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Warren Buffett, deer poop and postage
Postage and Inflation
Moments later, Rocky looks out his window to see melting snow and a half-dozen white-tailed deer. Rocky utters (with Buffett-esque solemnity,) “It’s only after the snow melts that you see all the deer poop on your lawn.”
Buffett’s letter makes interesting reading, and one paragraph catches Rocky’s eye: “The [likely consequence] of once-unthinkable dosages [of massive government action] is an onslaught of inflation.”
Rocky already owns some TIPS (Inflation-Protected Bonds), gold and other tangible assets. He wants something BIGGER, BETTER and TAX-FREE. Especially with savings accounts yielding a cool 0.0%.
Rocky drives to the post office and buys a massive speculative long position in “Forever” Postage Stamps. (The post office clerk must have thought that Rocky was laundering cash. But he was too polite to ask questions.)
Forever stamps are valid first-class postage regardless of the nominal price. Assuming that postage continues to keep pace (or exceed) inflation, this investment will compound tax-free (unlike the TIPS), and can be lawfully sold at premium to original cost.
If inflation really gets out of control, it’s likely the Post Office will cease issuance of the Forever stamps, the stamps will become priceless “collector’s items,” and Rocky will have scored a home run. Rocky’s stop-loss: becoming a junk mail distributor.
Senator Kerry’s Left Pocket (and right pocket)
“I’m sick and tired of picking up the newspaper and reading about another idiotic use of taxpayer money while our country is on the brink,” said Senator John Kerry. He made the comment after learning that Northern Trust (a TARP recipient) upheld their committment to the Northern Trust Golf Open.
For the first time in recent memory, Rocky and Senator Kerry agree on something. However, their agreement is not about business and charity decisions at Northern Trust, one of the few profitable banks (2008 net income = $640 million). Their agreement is about the idiotic use of taxpayer money.
For some “idiotic” examples, visit Time Magazine’s 2008 Top 10 Outrageous Government Earmarks: [click here for the list]
Rocky thought that the purpose of a stimulus package is to increase consumption. He wonders why would the Senator discourage a private, profit-making enterprise from engaging in that exact activity? If Northern Trust cancels their consumption while the Government spends stimulus dollars, it’s like moving money from the left pocket to the right pocket. Perhaps the Senator is upset because Northern Trust won’t sit nicely in his left pocket?
On a positive note, Rocky appreciates the Senator’s Rocky-esque pose in his picture. But there’s much more to “being Rocky” than just raising one’s fists.
“Judge” Gold = “Buy” Gold ?
Rocky just found another reason to explain the strong bull market in gold: Tax Evasion.
Last week, UBS (Switzerland’s largest bank) agreed to pay a $780 million fine, and provide a limited list of American tax evaders to the IRS. The next day, the Justice Department sued UBS to provide an additional 52,000 names of Americans with secret bank accounts.
The eponymous U.S. District Judge Alan Gold, presides over the case — which may end decades of Swiss bank secrecy, a country where tax evasion is not a crime.
Rocky speculates that tax evaders from around the world are descending onto the Gnomes of Zurich, and hastily withdrawing cash ahead of Judge Gold’s verdict. He posits that these unsavory un-Americans are buying gold with the proceeds — a fungible store of wealth that cannot be traced.
[Disclosure: Rocky complains about taxes, but he always pays his legally required minimum. He also remains long gold, but his view may change at any time.]
Stairway to (banking) heaven
After a particularly dramatic failure of the Trophy Wife Indicator (“TWI”), Trophy Wife cheered up Rocky with the following short video.
Rocky thinks the video is a hilarious allegory that captures the current Washington psyche. It also explains why Rocky always takes the stairs.
Pringles Potato Chips & Investing
Rocky made a serendipitous discovery involving Pringles Potato Chips, music and the markets:
Rocky’s laptop computer occasionally loses WiFi reception at critical moments. Yesterday, Rocky was listening to Queen’s Bohemian Rhapsody on Youtube, when the streaming audio got stuck at the word, “scaramouch.” SCARAMOUCH, SCARAMOUCH, SCARAMOUCH. Over and over and over, just like an old stuck record player. At first it was funny. But hitting the cancel key didn’t stop the ghastly word. SCARAMOUCH, SCARAMOUCH, SCARAMOUCH. Alt-Cntrl-Delete didn’t work either. . SCARAMOUCH, SCARAMOUCH. The WiFi connection had dropped, and left Freddie Mercury’s voice in an infinite loop. Even worse, the S&P-500 was dropping like a stone, and Rocky couldn’t trade.
SCARAMOUCH, SCARAMOUCH. Holding the power-off button didn’t even make Freddie flinch! The dropping markets, the frozen computer, the noise, and SCARAMOUCH — were too much for Rocky to bear.
Rocky picked up an empty can of BBQ Pringles Potato Chips and hurled it at high velocity across the room towards the router. It bounced twice, and remarkably landed upright in front of the router’s antenna.
“Thunderbolt and lightning, very very frightning…Gallileo, Galileo….” The song resumed. (Even the S&P-500 caught a bid, and started updating in real time again.)
Rocky wondered, “Is this the real life? Is this just fantasy?” because when he removed the Pringles can, his WiFi signal stregnth dropped. When he placed the can near the router, the signal strength increased.
Rocky described the phenomenon to his good friend, the Computer Guru. Guru knew about the Pringles Principle, and pointed Rocky to a webpage that describes a “parabolic antenna booster constructed out of a Pringles can” in exquisite detail. Click here for a description of the Pringles Antenna.
Geeks should click here for a more technical discussion..
Better music, barbeque, and markets … can all be found in a trusty can of Pringles BBQ flavor potato chips. With thanks to Ralph Waldo Emerson and Proctor & Gamble.
Fed’s new five year plan: World will be perfect
The Federal Reserve made a dramatic change in procedure today. In their quest to provide more “openess and transparency,” the Fed now provides their “long range” (five to six year) forecast for US economic performance. Click here for the official Fed release.
The first Five Year Plan was released with their Monthly Minutes at 2:00pm today. The results:
Real GDP: 2.5 to 2.7 percent
Unemployment: 4.8 to 5.0 percent
Inflation: 1.7 to 2.0 percent
Upon reading the forecast, Rocky was tempted to aggressively buy stocks, real estate and US dollars for all of a yoctosecond. Instead, he put his phone down, and devised his own five-year forecast with a probability of accuracy no worse than the Fed’s.
1) Global peace.
2) End of famine.
3) Dow Jones 36000
4) American Idol is canceled by Fox Broadcasting.
It’s good to be an optimist.
The best managers are the dumb managers?
Kevin Hassett, a respected economist, wrote a provocative essay today which argues that the Financial Crisis is due to Wall Street hiring “the best and brightest.”
“Twenty years ago…it was common for the best and the brightest to be doctors or engineers. By 2000, they wanted to be investment bankers….When Wall Street was run by people randomly selected from the population, it was able to survive everything. After the best and brightest took over, it died…”
He then goes on to state that “Harvard Educated Narcissists” (Hassett graduated from Swarthmore and Penn) and the self-confidence and training that Harvard engendered is a root cause of the Financial Crisis. Click here to read the entire article.
Rocky, a fan of Sally’s Pizza in New Haven, always thought that those Legal Seafood guys in Cambridge were over-rated. But Hassett’s disdain for the “best and brightest” provides some novel approaches to corporate management:
1) Only hire illiterate employees. (It saves time on inter-office email and leaves less documents for lawyers and regulators to seize.)
2) Only hire executives who have padded their resumes and who have bogus degrees. (Instead of persecuting drop-outs, celebrate their non-qualification qualification.)
3) Recognize that the so-called American Public Education Crisis is the way that the USA will regain global competitiveness. (The Harvard PhD’s in computer science should all go work at Sony and blow it up. Slothful Americans who can’t solve a quadratic equation will return Motorola to greatness.)
4) Have Congress amend the Americans With Disabilities Act to make it illegal to discriminate based on intelligence and education. (Anyone with an IQ over 120 will be a protected class under the revised ADA.)
5) Replace corporate recruiting at top universities with job fairs at homeless shelters. The newly hired executives will do a better job, and companies will save money on re-location expenses.
Memo to Kevin Hassett: Rocky would appreciate an autographed copy of your prescient 1999 book, “Dow 36000″. Please have the inscription read: To My Friend Rocky — Not a Bull. Not a Bear. Not an MBA.”
Trophy Wife signals likely stock price rise
Jim Cramer may have his “Trading Goddess.” But Rocky Humbert has his Trophy Wife. And when Trophy Wife speaks, Rocky Humbert always listens.
Trophy Wife (not to be confused with Entrophy Wife) is a Mistress of the Universe in her own right. She is also an astute observer of consumer behavior, fashion, and whether Rocky’s dirty socks inadvertently remain under their bed. Trophy Wife vehemently states that she cannot predict the stock market. Rocky believes otherwise.
Trophy Wife went shopping at a large Premium Outlet Mall on Sunday, and observed unusually high traffic and sales. In particular, Trophy Wife noted shoppers aggressively buying at Oscar de la Renta, Burberry, Coach, Gucci, Todds and Tory Burch. Trophy Wife said that even Starbucks was booming.
“I saw so many Gucci shopping bags that I thought they must be giving them away,” Trophy Wife reported.
Rocky carefully tracks Trophy Wife’s observations. In past reports of such high activity levels (this rates a “10,”) there has been nearly a 70% probability of higher US stock prices over the subsequent week.
Many factors contribute to stock price movements, but given the current, bearish macro-economic climate, Trophy Wife’s report is especially interesting.
[Disclosure: Rocky does not give investment advice, but he intends to nibble during stock market weakness on Tuesday, based entirely on Trophy Wife's track record. Rating: Rocky III ]
Cutlery, children and swans
A child’s bloodcurdling scream always triggers panic in a parent. Especially when sharp cutlery is involved.
The scream came after midnight. Rocky ran into his youngest daughter’s bedroom and saw the knife, and the look of terror on the girl’s face. But he saw no blood on the carpet. His pulse slowed a bit. He quickly examined her fingers, and saw there were still ten. His pulse slowed a bit more.
The child had been trying to activate an Itunes card. The process involves scraping off an adhesive strip to reveal a 16 digit alphanumeric code, and then entering the code into the computer. Unfortunately, her heavy-handed scraping with the knife rendered several of the letters illegible. In the best of times, it is difficult to discern the “I” from the “1,” and the “S” from the “5.” Now it seemed hopeless.
Rocky would sooner cut off his thumb than forfeit an Itunes card . (Particularly since Rocky owns no Apple stock.) He would not go down without a fight.
Rocky brought up his old cobweb-ridden microscope from a dark corner of the basement. Examining the Itunes card under 20x magnification, he narrowed the choices to about 1 in 456,976. After a decent day in the markets, Rocky felt lucky and he chose several probable letters. They typed the code into the computer. Voila! It worked on the first try.
As they high-fived each other, Rocky hoped this experience would teach his daughter at least two life lessons:
1) The role of Black Swans in life.
2) That Rocky is a great Dad.
Rocky pondered the best way to highlight these life lessons.
“Will you take a look at the blog, RockyHumbert.Com?” Rocky asked his daugher. “Just once? You’ve never looked…”
“Dad,” she replied, “Rocky is NOT real. He’s a figment of your imagination.”
“The odds were 1 in 456,976 that this project would succeed,” Rocky replied. “How real is that? Hmmm?”
“Ok, Dad. I guess you earned it. I’ll take a look.”
The Bishop of London never got the sack
Nearly three million Americans lost their jobs during the past year. Rocky scratched his head when he read that they are the lucky ones.
The Times of London quotes the Right Reverend Richard Chartres (no relation to the Wrong Reverend Jeremiah Wright) as saying “it’s difficult to know whether to sympathise more with those who had lost their jobs, or those who were left carrying even greater loads with higher targets and fewer colleagues.” Chartres is the Bishop of London in the Church of England.
Having dated an English girl for several years, Rocky knows aplenty of the British stiff upper lip (literally). But an unlucky chap has nary a choice between “getting the sack,” and keeping his job.
In recognition of his foolish statement, Rocky hereby nominates the Bishop to the Royal Order of the Boot.
Interestingly, the Chuch of England website has a Prayer for the Current Financial Situation. Press reports state that their website hits increased 25% since the prayer was first published.
Gasoline, Washington and Pundits
Rocky wrote last month that he was buying the Gasoline crack spread because he thought it was a good investment both technically and fundamentally. Since he entered the trade, Rocky’s investment has returned 550% (unleveraged). Rocky never gives investment advice, he just “calls them as he sees them.” Hence the purpose of this update is not to gloat or celebrate, but rather to point out the inconsistency of an article in this morning’s Wall Street Journal.
Mark Gongloff writes a modestly gloomy piece, “Falling Gas May be Gone as a Stimulus:”
“Falling gasoline prices were for months a rare and welcome bright side to the economic meltdown. They aren’t falling anymore….Gas has risen even as crude oil prices have tumbled…and demand for gasoline has fallen amid a deep recession. Higher gasoline prices sometimes crowd out consumer spending on other suff, but they will bolster January retail sales numbers due Thursday.”
He concludes: “…if gasoline has found its floor, it will be one less support for any economic recovery.”
Rocky notes that this is a textbook example of glass-half-empty syndrome — reminiscent of a frightened blind man looking in a mirror. (Rocky frequently mixes his metaphors. Always shaken, not stirred.)
As gasoline prices reached $5 last summer, doomsday pundits wrung their hands and politicians spoke about intervention in the markets. Newspaper columnists predicted the end of the American way of life. Fortunately, Washington did not intervene, and high prices increased production and curbed consumption.
Last fall as gasoline prices collapsed, the same doomsday pundits pointed to the deflationary collapse of the economy — and all the evils the collapse will wrought. As commodity prices ticked lower, more people jumped on the bandwagon and viewed this as a coincident indicator of economic implosion. Eventually gasoline prices overshot to the downside late December (when Rocky entered his bullish trade); other industrial commodity prices are groping for a similar floor.
An algebraic representation of this phenomenon:
Prices high = pundits are bearish. Prices low = pundits are bearish.
Both when gasoline reached $5 and when the crack spread went negative, supply and demand came back into balance, and a new equilibrium was reached.
To conclude: Rocky believes that gasoline’s ticking up a bit is a POSITIVE sign for the economy. It also shows that markets, when left to their own, eventually find a sensible equilibrium.
A trader’s best friend
Rocky is a rabid sports fan. He dislikes baseball, football and basketball. He is lukewarm towards tennis, golf and skiing. He finds bowling, archery and snooker boring. He loathes cricket.
The reason Rocky is a rabid sports fan is his passion for competitive dog shows.
Nothing tops the excitement of watching elderly matrons trot around an astro-turf covered ring, dodging excrement from lesser-bred brethren — all while keeping the leash tighter than a bodice that Madonna might wear during a book signing.
Yesterday the stock market fell almost 400 points. A Dog Day came as no surprise since Westminster Kennel Club representative David Freit rang the Nasdaq Closing Bell. Frei was at the Nasdaq to publicize the Westminster Kennel Club Dog Show Finale. To be aired live, in prime time.
As Rocky wolfed down a few hot dogs, and his wife ate leftover Chinese food from a doggy bag, the Humbert family sat transfixed in front of their not-HD television. The tension was palpable as a Scottish deerhound named Tiger Woods outmaneuvered a Puli with dreadlocks that hairless Rocky can only dream about.
Well, not the whole family.
“Dad, can I watch American Idol?” asked Rocky’s daughter.
Rocky swallowed his mouthful of Bud Light and hastily replied, “No way. We’re coming to the best part. Best of Show.”
Rocky knocked over his beer bottle in a fit of ecstasy as he viewed the show’s climax. The winner: A previously retired 10-year old Sussex Spaniel named Stump. (Yes, the dog had all four legs.)
A 10-year-old dog is 70 years old in human years. This dog was the oldest winner in the 133-year history of Westminster!
As Rocky drinks his morning coffee and plans his day, he already feels younger.
You know it’s a depression when….
Each year, Rocky’s Alma Mater arranges an exotic vacation for its alumni. Past destinations included Antartica, Alaska, Thailand, and the Baltic.
The University just announced its 2009 cruise: A Voyage Around Lake Superior.
With all due respect for Duluth, Minnesota, a visit to the Duluth Childrens Musuem and a baseball game by the Duluth Huskies is quite a step down from the Louvre and the World Cup.
Rocky remembers the saying: “It’s a recession when your neighbor loses his job. It’s a depression when you lose your job.”
Rocky says: If the 2010 trip is a cruise on the Cuyahoga River (fireworks included), he’ll know it’s a depression.
A-Rod should care about Obama’s pay cap
Rocky suddenly realized that Obama’s executive pay cap may be a conspiracy orchestrated by the Boston Red Sox.
The plan caps salaries at $500,000 for executives at firms that accept “extraordinary assistance” from the government.
It turns out that the New York Yankees can be included in this category.
From Jim Dwyer’s NY Times article on 1/9/09:
“Now, beyond all sense or sensibility, the New York Yankees have appeared with a request for $370 million in new taxpayer-backed financing for a new baseball stadium that will open in April.
This is more. New. In addition to. On top of the $942 million in previous financing, and $660 million that the city is pitching in to replace parkland sacrificed for the new stadium and transportation improvements.
What is the team going to spend the new $370 million on?
Here are some items on the submission filed with the city’s Industrial Development Agency: $10.5 million for “suite level upgrades,” and $5 million more for “public washroom upgrades,” and $1.1 million to “upgrade suite seats, field seats” and areas where disabled fans will sit. For a better sound and television system in the building, new mounts and screens, a video system and scoreboard, they want $34 million. And $3.9 million for “extensive cabling necessary to accommodate multiple, domestic and international broadcasters.” To enclose the press box and build a dining room for employees, they’re going to spend $3 million. They also plan to spend $137 million for “food and beverage build out.”
Alex Rodriguez tops the MLB salary table at $28 million per year. The average MLB player now earns $3 million per year. If the Yankees were forced to cut A-Rod’s pay to “only” $500k, he would presumably move to a higher-paying team that receives no government funds. Alternatively, if every MLB franchise had a $500k cap, fewer people would choose baseball as a career, and the quality of the game would suffer.
It’s easy to see why, when the government starts setting salary limits, it’s a slippery slope. With unintended consequences.
The Curse of The Bambino may have been broken. But it is being replaced with a new curse.
SEC: Take a lesson from the Snow Plow Police
The following story is true. The names and places were changed to protect the innocent.
Rocky received a Summons from his Town’s Snow Plow Police yesterday. The Summons reads: “You have committed a violation of Sec 196-37 and in the name of the People of the State of New York, you are hereby summoned to appear before the Town Court. Failure to respond will be treated as an omission in appearing before the Court, and a warrant may be issued for your arrest.”
Rocky’s TIVO has thousands of Law & Order episodes, so he knew exactly the right course of action: Remain silent. Get a lawyer.
Rocky (to usual lawyer): “I need help. The town has accused me of plowing snow into the road. And I’m innocent. I don’t even own a snow plow.”
Lawyer: “Of course you’re innocent. All of my clients are innocent. But I can’t represent you. Snow plow law is a complex subspecialty. If you need to find a lawyer, search in the Martindale Hubbell directory under Snow Plow Law.”
Rocky: “But I thought you’re supposed to be one of the top lawyers in the country.”
Lawyer: “I am. I’ve never lost a case. But my area of expertise is recycling law. I assist defendants against allegations that they mixed the paper with the plastic in their recycling bins.”
Rocky: “What should I do?”
Lawyer: “I can’t represent you. But here’s what I think: You’ve got a few choices. You can get a continuance until the spring. By then, the snow will have melted, and the judge might dismiss the case on lack of evidence. You can ignore the summons, and get sentenced to a fine and jail time. You can plead guilty, pay the $25 fine, and hope that this matter never comes to light when you run for the US Senate. You can plead innocent, hire a lawyer at $900 per hour, and when you are convicted, you can appeal to the New York Supreme Court. When the conviction is upheld at that court, you can appeal to the New York State Court of Appeals. When the conviction is upheld at that court, you can file a habeas corpus petition with the Federal District Court. When that Court upholds the verdict, you can appeal to the Second Circuit Court of Appeals. When that Court upholds the verdict, you can file a motion for an En Banc Hearing. When they turn you down, you’ll have to pay the $25 fine.”
Rocky: “How much will all of this cost?”
Lawyer: “It’s impossible to know the costs of litigation in advance.”
Rocky: “Just a ball park figure please.”
Lawyer: “It would be unethical for me to answer that question.”
Rocky: “Please??”
Lawyer: “As a hypothetical, I’d guess 2 or 3.”
Rocky: “Thousand?”
Lawyer: “No, two or three million dollars.”
Rocky (sotto voce): “Larry Craig, I feel your pain.”
As Rocky reaches for his checkbook to plead guilty, pay the $25 fine, and risk his family’s humiliation for associating with an ex-con, he feels a renewed confidence in our justice system. Most civil servants and regulators are hard-working, diligent and dedicated to their important jobs.
Boost the economy, buy a light bulb
Rocky shares the following letter, which is partly based on Keynesian economic principles articulated in the Broken Window Parable of Frederic Bastiat from an 1850 essay:
Dear Fellow American:
Almost ten percent of us are unemployed, and the economy is a mess. The ninety percent of us that still have a job are scared, and we read about the government borrowing and spending trillions of dollars as a “stimulus” to the economy. That debt will either be a burden to our children, or it will be wiped out by an inflation that destroys the value of our savings even more.
We can do something that is good for us, good for the economy and good for our children. Buy a lightbulb! Buy a toothbrush! Buy some laundry detergent!
This is not a joke. Please allow me to explain.
We all use some of the following:
1. Lightbulbs
2. Toothpaste / toothbrush
3. Laundry detergent, soap, shampoo.
4. Razors, shaving cream
5. Plastic bags, aluminum foil
6. Kitchen glassware, forks, knives
7. Canned tuna, canned coffee
8. Batteries
9. Paperclips, staples, paper, pens
10. Blank computer CD’s
The money in our savings accounts are not earning any interest. So let’s spend some money on these things since we know that we will need them. Since they don’t ever spoil, let’s buy them NOW. Let’s buy enough so that we won’t need to buy more for the next year or two or three.
If every working American stocks up, there will be an immediate benefit to the economy. Factories that make them will stay open. Jobs will be saved. And if prices rise (which they probably will) over the next year or two, we will have saved money too. If you can find these items Made in America, even better. But it doesn’t really matter. We live in a global economy, and what’s good for the world is good for America.
March 1, 2009 is “Buy a light bulb day.” Please join us as we jump start the economy without the government’s involvement. Please share this message with your friends, family and co-workers.
Thank you for your time.
Brought to you by “BALBOA”
( Buy-A-Light-Bulb, Boost-America )
The price of everything, but the value of nothing
January 30, 2009 — LAKE FOREST, Calif.– WD announced the first 2 terabyte (TB) hard drive – the world’s highest capacity drive and the latest addition to WD’s popular, environmentally friendly, cool and quiet, WD Caviar Green hard drive family.
What can someone do with a two terabyte hard drive?
It’s past midnight, and Rocky sits in front of his wall of computer screens watching the Nikkei approach prices last seen in 1982. He thinks of Oscar Wilde’s quote: “The Cynic is a man who knows the price of everything, and the value of nothing.”
Rocky thinks Oscar Wilde’s quote is an anachronism: “The Cynic is a buy-and-hold investor in the Nikkei who fills a two terabyte hard drive, and needs a second one.”
Rocky is a curmudgeon but not a Cynic. He smiles as he checks on his sleeping family, and quietly climbs into bed.
