July 7, 2010 Summer Reading Ideas
I am taking break from the Steig Larson’s trilogy after finishing the first two, The Girl With The Dragon Tattoo and The Girl Who Played With Fire. These were phenomenal books once you got past the Swedish surnames and place names and the lack of dialogue prompts. The third in the trilogy The Girl Who Kicked the Hornets' Nest is on my Kindle and ready to go, but wanted to break up the flow a bit with another read. It is The First Elizabeth by Carroly Erikson (1997 first ed) and it is the break I wanted. You really love hating King Henry in the first 100 of the 448 pages. If you’re into medieval history or studies of the Royal Family, a great read.
Speaking of great reads, last night I downloaded the ‘‘Dodd-Frank Wall Street Reform and Consumer Protection Act’’. I exaggerated yesterday when I said it was 2400+ pages. It is only 2,319 pages. It’s a no wonder this thing is so hard to find. Just click on the name and you to can have this wonderful PDF document delivered right to your computer. Remember that this in not the final as the parliament of whores are still wheeling and dealing to make sure we get what we deserve.
If you dare, try giving this a read. As a teaser, here is the section on providing financial stability to the finance industry. It is section 120 of the document and addresses (I think) standards for stability purposes. Have a read:
SEC. 120. ADDITIONAL STANDARDS APPLICABLE TO ACTIVITIES OR PRACTICES FOR FINANCIAL STABILITY PURPOSES.
(a) IN GENERAL.—The Council may provide for more stringent regulation of a financial activity by issuing recommendations to the primary financial regulatory agencies to apply new or heightened standards and safeguards, including standards enumerated in section 115, for a financial activity or practice conducted by bank holding companies or nonbank financial companies under their respective jurisdictions, if the Council determines that the conduct, scope, nature, size, scale, concentration, or interconnectedness of such activity or practice could create or increase the risk of significant liquidity, credit, or other problems spreading among bank holding companies and nonbank financial companies, financial markets of the United States, or low-income, minority, or underserved communities.
10 (b) PROCEDURE FOR RECOMMENDATIONS TO REGULATORS.—
(1) NOTICE AND OPPORTUNITY FOR COMMENT.—The Council shall consult with the primary financial regulatory agencies and provide notice to the public and opportunity for comment for any proposed recommendation that the primary financial regulatory agencies apply new or heightened standards and safeguards for a financial activity or practice.
(2) CRITERIA.—The new or heightened standards and safeguards for a financial activity or practice recommended under paragraph
(1)—(A) shall take costs to long-term economic growth into account;
and (B) may include prescribing the conduct of the activity or practice in specific ways (such as by limiting its scope, or applying particular capital or risk management requirements to the conduct of the activity) or prohibiting the activity or practice.
That was clear as mud. Don’t it make you feel better about the financial industry already. It actually makes this blog sound interesting. OK maybe not. I will pluck my way through this beast and see if there are any gems. ZZZZZZZ
We have been adding to our INTC position recently with all the drops. Cramer has been pimping the stock pretty hard and a little bird (who kinda looks like Lenin) tole me he bought more today. Again we have earnings season kicking off on the 12 and INTC reports on the 13th. Now if you go back and see the posts from Jan 13 and 14, we were really high on INTC, we got the whisper number right, and we were poised to see a 20-30% pop in the price and it got whacked. Lesson learned, buy on the rumor sell on the fact (or news). I am not seeing any significant rumor buying (except today) so I am hoping for a nice earnings report on All Star Game Day, the 13th and a nice pop in the price unless we see a huge build up between now and Monday’s closing. The analyst’s details are flat to a slight decline in revenues and margins sliding a bit. If you look for linkage on this play, read some of the MSFT press releases about the surprising numbers for Windows 7. (hint-More users more new computers more chips.) Now we could have all kinds of good revenue surprises and margin improvement at the report and then have Otellini say the word “cautious”, in forward looking statements and it will take the willy out of this undervalued equity. It is a 27-28 dollar stock selling at 20 a share. Oh yeah, it throws a nice dividend yield at this level. (3.13%)
If you are wondering if Gold has any more legs to it, we get a daily publication from Reuter’s about the most active call and put option plays and there was heavy trading on a January 2011 $125.00 call indicating serious bets to the upside of about 7% from today’s range. We’ve been pimping this ETF since February and enjoy a 14% gain (Corrected for the flash crash debacle). We will be taking some or all the profit at 122.75. Remember, “bears make money, bulls make money, PIGs get slaughtered”.
How do you gauge if you are a PIG? Thanks to one of my mentors, Tim Tunney, I have a better feel for when I am being greedy. Look at the yield or return on a 10 Year Treasure Note. My personal goal is to get times 2 that yield on an annual basis. So right now that would be an annual return of 6%. If I can get 18% on GLD for a 7 month investment, it annualizes to about 30.8%. That is 5 times my goal. That is greedy. Take some money and run.
I don’t know if you caught it in Tuesday’s WSJ as it was in the little tiny column “Heard On The Street”, and it concerned Roger Douglas the former minister of finance from New Zealand. Now don’t laugh, this guy was in charge of the Kiwi Coffers while it shifted from a socialist bound high tax haven to a “free-market pin-up”. He has a suggestion for the ideologists who are in the G-20. His message is don’t spend time and effort analyzing each government agency and department for savings, just eliminate the non-performing agencies and departments. His point is if you leave them in place they will, by nature start to grow and spend again. Can this guy run for office here in the states?
Anyway we had a strong day today with average volume. There was no big bang story to cause the rally today so here is my guess. 10 year Treasury yields are below 3%. Some of the stock yields right now are looking extremely attractive and fund managers are moving cash into the market, very slowly. We will take it. Techs, industrials, and finance got a lot of action today. We suggested a 2.5% pop this week when we posted on Sunday night. We are above that already so let’s hope we hold on. Late in the day we got a nice report about retail sales. The Int’l Council of Shopping Centers announced a 4% increase in the last 5 months which is a huge jump. Assuming no bad news in Europe or Asia tonight, this euphoria might carry over to the opening. Watch your stop orders.
And in the first casualty of the finance reform bill, late today Wells Fargo announced the elimination of 3,800 jobs the balance of this year. The explanation involved poor performing mortgage loans and the closing of non-prime loan offices. It might be a coincidence that it occurred as the Dodd-Frank Wall Street Reform and Consumer Protection Act became better defined, but I think not. We own WFC and will look to add more tommorow.