Take A Look At My New Position

I am going through the portfolio with a hatchet this morning, cleaning up positions and trimming them down. My goal is to raise my cash position to 10%.

Ten percent.

That critical number which I aim to keep all my positions at; because that’s what cash is now.

Henceforth, I am investing in, “The Gubment,” in anticipation that their value is being greatly underestimated.

It’s not so much that I like the “company” now, as that I see the seedlings of reform being planted. The potential is in the works for the ‘ol “stock price” to barrel through the roof. On the one hand, many of you are probably shaking your head in disbelief, reiterating to yourself how they are utterly frozen most of the time these days. How they accomplish nothing and devalue the currency, et cetera, et cetera.

And all of that is true. But remember that they were mainly setting themselves up for this when they were getting things done. In light of that, their accomplishing nothing is actually a great improvement.

Plus, Europe has been getting torched for weeks now. We haven’t been saying much about it because of the Japan fiasco, but these events will come home to roost. Mark my words, we’re back where we were in 2010. A further collapse of the European states has not been priced in.

So I’ll be holding at least 10% of my portfolio in cash from here on.

You see, despite fully jumping on the devaluation station back in ’09 via large purchases of precious metals and massive leverage, I know when not to press a bet. And, I love this country, despite it being run by degenerate crack heads, and trust that is will ultimately succeed.

Bring back the all mighty dollar!

Really, I am more than ready for a little silence on the airwaves. The day in and day out nonsense that takes place in Washington is more than enough to wear my patience thin. It’s bad enough that the situation in our nation’s capital has become so bleak. But couple those structural problems with the fact that the only people who reside in those marble halls are morons with law degrees, and you have a situation that is just insufferable.

The ceaseless stream of press releases from all the little groups, every other hour, on how we’re heading down a path that will lead to child murderer, family slaying, citizen killing terror has long since lost its interest.

Anytime someone’s little power pot-budget gets touched, suddenly the whole lot of them flip out and clutter the press with releases containing obviously dubious facts and illogical points about how any reduction of spending will systematically bring about the end of humanity. The culmination of this effort was Harry Reid saying that money being withheld from some gay cowboy jamboree would cause Nevada to lose jobs.

Sure it will…

The reality of the day is: our government sucks because the people in charge of our government suck.

The last thirty plus years have been dominated by this intense game, where all the players do their best to win at any cost. And the heart of this game is rooted in the false choice. That’s how you end up with the kinds of people we have, really. Because elections get phrased by the fanatics as a life altering decision between two fairly unglamorous ends.

But somewhere along the way, these same people who have dominated the process forgot something very important. Political power is shallow. It lasts only as long as other forms of legitimate power are undercutting it.

And most of these imbeciles, while more than capable of winning an election, are utterly incompetent when it comes to anything more substantive. They don’t have the discipline to manage resources, and they elect to increase those available resources well beyond the means of any other more sensible individual to handle either. You could have the best of industry in our government, and I doubt they would be able to correct it any time soon. It simply is too big, that anyone who tried would be worn thin.

So we find ourselves here. It’s time to thin this thing up and simplify it. And the first step is about to happen.

As Democrats and Republicans try desperately to paint each other as the source of the shutdown, they both seem to be missing a subtle concept here.

This isn’t the 90’s.

The last time government shut down, people couldn’t see the reasoning for why. We weren’t in a recession, and worrying about spending, to the average, myopic citizen, was not something to be comprehended. The idea that missteps during good times eventually lead to bad times is not something people like to acknowledge.

So you have two political groups right now fighting based on conditions that haven’t existed in 15 years.

Maybe next they’ll try to win the Cold War, or invade Vietnam?

Republicans are very much aware that they’ll be blamed for this. But blame and recognition are not very distinguishable things. If they were smart, and flexible, they’d jump up and start claiming that they’re responsible for the shutdown. That they are the carriers of the country, and are determined to get things back under control. Thanks to suffering, the will power is there, with the citizenry.

Instead, both groups look like blundering idiots.

But appearances are no longer going to be shaping the issue. Politics are increasingly less relevant, as cold, unforgiving boundaries are becoming more apparent.

For the first time, we have some of the largest players, like Bill Gross, questioning the logic of investing in treasuries. Image more like him appearing. Such a change could redirect the flow of capital in this country.

We should soon be coming to the point where all decisions of the U.S. government are undermined immediately. They announce a new spending program, and money circulates in front of them to drive up costs before they can even get it off the ground. Where people vacate traditional savings methods to embrace (increasingly less) fringe tactics. Remember, it wasn’t too long ago that precious metals markets were viewed with skepticism.

However, I don’t believe that means we continue on the path of decreasing dollar value and higher stock market prices.

The truth is that the credibility of governing individuals has been thoroughly shattered. But, with that ruin will likely come new behavior. These same men and women in their quest to stay relevant can be expected to change on the face of a coin. The same malleability that led them to ruining this country can just as easily lead them to saving it.

You see, a stark truth has been revealed over the last years. The lesson should be driven home by now: If in winning power, you lose relevance, you haven’t won anything. The actions public officials have taken to hold offices have simultaneously destroyed them.

And so we get to the critical inflection point.

Imagine, just ten years ago, John Boehner running around as a fiscal conservative. The man spent more money during the Republican controlled era of the early 2000’s than I care to recall. Yet here he is, fleeing his own legacy. The same can be said about much of the rest of them.

What will the men and women in control of government do in the face of its demise? What might they accomplish in panic?

I do know from studying systems that unstable solutions in networks very rarely exist in nature. Obviously, any change causes them to disappear. Most systems we witness are relatively stable, or non-linear. So I have no reason to expect that this event will mark the end.

Our government, our currency, and our way of life isn’t just going to be continuously destroyed for eternity. Not without new, younger networks springing forth from our current system first.

And so I am watching with baited breath. Could this coming calm be the first step in changing winds? Personally, I think the U.S. government has said quite enough recently. They’ve become increasingly belligerent this decade. Maybe I’m trapped in the moment, and the 90’s, and 80’s and…maybe they were just as bad.

But whatever happens, I think a little peace and quiet could do us all some good.

The Fed notes that were released reveal agreement that they have no intention of cutting off the Treasury cold turkey in July. In the event that Japan or others can’t show up to the market, the Fed will be more than happy to oblige.

Most of you probably guessed that. Myself, I was secretly hoping they’d show some spine and refuse to just go along with things. Too bad, full steam ahead.

The value of the U.S. dollar will now be decided solely in the halls of Congress. While some of you “democracy” advocates will likely be championing the issue, saying that is the way it should always have been, a word of caution:

Some things are not democratic. Some things don’t care about concensus. And, incidentally, most of these same things are heartless forces of nature that will ravage anyone dumb enough to stand in their path.

In my mind, it seems it would be a far softer issue if the illusion that continuing as we have been is taken completely off the table. Basic principles of conservation dictate that something has to change. We can’t all own the same puzzle piece; only one of us gets to lay it down. It would be nice if the Fed would settle this matter by forcing our Government to play by reality.

Precious metals are absolutely sprinting out here. I don’t doubt the release of the material and divided nature of the Fed has something to do with that.

This is the part of the craft which is most trying. The great strides of time that seem to channel behavior both sluggish within their barriers, as well as profligate in hindsight. The long hours of anticipation. The hunters’ momentary lethargy.

On the one hand, I am human. And as such, I despise waiting. But on the other, I can transcend my earthly disposition, and value the beauty of a lingering hour. If only all hours lingered like these now, then I might live forever in them.

On the one hand, we are continuing upward in small, consistent steps. However, the world is anything but consistency. Real change and innovation comes about in sporadic, wild strides that change the face of the world in days, hours, or even minutes.

Steady doldrums of progress are a myth.

Europe continues to melt down, and while this comes as no surprise to us who observe these things on a regular basis, the real question becomes, has the pricing in of further bailouts and failures of the Old World already been factored in.

And what of the continued crisis of Japan? What if America’s promises start to haunt her streets? And who will stand up to guarantee certainty then, in this uncertain land of ours?

These are all questions which remain to be answered. As we wait, we can only wonder, when?

I spent today looking over some proxy information; AWK and AEC are out of the way, with CLP remaining.

AEC remains notable. Would you care to guess how much AEC lost last year?

The answer is about $8 million.

Would you care to guess how much the company lost thanks to depreciation & amortization?

That answer is about $40 million.

So if tomorrow, suddenly the slaughter in real estate prices were to subside, where would that leave the company, all else being equal?

A $32 million windfall, before amortization is added back in.

And who wants to guess that housing prices are making a significantly greater portion of the loss than anticipated maintenance expenses?

Why as a matter of fact, I do.

Also discussion worthy: AEC’s occupancy rate at year end was higher than it’s been since 2006. And, that’s after expanding operations significantly. Michigan and Ohio markets no longer make up more than half of their business. On a per unit basis, they now make up a little less than half of all business conducted, with great expansion in Southern states.

The other great cash flow consumer to AEC was their interest expenses. Those make up about $40 million more.

AEC’s debt is nothing but fixed interest rates until 2016. There is virtually no danger to the company from increasing interest rates.

The company is small, and are growing fast. They are growing fast with fixed interest. They are growing fast with fixed interest which, subject to occupancy and rent, will enable them to grow out of their current debt.

And you all know my opinion on occupancy rates and rent.

Expect the company to absolutely destroy expectations to the upside, in the relatively near future, as their losses to depreciation taper off and the ratio of losses by interest payments to revenue decreases exponentially.

I am up over 1.5%, as my special collection of multifamily REITs, gaming corporations, water utilities, uranium miners, and grain operations thoroughly abuse the other market participants.

It’s a strong end to a lame week; one in which I found myself not caring to even check my results. Hopefully, that lull in excitement won’t carry over into next week.

Although I am up, I wouldn’t much mind a good bleed out in market participants. If such a blessing were to occur, I would laugh maniacally while watching people flood the streets. I would stand at the 9th floor’s window, my eyes ablaze as I cackle wickedly at the multitudes, caught off guard. Even though my own positions themselves would be getting cut down, I doubt it would deter my mood much.

Our markets have been pushing up for too long; it’s a monotonous trend, and one I don’t want to stick with. Spending the next five or more years pooling cash into slowly increasing collections, waiting for the next big volatility point, isn’t something I’m really ready for.

I want a little more of the good, old fashioned stock-market-lynch-mobs. A few more 10-15% corrections or massive panics…it’s just too boring when volatility drops out. Even when I’m making money, effortlessly from my office chair, I have to ask myself “could this be more interesting?”

Maybe I’ll get my wish when our next bond auction sucks? Or when the Fed announces that they stopped out their programs two months ago, so as not to risk mutiny from the Texas and Southern members? Or, God willing, when the Tea Party Representatives stiff arm the budget negotiations and sends our portly programs careening off the nearest cliff?

But one thing is certain, as I stand rigidly staring out this window of mine; I am not ready for the fun to be over yet.