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Tuesday, December 18, 2012


How to Stop the Madness?

The heart wrenching murder of first graders, their teachers and their principal in Newtown Ct. has galvanized the country, unified not merely in mourning but in the reality that enough is finally enough, as President Obama declared with eloquence unusual even by his standards.  The curse of disturbed young men murdering indiscriminately with assault rifles has visited the U.S. too many times over the last two decades, but also Norway, Finland, Scotland, and several Asian locales.  Murder is, at this point, a daily event in war torn Arab lands.  So what can be done?

The laws vary from country to country, and I for one, am of the opinion that the Second Amendment means what it says.  That said, it doesn't guarantee that EVERY kind of weapon is the subject of a civilian ownership right.  Surely, we can draw the line somewhere. No one in his right mind would claim that civilians need and have the right to bear arms in the form of chemical, biological, or other weapons of mass destruction. 

So the answer to what can be done surely can't be "nothing."

I would start by saying that assault weapons, such as the Bushmaster used in Newtown, are not appropriate for civilian defensive purposes, and should not be legally available for sale to anyone but uniformed services.  I think Congress must give serious consideration to reinstituting the assault weapons ban that expired in 2004, and making it more effective this time.  That means that clips and magazines carrying over 10 bullets should be banned for all but the uniformed services too.  By the way, I think those who say that automatic weapons are hard to define are obfuscating the issue.  If you can fire more than one shell with a single trigger pull, that's an automatic weapon. 

The argument is often made that since criminals by definition don't obey the law, they will be the only ones with advanced weaponry in schools, shopping centers, movie theaters, etc.  True enough, but I don't know any teachers, theater managers, or store managers who routinely bring assault rifles to work, so law or no law, that's where we are.  We can at least make it harder to obtain those weapons, and remove the temptation for your neighborhood schizophrenic to achieve his 15 minutes of fame on a killing spree where he is able to get off over 100 rounds in a matter of minutes.

But gun advocates have a point concerning the danger and temptations that exist because of "pretend weapons free" zones.  The typical Adam Lanza is a coward who commits his crime in a setting where he believes he will have the only weapon and where his victims will be defenseless.  Typically, as soon as he hears the police coming,  he quickly turns the gun on himself.  So sad as it may be, I believe schools will need to have an armed guard on duty during the school day to discourage these acts.  I know, when we do this, the terrorists and criminals have "won," but we have become quite accustomed to having reservists (with assault weapons, no less) posted in Penn and Grand Central Stations every day.  It is a price we are paying for whatever in our world is causing these events to keep happening.

The other debate going on concerns what we can do to get a better hold on the mentally ill among us, and I agree that closing all the institutions and being so concerned about stigmatizing mental illness has been counterproductive.  This is a really difficult issue to confront, but sadly, it is part of the solution too, if there is to be one. As for the theory that violent movies and TV, as well as video games, are desensitizing youth, I think there is something to that.  Clearly, the vast majority can handle those things without going off the deep end, but those with mental and behavioral problems may be susceptible.  There is clearly a lot of copycat in these incidents, and the internet may be part of that.  Hollywood will defend its choices in the name of artistic expression, but I would ask those responsible to think about whether graphic scenes of violence really add to the artistic value of what they are creating.  My suspicion is it is much more about the commercial than the artistic.  Lord knows, I am not against commerce, but again, there should be standards that we observe.

On Long Island, the public is still riled up about LIPA's Sandy performance. LIPA is the local utility, but more accurately, the authority in charge of providing utility services.  Residents did not understand why the out-of-state crews reportedly on their way to help, took so long to be deployed.
A good part of the reason came out in Newsday's November 10 issue when it was revealed that the International Brotherhood of Electrical Workers would not let outside workers in unless union dues were deducted from their pay and forwarded to the IBEW.  In effect, the IBEW insisted that these workers become temporary members of the union, even though they would never benefit from that union.  These deductions were non-trivial, (as actuaries like to say).  Start with 22.5% of gross salary to the IBEW annuity fund, add 9.75 an hour to the union's health and welfare fund, 3% of gross salary to the union's "craft division skill improvement fund" and 3% to the National Electrical Benefit Fund, and smaller amounts to other funds.  Well, why work at all under those conditions?  Until the Authority got the union to stand down on these demands, no one showed up.

And you wonder how "right to work" passed in Michigan?  The wonder is that there are any closed shop states left anymore.

So, we were not surprised to see R.A. Dickey get traded.  On the one hand, with his low salary due for 2013, the deal he wanted was not unreasonable.  On the other hand, he is 38, and though most knuckleballers can pitch into their 40's, how effective he will be in the future when he relies on such a hard knuckleball (usually in the 80's) is something we don't know.  Not surprisingly, the Mets are gun shy about long term deals for anyone given their history with them.  By trading him now, rather than waiting for the season to begin, they were able to land another two good prospects, one at a position where they had a desperate need, catcher.  Besides, if the Mets have a strength, it is starting pitching depth.  So the logic was there for both teams.  That's what makes for good trades - both teams may benefit.
The market continues to treat us well, fiscal cliff or no cliff, despite the ineptitude of everything Washington.  One of the reasons is that corporations, flush with cash, can't think of anything better to do with it than accelerate dividends (to beat higher tax rates next year) and buy in gobs of their own stock.  Regular readers know how much I hate buybacks, but they do provide demand and reduce supply of shares, temporarily juicing prices.  What we really don't have are companies increasing sales and profits.  I guess you can't have everything.

On 12/10, we bought 50 shares of old favorite Schlumberger (SLB) the crown jewel of oil service stocks.  We paid 71.92 per share.  On 12/13, we bought 100 shares of Protective Life Insurance preferred (PLP) for the IRA at 23.76.   On 12/17 we bought 100 shares of Bunge Foods (BG) at 72.15 for the IRA.  We also sold 400 shares of TAT Technologies (TATT) at 5.86.  We are still recording losses on this stock, since we paid 12.26 for 200 on 4/9/08 and 10.74 for 200 on 5/5/08, when it was Limco Piedmont.  These losses are in the IRA so no tax relief is provided either.  We paid a lot less for the shares we still have.  


Tuesday, December 11, 2012


Fiscal Cliff Notes

6 nights in National Harbor, following closely on the D.C /Orlando trip, left your blogger in a state of some physical and mental alcohol induced fatigue, so there have been no posts in almost three weeks.  During that time, recovery was sufficient to allow a trip to Birdland Friday night where I thoroughly enjoyed the Phil Woods quintet.  Phil Woods is 81, a prostate cancer survivor, and has emphysema, which is a challenge for a saxophonist.  He plays while hooked to an oxygen tank, and as he half jokes, learned a playing technique where he only has to breathe out.   He plays with a great "working band," which means they are very much together and enjoying playing with each other.  It would be hard to single out any of the side players, but I must say that pianist Bill Mays is in a special category.  The set was very approachable while still giving the players ample opportunity to demonstrate their chops.  A highlight actually came during Phil's short break when he laid out while the band played a delightful version of Jimmy Webb's "By the Time I Get to Phoenix."

Later in the post, I will run through some of the great jazz scheduled for the remaining three weeks of the month, when the City is alive with the holiday season and is just the most fun place to be.


Otherwise, it's all fiscal cliff, all the time, as CNBC viewers know only too well.  On the one hand, you have talking heads in despair that a compromise does not appear within reach; on the other, the WSJ and Tea Party types are in equal agony because they listen to various GOP legislators trying to sound reasonable and worry that the GOP will give in on the issues by negotiating with themselves instead of with the President and Senate Dems.

I have to admit that it does seem foolhardy to try to predict how this is going to go.  The conventional wisdom is that failure to make a deal will be an economic disaster.  Maybe.  I think a worse disaster would be a deal that essentially kicks the can down the road on entitlements and real deficit reduction.  I'd prefer going over the cliff, incurring the tax increases and the sequester, to that.  But that's just me. 

It does occur to me that politically, Dems probably see little or no advantage to any deal where they compromise on tax rates or on entitlements.  If we go over the cliff and bad things happen, they will have Congressional Republicans to share the blame.  So I don't expect to see the Administration move much at all.  For Republicans' part, they have to be torn.  Congressional Republicans won an election too, and they need to keep faith with their voters.  On the other hand, the temptation must be great to let the Dems have their higher taxes and let them own the recession that will be all but inevitable.  That could set the GOP up for a massive rout of the Dems in the off-year vote in 2014.  However, is anybody willing to risk such bad policy when we are very near, if not already past, the deficit tipping point? 

I think one point where the GOP will draw a firm line in the sand is on the Obama request to waive Congressional authority over the debt limit.  This proposal is on the order of FDR's ill - fated Supreme Court packing proposal and should be a non starter.  So I am confident that the GOP will hold the line on that.  But otherwise, I don't know for sure.  When you see guys like Senator Coburn (OK) getting weak in the knees, it has to make you wonder.   
The amazing world of New York sports is as unpredictable as ever.  The Jets are not playing well, but somehow they are eking out wins during this soft schedule stretch, and if by some miracle, they ran the table, they might sneak into the playoffs.  The Giants looked to be in the midst of their second half swoon, and with Washington and Dallas winning, things were getting uncomfortable.  But then they get off the floor and played Super Bowl like football against a pretty desperate Saints team.  In basketball, both the Knicks and Nets have started very well, and the Knicks keep winning no matter who gets hurt, and almost no matter who they play against.  And the Mets raided their own treasury and somehow came up with the money to keep David Wright at the hot corner.  We'll see how much is left for Cy Young winner R.A Dickey.  Meanwhile rumor has it that if the Yankees could get around the drug and alcohol problems, Josh Hamilton could patrol the shallow confines in right field in the Bronx.

When Saul Steinberg died last week at 73, it brought back memories of the bad old days in the 1980's when Michael Milken ran a junk bond ring out of Drexel Burnham Lambert that provided high yields for Steinberg's and Fred Carr's insurance empires and financing for Carl Icahn and Victor Posner's corporate raids.  Milken went to jail, Carr's and Steinberg's insurance companies ultimately failed, and Icahn and Posner turned everything they touched to manure.  Forbes memorably ran a cover that displayed Michael Milken's Amazing Money Machine, but the cover story actually called it pretty square, explaining why the incestuous, rigged deals would eventually backfire.  Did they ever.

We also lost Dave Brubeck this week, at 91.  The inventor of the California cool jazz sound, Brubeck was a great arranger composer and his groups often played in odd meters, and hence the name of his classic album, Time Out.   I saw him at Planting Fields a few years ago and he apologized for not being still able to play the songs the way he could decades ago.  He needn't have, since even at his best, Brubeck was often criticized for being "ham handed."  In truth he always had physical problems with his hands.  His genius was less about his playing chops than the intellectual power that he brought to the music.  It didn't hurt to have Paul Desmond on sax either.
Many of my favorite jazz players will be in action in New York this month, and if you have the slightest inclination, you should enjoy the Big Apple at its festive finest in December.  Tomorrow, Tuesday, Bria Skonberg has a one-nighter at Iridium.Also, the ageless Roy Haynes kicks off his 5 night gig at Birdland.  Eddie Palmieri takes over the Rose Hall stage at Jazz at Lincoln Center Friday and Saturday, but I am likely to try to score a ticket to see the Preservation Hall Jazz Band at Long Island's Tilles Center Friday night.  December 18, Nat's little bother Freddy Cole comes to Birdland for five nights to captivate the ladies, but there will be stiff competition in the form of Christmas Samba up at Dizzy's, featuring guitarist Romero Lubambo and the wonderful Anat Cohen on reeds.  Taking over Smoke the weekend of the 21st is the Javon Jackson Quartet featuring George Cables, part of Smoke's Coltrane tribute.  They are followed in on the 24-26 by "Black Pearls," that is drummer Louis Hayes  and the Harold Mabern Quartet (that will include Eric Alexander). The week of the 26th will be just crazy.  Wynton Marselis makes a rare appearance on Dizzy's stage, running though New Years Eve, playing the music of Louis Armstrong's Hot 5's and 7's.  The Grammy nominated Birdland Big Band will be holding court at Birdland all week, and on the 27th, veteran drummer Jimmy Cobb takes over Jazz Standard for four nights with Jeremy Pelt, Javon Jackson, Vincent Herring and Buster Williams!  And on New Years Eve at Jazz Standard, the Mingus Big Band will feature Helen Sung on piano.

Finally, at the end of December, Harlem's famous Lenox Lounge will close its doors permanently.  That's a sad thing.  Surely, someone out there can buy it and reopen.

On November 20, we bought 400 shares of Genie Energy (GNE), a value buy at 6.01.  On 11/21, we sold 100 shares of Bunge Foods (BG) at 72.14.  We paid 54.01 at 12/19/05.  On 11/23, we paid 24.20 for 100 shares of Raven Industries (RAVN).  On 11/26, we bought 50 shares of Cincinnati Bell preferred (CBB.PR.B) at 45.48.  We also sold 400 shares of TAT Technologies (TATT) for 5.65 out of the IRA.  These shares were acquired when the company took over our Limco Piedmont shares.  It appears we lost about 50% on this sale.  On 12/3, we sold 300 shares of Great Lakes Dock and Dredging (GLDD) for 8.88, from the IRA.  We paid 4.52 for 200 on 3/1/10 and 5.65 for 100 on 5/10/10.  On 12 /4, we sold 100 shares of our railroad, Genesee and Wyoming (GWR) for 72.89.  This was a nice gain versus our purchase price of 26.44 on 1/23/07.  Somewhere along the line, we got 35 for each of 200 shares of Ceradyne via takeover.  We paid 17.53 on 4/30/09.  On 12/5, we bought 200 shares of ENI (ENI), a value buy at 17.17, and a high risk maneuver, considering most of its business is in southern Europe.

Neither Redwavemusings nor its author are investment advisors, and the securities mentioned here are not to be considered recommendations as they may not be suitable for anyone (else).

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