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$TW

Added To CCJ, Otherwise Doing Nothing

I added more CCJ for $20.40. I had slimmed the position at $21.80 when I raised cash across the board at the top.

CCJ is always a buy around or below $20.

Other than that, I’m sitting on my hands, with >40% cash. I’m not convinced we don’t keep selling off, but am open to change. Valuations are crazy, but where else are you putting your money?

Bernanke is gone, but Yellen is hardly a hawk.

We’re at about a 5.5% selloff in the S&P. I’d feel a little more sure footed if we were at 10%. That at least would mark a real correction, and would probably require the flattening of a handful of the most serial offenders of the hope trade. The most egregious of inflated share prices, like the TW’s and TSLA’s of the world…

I’m excited by how well BAS has held up during this selloff. That stock normally passes out at a nearby sneeze. Maybe all the soft hands have finally relinquished their last pitiful handful of shares, so that the firm grip of men can rally the company?

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Okay, The End Is Nigh

I just looked at Towers Watson (TW) stock. Look at that valuation, then look me in the eye and tell me this rally isn’t a bubble.

Do you even know what TW does? I do – because I used to be in the industry. It’s an actuarial firm; imagine all the employee compensation of a performance investment bank, but with none of the leverage or scalable business to ever make the big returns even possible, trading like a tech stock in the 90’s.

At least a third of Watson Wyatt and Towers Perrin (before they merged and consolidated) was – get this – pensions. As you can imagine, the fascinating and exciting business of fixed income securities is just a booming source of revenue growth nowadays…

Wait, no, sorry. Pensions is actually a hole that at these interest rates will eventually swallow whatever it touches. That’s what I meant to say.

I’m sure TW is getting some good business from the healthcare deal. Hell I know I am on the consultant side. But there is no way there’s enough growth taking place here to justify a 30 PE ratio. That’s insane.

Towers Watson employees are highly trained, high cost employees that expect massive bonuses when they contribute. The business is intellectual capital driven – outside of the minds of the employees, it’s just a bunch of Excel spreadsheets and some office equipment. The company can’t even take a position that could possibly result in a massive payoff like banks sometimes do; it’s a permanent fixture in consulting circles. Any big performance gets eaten up in employee performance compensation – $400,000 salaries come from somewhere.

You people are out of your minds. I will begin to ease into a larger cash position with the next low volume melt up. This ends in fire.

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