he has benefitted from the hedge fund manager exception, and that should be ended.  To his credit, he did not deduct a large portion of his charitable gifts, so he increased his tax percentage some to offset that adb\vantage.  So I do not think income tax rates are too low at any bracket.  In fact, I think Bush got that about right.  Some may recall we were collecting too much tax during the second Clinton Administration, leading some to worry about whether investors would find sufficient supply of Treasury Bonds and Bills.  The Clinton tax increase caused the economy to be slower than it needed to be, and led to surpluses when he also curtailed defense spending while Congress reduced welfare spending.  So the Bush tax cuts were prudent and led to an almost immediate increase in revenues.  If only he had been so prudent to restrain Congressional spending!

On estate taxation, I kind of think where we are on that is pretty good.  That is, we have increased the amount you can pass estate tax free to the point that only large estates are taxed.  Also the tax rate on those estates is no longer confiscatory (55% was much too high).  Unfortunately, if nothing is done, we might go back to high rates and low exempt amounts.  That would not be helpful.  I am not for eliminating the tax entirely as many Tea Partier's are.  As for the AMT, conceptually it is an abomination.  However, it has one salutary effect, largely unrecognized, in that it makes a lot of this talk about changing tax rates irrelevant.  In fact, I am an advocate of making the AMT the basic income tax system and throwing out the rest of it.  If you did that, things that are now deductible (but not under the AMT) would have to stand on their own merits.  For example, when states went to raise their taxes, they would have to consider that such increases are not deductible.  Too often, that issue is not considered though AMT payors don't get the benefit of those deductions.                  

Changing our system to make the AMT the basic tax system, for earned income, with schedule D the system for investment income, is in my view, the simplest way to simplify the system and put the tax schemers out of business.

People railing about replacement officials in the NFL have short memories.  Did a week ever go by without controversial calls even with the real officials?  That said, confidence in the ability of the scab officials is lacking, and the NFL owners are kidding themselves if they think their product has the same credibility with the replacements.
WSJ reported on the recent passing of Tinkham Veale II.  Who was Tink?  When I first got interested in stocks, the second stock I bought was a conglomerate called Alco Standard.  Tink and his brother George formed Alco in the 1960's after Tink had made a fortune in automobile air conditioning and induction heating equipment.  He was also active in horse racing, selling a track to Churchill Downs. 

The idea behind Alco was not to buy public companies, like IT&T or Gulf and Western did, but to find small business owners in need of capital and support services so that they could grow exponentially.  Alco provided those in exchange for ownership of the companies, keeping the former owner managers on to run the businesses.  Those managers were called Partners of Profit and the annual POP meetings were celebrations of US capitalism at its best.  Alco bought hundreds of businesses to build strong market share in paper distribution, office supplies and equipment, wine and spirits, glassware and bottles distribution, parts manufacturing, health product distribution, and so on.

As time went on, I accumulated lots of Alco shares through its dividend reinvestment and optional purchase program (DRIP).  I also wrote a paper for an MBA course about conglomerates highlighting Alco and its unique approach, and sent it to TInk.  He thought enough of it, he gave it to his PR Department, and they came up to do a photo shoot and included me with other shareholder profiles in its 1982 Annual Report.  The next year, all of us who were profiled were invited to the POP Club meeting on Hilton Head, a truly memorable experience.  My recollection of Tink was that he was a real character, and one of his favorite things was to play poker and craps with the attendees into the wee hours of the mornings. 

1983 was the beginning of the end of the recession, and the news of orders at the various businesses spread through the convention center and was cause for much celebration.  It was the onset of very heady times.  My Alco stock largely paid for our house.  After Tink retired for good, the Company eventually shrank itself and split up, as analysts demanded that conglomerates narrow their focus.  The remnants of its health distribution business is Amerisource Bergen (ABC), still on the musings buy/hold list.  Tink passed away at age 97.  RIP.     
On 9/12, we sold 1000 shares of Frozen Food Express (FFEX) at 2.20 from the IRA.  We paid 1.25 for 200 on 11/10/11 and 1.28 for 800 on 12/19/11.  On 9/14, we sold 200 shares of Pulte Homes (PHM) at 16.25.  We paid 8.18 for 138 on 10/22/10 and 7.34 for 62 shares on 12/22/10.  On 9/17, we sold 300 shares of Newpark Resources (NR) at 8.13.  We paid 2.85 on 6/22/09.  On 9/19, we bought 300 shares of Genie (GNE) at 6.90, a value buy.  On 9/24, we bought 100 shares of Expeditors International (EXPD) at 36.73, a zero buy.

Thursday, September 13, 2012


The Dem convention; options part 3

The link below is to Haverford's website with an interesting research story for environmentally oriented folks concerning the exciting prospect of separating and diverting carbon dioxide from burning fossil fuels.  The idea of course is to extend the useful lives of fossil fuel burning plants, especially since the advent of new drilling techniques has made so much more fuel available.

Whether one is concerned about the possibility of man-influenced climate change or not, we all should be pleased that techniques will be discovered to reduce the emission of suspect gases.  Of course, I anticipate a breed of environmentalist who would reject any such solutions, since the agenda of such people is really curtailing industrialization and corporatism.  Such discoveries may finally expose those creatures, as opposed to the ones really concerned about protecting the environment, who would welcome developments like this.

Haverford Researchers Create Carbon Dioxide-Separating Polymer - Haverford College News


The Democratic convention was a progressive's tour de force, showing off the party stars to their best advantage, tightly scripted, predictably over the top criticisms of the opposition, and nauseating to the rest of us because of the constant mischaracterization of the GOP positions and objectives, and even worse misrepresentation of history and the "achievements" of the inept Obama administration.  I have to admit, I could only take it in small doses, try as I might.  But Obama's progressive and socialist fans ate it all up - just look at the left wing blogs - and so did the leftist biased media.  They put everything in a positive light, after being at best indifferent but more typically critical of what went on in Tampa.  But conservatives have lived with that handicap for 50 years.  At least now there is Fox News and Conservative radio to shore up the base.

 Yes, the Dems got a bounce in the polls.  The media happily reported that.  Let's see how quickly they'll acknowledge its fading, which has already started according to today's polls.  Part of the reversal had to do with the horrendous jobs report Friday.  But that's real - the bounce was a fraud.
Nevertheless the time has come for those who want to see a change in administration to get involved.

You do this by talking about the election with friends and acquaintances as tactful opportunity presents itself.  We are all centers of influence for some number of people.  It's easier to come over to our side if you hear people you like or respect talking about how it's ok to make a change.  Now I know many are so turned off (understandably) by politics that the idea of raising the subject (generally a social taboo) is anathema, but political participation is vital in a democracy or republic.  By the way, if Obama is your man, I would similarly encourage the same kind of participation, though please don't bother trying to convince me (and if you do, I will take advantage of the opportunity to explain why you should be on my side).

By the way, there are ways to do this and ways not to.  At bridge Saturday, one South we came to displayed a piece of note paper that said simply "defend Freedom, defeat Obama."  I have to admit this caused an awkward moment, and I responded simply "as my Dad would say, vote early and often."  That non-partisan rejoinder relaxed the table and ended the inappropriate political discussion before it really started, so that we could play the hands.

The Romney campaign is not doing especially well.  They have been slow to spend their money and run their ads in the swing states, and need to sharpen their positions (I had some suggestions in the prior post) and take advantage of the daily torrent of bad news for this administration.  When the Dems say something patently absurd (such as that they have been strong supporters of Israel, or did not reverse welfare to work), the Romney campaign should call them on it and cite chapter and verse.

But another key point - it matters who has the lead now.  Early voting starts in September in several swing states.   So NOW is the time to turn things around - not after the debates.

As if we needed more food for fodder, the sad and violent murder of our ambassador to Libya, greeted by a State Department comment blaming the producer of the short film that allegedly incited the mob, instead of the perpetrators, was rightly commented on by Mitt Romney.  His comments critical of both the State Department official making the stupid apologetic comment, and the President's weak MidEast policy that encourages such activity (we have talked many times on this blog about how terrorists only respect strength and gorge on weakness) elicited a White House rebuke, to the effect that the candidate had no business politicizing (or even commenting) on this foreign policy matter.

This is so absurd that it is hard to believe that even this myopic White House believes it.  First, it is so typical of Obama, and progressives in general, that rather than actually address Romney's criticism, they responded with an ad hominem attack but also questioned whether his comment was appropriate.  Well, if Romney hadn't said anything about such a serious incident, wouldn't we all have been wondering what the candidate was thinking?  But second, every American has a first amendment right to comment.  In fact, wasn't it Dems who asserted this right (correctly) during the Vietnam era, not to mention ad nauseum with respect to Iraq.   And if every American has that right, how dare the President question whether his opponent has that right?

A loyal reader has asked for the Musings view on taxes and whether we would support any increases.  I will explain that position in the next post in, I believe, convincing fashion.  The posts will also be coming thicker and faster as we move into the heat of the campaign.

 For this post, we need to finish our series on options and options trading.  This last installment is on index options.

We have previously provided a primer on the mechanics of options trading, and then a discussion of the hedging strategy utilizing covered calls.  For the third and last installment on this series, we will discuss index options.

Theoretically, options could be traded using any asset with a trading market as a reference point.  Once everyone understood this, the attractiveness of trading options based on indexes, like the S&P 500 or the Dow industrials, became obvious.  What makes option trading sexy, especially for speculators, is volatility and leverage.  However, the first to use indexes were hedgers.  The idea was that you could sell a basket of stocks in the form of an index to hedge an actual portfolio of stocks (long positions) or buy an index to hedge a short position.  Once the indexes were being traded in this fashion, the next obvious step was to increase leverage to attract speculators.  Options increase leverage, because like futures, you control a lot of assets with a relatively small cash outlay. 

Once the Street realized there was a lot of money to be made selling options on indexes, they set about constructing indexes with more volatility, and factoring those indexes by ten if necessary to increase volatility and option premiums.  The more volatile S&P 100 (OEX) quickly surpassed the S&P 500 in popularity for option traders.  How would this work? Let's say we have an index trading at 1300.  If I am bullish on the market, I might want to buy an option to buy the index at 1340 (roughly a 3% gain) expiring in four or five months.  Depending on the historical volatility of this index, it might cost me about 10 to buy this option.  So to buy 10 options will cost $10,000 plus commission.  Now the index needs to climb above 1340 theoretically to get into the money, but actually, if the index could bounce to 1315 or so over the next week, the price of the option might go to 12.  I could sell the options then and net $2,000, minus the commissions.  In other words, this works exactly like options on a stock, but the speculator is betting on the market direction, not on the action in a single stock.  If the stock didn't move with the market, the stock option's value would waste away (see the first installment), even though I might have been correct to take a bullish view of the market.  With an index, if I guess the market correctly, I'll make money, assuming I have a careful selling strategy.

Just like with stock options, index options come in both calls and puts, and in theory, they can be shorted, though this is too dangerous for retail investors, and most brokers wouldn't allow them to do it.  It's interesting that brokers will tell you that most speculators are either wired to be bullish or bearish.  The bulls buy calls when they are comfortable with the market or sit out.  The bears are only comfortable buying puts when they think the market is too high.  Very few people are sharp enough to play both puts and calls successfully.

Perversely, the Street believes that most retail option players are as unsuccessful as retail stock players.  So a ratio that is watched closely is the put to call ratio.  When the ratio gets high, indicating investors are bearish, that is considered a contrary indicator that the market is about to rally.  When the ratio gets low, indicating the call players are more active, that is a bearish sign for the market. 

Options have become an important part of the market - they've been that way for over 30 years, certainly since the advent of index options as a retail product.  For a retail investor (as opposed to a speculator), they are a tool to be aware of but not necessarily to use, other than covered calls under the conditions and with the limitations I described in installment 2.  The redwavemusings investment formula does not use options at all currently.  In fact, I haven't bought or sold an option of any kind in 20 years.  Sure its exciting to make a thousand dollars in a matter of hours.  It's also a pretty sick feeling to have an option go the wrong way and watch your whole purchase price get lost over days, weeks, or a few months.  I've had both of those experiences.  For that kind of roller coaster ride, I strongly suggest a casino. At least you know going in that the odds are against you, no matter how smart you think you are. 

The stock market continues to treat us very well.  On 9/4, we sold 900 shares of Frozen Food Express (FFEX) at 2.33.  We paid 1.25 on 11/10/11.  On 9/5, we sold 200 shares of Pulte Homes (PHM)  at 13.69.  For 38 shares, we paid 8.70 on 6/29/10, and for 162 shares, we paid 8.13 on 10/22/10.  On 9/7, we sold 100 shares of Teleflex (TFX) at 68.42.  We paid 37.95 on 5/22/03.  Finally, on Monday, we bought 100 shares of Protective Life Preferred (PLP) for the IRA  for 24.50.

Monday, September 03, 2012


Post # 300 - The RNC 2012 Convention

According to blogger, this is our 300th post on redwavemusings and that is a milestone that would never have occurred to me as a rational possibility when I posted the first time.  So, again, thanks to the readership for maintaining interest and executing thousands of page views over that time.  You put up with a very irregular posting schedule and wade through a lot of drivel to get to whatever quality stuff there might be, and I appreciate that.

Some thoughts concerning last week's convention.  Given the weather induced cancellation of night 1, the GOP did a pretty good job of explaining why theirs is the better ticket and spotlighting the rising stars of the party.  That's about all that happens in conventions these days since the primaries generally settle matters in advance of the convention.  That's why network TV doesn't bother covering them, except for an hour each night.  Political junkies can always watch gavel to gavel on C-SPAN which I did on Tuesday night (but I was out and about the other nights and caught the major speeches on reruns) or on the internet.  Conventions were a lot more interesting and coverage worthy when the delegates actually came to pick a candidate.  The last time that really happened was in 1976 when Ford beat back Reagan's challenge. 

The media needs to be largely ignored while you make up your own mind about what you see and hear.  The speakers Tuesday night did not get much attention, and the press hated the We Built It theme, but I thought it was a very effective night.  The Obama machine has engaged its friends in the media to do a negative "fact check" hatchet job on Paul Ryan's speech, but to no avail, I think.  The VP candidate comes across as sincere, honest, clear eyed and concerned.  He is going to be a very positive force in the campaign and in the Romney Administration, assuming that occurs.

Governor Christie's keynote was generally panned by the media, but I don't know what they were expecting.  I guess most members of the working press these days are too young to remember real convention keynote addresses, and Christie's was certainly in that spirit - harshly critical, even sarcastic, concerning the other side, and of course aimed at firing up the base.   That's what keynoters are supposed to accomplish.  If anything, the speech included nods to bipartisanship that I would not have expected.  But this was consistent with the theme, "Obama's not a bad guy, he's incompetent, so it's OK to let him go."  This theme was also explored by Clint Eastwood in his dialogue with the empty chair that the mainstream media characterized as bizarre.    Frankly, I thought it was pretty hilarious and understated.  It did need to be shorter though, and I think part of the problem is that Clint is at an age now where he doesn't do anything very fast.  The worst part, as many expressed, including Ann Romney (whose own speech was pretty effective), was that the visual piece that had been prepared as an intro to Romney's speech was cut from the network broadcast.  Reportedly, that was an effective piece, and the campaign should consider buying time to show it nationally instead.

My decision would have been not to cut it, simply run over and dare the networks to terminate coverage in the middle of Governor Romney's acceptance speech.  I think they would have stayed with it, and equal time should not have been a problem, since the Dems will get an extra hour this week, unless there is another hurricane.  Senator Rubio's speech was widely considered the best of the convention, and it might well have been.  Certainly, his delivery was all but flawless.  He is definitely a formidable talent.  As for the Governor's acceptance, it was fine and forgettable.  Let's face it, this is not candidate charisma.  The other side thinks they have that.  What Romney represents is competence, leadership, and pragmatism.  Given that, there are a few things I would love to see him do early in the post convention runup to the election.

First, I think the Governor should make a strong statement about recharacterizing "carried interest" as ordinary income instead of capital gains.  That statement would take the air out of the Obama class warfare balloon.  It is also a position long espoused on this blog.  Second, it would be a good idea to confirm his agreement with the Ryan budget, and perhaps suggest reviving the Simpson Bowles group for another try at true tax and budget reform.  He might remind everyone that Ryan's vote against that work product was that it simply did not go far enough by addressing entitlements.  Maybe bipartisan support for such reform could emerge once the commission obtained a super-majority, which it just missed last time.  Finally, I think Romney needs to talk more about foreign policy than he has. While the Obama campaign thinks it's strong there, I think it has been terrible there, and that's an idea I think people are coming around to.  What's the popular mood around the Afghanistan venture, the Vietnam - like withdrawal from Iraq, and the unwillingness to take on authoritarians in Iran, Venezuela, and Russia more effectively?  Do Americans really want a President who leads from behind?

Well this week it's the Dems' turn, and I expect the usual progressive nonsense (like comparing Ryan to Goebbels), goofy belly aching about plutocracy and the rest.  They can only make Obama-Biden look worse - certainly more extreme than what the Republicans displayed.  Clearly the Obama strategy seems to be entirely negative - making the GOP look unacceptable, and they are pouring all their money and energy into that effort.  Right now, it looks like the public's not really buying it, and the polls show a little favorable momentum for the R's.  The Dems' task this week is to stop or even reverse that.

On this blog, I have occasionally talked about Irving, my first stockbroker who taught me so much about stock picking and timing, technical analysis, options and the ways of markets.  In those days, brokers typically worked in large open office space, with adjacent desks so that they could trade ideas and observations.  Irving was one that everyone who worked with him always paid special attention to.  I used to love taking my lunch hour in his office, watching "the tape" go by (on the wall, there was no CNBC yet) while we showed each other our charts, and waited for earnings reports or other news that would move our stocks and option positions.  He had many pithy sayings and beliefs about the market that were true more often than not, like his belief that market moves on Mondays were often head fakes, but that "pivotal Tuesday" moves would often set the tone for the rest of the week.

Irving retired decades ago, and passed away a couple of months ago in California at age 92.  If he had ever read this blog, and especially the last two posts on options, I hope he would have liked it.  I'm sure he could have added some thoughts that would have made those posts better. 

We will do the last installment of the option series on index options in post # 301.

General Motors, that manufacturing and marketing subsidiary of the United States of America, operated largely for the good of the United Auto Workers, announced last week that Volt production is being shut down for four weeks "to work off inventory."  In other words, electric cars ain't selling.  Earlier this year, the plant shut down for five weeks.  Only 10,666 Volts had been sold year-to-date according to the announcement. 

Why this would surprise anyone is beyond me.  Who would want a car with a four hundred mile or so range, after which it needs to be plugged into the wall for 12 hours before it is ready to run again? And why does anyone think this helps the environment?  What's the difference whether gasoline runs the car directly, or carbon based fuel runs it indirectly after first generating electric power at the utility plant?  We're still burning carbon either way.

Anyway, it doesn't matter because in spite of the government's subsidization of such purchases, and the money Volt owners allegedly save on gasoline, the dogs just won't eat the dog food.  Meanwhile, Ford announced it has begun exporting Lincolns to China.

A recent passing we meant to note was that of bass guitarist Bob Babbitt, one of Motown's great Funk Brothers studio musicians who backed up their classic vocal artists on those great hits from the 60's and early 70's.  Babbitt, like most others, considered himself second string to James Jamerson, considered Motown's greatest musician.  But second string to James was a necessary and busy position due to Jamerson's unfortunate alcohol habit that caused him to be not always reliable.Babbitt was one of  the very few white musicians who played on those records as part of Motown's studio group of jazz musicians moonlighting in the greatest backup band ever.  For more information on Babbitt, simply google him, or better yet, see him and the other then living Funk Brothers in the great documentary movie, Standing in the Shadows of Motown, which should be easily available on DVD.

Lots of transactions to catch up on.  On Aug 16, we sold 100 shares of Shulman (SHLM) at 23.27.  We paid 23 for these on 10/4/06.  On 8/17, we sold 1100 shares of Frozen Food Express (FFEX) at 1.95, as the stock continues its recovery.  We paid 2.13 for 400 of these shares on 9/30/11, and 1.25 for the other 700 on 11/10/11.  On 8/20, we sold 800 shares of Serius XM at 2.60.  We paid 4.97 on 3/1/06 for 400 and 3.19 for the other 400 on 7/24/07.  I am a little concerned about this stock given the looming transaction with Liberty and insider sales transactions by CEO Mel Karmazin.  We may be making a decision to sell the rest and remove the stock from the buy/hold list if we don't like these corporate developments.  We have nice gains on many of the remaining shares.  On 8/21, we sold 400 shares of FSII from the IRA at 6.1805, since it will actually be more expensive to pay E Trade to tender the shares.  The tender offer has now begun, and we will tender the balance of the shares we own.  For these 400, we paid 2.04 on 9/7/11.  On 8/22, we sold 100 shares of ITW at 59.02.  We paid 42.54 on 6/6/05.  On 8/24, we bought 600 shares of USA Trucking (USAK), a zero buy at 3.74.  On 8/27, we bought 50 shares of Cincinnati  Bell Preferred (CBB.PR.B) for the IRA at 44.50.  This is a new addition to the portfolio.  On 8/29, we bought 300 shares of Alcoa (AA), which has been long the Dow's worst performing stock.  We paid 8.50 for this "value."  Don't try this one at home.  On 8/31, we bought 100 shares of Raven Industries (RAVN) at 30.68.  Remember, nothing mentioned here is necessarily suitable for anyone else, and this site and its author are not investment advisors.      

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