“Get Long, Get Loud”

“Haven’t blogged in a while. So I decided to look back and pull out one of my first blog posts, from 2004.  An oldie, but goodie !

The Number I recommend that anyone with an interest in the market jump at the chance to buy it.

In 1990, I sold my company, MicroSolutions which specialized in what at the time was the relatively new business of helping companies network their computer equipment to CompuServe. After taxes, I walked away with about $2 million. That was going to be my nest egg, and my goal was to protect it at all costs, and grow it wisely.

I set about interviewing stockbrokers and settled upon a broker from Goldman Sachs, Raleigh Ralls. Raleigh was in his late 20s, and relatively new to Goldman. But we hit it off very well and I trusted him. As we planned my financial future, I made it clear that I wanted my nest egg to be invested not like I was 30 years old, but as if I were 60 years old. I was a widows and orphans investor.

Over the next year I stuck to my plan. I trusted Raleigh, and he put me in bonds, dividend-paying utilities and blue chips, just as I asked.

During that year, Raleigh began asking me a lot of questions about technology. Because of my experience at MicroSolutions, I knew the products and companies that were hot. Synoptics, Wellfleet, NetWorth, Lotus, Novell and others. I knew which had products that worked, didn’t work, were selling or not. How these companies were marketed, and whether or not they were or would be successful.

I couldn’t believe that I would have an advantage in the market. After all, I had read A Random Walk Down Wall Street in college. I truly thought that the markets were efficient, that any available knowledge about a company was already reflected in its stock price. Yet I saw Raleigh using the information I gave him to make money for
his clients. He finally broke me down to start using this information to my advantage to make some money in the market. Finally after more than a year, I relented. I was ready to trade.

Notice I didn’t use the word invest. I wasn’t an investor. I just wanted to make money. The reason I was ready to try was that it was patently obvious that the market wasn’t efficient. Someone like me with industry knowledge had an advantage. My knowledge could be used profitably. As we got ready to start, I asked Raleigh if he had any words of wisdom that I should remember. His response was simple. “Get Long, Get Loud”.

Get Long, Get Loud. As we started buying and selling technology stocks, most of which were in the local area networking field that I had specialized in at MicroSolutions, Raleigh put me on the phone with analysts, money managers, individual investors, reporters, anyone with money or influence who wanted to talk technology and stocks.

We talked about token ring topologies that didn’t work on 10BaseT. We talked about what companies were stuffing channels – selling more equipment to their distributors than the distributors really needed to meet the retail demand. We talked about who was winning, and who was losing. We talked about things that really amounted to the things you would hear if you attended any industry trade show panel. Yet after hanging up the phone with these people, I would watch stocks move up and down. Of course as the stocks moved, the number of people wanting to talk to me grew.

I remember buying stock in a Canadian company called Gandalf Technologies in the early 90s. Gandalf made Ethernet bridges that allowed businesses and homes to connect to the Internet and each other via high-speed digital phone lines called ISDN.

I had bought one for my house and liked the product, and I’d talked to other people who’d used it. They had decent results, nothing spectacular, but good enough. I had no idea Gandalf was even a public company until a friend of Raleigh’s asked me about it. What did I think about Gandalf Technologies? It was trading at the time at about a buck a share. It was a decent company, I said. It had competition, but the market was new and they had as much chance as anyone to succeed. Sure, I’ll buy some, and I would be happy to answer any questions about the technology. The market size, the competition, the growth rates. Whatever I knew, I would tell.

I bought the stock, I answered the questions, and I watched Gandalf climb from a dollar to about $20 a share over the next months.

At a dollar, I could make an argument that Gandalf could be attractive. Its market was growing, and compared to the competition, it was reasonably valued on a price-sales or price-earnings basis. But at $20, the company’s market value was close to $1 billion – which in those days was real money. The situation was crazy. People were buying the stock because other people were buying the stock.

To add to the volume, a mid-sized investment bank that specialized in technology companies came out with a buy rating on Gandalf. They reiterated all the marketing mishmash that was fun to talk about when the stock was a dollar. The ISDN market was exploding. The product was good. Gandalf was adding distributors. If they only maintained X percentage of the market, they would grow to some big number. Their competitors were trading at huge market caps, so this company looks cheap. Et cetera, et cetera……”

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“The U.S. December budget deficit was just $260 million. This is according to the latest Monthly Treasury Statement from the Financial Management Service.

Economists were forecasting a deficit of closer to $1 billion.

The December deficit was also the lowest December number since 2007, reports Bloomberg.

It’s worth noting that monthly numbers are noisy, and that seasonal factors tend to be considerable in December.

Regardless, this is an encouraging sign.

Receipts were $269.5 billion while the spending was $269.7 billion.  This is important to remember, because budget deficits and surpluses aren’t just about spending levels.  Indeed, growth plays just as important a role.

As GDP grows, the deficit shrinks.  To better understand this, read this and this.

Here’s a look at some historical numbers….”

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Judge Davis’’s action on January 4th was firm, in our opinion, establishing a tight framework for AAPL to provide additional financial/shipment data –– we viewed his action favorably as it implies he may be in a position to record an Entry of Judgment (final ruling) within a period of weeks, not months (likely triggering the appeals process). The specifics re the submission of materials (dates) eliminates the risk of lengthy legal tactics used to ““buy time””, and more importantly Judge Davis continues to remain deliberate and steadfast –– his consistent actions imply his language/opinions (embedded within the final ruling) may be stern but measured. We anticipate a final ruling to be recorded shortly after all data/motions (VirnetX) are filed, providing a greater degree of clarity for investors. In our view, all parties involved understand that it would be very beneficial for both Apple and VirnetX to resolve the situation, as a formal relationship/partnership is in the best economic interests of both parties for the long-term.

Construction – Judge Davis has a Degree of Latitude

The recording will address all post-trial motions/issues –– however, Judge Davis is afforded a degree of latitude allowing him to be ““creative”” so that he may ““inject”””” his own opinions/guidelines. Considering his knowledge of the situation, length of time involved, and prior actions/opinions, we believe his tone will remain consistent once again – his final ruling will likely be very firm but calculated.

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“Lawmakers in Washington can at least take solace in the fact that they’re more popular than meth labs and gonorrhea.

But the fact is Congress’ popularity among voters continues to reach new lows, not just in terms of statistics but also when compared to unsavory aspects of life.

Public Policy Polling asked more than 800 respondents whom they liked more or less, and in many of the matchups, Congress lost.

Lawmakers were less popular than root canals (32% to 56%), lice (19% to 67%), colonoscopies (31% to 58%), cockroaches (43% to 45%), traffic jams (34% to 56%) and used-car salesmen (32% to 57%)….”

Read more of who congress lost out too

“As a state senator in Illinois, President Obama opposed legislation providing an exception to handgun restrictions if the weapon was used in the defense of one’s home.

Obama’s vote would have maintained the status quo, which made it a violation of municipal gun ban law to use a firearm to save your own life in your own home. But the bill was passed anyway without his support.

The vote is a sign of how committed Obama may be to strict gun control measures.

The Illinois vote is hardly ancient history, having occurred in 2004 as Obama was running for election to the U.S. Senate. In opposing the measure, Obama lined up well to the left of the mainstream, as the Illinois Senate included 32 Democrats to 26 Republicans but approved the bill by an overwhelming margin and subsequently overrode a veto by then-Gov. Rod Blagojevich….”

“Ireland took over the presidency of the European Union on January 2013 for six months. Prime Minister Enda Kenny is thus in a unique position to try to find a solution to the banking crisis that has bedeviled Ireland since 2008. However, the job at hand is not going to be an easy one as reported by Christoph Pauley of Spiegel Online on the 7th. January:

“Ireland’s reform policies have been widely praised for helping it emerge from the crisis, but the truth is bleaker. If the government fails to get European taxpayers to assume some of the risk of its ailing banking sector, the country could soon require another bailout….”

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Get your private placements ready should the ‘preppers’ buy into this….

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“The 2012 to 2013 Flu Season is in full force and it looks stronger than we have seen in years. If you look at the Google map of the Flu season the outbreak map of the lower-48 states shows that “High” is for only 7 states and “Intense” is used for the other 43. That is bad news for you, your families, and for me. Flu season deaths are classified as being at epidemic levels right now. It is hard to take the financial angle of many tragedies, but the current flu season is likely to act as a boost for cemetery owners, funeral homes, and those supplying the death care industry…”

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“The trend in rail traffic has moderated substantially in the last few months as the 12 week moving average in intermodal traffic hit its lowest reading since 2011.  The current moving average of 1.34% is consistent with an extremely sluggish economy and one that has come well off the early boom period of the beginning of the recovery when rail traffic was consistently experiencing 10%+ year over year readings.

AAR has more details on this week’s data…”

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“Small investors are getting very bullish on the equity market again.  The latest reading from AAII showed the highest level of small investor sentiment since December which was the highest sentiment reading since early 2012.  As you can see in the chart below, this puts us above the “extreme bullishness” range that has typically been consistent with a risk equity market environment.

AAII has more details here…”

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$FB is up 75%+ since its recent lows…

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“(MoneyWatch) JPMorgan Chase (JPM) is likely to face a major regulatory actionconnected with firm’s anti-money laundering and compliance programs. The banks two main regulators, the Office of the Comptroller and the Currency (OCC) and the Federal Reserve, are expected to announce the action as early as today, according to Reuters, which would likely be in the form of a cease and desist order. A cease and desist order is the harshest form of enforcement action that the OCC can issue. While the bank is not expected to pay a monetary penalty, the order could potentially limit the bank’s business activities and strategic opportunities. Additionally, the bank will be required to enhance its monitoring and risk surveillance systems and procedures.

JPM CEO Jamie Dimon can’t blame this on a “flawed, complex, poorly reviewed, poorly executed and poorly monitored” strategy, like he did when the bank lost $6.2 billion on the so-called “London Whale” trade, which was disclosed in May of last year. At that time, the lapse was described as an uncharacteristic black eye for its charismatic CEO.

In many ways, the current potential regulatory action is worse than any trading loss, because it indicates a systemic lapse in controls. Regulators, who heightened scrutiny in this area months ago, appear to have found a company-wide lapse in procedures and oversight connected to anti-money-laundering (AML) surveillance and risk management. AML controls are intended to deter and detect the misuse of legitimate financial channels for the funding of money laundering, terrorist financing and other criminal acts.

The JPM sanction would be the fourth major AML action in the past 12 months….”

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“An incredible and a rare site in the Holy Land: The biggest snowstorm in decades covered Jerusalem with a blanket of white Thursday, paralyzing the city, but thrilling residents.

Looking out at the hills around the ancient city is more like looking at Colorado or Switzerland than the arid Middle East. Cars, pine trees and palm trees are all covered with snow.

The city was completely shut down, schools closed, businesses closed. Snow is so rare in Jerusalem that it essentially brings an unscheduled national holiday…”

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“Despite the supposed end of the PC, I’ve been noticing some very interesting behavior in the semiconductor space, as its performance echoes the late-2010 period of strength in risk assets.

Semis are generally perceived to be an aggressive way to play equities because of their more cyclical nature within the technology space, and their outperformance provides some insight into the nature of risk-sentiment, as well as the potential duration of strength.

Markets love symmetry, and to that end, the relative behavior of the industry now is important to watch. Take a look below at the price ratio of the Market Vectors Semiconductor ETF SMH -0.12%  relative to the S&P 500SPY -0.15% . As a reminder, a rising price ratio means the numerator/SMH is outperforming (up more/down less) the denominator/SPY. For a larger chart, visithttps://twitter.com/pensionpartners/status/289704766269956096/photo/1 .

Leadership off of the mid-October low has been fairly powerful as semis began leading, and the trend higher appears very much to be intact…”

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“SYDNEY (MarketWatch) — Ford Motor Co. F +1.05% said Friday that it’s planning to hire 2,200 salaried workers in the U.S. this year to support the introduction of new products. The job additions announced Friday were the company’s largest increase in new salaried workers in more than a decade, it said. Ford is now more than halfway to reaching its target of creating 12,000 hourly U.S. jobs by 2015, it said.”

“Although it might not pass as willful financial manipulation, hedge fund actions are influencing gold prices, according to Mike Swanson, founder and chief editor of WallStreetWindow, an online community of independent investors and analysts.

The price gold is being suppressed as poor-performing hedge fund — and there are many of them — are forced to meet investor redemptions, he says

But gold will rise again when those redemptions end in a week, predicts Swanson, himself a former hedge manager….”

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“The government reports that consumer prices rose 1.8 percent in the year through November. But don’t believe that hype, says Peter Schiff, CEO of Euro Pacific Capital.

“The CPI [consumer price index] isn’t an accurate measure of inflation,” he tells Yahoo.

“It’s sheer propaganda. Prices are rising at a much more rapid rate than the CPI would suggest.”

He offered the example of the prices of newspapers and magazines. The government says their prices have risen 35 percent over the last 12 years. But looking at cover prices, Schiff and his colleagues found that prices rose 135 percent.

“How can you believe the statistics when the numbers are so flawed?” Schiff says. To be sure, it’s possible that the newspapers and magazines lifted their subscription prices far less than their newsstand prices.

“I don’t care what the government is telling me. If the government weatherman tells me it’s a sunny day and I can see it’s pouring rain, I’m not going to believe the government, I’m going to go outside with an umbrella.”

As for the true level of inflation, “If it’s not 10 or 11 percent, it’s certainly 7, 8 or 9 percent,” Schiff says. “It’s going to get a lot higher. If we keep printing money, … we’re going to have a huge inflation problem.”

Plenty of economists disagree with Schiff….”

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