The Contrarian's View s published 11 times per year on a mostly-irregular schedule, and the views expressed are those of the author and editor, Nick Chase. Because nobody can predict the future, results of past suggestions or recommendations are no guarantee of future results. My own material in this publication may be freely quoted provided proper attribution is given to its source; quotes from other people are subject to fair-use copyright restrictions. Subscription rate: Free on the Internet. Using your favorite Web-browsing program, open URL http://onashi.org. Former paid subscribers to the printed version are now receiving LIFETIME subscriptions, and subscriptions to the printed version are no longer being accepted. Unsolicited material sent to us by UPS or by courier other than the postal service is refused and returned to sender! ISSN 1536-4429 Phone: (508) 757-2881
Now I, in particular, despise fluorescent lighting (which would be the most likely lower-energy-consuming replacement). We have exactly one fluorescent light in the house, built into our electric range, and we never use it. In the extensive remodelling my wife and I have had done to our Victorian abode over the past thirty years, I have adamantly held out against installing any fluorescent lighting, either as suggested by contractors or built into appliances.
Although I always found the long fluorescent tubes of yore to be harsh and unpleasant, my intense dislike for them stems from my freshman year in college. As a freshman I had several required courses (of several hundred students in each course) with required readings, which were placed on reserve in the library so all of the students in a course would have opportunity to access them. The library was a 1950s-vintage building with long white fluorescent tubes in the ceiling, a dozen of which were flickering at any time because their ballasts were sick, and they were all noisy. Bzzzzz.... bzzzz... a loud, constant buzz. Dreadful. Impossible to concentrate.
After college, I found an explanation for why fluorescents bother me so. On a trip to Europe, I had a chance to see a little British TV, which refreshes (interlaced) at 50Hz; that is, there are 25 complete images per second instead of the 30 (60Hz) we have in North America. The TV pictures flickered so badly, I couldn't understand how anybody could stand to watch them. I asked a friend, "Doesn't the flickering bother you?" "What flickering?", he said.
That was when I realized that I am more sensitive than most people to cycle flicker; I can sense it at higher rates than the population at large. In my later work with computer graphics displays (back in the early days of computer graphics), where the refresh rates (non-interlaced) of the pictures could be programmed, I found that I would begin to detect flicker at around 57 or 58Hz; in other words, 60Hz was right at my flicker-detection boundary.
Fast-forward to the modern age. Improvements in picture-tube phosphors, the multiscan computer display with (interlaced) refresh rates of 70Hz and higher, and now LCD and other solid-state displays have made the problem largely disappear for me.... except for those long, ugly tubular white lights in the ceiling.
OK, this has been a long diatribe on why I hate fluorescents, and no doubt you would like me to return to the point. The point is, (for whatever reason) I don't like fluorescent lighting, not even the new curlicue light-bulb replacements, and I don't want to be forced to use them. My wife and I are willing to pay for the extra energy cost of incandescent lighting.
Now my wife tends to lean toward the bleeding-heart liberal side of life, unless the subject involves something "natural" (she's allergic to most of nature), or teenagers (her area of expertise) or unless somebody else tries to tell her she should be doing something; then common sense cuts in. And once she gets fired up on a subject, she is a veritable tornado in trying to set things aright.
So how, I thought to myself, can I enlist her energy in my cause?
"According to this story in the Journal", I said to her, "it looks like we might have to replace our upstairs bathroom ceiling light".
"What do you mean?", she said, and I showed her the story to read.
Now, you need to understand just how special this light is. My wife selected it shortly after we were married, when we were fixing up our first house in Hubbardston. It is a baroque-y-looking fixture with three brass arms which hold frosted glass teardrop-shaped globes, and it takes 40-watt candle-flame bulbs. One day, while replacing a burned-out bulb, I dropped and broke one of the teardrop globes, so we went out and bought a supply of backup globes (they were still available then). We have a lifetime supply stored in the closet, just in case I should drop and break another one.
When we moved to Worcester, the financial backwater of America, my wife had me remove this bathroom ceiling light and replace it with something else before we put the Hubbardston house on the market, just so we could keep this ceiling fixture, which was duly installed when we renovated our Worcester upstairs bathroom. So, as I said, this is a special light.
After she read the story, my wife was galvanized into action. Shortly thereafter, e-mails had been sent to our congressional representative and both of our senators (they, also, of bleeding-heart liberal persuasion) to vote against any such stupid legislation should it actually arrive in Congress.
Should an incandescent-bulb ban actually come to pass, my wife and I will stock up on a lifetime supply of incandescent light bulbs (I'm sure we can find some place to store them). They will join the lifetime supply of teardrop globes, Oscar de la Renta gold-rimmed wine and water goblets, Clairol piney-scent herbal-essence shampoo, Vidal Sassoon blue-stripe bottle shampoo, British Sterling deodorant, our extra 1970s-vintage showerhead which actually delivers a decent amount of water for a shower, and other treasured items which have disappeared from the marketplace, though not necessarily because of Congressional action.
For other people not as foresighted, they will no doubt resort to a black market of incandescent light bulbs from Canada, which will spring up to join the black market of toilets from Canada which actually flush.
When I was young there was real, abhorrent discrimination - especially sex and racial - in hiring and in where you could live; in the South, even where you could stand and sit. Thankfully, these horrible ways of treating fellow human beings have almost completely disappeared. But the urge for some people to tell other people how they should live their lives has not gone away; the nanny state now discriminates against the politically-incorrect. New freedoms for some, but less freedom now in other ways for all of us.
In a land where capitalism supposedly flourishes, it
amazes me how unwilling people have become to
trust market forces to correct imbalances. No
perceived problem appears to be to small to escape
public pressure for interference by some nanny-state
bureaucrat. But where markets are truly at risk....
namely, with the taking on of too much debt and
leverage which threatens to collapse the whole
system.... there is no pressure at all for any
regulatory oversight. At least, not yet.... everybody is
having too good a time at the party.
China is clearly in a bubble. Shanghai stocks are up 250% since 2005 - and 35% this year alone. Still, investors are so eager to get in at these prices - while they can still get hurt - that they take up Chinese bank IPOs at twice the P/E ratios of banks in developed countries. And what do they actually get when they buy a share? What exactly is a bank chartered and regulated by communists? They haven't a clue. - Bill Bonner
We are facing the biggest decline in housing values since the 1930s and nobody gets it yet. In former hot markets, prices will fall 15 percent to 25 percent this year and more next year as the tragedy plays out. - Bob Chapman
In short, it will not be the housing bubble that takes out the US economy. The powers that be are in tune with the rapid deceleration of home sales and are already talking bailout. Mother Government will now engineer the mother of all bailouts; in the tens of billions most likely ensuring that people will be rewarded for their failure to exercise due diligence. The balance of us in our entirety will pay for this bailout through higher prices on pretty much everything. The government cannot go to the savers and issue bonds because there is no savings. The money to engineer the bailout will either be printed or borrowed from foreigners. Take your pick; both solutions are awful. - Andy Sutton
It will be interesting to watch going forward how many more programs will be brought forth to contain that which is already said to be contained. But that won't stop the reality of the situation.... The little guy will not be bailed out by these programs. These programs all have their roots in attempting keep people underwater and in trouble from declaring bankruptcy. The idea is to make people debt slaves forever. The last thing any lender wants is to be stuck with an overpriced home with no one to sell it to. - Mike Shedlock
My guess is that US consumers won't wake up to the urgency to rebuild income-based saving until they face some sort of a shock that raises questions about job and income security. As long as the unemployment rate hovers near its cycle low - precisely the message from a 4.4% reading for the jobless rate in March - that won't happen. But if and when the unemployment rate starts to rise - as I fully expect will be the case in the second half of 2007 when long-deferred construction sector layoffs finally kick in - then consumers will need to come to grips with the excesses of asset-based spending. If that prompts an increase in income-based saving, as I suspect, then America's overall domestic saving position will also improve - thereby limiting US demand for foreign saving.... If, however, US consumers remain unflinching, imports will remain excessive and any cyclical tendency toward global rebalancing will quickly be short-circuited. A lasting global rebalancing cannot occur unless the excesses of the Asset Economy are finally unwound. - Stephen S. Roach
...when the Boomers were entering the workforce in 1970, the nation's largest private employer was General Motors. They paid an average wage of $17.50 an hour in today's dollars. The largest employer in the post-industrial economy is Wal-Mart. Their average wage? Eight dollars an hour. The service-driven economy is also a youth-driven economy, burning young people's energy and potential over a deep-fat fryer.... The entire labor market is downgrading toward what was once entry level. - Anya Kamenetz [in Generation Debt: Why Now is a Terrible Time to be Young]
The composition of the American economy is changing in fundamental ways -- ways that will not, in the long run, be favorable to most Americans if current trends continue. The younger generation is simply the first to bear the brunt of these changes, and as a result, is the first to grow up poorer than the generation preceding it. This, ladies and gentlemen, is known as national economic decline. This is unpleasant news, and is therefore completely unacceptable to the mainstream media. It's easier to sell the idea that the younger generation is just plain lazy, stupid and hopelessly screwed up. After all, didn't you hear? The Dow just hit 13K! How can the economy be bad? - M.A. Nystrom
On April 16, the Christian Science Monitor published the results of a study showing that a majority of Americans - 52.6%, to be exact - now receive "significant income" from government programs. At the same time, the percentage of the working population "not employed in a government-reliant job" has fallen below 29%. Now consider the implications. Fewer than 30% of workers are airmailing large portions of their paychecks to more than half of the rest of the population. And as the Baby Boomers retire, the latter number is inexorably headed up; it's projected to close in on 60% by 2030. - Doug Casey
The investment markets are only part of the debt picture. Most individuals have borrowed to buy real estate, cars and TVs. Most people don't own such possessions; they owe them. Credit card debt is at a historic high. The Atlanta Braves just announced a new program through which you can finance the purchase of season tickets. Can you imagine telling a fan in 1947 that someday people would take out loans to buy tickets to a baseball game? - Bob Prechter
A highly geared life based on maxing out credit opportunities has become the norm across all strata of US society, but naturally such a way of life is not without risk. For all players, from the ordinary guy on the street trying to pay his huge mortgage and keep up with his credit card payments, right up to the Fed and the government, the specter of a liquidity gridlock and a deflationary implosion is understandably the thing to be feared more than anything, even eventual hyperinflation, and the thing that needs to be kept at bay. Who was responsible for this mess? - principally the government and the Fed, but essentially everybody - including every corporation and private individual who has run a highly geared operation or lifestyle based on credit. The essential point to grasp here is that there is now no way back, no way to return to a life of financial propriety. The flood gates were opened long ago and structural indebtedness has reached such extreme levels that any attempts to rein it in and bring it under control would quickly result in a liquidity gridlock and an inflationary implosion. A monster has been created with an insatiable appetite, and the Fed now has no choice but to keep feeding it. - Clive Maund [Nick's comments: I remember similar remarks being made in the late 1970s, but Fed chairman Paul Volcker was able to rein in the inflation-driven silliness with very high real interest rates. Sadly, I don't currently see anybody in Washington (except for Ron Paul) with the backbone (or desire) to pull off a similar feat.]
The press today is an army with carefully organized weapons, the journalists its officers, the readers its soldiers. But, as in every army, the soldier obeys blindly, and the war aims and operating plans change without his knowledge. The reader neither knows nor is supposed to know the purposes for which he is used and the role he is to play. There is no more appalling caricature of freedom of thought. Formerly no one was allowed to think freely; now it is permitted, but no one is capable of it anymore. Now people want to think only what they are supposed to want to think, and this they consider freedom. - Oswald Spengler
There virtually can't be a recession on the horizon. The world is awash in financial liquidity. Anything that goes wrong - like the housing slowdown or the subprime mess - is easily absorbed by the massive amount of money available in the world.... For the moment, let the bonehead bears say whatever they want... It's good for a laugh at their expense. And besides, we bulls have to have someone dumb enough to sell us the stocks we want to buy. - Donald Luskin [chief investment officer, Trend Macrolytics. Nick's comment: Permabull with hubris.]
This will end badly. In recent weeks, we've started to observe what people used to call 'shooters' back in the '60s and '70s -- stocks that rise by 30-40% or more in a single day. That sort of action is characteristic of a speculative blowoff. The difficulty is that such blowoffs can continue over the short term, but also tend to end abruptly. I have no strong view about the very short term, except that we're observing an instance of fairly extreme overvalued, overbought, overbullish conditions, which have typically been followed by deep and abrupt losses. - John Hussman
I think of this as a debt bubble, not a private equity bubble.... How do you default? You used to say, "Can I pay down enough of this debt so if a recession hits I can get through it?" Now it doesn't matter even if a recession hits next week. - Kevin Landry [chief executive, TA Associates. Nick's comment: Yes it does.]
The reality is the markets are willing to provide extraordinary amounts of debt, almost indiscriminately. It's hard to put these [private-equity] companies into default. I can't think of the last time we had a real covenant in one of our deals. - Scott Sperling [co-president, Thomas H. Lee Partners]
Of course, the Internet is.... also changing the way we get information and ideas; never before have so many people had such ready access to so many bad ideas.... And everywhere traditional news media, in which the lies are printed on the pulp of trees, is giving way to the new news media, in which the drivel comes to you electronically. Through no fault of our own, we have occasionally been the victim of news stories, in which the 'news' differed dramatically from what we knew to be true - often to such a degree that the reader would come away with the exact opposite of the truth. But what would you expect? The fourth estate is no less self interested than the other three - and it is dominated by a class of people who are particularly dull-witted and lazy. Generally, they have 'the storyline' already in mind - because it has been written hundreds of times already - before they have ever taken a single note or looked at a single fact. - Bill Bonner
Precious metals have always been insurance against government bungling. During times of political and economic stability, they don't do much, but during times of great turmoil, they skyrocket. So, if you are in precious metals, you have all the insanity of all the world's governments working to generate profits for you. In the realm of human affairs, that's as close to a sure thing as we are ever likely to get. - Richard Maybury
It is time to get out of the market and I don't think it would be unreasonable to expect the market to fall by more than 20 per cent in a very short space of time. - Ken Murray [chief executive, Blue Planet Investment Management]
Wall Street continues to view stocks as one-way bets, with positive outcomes. Every day, I am more and more astounded by the bravado/denial that I see. If you told this crowd that the world was going to end on Friday, they'd be buying stocks in anticipation of the rebound they would expect to occur after its demise. How anyone can be sanguine about how this movie ends is beyond me. - Bill Fleckenstein
My fear is aggravated by the extremely high level of complacency that exists in absolutely every fiber of American society. How do you measure complacency? The market has its barometer and it's called the VIX which is short for Volatility Index. I've been in the investment business for a while now and I don't recall such a prolonged period of high P/Es, low dividend yields, and low VIX readings. Either everyone has ice water running through their veins or everyone is piled over on the wrong side of the boat. Any bets on how that will end? - Enrico Orlandini
After four years of rising stock prices a person might wonder how private equity investors can keep finding companies cheap enough to deliver decent returns on their investment. According to Thomson Financial, private equity firms bought 654 U.S. companies last year. But were they bargains? Were they bought cheap enough to produce a decent return on their $375 billion cumulative price tag? Here's the answer: It doesn't matter. That's the great thing about being a private equity investor. It doesn't have to be about the Return on Investment or the ROI. There's always the RFP, or Return From Pillage. So far, RFP has come in the form of "management" fees and "dividends" paid by recently-privatized companies to the privateers who privatized them.- Rob Peebles
We Americans have come to think it our natural-born right to be able to drive huge SUVs while most of the world lives in relative poverty. But our materialistic view of the world is on a collision course with a new reality that will be forced on us and will reduce our standard of living. The new reality I speak of is derived from a combination of declining production of oil, especially cheap oil, and rising competition from huge numbers of middle-class people from places like China and India as well as other lesser-developed countries. We are going to continue to pay much more for oil, as various geopolitical interests compete for dwindling supplies of oil, and as central bankers print more and more money in a self-deceptive move to try to pretend to society that we can afford expensive oil. - Jay Taylor
If one were to ignore the components of the Nasdaq 100 with triple-digit P/Es and those with no trailing earnings at all, the arithmetic average trailing P/E of the remainder of the companies in the Nasdaq 100 is 34.3 and the forward P/E is 22.1. Including all components of the Nasdaq 100, the forward P/E is a whopping 34.9. Earnings growth based on Wall Street analyst expectations is projected to be over 35% over the next year.... the dividend yield of the Nasdaq 100 is a mere 0.36% (0.5% capitalization weighted) by comparison.... Analysts expect that only seven companies in the Nasdaq 100 will post lower earnings in the next year compared to the previous year. With only seven companies (7%) expecting to have an "off year," this would seem to be a rosier forecast than any reasonable soul not from Wall Street would expect. What happens if the US economy slows? - Martin Goldberg
Clearly there is a liquidity frenzy going on suspiciously simultaneous to the housing bubble collapse. The housing bubble was created to stem the collapse of the stock market bubble and now we are coming around full circle. So much for the idea of the Fed saving a few bullets for a truly rainy day. They seem determined to run the bubble economy until something goes wrong. Now that they are maxing out in terms of monetary growth what will be the next trick to bail folks out? ....I think most everyone knows the party is almost over but for now the plan is to just make believe all is well. - Marc Sexton
The real estate market is crashing faster than anyone had anticipated. Housing prices have fallen in 17 of 20 of the nation's largest cities and the trend lines indicate that the worst is yet to come. March sales of new homes plummeted by a record 23.5% (year over year) removing all hope for a quick rebound. Problems in the subprime and Alt-A loans are mushrooming in previously "hot markets" resulting in an unprecedented number of foreclosures. The defaults have slowed demand for new homes and increased the glut of houses already on the market. This is putting additional downward pressure on prices and profits. More and more builders are struggling just to keep their heads above water. This isn't your typical 1980s-type "correction"; it's a full-blown real estate cyclone smashing everything in its path. - Mike Whitney
Weak housing is unlikely to derail the economy. - Abby Joseph Cohen
However, illiquidity among the US household sector, along with the reluctance of the Fed to cut rates right away, combined with the requirements for enormous capital investments for infrastructure in emerging and developed economies, could lead to some tightening of liquidity around the world. Therefore, I expect a more meaningful setback in asset prices and would certainly defer the purchase of financial assets. In particular, I am concerned by the inability of financial stocks to rally convincingly from their March 2007 lows, since financials are usually leading the market up and down. In my opinion, there is an ongoing deterioration in the US stock market. In the summer of 2005, the homebuilders peaked out. Last year, it was the turn of the sub-prime lenders to top out. And early this year, financial shares, including brokers, made their highs. The economy is likely to follow this slow stock market erosion and gradually deteriorate, with disappointing corporate profits to follow.... it should be clear that in the long run the purchasing power of the US dollar will continue to decline against sound currencies such as precious metals. Therefore, I continue recommending the accumulation of gold and silver. - Marc Faber
The introduction of derivatives has totally made any regulation of margin requirements a joke. I believe we may not know where exactly the danger begins and at what point it becomes a super danger. We don't know when it will end precisely, but...at some point some very unpleasant things will happen in markets. - Warren Buffett
To say that ex-housing the economy is doing just fine is tantamount to claiming that ex-Iraq, Bush's Middle East policy is a rousing success. - Caroline Baum
To those who do not tolerate high levels of financial pain, we have not left our "Collapsing Chinese Stock Market" days behind us. At the present rate of ascent, my guess would be that yet another big shock wave should be coming from the Shanghai Market within the next few weeks. Judging from the extended nature of the chart, a sell off back down toward 3,200 should be in the cards by mid-June at the latest, about a 20% haircut in the Shanghai Composite. That means we are virtually sure to see a few hair-raising days for the Dow and maybe other world markets. - Frank Barbera
The idea of running cars on corn has got to be the dumbest idea I've ever heard. - Charlie Munger [Berkshire Hathaway]
With any sustained pullback in consumer spending, the massive overcapacity in retail stores will become rudely apparent. Perhaps this is finally it or perhaps not, but eventually, those stores that were busy hiring because of expansion are going to have to start laying people off. All the pieces are in place for one heck of a nasty consumer-led recession. Unfortunately, few are prepared for it. - Mike Shedlock
I think we will discover (probably painfully) that globalism was a set of transient economic relations made possible by a half century of cheap oil and relative peace between the great powers, and the enterprises that rely on these transient mechanisms - such as Wal-Mart, with its 12,000-mile merchandise supply chain to China, and its "warehouse on wheels" of tractor-trailer trucks circulating incessantly on America's interstate highways - will be on their knees in a few years as we enter the export crisis phase of post-peak terminal oil depletion and the great powers of the world act with increasing desperation to compete over the remaining supplies. - James Howard Kunstler
Too many people in positions of responsibility act as if these are just positions of opportunity - for themselves. The ones who simply steal money probably do less harm than teachers who propagandize their students, media who slant the news or politicians who sell out their country's interests in order to get re-elected. - Thomas Sowell
If you look at history, you can see that there is essentially a blueprint for turning an open society into a dictatorship. That blueprint has been used again and again in more and less bloody, more and less terrifying ways. But it is always effective. It is very difficult and arduous to create and sustain a democracy - but history shows that closing one down is much simpler.... Because Americans like me were born in freedom, we have a hard time even considering that it is possible for us to become as unfree - domestically - as many other nations. Because we no longer learn much about our rights or our system of government - the task of being aware of the constitution has been outsourced from citizens' ownership to being the domain of professionals such as lawyers and professors - we scarcely recognize the checks and balances that the founders put in place, even as they are being systematically dismantled. - Naomi Wolf
Today, Iraq is like an international bug-zapper for jihadists. It sendeth forth a glow in the night to all delirious Ahmadinejad wanna-bees, so they come flying from all over the world to die, to embarrass themselves, to fight a losing battle. We are even beginning to drain Iran of them.... Perspective is needed. America's security aims are being achieved and the most unbelievable military victories have taken place all at casualty levels considered record minimum by war historians. Humanitarian concerns and the 1,500-year-old hate between sects are primarily the responsibility of the Iraqis. Failing to heal the Middle East doesn't constitute failure on our part. Our job is to keep our eye on the ball: making the terrorist miserable. - Andrew Longman
There were 20,498 people killed by terrorists in 2006. Of that total, 13,340 were killed in Iraq. This is not evidence we are losing the war in Iraq. Rather it is evidence Iraq has clearly become the center of the war between the West and Islamo-fascist terrorists. In other words, there can be no question - not by any objective standard - that Iraq is now the focal point of the showdown, the so-called war on terrorism. The grisly statistics prove the case.... But running away from those statistics - as ugly as they might be - means running away from the "war on terrorism." It means surrender - not only to the al-Qaida enemy in Iraq, but to the worldwide al-Qaida enemy and its allies. - Joseph Farah
There's a simple reason why the Israelis and Palestinians have never been able to reach a peace agreement: It's because the Palestinians are part of a sick, twisted, death cult. Their "nation" is run by terrorists who openly admit that their goal is to destroy Israel and the average person on the street is a monster who wants to kill Israelis more than he or she loves his own children. Speaking of the children in that country, before they can even stand on their own two feet, they're being taught that the grandest thing that they can ever do in life is blow themselves up and take some Israelis with them. No wonder the Israelis can't get along with these people. No one could. - John Hawkins
Something else that's undeniable is that almost all of the shooting sprees in modern American history have
one thing in common aside from a lunatic with a gun: They happened in places where there was little
likelihood that anyone could shoot back. Psychos aren't stupid. They're cowards, but they aren't dumb. They
don't often stage their rampages at police stations, gun shows, National Guard armories, honky-tonk bars,
biker rallies, or even bad neighborhoods. They pick schools and malls and post offices and restaurants and
quaint Amish communities to murder their way to their sick 15 minutes of fame. That's because they KNOW
no one is there who can fight back effectively. - Jim Amrhein
In my opinion, this disparity is a result of, and a measure of, the current bubble - private equity funding - which is removing stock primarily from the NYSE, thereby causing money managers to chase after replacement shares, also on the NYSE.
This has caused the NYSE to diverge from reality. Everything I see tells me that the economy is growing progressively weaker, and that with the housing ATM having run dry, consumers are going even deeper in debt (on credit cards) to keep up with their expenses. This consumer spending spree will certainly slow down by the fall, as people simply run out of money (or money that can be borrowed).
So, the tide is now turning. I expect the summer to be a weak period overall for stocks (neutral to negative), with the possibility of a major decline in the fall.
The odds that a systemic failure (mini- or otherwise) will occur remain about 2 in 3 between now and December. Remember, we've already had one of these this year, in late February. Throughout the summer and into the early fall, mini-failures are more likely than a major systemic collapse. In the fall, mini-failures could well be followed by some sort of systemic collapse. (The mini-failures are warnings of what's to come, though they cannot predict the timing of it.)
The most likely point of failure is still China. "To get
rich is glorious", the Chinese say as they participate
in a stock-market bubble every bit as extreme as ours
in the U.S. was in 1929 - maybe more so. Boy, are
they headed for a crash, though the worldwide impact
will be felt in how that crash affects the various
highly-leveraged derivatives bets the hedge funds
have placed.
A. "Inheritance" - real (normalized) "dividend and interest distribution" portfolio:
SUMMARY - "Inheritance":
Original cost: $100,000.00 (normalized)
Present value: $116,882.05 (see below)
Increase: $16,882.05 [+16.88%]
COMMENT on "Inheritance": I've increased my "portfolio protection" with 20 more shares of QID. On May 18, I sold 50 shares of Maine & Maritimes (at $27.11), recouping most of my original investment; I'll let the profit ride.
The portfolio cost (normalized) is $108,982.99 with $47,492.25 currently in cash or near-cash.
B. "Professors' Investment Group (PIG)" - investment club portfolio.
SUMMARY - "PIG":
Original cost: $10,699.00
Present value: $21,454.29
Increase: $10,755.29 [+100.53%]
COMMENT on "PIG": I continue to "roll over" 3-monthT-bills, one per month.
C. Roth IRAs - real portfolio:
SUMMARY - Roth IRAs:
Original cost: $29,766.19
Present value: $38,352.81
Increase: $ 8,586.62 [+28.85%]
COMMENT on Roth IRAs: Added to my Fidelity Roth on May 18, and not reflected in the figures shown above, were 150 shares of Prospect Capital Corp. (NASDAQ: PSEC, at $17.60), essentially a closed-end investment fund which owns equity, debt and warrants in midsize energy drilling and distribution comnpanies and MLPs. The warrants make this company interesting because of their implied leverage should energy prices take off and the companies in PSEC's portfolio do really well.
D. TIAA/CREF 403(b) and (non-Roth) IRA retirement plans: My TIAA-CREF and Fidelity non-individual-stocks retirement investments, both the part from which I am making monthly withdrawals and the parts that are "resting", are invested as follows: TIAA traditional, 74.65%; T-bills and money-markets, 5.11%; TIAA-CREF inflation-indexed bonds (retirement), 16.49%; TIAA real estate, 2.47%; MLPs, 1.24%; TIAA CREF High-Yield II, 0.04%. Added to my Fidelity non-Roth IRA (on May 18, not included in the aforementioned figures) were 55 shares of Chenière Energy Partners (CQP), an MLP which is building an LNG receiving terminal on the Sabine Pass Channel in Louisiana. Cash distributions are currently minimal but should increase as the terminal is placed in operation in about a year's time. Yes, there is a "hurricane risk" with this investment.
TIAA-CREF values, 17May2007: stock, 262.46; equity-index, 102.08; MM, 24.17; bond, 80.78; inflation-indexed bond, 47.33; real estate, 288.77; TIAA current yield in SRA, about 4.82%. COMMENT on NYSE "Timer's Trend": We are currently on a BUY signal of March 8, 2007.
COMMENT on NASDAQ "Timer's Trend": We're on a SELL signal given May 10, 2007. (The NASDAQ continues to be considerably weaker than the NYSE.)
NEXT ISSUE - will likely appear in June 2007.