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Archive for February, 2009

Warren Buffett, deer poop and postage

February 28, 2009 7 comments

Postage and Inflation

Postage and Inflation

Rocky finishes reading Warren Buffett’s annual letter, and remembers Buffett’s quote, “It’s only when the tide goes out that you learn who’s been swimming naked.”

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.

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Senator Kerry’s Left Pocket (and right pocket)

February 25, 2009 2 comments

kerry2“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 ?

February 23, 2009 Comments off

goldRocky 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

February 21, 2009 1 comment

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

February 19, 2009 2 comments

pringlesRocky 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

February 18, 2009 5 comments

fed-sealThe 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?

February 17, 2009 Comments off

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.”