Unterminated Media Loops

Ya know? I think like a programmer. I've tried to fight it. Tried to deny the fact that I am interested in how life imiates the way programmers give instructions to processing engines. It is almost as if we are all executing really long instruction sets, endlessly repeating various events and experiences in ever so different ways. These instruction sets are so long that we can't remember where the instruction set began so the events and experiences seem new to us. But they're not.

Think that is a load of hooey?

Consider this theory.......the media is run by people. Just normal people like you and I (even though they seem to think they are something more than that). These normal people are also running thier instruction sets, however once these instruction sets combine, they mutate into an Unterminated Media Loop.

For those non-programmers out there, an Unterminated Loop is a set of instructions that keep repeating over and over and over until all of the system resources are consumed and the server crashes.

An Unterminated Media Loop is the bias that sets up when a certain group of discreet loops join. Now, before you think this is a blog entry on Media Bias...stop. Im not talking about that. Im talking about repretition. For example.....

Has anyone wondered why at the end of every 8 year presidential term (Democrat or Republican) the press is reporting on "A White House Mired in Scandal". I mean, it really wasnt long ago that the Clinton Administration was "mired in scandal". George Bush 1 got a pass...he only got one term. If you re-call, even the venerable Ronald Reagan had his "mired in scandal" couple of months from the Unterminated Media Loop. Im still waiting for the story on how every 8 year term becomes "mired in scandal". If you asked me? I think the media just get bored.....and engineer the whole thing because their loop is getting to repetitious to sell. They need new blood. A new loop.

Global Warming? Can't we just kill that process and bring back the Avian Flu loop?......It does less damage to the economy.
Alberto Gonzales should step down? How about we just do while Sandy Berger shreds documents?

Unterminated Loops....processes in search of a cycle....in this case a news cycle...but you get my drift....

Capitalism - An Ideal for Living

Many people want to write the eulogy of Capitalism these days. They beg us to create a long view and see that the ideological underpinnings of Capitalism are devoid of substance and emotionally unfulfilling. They tell us it can only lead to destrcution and ruin due to its vapid twists and emotionless turns.

They want future authors to write the follwoing eulogy in the RSS feeds of the future:

"They blindly followed an Ideological path that was deeply rooted in the consuption of goods and services; ultimately consumption became the sole "lubricant" for political and soical discourse, and the society crumbled.".

But I think they are just victims of a bad upbringing. An "Un-Capitlaist" upbringing. The Socialist movements of the 1920s and 1930s injected a remorse into this country. An obtuse social meme that created disgust at the idea of consuption for the sake of ideology. Some embraced this philisophy and others rejected it. That is the beauty of America. I think having the two co-exist is like mixing oil and water. There is no logical way one can compliment the other.

Fast forward to today. 2006 in America.

Many still feel as though "consumption" is a bad thing. They bemoan the "commercialism of Christmas". They lament the directionless "brand identities" that promise a euphoric experience, only to leave us hollow with an incredible lack of substance. I say this is the wrong way to accept Capitalism as an ideal for living. In order to fully appreciate the fredoms that Capitalism brings us as an ideology, Capitalism must be embraced as a balance of consumption and hard work.

Without the "hard work" part. Capitalism is vapid and devoid of substance. However if you throw the "hard work" part back in, consumption becomes the reward for achieving a goal. It is the exact format the human spirit needs to exist and fourish. Capitalism, in this way is the only true ideology uniquely suited to the human condition. All other ideologies pale in comparison to the strength of harnessing the human condition.

Fact is, Chrstmas really IS commercial. If it were not for the period of time between the day after Thanksgiving to the first of the year, I can think of at least 5 major business sectors that would not exist. The truth is (Virginia), Christmas is a Capitalist holiday. A virtual orgy of consumption and spending that lets the governing influences of capitalism know how to plan for the next year of spending and consumption. Thats a fact. Ask anyone in the financial services sector how that works.

So why can't we just relax and enjoy it? Why can't we just accept the idea that we vote with our wallets every day of the year? We live in a society that is the ultimate expression of he human condition. Our free spending and conspicuous ways are a monument to the true condition of human discourse and social growth. Like everything else "human" we want to deny it and hide it, but when you look around. When you really survey what we have created in America, the operative word is always "we". We are responsible for all this. We made it. We need to realize this and live with it productively or the Eulogy I wrote above will get written, and it will be true.

Is an Opportunity what you make it?

I've been coming up with an interesting conundrum while looking for my next gig. As I look at all the various startups out there that I would like to get involved with, many of them are run by smart, focused people who are destined to succeed. At fist blush, it seems like a very high percentage of them will achieve their goals. Scratch the surface, and you elminate some of them, but you always wind up with more than one. Which leads me to the problem at hand, "What is the determining factor in successful deals."

As an entrepreneur, I always want to create businesses from the ground up. The most profitable business is one that is based in a unique and compelling value proposition to a large enough client base. This always means starting up from zero. However, the theme I am pursuing as an overarching goal is "streamlining". I've always thought that if I didn't find a compelling deal while looking at things with partners, that I would eventually try my idea of "Streamlining an existing, wrote, service business using technology and advanced people management processes.". This means I would need to buy an existing, wrote, service business. Which is altogether more difficult.

There are so many and so many variations on the same theme that they all seem to get lost in the din. Car Washes, Building Management Companies, Dry Cleaners, Auto Repair, et al all exist at voluminous levels. But once again we have to answer the question....."What is the determining factor in successful deals.' and now, how do you do that in a market full of service businesses that all seem to be the same?

More as I learn it........

It is getting hard not to get discouraged

Today is day 10 of my due diligence effort on the state of call centers in the US, and it is getting very difficult to stay hopeful. I've spoken to entrepreneurs, politicians, lawyers, bankers, call center managers, and call center reps. Something that "jumps right off the page at you" is the complete lack of faith senior leaders have in the core workforce. When comparing India service workers with American services workers, the general consensus is that we (Americans) are under-educated, un-focused, and generally do not have the drive to succeed.

As an entrepreneur, I find it hard not to get outraged at something like this. It makes me want to change things, it makes me want to prove them wrong. However when you peel back the skin on that onion, they are consistently correct in the assumption. Why is this happening? Why is poker a career aspiration in the US? Entitlements. Government, state and local entitlements have truly formed a safety net in America, and many of my fellow countrymen have decided to take advantage of it.

We need less safety nets and more free markets. It seems that while we have been gleefully practicing the art and science of capitalism, we have simultaneously been undermining our workforce by getting them hooked on a socialist entitlement system. For the life of me I can not understand how this benefits us in the future. Look at the inner cities. The ONLY thing that works is free markets. Unfortunately, the largest free market in the inner city is drugs! Imagine what the person who organizes the intricate systems of runners, dealers, and enforcers that the drug trade plys could do if he/she were building a chain of auto supply stores. It surely isn't profit motive that should stop them. Running a multi-store chain is exceptionally profitable; much more profitable than the drug trade if you apply the risk premium of dying or going to jail!!!

It is this fundamental shift in perception that has to change. I advance that it is merely getting that drug dealer to realize the legitimate end to his/her organizational skills!!!

You can't legislate a living wage, you have to EARN it.

As I examine all the ways that US business could compete with Offshore BPO outsourcing, the one thing that keeps coming up is that American companies can't beat the pricing that Offshore providers can offer. Salaries of 20,000.00 per year are commonplace in nations that support offshoring. This makes stateside, labor for labor comparisons almost pointless. Clearly US business and Offshore outsourcers of business processes are taking advantage of the disparity between standards of living between two nations.

I think that right now, you are probably going.....duh..... However lets examine this trend. If you consider that there is a finite amount of wealth in the world, and that assets shift according to where free markets roam. The US is on the incorrect side of an ever-increasing curve. As countries that support Offshore outsourcing gain in terms of labor, wealth and market share, the opposite relationship must occur on the other side of the curve. This means that the US must prepare for deflation of wages in order to balance out the gap between nations.

So, when I see things like this It proves to me that politicians are not governing for our future. They are merely satiating the panicked crowd. The reality is that you can't legislate what the free market is creating. You can't just swipe a pen and balance the massive gap between the standard of living in India and the standard of living in the US. As long as the ability to exploit these two differences using the revolution of technology communications exists, it will continue to erode the ability for wages in the US to evolve. Forcing stores to support a living wage without chaining the economic landscape just means......Less jobs. As companies close stores in areas that require a living wage either through bankruptcy or intelligence.

Americans should fight offshore outsourcing

.....and I don't mean by endlessly complaining about politicians or crooked business people.

Why don't we COMPETE? We complain that we are losing thousands of middle and high tier service jobs to offshore concerns and I don't hear anyone tying to fight it! Why? Some say it is because we can NEVER compete with the wages people are willing to work for globally. But that just says that Americans are OVERPRICED! We say that about ourselves when we decide NOT to compete.

The answer is the combination of better, more innovative technology driving call center and BPO organizations combined with the active revitalization of inner city and low income areas. The truth is we can not count on the government to revitalize inner cities and low income areas. It is always the free market. Right now I see the same situation plaguing American inner cities and low income areas that was plaguing towns in India that were mired in the caste system.

It is five years later, and they are transforming while we are arguably getting worse. But that is when the Free Market comes in. There will be a point where offshore economies will begin to expand and their citizens will enjoy an ever increasing standard of living. Which is when the balance of opportunity will shift back American ideas and technology. The time to fight back is coming......I for one am going to be ready.

How to deal with a Venture Partner

Maybe it is just the type of blogs I read, but for some reason, everyone wants to tell you how to deal with a Venture Capitalist. I see things like "The Top Ten Things when talking to VC." or other "lists" that seems to suggeest that someone actually knows how to manipulate a VC into liking your idea. I have to say it seems much more organic than that.

I've seen people get funded, and I've seen a lot more NOT get funded. The ones that actually DO move through the maze far enough to GET funded seem to be getting there not on some swift sales pitch, and not even on a good cash flow model. They just "click" with the overall tone and tenure of the firm doing the funding. It seems almost magical.

So, I would say, if you have to read "lists" to get funded. Your idea needs more work and isn't immediately compelling.

Back and Blogging....Looking for the next Gig.

Nice to be back Blogging.

I took a bit of a vacation from blogging as I built my latest company, ReadyTechs (http://www.readytechs.com/). I've recently completed a transaction with my business partner to take control of ReadyTechs so now I am back at the grindstone looking for the next deal. Which, I currently think, is Call Centers.....or more specifically, Digital Contact Centers. A call center format using all forms of digital communications (VOIP, IM, Email, Web) to provide a higher level of contact to users.

If you are a call center owner or operator, please Email me. ethigent is interested in purchasing a tradtional call center to transform into a digital contact center, or partnering with an existing one to develop the technology needed to drive this.

REALLY Vote with your remote....

I think that we should attempt to skew the way news is relayed to us, the information consuming public. The news networks keep saying that the reason they report what they report, when they report it is that they are in tune with what people want to watch.

Witness the latest news du jour.....the Libby/Rove indictments.

By every indicator I have, no one really knows or cares about this issue. I have not yet met anyone who can articulate the situation (outside of partisan "spin-based" sound bites) properly or accurately. I say this since not even the most unbiased of news organization can give "one" unified explaination of the issue (skewing either left or right).

Empty Meme = (adj.) An issue designed to carry the message of a partisan argument disguised as a relevant issue.

I don't know about you, but I find this insulting. Given the above, we can only conclude that this issue is what I would call an "Empty Meme". An issue designed to carry the message of a partisan argument. I mean, since when do we have the news networks telling us that someone "couple possibly be indicted in a few days?". No one seems to want to tell us about all the child molesters that "could possibly be indicted in the next few days!". In this case, the Dems use it to say that "The whole Iraqi war is a farce", the Repulicans use it to show case partisan spin and lack of control of the big picture. The networks seem to be the only people who care about this issue, and unfortunately that says a lot more about their partisan slants as news organizations than it does about their will to publish facutal reporting.

So I say that we really do "Vote with our Remotes". Every time you see an "Empty Meme" being reported on, like the Libby/Rove indictments, change the channel. While I do not think that the ratings are granular enough to see shifts in behavior based on news segments, the volatility between networks would be enough to make a case. If enough people did this, we could actually shape the way stories are reported to us. Imagine if news directors had to consider the "Empty Meme" dilemma and were forced to report facts based on thier own form of measurment.....ratings.

Remember! "If its an empty meme, change the screen!"

The Importance of Being Earnest....or.....Not Letting Things Hit You Over The Head

It is coming. You can hear it. You can see it. You can even taste it in some instances. All you know is it is going to hit you hard when it gets here. It really dosn't matter what "it" is. It just matters that you see "it" before "it" hits you. "It" could be a baseball, a margin call, or a disgruntled employee. The only thing that matters is that you see "it".

Something that I see on the horizon of the markets is fear. I really don't think we have fully recovered from the idea that the fear bid is in the market forevermore. If they go down some gully in Pakistan and actually find Osama, that fear trade ain't going anywhere. Why? Because terror is now fully institutionalized.

You see, "it" in this case is fear. We are all fully invested in it. What Im wondering is what does that do to bonds and fixed income? If, indeed, fear is now with us forever, does that mean bonds stay here to, and any movement in this fear laden space is doomed to a trading range forever keeping the ten year under 5%? It certainly seems like it.

This all leads me to the conclusion that fear is a tax we have to level on everything form the GDP to the Fed Funds Rate. A modifier that ensures we dont get ahead of ourselves. It also creates an environment that I dont think any of us have ever had to deal with. An evironment based on the intangible nature of human fear response. The cure to which is only one thing. Politics and the leadership provided by the government. It is only with this that the fear trade disappears. Never before have politics so intertwined with finance.

Oil - The big head fake

"Oil is going to kill our economy."

"We are addicts, and the Saudis are the pushers."

You hear commentators saying this all the time these days. Amazing to me how if you live long enough, you see things repeat themselves endlessly. Doesnt it feel like the 70's gas crunch is right around the corner?

If you read way back in my blog, you see a theme that suggests that the most evident meme in the news cycle is almost always false. It is the head fake of all head fakes. Yes. At this point in the game, the news media seems all too easy to manipulate. This is why one has to go a bit deeper.

There are three things you have ask yourself when you consider Oil.

1. Why doesn't the government raise the tax on Oil to a point where we HAVE to conserve? They force us to do other things, why not something so basic?
2. If we are so desparate for Oil, why do we allow Oil companies to have a choke hold on our import by accepting far too few REFINERIES.
3. Why do the economic models of most alternative fuel types fail miserably. BioDiesel (a full replacement for Diesel fuel) has been around since the 80s and can not be produced for less than 4.50 a gallon!

It all smells of manipulation. Dont forget, we have had a decade of Oil doing nothing so there has been ample time to rig the system up right with hedges, non-compete deals, and inventory grabs. Yes. Manipulation.

Now, please do think me one of these conspiracy theorists, nor to I think this is a way to simply bilk the American wallet. I feel like in free markets, a certain amount of manipulation is appropriate. However once you start manipulating at the level where national economies are affected, the story has to change. Yes. Oil has always been about power, and in times of contention becomes the central player (Vietnam). So here we are, another thing you can tie back to the global war on Terror.

Finish terrorism, and you will finish this Oil hoard.

Back After a Year of Nothing

Back!

After a full year, Ive come back to continue my markets insight in this blog.

I found it immensely helpful to go back to this blog to see where my trading style has led me, and to see if my predictions were correct. I feel quite vindicated on both fronts. My endless rantings about the incorrectness of the media, and the herd mentality of the markets (both needing to be shunned) seemed to pay off well. Please read the blog posts from last year. Yes there are some dog calls in there, but there are also some great picks.....like KMRT....which at this point, many are saying is the next Berkshire Hathaway.

But that was then and this is now. I dont intend to do the morning/afternoon stuff like I used to. Ill be posting at least twice a week with more macro views on the direction of the most liquid markets in the world......the US equity and bond markets. I also intend to write a bit on the venture capital scene and deals that are getting done that interest me.

See ya in the blogosphere!

Gerry

Meme Watch - The Iraqi Effort is Falling Apart

If you watch a broad spectrum of the media news outlets, I really don't know how you can tell WHAT is happening in Iraq. I watch NBC and they have all but written the effort off, acting as if we should be getting out immediately. Then I turn on Fox and actual soldiers are on TV saying that Iraq really isn't that bad. How in the world can you gauge the geopolitical risk?

While listening to a popular radio program the other day, I heard a soldier tell the host that he is 3 times as frightened about Iraq while watching the news media in the US, than he is while he is actually in Iraq. What is that saying? How are we to react to a news media that seems to want to hold us hostage to the lens with which they view the situation?

Is it just politics? Are we merely moving through a political cycle where everything (including the disruption of a nation) is fair game? Would this have worked during World War 2? Could we have fought a World War while obsessing about abuses in one prison camp? How many prison camps were there in World War 2? Do you mean to tell me this is the FIRST time this has happened? I say no. The only thing different is that the media has become ubiquitous. It seems wrong to me.

Not my job to judge here though. My job is to game this. So, as in any game I have to believe that you have to play this AWAY from the major networks. There is clearly a disconnect with their base when they feed this constant slam on the US administration. They forget that Americans always fall back on pride. Telling them that they have nothing to be proud of is a losers game. This will affect their revenues and further decentralize the average viewer. Making them more niche oriented as Cable variety moves in to fill the void (the harbinger of all this being the Fox New Channel).

Short and sweet. Here is how I would play this:

1. Short the networks and their associated stocks. They will loose viewers as alternatives from cable grow stronger. Mis-steps like their current jag only serve to further destabilize their base.
2. Buy cable companies with broadly diversified offerings for subscriber revenue. They will be the benefactor of the major network exodus.
3. Sell Major Advertising concerns. They will be faced with a landscape of smaller "cable savvy competitors as the network loose their clout. Their contracts with the major networks will render them useless.
4. Buy Niche oriented content plays. Buy networks, both interactive and cable video that cater to wide niches of people that have been overlooked by the networks.
5. Do not buy Network Sponsored entities. These are cable and content outlets that are owned by the networks and thus tied to their downward spiral. Buy scalable pure plays.

That is how I would play it.

DISCLAIMER: I own some stock that fit the above categories. However I do not own many and may have positions that contradict the above advice.

Cruelty- The ultimate backhand from the Market

Yesterday was just a cruel day for equities. Just cruel. We started the day up big, held it all day long, only to be sold off to a down 30 on the Dow by the time it was all over. Volume surged in the last hour as well, lending an exclamation point on this market that said "Nope, everyone is still too happy and optimistic for the market to move higher.". For those of us who are long, days like yesterday hold an irony reserved only for fools who try to divine the future.

Another funny thing I'm beginning to observe is the complete lack of reference for the type of movement we are seeing. Well respected writers I follow say things like "Why is this happening? I don't know." or "I have no idea who actually buys and sells these types of moves, but I'm sure glad they are there.". A complete lack of perspective.

Most say it is because Oil continues to make higher highs, the 10 year is now hovering around 4.80, and there is a general lack of urgency coming from the Fed.....Not to mention Iraq. I'm sure it is all of those things, but I'm starting to feel like we need to simply game the psychology and forget about fundamentals. When I get to this point, I always stop and remind myself that I'm not in this to fall folly to that markets whims. I'm in this to grow my investments at a more aggressive pace than a bond or a mutual fund. So I sit back down, take my hands off the keyboard, and stop trading. Which I will not do until some semblance of order comes back to this market. I suspect that the reason we can't break support or surge past resistance is because my view is a popular one.

Trading Track - A glimmer of hope in K-Mart

Ed. Note - We have added the ability to comment on these posts. Please let me know your thoughts! Just click on the comments link below each post, scroll to the bottom of the next page and add a comment! - GJL

Check out the action in K-Mart. Just bursting upward with no restraint. I'm encouraged by this since K-Mart got relentlessly pounded last year for poor management, slow growth, and underperformance in comps. The reason I'm encouraged is that K-Mart seems to be a bottom low enough for investment, and thus starts to show us where stocks need to be valued in order to move up in this market.

I'm sure you are going to stare in disbelief when I write that I'm hoping we go down further. K-Mart is WAY DOWN, and it now has upward momentum. The rest of the market, unfortunately, is not WAY DOWN enough to equal where K-Mart is rebounding. So we continue to drift around, never creating enough down draft to create a sustainable rally. I believe in this ideal fully. Market momentum is perhaps the most powerful thing it can provide us.

Heres hoping for Dow 9000!!! I hope I'm wrong, but without geopolitical catalysts, and without significant changes in business momentum, I'm afraid all we have is market momentum.

Trading Track - Gaming the 1990 Scenario

I'm hearing that traders are starting to compare this market to the 1990 scenario (Post War Daddy Bush's long slide into oblivion). The idea is that we have to price in a complete rollback of the last year to the beginning of the war, because inflation will kill the consumer, and the banks, and everyone is coming along for the ride. It is at times like these when we question the nature of our recovery in the US, and indeed the world.

I've always found that it is best to stop and take a pause at this type of juncture. We have been here before...Recently...From the 1987 crash, to the first Iraqi War, to the Dot Bomb Bubble, to 9/11, to Madrid. You have to look at the world and ask yourself if doomsday is actually around the corner, and make your trading judgments as a result of what you see. Right now I see instability. That is for sure. A geopolitical situation fraught with uncertainty and the ability to spiral out of control at a moment's notice.

I urge you all to see that while we seem to be teetering on the brink of something we all have no clue how to game, we have never actually gone over the brink. Right now the market is pricing in some sort of cataclysmic crush of problems that will seem to actually defeat our economy soundly. This is an extreme sentiment to say the least. The strength of the US business landscape is great enough to overcome this type of crush. The question is, when will the markets decide that they are at a level low enough to stop the onslaught of selling.

Indexes - Not even thinking about this yet.
Bonds - Had some trading activity here. Took advantage of some of the higher yields in the 18 year range, and took down a block of Floaters with good structure. I have a feeling that these trades are going to look even better once we start seeing the fear bid come back into bonds.
Equities - I'm getting shelacked. That's all I can say. I'm almost fully committed with about 3% cash left. If I try to take advantage of lower levels, I will have to start liq'ing down positions. I don't feel comfortable with that, particularly since this is clearly an exercise to wipe out all the bravado that was in the market. I feel like we can ride it out and not liq anything. Yes. I'm getting killed on all plays from raw materials, to the cable plays to the tech, to the advertising. Scaling into oil stocks over the last three weeks has been a buoy and kept the PF from falling. Right now I'm about to take the stance that most of my stocks pay divs and I'm just going to get paid to wait this one out doing no activity at all. Somehow I think that some angles will materialize and Ill start trading around the market again. Nothing right now.

Meme Watch - Rebound and The Election Year Media

Rebound

Watch carefully. There are a lot more signs that the market is bottoming out from this recent sell off. Did I get caught by surprise? Yup. Was I 80% committed at Dow 10,500? Absolutely. Do I have average downs the whole way back through 10,000. Most definitely.

Why? Because the sell pressure is subsiding. Things just cant go down much further without taking out stops that will bring us to Dow 8500. No one thinks we are going back there with an earnings picture like we have, and with economic indicators coming in the way they are. Even Inflation seems to be capped with a Fed number of about 2.5 to 3. That says we have a floor, and a top. A range that we are at the bottom of.

I know. I'm a bull. I can't help it. Believe me, two years ago, I was holding dividend paying stock only and not trusting market action at all. I guess you could say that I traded my way through the bad, and this is nothing compared to the market in 2001 and 2002. Back then we had to trade against abysmal earnings, and even worse economic numbers.

The Election Year Media

This can not be discounted the way everyone seems to be going along with it. Lets face it, the main media outlets are gunning for Bush. They report all of the bad and let the good bubble up every once and a while. Is it our fault? They seem to think that we WANT to hear this scandalous stuff. When I talk to people and read the blogs I read, I don't see that. I see people who want to have pride in their country as we are under siege and turn away from news that makes us feel shame. That's all I hear from the news outlets. Shame on the military, shame on Bush, shame on Rumsfeld, shame on the greedy CEOs, and on and on and on and on.

They are either working for the terrorists, or they want to change the political picture. Since Tom Brokaw wouldn't be able to survive in a cave without his "product", I have to believe that they are trying to affect politics. That is manipulation, and we have to turn away from it. Yet the markets seem to want to react to it. The trader in me KNOWS I have to game it that way, but the citizen in me, the US citizen who has invested in both the economic, municipal, and political landscape wants to expose it and bring it down. I have a feeling that it is going to have to be a little of both for me for now.

Trading Track - What more is there to say?

Many of you have emailed me wondering about my thoughts with this market. I haven't posted because I don't think anything has changed since my last post. We are getting the thing that I always knew we would have to face, the interest rate motivated selloff. The knee jerk reaction that most traders get when faced with a new interest rate environment. I was expecting it AFTER the Fed started to tighten, but I have to say I'm glad we are getting it out of the way. I know, this is exceptionally painful for the longs out there (of which I am now fully 100% a member of).

The nice thing about this move down is that we are wringing out a lot of the weak hands involved in the last run up. Many of whom were wondering if they should sell weeks ago, now see themselves at breakeven or a little worse and just capitulating. They have now had enough pain and want to make it stop.

I believe that this sets us up for a big run north after all the capitulation is done. But then again, I've been saying that for two weeks now (thus the lack of posting). Here is the fundamental thesis that works the same way that saying the jobs numbers were wrong when everything else was pointing to a better economy. This is economy is now solidly growing and expanding. This is something that was not present when we crashed so hard in 2000. Everything looked like it was behind us then. Now everything is in front of us and we have the economic engine to participate. People may be selling, but it sure isn't because business is bad. That is flawed logic, and I have to buy that.

Meme Watch - Inflation - Again

I'm getting very concerned about the future for growth in the stock market. Although a healthy dose of human nature should cure the condition, I feel like once interest rates ACTUALLY start rising, everyone is going to loose their heads. We have not even had ONE FED TIGHTENING, and everyone is acting like this is the end of things for stocks. What happens when things actually start going up and stay up? Its like watching a junkie wean off crack.

How do we play this? I've got some good sized bets on raw materials, cable, tech, and ad spending for medium term turns in stocks, and I'm starting to nibble at some bonds again. As yields perk up, there are some good deals in the "slightly under 20 year" range in munis so I picked some up yesterday with some new dollars from the stock PF. So, in a word, this next stretch in the market is going to be selective stock picking and a migration to better yields.

Trading Track - Uneasy relief

I really don't like what the general markets meme likes these days. I ask myself all they time why I feel different about it but I cant seem to work it through. Yesterday, the Fed came out and said that they were not raising right now, but that that they may act soon and in small "measured" levels. Meaning they would start tightening in .25 or .50 bp moves over a protracted period of time. The markets liked this because, while they don't like higher rates, they favor a slow, inch by inch approach.

I continue to wonder why the market feels this way. I wonder why we are paying attention at all until the fec gets to 2.5 or 3!!! That would put us in the mid range. For those of you counting, that would mean the Fed will need to do FOUR tightenings at .50 or EIGHT tightenings at .25! Eight tightenings would last two years using this approach. Even THEN we would still only be at a nominal FF rate. I don't think that the world is going to wait this long and the forces of inflation will creep up on the Fed and overwhelm it.

This says two things to me....Change the stock strategy, and wait for higher rates because they are right around the corner. Inflation isn't in check folks, and just because the government says that food, gas and general services costs are not part of inflation doesn't mean that the consumer doesn't get hit.

So....

Indexes - Still dormant here. Cant game a 10,000 to 11,000 range on the Dow when you are in the middle of it.

Individual Stock - Commodity recovery seems to be taking on some steam. Steep recovery in PD and a slight one in AA. CHRT getting hit but I remain steady on it and am looking to buy more at 3.5 if I get the chance. CMCSA recovering nicely after they dropped the Disney bid. About to go positive on CMCSA. Nice gain and holding in Estee Lauder. Going to liq it soon. EMC still down but inching back. Jury is still out on this one.

Bonds - Had a setback on a new CMO I was purchasing, had to bust the trade. Now have more FX cash than I'd like. Trying to hold out for a nice 5% muni. Going to wait as long as I can before the income picture starts to bother me. Gave up on trying to do a Treasury. Rather buy a muni instead.