New Position ALDW

This morning I purchased a full 10% position of ALDW for $18.73 per share. The company is on fire from cheap crude oil and a wide crack spread. Prices for refined products like gasoline have firmed up noticeably in the past month or so, and the company’s 2014 numbers were solid.

I have a full write up on ALDW coming in the next edition of the Income Investment Report (to be released this weekend) and will be releasing the analysis of this company as a freebie to the masses, as a token act of goodwill.

My cash position is down to 30%.

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We had the greatest market of our short dumb lives, and you just couldn’t be happy with that could you? We awoke, for months upon months, every morning to find riches and spoils filling our coffers and bread lining our pockets. My what a terrible situation…(extra sarcasm)

Now we have the market from hell, rising out of bed every morning bracing ourselves, not knowing if we’re to receive a few hundred points up or a beating down. But it doesn’t really matter either way, because these moves are only here to screw with our emotions. At the end of the month, they all average out to a big load of nothing. Sweat and tears and kids crying at their shadows.

I want back my bull market and I want it back now. I’m tired of being on pins and needles every single freaking day, worrying about the financial state of affairs in countries whose names and languages I can barely pronounce quite literally on the other side of the planet. Over half the US didn’t even know these places existed 5 years ago.

The currency markets and interconnectedness of trade is just ridiculous. It was bad enough going to war with these places on a global scale just a century ago. Now a smog laden city with a hand-washing problem in China gets a cough and I get rewarded with a sell-off in Chicago. Greece, inventors of public corruption, exercise their trade and I get a bond selloff in New York. Africa – AFRICA! – sucks and Europe teeters from that…I mean what else would Africa have?

Screw it, let’s erect some trade barriers again. Globalization inevitably boils down to having to trust that illiterate countries are meticulous with paperwork and mafia run countries don’t have theft problems. It’s almost uncanny, really.

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A thought, friends.

We live in a stunning age, one that is part of a larger cycle which seems to wind its way around once every hundred years or so (just after the mistakes of the prior apogee wane from memory).

The problem I am talking about takes many names. In the last cycle, they went by the moniker of public servants seeking out the greater good for humanity. The Zeitgeist incantation of the early twentieth century, if you will. Before that they were the unquestioned rulers of kingdoms, keepers of secret orders, men of the cloth, etcetera. They have taken many forms.

The expert problem has always had its underpinnings in Aristocracy (and I refer to the original ideas of Aristotle in this reference, not particularly the blood worship Hereditary Aristocracy most of us probably associate with 18th century France before the guillotine felled it).

The Hobbesian monarchies throughout our history and several other movements that grew powerful also swirl around, stirred by the thought, but I don’t want to develop those tangential interludes. I’m sure we could spend days talking about the elite thinkers who set out to raise up the world on their on shoulders, only to have it smash them back down.

The real thing to remember about the expert styling is that it always ends in flames. And I say this as someone particularly enamored with the thought of the “superhuman”, endeavoring in my own – probably hopeless – way to become one. The movement always fails. The great men who take all upon themselves “for the sake of others” usually harm those they want to help.

The latest incarnation of the “superhuman leader” is starting to appear. And if we have any appreciation for the deep suffering of our grandfathers and great grandfathers, we will mow it down with the scythe while it remains in its infancy.

I see the new zeitgeist promise staring at me from the usual places these ideas fester; the self empowering “experts of everything” who crowd out debates that should belong to the public; the naïve call by young adults for “empiricism” and “science” to dominate all facets of life, never questioning the limits these approaches might have; the childish gatherings of shameless non-victims on public colleges, ever afflicted by non-crimes, who are trying to empower a supra-legal authority; the condescension towards those of “average” intelligence or even “sub-par” intelligence as being somehow incapable of great things…an incapable class of people who need patriarchy for protection in all ways.

I would be hard pressed to find a better example that more perfectly embodies the shambled spirit of this rebirth than our dear Vox.com. When Vox emerged and I saw who they were and what they were doing, the dread shiver danced on my spine.

I’m not going to dwell on them any longer. More generally, what they represent is the larger movement of taking the personal, the individual, the elemental, away from the local and giving it to the “higher”, the “better” the “greater” for safekeeping. They are the best example because they trip over themselves so often that any third party should be able to see the total irony of expertise plainly.

These ideas rest their laurels on beliefs like “the ordinality of everything”, “anything can be measured”, “there’s always a right answer”, and of course that timeless and terrible mixture of elevating half of what is on a pedestal and assuming you can force everything else to be better. They are very human thoughts, and very wrong.

As a simple thought experiment, just imagine how many problems you encounter in the course of your own day. Small innocuous problems which you fix without even noticing. Consider one or two of your own problems, to yourself now. What are you thinking of? A crack in the drywall, perhaps. A complication with your child’s school. Your lawn or garden. Finances are probably near the top of the list as well.

The problems are tiny, dismissible and almost irrelevant, you have so adjusted to patching them up when you come across them. Perhaps even tedious in a way. How many problems did you think of? Five problems? Ten problems?

Now look at all of humanity and compound that by seven billion. That is the scale of problems and work which humanity gets up, once a day, to face. Seven billion heads of mankind have seventy billion tasks every day which they courageously face off against (with perhaps some mild complaining) – seven billion enduring lives solving more than twenty five trillion questions or puzzles or hurdles every single year, after year after year.

That is the power of humanity.

Take that away from humanity and hand it to the human…even, yes, the superhuman, the elite, genius, greatest among us…who can number by definition no more than a scant few million of us, and you do not get a better result.

You get overwhelmed genius! You get hopelessly lost, hopelessly outmatched, hopelessly…hopeless.

Genius has problems admitting when it doesn’t help to be genius. Elite does not like to think of itself as small. Greatness as averageness is insulting to our ideas about greatness. So every hundred years or so this zeitgeist appears, attempts to wrest all the levers of humanity for itself under the alluring promise of progress and freedom for the weak. And in doing so their strength is put into perspective. The timeless cycle plays out again; arrogance of the few shifts to stubbornness and later outright rejection of truth; humility must be reinstated. But before any of that happens, there is much pain and much sorrow and much hardship. Because total failure is apparently the only argument strong enough to cut through the pipedream. Normal everyday failure just will not do.

Along with it, the elitist candle is snuffed out for a time, waiting to be rekindled by ignorance.

As we continue to watch the fashions of our time unfold, with ever expending and ever growing fields of “experts of everything” – the great men, our salvation – interjecting themselves into every facet of our day to day lives, I bequeath you to remember:

William Golding’s classic was not a book about lords in so much as it was a book about flies.

As you go about your days you will invariably come to the Earthly questions. “Who am I?” “What do others think of me?” “How will I be remembered?” “How can I help others?” These questions are notable in that they are invariably tainted from the start.

None of them matters to the wise man, who understands foremost and intricately that he cannot even help himself. The path of humility is the path that errs on the side of caution, preferring not to harm others, even when it appears at first glance cold and heartless. The wise man knows he will never be remembered anyway, even if his name should somehow be carried on by the rapacious opportunists. His spirit and intent will still be lost along the way.

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Former position ETP just announced ink drying on an $816 million deal to sell retail gasoline assets to Sunoco; the second wave of such sales to Sunoco.

In a sense it seems like ETP is doubling down on their plans to serve as midstream logistics (notably to the Bakkens), oil prices be damned.

I really am very intrigued by certain key plays in the oil sector. I know they are a charred grounds right now, but that is historically where I make most my money anyway. I just happened to have had the bad fortune of being at ground zero when the sky lit up this time around. It happens, unfortunately.

There will be a few more energy sector ideas in the new issue of the IIR. I found one very tantalizing play which is completely shrugging off the US oil meltdown.

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I have been busy working to finalize the next issue of the Income Investment Report. I will have you know that each issue is lovingly, painstakingly put together via a combination of analytics I have provided (the data engine of which is The PPT), which are then intensively vetted through an on the ground process.

With most financial newsletters (you know who you are), you get a computer algorithm – which an intern has kindly half-glanced at – telling you “XYZ stock saw earnings growth of #REF!% in 2014!”. This kind of offish offering is an embarrassment and I would never allow it.

Rather each issue is combed over by myself to ensure it passes muster.

You cannot reasonably expect an analytical approach on its own to produce winners all day long. The number of charlatans and hustlers outstanding dwarf the good…never forget that.

Accordingly, the number of false positives in any statistical work you undergo must be present. If you use a fair process to look for deals in a sea of liars and get only quality on the other side, you are being taken for a fool.

It is the job of the investor to carefully vet out the garbage. That is the second value we provide with this report. Make no mistake that we read hours worth of financial reports to make this happen, hunting for red flags and evidence that the metrics are misleading.

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Welcome, friends! For the 2015 DAY OF PATIENCING UPON US (blessings and praise) is, well…upon us!

In all of its infinite glory, the markets have ordained that, on this day, we should all be held hostage to the English predilections of a 68 year old woman.

Now! Wait with fearful deference to the Fed statement yet to be transcribed at the hands of careless twenty year old interns! And pray they do not forget to add the word “patience”. Twice for good measure.

On this remarkable day it is well worth it to go over the rules, which are completely capricious and still being made up at the moment. But here is a short breakdown:

1) IF Yellen says she is “patient”, then the market shall rejoice for no particular reason.
2) IF Yellen implies that she is, in fact, not patient, then the market shall despair for no particular reason.

So how does one know if Yellen is patient or not? Admittedly, it would be great if she just came out and say “Hey all, I’m taking a break from knitting, tending to my bonsai trees, and listening to a close, dear friend talking about her grandchildren to let each and every one of you know – I am super patient.”

That would be a most wonderful day and could very well touch off panacea.

Now, where it could get dicey is if Yellen says she is patient without just saying she is patient. Since these particular letters p-a-t-i-e-n-t seem to mean such a great deal, in that particular order, well then it could be quite a fit if she doesn’t use them.

In such an outcome, I suspect the best and brightest thirty year old micro managers would force their twenty year old trading slaves to lay down and cover their ears while they crosschecked the nearest thesaurus for clues.

To save you the trouble, I am providing you here a convenient list of synonyms for patience so that you can get ahead of the game, because that is the type of unparalleled service we provide around here.

Calm, forgiving, gentle, quiet, tolerant, long-suffering, understanding, accommodating, composed, easy-going, enduring, even-tempered, forbearing, imperturbable, indulgent, lenient, meek, mild, mild-tempered, persevering, persistent, philosophic, philosophical, resigned, self-possessed, serene, stoical, submissive, tranquil, uncomplaining, unruffled, untiring

But naturally this whole exercise is somewhat without purpose, as America’s most brilliant economists and laymen have already determined that interest rates shall be raised. Here is a direct quote from a recent publication:

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School.

Oh, no excuse me for my confusion. That was not from this year, it was actually from 2010.

Here’s the real quote.

Last week, Narayana Kocherlakota, the governor of the Minneapolis Federal Reserve, predicted… the Federal Reserve could raise interest rates.

Wait, sorry…sorry…I lied. That was actually a murmur from 2011.

Alright here is the real quote. For real.

We could still see the euro weaken against the dollar from here, which would still result in lower commodity prices.

What has really changed is the prospect for another plunge. It is most unlikely, with the various central banks of the world looking to shore up Europe, that we go back to an across the board sell off. That does not mean we go higher. It just means we don’t go to $0.

It also means that safe haven plays are at extreme risk. If Europe is not going to disintegrate before our eyes, then why hold half your net worth in gold.

Or treasuries…

…

…okay, I lied again. This time that was me in 2011 betting on higher treasury rates. I cannot recall if I ever made a specific bet on when the Fed exactly would raise interest rates, precisely. I wouldn’t doubt it though. But let’s agree that betting against treasuries in 2011 was just as wrong, shall we?

Here’s a Reuters article in 2012 betting the rate hike would be before late 2014. A cadre of economists actually thought the Fed would just pull the trigger right then and there.

(Reuters) – There is a good chance the Federal Reserve will raise interest rates before the end of 2014, according to a Reuters poll which also showed a significant minority of economists still expect a further easing of monetary policy in coming months.

The poll saw a 50-50 chance the U.S. central bank will break the pledge it made last month to keep benchmark overnight borrowing costs at near-zero for the next two years.

Here’s Fed chair Bullard in 2012 suggesting it would come in 2013.

March 23 (Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard said U.S. monetary policy may be at a turning point and the Fed’s first interest-rate increase since the global financial crisis could come as soon as late 2013.

With policy currently “on pause, it may be a good time to take stock of whether we may be at a turning point,” Bullard said in a speech in Hong Kong today. “As the U.S. economy continues to rebound and repair,” further action “may create an overcommitment to ultra-easy monetary policy.”

Here is LaVorgna, chief U.S. economist at Deutsche Bank, hanging out at with our good pals at CNBC in 2013, ignoring everything the Fed said completely and still suggesting the rate hike would be imminent.

History, in fact, suggests that when the claims number averages below 350,000, you can safely bet a Fed interest rate hike will come within the year, according to research from Joe LaVorgna, chief U.S. economist at Deutsche Bank.

In the current Fed forecasts, rate hikes wouldn’t come until mid-2015, when it expects a rate of 5.8 percent to 6.2 percent.

But rate hikes came when claims averaged 350,000 in 1958, 331,000 in 1961, 345,000 in 1984 and 344,000 in 1987.

“If past is prologue, whereby low and declining claims accurately foreshadow a noticeable pickup in hiring—and hence a sharp decline in the unemployment rate—then monetary policymakers will not be waiting until 2015 before raising the fed funds rate,” LaVorgna said.

Which brings us to 2014, just three months ago, when we started this comical jig, waiting on an old woman to assure us she is still, in fact, patient.

For reference, see Bloomberg.

So let’s have a moment of contrite honesty together. You…me…all of us have been absolutely terrible at guessing when the Fed will raise interest rates. Even the Fed themselves have been terrible about guessing when they will raise interest rates.

The dance above us that you see, prancing over five years, is a display of failure. It is time to admit that candidly amongst one another.

This economics game we play – the underpinning of everything in investing – is not a science. It is an art form, rather; one which is prone to fits and everyone gets to be wrong quite a lot.

So why, dear reader, should I believe that now – with such rampant destruction in forex markets and the US dollar almost audibly sucking air out of the room – is the time to raise interest rates?

Why would you be right this time?

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