Why is investment news still surprised of housing glut

OK, so I'm watching the business news this morning and the story is that the markets are reacting badly to the housing market, that there's no recovery in sight, and other such blah...

"Old story" we should be thinking. That'd be like me reacting negatively to news that I'm fat.

We've talked about the housing glut, falling sales, and inflated home prices. Sure there are pockets where it's better, but at the macro level we have too many empty homes sitting out there (they're still building more), priced too high, and there aren't as many buyers as there used to be. It's ugly and it's going to stay ugly.

Here's a story from the Businomics blog that covers the housing glut pretty well. He calculates that at current construction and purchasing rates it'll take almost 5 years to work off the surplus.

Now we can quit being surprised when the housing market doesn't turn around any time soon.

Discover Magazines Science Stories of the Year

Discover Magazine put together their list of the top science stories of 2007. I've been a subscriber for as long as I can remember and pretty much read cover to cover - albeit I'm always a couple months behind.

Of the 20 top stories, the most interesting to me was the story of scientists implanting electrodes in the brain of long term coma patient to awaken him.

Reawakening the Dormant Mind

It’s almost as if his brain was stuck in idle. “He still had these network connections that could in principle be recruited,” Schiff explains, “but the brain was not regulating its own level of activity properly.”

If this is indeed an accurate summary of the biggest science stories of the year it's a pretty depressing list overall.

Marketocracy update - year end 07 at Dec 28.

I think there might be another trading day left in the year next Monday, but I wanted to go ahead and review the year's Marketocracy investment results.

For the past 12mo, my main Marketocracy fund SMF is up 10.99%. A decent year overall, but it is worth noting that the fund actually declined 1.11% over the past 6 months. The past 6 months have been wheel-spinning. Not good.

For the past 12mo, my secondary Marketocracy fund SOS is up 9.64%, and virtually flat over the past 6 months.

While investing in similar stocks and having similar selection criteria, the secondary SOS fund is more aggressive in selling positions than the primary SMF fund by design - it's a test in sell strategy. Again like in past years I find that it's better to follow the SMF approach and ease out of positions slowly - to let them run a little longer. The SOS approach of selling more rapidly when my opinion of a stock changes just doesn't seem to be quite as effective.

The 10 largest holdings in the SMF fund are (53.4% of fund):
GRMN Garmin
LIFC Lifecell
GOOG Google
HANS Hansen Natural
CTSH Cognizant Tech
SAY Satyam Computer Services
INFY Infosys
HWAY Healthways
VDSI Vasco Data Security
NTRI Nutrisystem


The 10 largest holdings in the SOS fund are (65.95% of fund - the SOS fund is more concentrated at the top because I sell full positions faster here)
GRMN Garmin
VDSI Vasco Data Security\
LIFC Lifecell
CTSH Cognizant Tech
GOOG Google
HANS Hansen Natural
INFY Infosys
TRAD Tradestation
SAY Satyam Computer Services
CEO China National Oil

Underwear

My wife threw away an old worn and torn pair of my underwear.

I saw it in the bottom of the garbage can.

It's in a better place.

A Bear's tale

Read about the adventure of this poor bear.

Dynamic Demographics

I found this presentation by Hans Rosling fascinating. He has dynamic graphs/charts that show how relationships between variables in different countries move over time. Birth rates vs. life expectancy, income vs. child mortality, etc. You can watch countries evolve over time.

Warning: This is a long video (20 minutes) and the file size is large (68 meg), so only try this if you've got a good broadband connection. If you want to just read the article look to this Discover Magazine article.

I had trouble getting the whole presentation to play online, but I could download a zip file and view on my PC in Quicktime after unzipping.

7 favorite unsigned bands or artists

Over the past 4-5 years I've listened to quite a bit of music by unsigned bands / artists. As with most unsigned music there's a bunch out there to listen to, and it takes alot of wading to get to the stuff you like. But there are some excellent artists out there who for whatever reason never get signed.

Below are some of my favorites:

Rose Reiter. The first phrase that comes to my mind is 'a true artist." There's something special here. Rose is an incredibly talented vocalist and songwriter whose work is uncompromised but still melodic and accessible. Rose's music is comparable to that of Sarah MacLachlan or Paula Cole.

Here's the first of her songs I heard, and still one of my favorites:
Play Phantoms by Rose Reiter

Here's an interview with Rose on unsignedbandweb.com, a link to Rose's website, her MySpace page, and a link to purchase her most recent CD at CD Baby.


Ghotti This band from Brighton England is no longer together, but these guys are by far my favorite unsigned rock band. Excellent musicianship, songwriting, and vocal performances.

Here's one of Ghotti's more popular songs "Control" that's reflective of their sound - patient with underlying and building intensity. Here's my personal favorite: "Fallen"

An interview with the band, and band page.


Here's a few more who I'm buying some CDs for this year:

Adrina Thorpe - another excellent female vocalist. "Did you think" is a representative tune. Similar to Rose Reiter. Here are some samples.

Five Nickel High - This is a rock band whose guitar player reminds me alot of Nuno Battencort - one of my favorite guitar players growing up. Sound is 80s guitar rock. Listen here.

Goodnight City - these guys are a pop rock band. I just think they have some very high quality stuff, fun music. Listen here also.

Rachel Merchand - hypnotic layered vocals. This is some unique sounding material. See if you don't agree with either of these: "Humble" and "Angel"

Wiser Time - Black Crowes southern rock sound. Like their vibe. I posted a bit about them a short while back. This tune "10 years" has some good stuff going for it.

Guantanamo hearings

I was watching Guantonimo hearings on C-Span this morning (recording of meetings on Tuesday) and one of the presenters was professor Mark Denbeaux from Seton Hall who along with his students studied government documents on the status of detainees. I was surprised by his report and thought you would be too.

While certainly some at Guantanimo are very dangerous people, the report finds that many of the detainees fail to approach the "worst of the worst" variety that official public statements would have us believe.

Some of his key findings:
- fewer than half are known to have committed a hostile act against the US or allies. (most are not captured on field of battle - more below)
- 8% of detainees are characterized as Al-Qaeda fighters. 40% of detainees have no definitive Al Qaeda connection.
- 93% of detainees were captured by those other than US forces and handed over at a time when bounties were offered for turning in suspected enemies.

Here's some of the language in one of the flyers regarding bounties:

"Get wealth and power beyond your dreams....You can receive millions of dollars helping the anti-Taliban forces catch al-Qaida and Taliban murders. This is enough money to take care of your family, your village, your tribe for the rest of your life. Pay for livestock and doctors and school books and housing for all your people."

A link with an image of the flyer referenced in the report.

Here he quotes the record on one of the detainees who was a conscript and was apparently a cook's assistant for the Taliban forces in Afganhistan:

The following is an example of the entire record for a detainee who was conscripted into the Taliban:
a. Detainee is associated with the Taliban
i. The detainee indicates that he was conscripted into the
Taliban.
b. Detainee engaged in hostilities against the US or its coalition
partners.
i. The detainee admits he was a cook’s assistant for Taliban
forces in Narim, Afghanistan under the command of Haji
Mullah Baki.
ii. Detainee fled from Narim to Kabul during the Northern
Alliance attack and surrendered to the Northern Alliance.

All declassified information supports the conclusion that this detainee remains at Guantanamo Bay to this date.

Certainly this is not a typical record for someone classified as an enemy combatant, but if you're like me you're wondering why is he in Gitmo? He doesn't sound significant, and doesn't seem much different than any of the thousands of Taliban forces in Afghanistan when we invaded the country. The report concludes there are many others who were likely in the wrong place at wrong time and/or turned in for the bounty without much corroborating information.

My main concern with all of this: If the war against terror lasts generations how long do we hold people in Gitmo without a trial? And even if we conclude that it's a necessary cost of a "war", how American is that?

Here's a link to the full report by professor Mark Denbeaux.

Wind generator - wind belt

check out this video of a different type of wind generator - a generator without a turbine.

A little elfin fun

Check out these talented elves (turn on your speakers)

Talented family 1

Talented family 2

Have a digital picture? You can make your own here courtesy OfficeMax.

Dinosaur stripes

Soft tissue fossil of dinosaur shows first hard evidence that dinosaurs had stripes.

It's amazing to me that soft tissue can survive through at least 65 million years.

Links 12-02-07

Check out this tiny sculpting.

.. and some microscopic pictures of snowflakes.

... and let's finish with this misunderstanding.

Too much government?

Here's a story of a man being charged with animal cruelty with possible jail sentence for refusing to allow his old dog to be put down.

It's kindof like the canine version of the Shiavo case, except the dog was just old and arthritic, not in a vegetative state.

College Football Champion: N/A

Since every team has proven itself undeserving of this year's title, there's only one truly fitting way to end the season, by calling off the BCS title game. Vacate the title as they do in boxing, give everyone a trophy as they do in youth soccer—but don't make anyone national champion.

Read the full article from Slate Magazine here: "What a bunch of losers."

Month end holdings

I figure it's time to update my holdings for Nov07. There's been alot of movement over the past couple of months that we talked about, and I've been deploying alot of free cash into stocks over this time.

Here's where I'm at now - from largest to smallest holdings
CTSH Cognizant Tech - IT consulting/services, India. Loaded for bear in this position - by far my largest holding.
GRMN Garmin - GPS maker
VDSI Vasco Data Security - data transactional security (paying for stuff electronically) - primarily customers are banks
INFY Infosys - large Indian IT consulting/services.
TRAD Tradestation - online brokerage
LIFC Lifecell - tissue products (like growing skin for burn patients.)
ASFI Asta Funding - a collections company (example: purchase bad debt from credit card companies and try to collect).
HANS Hanson Natural - Energy Drinks
NTRI Nutrisystem - weight loss program/food
BLUD Immucor - blood tests
MLR Miller Industries - Tow Trucks

Anyhow, that's what I'm in now. Obviously I have more confidence in the larger positions than the smaller. Another that I'm looking at now is QCOM Qualcom, but I haven't opened a position there

FrankenFinance

I'm not educated enough about the issues this article addresses as I don't understand the balance sheet issues mentioned, but found it interesting food for thought regarding the factors driving the current financial bubble. I like his observations that "We are trading recessions for bubbles, on what seems like a regular basis," and in the article he points out what he sees as key contributors. Read "Welcome to the World of Dr. FrankenFinance"

Wiser Time - I like this band's sound

I just ran across the band Wiser Time on Unsignedbandweb.com. Check these guys out if you like bluesy American rock. Sound is similar to the Black Crowes. There are a couple of free mp3 downloads for your ipod too if you like. This is good stuff imho.

PEG

Nasdaq 100's top 25 PEG Plays.

#7 and #8 are two of my larger holdings (I've been adding to). This is part of why I like their valuations right now.

The "PEG" is the ratio of a company's PE ratio to the earnings growth rate of the company. So if a company has a PE of 30 and an earnings growth rate of 20, then the PE would be 30 / 20 = 1.5. All else being equal you like lower PEGs because you're buying earnings growth at a discount.

The first place I heard about the PEG ratio was in Peter Lynch's book "One Up on Wallstreet," and he's credited with its widespread popularity as a valuation rule-of-thumb.

Taser story and other stuff

You gotta read story of a guy testing his new Taser

Check out the "shape of sound" vibrational patterns in this video


temperature swings?

and I just thought this photo was cool.

Out of Pattern

When I was in college a classmate was doing an experiment to determine "g", the force of gravity. The experiment attached one end of a yardstick to a tiny electric motor, with the yardstick able to swing like a pendulum from the pivot point where it is attached to the motor. (click to enlarge)



I don't remember the details, but by knowing factors like friction, the mass of the yardstick, height above sea level, the internal resistance of the motor, etc - "g" could be determined by looking at the electrical current that was generated by the motor (recorded by a computer). The resulting signal from the motor behaved as a damped oscillator, producing a damped sin-wave type signal like that shown (sorry for the poor drawing) when the ruler was raised and let fall.

A very accurate value for "g" was determined (very close to expected value for "g"), and for the most part the recorded observations fit very well with the expected damped oscillation curve. What was very interesting to me though, was that at the very beginning of the observations the curve didn't fit the expectation very well at all.

When I asked the professor why the curve fit so well except at the beginning he said something like "It takes it a little while for it to figure out what it's supposed to do."

I mention this example because I find the out-of-pattern observations like in this experiment as one of the more interesting parts of the experiment. The experiment mostly performed as expected, except the odd data when it yardstick was first released.

I think that's why I'm intrigued by alot of the things that don't make sense - that are a tad out of pattern - and probably why I get interested in some of the more "fringey" things I occasionally post about here, including UFO accounts and videos, near death experiences, and the odd behavior of the stock market. There's enough there to make me think there's something to some of these, even if it's something I can't know for sure. Makes for a more interesting world in any event.

Marketocracy update

My main Marketocracy fund, similar to my real-life portfolio, has been getting it's clock-cleaned over the past month. As I'm writing this it's down 12% over the past month and down 4.5% over the past 3 months. Needless to say the portfolio isn't built to do well in down markets. This is probably one of the worst stretches I've had since starting the Marketocracy test.

Some Thanksgiving tidbits

Since it's always important to ask the stupid question, I got to wondering why we eat turkeys at thanksgiving. I did some google searches and turned up a few thoughts.

Would you guess that turkeys might have something to do with Queen Elizabeth, a goose, and the Spanish Armada?

If Ben Franklin had prevailed in his attempt at making the turkey the national bird (instead of the bald eagle), would we still be eating turkey at Thanksgiving?

Apparently we don't necessarily know a whole lot about the actual first thanksgiving. There seem to be only 2 direct accounts. According to this website the first thanksgiving meal included:

From Edwin Winslow's account:
Corn (probably just for meal. Indian corn was not like present day corn)
Barley
Some pretty sorry peas (very bad crop apparently "not worth the gathering")
fowl (probably means waterfowl in the usage)
5 deer

From Governor Bradford's account written many years later:
Cod and Fish
Fowl and besides waterfowl there was wild turkey
venison (deer)
Corn (again, probably just meal, not like modern corn)

Also, the first thanksgiving in 1621 occurred at some point between Sept 21 and Nov 9.

Thanksgiving was an irregular holiday on different dates until made a national holiday by Abraham Lincoln in 1863. Later FDR made it the 4th Thursday of November.

What all of this has to do with turkeys I really don't know how that came to be, but for some reason they won out over deer through the years.

Financials

Given the collapse in so many of the financials over the past several months, I wanted to take a step back and put the declines into perspective to see where we are.

Take a look at this 5 year chart for XLF - the Financial Select Spider exchange traded fund. It's down about 25% from the high back in May07. From the chart you can see the financials were trading at similar levels back three years ago in early 2004.

Of note is how steep the decline has been and the current steepness of the decline. I don't understand how to properly value financials, so any exposure I get would likely come through an ETF like this or through a similar mutual fund.

UPDATE: I opened a small position in NTRI Nutrisystems today after it showed some upside strength. It's been in a terrible freefall and even given growth concerns seems like it's worth a bet at 7X earnings.

adding on the way down

Bought a little more Cognizant Tech CTSH on the way down today. I probably should be waiting for price declines to bottom, but the price just seems too attractive and figure it's good to increase exposure a bit.

Different view of regulations

Here's a good post on The Agitator about how big corporations might actually benefit and welcome burdensome regulatory structures as is it makes it harder for the little guys to compete.

National Press Club UFO Nov 12 followup

Here's a first hand blog post by Bijan Bayne, apparently a reporter who attended the National Press Club panel discussion. (I have no reason to believe this is anything other than a first hand account).

Here are brief clips of various speakers - unsure of network source.


Here is a pretty good CNN report


Here's another CNN report from the National Press Club UFO panel. The reporters can't seem to get past the "little green men jokes" used to discredit folks who see something incredible.

Here is a seperate interview with John Callahan, one of the speakers on the panel, regarding an incident in Alaska.

Overall it's been difficult to find information on the panel. I'm hoping C-Span shows the entire discussion in the near future as they often replqy National Press Club talks.

Galaxies and Neurons

I was watching a show on Discovery channel and happened to think of this image from the NYTimes from last year comparing the structure of a slide of 3 mouse neurons and a simulation of a galaxy cluster (including dark matter). Images of a Galaxy Cluster and Neurons

Anyhow, even though I can't understand why there would be such similarity, it's just kind-of one of those odd similarities that sticks in your head.

Here's a website with some interesting animations. In one of the animations you can sortof see the phase of formation shown above.

And if you want to feel small check this out

Good reading in the Times today

Several of good articles in the NYTimes today

The money in NCAA football and an estimate of what players could make based on the revenue streams they create. (Article is by Michael Lewis, also author of excellent book Moneyball on how to evaluate underpaid/overpaid professional baseball players to help get most bang for your buck on the roster).

I don't normally get into politics, but it's sad how far we've come that congress is probably going to approve an Attorney General that won't state that waterboarding is torture. This is a criticism of the democrats for letting it slide.

And driverless cars might be nearer than you think due to powerful GPS and improving artificial intelligence.

And did you hear about this? Saudi King Abdullah visits the pope at the Vatican.

Rocks

You just gotta check out these rocks. The one with the goat standing on it gives me the heebes.

This experiment also applies to investing and fantasy football

Read this article about decision preferences - and how our evaluations of our decisions change our preferences after we make decisions.

The general idea is that we have cognitive process in place to reinforce the idea that the decision we made is better than we initially thought it was, and in the case of purchases as a result we value what we currently have more than we would value it if we didn't have it.

In fantasy football, I think it explains why there are so few player trades in my league. In my league hardly anyone wants to trade because they value their own players too highly. Very few fair trades can be found that are agreeable to both parties.

It can manifest itself as follows:
A. Let's say I have Shaun Alexander on my team. If I want to trade Shaun Alexander for another team's Lamont Jordan, the trade gets rejected.
B. However, if the situation was exactly reversed and I had Lamont Jordan and wanted to trade for Shaun Alexander, that trade would also be rejected.
C. Neither version of the trade will be accepted. Either Alexander > Jordan or Jordan > Alexander, but it seems in our league it depends on which one is on your team. One of the trades has to be better than the other.

In investing, I think it helps explain why we may tend to have a better opinion of our own holdings than the market overall has, and why we might hold onto a loser too long - or do what I've been doing recently and average into a stock that is dropping. In the past I've found this is not a good practice, but as we've seen I sometimes cant help myself because I've convinced myself of the value of a current holding. These psychological experiments in the story show that simply by making a decision to buy a stock I am also making a decision to overvalue that stock.

Knowing that this effect is in play can at least help us understand our thinking and control against these counterproductive tendencies.

Stocks look cheap to me

I added to Cognizant Tech CTSH and VASCO Data Security VDSI today. I can't help but think both of these are just far too cheap. The market's obviously telling me I'm wrong and maybe I'm discounting some things that I should take more seriously, but these (and others) just look out of whack to me.

I read through Cognizant's conference call and while there's concern about IT budgets in Q4, we're talking about a company whose revenue increased 48% in Q3, EPS increased 60%, and reading between the lines the management seemed to be telling me the business has strong prospects looking into 2008. The company's PE is @30 right now, and it's forward PE is closer to 20. It's not often I can buy companies like this at these prices. I increased shares another 40% today.

Here's some numbers I like (current data doesn't include current quarter. y1 = last fiscal year. y2 = previous fiscal year, etc)

Return on Equity
curr 25.3
y1 26.0
y2 28.5
y3 27.5
y4 26.1

Book value growth
curr 47%
y1 45%
y2 51%
y3 57%
y4 57%
y5 63%
...

Sales per share change
curr: 48% current quarter change
y1 55%
y2 45%
y3 52%
y4 52%
y5 24%


I also am making a big move into VASCO Data Security VDSI. They've gotten hammered and I'm not as comfortable with the story there and expect greater volatility, but revenue and earnings are growing at over 60% clip, so they could still slow considerably here and still justify the current 33 PE. This is a smaller company, without as established trends as CTSH, but Return on Equity and Total Capital seems to be settling in around 40% over the past couple of years. They're clearly getting excellent returns on their capital.

Anyhow, I guess I look around and am just seeing so much cheap stuff out there. CTSH and VDSI were buys today, but looking to keep putting more cash to work moving forward.

I'm keeping an eye on the Garmin GRMN story. Sortof hoping GRMN drops the buyout offer for Tele Atlas and instead works with Nokia long term to have the Navtech maps give them the data they need. I honestly don't see why a partnership couldn't work, instead of having to buy one of the map providers outright. Garmin clearly has good places to put their capital to work other than a buyout offer.

National Press Club UFO panel discussion Nov 12

I find this interesting. The National Press Club is hosting a press conference revealing some apparently new data on Monday Nov 12. The conference includes a governor and many military officials, both American and international. Here's the press release.

It's interesting that a UFO sighted by many ground-crew at Ohare airport in Chicago is prominently mentioned in the press release. I'd heard of the report at Ohare and wonder if there's new data. Here's the report from the Chicago Tribune. Here's a video of the reporter for the Tribune talking about the story.

FOLLOWUP/POSTSCRIPT: Here's a link to some clips following the panel.

Link Gallery 11-09-2007

Here's an interesting illusion.

Too much to drink.

Here's some air traffic control humor.

and the tallest man in US.

Whew! Getting Smoked

I just got back from a business trip and the market and the stocks I've been holding have been getting smoked! I plan on sorting through the wreckage this weekend, but there's bound to be some buys at the bottom of this mess. It makes me a little mad that I added some just a week or so ago and wish it would've tanked a bit earlier, but this is why it's nice to have some cash sitting around. Might also make sense with big price changes to move "heavy-in" on some of the favorites.

Comet Holmes

Those of you out in the country might want to try to see comet Holmes which is apparently about the 1/3 the size of the moon currently.

Here's the detail from Astronomy Pic of the Day

It says the comet looks like a fuzzy cloud in the sky below the constellation Perseus, to the west of the Pleidies.

Bourbon and Bluegrass

Each weekend the NY Times has a travel section that talks about sortof out-of-the-way places. This week they had an article titled "Bourbon & Bluegrass" talking about visiting the Bourbon Distilleries in and around Bardstown in central Kentucky , visiting a little music spot in Mercer county KY called "the Barn", and visiting a bluegrass festival in Rosine KY, the home of Bill Monroe in Ohio county. (Per Wikipedia the population of Rosine is 41 people).

When I was little I remember going to one of the distilleries up there. As a kid I remember the smell being - how shall I put it - strong - and also being afraid of heights because the big tall vats of mash were surrounded by see-through metal grills that we walked on about 20 feet up in the air. I was afraid I'd fall through so was glad when the tour ended.

Anyhow, here's the link to the article. It think it requires a NYTimes i.d., but it's free to setup.

Camouflage

Look at how this factory was hidden during WWII.

More trades to place

It's strange, but I'm finding the need to place quite a few trades recently. I rarely find the need to place this many orders unless I'm cleaning house and on a bunch of losers.

Anyhow, I placed limit orders to buy more VASCO Data Security VDSI and Cognizant Tech CTSH. Will see whether I get tomorrow.

I'm a little concerned that exposure to India might be growing too large given sizable holdings in both CTSH and INFY, but these stocks haven't moved in quite a while, but the underlying business continues to be strong and they just seem cheap to me right now. At some point I think the underlying business growth has to push CTSH and INFY higher imho.

Garmin

Big News on Garmin front today. Announce excellent earnings, but market reacts negatively to Garmin's bid to purchase Tele Atlas, a digital mapmaker who is already in purchase deal with competitor Tom Tom.

Here's a link.

The next time you see a comparative chart...

...think of this article.

It's good comparison of the stock charts prior to the 1987 crash and current markets. Every few months I come across an article saying that the charts look just like they did before insert your favorite market correction here. This reminds us that the framing of the data can actually change the discussion completely.

Ceradyne CRDN

I'm placing an order to sell my remaining shares of ceramics/body armor company Ceradyne CRDN. It's no longer the type of growth stock I have a feel for, although I can see it still appealing to value investors. I sold most of my position back in August, and this sell represents the rest. CRDN has been a holding for over two years, so I'm saying goodbye to a longer term hold.

Crazy ending to a Football Game

Just watch

Rice Terraces

Put this in the category of "how did I get to be so old without knowing about these?"

I'd never heard of these, but check out these photos of the mountainside Banaue rice terraces in the Philipines. Per the link all of these built by hand about 2000 years ago.

Added to Infosys INFY

Quick post: I added to my Infosys INFY position today. It hasn't really moved much in a long time but the business seems solid to me. Valuation is looking good to me.

Let's look at a high flier VDSI

Let's look at VASCO Data Security VDSI, one of my holdings. Quarterly results were announced today. Earnings were up 78%, revenues were up 60%, and the stock was down 34% on the day. I'm almost back to where I started on this one. I haven't read the conference call transcript yet, but apparently the business seems to be slowing a bit.

I guess best I can do is shrug my shoulders, but this is an extreme case of how the market trades on expectations and the wide fluctuations companies like this can see. These hyper-growth stocks are difficult to value, but I think even 35% sustainable revenue growth with sustainable margins (which have been expanding) makes this company attractive.

My rule is not to immediately buy after a big spike down like this, but I'll keep on my radar for potential adds. I like the company and it feels oversold, but I'm learning to listen to what the market tells me and let the air clear.

Vote For Trish!

If you haven't heard, my wife Trish has one of her favorite books in a contest. It's about a woman who due to dark/secret government experiments has inherited invisibility... and now that they know she inherited it her life will never again be her own!!! Exciting stuff, including lots of X-Files type conspiracy theories.

Anyhow, the winner of this contest gets the book published. The first stage of the contest is for "Best First Line". If you like it, vote for Trish Milburn's "Out of Sight" here. She's the sixth one down.

Investing Books

I finished reading Phil Town's "Rule #1" and while I'm still struggling with some of the technical analysis he talks about (I'm trying to figure out how to program the signals and back-test), I think it's a pretty sound approach and is very close to what I do in terms of stock selection. Again, I'm withholding judgment on the technical analysis/trading section of the book because I'm not sure it works in most of the cases I've examined for the stocks I select, but I'm still investigating.

With the addition of this book, I figured I'd list my favorite investing books. I don't think I've posted this before, but I found the following books to have been very useful for me in learning to invest.

Buffettology - Mary Buffett and David Clark. I've worn the library out reading my fair share of investing books, but this book contains much of the basis for how I value companies. It emphasizes consistency, predictability, and valuation. Maybe it was the culmination of alot of other things I'd read, but as I worked through Buffettology I had one of those "aha" moments that underlies much of my thinking about investments.

One Up on Wallstreet - Peter Lynch. I haven't read this one in a long time, but it did a great job of educating me back in college when I was starting out. Lots of real-life examples in here.

A Random Walk Down Wallstreet - Burton Malkiel. Another college read. Anybody who's picking stocks is trying to do what this book says can't be done, but it's good to see where the efficient market hypothesis is coming from, and why low cost indexing is so successful.

Super Stocks - Kenneth Fisher. I read this back in the mid-90s and found it valuable in evaluating fast growing tech companies that don't yet have earnings but have some type of competitive moat. If you're into tech stocks this is a must read imho.

The Gorilla Game - Geoffrey Moore. Another must read for tech investors. What produces a sustainable long term advantage when thinking about technology stocks? The book fails to aid us in valuing technology Gorilla companies and alot of Gorilla gamers got hurt in the tech bubble bust as a result, but I like the way of thinking about how network effects contribute to competitive advantage.

Rule #1 - Phil Town. I just read this one, but it's gotta go on the list as it's so close to what I do. Not sure about the technical analysis pieces, but this method will turn up a lot of the same companies I invest in.

The Millionaire Next Door. Thomas J. Stanley and William D. Danko. The authors made a career out of studying millionaires. They find that often the secret to accumulating wealth is not how much you make, but simply living within your means. Great read.

Manias, Panics and Crashes. Charles Kindleberger. They're hard to spot when you're in them and they can persist, but this book helps us understand bubbles.

Carcinogens and Natural Foods

Sorry for the lack of posts. Haven't been feeling well. Here's one I bookmarked a few weeks back.

Here's a different line of thinking. About 5-6 minutes of a lecture, but I found this interesting regarding unintended consequences.

Price activity and the future

The TraderFeed Blog first got me interested in how short term price activity is not necessarily random as I had expected. Like a point guard who goes right or a center who pump fakes, the market does seem to have predictable tendencies. The theme of many of the TraderFeed articles on this topic reinforces contrarian aspects of price behavior - that going against the crowd has rewards.

Here's a good article on how 20 day highs in down markets tend to be followed by subpar returns, while 20 day highs in up markets aren't much to worry about. 20 day lows in down markets tend to be followed by strong short term returns.

Here's another similar article looking at similar themes put in different time periods.

The theme for index moves - be contrarian and buy the lows. Now I'm not ready to expand this to individual stock selection and I may do some similar investigation on individual stocks, (I actually expect that an individual stock going down is probably more likely to keep going down, or at minimum exhibits more volatile tendencies - so we need to be careful with interpretation - but at least in aggregate the market has a reversion to the mean tendency.

Lame 80s lyric of the day

I was listening to one of my Pandora internet music radio channels - one geared to play 80s music I grew up on - and was cracking up to the lyrics to a Def Leppard song.

Don't call me gigolo; don't call me Cassanova
Just call me on the phone and baby come on over...

Yep - some of the music I listened to when growing up is that embarrassing. Not exactly Robert Frost, but at least it rhymes - sortof.

Excellent points on Health Care

I found this post on Marginal Revolution excellent reading as the health care debate heats up in the campaign.

Some key points:
- spending more $ does not increase health result outcomes in many cases, so be wary of a plan proposed that does this. The US is a huge spender and does not produce commensurate result. (Does this sound somewhat like the conversation around our approach to education also? Lots of spending without as much result?)
- pharmaceuticals are one area where spending does seem to produce results.

...but I wanted a puppy

These are funny letters to God by kids. There are over 20 - click through them all.

Example:

Dear God, Thank you for the baby brother, but what I prayed for was a puppy. Joyce

Short Note

Surprisingly all the trades I made yesterday went through. It rarely happens that way.

- sold 40% of HANS
- sold 50% of BLUD
- opened a new position in ASFI

Going to go and figure when to re-build the HANS position. I really like what the company has going on, it's just value concern right now.

Why Asta Funding ASFI?
It's always fun when I find a new stock that I've never seen that pushes most of my buttons. I don't know if I'd ever considered Asta as a holding before, but everything fell into place when I was evaluating last night.

Some of the things that I liked

Book Value has been growing at around 25% annually
6/07 $16.16
9/06 13.51
9/05 10.72
9/04 8.58
9/03 9.76
9/02 4.16
9/01 2.86
9/00 1.77

Return on Equity
6/07 25.9%
9/06 27.8
9/05 23.9
9/04 21.5
9/03 18.4

While sales per share have not been as consistent on an annual basis, we've still seen revenue more than triple over the past 4 years.

The PE on this is 10. A similar company that I like PRAA Portfolio Recovery trades at a multiple closer to 15. Many stocks appreciate via PE expansion and the opportunity is here.

Big fat net margins - over 40% for the past 3 years

Free cashflow - this is a cash business. No heavy investments in plant or equipment required.

Transactions

I haven't looked seriously at transactions recently, but I just placed some limit orders for tommorrow - we'll see what happens. Cramer always says take some off the table after a long run-up, so that's what I'm doing.

I put in an order to sell half of my Immucor BLUD position. They sell blood tests and blood test equipment. This holding has good momentum going for it, but I think it's getting close to fair value and want to ease out a bit.

I put in an order to sell a portion of my Hansen Natural HANS position. I'll probably get burned on this one and it may keep on running up, but it's gone a long way fast and like the other, I want to take a bit off the table. Hopefully can add back to my position on a correction. This is a dangerous trade to me because I think it's likely HANS will be higher 1-2 yrs out... but going to see if I can take some off the table.

Opening a position in ASFI Asta Funding. They are a collections company - buy up past due debt at pennies on the dollar and try to collect.

We'll see what happens tomorrow.

Online Ticket Sales

My sister-in-law tried to buy Hannah Montana tickets and was unsuccessful at face-value. They're "sold out." She could easily buy them online for many multiples of face-value though through various ticket re-seller sites. Here's the question: Why has purchasing tickets turned into a business where the resellers - or "scalpers" as they're more lovably known - often stand to make more on the ticket than the people putting on the show?

Since ticket sales have pretty much moved online it offers an opportunity for a new business model. Here's my proposal to Ticketmaster and other primary ticket-seller sites when you clearly have a show where demand exceeds supply.

Option 1: When tickets go on sale: instead of selling out all your tickets in 15 minutes at face value (demand is obviously more than supply at that price), why not go to a declining auction system? For instance, start ticket prices on sale at $1000 each and then start lowering ticket prices gradually throughout the day as folks bid on tickets as the price declines? There are many auction based sites that function fairly smoothly using an auction system, including ebay. People could watch in real time as seats sold out, see what prices, and know what the "market" for seats appears to be for a particular show. This is similar to the market-maker system in the stock market. Ticket sellers manually match supply with demand.

Option 2: Have a sealed bid auction system. Similar to purchasing stocks, folks could put in "limit" orders for how much they're willing to pay for a group of tickets. No need to sit and watch the auction, and if an outlet has 8000 tickets to sell, the top 8000 folks placing bids would get the tickets. People placing higher bids would get filled with the better grade seats closer to the stage/box seats/etc (a priority system could be devised for seats as every arena will be different but still allow a bidder to opt out of the priority seating if they preferred a lower priority seating but still wanted to make sure they got in.)

I think either of the above are better for the industry as a whole. The folks putting on the show capture more of the revenue for the show - capturing the value of the extra demand they've created, and at the same time folks that are willing to pay more than face price can still get a ticket without having to go through scalpers.

Purely conspiracy theory: I expect that there's some arrangement between the acts, the primary ticket sellers, and the resellers in any event involving kick-backs in lots of directions. The acts don't want to be seen as gouging their fans so they set below market prices, but they know the tickets are going to sell for far more than face value in most cases. Instead of just giving all that profit margin up to scalpers they're probably working to cut deals to capture the surplus. Same for the primary sellers with the resellers. The systems proposed above would probably just make all that activity more public than it currently is. Just a guess anyhow.

Here's a NYTimes article of you have access.

Space Tether video

I find this video very interesting.

Based on some web searches I guess it's possible that there's some video artifacts going on here given the shape of some of the objects seen here, kindof like maybe seeing reflections of stuff in your own eye sometimes when looking in a microscope, but I was engrossed when I saw this. Note how many of the objects appear to move behind the severed tether in the video. Here's an in-depth video analysis.

It's incredible footage and too easily dismissed with a shrug of the shoulders in my opinion. Very cool stuff. Way more interesting than a lot of stuff that's treated seriously. Doesn't it remind you of looking at pond water under a microscope?

Economic development and Rule of Law

Here's an interesting article on a driving force of economic success: the rule of law.

According to the study it's the social institutions - the rule of law - that create more value in an economy than the actual hard resources present.

So what? If the rule of law is central to a productive economy, the focus of aid to developing countries should be tied to strengthening the rule of law. As Colin Powell would say - it's a force multiplier. Working hard in a corrupt system doesn't pay, working hard under the rule of law does.

Ingenuity

Here's an innovative solution to your varmint problem.


http://view.break.com/365748 - Watch more free videos

Adding to Garmin

I missed the news yesterday, but Garmin dropped over 15% over the past 2 days due to Nokia purchasing digital mapmaker Navteq. Navteq supplies the digital maps for Garmin.

I put in a small order to add to my Garmin position following the drop. Here's an article from Seeking Alpha that aligns with my thinking. It's normally good to hold off on sharp declines, but I think this drop is based on a combination of panic selling, and alot of folks riding large profits willing to sell a big gainer easy.

Here's hoping panic is what's going on.

Also, Immucor BLUD announces earning tomorrow and I'm going to put in a limit order sell half prior to earnings. I haven't had this one long, but it's approaching fair value and I just want to take a bit off the table. It's had a good run and stocks with good momentum like this tend to keep running so I don't want to sell all.

Phil Town's Rule #1

I was reading my issue of AAII's Computerized Investing and it had a stock screening article explaining Phil Town's Rule #1 approach to investing.

As I was reading through, the article started off with alot of basic spiel about buying great companies with strong management and a sustainable competitive advantage at discounted prices. I tend to roll my eyes at some of this because it's a strawman - who wouldn't want to buy fine companies at discounted prices? The devil is always in the details in these types of things, but as I read further into the mechanics of the the approach I find out that this Rule #1 approach is almost exactly what I've been doing in my screening and valuation approach - with the exception that once he identifies his companies Town then seems to actively trade those those stocks based on technical indicators.

I've requested his book from the library and look forward to reading, but outside of the book "Buffettology" it's one of the few mainstream books that I've seen that espouses this screening and investing approach.

The "Buffettology" book is the foundation of much of the valuation approach that I currently use and underlies my screens and valuation methods, and it sounds like the Town book will go into considerably more mechanical detail than the Buffettology book. I'm particularly interested in the trading approach that he's using.

Expenses

I hadn't really thought about it this way, but this Motley Fool article got me to thinking about annual mutual fund expenses.

If somebody has $100,000 of investments sitting out there in a mutual fund with a 1% expense load, then they're paying $1000 per year in expenses to the fund. At current discount broker rates thats easily over 50 round-trip trades per year...

Humor for the day

This is funny. The world in 7 pictures.

Andy Mckee - Drifting

My brother sent me this link a while back and I came across it on the web again today. Pretty cool if you haven't seen it yet. Artist is Andy McKee, song is "Drifting". Here's his website.


http://view.break.com/237467 - Watch more free videos

Healthier Tobacco?

I was reading about the recovery of tobacco farming in the U.S. Apparently tobacco acreage in the U.S. has increased 20% since 2005 due to increased tobacco exports.

This got me to wondering - why don't we have a healthier cigarette? Current tobacco smoke is loaded with carcinogens, many of which are "formed from natural components of the plant." Why haven't less carcinogenic tobacco plants been developed?

After looking on the web it seems efforts have been made but progress has been difficult. It actually seems like some progress was made (see XA project) using a catalyst to make the cigarette burn cleaner, but it was difficult to bring to market because the new healthier cigarette might open up the industry to more legal and regulatory scrutiny, and competitors might retaliate.

At the end of the PBS Nova article from above it's also mentioned that "Brown & Williamson and RJR are developing cigarettes that use a special tobacco with lower nitrosamine content. The tobacco is cured with a special process that inhibits the formation of nitrosamines." ... So I guess things are moving that direction after all.

Maybe one day we'll be able to eat a meal of fat free french fries and pizza, drink a sugar free coke, and when we're done light up a cancer free cigarette.

Home Runs

I'm pretty bored with the entire steriods and sports discussion and all the apologists, but here's an interesting study on what a 5% increase in bat speed can do for home run production in baseball.

The study estimates a 5% increase in bat speed (estimated bat speed generated from additional muscle mass of steroid use) can increase the speed of the ball off the bat by about 4mph, and is projected to result in 50% or more increase in home run production. Here's the story.

I got curious to see how far from historical norms we are now, and while there was a clear surge in the 1990s, we're actually seeing home run leader totals moving back to more historical norms in recent years. Probably a better measure is the average or median level of home run total in the league, but I don't have the data to get there, but this gives an idea. Thanks to infoplease as the data source.

Heavy Duty Batteries and Stompers

Does anyone know why batteries with a name like "heavy duty" are the least powerful you can buy today compared to the common alkalines and rechargables? If you need a battery for a remote control or a clock it sounds like a heavy duty will do, but unless you want your camara to puke out after 20 pics use higher powered stuff.

At one point long ago were "heavy duty" batteries the good batteries? How did they earn that name and why don't they have a new name now? Even back in 1980 when I was 10 years old the heavy duty batteries weren't any good.

This was all very confusing as a kid, because when you're 10 years old and wanting to win your stomper pull wouldn't you naturally reach for the "heavy duty" battery? It's like you'd think you're putting 93 octane in your machine, but in fact it's the opposite.

(Don't know why I just thought of stompers, but do you remember everybody wiring them up to 6V batteries anyhow with stripped out lamp wire, hooking lead tire weights to the front to hold the wheels down, and adding on extra cool tires for better traction?)

Space Walk

I saw this today on the Astronomy Pic of the Day



Here's a big version of the image. Photo is from NASA.

Free Trades?

I use Scottrade as my primary broker, but I came across this company named Zecco today featuring $0 stock trades. I haven't tried it yet but it sounds like checking out if you're thinking of opening an account.

I'm not sure how they make money, but it sounds like they don't pay interest on cash balances. With a broker offering free trades you'd have to worry about executions, but they post a study on their site claiming above industry average execution quality.

1234

Here's that catchy song "1234" from the Apple ipod commercial. By the artist Feist. Beautiful song.

Yep.
Acoustic guitar
electric bass
big thumping drum kit
hand claps, finger snaps
banjo
trumpets
brass section
honkeytonk piano
harmonica (or maybe light accordion?)

September holdings

I haven't posted stock holdings in a while, so here goes:

from largest to smallest

GRMN Garmin - GPS systems
CTSH Cognizant Tech - Information Tech outsourcing India
HANS Hansen Natural - Energy Drinks
VDSI VASCO Data Security - e-transactional security
TRAD Tradestation - online broker
CRDN Ceradyne - body armor, ceramics,
LIFC Lifecell - tissue generation
BLUD Immucor - blood test
INFY Infosys - IT outsourcing India
CKFR Checkfree - in process of buyout by Fiserv.

Weakening Dollar - Impact on Equity Indexes

Here's an interesting graph on Traderfeed adjusting the S&P500 index for the declining value of the dollar. Taking the declining dollar into account we're still considerably below values in 2000.

How low will the value of the dollar go? Value of dollar vs. major currencies is shown below. Link to Federal Reserve Source

Second Life

There was a good story in today's NYTimes about the online game Second Life offering insights into what makes us tick. (NYTimes i.d. required but registration is free)

Second Life is a virtual world, so there's no reason it should be similar to real life, but in many respects it is. Keep in mind that I've never visited the site, but have read quite a bit about it. The site seems to be a popular topic of social researchers also.

The NYTimes article discusses how status matters even in a virtual world. People use in-world currency to purchase nice clothes, hairstyles, nice homes, real estate, and even "buff" bodies (in-game avatars). The article notes that "trendy" fashions evolve in this virtual world just like in the real world.

Much of this to me indicates we're hardwired to pursue status and I think this might be behind our keeping-up-with-the-Jones' mindset. There's probably no real reason we need all the stuff we think we do (most of us passed what we "need" long ago), but our stuff serves as a proxy for status -> status is what we really want.

In the real world I think this helps us think about our motivations and understand what makes us tick. From a financial perspective maybe it'll help us control things a bit better when we realize how we're wired.

Forrest Gump in one of my favorite movies understood this:

Now, Momma said there's only so much fortune a man really needs and the rest is just for showing off.

Voyager's Golden Record

I was reading about the Golden Record that was put on the Voyager spacecrafts and found this very interesting. (The record cover is shown above - here's more about all the symbols on the front. They say an intelligent race could decipher what's on here, but I wonder.) Image from JPL/NASA

The record was designed to last for a billion years so that if somewhere out there the spacecraft was encountered by an alien race there'd be a message from earth to them. The cover above shows information intended to communicate how to play the record and retrieve the data, including audio and visual information.

It's interesting - how do you communicate without language? and what gets put on the disk? There's greeting from earth in many languages, music, and images from earth, including images of our solar system's location, images of the planets, mathematical notation, as well as everyday scenes of life on earth.

Anyhow, I thought this was pretty cool to read through - imagining I had encountered something like this - how would I interpret what I see? Also, it's interesting to see what was included on the disk (many scenes of biology and daily life)- and consider what was excluded (no scenes of war).

Alternative Air conditioning

I found this innovative. Guy cycles cool well water up into his home, runs it through a heat sink (radiator) with a fan blowing on it to cool his home.

It's ugly, but a neat idea.

Source of extinction level asteroid

Here's an interesting hypothesis on the origin of the asteroid that scientists think struck the Yucatan and killed the dinosaurs at the KT extinction 65 million years ago. A massive collision in the asteroid belt that exists between Mars and Jupiter is identified as the source in the study. The study is interesting as they've taken orbits of existing groups of a family of shattered asteroids and worked backwards to the point in time when a collision broke them apart from what used to be a much larger asteroid.

Spider-web

Have you heard about this giant spider-web in Texas?

You can also view the video from the CNN site to get an idea of the scale.

From the video you can clearly see that there are several different species of spiders included as part of this web. It's not one big clump of the same type of spider.

Subprime Assessment

Here's one of the better short articles I've seen on subprime mortgage problems.

From the article:

Now there is a lot more that I can get into here, but I wanted to just briefly focus on what I see as the key issue that has made the word "subprime" sound like "Long Term Capital Management" -- namely, the availability of 100% financing.

I have no problem with 100% financing when you're talking about a big screen TV or maybe a nice sectional, but 100% financing for a home is asking for trouble if you ask me. Even worse is allowing subprime borrowers to use 100% financing. Of course, I'm not just talking about full 100% loan-to-value [LTV] loans, the same applies to the so-called piggy-back loans that provided 100% financing through 80/20 or 90/10 paired loans. And don't even get me started on 110% LTV loans...

In case you find yourself without your space suit...

I've not seen this discussed before, but this post discusses what would happen to you if your body were unprotected in space. Actually it's not quite as extreme as portrayed in the movies, and surprisingly it indicates you could probably survive for a while in space without a suit. And despite the extreme cold you wouldn't immediately turn into an ice cube because despite the cold there's so little air to take your body heat away.

Fantasy Football Roster 2007

We had our fantasy football draft today after work.

Here's the first 12 players in my work league for 2007. It's a 14 team league starting 1 QB, 2 RB, 2 WR, 1 TE, 1 K, and 1 Defense. I picked 4th in a serpentine draft order.

Rd pick player
1 4 Shaun Alexander RB, Seattle
2 25 Brandon Jacobs RB, NY Giants
3 32 Torry Holt WR, St. Louis
4 53 Plaxico Burress WR, NY Giants
5 60 Javon Walker WR, Denver
6 81 Adrian Peterson RB, Minnesota
7 88 Ben Roethlisberger QB, Pittsburg
8 109 Tatum Bell RB, Detroit
9 116 Bernard Berrian WR, Chicago
10 137 Alge Crumpler TE, Atlanta
11 144 Rex Grossman QB, Chicago
12 165 Arizona Team Defense

We have a salary cap league and I have enough left under the cap to pick up a kicker and perhaps a backup Defense and hopefully a backup TE. I'll do that once we open free agency in a few days.

I'm pretty happy with everything I have right now, except I'm slightly concerned at the RB position. I may have stretched a bit to take Brandon Jacobs in the late second round and might should've taken Chad Johnson or Reggie Wayne who were both still on the board and hoped that Jacobs would still be there in the 3rd round, but I didn't want to risk it because almost all of the decent calibur starting RB were getting snatched up at that point.

For my #3 RB I picked upside potential with Adrian Peterson in the 6th round rather than taking a player like Jamal Lewis or Lamont Jordan. Hopefully my RB picks don't come back to bite me.

I feel very good about my WR - I feel like I got 3 #1 WR somehow (I'm not sure why Javon Walker stayed on the board until the 5th round but I couldn't pass on him).

Was also very pleased to be able to pick up Alge Crumpler in the 10th round. Everyone seemed afraid to take him because of all the issues with Atlanta this year, but he's a top 10 TE.

Fantasy Football - Team Defense

At work our fantasy football draft is tomorrow and I've been busy this weekend on my pick sheets. I think there's something inherent in most who play fantasy football that we think we can outsmart the experts, find sleeper picks, find over-valued players, etc... For some reason we think we can go home one weekend and come up with a better list than several dozen professional websites - who've probably spent 100s or 1000s of hours putting player projections together... Heck, we might not have even seen one game last year by some of the players we're projecting, but we've read somewhere that a player's having a great pre-season...

But I guess that's the fun of it. We'd rather go down in flames with our own mis-guided player list than just blindly using a carefully researched cheat sheet from a professional website.

Well, today I've been looking at Team Defenses and have come to the conclusion that they're very difficult to project - at least not with the certainty to warrant a high draft pick.

For example:

In 2005 the top scoring defense in my league was Carolina with 220 points - about 60 points better than average. So it should make sense that they would've been good in 2006? Nope! Carolina had a below average defense score in 2006 - ranking 19th in the league. (Defenses in fantasy football include things like sacks, interception, fumble recoveries, return game TD, defense scored TD, safeties, blocked kicks/punts, points allowed, etc)

In 2006 the top scoring defense was Baltimore scoring a whopping 275 points - a full 109 points better than the average defense. So should I step up and draft such a powerful defense early? I don't know, because they only scored 172 points in 2005.

Here's another thing. The 3rd best defense in 2006 was San Diego - scoring 208 points. Was 2005 any indicator that they'd be that good? Not really. In 2005 the San Diego defense ranked 23rd in fantasy defense only scoring 148 points.

Why should defensive scoring be so volatile and seemingly unpredictable? The Baltimore defense would seemingly be drafted very early - probably a first round draft pick if they could be relied upon to score 270 points again this year, but in our league the top defense generally doesn't get drafted until the 3rd round, and in most leagues the defense doesn't go until much later - 5th or 6th round. It does seem they're highly unpredictable.

Some stats: The top 10 fantasy defenses in 2005 scored an average of 195 points, an average of 35 points above average. In 2006 those same 10 defenses averaged 167.4 points - less than 2 points better than the average for the league. In fact, 5 of the top 10 2005 performers were below average in 2006. In fantasy defense, past performance seems to often have little to do with future performance.

It makes me think fantasy scoring for defenses is based largely upon random or at least unpredictable results and that the level of certainty of future defensive scoring is very low.

There is one defense that has been consistently strong over the past 2 years: Chicago Bears. They performed well above average with 216 points in 2005 and 248 points in 2006. That seems more the exception than the rule though.

My plan? Unless the best defenses drop farther than they normally do in my league I'll probably try to take two defenses late and play the best match-up in a given week.

Singing Horses

And this is just kind of fun... Turn on your speakers.

Backyard Helium Balloon Launch

Is this not cool? Check out these photos taken from an amateur helium baloon launched from their backyard in Alberta Canada. The balloon reached over 117,000 feet.

Aid organisation refuses food subsidy

I found this story interesting. I've blogged before about the concern that the way U.S. foreign aid programs are structured may damage local economies of the countries they're designed to help by undermining local farmers. (Farm subsidies that send under-priced agricultural products overseas can put farmers in those countries out of business increasing dependency...)

At least one major NGO has refused the food subsidy for this reason.

Shadow Puppets

My friend Steve pointed this video out to me. Pretty incredible stuff. To Louis Armstrong's "What a Wonderful World"

Here's the thing

How much do we really need and why do we think we need it? Why are we wired to compare ourselves to everybody else around us? These are interesting questions to me.

I figure we live like kings compared to even the most well-off people from even 100 years ago. I mean there wasn't even electricity then, and thankfully I haven't ridden my horse to work in a while. (The horse is thankful also). How many people even 100 years ago could wake up to a warm shower? By all objective measures the average Joe today lives like a King compared to almost anyone living 100 years ago.

But I wonder if the average Joe perceives himself as any better off?

I wonder if in 100 years people will be orders of magnitude "better off" than we are now, but will they still be slogging away at jobs they don't enjoy, trying to pay mortgages and buy stuff, and just trying to figure out how to get ahead... Will we ever get to the point where we're satisfied, or are we wired against it?

No bailout

I like this comment from Warren Buffett on a potential bailout of the many troubled lenders.

"If lenders lent money that they are not going to get paid back, that's their problem, frankly"

Here's the commentary from seekingalpha.com

Squirrels

This story about squirrels "heating their tails" and harassing rattle snakes is one of the stranger things I've heard in a while. Apparently adult squirrels can survive rattlesnake bites.

from the story:

Because the snakes, which are ambush hunters, can sense infrared radiation from heat, the warming makes the tails more conspicuous to them — signaling that they have been discovered and that the squirrels may come and harass them

Fantasy Football

Fantasy Football season is almost here. At work we picked numbers to determine our draft order today for our 14 team league. I got lucky and picked #4 this year, the best pick I've had yet over the past several years.

Players like Frank Gore, Shaun Alexander, and Larry Johnson will likely be among those I'm picking from at that spot.

Newt Gingrich

I tend to lean to the liberal or even libertarian side of things politically, but I am a big fan of the Newt Gingrich's ideas and the way he thinks. Whenever I catch him on C-Span I find his talks to be always engaging, insightful, and even visionary. I saw one of his speeches recorded at Vanderbilt where he discussed this same "World that works" critique of bureaucracy similar to the one illustrated in the video below.

Quotes of the day

Here are some good quotes I saw on the Big Picture Blog.

A couple of my favorites:

"It is pretty hard to tell what does bring happiness; poverty and wealth have both failed."
— Kin Hubbard

"There was a time when a fool and his money were soon parted, but now it happens to everybody."
— Adlai Stevenson

Lotsa buying/selling today

I took the day off of work today and made quite a few changes in my portfolio, taking the chance to trim some poorly performing stocks. I find it's good to clean the decks sometimes after major market pullbacks as there's usually stuff out there I want to buy, and that's what I've tried to do.

I reduced further my position in CRDN Ceradyne. It's been very profitable, but time to lessen exposure here given the poor performance since the conference call.

I eliminated my final small position in PMTI Palomar - a big looser for me.

I sold my position in NGPS Novatel. I made good money on this one over the past couple of years, but it's been trending poorly, and sales growth has been anemic recently when GPS components should be performing better.

I added to my position in Vasco Data Security (VDSI).

I tried to purchase more Cognizant CTSH, but the order did not fill.

What I've been reading

"Trend Following" by Michael Covel. Trend following is a trading philosophy designed to capture benefits of longer term trends. It details successes of many trend followers and along the way bashes about every other method of investing. I found it good to have read, although like most books it's padded with too much fluff. Could've gotten the same point across in 100 pages. Suggestion - read the first couple of chapters and turn to chapter 10 to get the gist of the trend following approach.

"Hot Commodities" by Jim Rogers. I'm reading this right now. Jim Rogers is a well respected investor (you probably see him on the financial news occassionaly) who advocates moving some of your asset exposure into what he sees as a long term commodities bull market. I've been learning about trading systems and many trading systems (including trend following) incorporate trading in commodities (like oil, natural gas, wheat, cocoa, corn, cotton, pork bellies, etc).

"Foreign Currency Trading" by Russell Wasendorf (Jr and Sr). I'm still reading this too, but is an introduction into foreign currency trading. Just trying to expand my options as I work on a trading system. Many traders trade currencies.

Over-leveraged

Here's an interesting story regarding the over-use of leverage putting selling pressure on the current markets. I found it interesting reading for perspective.

"The Minsky Moment is important because it means the beginning of forced selling. Buying driven by ever-increasing leverage stops, and selling to decrease leverage begins. The deleveraging sellers are there because they must sell."

Homes carved from stone

Check this out. It's not an optical illusion although it's hard to believe the scale of the first image. These are homes carved into stone towers in Cappadocia.

This photo gallery has many pictures of the region. I'd never heard of it until I came across today.

The song that launched "unplugged"

I remember this performance from when I first heard it on an MTV award show around 20 years ago. While soon after this it became popular for bands to play acoustic versions of rock songs, Jon Bon Jovi and Richie Sambora were really doing something unique for the time period when they unplugged for this performance medley of Living on a Prayer / Wanted Dead or Alive.

Conference Call Transcripts - Garmin and Cognizant Tech

Here's a link to Garmin's Conference Call Transcript. Garmin makes personal navigation devices, and reported some very strong results, and are hinting at what sound to me like run-away product demand.

Some Highlights.
- Revenue up 72%
- Unit Volume up 99%
- Automotive Unit Volume up @173% is driving unit volume results.
- margins higher than expected
- unit price decreases being offset by component price decreases, although expect margin compression in last half of year due to spike in flash memory prices.
- market seems to be growing faster than they thought.
- sounds like they expect eventually over time 40%-60% of cars to have a navigation device.

Here's a link to Cognizant Technology's Transcript also. Strong quarter there too. Europe is clearly a focus for growth going forward. They don't see capacity constraints being too much of an issue, especially not the employee count constraints so often mentioned in analysis. They feel like they have excess capacity built into their business model already.

High School Graduation Rates

Ever wonder where your state stands in its efforts at graduation high school students? Here's a table that shows Public School Graduation Rates in the US in 2000.

It's really a pathetic showing. I honestly didn't realize it was this bad in some areas. In my state of TN 6 of 10 high school students graduate. And there are some states that are worse.

That's really scary considering how it limits future opportunities for so many kids. And Lord help you if you're a non-Asian minority.

Crazy - This is Classic

Crazy - The Studio Recording Session.

Red Velvet Ant (Wasp)

I saw a Red Velvet Ant outside today while I was mowing. First time I think I've ever seen one in nature. Here are some good picture's I found on the web.

Pic1
Pic 2
Pics 3 and 4

Turns out it's actually a female wingless wasp - and known to have a powerful sting giving it it's alternate name of "Cow Killer."

Simpson's

I'm not a Simpson's fan, but I understand there's a movie out and it's doing great. I came across this impressive video of the Simpson's theme music.

Firestone

I'm curious. Have you ever dropped your vehicle off at a Firestone Service Center and not had them recommend significant additional work?

Last year when I purchased new tires they recommended over $1000 of additional work on axles/struts/or something.

Today I wanted an oil change and tire rotation. They recommended additionally I replace the serpentine belt.

I don't trust them farther than I can throw them, but is this standard operating procedure?

I have some local guys at a gas station that normally work on my vehicle (excellent work) who tell me for the most part "if it ain't broke don't fix it." Even though they're not a tire place I'm wishing I would've just purchased my new tires from them so I don't have to deal with all the up-sell every time I take advantage of the free tire rotations from Firestone. Advice is useless if I can't trust the folks giving it.

Transactions Today

Down markets seem like a good place to weed out some losers and move money into some different places, so made a couple adjustments today.

I sold the Palomar Medical Tech (PMTI) in my taxable accounts today to take tax loss. Still have some in another account, but will re-evaluate after 30 days.

Moved funds into a position in Immucor (BLUD). They had strong earnings announcement last week and I like the company characteristics in general. Also considered putting into CTSH Cognizant, but held off there.

I almost bought a big chunk of the general market Nasdaq Index QQQQ, but decided I'll stay with companies instead of the index for now while I'm research the general market trading system.

Working on trading strategies

A short while back I was studying the beneficial impact of buying on down days and that got me to thinking about trading strategies in general - something I've never given serious thought.

This weekend I've put in a lot of effort working on a trading system - trying to see if I can come up with an automated trading system that can outperform the market.

I'm still working on it and I'm thinking "maybe" it's possible, but it seems to be much more doable in sideways or downward moving markets like 2000-2003. When I transition the strategies that work into more bullish environments, it's tough to beat a strictly buy and hold approach. By this I mean the models are decent at making money in bad markets and picking decent exit/re-entry points, but aren't as good at staying in in good markets. Market timing in bull markets seems somewhat counter-productive unless highly productive and timely sells can be targeted.

I'm trying to build logic to improve performance in bull markets, but it's tougher than it seems it should be at first glance.

Time for a test

A slight variation of this trading strategy discussed a short while back is giving a buy sign right now.

I'm curious to see the outcome. Current status of SPY - the exchange traded index of the S&P500:
- Down Day
- Down market trend vs both 20day and 40day intervals
- 4 or more of last 7 trading days have closed down
- Sentiment indicator Neutral

In the 40 instances the market has had this setup since 2004, after 4 days the SPY has closed up 83% of the time, with an average gain of 1.32%. SPY is at 148.02 in after hours trading right now. Lets see if closes next Thursday up from this point, and by how much. I'm unsure if there are any dividends between here and there, but if so we'll adjust the prices to account for them.

Still investigating how to get the leverage to make these types of expected moves play out, but it's interesting to think about.

By the way...

Did you hear that my wife sold her first book the other day?

Congratulations!

Ouch

Ouch. Palomar Tech's earnings announcement apparently disappointed big time today. I haven't had a chance to look into detail yet, but this is a small thinly traded stock, so it can move big when pushed. There was a special one-time royalty earned last year that also complicates year over year comparisons. At first blush the report doesn't look like it should've triggered such a bad reaction, but there could be something else there.

At least most of mine is in a taxable account...

Interesting Articles today

1. Your friends can make you fat.

2. Better student achievement in rural schools. Note the comment about less money spent per student but smaller schools and more people know each other vs. bigger city schools.

3. And this was an interesting video find from Stars' Reflections blog. Pay attention