Market Chatter

2011-11-29T13:21:00.001-06:00

La Belle et Le Bad Boy http://ping.fm/AAKbd

2011-11-28T05:59:00.001-06:00

Occupy L.A. - W.T.F. is Going On? Man on the Street Asks http://ping.fm/GiBDn

2011-11-20T09:09:00.001-06:00

budweiser lobster http://ping.fm/Pn4XI

2011-11-20T08:59:00.003-06:00

E*TRADE Singing Baby updated 2/19/10 http://ping.fm/AFBsE

2011-11-20T08:59:00.001-06:00

E*TRADE Golf Baby updated 2/19/10 http://ping.fm/avJGr

2011-11-19T20:39:00.001-06:00

AT&T - Trojan Horse http://ping.fm/k7jof

2011-11-17T12:49:00.001-06:00

Shelby County High School 2001 KMEA Kentucky State Marching Band Finals http://ping.fm/zTddv

2011-11-12T18:59:00.001-06:00

KCCM Capital Management Arbitrage and Risk Management Intro http://ping.fm/uVZgV

2011-11-11T18:59:00.001-06:00

Is a Bird in the Hand Worth Two in the Bush? GEICO Commercial HQ http://ping.fm/qNymw

2011-11-11T16:36:00.001-06:00

Test

2011-11-03T20:19:00.001-05:00

Paul Laurence Dunbar High School 2001 KMEA State Marching Band Finals http://ping.fm/y6Bg1

2011-11-01T21:49:00.001-05:00

Goerge Rogers Clark High School 2001 KMEA Kentucky State Marching Band Finals http://ping.fm/fQZ47

2011-11-01T20:29:00.001-05:00

Boyle County Marching Band - Finals at South Oldham http://ping.fm/AHoTI

2011-10-27T13:59:00.001-05:00

Little Lion Man Church Recording http://ping.fm/ieJLV

2011-10-24T22:16:00.001-05:00

Hey guys I'm very excited about getting my ping.fm account running, so watch tomorrow as I stream the orders my simulation account is taking

My Contact Information

2011-09-12T19:27:00.001-05:00

Beau Wolinsky

President and CEO, RIA Rep, CTA

K.C. Capital Management, Inc.

RIA, CTA

e-mail: bwolinsky@kccapitalmanagement.com

iPhone: 1.859.583.9016

President and CEO

The Kansas City Stock Exchange

The Kansas City Stock Exchange Periodical

Covestor Investment Management, Inc.

RIA Rep

KC Capital Mgmt on Covestor

The Market Chatter Blogspot

BWO Vision

BWorldOmnimedia on Twitter

K.C. Capital Management, Inc. on Facebook

My Linkedin Profile

Quantitative ETF Model's Blogpost: We know we are in a hyperinflationary environment

2011-08-16T17:02:00.001-05:00

College Conspiracy

2011-06-20T17:31:00.000-05:00

http://youtu.be/VpZtX32sKVE

Forums - Td Ameritrade Think Or Swim Super Dom Simulator

2011-03-22T09:38:00.000-05:00

Forums - Td Ameritrade Think Or Swim Super Dom Simulator As I was preparing for 24/6 days, I finally decided to use a simulator. I was unaware of the relationship, but eventually I figured out that the dom data was delayed while time and sales and charts were in real time. Still, I wasn't aware, and I thought I made good money trading on a discretionary basis, but, still, just a simulation, and pretty funny. Being my first post in a long time, I've been working towards fulfilling my compliance obligations for all of my ventures, including one stock exchange, an RIA, and a CTA. I plan to take level II of the CFA Curriculum next year.

25th Hour Broker Scene

2010-12-27T09:08:00.000-06:00

Global Sentiment, Risk Management, Capital Management Arbitrage, And Financial Science (1)

2010-10-27T23:41:00.002-05:00

Read it first, or watch the video first. If you'd rather read first, you don't have to listen to the lecture at the end. But doing so at both the beginning and the end would really drive the point home. Enjoy.

View more documents from Beau Wolinsky.

Market Chatter: What is Price Physics?

2010-10-18T03:06:00.008-05:00

Market Chatter: What is Price Physics?: "PRICE Physics?" K.C. Capital Management's Facebook Page Any questions? Please don't hesitate to Contact me. I'll represent you without a Principal Agent Dilemna conflicting with me not working in your best interests, your companies best interests, your investor's best interests, or my own conflicts of interest through Financial Market Strcuture Re-Engineering designed to segmentize the risks involved in the transaction according to allocating that investor's chosen financial instrument vehicle.

Beau Wolinsky

President and CEO, RIA, CTA, Financial Scientist, Price Physicist

K.C. Capital Management, Inc.

bwolinsky@kccapitalmanagement.com

Video Voip and Webcam Voicechat enabled iPhone: 1.859.583.9016

President and CEO

The Kansas City City Stock Exchange Periodical

Covestor Investment Management, Inc., CVIM

CVIM RIA Rep

kccmBWO Covestor Portfolio Profile, Performance Summaries

The Market Chatter Blogspot

BWO Vision

BWorldOmnimedia on Twitter

K.C. Capital Management, Inc. on Facebook

Scalar Risk Management Iteratively Planar Customizable Allocation Multi Strategically Modified, Multi Scale Decimalized Multiplicative Re Allocation Modifier

2010-10-17T13:11:00.001-05:00

Check out this SlideShare Presentation:

Scalar Risk Management Iteratively Planar Customizable Allocation Multi Strategically Modified, Multi Scale Decimalized Multiplicative Re Allocation Modifier

View more documents from Beau Wolinsky.

Global Sentiment, Risk Management, Capital Management Arbitrage, And Financial Science (1)

2010-10-17T13:03:00.001-05:00

Check out this SlideShare Presentation:

Global Sentiment, Risk Management, Capital Management Arbitrage, And Financial Science (1)

View more documents from Beau Wolinsky.

Thomsonreuters Markets

2010-10-17T12:51:00.001-05:00

Check out this SlideShare Presentation:

Thomsonreuters Markets

View more videos from Beau Wolinsky.

Global Sentiment, Risk Management, Capital Management Arbitrage, And Financial Science (1)

2010-10-17T12:27:00.001-05:00

As a slideshow, I'm pleased to bring the slide-show version of my Global Sentiment, Risk Management, Capital Management Arbitrage, and Financial Science Presentation.

Global Sentiment, Risk Management, Capital Management Arbitrage, And Financial Science (1)

View more documents from Beau Wolinsky.

Price Physics Alert

2010-10-15T00:01:00.016-05:00

Seems to be a very good time to consider hedging Treasuries, and Financial Securities Generally, supported strongly by Gold and Silver, otm calls, and possible covered call selling.

Be sure to watch BWO Vision's Financial Science and Applied Mosaic Theory playlist for information related to this information.

These videos I find particularly to have constructive observations and criticisms about our society. Call me or e-mail if you'd like more information about the Mosaic Theories giving rise to this Price Physics Alert. I regard it in a 2-4 week time frame, as depending on higher low or lower high price action.

Any questions?
Contact me.

Beau Wolinsky

President and CEO, RIA, CTA, Financial Scientist, Price Physicist

K.C. Capital Management, Inc.

e-mail:%20bwolinsky@kccapitalmanagement.com

Video Voip and Webcam Voicechat enabled iPhone: 1.859.583.9016

President and CEO

The Kansas City City Stock Exchange Periodical Blog and Website

Covestor Investment Management, Inc., CVIM

RIA Rep

kccmBWO Covestor Portfolio Profile, Performance Summaries

The Market Chatter Blogspot

BWO Vision

BWorldOmnimedia on Twitter

K.C. Capital Management, Inc. on Facebook

The Kansas City Stock Exchange is Announcing a Reverse Silent Double Dutch Auction,or Mutually Agreeable Negotiable Terms for KCSE Membership Seats

2010-10-13T19:55:00.006-05:00

kccmBWO Covestor Portfolio Profile, Performance Summaries Letting you get back to value, so that we can positively benefit from our Mutually Beneficial Securities Exchange with new Seats, and profit. Letting you get back to value, so that we can positively benefit from our Mutually Beneficial Ownership of Seats by listing in the Private Equity Market at the Kansas City Stock Exchange Letting you get back to value,so that we can positively profit from our Mutually Beneficial Ownership of Seats by listing in the Private Equity Market at the Kansas City Stock Exchange. Letting us all get back to value, so call me. 859.583.9016 and we'll discuss our new ventures colloboratively, not behind closed doors, but with the door shut just enough to make the public without Private Equity Placement Participation Experience who doesn't have them, will be able to get them through a basket of these Private Equities into a customizable, deliverable investment vehicle, allowing you to track Capital, and guage Economic Profit. Join me today, and I will make sure every company no matter the size has a chance to fund its startup capital identically to what you see taking place here at all of my companies various websites. Enjoy. I want your business. Beau Wolinsky President and CEO, RIA, CTA, Financial Scientist, Price Physicist K.C. Capital Management, Inc. e-mail:%20bwolinsky@kccapitalmanagement.com Video Voip and Webcam Voicechat enabled iPhone: 1.859.583.9016 President and CEO The Kansas City City Stock Exchange Periodical Covestor Investment Management, Inc., CVIM RIA Rep kccmBWO Covestor Portfolio Profile, Performance Summaries The Market Chatter Blogspot BWO Vision BWorldOmnimedia on Twitter K.C. Capital Management, Inc. on Facebook

Global Sentiment, Risk Management, Capital Management Arbitrage, and Financial Science

2010-10-12T15:37:00.006-05:00

And witness the birth of our collective awareness of how present levels of technology can absolutely revolutionize the way we conduct our lives, and how we govern our diplomatic relationships with Democratic Global Society and American Capitalism. We would like our output to be as flexible about its input for our own sanity in performing quadrillion total bit calculations to arrive at Optimized Variables through both Parametrizational techniques related to the disproportionate Scalar Conversion Fractal Mathematics Theoretically Derived Factors affecting the underlying volatility of the portfolio uniformly that, over many iterations, should converge and be Plainly Scalar, meaning any combination of optimally allocated pyramidial combinitorical options can be taken into consideration and adjusted for that investor’s and advisor’s chosen counselled level of risk . My personal recommendation is a 5% target drawdown per contract, adjusted for portfolio drawdown to account for the effect of impossible theoretical lognormal loss assumed generally in our commodity markets and futures markets, including those of precious metals, forex and bonds, and billions of dollars of other exotic instruments that benefit a few wealthy people, to be impossible. So the public Liquidity Preference means Public Private Equity Trade doesn’t ever happen without an active market in demand re-inforced by the most recent pricing and fundamental information. Which we should all be thankful that the debtor society we would have today from the likes of Enron to the Global Economy, and all of the financial hardships from greed and financial injustice that just from the corruption, including pumping and dumping and outward projection of confidence shows that we all let our guard down when he walks up in a Ferrari and tells you about the 200 $100,000 checks he just cashed for $20 million that he got and spent for formatting standardized proprietary reporting software to pay what clearly were excessive kickbacks, despite the obvious conflicts of interest in this arrangement….But if we really thought that, Wall Street would not have paid them if they weren’t actually making tangible profits in third party portfolios based on that information that chased the image, hype and iconic style Enron gave eternally to Corporate America. That’s what lead to our subsequent idolization of the wealthy, with rumors of the stories I doubt anybody would deny they never heard about about how the wealthy became wealthy by further exploiting their relatively meritless fame with gossip from regularly featured, random quarter hour frames about great financial success, which is not simple to claim, especially for all of us that don’t know what a billion dollars is for. I plan to demonstrate why publicly by putting the spreadsheet mentioned here in various locations around the internet, and You’ll see how the evolution of our financial system is determined by human projections desiring predictable repeatable patterns entangling with all of our typically optimistic intentions allowing for frequent friendly, attractive opportunistic trading activity usually as entries or trades placed in our individually opinioned, directionally hedged speculations that can always be priced when any public quotation auctions its change. So my commentary wherever I choose to discuss this subject on the internet will have the spreadsheet I’m using as a Financial Science Experiment, just to demonstrate that I’m not doing anything different programming a computer than you do every day thinking about how to get to the store after your doctor’s appointment, or, for instance, how to conduct yourself when you’re trained either as employer to employee how or as employee who every American Capitalist would want to be automatically initiated, engaged and introduced into the line of production asap to compete with other employees so vitally important to the boundaries of their chosen assigned Scaled Scope of Operations, at both the individual and Corporate Level. Any amount of Risk that can be proportionately described in terms of both optimizable Scalar risk units, dollar amounts, or any other relevantly related calculation pertinent to that particular investor allows us to allocate a portfolio model level, multi-strategy/symbol Capital Management Arbitrage operation using underlying base contracts of inception as a target capital asset investment level commitment prior to any consumated processing of discretionary, unsolicited, third party financial transactions. For any amount. Even quadruple percentage losses wherein you have creditors who do not mind your temporary capital deficiency because they’re insured synthetically in the CDS Market against your loss, accepting that by the short seller who damn well should never have taken on the directional hedging transaction against you without a correspondingly equal hedge that I know was precisely due to the informational inefficiency in this particular Exclusively Knowledge Based Financial Society that’s not able to output financial data quite like what you see publicly or in this spreadsheet, primarily due to various limitations with personal microcomputer processors, but even more clearly despite intermediating the very transaction they were arranging. After quick introduction and discussion with self-interested, intelligent multi-decade experienced Wall Streeter Credit Analyst Bond Rating Agencies who felt by passing judgement overpriced cash money paper to throw into the debt ball we call California to pay other debt balls far too large than they ought to have been allowed to balloon to, who now need to sell nearly every state department, just to finance its monthly interest payments for 2010…… Libertarian ideals particularly with regard to Prop 19′s National Implications to the Future of American Society, should turn Cannabis into a symbol of Freedom from tyrannical oppression through Artificial Financial Manipulation, Deprivation all due to the merit based system of our economy, though it’s not that that its nearly flawless incentivization system engineered through societal social environmental engineering could be re-designed to avoid insititutions who want to take away ultimate liberty from us just so that that will save us from ourselves, and live the complicitatively, mediocratic life our governing legal counselors believe is politically acceptable to keep their political power without making issues of public opinion publicly known personal opinion. If we try to change more than we ought to in too short of time, which has its own biological clock governed by every human emotional projection that you send into the cosmos in the nearly 13.5 billion year history of sentient thought that exists in this galaxy, and anybody who truly devotes deep meditation to this ability will discover this pre-meditatively through intuition, syntextual and cultural context, and also naturally by the curiosity I’m sure you’ll have about me. But that really is like saying that because not everything can sustain everybody because of their lack of abundance, sustainability, and availability, is the exact same conclusion every candid environmental scientist will most likely choose to discuss during an interview. I published a blog to suggest passing through capital without principal subsidy by offering their investors, discounts in their tax bill due to Munincipality Technical Default in order to maintain their business and keep the Debtor out of Actual Default. As in it costs far less to pay single digit liabilities on the notional value peridoically than to pay the cash flows long term for immiediate sale at forwardly contracted artifically high engineered prices far in excess of the previous month’s rationally acceptable price through a synthetic put option described by the Khana Academy on YouTube and later receiving$2 million for their work in promoting education to anybody with connection to our global Information Network, I suspect, due to my persistent featuring of Mr. Khana particularly and promotionally. Meanwhile large institutional multi-million dollar blocks still frighten inexperienced new insitutions many investors in this market would happen to create such wild fluctuations profitably unintentionally in price because of the proportional changes in the implied volatility that due to the changes that that magnitude of price change implies by the change in the change, mostly makes only mathematical sense in an economic context, even though the third derivative change in the change in the change, related to Pricing Histories, Charts, exists fromValuably Enabling Analytical Financial Reports. If securities should never have traded at potentially irrationally clearly irroneous realized prices then were it not for the actual financial strength of that particular CDS tranche, that happened to be the one your dealer recommended, that alternatively choosing to invest due to the Adittional 50 basis point 0.6% APY Premium Yielding 9 Percent Ponzi Fund, you would not have lost if you inquisitely analyzed what you were choosing to own for purely speculative monetary gain. Could it possibly ever be that to do what we need to do all of us who are in the battle of corpororatic financial armageddon can continue to defend our nations economic future’s potential vitality from the Capitalist Apocalypse fortold by nearly every commodity based currency exporter who never re-invested and gave back their oil in exchange for paper dollars, could actually be theoretically used marginally to purchase these bonds, to pay interest on the collateral, but in keeping oil prices low by Currency Trading Restriction Sanctions simultaneously, unfortunatelyonce this music stops, it’ll probably be the Federal Reserve Holding the Bag of TARP Funds, with nearly every single non-performing security left over from that debacle due to the very nature of the offer to buy implied in the Fed’s actions October 2008. Ultimately meaning that the American Public likely will not understand why they can’t pay for basic necessities, but will preoccupy themselves complicatively complacently apatehtic with idol reality TV, useless, also apathetic, placating purchases of unproductive entertainment experiences, casual relationships, and social experimentation to live what we all refer to as our life. Not your life, not the life my constituent gladly paid $500,000 for in exchange for a superficial, politically idol promise, my life. My nation’s life and my life may not seem worth fighting for now considering my nation’s life’s relationship to my life, given that its monetary system is about to collapse, even though having known every Boomer’s stories about how Social Security would fail by Unavoidable Certain Ponzi Scheme Governmental Default, was a publicly documented opinion throughout America very shortly after American Journalists Literaturalists literally faced a new global mechanized terror that if it hadn’t have been for the boost in manufacturing technologies during the late 30′s, we would not have won the war. People ask naievely why we used so many resources to build such a terrible weapon of mass destruction in the Manhattan Project, at the historically outrageously sensationalized disproportionate expense that seems to imply questionablly, if we had all of those resources why we chose to develop the Atomic Bomb? …. ….. We had no choice, and would have been killed losing WWII and Global Liberty, otherwise. It is not the magnitude of the effort or expense, but the consequential results that matter. The world then benefitted from Uncle Sam’s position of relative financial stability enforced by the integrity to independently finance the reconstruction of the entire European continent. If Stalin had not decided to occupy Eastern European Countries, political tensions historically from clearly genocidal acts would not have bode well for the uneasy truce that lasted until the Russian’s released videos of their own Nuclear Blasts, actually marking the true start of the Cold War. Very shortly thereafter we detonated our first thermonuclear weapon in 1954, with a 15 megaton yield. That was more than 50 million pounds of tri-nitro toluene TNT High Explosive yield Equivalent that reportedlly had a leaked classified Blast Radius in excess of 150 feet deep and over 1 mile wide. A little known factor that affects commodity prices that account for changes in the difference between the spot price and the futures prices is called basis. So, when our average wealthy industrialized lender nation lends us capital but we owe more in monetary resources to them, who is really in a position of competitive advantage? At some point they may wish to disengage centrally from the Treasurie’s Federal Reserve Dollar Based Fiat Currency Monetary System, having no realistic choice or Globally Recognized Alternative Universally Accepted Global Currency. With lives potentially about to be destroyed for years if these companies can’t get their AAA ratings marketed they know that they need to keep credible, public evidence of solvency propoganda perpetually rationally publish but in acting perversely unethical because we all need to sell an opportunity to prosper from buying breakfast cereal, toothpaste, or finding sources to continue financing your current clients and trading on ECN networks to discover pricing information, you inferred through securitized Debt to Maturity Similarities in both the YTM and the the Yield itself, that you were clearly insolvent, despite rhetoric to the contrary. They had to save their companies jobs and their own, out of pure self-interested preservation, pretending later that these were not armslength pre-disclosed transactions…THEY WERE! Passively shifting that responsibility onto the taxpayer through Professional Deceptive Malpractices, will likely cost even more litigation dollar economic losses as taxpayers realize, “Why the fuck are we paying the banks to loan money to us? We give money on generous terms essentially free, then they take that, give it to who they owe, and the exact same dam problem of perptual debt refinance goes on if you had when you bailed them out later in the Geithner plan, made no rational economic sense for all of the reasons outlined in BWO Vision. Who thought that up? A Bureaucrat? Ben Bernanke? Sounds like Paulson, who after watching his videos many times at BWO Vision, my youtube channel, I think you’ll find as I did that maybe he was looking out, but if the choice between worrying about American Cronyism Corporate Interests preventing Financial Democracy is fueling the destabilizing force of socialization and ceasing of pursuit of happiness, means we are giving up all we have so that Mr. Ben can test his Coordinated Global Quantitative Easing Macroeconomic Growth Strategies similar to the models you’ll find at the links through my various sites that lead to this spreadsheet. Just without any actual idea how to periodically coordinate that, when it will be forced to sell more than $100 billion of bonds in the next month alone to prevent a collapse of our economic system, and a short squeeze in commodity prices that will with little uncertainty put further pressure on the debasement of our currency which when we notice International Investor assumptions we’re resorting to when we try to deal with the issue of maintaing credibility despite substantial increases of over 20% in nearly every commodity since May 2010. Hyperinflation is already here. So Mr. Bernanke went to study the monetary changes these capital infusions had effected months after public money was first authorized for short term use collateralized against artificially rated AAA collateral Junk Paper Certificates from Private Portfolio of Public Companies that I referred and aptly publicly described analagously coined the name “A Corporate Liar Loan”. You will find many banks have already paid back their short terms, but the short term issues of preventing a systemic collapse were centred more about the questions of having a virtually implied guarantee from every State in the Union obligating us so that State Insurance Regulators will pay every dollar of liability sold by any Insurance Agency who succesfully sells these contracts for commission to any third party that does not directly benefit the other non-insurably interested entity, with regulations regarding the loan loss reserves that when they go below incurrs a net underwriting loss. However, this has been a tenent since the beginning the United States Insurance Regulatory agencies in every level of government, from insuring semis, tanks, bull dozers, aeronautical aircraft for private public use of all kinds during non-combat operational use that was merely a bonus to pay Veteran Servicemen for their selfless act of needless, unrewarding, unimaginably hellish commitment to pursue civil service under the guise of patriotism……. We must all unite, but unite for the right reasons. Not out of artificial popularity projected by media or to one particular nation’s cause, but out of collective self-interest that it is so obvious to every American. We don’t need to dictate fascistly how individuals should conduct their lives, whether it includes alcoholism, smoking, marijuana, sex, television, internet, these are all natural pure human emotions that if you even choose to think about what you’ll do after you finish reading this, and decide if you are satisfied with the stratification of American society, then join the fight so that you can help American Collective self-interests to maintain its roots in entrpreneurialism, liberty, capitalism, and above all else, Economic Growth, Wealth and Prosperity, Peace and Unity. This idea that we should embrace Unity will all bring about an awareness of humanity that it is more than a division of nations, not divided in their nationality by race, origin, sex, or ethnicity, but by common purpose, for the good of globalization, Happiness, and making our economies roar to life as we once again chase cheap dollars to make one last final jab and see if by our flooded monetarily overcapitalized investment transferred by the Fed to financial institutions, I know we will have to consider how to re-balance ourselves politically, economically, socially, and go forward united in Common Collectitvely Aware Self-Interest. Problems? I don’t see one, but if you look at AIG and gedankein that if this wasn’t actually the problem or issue…they were stupid for not saying that regulatory insurance contracts guaranted every underwritten contract sold by AIG or any other insurers selling contracts under that regulatory structure. Which may have calmed outrage about the Fed’s Loan Sharking to AIG, whose stock has declined nearly 90% since the government got warrants in securities that are no longer trading where it would make any profitable sense to even attempt to claim their shares. But if I told you how tired I am of writing hundreds of words in many places about nearly identical subjects posted most recently in the passed 72 hours online, I think you’d tell Bear Stearn’s to sell at $2 Monday even though clearly the Manhattan price of their downtown building was worth at least $1 billion. And with 100 million shares outsanding that were formerly trading above $150 per share, as the credit tsunami hit, it bankrupted them from short term, not long term insolvency. Many financial companies figured out how to secure virtually unlimited leverage from creditors in exchange for raising capital to finance their mezzanine refunding operations because there was an active market to do so, without worrying about the quality of the bonds they were trading having generally assumed by incorporation how to have already pre- arranged these transactions even immediately up to IPO that surely they must be ready to move paper, before they even exist or start business, right? You know what happened. Nearly every dollar left over indebted to TARP is over half way owed by AIG, who, after being more than a $10 billion stock, reverse split it’s shares with split adjusted levels 5 years ago that publicly display prices backwardly adjusteded in excess of 4 figures, were saved not because they did anything wrong, other than masturbate over supposedly mathematically convincing actuarial algorithms, (imagine that), that they’d assumed that if they paid math graduates to write to make decisions about filling this gap that perversely incented through various investment banking relationships throughout Wall Street, particularly near the Manhattan, Connececticut area, created by the common Principal/Agent problem from Principally Concerned disincentives to accurately report profitability is created if overleveraging did not lead to bottom line growth but can be Financially Engineered or, in the case of restatement, Re-Engineered, by Accounting Manipulation. And this is the main indication of a lack of economic profitability central to the growth of equity and the foundation of the Fundamentals to Financial Science. AIG may have been the only real bottom line misrepresentation to our American Public, I think, but what is a financial scientist’s opinion worth, anyway? I’m sure there were lots of people with higher SAT or ACT scores that have lost more money than I ever want to lose when I do become as wealthy as I envision being after these titans of industry who bragg about spending $1,000 just to get to work every day by helicopter, feeding an egocentric herded behaviour with natural self-aggrandizement, find out that strategic re-structuring of our Economy is vitally important if we want to stay a United States Republic, without resorting to martial law, military dictatorship following the total collapse of the monetary system and leaving a piece of likely radioactive dirt to shape and mold to re-build a system that can make every common good available to man abundantly, and still allow our companies to fuel innovation, research, capital expenditures and generally excercise the aggressive pursuit of success as excessively as we possibly can try to when we’re working for a government issued single productivity credit contract equivalently arriving in the event following a 100% hyperinflation, but not settling till after a 1,000% rise in CPI after 5-10 years 5-10 years from now. This I do not consider opinion, rather than clear factual basis if you look at any cursory information about the functionings, dealings, and issues in every single financial media agency that wants to have any credibility when they discuss this subject. Despite what others say is that without the principally guaranteed bond insurance dealers, no one would have ever taken these bets in the first place. With low rates, artificially low or not, the fact we haven’t had any failed treasury auctions suggests there is plenty of demand for US Dollars. These banks sold paper that only requires a few percent of temporal guarantee per year to maintain until the banks actually become re-solvent, even if they were according to US GAAP Accounting Rules of FSA Principles generally, could have been managed through Risk Managers experienced in unwinding unhedged market exposure, regardless of which market you’re interested in or when you made the trades in the Global Financial Markets. Goldman Sachs hyperactive scramble to become a Bank Holding company, in order to gain Federally granted freasy money given to loan to the American Public, did so intending to use it to trade on a proprietary basis, shooting up leverage debt/equity rations yet again, and while tacidly banning of risk is not adviseable for any market, I would think that after our credit debacle, in hindsight, we did raise securities prices in which now more than any other time in US history hold over 50 million investor accounts owning shares in domestic equity shares that many don’t realize are inevitably correlated to the changes in the underlying index they compose. Say we all quintupled, but your bread cost 100% more, does a 1,000% increase sound like that prospect is beneficial for anybody on Earth? I’m not talking just the US, I’m saying this is being played out by fiat currency market regulators who believe by keeping their currency relatively exceptionally attracitively undervalued that they can benefit their poor pockets of society by offering them jobs in minimum safety, and sub dollar daily salaries that get more and more dilluted every day through the inflation China in particular will face if they continue to artifically manipulate their currency, for the sake of Hybrid Chinese State Communism that they should in turn realize, that just as they are as democratic, and indebted financially, various poor publicly invested bureaucratic failures from publicly funded government investment projects typically run as far over budget just as is problematically reported by the US without resolution. When credit defaults are actually more important to bond dealer investor brokers who trade amongst themselves even sometimes on a first name basis, but if we had not have created this scheme where the bank can offer perverse incentives to overpay on this transaction in exchange for what is likely financially profitable for each side because these AAA ratings still yield triple handle percentages in certain tranches if you look hard enough. So in that world we live in this dimensional frequency of reality where this perversely Moral Principal Agent Dilemena can be disintermediated through market structure re-engineering, segmentation, related to how the products of each company disclose every relevantly, conerning financial transaction they are involved with, including as with Investment Bankers also being FDIC Bankers, which are not the same thing, and I love investment bankers, but suits out for cash hoarding, check cashing for the sake of deposits as well as other obvious compliance issues I don’t think can actually ever be firewalled. Especially given the level of our technologies, and obvious inadequacies in personal computer virus protection updates and general technological maintenance. Planning to get 64 Bit Windows Quad Core I7, so watch out for me to really step up the pace of financial output for educational purposes to discuss strategies for this particular multi-instrument portfolio position sizing technique. I’m here to change the way the American Capitalists do business, but not to whimsically promote Idealistic, Irrationally Economically, Illogical reasons that aren’t at all based on universally distributing wealth. Not in the least bit. I have schemes that I have intuitively concluded will transform our society through correct incentivization re-engineering that rewards technological growth. If we need 700 companies created like Apple to make it through this year, send me your best proposals, and I’ll intermediate these transactions in a private share market interested only in intermediary, principal non-proprietary holding company trades. We need new entrepreneurs, and don’t ever forget Apple Company is really a 70′s era company that every investor loves to hear quarterly reports so much so that they do actually listen to them, in fact. Any questions?

Contact me. Beau Wolinsky President and CEO, RIA, CTA, Financial Scientist, Price Physicist K.C. Capital Management, Inc. e-mail: bwolinsky@kccapitalmanagement.com Video Voip and Webcam Voicechat enabled iPhone: 1.859.583.9016 President and CEO The Kansas City City Stock Exchange Periodical Covestor Investment Management, Inc., CVIM RIA Rep kccmBWO Covestor Portfolio Profile, Performance Summaries The Market Chatter Blogspot BWO Vision BWorldOmnimedia on Twitter K.C. Capital Management, Inc. on Facebook

Personal Portfolio Strategy update

2010-10-09T20:09:00.010-05:00

October 9th, 2010: Clearly from the rise in commodities hyperinflation has already occurred, and, ironically, the decision to allocate to tip bonds and the results you can see at Pairs Trading QID QLD 2 which bought the ETF TIP over 2 months ago has increased over 5% in less than 2 months since that purchase, and rates have remained artificially low, putting more pressure on the rise in commodity prices, financial products, and other investment instruments that ultimately all impact the US Government's ability to finance its deficits. If you would like to see my personal portfolio and track record since K.C. Capital Management, Inc. began it's operations , please click on the article headline, and you'll be taken to see kccmBWO's Covestor Portfolio, , which tracks client transactions that I control under discretionary authority, supervision, and advisement generally in the investment decisions of my personal portfolios and client investment decisions. As of the date of this update, I have kept this profile hidden, but the inception date is the effective date I started this profile in order to effectively keep a universal record of all of my transactions, because that was literraly the only alternative I had in order to produce performance histories. And these are realiable third party summaries, but they have technical issues that don't always update my transactions effectively. I promise I will make it a priority this weekend to get all of the trades I've effected as an RIA to show you how I manage capital. I'll be working towards these ends for the purpose of financing expansion and to promote the capital growth and equity growth I want to see perpetually created by these new endeavors.

A financial game of musical chairs created through our fractional reserve Banking System.

2010-09-06T14:35:00.000-05:00

Financial Science and Applied Mosaic Theory MeltUpdate

2010-09-06T13:09:00.000-05:00

Financial Science and Applied Mosaic Theory

Meltup-For full disclosure, please see my covestor accounts, long significant positions in TIP.

2010-09-01T02:44:00.003-05:00

For a full disclosure, please see this link: These are hard times economically, but if you know the right people, the solutions to promoting wealth and prosperity, peace and unity is vitally important to the interests of all Americans. What I hate to say to Nixon is always, good show. Stowing away millions of ounces of gold that will become our greatest resource when the fiat currency hard asset deconstruction phase beyond socialist capitalism is one of great prosperity, and exploring new boundaries to promote our civilization and marvel at its awesome power. The greatest part of living history is knowing you are making it as you write and progress through life. Whether I was in the business 10 years, 20 years, it didn't matter, because I would have still had to raise capital, but I didn't want to do it once, I wanted to make a business of it. If there's net equity beyond the bank's balance sheet losses, it's clear that Bank of America overpaid significantly for Merrill Lynch, but it is not clear if this was just another case of strong arming by Paulson. Could be both, and I wouldn't put it past Mr. Bernanke to have an interest in maintaining orderly markets.

Financial Science and Applied Mosaic Theory

2010-08-29T15:49:00.002-05:00

By clicking the title of this post, you will leave this page to view my channel's playlist entitled Financial Science and Applied Mosaic Theory. Financial Science is the next generation of advanced econometric, empirical analysis, enabled through an investment into acquiring information through Information Technology Capital Expenditures. The cloud could run very efficiently if third party data issues were eliminated from institutional trading. The solution to our economy clearly was to wipe out the shareholder's of our financial companies, into new companies that would have eliminated the liquidity problem facing our institutions today. Liquidity, even just a penny, in the financial world requires an interconnected network that ultimately trust the data reported by their broker. Rather than re-invent the wheel, this was my best solution to solving a liquidity problem created through the principal/agent dilemna.

My FundingPost.com Public Profile for the Kansas City Stock Exchange

2010-08-29T15:33:00.001-05:00

New Partners

2010-08-13T22:34:00.002-05:00

I really liked the Thomson Reuter's Markets video. It should provide good basis for what I'm trying to do, and what technology is required to implement it. Hacking and software development are simplified through outsourced financial platforms built to create ascii data files of each tick and trade with a trade confirm number for every one using FIX Protocol programming.

I'm planning on developing a Price Ladder Trading touch-screen iPhone app that will allow anybody able to receive texts the chance to trade with me or follow a strategy of their own.

BP's Rep Tarnished, Market Poised for a drop

2010-06-18T18:43:00.003-05:00

Amidst all the scuttlebutt it seems that BP may go bankrupt from legal fees and other "well intentioned" funds put aside to satisfy the politically expedient outrage from congress. I'm positioned for a slight decline next week, and I was hoping we'd have more volatility than this going into last week.

Breached Flash Crash Lows Overnight

2010-05-20T19:32:00.002-05:00

On the S&P futures we are only 12 points above the flash crash low, and I have no opinion as to the short term direction of the market right now. I'd say don't buy, but I'd prefer buying to selling, certainly, given the drop to these levels, especially being below 1170. The FINREG speech today may have been spooking the markets, fearing over-regulation, a mention of either transaction taxes, or talk of banning short selling, which is an incredibly naieve proposition in any country regardless of naked trading. Pairs on QLD and QID point us lower on QLD to $52.20, and this is partially reflected in overnight trading. Today was the largest percentage drop for the major indices since March and April, and I would expect continued volatility in both directions. Eventually we will bottom, and price action in general I would call overly bearish, implying that we may have overshot the equilibrium price, which tends to be the nature of pit futures. I am working to secure financing for my companies, and am working on building business relationships to support my operations, especially with regard to my substantial IT infrastructure requirements. Legal issues are pretty much taken care of, and the only thing really left to do is to find partners willing to put in a little time for my projects. Feel a bit redeemed now that the S&P has legitimately dropped 10%, making my recent 5% losses small compared to the relative under-performance of the S&P.

The most incompetent aspect of trading

2010-05-11T17:29:00.003-05:00

The most incompetent aspect of trading is trust. Without confidence in your abilities, we find that we can never trust ourselves even with our own money. Even those we trust with the trust of our money are never truly confident in our ability to generate a positive cash flow from trading. It is for that reason, that we may all be incompetent, yet capable of following our dreams when it is really ourselves who are our greatest enemy in the sense that we hold ourselve completely accountable for our actions. In following tech indexes, I've found a unique correlation with confidence in oneself and performance. We would all do well to remember that even as we are learning the ultimate purpose is to be so uncommonly succesful that we pursue our dreams so that we can find the confirmation of this confidence. Even if we leave money on the table, a competent professional always has a rational, reasonable basis behind his actions. It is the incompetent that never know if what they have is truly an aspect of trading that is profitable. If we were to assume that we are employing a perfect clairvoyant, it is still beyond us to know for sure if we know what our advisor or ourselves are doing is even remotely rational. Without rationality, there can be no market, and even though I feel duped by my actions, it is ultimately the confidence I have in myself that makes me believe I will be resoundingly succesful later in life. Those who do not wage war with me know I am just as much of an ally as I am a benefactor of our patriotism in believing in others. If I'm not, then the United States itself is doomed, but only when we do not believe the government works in our best interests, will the country actually fall. Whether or not you believe what I'm writing, ultimately losing for the right reasons is better than losing due to greed. I would rather behave rationally than fork money over to market makers only long a position to make a penny per share in my capacity as a hired gun for the stock I employ as the first market maker was when he endowed himself with a position great enough to signal a belief that the company he constantly trades on is a winner. Whether or not the company is actually a winner, the real winner is always the location of these transactions that give our greatest economic profit to, as riskless trading is tantamount to free money. The current securities exchanges and brokers have already found this edge, but have not acknowledged publicly that identifying the rationale behind transactions is an edge in and of itself. It does not guarantee personal transactions are profitable, but does grant a unique sense of reason behind the transactions themselves. If you believe in yourself, as I say at the bottom of this blog, nothing is impossible to someone empowered by his belief in himself or herself.

New Max-D-Day is what I'd Call May 6th, 2010

2010-05-07T15:14:00.003-05:00

I was stopped out of a position at $61.25 in QLD, yesterday, and just walked away. About 20 minutes later I saw a sell-off I believed was due to a nuclear weapons attack internationally. Not significantly long as I'd lightened up on 95% of my position, but sold 5% of it at what I'd call a catastrophic loss that could only be managed through risk management techniques that include a general rule of thumb to always have stops in place. On a discretionary basis, I let it come back from 48 and sold 52.67 and I don't know why the NYSE and NASDAQ did not just call every trade back between 2:40 and 3:00 pm. Apparently, there were some silly bids that were actually taken, and what happened on Max-D Day, I'd say I'll live another decade before I see a dumbass trader add two zeroes to his order and not have it rejected. It's my conclusion from what I've read that Max-D Day was caused by a multi-billion dollar sale in Proctor and Gamble that I would almost certainly disregard as an obvious error. Apparently the threshold the NYSE takes is 60% away from the last tick, and I agree any market maker looking to steal very easily could have gladly taken the other sides of these trades. If you want to know what panic selling is, there won't be a better example I believe in my lifetime unless we do get that atomic terrorist attack we've all been scared of hearing about. I say if I was going to lose too much on a trade it might as well be an error, but I believe any security mispriced index wise by more than limit down plus 8 should be busted, and there's not any reason not to except that Wall Street made a ton of money on those trades. I think in the future this may happen again, but probably not at the magnitude nor widespread panic that was seen during the time from 2:40 to 3:00 pm.

Financial Reform

2010-04-26T18:55:00.000-05:00

Financial Reform

Monetary Stimulus we've seen, how do you do Fiscal Stimulus?

2010-04-19T11:07:00.000-05:00

Monetary Stimulus we've seen, how do you do Fiscal Stimulus?

Regulatory Issues in Modern Times

2010-04-07T16:33:00.003-05:00

The assumption of rational markets is central to efficiently pricing securities. The distortions created through uncertainty are a mark of humanistic herd behaviour. Conflicts of interest may be a problem, but if there is no trust in the financial system itself, the future of that system can be called into question. Financial Companies are Financial and focused as such. The inherent risks of allowing a client to engage in a transaction they do advise against is not a problem if they don't blame you after you lose money. Legal issues are just that, but liquidity, capital raising, private equity financing, are all fundamental assumptions of our American Capitalist system. It is not necessarily that you can make conflicts of interest go away more than it is that acknowledgement that there will always be conflicts of interest virtually guarantees a smoother transition towards capital management. Financial Science is a combination of theories related to the theory that the lifestyle of an individual can be advised on in addition to regular investment allocation decisions. Money becomes infintely divisible if there's a decent Financial Infrastructure within the country, allowing it to compete even more efficiently with foreign countries. Private Equity only becomes private equity when there is a tangible amount of seed capital up front to signal support to the manager. I see a centralization of our financial markets occurring.

Free Advice that Hurt Me

2010-03-26T20:45:00.007-05:00

I think I've discovered a new class of wealthy that is so rich that they tell you how rich they are, how rich their friends they know are, the richest person they know and an exact mind bogglingly high figure....... then immediately tell you you can't manage a dime of their money. I probably could have stood for it to have been a meeting with an actual suitor, but I willingly went to a free SCORE LEX Small Business Counseling Follow Up Session and this was my real feeling about an intellectually insecure "I tear you down and gloat about how much money I have and my friends have then tell you no" so he can watch me glare at him in what if he ever reads this knows was a psionic, feral rage that literally was a classless personal insult to my generation that included the skepticism of attending the number 1 highest rated academic institution in the whole south as rated by Forbes. The intention was malicious, demeaning, and especially professionally condescending. Some remarks were a "You really said that?" moment I considered yelling back. I could also have asked for my materials back, and left. But, hey, then I'd be the one with no class. This encounter was with what I'd call a typical Kentucky Good Old Boy. Well connected, yet truly ignorant of quantiative financial mathematics that I was attemtping to use as a Theory of Economic Profit that this particular man had no intellectual capacity or patience to try for the quantum leap into realized executable software that could be done off the shelf with no problem. I'm sure his response is just the same and just as unhelpful and hateful as his conclusion was about my executive abilities. Funny thing about that. I don't recall any time he ever asked me anything about my history. First session, brief intro, yet clearly an idea they cannot rip a small bussinessman off quickly on, and that is truly how much of a conflict of interest I can see approaching a rich man so obsessed with his wealth and the wealth he knows about that he perceives all seekers of advice as people "begging for money." That's the whole MO of the institution, and there's no reason an aspiring large corporation would even talk to these people. Unfortunately, as I'm finding, not many people are willing to listen for a solid 3 hours about a possible 8-10 figure company. No, it seems everybody I work with has such a lack of great intellectual power they are likely unable to summon focused studying for much longer than 15 seconds at best before they interrupt you, tell you not to interrupt them, you apologize, then you talk, and then they interrupt you. He was gloating about $5 million level people he knew. I don't know about measley 7 figures. I think a solid company is at least to 10. The advice was a completely uninformed and rehearesed rant against unrealistic expectations about advanced technology I guarantee he never knew about, researched, or even worked in the back office industry with. I've seen where all the strings are pulled from, and this man without looking at any of my credentials, including my resume or a complete examination of my business plan before he decided to keep sniping me psychologically. I guess public comment is the best response I have to an organization designed for small, underperforming, already underperforming, likely to be underperforming, and poorly run companies seeking advice likely to be just as unproductively condescending. If he'd have seen my resume, maybe he would have realized I've managed money since I was 18. Now, with credentials, market making technology, I don't see any reason to think if this guy didn't even know who I was, I should really care about anything he has to say as it is an easily identiable case of lack of information and pre-requisite knowledge. I'm pretty sure you know who wrote this. Was this expected? Definitely not. I thought about why anyone would even tell me off at a meeting I'm trying to get advice from? Seriously, this organization is an indulgent network that hand picks its people, but apparently is so horribly run that they never found out anything about me until they read this and notice the shit on the side of this page. This man acted like I wanted money from him, and I just wanted advice. When advice about writing a business plan went to "there's too much fog", which, considering the scope of my business, is like saying, "I don't actually believe I want to read this at all nor do I even know if it's realistic or not" without actually reading it. I asked if they knew about Collective2, Covestor, my blog here, or done in search at all. Since they had no idea who I was and no idea about my resume and tonally sniped me for only being attending a liberal arts college. The secretary was also very rude. I feel personally insulted, professionally rejected as I'm sure he wanted, yet it is likely him that has no real global money management credentials. Couple that with DKing the entire meeting about me or my background, and this was over before it even was considered. No real thoughts, just criticism. Too much fog. Your dreaming, yet we read less than 5% of the business plan. He kept telling me the fog factor was too high yet it is likely he has never actually seen bourse formation procedures or technologically what is required. Didn't hear him say he had a CFA or even the first level. In light of the fact that at the end of the interview I found out they had no idea who I was, I decided just to passively walk away planning to let them know how I felt about it. Cards in the trash can, now. I am absolutely appalled at the disrespect shown to a person with 60+% ROE and capital growth that resulted from a $5,000 initial investment to a net worth of $32,000 in two years. Go figure. With growth that low they concluded I had no ability to run a business. What a horribly judgemental statement that has no professional validity if this site is any testament to what I do in my career. I mean you can see all I do. Is there a world where starting with 5, and ending with 32 is a sign that your manager has no damn clue what he's doing? What a bunch of snobs. Seriously. They didn't know how to verify the information I was telling them, and stupidly interrupted every attempt I made at describing my performance to them and my portfolio management philsophies that I am sure are beyond his capabilities. They also didn't want to even tour my websites and see my net persona. They told me I had no credibility. I'm telling you I'd been the public face of an Advisor Site instrumental in stopping a horribly market efficiency reducing tax that is now 91% against, and the third most widely read pressed word press article ever written. For one meeting, I was running I estimated ten minutes behind and called them and they told me not to show up. Yeah, first problem. Stare back. He's the mirror, but he only sees himself. Once he sees his reflection, he'll know that he doesn't know, and never did.

Forums - Did I just catch myself saying "nestal fracted" loop?

2010-03-24T05:40:00.000-05:00

Forums - Did I just catch myself saying "nestal fracted" loop?

Rated F For Financially Mature Audiences

2010-03-23T04:29:00.005-05:00

These are the slides that summarize my intentions to change how we raise, manage, and diversify capital management. It is for a Financially Mature Audience.

"The Most Valuable Commodity I know of is information." Wouldn't you agree?

2010-03-13T00:00:00.004-06:00

When the simultaneous release of information is the standard with which we measure the fairness and equitable distribution of our society, perhaps those who know how to use information know more than just what the information really is.

What the investing public doesn't know, is what makes them the investing public

2010-03-12T17:00:00.003-06:00

What does the investing private sector know that you don't? Perhaps all they do is read more into lines than the rest of us. Financial documents require at least some background into deciphering. The typical analyst reads all of the information available on a company, and forms an opinion as to whether it is in the part of the business cycle that will benefit the company and add NPV to a project.

K.C. Capital Management, Inc. is now an RIA

2010-03-11T06:15:00.002-06:00

I have registered my firm as an RIA, and filed my U-4, which is a document that declares yourself as an RIA Rep for your RIA firm. It's not complicated, but it appears that K.C. Capital Management, Inc. is now an RIA (Registered Investment Advisor). My business is centered around the proper allocation of a financial portfolio. If you have $50k in cash, $200k in a house. and $350k in an IRA, your portfolio is worth $400k and the $200k on your house is considered an illiquid asset. In light of changes in the financial industry, I believe it is in the interests of my clients to begin to utilize the 25 core Barclay's Commission-Free ETF's at Fidelity. I intend to operate my allocations through iShares.com, and convert those allocations into transactions in client accounts. Thereafter, I will utilize the business cycle to "cycle through the sector rotation" of our domestic and international economies.

The Real Threat to America’s Economic Survival

2010-03-04T20:32:00.000-06:00

The Real Threat to America’s Economic Survival So old.

Search Results - THOMAS (Library of Congress)

2010-03-04T20:25:00.000-06:00

Search Results - THOMAS (Library of Congress): "In 1932, Congress more than doubled the tax to help overcome the budgetary challenges during the Great Depression."

Corporate Interests 101

2010-03-04T16:00:00.002-06:00

As I learned passively though never aggressively about "Green Mail", I actually decided that any money given with good intention is clean money. Green mail is what I took to mean by making an offer other institutions cannot and will not refuse, whether or not they are actively involved in the underwriting process. They will do so willingly as per FINRA regs allowing insitutional access to be "passed along to customers." I think for our foreigners, it should be known that I do offer a translator into many languages on Earth, and will have no trouble translating into one you can see what I am writing. I actually think I pre-filled these pages with Spanish, which I anticipate can speed up the process. In my initial letter to the SEC, I mentioned certain bits of information getting places before they shouldn't. The idea behind greenmail is that you only make the offer when it's not possibly true so that they have no choice but as rational, economically minded profit maximizing corporations ultimately win through side-deals.

K.C. Capital Management, Inc. Seeks $500,000 loan to secure Legal Funds

2010-01-20T09:39:00.004-06:00

I am currently working on the 2 year project of taking my company public with the intention of becoming a custodian for the newly formed ECN Kansas City Stock Exchange in colloboration with DST Systems, Inc., a former employer of the author, but now a partner in the Kansas City Stock Exchange.-- Beau Wolinsky bwolinsky@kccapitalmanagement.com 859.583.9016 How Much is Enough? AUM Expected $1 billion in 2012. 10 million per year revenue streams to be purchased with Operating agreements between DST Systems, Inc., Tradebot Systems, Interactive Brokers, CVIM, FRIAG, and TD Ameritrade Institutional. Expected Completion Time is 2 years.

K.C. Capital Management, Inc. To Launch New Hedge Fund and New Expansion Plans for it's leap to the National Stage

2009-12-31T15:45:00.002-06:00

We're Dead, let's Nuke It

2009-12-30T14:42:00.001-06:00

My historical analysis of the Past 10 years

2009-12-05T18:50:00.004-06:00

Before I forget a lot of the details about these historic times in the global financial markets, I wanted to outline what I believe is the most accurate logic behind explaining the past decade, and it's catastrophic collapse. There are a lot of moving parts to our capitalist system, not the least of which is the Federal Reserve at the core. I am not going to debate the Federal Reserve with anybody, because it is an independent governmental entity that requires continued autonomy in regulating both growth, inflation, and monetary policy, especially. The collapse specifically is what I would like to pin-point as to the nature of the cause. I believe this post will be the historic record on which historians should base their judgements about the leading causes of our financial market's collapse. My background is that I was a Governor's Scholar in a program called GSP in Kentucky. This paid for more than half of my college education in the six figures at Centre College. Now that I've embellished, understanding my approach to historical analysis is rooted in documents related to the perception of news articles from the specific time periods. I am well versed in all of the literature and many of the major events as it relates to my project of analyzing the Vietnam War, and is also the approach I take in analyzing The Great Recession. My conclusion for Vietnam specifically relates to the manner in which it was fought, and to the impact on the American psyche following the Tet Offensive. For Vietnam, my conclusion from the articles I read lead me to believe that 1 of 2 things needed to happen to win Vietnam 1)Invade and conquer North Vietnam. 2) Quell any guerilla fighters left after razing every city in the country, then rebuild. Ironically, in modern times, these wars are more like prolonged occupations in terms of time. But to get to the task at hand of analyzing this recession, requires someone well versed in historical analysis, finance, economics, and knowledge of modern financial instruments that came to be known as financial weapons of mass destruction as coined I believe first by Warren Buffett this decade. That's enough intro into my ability to lay out the causes of the Great Recession. What I believe caused the Great Recession was the government's dual mandate to provide low-cost mortgage financing to previously unqualified borrowers. This mandate dates back to Jimmy Carter, and was revamped historically in late 1990's by Bill Clinton. I think I'm using mandate a bit strongly. Mandate I believe implies a "requirement", but really this mandate was more of an "allowance" to lower lending practices. So, the people then were able to qualify for both FHA and sub-prime mortgages whereas previously the requirement of at least 10% down with virtually no debt pretty much prior to what I think is 1990. Around late 1990's is when Bill Clinton specifically started to run ads about minorities and other previously unqualifed borrowers obtaining low cost mortgages. I am only going to provide interpretation, and I do not really want to take the time to find any links. We all know these events happened, but figuring out how the puzzle fits requires someone specifically with my credentials to explain to the investing public. With the "dual mandate" now allowing Fannie Mae and Freddie Mac to finance more risky borrowers, a couple things happened because this I truly believe is misinterpreted by the American public as so-called "Wall Street Greed." (I admit they make a lot of money, but they add value to the shareholder, and in this business, that is all that matters). When Fannie Mae and Freddie Mac would go to lend to these less-than-credit-worthy borrowers, they would "collateralize" mortgages into what is known as CDO's (Collateralized Debt Obligtations), aka,CDS's(Collateralized Debt Securities). Michael Moore could not find anybody that could explain a CDO or CDS because no one he was interviewing was qualified to explain these securities. Investors in these securities admittedly claim to have been lead astray by the ratings agencies Standard and Poor's, Moody's, and Fitch Ratings agencies. You "could say that that was the cause", but it would not be entirely accurate. The process of creating a CDO is the ability to separate specific cash flows such as prinicpal payments and interest payments into wholly separate cash flow streams for the purpose of financing even more mortgages with which to "collateralize" these mortgages. To me, and this is all about what I learned and what I remember in Level II of the CFA Curriculum; you can strip not only interest and principal, but time values of cash flows to create what I describe as synthetic cash flows that we know today as CDO's and CDS's. I apologize if you find it difficult to understand why this is significant, because what I believe the investing public is missing is that these mortgage obligations specifically were "guaranteed" essentially de-facto by the FHA GSE institutions known as Fannie Mae and Freddie Mac. I liken the game of having a mortgage broker sell a mortgage to somebody, just to send the actual cash flow stream to a third party entity so they can collateralize each mortgage into 100's to 1000's of separate cash flow streams, as a financial game of musical chairs. It is not important specifically where these cash flows came from, more than that they were assumed to perform with slightly more default rates given the lowering of the lending standards. Always with financial catastrophes is the element of mispricing risk, and while the investors, namely institutions, claim it was the rating agencies responsibility to asses the credit worthiness, just taking an agency's word for it is inexcusable given that almost every investor was managed by some institution absolutely capable of performing their own independent audit and due dilligence on every security. Anybody able to buy CDO's, knew what they were getting. Caveat Emptor. I don't know of any "individuals" buying into these CDO's. I believe mostly this process was controlled by institutions that really have no excuse for not utilizing their own resources in performing financial analysis on these securities. So with the rating agency argument out the window, there are still some other causes that need to be debunked, as below.What I think of the process of writing a mortgage, selling to an institution to create a CDO, so that the writing institution has money to write more mortgages, is, more or less to me, a financial game of musical chairs. More on this after an explanation of credit markets. When we say credit markets, professionals only see quotes as to yields, time to maturity, and a price. The credit markets are what enables a writer of a mortgage to find a willing buyer that will then "collateralize" the mortgage obligation. If this "credit market" locks up due to paranoia, then whoever is left holding the bag on a non-performing asset essentially has lost their entire investment. We all hear credit markets, but what is the credit market? It is the market for any quantifiable cash flow stream in the United States, or, at least, as I will only interpret domestic issues. Cash flow streams can be parsed into more infintesimally small cash flows. Cash flow streams include loans on homes, commercial real estate, credit cards, auto loans, streams of payments from these troublesome CDO's, as well as any other "loan" that can be made into a contractual agreement between the lender and the borrower of a "promise to pay." And that covers everything. The Financial Game of Musical Chairs Now, we're at the heart of the issue. What caused the Great Recession. Overleverage, and holding non-performing securities as more than 20 to 1 debt to capital. What happened to cause the collapse is essentially the scenario I described more than a year and half ago. I have $50,000. I lend $1,000,000 to make what I believe is a kind-of sure thing at 7%, so that I make $70,000/$50,000= 1.4 or 140% return on equity. It is not actually that borrowers began to default on their loans, more than it was about the fact that institutions, as part of the dual mandate and lack of regulation though they were still compliant, lost more than they should have if they were not allowed to have such large debt to capital ratios. Not even 25% of the mortgage obligations in this country have defaulted, yet many of our banks and institutions are having trouble climbing out of the hole they dug. What happens when you're unable to sell your mortgage to someone? You cannot finance further mortgages until this security is off your books, and your only option would be to sell at much lower prices. Not only did the lender in the example above lend 20 times more than his capital to the borrower, he got stuck holding what collateralized obligation their was that had decreased 30 and in some case 60% of their value. The only difference I see in this story, is a paramount shift in the attitude towards home ownership. When these home owners realized they could not afford the mortgage, nor was it worth as much as they paid, they "chose" to default, and declare bankruptcy. Now, I acknowledge that in most cases people simply lost their jobs or whatever sort of income they had, but, in the end, this goes back to the writer of the mortgage understanding who they were lending to, rather than committ DK, aka Didn't Know. The game of musical chairs I see falls directly onto the responsibility and duties accompanying the "dual mandate" of Fannie Mae and Freddie Mac. When the GSE's became unable to offload their CDO's for the purpose of creating synthetic securities, they quickly went bankrupt. Now a GSE bankruptcy is debateable as to whether it has an actual economic effect beyond the company, but what sunk these two was the sudden freezing of credit markets taking place outside of the GSE's. Everyone essentially got caught standing up holding both non-performing, and less valuable collateral not just because of the economy, but because institutions suddenly realized what they had invested in was worthless essentially. (Some debate worth, while their was "some value" left, if you cannot sell something that you're not being paid to hold, I consider that worthless, and that's my financial analyst opinion). Now that I have blamed "government" for the cause of the collapse, there is another side to this story that nobody will let me leave out. I've provided hard economic logic as to the direct cause and effect. But what was going on beyond these financial transactions is where more historical analysis is needed. At the dawn of the new millenium, the twentieth century was the United States without question. Not only had we defeated communism in Russia, we proved that we would not waiver in our resolve to spread freedom to countries with oppressed people. 9/11 was a culmination of what I call "great experimentation" into what you could smuggle onto an airplane for the purposes of hijacking and suicide bombing the World Trade Towers. This single event sparked an enormous up-tick in government spending on defense never before seen as a percent of GDP since WWII. This increase in government spending created deficits whereas Clinton had left a wake of surplus through taxation on illegitimate short term capital gains, and was in no way a true reflection of the economic viability of the securities in the Dot Com bust. Luck is about the only thing I can give Clinton credit for, but we are only talking about the last 10 years, and clinton was not in the picture for 70% of what happened after that. With the sudden shock of a financial capital, the ramifications were enormous, creating investor jitters, and other seeds of a lack of confidence in our capitalist system. Inheriting the poor economy there are two events between 2000 and 2003 that shaped the next 7 years. One of those events was the lowering of tax rates by Bush, which I know for a fact got the economy going again, but not without the proverbial "Go out and Spend" line following it. Now, I know this will be debated most likely beyond my lifetime, but I don't hold Allan Greenspan at fault for creating a bubble in domestic real estate. As the manager of money in our capitalist system, their is also a mandate for growth and inflation. When the economy took a turn for the worse early in the decade, Greenspan lowered rates to what I think was 1% from about 6%. Now, those institutions holding bonds suddenly made hundreds of billions of dollars overnight on their current holdings, which only made them seek out more CDO's. The Federal Reserve in this move, I believe helped us escape the economy. It is not the responsibility of the Federal Reserve to manage, create, stop or even control investable assets that may be in a bubble. Historically, the Fed was reacting to the decades of study as to the causes and cures to financial underperfomance in the macroeconomy. Arguably, then, this created too much "liquidity" in our capitalist system, and that money found it's way through the GSE's into highly risky, speculative borrowers who paid enormous premiums in hindsight for their properties. I don't exactly blame the borrower, because at the time, based on supply and demand, the prices of real estate absolutely had to be appraised at the prices being financed by the lending instiution. Only afterward did this wave of liquidity cease, and the easy going, no-proof, liar loans continued until the credit freeze that most peg to December of 2007. The last two years have seen great changes in the landscape of our financial institutions behaviours. I'm not going to go into specifically the cause of Bear Stearns collapse, because I have already studied the first source document called The Street Fighters on my blog. To summarize that book, Bear Stearn's got left "holding the bag" of unsellable CDO's, creating what was only a liquidity problem when other institutions realized the ability to pay by Bear Stearns had been extremely questionable. Through to the end, till Paulson allowed Bear to be sold for $10 to Morgan Stanley, Bear was never a worthless company. Book value was about $70-$80, but the nature of the balance sheet is what made Bear worthless. The inability to finance daily operations because there were securities they normally would sell periodically to raise cash to continue operations became impossible. Ace Greenberg used to always sell even if it was a marginally small loss. Bear Stearn's management disregarded that axiom, and lost the equivalent of 20 years of earnings in less than a quarter. Lehman collapsed for the same reasons. No liquidity, and no willing buyer. Lehman's savior B of A was stolen in a massively obvious fraud, and conflict of interest by Merrill Lynch's CEO, John Thain. You can search my blog for that article, too, but we are only now realizing why these institutions failed. B of A, being convinced by Thain after looking at Lehman's books, fell for what I call one of the greatest scams of modern financial markets. John Thain essentially sold a worthless company for $29 per share. I recall examining Merrill Lynch's balance sheet, and stating that the merger would be a catastrophic loss to B of A, because Merrill Lynch had no net asset value to speak of. It held so many worthless investments on it's balance sheet, that when I was commissioned by a client to analyze B of A, and all of the other banks in the KBW ETF, I found B of A's texas ratio to be 96%. I know you will need to look up the Texas Ratio, and what it means, but after analyzing this value, it implies that 96% of B of A's balance sheet was worthless, and is what lead the stock price to collapse ultimately. I can only recall that B of A prior to that had an acceptable, to excellent balance sheet when I looked at it prior to the merger. The "Fair Value" opinion, given for $10 million, was given mainly based on book value and possible "growth in earnings." While I acknowledge there is always some unknown ability to generate future cash flows, what is not quite so clear is that this masked the "off-balance sheet" CDO's. Every institution in this country having a debt to capital ratio over 1 is worthless in my opinion. As in trading, would you hold a position overnight at 20:1 leverage? Probably not, but while times were good, of course you're going to get stellar results, but when they go bad the downside volatility creates an almost unrecoverable loss that surpasses even the owner's entity ability to pay, which lead to "Wall Street Bailouts." The bailouts have kept our most prized institutions afloat. TARP has greatly increased the liquidity in our credit markets. Coupled with the new Fed Chairman lowering rates to zero, I must conclude that they can't go any lower. This wouldn't be a complete historical analysis without a mention of what I believe is the cause of our election of our first African American President. I think a lot of blame had been misplaced on the two term president who ran two wars, and created jobs while in office. "Anybody but Bush" was practically a household word to some people, especially moderates and independents. I have identified the government's dual mandate as the cause of our collapse. Clinton's "allowance" of lower lending practices created a link between risky borrowers, and almost limitless funds of Wall Street. The process of collateralization is not what caused our collapse, it was the overleveraging of our institutions allowed, once again, by the government. You could say that was the Federal Reserve's job, but if nobody's complaining, it was too late to do anything about it. Obama has now doubled our national debt to $12 trillion total with our approximate $14 trillion economy. I find examining other countries debt to GDP ratios reveals that there is only financial distress when we approach greater than 150% of GDP, and we're not there. In fact, another reason I don't mind the spending is because it is financed through the lowest rates in modern financial history. 3 month notes, yield close 0.01%, 2 year a little bit more, and the 30 year, brought back close to the end of the decade, below 4%, essentially. Uncle Sam still remains the world's best credit risk, and I don't believe will ever default on their obligations. If that happens, it will be due to Armageddon, nuclear war, or invasion by a foreign force. None of which are likely, but I do actually think the world will only end through a meteor impact or from nuclear winter, ultimately, whether that is by nature or by man. I hope the game of Brinkmanship will continue to be won as it was in the Cold War by the United States. Militarily, our forces are omnipotent, having a perfect view of both terrain, and enemy locations in every country. I once enlisted into the US Navy as a Nuclear Engineer. I had aced my NAPT test with more than an 80%, which my recruiter said was the highest he had ever seen. I did not enter due to medical reasons, but it was that sense of patriotism sparked by the worst attrocity of the new millenium. I and others would still protect the United States, and I would answer duty calls if there is a draft. I don't anticipate one unless we go to war with China. Economically, this would be catastrophic to both countries, and remains unlikely despite the human and intellectual rights violations of China. I know you guys want to hear about trading, but I do a lot of thinking about events beyond what you see here. You probably can figure I don't factor events into my trading, but in analyzing for my clients I have to always keep in mind a very big picture requiring an economically gifted mind to understand.

This Week is all about the Chain Store Sales Number

2009-11-29T22:18:00.001-06:00

I'm pretty excited about this week. The move up after hours tonight I believe is reflective of the anticipation of better than expected retail sales for the holiday weekend. Virtually any increase in holiday sales would beat any consensus estimate on the Street, currently, so banking on a quick trade in the release of that number will be a pretty good bet if it comes out better than expected. http://www.bloomberg.com/markets/ecalendar/index.html Specifically pay attention to the Chain Store Sales number, as it would be a leading indicator for future sales reports, especially from retailers. I think you can pretty much extrapolate from that number what other retailers did, and, as I said, any increase would cause a market rally in my opinion. Look for any news that talks about the sales over the weekend, and I think that'll be mostly what drives us this week. I think we'll get some reports of good and bad areas, but, as a whole, once we see the chain store sales number, I think it will be much better than expected. I'm planning on reviewing the old June 2009 Level II CFA Exam material I have, and studying till I register for the June 2011 exam in a couple years. My failure on the exam I don't believe was a lack of preparation. I believe my failure specifically was in only preparing based on Schweser Kaplan notes and watching the classes. Practically none of my time was spent reading the actual CFA Institute Curriculum Vitae. My loss, I guess, but I never read any of the CFA books for Level I. None, I actually returned them to the CFA Institute in the year I passed, and the year after that, they made it mandatory for CFA candidates to purchase $300 of books in addition to the $800 registration for the exam with no returns allowed. SO... I will come back to it. There were certain questions I recall on the exam that seemed to be taken off of very specific examples only written in the actual CFA Institute textbooks. Again, Level I is basically plug and chug. You take two 120 question 3 hour exams at level I, and it tests speed predominantly. At Level II, you only have to answer 60 questions in each 3 hour session. The format at Level II is another reason for my failure. The Case Studies or "Vignettes" required all previous answers to be correct before having a chance to answer later questions. If you got stopped at question 3, pretty much you couldn't answer the next 3 questions, and basically guessed answers at that point. I found that the first 3 questions were always easy, and every 4-6 question number was tied to the inital 3 questions in some way, at much higher difficulty levels. I aced Corporate Finance, Alternative Investments, and Derivatives with greater than 70%, but I knew they were all correct. The rest were below 70%, but really it's not a very good measure of reality. If there were only 6 questions, and you only got 4 right, automatically you're below 70%, and I was always banking on having at least 4 out of 6 right. If I had that I think I would have passed. Scoring a 3 out of 6 puts you at 50% and below. There was a lot more below 70% than above, but being 1 in 533 to be a member of the CFA Institute should tell you something. There are only 53k current CFA members, and only 45000 CFA Charterholders, approximately. As I said in another thread, I have yet to be denied an interview for any investment advisory, portfolio management, or research analyst position, because I have Level I of the CFA Exam under my belt. Each time I asked why I wasn't hired, I received the response of a 10 year veteran of Wall Street being chosen over my credentials. Well, some of these positions were just exciting to have actually been considered for. I went out and bought some suits for a couple of them, deducting costs from my business in the process. I'm looking forward to the rest of the year. I can't wait to see 2010 roll around. I think the market will breathe a sigh of relief to be out of this year. I don't know of any financial catastrophe on the horizon. I am convinced that I will not have to deal with 56% drawdowns in the market for the rest of my life. Maybe some 40%'ers, but never 56%. It was "too stupid for words", and the whole time you could tell by the median price to book ratio of the market being below 0.7, when it's usually greater than 1.4. Onward and upward.

All About Retail Sales Numbers After this Friday

2009-11-26T00:04:00.002-06:00

I believe the market is waiting to see what our retail sales numbers look like on Black Friday, and the week of. I think if we see any growth in that figure that we'll most likely rally, and my money's on that. Then again, I can never be short with my clients, but with personal money. Either way, I think we're going to rally pretty hard next week off any reports of higher than expected retail sales figures. Happy Holidays! Have a Happy Thanksgiving!

My Bio

2009-10-24T22:20:00.001-05:00

Mainly, my story is well....completely available at wl4.wealth-lab.com, wealth-lab.com, collective2.com, and, especially on elitetrader.com. Google searches for my name pull relevant topics, too. Anyway, I started in college prior to my junior year with a 6 figure bankroll of family money. I completed my BS in Financial Economics and a minor in mathematics a couple years after that, and found a firm in Chicago looking for independent investment advisor representatives. It was an entrepeneurial position with no salary, a few thousand dollars of legal fees to incorporate, and passing series 65 and life insurance licenses. I had done internships at local financial services companies that had shown me all you really need to run an investment advisory firm or to even work with one is to find a reliable custodian and an excellent third party asset manager. On those I was happy that the broker I'd used in college, Fidelity Investments, was also to be my custodian for client assets. I utilize Envestnet asset management because I'm able to access institutional level managers that have negotiated with independent advisors at much lower, reasonable minimums. At the 100k level, I get $10 million minimum manager, and once you are to $250k, that minimum goes up to $30 million with managers no other advisor other than an Envestnet advisor can offer. I'm happy with the performance since I started in January 2007. Most clients have actually made money in this market on the backs of outstanding cautious approaches (not that they weren't down, though) timed perfectly with aggresive actions near the end of the first quarter this year. I started on C2 with a shell model I found on Wl4.wealth-lab.com, now on wealth-lab.com. Did well with it for a few months, then realized that static (meaning hardcoded, set in stone values) of overbought and oversold levels were not a long term profitable solution. So what was the solution? I used volatility as the basis for the overbought and oversold levels. It made perfect intuitive sense consitent with my education, and progress through that point in the CFA curriculum that mentioned pairs trading was an acceptable form of instiutional trading strategies. Around August 2007 the QID and QLD system went to 200k by July of the next year, doubling. Then volatility started to pick up in a big way particularly on November 1st, 2007, practically at the top. I bought QID that day, and stupidly added a trailing stop during the trade when QID was around 34.6. A day after trail stopping out, we had not crossed back over the overbought threshold as I thought we would. We were extremely close, but that didn't stop the market from crashing 10% over the next 5 trading days. One of my subscribers mentioned he'd put 100% of his money into a QQQQ put, and said he would have made about 150%. I would probably still have kept a lot more subscribers if I had called that right. At that time I had 40 subscribers, and they were absolutely affecting my personal trading performance. I was advertising as a featured system, though, but it just proves the subs on c2 only subscribe if you are up and your annualized rate is above 200%. Well, all the stats were definitely good. Sharpe at 3, APD at 1.4, dd at 18%. I'd just say that if you really go into subscribing to a system with those stats, I would tell you that's essentially performance chasing. Just as you'd be looking at a price chart and maybe a sharpe ratio of a mutual fund, the same rules would apply to high fliers. I turned my subscribers away at 185k, up about 85% because I was in the process of changing my affiliations, now at SCF Investment Advisors from TREW Capital Management at trewfinance.com. All through this studying for the CFA curriculum. I had taken level I of the CFA curriculum in June of 2008, and had passed, immediately registering for level II. I studied a boat load for that, neglecting my marriage in the process. Having not passed this year, I have decided to put it off for a couple years, and make a pass at it when my employment situation improves to mid 70's salary, possibly 6 figures. I'm excited about 2010 because I feel like I have my ducks in a row presently. I now personally control a lot of money. I have a condo, though I'm trying to sell right now, two cars, a Nissan Rouge 2008, and a brand new paid in cash Mazda 3. I mean being three years out of college I'm really proud of my accomplishments. I have yet to hear of any college age person starting their own independent RIA rep position straight out of college. So, the performance summaries may seem useless to you, but until you are actually able to produce mechanical systems with performance results that look like that, I can't say long term you can expect to succeed. Ironically, at one of my internships I spoke with the manager of SENBX, (oh, yeah, have a look at that one), at the time, I had just released the first Superbands that gave rise to the most profitable, publicly available trading systems. I asked Alan Murrell if he ever backtested his model? He said no. If he had, I guarantee his results would not look as atrocious as they do today. At the time he was convinced his poor performance was due to the timing of the inception of the fund near September 2000-2001. I guess I should give the background on this model. It was a quantiative analysis program built on an absolutely, mind bogglingly large time series dataset of all financial companies in the United States. He would regress this data as a time series onto the current logarithm of the market cap of the stock and purchase the 10 most undervalued securities on the first of each month until they were no longer in the top 50. I think he should have done more research on the risk characteristics of his strategies. He claims the model was built in the 70's, and this would have been around 2005. Today, I'm pretty sure no one would invest in SENBX if you put a gun to their head. (Have a look at the chart if you want to see what a quant with a CFA can still do to a fund in an attempt to have a reasonable basis as backup for losing 75%). Really at that time I thought his model worked, but through the brokers at the then Hilliard Lyons branch in Danville, Kentucky, they mentioned a spat in the 80's where large positions in companies proved to be worthless investments some months after buying into them. I think that would have been the time in the mid 80's to examine the true validity of the model. Now, I would say that the pairs model is working, and I'm really just experimenting with the Jack Hershey Cash Cow model. I doubt that would stop anybody from subscribing when it goes up 30% in a month at some point. It has hardly traded at all since March. Primarily because having .SPX volume at the 15 minute interval above 20,000 rarely happens past 10 AM EST. The volume filter is the reason it works, and I've seen ancient threads with snippets mentioning that 20,000 level with some basis. I use the life insurance license to sell Allianz Fixed Indexed Annuities. We have a local financial advisor named Don Whales with his own radio talk show called "Capitalist Pigs" that constantly talks about these products. Really there isn't any other company you should consider buying fixed indexed annuities from, but occasionally there will be some that are just as competitive as the norm of Allianz. I'm usually aware of it as an agent through Crump Life Insurance with every insurer in the country at my disposal. I spent today contemplating selling to open QQQQ puts and calls with position sizes in accordance with the delta of the option. I might do it, might not. I have put off options, though I have the privelege, because the liquidity in QID and QLD itself has greatly improved since moving to NYSE-ARCA. My internship at KY Trust Company was coupled with research on the vast changes in NYSE and NASDAQ rules of equities market making. No, duh, a lot of their profits went to nothing after decimalization came. The allure of a day trader at the time, and I do have the book Day Trade Online, was all about splitting the nickel spread with the market maker. Now that spreads are a penny, this sort of riskless trade is not available but on the most illiquid of securities, and trades take place much to quick for this be any edge in any other liquid security. I bought that book around 2002, way after it was even possible, but it reads like a gambling book to me. Excerpts include "I finally hit a home run. Made $3,000 in ten minutes. I turned off the computer, and grabbed the clubs." If only it was that easy. It does include a very cathartic regret of losing 20 g's on citigroup at $93. LOL, I think you're lucky you didn't hold onto it, bud. So, I think that covers my bio. I played Sousaphone, yeah, the big bell-toned shiny instrument, in marching band for the Boyle County Rebels. That same year I was awarded as a Kentucky Governor's Scholar that required me to stay at a college campus for 5 weeks during Junior and Senior Year of High School. It was great, though, it paid for a $100,000 education at Centre College. We were State Champions in 2001. Prior to relocating to Kentucky, I was in Springfield where I played Competitive Check Hockey. We are still the only Springfield PeeWee Hockey Team to have ever won the Missouri, Illinois league called MOAM. Well, if you read this far, congrats. Now I'm sure you know a lot more about me, but, it's not anything that you couldn't figure out by googling my name. Cheers! Good Trading! Beau Wolinsky

China Does Not Own the United States

2009-10-16T00:03:00.002-05:00

I thought the media has gone a bit far in thinking China has any capability of taking over the United States Economically. Let me put it this way: China is a poor, third world country with a GDP per capita lower than even our own poverty level. GDP of China on an absolute basis is not even a quarter as big as the United States. Now, rather than post links about where you can confirm it, I would hope you'd already know where to find this information. I hear Wiki is pretty good at this, just search "GDP Per Capita" and you'll get three rankings with China very near the bottom. In fact, I recall their GDP per capita is around $3,300 - $3,600. Meaning the average person lives on $300 a month if they're lucky. Yeah, just think what that buys in the United States; basically you'd be on welfare and totally dependent on government as essentially all of the communist (citizens) ie:(priosoners) of the country are. It's absolutely laughable to think this country finances us. As if... We fund ourselves, and we are not dependent on any country for financing either. Put another way, China owning the United States would be like HERO trying to buy XOM. Yeah, right. Have a look at their Market Cap if you want a reference. We owe money to ourselves mostly, and if you want to know who the top 2 holder of 80% of our national debt are you'd be wrong thinking it was foreigners. It's actually held in Pensions by U.S. Citizens and as property of the Treasury.

The FOMC Announcement Tomorrow

2009-09-22T17:55:00.002-05:00

From Bloomberg: POWERED BY Resource Center » U.S. & Intl Recaps Release Dates Why Investors Care Today's Calendar --> FOMC Meeting Announcement Released on 9/23/2009 2:15:00 PM Prior Consensus Federal Funds Rate - Target Level 0 to 0.25 % 0 to 0.25 % Market Consensus Before AnnouncementThe FOMC announcement for the September 22-23 FOMC policy meeting is expected to leave the fed funds target rate unchanged at a range of zero to 0.25 percent. Fed Chairman Ben Bernanke and other Fed officials have repeatedly stated that the fed funds target is expected to remain low for an extended period. Now, markets are focusing on any announced changes in balance sheet expansion or planned unwinding. Comments on the status of recovery will get heightened attention. DefinitionThe Federal Open Market Committee (FOMC) is the policy-making arm of the Federal Reserve. It determines short-term interest rates in the U.S. when it decides the overnight rate that banks pay each other for borrowing reserves when a bank has a shortfall in required reserves. This rate is the fed funds rate. The FOMC also determines whether the Fed should add or subtract liquidity in credit markets separately from that related to changes in the fed funds rate. The Fed announces its policy decision (typically whether to change the fed funds target rate) at the end of each FOMC meeting. This is the FOMC announcement. The announcement also includes brief comments on the FOMC's views on the economy and how many FOMC members voted for and how many voted against the policy decision. Why Investors Care The Fed closely monitors the core PCE price index to indicate whether or not policy is approximately correct, overly accommodative, or too restrictive. The PCE price index is preferred to the CPI because it is more closely aligned to the cost of living than the CPI (which measures a fixed basket of goods & services.) This chart covers monthly data and the fed funds target rate reflects the monthly average. As such, it will not correspond to the most recent fed funds rate target announced by the Fed. The big event tomorrow, as Bloomberg sees it is what happens to the balance sheet of the Fed. Just as I'm writing this Kudlow is talking about the Fed removing liquidity from the market, and they can only do that by selling their investments. I don't particularly agree with that. If anything I believe the balance sheet might have expanded this past quarter, and to top it all off we have rates near zero, so the only way they can go is up. How soon they go up is the biggest problem. Some put that in the second quarter of 2010, but I'd put it possibly in September 2010, because I think the Fed is going to want to give that last little boost before the market recovers to its former highs or at least 20% away from them.

2009-08-30T16:28:00.003-05:00

I thought both of these images are very representative of modern American life. I know I'm close on all of these, little bit more on income, but the lifespan that most Americans go through is outlined very much along the paths shown in the Life Parody.

Street Fighters, A Book Review

2009-07-06T13:13:00.003-05:00

I read the book Street Fighters to get a real sense of history about the collapse of Bear Stearns. I truly felt that only an industry professional could understand the actual cause of the collapse. A lack of liquidity speculatively fueled by rumor mongering caused Bear Stearns to essentially beg the Federal Reserve for a bailout that fueled a large run on the bank. There are several key bits of information leading to Bear Stearns collapse, some more obvious than others. I read this from the point of view as an analyst trying to figure out if in hindsight there was any hint that there could be a leading indicator into the failure of Bear Stearns. I have only identified leverage at 30:1 as the smoking gun. There is, however, buried in the footnotes talk of the actual corporate culture of Bear Stearns. The quote "Criticism is not welcome" was given to a higher up subordinate directly out of the mouth of Schwartz. Only an insider would have been privvy to this type of inside information. Though non-public, it would seem that to probe this question with regard to any company's financial analysis a qualitative assessment of corporate governance would have revealed this fatal flaw. We all know that leading to the Bear Stearns collapse was a shotgun wedding in which Paulson did not approve of what would have been an initial $10 bid by JP Morgan for Bear Stearns. Upon further review of the balance sheet there was $30 billion of unmarketable collateralized mortgage obligations that would normally be sold to obtain more CDO's to sell. This process froze during the Credit Crisis, particularly around March 16th, 2008 and caused the liquidity crunch that stopped Bear Stearns from functioning in the market. Coupled with a run on the bank it appears to me that one particular facet could have spared Bear Stearns. Nearly 15 minutes after the acuisition was announced at 7:05 pm on the following Sunday around 7:18 the Federal Reserve announced that they would accept the CDO's with AAA ratings as collateral for overnight funds. It is my assesment that this would have saved Bear Stearns. Around this time, I issued a statement last year calling these Corporate Liar Loans, which is what they are. Far from worthless, yet without a functioning secondary market to price theses assets, banks would mark to model these securities. The deal with JP Morgan would never have been completed without Geithner and Paulson lobbying for the acceptance of AAA paper as collateral for immediate overnight funding. As an analyst, what struck me most was the absolute arrogance of Schwartz in all this. By the end of the book everyone was yelling at other saying "You should have sold" (our CDO's) three months ago, but they refused to take the loss and ended up losing everything. This is surely hindsight, but a point of fact was the former corporate governance mentality of Ace Greenberg that essentially would never hold slightly losing positions. The losing positions, particularly the CDO's, that caused the liquidity crunch would have been alleviated if these positions were not on the balance and cash was in hand. During a conference call the prior weekend to BSC's sale, an analyst had a buy rating on BSC. Understandably so, as the book value was $80, and BSC had closed at $30. JP Morgan made a fortune instantly on this deal. The original deal was announced at $2 with a crown jewel clause of the $1 billion headquarters of BSC. The later deal was upped to $10, which still was astronomically low from the book value of $80 per share. As an analyst, I would say a much greater analysis of qualitative corporate governance documents as well as higher level interviews would have been a signal that something was amiss. Me personally I've long advocated for low debt to equity rations, no more than 20% of net worth should be debt. Just by Modigliani and Miller the company was nearly completely debt, and the costs of financial distress especially for BSC's debt mispriced. It has long been accepted that high debt to equity ratios are acceptable in the case of financial companies because of there ease and lower cost of issuing debt obligations. BSC did not have a capitalization problem. They had a liquidity problem. I cannot see the data anymore with any companies after BSC was sold, but I would bet that the current ratio was greatly below 1, meaning their short term obligation far exceeded their short term liquid assets. I thought the book laid out in an understandable chronological fashion the events of the last 72 hours of Bear Stearns very clearly. I do think that the tangents to explaining the backgrounds of the players involved would have made a much better introduction than jumping straight into the liquidity panic at the beginning of the book. In the end, the epilogue written with hindsight drew a parallel with the debt leverage ratios and overall economic conditions as the cause of not only BSC's collapse, but Lehman's, and AIG's. I would posit that a combination of greed and hubris caused all of these firms essential demise. There's no short straw that these were competitive cultures, but somewhere higher up there has got to be some form of humility. If I learned anything from this book, it's that a good financial analyst explore qualitative somewhat nonpublic sources before making their assessment of a company's long term prospects. Mainly I read this book to see if there was any way to at least know what was coming. In the end, there was only the smoking gun of intense leverage that caused operations to cease when large institutional clients began to pull money out of the accounts. Know that any company receiving Federal Funds is on the government's time. What this means as investors is that all TARP receivers are failed companies, and are now controlled by the Treasury and Federal Reserve with quite a few strings attached. Normalcy will only return when the Treasury and the Federal Reserve are satisfied that the funds not only were repaid but that they are sure they will never have to re-issue bailout money again. As it relates to Bear Stearns, the overnight receipt of funds from the collateralized mortgage obligations if they could be used by an investment bank to tap the discount window would have absolutely prevented BSC from being acquired at brutally heinous levels. This ability to tap the discount window ended a whole culture of investment banking, as more companies then turned into bank holding companies or financial supermarkets. It's a quick read, but an essential read if you truly want to understand the credit crisis and what is being done to correct it.

VC Firm to Invest as Co-Investor for $5 million with K.C. Capital Management, Inc.

2009-06-22T16:35:00.003-05:00

I presented to the National Private Investor Lender Forum, with a funding request for $5 million to raise money for trading in the system I call Pairs Trading QID QLD Scalper at the link above. I showed them performance summaries in both collective2 and from directly out of Wealth Lab Pro 4.5. They replied with a letter of interest to be a co-investor with another client of mine. I believe this is a big step towards garnering instiutional interest for my systems. My efforts at taking the CFA Exam have paid off, as it was a topic discussed as to my qualifications for managing such sizable amounts. The significant outperformance of Pairs Trading QID QLD Scalper was a major selling point. Sure it has had down months, but that's nothing compared to what the S&P 500 did by drawing down nearly 55% and ending net down 40% at the time I presented. I anticipate writing an ironclad agreement through my compliance department at SCF Investment Advisors, Inc. I'm really excited, and pleased with their decision, as it was a carefully considered expense. The story that went into was I posted on gobig.com, and started receiving some expressions of interest from a few people. Nothing ever went through until I received an E-mail from http://npilf.com out of Cincinnati, Ohio. I had actually registered for this presentation in February, but felt that I needed to have at least two years of a track record, both from my brokerage accounts and on collective2.com before making the presentation. I compiled a very nice PDF binder containing all the relevant information, including Performance Summaries with comments about the major metrics, a snapshot of the c2 equity curve, screen image of the backtested equity curve, a complete trades list from the backtest, Profit Distributions, Max Adverse and Max Favorable Excursion summaries. Now before you go thinking that's all there is to it, you really need to have your ducks in a row to pull a presentation like that off. I gave it on my cell phone in a conference room, and was required to speak for a solid 40 minutes about the system. We discussed each page for about 5 minutes, and by the end of it, they started questioning my credentials. Put simply, I do not believe I would have received this letter without being an industry professional with a Series 65 and a Level II CFA Candidate. I spoke very well, and gave the presentation of my life. I had already had experience as a speaker at the Kentucky Math Association in April of 2006 during my Senior Year of College presenting financial trading systems. There's a lot of competition, but I truly believe they saw great potential in me, and were obviously understanding of relative performance that seems elusive on the system subscription crowd on c2 and elsewhere. To date, I've outperformed the S&P by nearly 10,000 basis points, or a 100% difference for over two years. There isn't any mutual fund in the country with those returns currently. When I hit the three year mark if I stay on c2 I believe I can increase that margin. In the end instiutional managers benchmark your performance against the S&P500. It's what every trader should measure themselves by. Your accounts down 10% in the last 2 years, so what? What'd the S&P do? (40)%? You beat by 3000 basis points. Every person on the sideline by that metric, then, did well. Not that being negative is good, but that I'm assuming under more favorable market conditions you would have had a postive year. I can't wait to close the deal, but the major step is over.

We will be better behaved in 2009

2009-04-29T22:48:00.002-05:00

At the end of 2008, I discussed our debt snowball. I'm observing talk of our savings rate increasing from negative rates to around a reasonable 9-10% that has been "the average rate" for the last 20 years. It's good to hear that and while it's not in any data source currently, I believe we're trending back towards that rate. It's great and I think that a positive savings rate is actually good for the economy, because it means we are investing in future technologies, presumably. In the short run I believe we can let the government's expenditures give us a nice little boost in our GDP, but in the long run I can see sustainable growth coming from a positive savings rate topping at a decent rate.

Soros is into pumping his positions

2009-04-07T21:51:00.005-05:00

Soros Says Gain in U.S. Stocks Is ‘Bear-Market Rally’ (Update2) Share Email Print A A A By Saijel Kishan and Kathleen Hays Let's stop to consider the context of this statement. If I was still short, I'd also want to rationalize about why stocks are going to continue to decline. His analysis is correct up until the point where he states that the economy is shrinking. On this, you can look at the market and see it's come back substantially from the lows. Anyway, here's the rest of the article. April 7 (Bloomberg) -- George Soros, the billionaire hedge- fund manager who made money last year while most peers suffered losses, said the four-week rally in U.S. stocks isn’t the start of a bull market because the economy is still shrinking. “It’s a bear-market rally because we have not yet turned the economy around,” Soros, 78, said in an interview yesterday with Bloomberg Television, referring to the recent rebound in stock prices. “This isn’t a financial crisis like all the other financial crises that we have experienced in our lifetime.” The Standard & Poor’s 500 Index of largest U.S. companies has climbed 21 percent since March 9 on optimism the worst of the 16-month U.S. recession is over. The economy continues to contract, and there’s a risk the U.S. falls into a depression, Soros said. “As long as we deal with this in a multilateral and more or less coordinated way, I think we’ll get through,” said Soros, whose Quantum Endowment Fund rose 8 percent last year, compared with the average 19 percent decline of hedge funds tracked by Chicago-based Hedge Fund Research Inc. Marc Faber, managing director of Hong Kong-based Marc Faber Ltd. and publisher of the Gloom, Boom and Doom Report, said in a separate Bloomberg TV interview today that the S&P 500 may drop as much as 10 percent before resuming gains. Views on Obama Soros gave a mostly positive review of the President Barack Obama’s administration. “He’s done very well in every area, except in dealing with the recapitalization of the banks and the restructuring of the mortgage market,” said Soros, who has published an updated paperback version of his book “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means” (Scribe Publications, 2009). “Unfortunately, there’s just a little bit too much continuity with the previous administration.” Soros said the U.S. housing market hasn’t bottomed, even as transactions in states such as California have increased. “There are some signs of hitting bottom, but we are not there yet,” he said. “A lot has been done to forestall foreclosures.” U.S. stocks declined for the first time in five days yesterday on concern that government measures to shore up banks may not help as much as estimated by analysts and loan losses will exceed levels from the Great Depression. The S&P 500 today fell 2.4 percent to 815.55, adding to yesterday’s 0.83 percent drop. ‘Zombie’ Banks Soros said the banking system is “seriously under water” with banks on “life support.” “They are weighed down by a lot of bad assets, which are still declining in value,” he said in the interview in his New York office. “The amount is difficult to estimate, but I think it’s in the region of maybe a trillion-and-a-half dollars.” Soros said the change to fair-value accounting rules will keep troubled banks in business, stalling a U.S. recovery. “This is part of the muddling-through scenario where we are going to keep zombie banks alive,” Soros said. “It’s going to sap the energies of the economy.” The Financial Accounting Standards Board relaxed so-called mark-to-market rules last week, allowing banks to use “significant” judgment in gauging prices of some investments on their books. While analysts said the measure may reduce writedowns and boost net income, investor advocates and accounting-industry groups said it will help financial institutions hide their true health. Bank Nationalization The “bugaboo of nationalizing banks,” which the Obama administration wants to avoid, means “we are nationalizing only one side of the balance sheet,” Soros said. “We gradually take over the deficits on the balance sheet. But we aren’t actually going to benefit from the banks recovering.” Money being injected into banks under government rescue programs should be used to finance new lending, according to Soros. He said he participated in HSBC Holdings Plc’s rights offer, which raised about $19.1 billion. Soros’s firm oversees $21 billion. Its Quantum Endowment Fund rose 5.2 percent this year through February, data compiled by Bloomberg show. Soros ranked last year as the industry’s fourth-highest paid hedge fund manager, earning about $1.1 billion, according to Institutional Investor’s Alpha magazine. Hedge funds should be regulated like other financial firms, Soros said. It would be appropriate for authorities to monitor positions to see whether managers have “excessive exposure,” he said. Hedge-Fund Regulation The Group of 20 leaders said last week they would extend oversight to all financial institutions deemed vital to global financial stability, including “systemically important” hedge funds. U.S. Treasury Secretary Timothy Geithner said last month he wants to bring hedge funds, private-equity firms and derivatives markets under federal supervision for the first time. “The hedge funds that have used excessive leverage have actually failed or are on the way out, so I don’t think this is going to do any damage or hurt the hedge funds except for the fact that they have to fill out more forms,” Soros said. “Recognizing that markets are inherently unstable does require a different kind of regulation than we had in the past,” he said. Soros Fund Management LLC was fined 489 million forint ($2.2 million) last month for attempting to manipulate the share price of OTP Bank Nyrt., Hungary’s largest bank, the country’s financial regulator said. Hungarian Ruling The Soros fund attempted on Oct. 9 to “send out false or misleading signals about a security’s supply and demand or its share price” and short sold OTP shares, the regulator, known as PSZAF, said in a statement late yesterday. The short selling caused the shares to drop 14 percent in the final 30 minutes of trade, the regulator said. Soros apologized for the trade and said the fund had started an internal investigation. Hungarian-born Soros gained fame in the 1990s when he broke the Bank of England’s defense of the pound and drove the currency from Europe’s system of linked exchange rates. He also successfully bet that Germany’s mark would appreciate after the collapse of the Berlin Wall in 1989 and Japanese stocks would start to fall in the same year. Soros said China’s economic growth will accelerate before the end of the year. “They have a pretty big stimulus package,” he said. “They are going to use more, because not being a democracy, the leadership knows that their very survival, the avoidance of social unrest, requires them to generate growth.” Brazil to China China’s economy grew 6.8 percent in the fourth quarter from the same period a year earlier, lagging the 9 percent expansion in all of 2008 and 13 percent in 2007. Industrial output growth slowed, forcing thousands of factories to close and leaving about 20 million migrant workers jobless. Brazil’s economy will resume growth “relatively soon,” helped by Chinese demand for iron ore and soybeans, Soros said. “I think Brazil actually, together with China, will be among the recovering countries,” he said. “The outlook for Brazil is better than for most other countries.” To contact the reporter on this story: Kathleen Hays in New York at khays4@bloomberg.net; Saijel Kishan in New York at skishan@bloomberg.net My opinion is that he's right about this quarter's GDP being down substantially. HOWEVER, the economy is expanding from the low from sometime around February. He's thinking that because the GDP number, when it's released, is going to be negative that that will be reason enough for stocks to continue declining. The point of fact is that the contraction has already taken place, and he's ticked that he didn't cover lower. My best advice to Soros is to cover, because the bank restructuring is on track, and if he doesn't want to listen to me, he can try to think about the banks talking about paying back TARP funds. That alone would be the signal to permabear George Soros that the bear market hit it's low a couple months ago. While he might have the upper hand here a day after the market crashing becuase of these statements, it is my opinion that the market is on a tear, and this particular leveraged bet against the American Economy has already run it's course. If we do decline, I seriously doubt it will be 10%. Heck, we've already declined 2.5% mostly on fear of this sort of gloom and doom phase. The Bears have had their turn. What is the catalyst? Monetarism. Ex-Post Edit: If you ever wondered who "Beau in Kentucky" was on Jim Cramer's "Mad Money" for the day of atonement, then you know now. You can have the debate over whether to listen to Cramer or not, but I will absolutely never forget his statement, "Don't take seasonal trades, AND DON'T BET AGAINST THE FEDERAL RESERVE!" The point is that Soros is doing just that by staying short. The banks, financials, and technology are rebounding because of the Fed's actions. The government itself has come in to profit in the market. While there is a twinge of socialist rhetoric in it, the Fed will take all steps necessary to prevent the full blown collapse that he's banking on. I bet he'll keep the profit, but it won't be anywhere near as substantial as it could have been on the trough.

The Market is Signalling we are in Early Stage Recovery

2009-04-06T17:15:00.003-05:00

I know, there's plenty of data indicating otherwise, but if price action is really used to indicate the future direction of stocks, then I absolutely believe the huge rally we've seen off the lows indicates we are in an early stage of recovery. The data will continue to be horrible, but I believe the real reason for the rally is an uptick in the economy that won't be glimpsed by the data until the end of the second quarter. Even then, I think we'll see the GDP for the second quarter in the third quarter have a rally from the low. I think these past two quarters were horrible, sure, but the rally upward, if it is any indication of how the economy is doing, is signalling an early stage recovery. I think we'll keep seeing poor economic numbers and we'll keep rallying off of them because the recovery is already happening. The S&P was, at one point at the low, minus 26% approximately, and has rallied back to only being down 6%. I think we have another 20% to increase for an FY2009 projected return of 12.8%, putting the S&P around 1002.57 at year end. While some might say that's optimistic, stop and consider how large of a swing that is from trough to peak. We're talking about a 40% swing about in between the rally I think is coming. I wouldn't think it's a stretch that we end beyond that, but I do believe we'll have a positive year. What is rallying currently are financials and technology stocks. Both of these are the very foundation of the US economy, and have been for the last decade. I think manufacturing we'll continue to have problems. Service based economies will continue to benefit from the current US socialist policies of the Obama administration, especially in technology where the President has demanded an overhaul of our governmental infrastructure. Obviously that makes the DOW around 8800, and we're starting to see the influx of stimulus spending. Eventually, though I can't make a prediction yet, the recession will be marked from November of 2007 approximately to February of 2009. It was a long time. I think we'll look back and believe the sub-prime problems were obvious, when this was only 1 factor contributing to the recession. Other causes were an economic loss in overpriced commodities possibly attributable to wartime excesses. The focus of the market currently according to Bloomberg is whether Oil will hold $50. I think probably not, as OPEC is being shown to be ineffective at best with prices only rising due to perceived geopolitical risks. I happen to believe that Israel is planning to attack Iran pre-emptively, seeing that the passive aggressive approach is not working to curve the development of nuclear weapons. I think the US response will be to essentially isolate North Korea even further. Ruling with an iron fist is the only reason this country hasn't launched a full scale rebellion against North Korea's regime. The same is true in Iran where economic growth may be positive only due to the inflation of its currency. Putting all these things together, it appears that for the Western World, we are seeing early signs of a recovery long in coming. The US in particular is working towards stimulating the economy through intense monetary transactions. Normally this is inflationary, but the key difference this time around is that other countries are printing money at a rate far in excess of the US rate of monetary expansion. No matter which party you voted for this time around, the stimulus and spending packages would have been comparable in size and scope. Arguably the key difference would have been in its application, but the absolute values of each proposal would have been the same, and the effects similar. Monetarism by itself only works relative to other countries. Seeing as how Fiscal policy is not an option with rates being where they are, the expansion of the Fed Balance sheet should work to decrease the deficit as Obama is projecting by profiting from the securities it is now accepting on its balance sheet as collateral. This is an opinion, but if the deficit really can be cut to $500 billion by the end of his first term, it'll be because of what's on the Fed's balance sheet currently, and not really due to any special magic of the current administration.

AFL was the victim of a good old fashioned Bear Raid

2009-01-22T22:18:00.003-06:00

http://www.ajc.com/business/content/business/stories/2009/01/23/aflac_shares_drop.html The only reason for the link above is to note that we have entered into a "quiet period" for AFL's stock. This is actually the classic case of market manipulation on the part of the Morgan Stanley analyst that recently was released saying the following: "SAN FRANCISCO (MarketWatch) -- Morgan Stanley analyst Nigel Dally advised investors to be cautious on Aflac Inc. (AFL:$22.90,00$-13.37,00-36.86%) shares because the insurer may be exposed to investment losses stemming from a recent slump in the value of hybrid securities issued by European financial institutions such as Royal Bank of Scotland. Aflac (AFL:$22.90,00$-13.37,00-36.86%) has $7.9 billion of exposure to hybrid securities, Dally said. Using the statutory filings, the analyst estimated that roughly 80% of this exposure is to European financial-services companies, with UK banks including RBS , Barclays , and HBOS among the holdings. "The hybrid security prices related to these institutions were already under pressure at the end of last year," Dally wrote in a note to clients. "However, those price declines pale in comparison to the sharp fall-offs we have seen in the past week, where the investor concerns over the possibility of nationalization of some institutions has led many of these securities to decline 30% or more." If even a small portion of these losses are realized, the hit to Aflac's (AFL:$22.90,00$-13.37,00-36.86%) capital ratios could be "substantial" and the insurer's overall capital adequacy could be significantly less than most investors believe, the analyst warned." I do own directly and indirectly AFL. This is blatant market manipulation that can clearly be seen by the price action of the prior day and the day before that. I believe that these institutions sold AFL yesterday or 1 day prior to yesterday in a modern "Bear Raid" and closed out their positions at substantial gains, because the news of AFL's investment portfolio was purposely "released" coincidentally to coincide with AFLAC Corporation's "quiet period." I propose an SEC Investigation very soon to explore this for any possible impropriety.

Merrill Lynch Brokers will Walk Away

2009-01-11T22:06:00.003-06:00

http://bloomberg.com/apps/news?pid=20601109&sid=aMzHGkCEv2P0&refer=home Lewis is now Weill, and has made the same cardinal sins Weill made at Citigroup. This makes BAC a very poor long term investment choice.

2008: The Year our Debt Snowball Crushed Our Economy

2009-01-10T15:52:00.001-06:00

Now that 2008 has gone down in history as one of the worst years the market has ever seen, I thought I’d post about the heart of the problem. Down to the individual, our country has a problem with debt. Debt enables us to purchase goods and services, but also enslaves all earnings after we incur the debt to the debtor.

I posted on my blog the following quote, and I thought about it for a little bit and decided that it’s very appropriate as a summary of the market in 2008:

Would you hold overnight positions at 4 times your equity every single day of your life? I doubt it, but some companies leveraged themselves 20 times equity every day of the quarter, and it just took that one quarter to send their stocks to 0.

I believe this quote is exactly why we’re in the situation that we have right now. It’s not mutually exclusive to financial companies, however. It’s not even exclusive to corporations. It seems even individuals have problems with their debt ratios, as we see in the housing market and for unsecured credit card debt.

The problem I see with Americans in particular is that we have the ability to finance substantial desires that have the potential to bankrupt us if something unexpected occurs. Here’s an example at the individual level: I have no debt, but I don’t have insurance. I get into an accident and require major surgery. Immediately you are abjectly bankrupt from the $25,000 to $50,000 expenditure that comes as a hospital bill. This is understandable for an individual, sure, but corporations for the last decade have gorged themselves on debt. So much so that it is equivalent to saying I make $50,000 and I have $50,000 in the bank. I decide I’m doing well and borrow $1 million to loan to my friend at a higher rate than I was loaned the money, earning what I believe is a risk-free spread between the two. When my friend is unable to pay, I suddenly own whatever he bought, and it becomes my obligation. The problem is that whatever my friend bought is now worth half of what it was. The catch is that my friend might have chosen voluntarily to walk away from his purchase and stick me with the bill. Both parties lost everything in this situation. You might say this is exactly the nature of a sub-prime loan, and this is primarily what has caused the market to collapse, but this ignores the fact that I should have charged substantially more for the loan in the first place. I basically miss-priced risk, but more on that later.

When we issue debt or go to buy a bond (which is also a loan, either to governments, individuals, or corporations), we seem to have miss-priced risk. I believe risk management is a fallacy. Most risk managers trust “experts”, like debt rating agencies, but the catch and the gotcha really comes when you find out how risky the loan you made actually was.

The main point of this post is that as long as everybody, either corporations, individuals, or governments do not stop financing everything through debt, then essentially all we have left is a worthless IOU. Sure there are cases where it’s collateralized, but even then, if it was not appraised correctly in the first place, we miss-priced risk and lost substantial amounts of money.

At the personal finance level I don’t believe many Americans are well behaved in this regard. So much so, that even when the average American runs a behemoth corporation like Lehman, Bear Stearns, Ford, or GM, we pretend like debts will be magically repaid.

Work goes into paying back debt, but a lot of the work that goes into repaying the debt fails to account properly for an adequate level of return. The Golden Rule of Corporate Finance is: Are we investing the firm’s capital in investments that our shareholders do not have the capacity to invest in as well? Corporate America in 2008 got this question dead wrong. For that, our debt snowball finally caught up with us at the bottom of the hill and crushed our economy.

I’m not saying debt is bad, but that it has been misused for too long in our economy. So much so that I’m extremely dubious of any company with a current ratio below 1 and would go so far as to say that any company with a debt to equity ratio above 1 actually has a negative net worth. For the lay person, this simply means that all of your whole net worth is less than the size of your debts. That’s not bad by itself, but the kicker is that the debt requires payments in excess of the money you bring in. In Corporate America, this usually violates the debt covenants and triggers a technical default.

Ford, Lehman, GM, Bear Stearns were and are all in technical default. They have negative net worths. We know Lehman and Bear Stearns are no more, but no one saw this coming until it was too late and what little liquidity there was dried up. In the case of F and GM their losses on a per share basis are more than double their market cap. This implies that they are bankrupt. F and GM shouldn’t be saved, because they behave like teenagers with their money, aside from the fact that no one wants to buy their cars.

It’s been difficult to tie personal financial behaviours with Corporate America, but on both, when you understand what it means to be in debt, neither the individual or the corporation emerged from 2008 profitably.

My hope for 2009 is that Corporate America starts to behave itself with regard to debt financing as well as executive compensation. Any company with debt to equity ratios exceeding 5:1 I believe are violating their fiduciary duties to the company, because these are unreasonable levels of debt.

The old adage is that debt is cheaper to issue than equity because of the tax savings inherent in the interest payments. The fact is that with debt to equity ratios at these levels, when you’re paying 5% in interest, you have to earn 25% on your assets to cover the interest. Is there any company out there making that much on their money consistently to the point that you’d bet on your ability to make the payments for the next 30 years? Probably not, however, I’m not saying that there isn’t, but I’m saying the average company and individual in 2008 is engaged presently in this sort of over-leveraging.

I would want my investors to come to me with all debts paid off, and I’m of the mindset that there are only 3 things in this world worth borrowing money for because they increase your productivity capacity. Those are 1) House, 2) Car, 3) Education. Everything else should be paid for with cash, and all corporate growth should be financed organically. For you high net worth individuals, jets are never to be purchased under any circumstances and neither should boats. If you do a cost benefit analysis 99.9% of the time you’ll find that they don’t improve your productivity. In the rare case it does there’s only a marginal benefit. Boats and Airplanes are for renting, not owning, and that goes for corporations as well. (Note that it’s different if you’re an Airline Company or plan to open a private Airline).

The best performing companies in 2007 were ones with squeaky clean balance sheets, and did well until mid-2008. Most of these were technology companies, like Apple, Research in Motion, and some other tech bellwethers. I found very quickly in 2007 that companies with no debt of any kind, and high returns on equity are very well positioned to capitalize on opportunities, because their earnings accrue to the shareholder, and not to the debtor of the company. I absolutely urge any reader to sell any stocks with long term debt. Buffet states this as well, and while it’s true that this increases the leverage of the assets, you should see in 2008 that the debt financing is what caused our economic collapse. So please be warned in advance.

I know it was a very long post, but in 2009, I believe we’ll see a rebirth of the proper use of debt to finance growth. I find that companies that have to closed stores not only did so with debt, but also received negative returns on their stores. This makes these companies as corporations to be avoided in the near future, because it suggests that management does not know how to analyze opportunities correctly.

I believe 2009 will be an up year, and I think Americans will be better behaved financially, both at the individual level as well as the corporate level. Best of luck in 2009.

This post first appeared at advisorworld.com, where I am a contributing author.

I was honored by Wiser Advisor as a Regular Member with this Press Release

2009-01-04T23:15:00.003-06:00

12/09/2008 WiserAdvisor announces that Beau Wolinsky of K.C. Capital Management, Inc. has been awarded admittance as a member of its directory of financial advisors. Financial advisors are granted admission into WiserAdvisor (http://owa.scfsecurities.com/exchweb/bin/redir.asp?URL=http://www.wiseradvisor.com/) based on their credentials and qualifications. All members offer their services to investors with a fee rather than solely with commissions, allowing them to assist investors with a variety of different investment options. All members are also properly registered with the SEC, FINRA or other regulatory organizations. Since 2003, WiserAdvisor has focused on taking much of the guesswork out of finding a qualified financial advisor or financial planner. This is done both through the stringent admittance guidelines, as well as through the information provided to investors about each member advisor. All members must complete an extensive profile outlining their services, qualifications and credentials, including their education background. Because of the strict standards that a financial professional must meet in order to become a member, WiserAdvisor only admits a select few high-quality financial advisors and financial planners. More than 600,000 professionals can provide insurance and financial advice. Less than 1% have been granted membership into WiserAdvisor. Thousands of investors use WiserAdvisor each year to find local financial advisors and planners, and trust that WiserAdvisor will help them find the right professionals to meet their unique needs. About WiserAdvisor.com WiserAdvisor is an online service that connects investors to local financial advisors and financial planners. It is an independent and free service provided to investors, allowing them to find local professionals who can help them build their portfolios, plan for retirement, manage their estates, or to help them with other investment issues. More information about WiserAdvisor and its services can be found at http://owa.scfsecurities.com/exchweb/bin/redir.asp?URL=http://www.wiseradvisor.com/. About K.C. Capital Management, Inc.Beau Wolinsky is a financial advisor located in Kansas City, MO. Beau has over 2 years experience working with local businesses and investors.More information about Beau can be found at http://owa.scfsecurities.com/exchweb/bin/redir.asp?URL=http://www.wiseradvisor.com/advisor_profile_state~id~1822115.asp and at http://owa.scfsecurities.com/exchweb/bin/redir.asp?URL=http://www.themarketchatter.blogspot.com

Warren Buffet's Performance Stats

2009-01-02T11:54:00.000-06:00

The Wall Street low down with my opinions

2008-11-21T22:08:00.003-06:00

I can't believe I still have to explain to people what's going on with Wall Street. Here's the gist: The congress posted dual mandates to both the public interest, as well to FNM and FRE profitability. This allowed FNM and FRE jumbo, 100%, 20/80 loans to be issued as synthetic government paper. When these securities were purchased, they were bundled into Collateralized Debt Obligations. These securities were then combined even further into CMO's, collateralized mortgage obligations. When the inherent leverage of these securities collapsed when homeowners were unable to pay, a systemic collapse occured that we see reflected in today's prices. There's plenty of blame to go around. I don't see one convincing argument over another for the culprits: You could pick either 1)Bill Clinton 2) US Congress 3) Jimmy Carter 4) Alan Greenspan 5) Probably less convincing is the Bush Administration for lack of oversight, even though they were shouted down when they attempted to regulate this part of the market 5) Hank Paulson or Fed Chief Ben Barnanke. It's a comedy of errors that reads something like, well this happened, then congress did this, and Greenspan didn't know what he was doing by putting rates so low even though we came out of the recession, and the Bush Administration didn't regulate (hands off, you know), etc. Then pull it back to as far as Jimmy Carter and lesser so for the Clinton Administration. It doesn't matter what happened. I think we can stop that from continuing, so we must look forward. I keep seeing talk of dow 5000 or dow 6000 or dow 7000. I'd be shocked to see any of them. Fundamentals say we should be a lot higher, but that's not enough to take us back to the highs. We are now governed financially by emotions of very rich but hurting and bleeding equity management institutions. They know they shouldn't be selling, but they have to meet their redemption orders and so must sell. It's not their fault that their own finicky investor base is in a panic with the rest of the market. I certainly think if we do hit either dow 7000 or dow 6000 that it will be but a fleeting moment in time before I see dow 30,000 by 2030. Don't lose sight of the fact that we will come back from these. I don't buy the argument that "this time it's different." That's financial heresy, because something like this has always happened. I've heard it being compared to 1800 style recessions. I think out past 12 months from now, we'll be at least to dow 11,000, maybe dow 12,500 to the old high of the dot com bubble. The GDP data is being tainted with housing price depreciation, and we absolutely must be backing that out of the data, because it was a bubble, so it's probably not a good predictor of future economic conditions. This goes along with the deleveraging argument that you hear thrown about on TV. I don't buy that argument either, because we can't really deleverage much more than this when there are a lot of financial institutions that have already gone under and don't have much in the way of assets left to sell on their balance sheets. I specifically see that the PE ratios are at about 10, when historically, they should be at 15 for reasonable growth rates. The argument goes, "but earnings will be lower", sure, but if you take them lower when you've lowered earnings guidance by 50% or more already, what are we talking? Every company makes no profit? Not likely. New leaders that I expect to see re-emerge are Energy companies and basic materials. I happen to believe that the Chinese stimulus package will introduce a new wave of oil and commodities hoarding seen by the Chinese Communist Government prior to the Olympics. There is speculation that I deem to be accurate that the Chinese were buying Oil and other commodities to not have to pollute during their time as the Olympic epicenter. (I'm sure their gymnasts weren't 16, but they put on a good show, anyway). This lead to that run-up, and I definitely believe this is on the horizon. While it is true at this moment that Commodities are down, while they could stay down, the cyclical nature of these companies suggests they will be the trigger to take us higher. We need to remember what indexes the DOW and the S&P are. Most of the S&P used to be financials at about 20%. That index has declined by about 70% so financials aren't as big a part of the indexes as they used and single handedly account for about 14% of the market decline. The rest I stick to Commodities and Energy with Oil dropping by about 2/3's from $147 to $60. That used to make up for 25% of the S&P 500, and has declined at least 50% from their highs, including international stocks, especially in Russia. There's 12.5% of the market decline. Where are the rest of the declines coming from? Wall Street's "go-with-the-flow" pessimissim. They've assumed that because financial and energy companies will have declining earnings that it must be true that other consumer companies will have earnings declines. In this environment, I can see WMT gobbling up more market share from other higher cost producers such as Target or Costco. Costco will do all right because in some cases they are the lowest cost producer, but for everyday items with groceries I can see WMT gaining the lions share of the market share losses they put onto other retailers and grocery chains. So, I guess I'm saying that I expect Oil and Energy companies to be first on the rally list. Financials will take so long to recover because of trust issues, that I can't see them being a leader for at least 7 years. The consumer cyclicals and especially technology companies will continue to dominate in their respective fields. I don't see CSCO losing customers, and I can't imagine Apple will stop being the market leader in consumer electronics anytime soon. I kind of categorize retailers as different animals. I won't touch companies closing stores, because it shows that they invested too much in capital expenditures, and got no return. This suggests their management is not only not conservative, but also has extremely imperfect information when it comes to selecting locations to sell products from. These aren't good management tenets to look for in companies. Once materials catch up with Energy, I think that'll be a signal that the consumer is coming back. The political landscape I can't see having an impact on anything but pharmaceutical and health care companies. I don't think any problems will be seen for energy in this arena. What's the catalyst? A very good question. The best analysts know their catalyst. I think I've picked mine as a re-emergence of commodities and oil prices from anticipated expenditures from China's stimulus. When it is released, we should see a pickup in imports into China from China's perspective of oil purchases. How will International Stocks perform in this? It all depends if they are domiciled in a free market, democratic, capitalist country. Everyone can see the writing on the wall in Russia, so I'm not even going to go into that. I think Pakistan is still ruled by a dictator, even though he is one friendly to the United States. I'd avoid any non-Western Country, because I prefer zero political risk. Though there is some, I prefer to think if it's democratic and capitalist that it has no political risk of nationalization or royalty, rent-seeking governmental behavior. If those conditions are met, couple them with Buffet's tenets that it be a company that has a net worth of at least $500 million and pretax earnings of $70 million. Anymore I'm beginning to wonder if Buffet has lost his touch, but probably not, and I'm certainly not a critic. So, to summarize, given the political climate is similar to the U.S. and barring a push to nationalize industries or other royalty, rent seeking behavior, I don't mind investments in that kind of country, because it will be based more on company fundamentals allowing easier analysis. I guess I made up for a lack of posting. But each post has a lot of information in it already, and this one is no exception, but most of the beginning I've already touched. The new catalyst may not only be China, but our own fiscal stimulus packages.

GM and F, let them die

2008-11-07T22:32:00.002-06:00

It appears that political forces are the only lifeline available to GM and F. Why they didn't die 40 years ago I guess was for the same reason. I say let them die and fill the vacuous hole with new incarnations of profitable American Automotive giants. Where is it written that we must save corporations from their poor management decisions? Don't confuse this with the plight of Wall Street, because one spreads, the other is linked substantially to only those involved in the Auto industry. I can understand the arguments for a bailout, like, "Don't let the industry die." Who said anything about dying? Whoever buys the factories can easily turn a profit by retooling the debunk outmoded machinery. They've made crap for cars for years, and, now, when they have no ability to operate on thin margins and as a cyclical industry, do they beg for a shot of liquidity in the arm. This should be another 400 to 500 thousand jobs lost in the economy, very easily. I urge any politician in a position of power to look past the futility of funding an unprofitable, behemoth corporation. The bailout is not as far reaching as the Financial System, so don't fall for it a second time around, because they'll pull the same shannanigans in a couple decades again, anyway. It is absolutely not the government's job to boost a junk corporation (according to any rating of GM or Ford's credit quality).

Collapse

2008-10-11T18:58:00.002-05:00

I thought I'd explain again, what has happened. If down the road I'm not famous for summing it up this way, I don't know what else to do to describe the situation. The Depression: The financial system loans money to people at up to 30:1 leverage to buy stocks. Stocks decline, margin calls are issued, people can't pay, the loss is transferred to the financial entities balance sheet. Stocks continue to sell off, creating a perpetuating loss of value. Today: The financial system loans money to people at more than 7 times annual income to buy "homes" with under the guise of serving the public good (IE:FHA, FNM, and FRE dual mandates). People default once the rates are reset, the loss is transferred to the financial entities balance sheet. Home prices continue to sell off, creating a perpetuating loss of value. That's as simple as I can make it. A better analogy for more financially literate people, or even professionals, is this: I make $50,000 per year. I have $50,000 in the bank. I borrow $1 million to loan to my friend to buy a home with using a no lose adjustable rate mortgage, or so I think. The buyer defaults on his loan for whatever reason, while the collateral backing the loan has declined substantially. All equity is wiped out on this account, and all parties involved lose everything. It just takes a glance at these financial company's balance sheets to see that they borrowed at least 20 times what they were worth to make these loans. Really bad, but the system is still functioning, and I believe can overcome these excesses.

What is a systemic collapse?

2008-09-25T17:48:00.004-05:00

This is not a doom and gloom post, but a warning to help you see why there is hope with the possibility of catastrophic consequences. The "snag" hit on capitol hill suggests even more economic ignorance than I had feared, initially. It's hard to talk about something that requires years of training to understand. I know of no ECO degrees on Capitol Hill. That being said, you would also expect the Senators to have decent advisors. If the bailout plan does not go through, the financial system will collapse and there will be no entity to fill the void. The depression can be avoided, and is dependent on Paulson's bill being passed. If $700 billion is too much for you to save the economy, then think about the alternative. Imagine 3/4's of the wealth in the world being wiped out by frozen capital markets. If you're hoping for this, you're crazy. Benefits to the Paulson plan are the reverse auction process that I guarantee will set a floor in CDO's, CMO's, and some SIV's (collateralized debt obligations, collaterallized mortgage obligations, special investment vehicles). These products are not worth 0, and this process will ensure a rock bottom price for taxpayers. The way a reverse auction works is that everyone bids on the lowest price, and the treasury purchases securities at the lowest bid. I guarantee anyone who's been given this opportunity would take it. To the heart of the matter is what a systemic collapse can do to the financial system. Our markets and financial systems operate through measured rates of inflation. When these revert to a deflationary environment the incentive to save is removed, and deposits flow out of the system. A self-induced run on the bank perpetuates the deflation, and the market keeps declining. In such an environment, none of our institutions are equipped to operate in this situation. Bailout or depression? That is the question. If you think McCain putting off the debate is just to stall time, you're an idiot. This week is a historic pivot for democratic capitalism. If this plan is not approved by next week, I have no hope left for capitalism. People will whine for Big Brother to help, and we'll be paying extremely high taxes to support give away programs. I've said on some sites that this is not your grandfather's bailout. This is preserving the financial system, and goes as far as preserving our way of life. It's not bailing out one company, but saving the financial system. Without this increase in the money supply, we will collapse, and won't come back for a long time. The reason this plan is required is because there are no institutions left with the capacity to fill the void on these instruments named above. There isn't any instiution that can possibly buy $700 billion of anything, let alone that much of cdo,cmo, and siv paper.

FINALLY! No more bad debt

2008-09-19T04:10:00.000-05:00

I think you just hit rock bottom. Assuming the treasury will take the bad debt off the overleveraged banks and financial institutions hands, I see no problem with resuming the long term climb upward. Trillions dumped to save the financial system is not something to be considered a bad thing for markets, be they domestic or international. I can see 1320 by October's end. 1400 is a bit uncalled for. S&P's targets based on value weighting on the NQ are 2100 for the NDX, which is about 25% higher, but that has a 6-12 month timeframe. Seriously, the whole reason for the decline has been housing, housing, housing, sub-prime, sub-prime, leverage, leverage. Suddenly, it's all gone. With a bit more regulation and congress admitting they were dumbasses for affirmative action lending rules, I think they figured it out.

Financial Mutually Assured Destruction

2008-09-14T21:42:00.004-05:00

As expected, Lehman will declare bankruptcy tonight. That's not the worst part of this horrific story. It is the merger of Bank of America and Merrill Lynch that has me deeply concerned. MER closed at $17 about on Friday, and will now be bought by Bank of America for $29. This is MAD! Bank of America sidestepped one of the worst financial catastrophes in the history of banking, and is now deciding to try to call a bottom in the middle of all this. I believe this is a horrible deal for BAC. It moves all non-performing money losing assets to BofA's balance sheet and I predict with somewhat certainty will cause a quarterly loss in BofA's next quarterly report. MER is all debt, and totally leveraged to the hilt. This will only leverage BofA more, and cause a catastrophic loss on this company. The company had practically no net asset value to speak of, and makes it a money losing proposition. A huge premium like this is totally uncalled for. It's outrageous. I predict the overpayment will drop BofA by at least this amount in the coming quarter. Warren! Watch Out! You got to sell! This isn't why you bought BofA. You heard it here first. I did end with the above line, but then more horrific news appeared. This was from an ATP newswire. In addition, the Fed said collateral eligible to be pledged at the Fed's lending facility for investment banks has been broadened to include corporate equities and non-investment-grade debt. Previously, Primary Dealer Credit Facility collateral had been limited to investment-grade debt securities. We're Doomed! This says that the Fed is willing to accept worthless securities as collateral for emergency funding loans. This is probably what can bankrupt the U.S. Not government overspending, but accepting an expectational security as collateral. It's a Corporate Liar Loan, as I'd call it.

The heart of the Financial Crisis

2008-09-12T07:42:00.002-05:00

I want this to be a kind of warning to any head of a major corporation that might read this thread. The recurrent theme for all financial companies that lose their equity values appears to be one of overleverage. Right now, the industry average debt to capital ratio exceeds 900%. The whole industry is undercapitalized. I actually think it was never capitalized to begin with. The liabilities were being incurred just to buy non-performing investments. It's not like they set out to buy junk bonds or sub-prime with the idea of selling at a loss, but these investments even in Treasuries would decline in value at some point. The thing is, the leverage is too much for any reasonable investor to handle. Any company much above 300% is undercapitalized in my expert opinion. The reason is that that means no earnings are theoretically being accrued to shareholders. Through financial alchemy, it appears that companies are either showing a profit without including interest payments on their debt, or taking big baths to pay their debt. Either situation is not beneficial to the shareowner. Lehman is just one example of the problem. FNM, FRE, BSC all were horribly undercapitalized. Managing the balance sheet is not difficult. Long term debt and short term debt have its place, but when you use it to buy any investment or security, your company is then tied to these investments when that is not its primary function as a financial intermediary. I don't buy brokerage companies for their trading abilities. I buy them cause they are the house, and the house always wins. But when the house starts making bets with money it doesn't have, someone else is the house, and that's not how a company is supposed to function. All of the liabilities are sucking wind out of any earnings to the point where we have massive financial losses on companies that have no excuse for being in the business of owning CDO's or Sub-prime mortgages. We have FNM and FRE for that, but it still comes down to a leverage problem. 4 times your capital means at a small interest rate like 5% you would have to earn a 20% return on those assets to just breakeven. The managers of these companies may be guilty of fiduciary negligence. Just an opinion. Too much leverage in any security, even if they're treasuries, will bite if you don't manage your risk. I don't think risk managers know what risk management is, or they wouldn't have allowed the balance sheets to be overwhelmed by both long and short term. Long term on investments where they borrowed long term money to earn a spread, and short term like credit cards through commercial paper to finance their operations. Short term is fine for these reasons, but the borrowing was not kept in check. Some companies will be able to pull out of this if they are able to get out of their undercapitalization problem by diluting shareholder money. The problem is that there may not be enough capital available to circumvent the ratings downgrades to come for these companies. Would you hold overnight positions at 4 times your equity every single day of your life? I doubt it, but some companies leveraged themselves 20 times equity every day of the quarter, and it just took that one quarter to send their stocks to 0. Just think about it. If I want to invest in an asset management business, I'll buy stocks of mutual fund companies.

Calling all Leveraged Companies!

2008-09-11T13:46:00.003-05:00

Hi, per Fidelity Investments Research Page, I know why all financials are declining, and it is a theme not exclusive to FNM, FRE, or LEH. LEH currently has a total debt to equity ratio of 2,372.52% for the quarter compared to the industry average of 969%. This isn't hard to understand. What this says is that Lehman is leveraged by over 23 times its equity. All volatility is increased. You would have to be a total moron to rate Lehman a buy. The whole industry appears worthless, and this is a very reasonable measure of liquidity that I'm using. If you're wondering what a reasonable rating would be, it wouldn't be any multiple over 1 for this ratio. I like to look at the current ratio. I like ones with current ratios above 2 and no long term debt. Yes, I said it. No long term debt means all earnings go 100% to the shareholders. I'd think a lot about this and even do a search on how many securities there are in the marketplace that would actually be sufficiently capitalized for these ratings. That certainly doesn't make all of these securities with those ratings buys, but it is a quite reasonable filter to use.

Going to Mars would be better than bailing out FNM and FRE

2008-09-08T17:49:00.001-05:00

OK, so my calls that these were worthless stocks were right on. I estimate it will take a couple trillion to make these viable institutions. I totally suggest forgetting these institutions and let's go to mars with the few trillion that both institutions need. Come on! We can do it! Let's storm Washington and tell them we'd rather expand our scientific horizons the way microwaves and velcro were brought to us by launching an exploration of Mars. Seriously, I think we'd get much more benefit for our money on that than on these institutions.

GDP was decent

2008-08-28T17:45:00.002-05:00

So, in contrast to the last post I had, GDP was actually pretty good. Anything positive is going to be a real nice surprise for most of us. Recession? Hardly. There's no contraction in GDP to support that statement, and, yet, people insist on making it. In my opinion, this is more like, "If I just keep saying we'll go into recession, eventually I'll be right." That's exactly what it is. People have turned to other media besides Bloomberg and CNBC that are the only ones you should watch about business and TV, and instead turned to the likes of misinformed shows on FOX, MSNBC, CNN especially. They then decide to take a negative attitude on the economy. It'll take sometime, but housing isn't the whole economy, though it is a segment of it. The export sector is growing, which keeps us above water significantly. Outsourcing? No, try insourcing, because of the dollar weakness international companies find it is actually cheaper to produce here. Ironically, this makes our dollar go up, but getting them to make the initial investment is half of the issue, especially when you consider how well educated most American's are. That brings me to a point on a radio ad that I keep hearing. It is basically saying that there are 20 countries doing better at schooling and education than we are. I have a very, very simple reason for this. Most start at age 2-3 in institutional schools. Pre-school is optional in the United States, and kindergarten begins as early as age 5 for most kids. So, really, when the test results shown appear better, keep in mind that most countries beating the U.S. in education start significantly earlier than we do. In fact, I'd almost say that Seniors in High School in the U.S. are beating the 13-15 year olds who have had the same level of education in the countries we're competing against. I don't need any articles to support this, because it's a well-known fact that a lot of countries basically put their kids into school a lot earlier than we require. Thus, it's simply a curved system to say that High Schoolers in other countries are ahead, when really they should be, because they started so much earlier. How that relates to the market means people must study by going to college if they expect to overcome the ceiling that most high-school only people meet when they get older. The more educated you get, the better prepared you will be. My college experience is in stark contrast to most college friends I talked to that didn't attend my school. I felt challenged, and the median GPA at my school was in the mid 2's, whereas most schools exceed 3 on a 4.0 scale. Why? Grade inflation. The point of college is to challenge yourself, and most do not do that when they go. Back on GDP. There are sources that put our national debt at $5-7 trillion, and I'd put our GDP at $14 trillion. I think it is covered by corporations and individuals alike. While it is true that having better educated work forces might be more productive, the thing to remember about Democratic capitalism is that it is a super-efficient engine. The policies facing a lot of the rest of the world are self-imposed limits on growth. Some that even favor older workers over younger ones. These policies are an impairment for the efficiency of the economy.

PPI was horrible today

2008-08-19T16:42:00.002-05:00

So, the story is that the PPI was bad, and so were the housing start numbers. Add all of that up, and Wall Street decided to take some profits. That's an oxymoron, that every time the market goes down we can assume it was "profit taking." I think a lot of investors just take the loss and follow the herd. They think they should sell their stocks when it's down 0.25% and then sell at -5%. Most of the time they expect the security to go straight to the moon after purchase. I think there isn't any person here who has ever bought a stock and wasn't down at least a little bit before selling it. Worst case is the catch a falling knife scenario that we all try to avoid. I thought the rally near the end of the day was pointless. Why did it rally? It's not like we had good news. I wish I would have held QID through Monday's open and sold Tuesday. Big difference in the performance there. I think there could be some more pain coming, and even though I believe I'll be going long QLD soon, it's not like there isn't risk in pinpointing a market turn. Especially on the open, which is where most turns occur as they set the tone for the rest of the day. I'm working on Level II of the CFA curriculum. The ethics section has a bit more detail in it this time around. It's not really stuff I have to deal with, because I'm an investment advisor.

Age for the olympics?

2008-08-14T16:53:00.002-05:00

http://sports.yahoo.com/olympics/beijing/gymnastics/news?slug=ap-gym--underagechinese&prov=ap&type=lgns I don't buy for one second that China didn't just issue a fake id. Those kids are just that, kids. Maybe a couple of them were over 16, but most looked pre-teen.

Georgia VS. Russia

2008-08-11T17:50:00.006-05:00

I truly think that under the circumstances, that Russia's actions are justifiable. I don't have the figures, but for some reason, I think 1300 Russian civilians were killed in Georgia's attacks. It's half as worse as 9/11, so I can see where the nationality is easily identifiable that a juggernaut like Russia would defend itself. It's not really about freedom as much as they're leader wants to pretend it is. If they couldn't control the region, I don't have much sympathy for Georgia. After posting this I thought I'd clarify some things. According to this article: http://www.bloomberg.com/apps/news?pid=20601087&sid=aqXEOFTNv_bk&refer=home on the bottom of the article near the last couple paragraphs it sounds as though Georgia instigated the confrontation. It reads that after Georgia shelled South Ossetia for whatever reason, the Russian offensive started. Most of South Ossetia sounds like it is Russian citizens, so Russia's claim, then, is valid that they were defending their citizens as it is apparently a well known fact that most of the residents of South Ossetia were carrying Russian passports. That makes them de-facto citizens. If you don't want to click the article, here's the spot I'm speaking about: Troops Sent In Georgia and Russia began fighting when Russia moved in troops and bombed targets after Georgian forces began an offensive into South Ossetia, which split away from Georgia in an early 1990s war. Russia has said its actions are justified by what it calls a Georgian-waged ``genocide'' in South Ossetia. Russia says most of those killed in the conflict are civilians who died through Georgian military action. Georgia is a key link in the U.S.-backed ``southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia. The BP Plc-led Baku-Tbilisi-Ceyhan oil pipeline to Turkey runs about 100 kilometers (60 miles) south of Tskhinvali. The last italic is why I would actually say Russia might have the upper hand morally for once. Assuming it's true, and I would say it probably is, I consider it justified in case you wanted actual documentation for my reasoning. I don't really care about a southern energy corridor. So, don't get me wrong, it's not like I enjoy war. No one does, but it appeared that Russia would not act like this if it were not justified.

YHOO! Botched the recount

2008-08-05T22:43:00.002-05:00

I can't say too many people will know about this tonight, but Jim Goldman just came out with a blog post that reports Yahoo botched their recount and were missing about 200 million votes, and that these votes were in stark contrast to the confidence reported by the YHOO board. This is either incompetence or manipulation. Neither of which speaks very well for Yahoo's board or, to point to Icahn's blog, corporate governance.

Misused Funds

2008-08-05T22:09:00.004-05:00

http://www.cnbc.com/id/26044117 OK. Hey, Hank! I'll do it for $95,000 retainer, too. I can even simplify it for you. High leverage and non-performing money losing assets. The conclusion is a worthless stock. But don't take my word for it. Just follow my logic about the leverage of these companies. So we're going to buy FNM and FRE to keep it from going out of business? (To the best of my knowledge this will keep the equity from going to zero, but won't make money for the enterprise). Here's a quick look at how much FNM and FRE are worth: FNM:$13.3 Billion FRE:$5.3 Billion Both stocks are down 80% for the year. The treasury is seemingly making a tender for these companies whose assets are booked at over $1 trillion. Let's say we merged the companies together. If they had no liabilities and were 100% equity such that their market values were completely composed of assets, the leverage of these companies is equivalent to $1,000,000,000,000/20,000,000,000=50:1. For those that don't want to count the zeroes this $1 trillion/$20 billion. I have never had any trading system in my lifetime survive even the very first DD of 0.02% with leverage of 50:1. Never! Not once. I may be wrong about $1 trillion of off-balance sheet assets, but it could be more actually. But let's say those assets go down by just 0.01%, then the value of a basis point is $100 million. They get 200 basis points of leeway before their equity becomes essentially worthless. Let's say in six months the fed starts raising interest rates. I don't think these companies will survive as publically traded entities. Rates will move up 2% at one point, making whatever loans down here worthless with no profit. Yeah, I guess this is a major call. I don't believe FNM and FRE can survive, as we've socialized the catastrophic losses of the GSE's, and paid Morgan Stanley to tell us what I'm saying. Just think about it. Citigroup writes down $485 billion of mortgages when they did have $2.3 trillion at their high? It would seem that the market already is aware of this, which is why the stocks are down so much. But I think the treasury can throw all the money it wants at these enterprises, and they'll still lose nearly all of their investment. Why haven't their been any writedowns published by FNM and FRE? I'm sure they're waiting in the wings to figure out what will happen to the shareowners when they are announced. I can see the headline: "Freddie and Fannie loses their fannie!" Sorry, probably not that. Basically I'm saying that the unprecedented actions taken by the Treasury Secretary suggest that he is intent on weathering this storm. I think it is already here, and that both of these stocks are worth zero. Good thing we can't have any liability as equity shareowners beyond our initial investment. I guess Uncle Sam will be holding that bill.

Why get a CFA Charter?

2008-08-02T12:55:00.004-05:00

For me, the decision to get the CFA Charter, which stands for Chartered Financial Analyst, was a natural extension of my personal exploration of valuation models. I knew Level I was just introductory material, but, apparently, only 1 in 3 people could pass the introductory levels. I'm getting it because I consider it a mark of a professional as well as a global credential that can take me wherever I'd like to go. To pass, I used Schweser Materials with the 16 week archived, online classes. I think your chances of passing increase at least 50% when you take these classes. I know my scores were probably greater than what was needed to pass. It's kind of on a curve and my understanding is that you are guaranteed to pass with a 70%+ score, and the curve ends at 30% less than the top 1% scores. I'm getting it because I see real value in having this credential. Not to mention it seems the median salarly is well into 6 figures. I really do have a passion for this material, as I've been prepping myself for such an undertaking since getting a BS rather than a BA in Financial Economics from Centre College. I feel that having the letters CFA after my name will add a lot of credibility to what I do. If you haven't noticed, a lot of my business is contained in the icons on the sidebar. So, to answer the question "Why get a CFA Charter?", my answer is that you need to have at least one credential respected at the global level to compete in today's financial markets. This credential is essentially a big undertaking, and requires diligent, sincere effort to complete. I don't know how many hours I studied for it. Let us just say it was enough to pass, but that's a cop out answer that doesn't get to the heart of the matter which is to say 1 in 3 passed Level I. About the same will not pass Level II. You should not underestimate how difficult this is. If you haven't had a grounding in Economics and Finance as well as rigorous upper level Mathematics, you will be at a disadvantage when you attempt to pass these exams. It's not that upper level Mathematics is required for the exam, but that this level of thinking about theoretical concepts through the pushing of symbols is required to pass Level I. If you can't do basic calculus, you might have a problem with these exams. If you have an accounting degree, then you'll be at an advantage as FSA is the biggest section of these exams. "Was this the hardest exam you've ever taken?" I'm creating a subsection to this post following my background. The answer is not that it was the hardest, but that it was the most important. I've actually taken harder exams in my life, but none quite as comprehensive as this exam. It tested my mastery of everything that I claim I understand through my BS in Financial Economics with a minor in Mathematics. I found differential calculus much more difficult, and I'm sure that's obvious when you think about it. What made it easier than some other exams was the multiple-choice format. I guess my school was much more rigorous in its assesment of your mastery of subjects, as I found very few exams I took at Centre College were multiple choice. I would have had higher GPA's if that was the case. I'm sure somewhere someone's thinking, "Yeah, he's right. I did normally take multiple choice exams." So you know what I'm getting at when we talk about hardest exams. Multiple choice usually aren't as hard, which is why Level III with its essay sections will be the equivalent of standardized dissertation defense. That lightbulb should have turned on before taking the exam what Economics is, and how it relates to finance. I found that lightbulb taking Labor Economics in College when I discovered the real definition of economics, which is "The study of the proper allocation of scarce resources." By that definition, this should turn that lightbulb on into how finance interacts with theoretical economics. Buffet calls himself an allocator, and this is consistent with my definition of economics. If you don't see how that works, just think about it for a little bit. So, I'm off my high horse. I'm going to work hard these next 10 months to pass Level II, which, according to Schweser, is considerably harder than Level I. Good luck to everyone that wants to get their CFA Charter.

Now for that piece of data

2008-08-02T12:51:00.002-05:00

4Q07 GDP was revised to a negative growth rate, suggesting a recession. It will take a 1Q08 revision to a negative growth rate for it to pass muster as two consecutive quarters of negative growth. People can say, "I told you so", but if you were saying that before, you were just speculating because the data did not show a recession. It still doesn't, because 1Q08 still needs to be revised lower to a negative growth rate. So, it's still speculation to say we're in a recession.

The kind of story I hate to hear

2008-07-29T18:00:00.001-05:00

This one's pretty sad. Family gets a $450,000 new home and $250,000 of donations, and loses it all. This is why you talk to people like myself. http://tv.yahoo.com/extreme-makeover-home-edition/show/36736/news/urn:newsml:tv.ap.org:20080728:tv_extreme_makeover_foreclosure

Passed Level I of the CFA Exam

2008-07-29T16:33:00.002-05:00

I just got my results back on the CFA exam, and I passed Level I. I am currently working, then, on Level II of the CFA Curriculum. The CFA curriculum is an extremely rigorous test. You must pass two three hours exams at each level with satisfactory results. CFA stands for Chartered Financial Analyst. Level II and Level III exams are only offered in June. So it will be a couple years before I complete the curriculum.

The Jim Goldman/Cramer Effect

2008-07-25T20:37:00.004-05:00

Sure, Jim's blog is about Tech, but really nearly all of his material concerns the four horsemen. I saw him basically do posts and dialogues on television from the time Google first came out, to the time it went to 650. Maybe it's just me, but I don't see too many posts about GOOG anymore. It seems he has moved onto AAPL. And, yes, I do own indirectly some shares in AAPL. But watch it, he'll talk it up to the point where it declines 40% and realize it may not be such a good thing to talk about. So that's a subconcious influence, I think. Cramer's effect is much more pronounced. The best example I have of why it might not be a good idea for Cramer's show to be on during the time that it is is taken when he recommended PHO. So he gave all this advice about how water would become a scarce resource, and you should buy. After he said that, it was something like "If you're paying up for this stock after-hours" I disavow all knowledge of your transaction. It's like, people had no idea they were paying up for the security, I think 4% higher than its close. It opens and tanks basically back to where it had closed at. Duh! This happens too often, and I'm not sure if we can really mark the price that he should be suggested as being measured on, because it gets bid so much higher when he recommends something. If anybody ever wonders who Beau in Kentucky was on the day of atonement, you should know.

Shout out to those from NYC!

2008-07-25T20:35:00.001-05:00

Hey, guys, I'm sure you're all Wall Streeters, so here's a shout out from everyone visiting from NYC! I can see who visits from the cluster map.

We're German, SO YOU CAN'T BUY US!

2008-07-24T21:44:00.003-05:00

http://www.bloomberg.com/apps/news?pid=20601109&sid=a2ZL4ZmuTwuI&refer=home This kind of global behaviour is particularly troubling to me. Where is it written that a country must be owned by itself? That is, what does it matter if shareowners would sell their shares to a foreign company? When I last checked, dollars, euros, they all carried whatever monetary value they have for the shareowners. As capital markets advance, these notions of national sovereignity should come to an end. I think one candidate's quote was that it was "a shame" for a German company to be buying an American company. If you don't know which company I'm talking about, I guess you don't really follow the market. It's Annheuser Busch. It doesn't matter. If someone wants to buy it, if the price is right, then that's fine. I'm sure the shareowners can find other investments to do with the cash. It's not like there are only losers in this situation. The seller will have a substantial amount of capital to re-invest in other things. And all of this process, in due course, will serve to put capital towards its highest end use. It's just a market, and it matters little who owns the shares that own the company. If a Korean or Japanese company bought another American company, who cares? A very substantial chunk of these buyouts, where there are offers in excess of 30% of yesterday's closing price, are probably horribly bad for the buyer. I don't think there is anything wrong with letting companies buy each other for more than they're worth. We actually have an example in this blog of just such a company. We have YAHOO! to talk about. Microsoft bid nearly 50% in excess of the closing price on the previous day. Today, YHOO is about where it was to begin with. This implies a grossly overpriced buyout. It doesn't touch on the Nationality issue, but it still gets to the point that if enough shareowner value is unlocked through such bids, it is perfectly legitimate to sell shares to anyone regardless of the nationality. I'm sure YAHOO! investors knew the companies that would have made better investments, and probably would have taken their money into those if they still desired to remain invested in that particular industry. So...the point is that most of the time with a bid in excess of the closing price that the buyer will actually be the loser. The winners are the shareowners selling to the buyer. I really hope that you can see that this mantra of "we want to be owned by our own companies" isn't the right way to think about buyouts. The better way is to think "Suckers! Buying us for more than we're worth, well have fun!" That's a better way to think about it. It'll be on foreign companies to lose a lot of money, and the domestic shareowners to profit from this. It's a good thing. Those winning shareowners are how you should see it, not that the current shareowners with assets worth substantially more overnight are the losers. It's fine. The money will stay in the domestic currency.

A blog post worthy of reading

2008-07-20T12:37:00.001-05:00

I thought this post was pretty justified. http://www.cnbc.com/id/25722017 Basically buy & hold is a losers game. You're playing expectations, not "hope." Buy and homework by Jim Cramer on this post: http://www.cnbc.com/id/25740596 recaps some of the mistakes that an amateur makes that pros don't.

Spot on for Google

2008-07-17T15:23:00.001-05:00

So, I know a few people visited this site, and see the google post was spot on.

Google's Earnings

2008-07-17T04:29:00.002-05:00

Hey, you know what, history has a way of repeating itself. I'm sure their numbers will meet or exceed expectations, but I just feel like there will be something that will take the stock lower. To be honest, I feel there is limited short term upside for the stock, but a very real downside possibility. Even if I'm wrong, you might get a $20 pop, but then you might be looking at $50 on the downside, so who wants to take the risk? I remember an analyst recommended it around $460 before its high, and I sold around $505 and watched it go to $700+. So what? Now it's back down. So, I'm betting that all good news is fully priced in already, but I haven't made any predictions on top-line revenue or EPS, because I don't really have to. I'm sure they'll be good, but there will be something that takes it down. Hiring too few or hiring too many, I'm sure there's a large institution looking for a reason to dump the stock.

Off-balance sheet item and your money

2008-07-14T23:29:00.002-05:00

There was an article in Bloomberg that I thought I'd comment about. Apparently, Citigroup has nearly $1.1 trillion, yes, trillion with a t, of assets that are off of the balance sheet. Let's say those assets are worth 10% less, and citigroup will be forced to move them onto the balance sheet. Well, the equity will be worthless. It seems quite reasonable that the losses could be substantially more than that, considering about $500 billion of it is mortgage linked. So, by more financial alchemy we're able to hide assets that do belong to the corporation out of prying eyes of reasonable investors. This is a sham, if you ask me. I'd write Citigroup off pretty quick if this gets any worse. Note that these are just estimates, but the $1.1 trillion of off-balance sheet assets is spot on. So, say those assets aren't worth that much, then I guess through overleverage citigroup goes belly up.

My thoughts on IndyMac

2008-07-12T20:06:00.002-05:00

So, IndyMac has failed, and there will be some $1 billion of uninsured FDIC deposits that will get back half. The bank had not been doing well, but Schumer's letter appears to have been the last straw for depositors with the company, withdrawing $1.8 billion or $1.3 billion, can't remember, to send the bank into a liquidity crisis. I feel like when banks fail, it is more of a confidence issue than whether the bank's business model works. It appears their model was having troubles, but when no one want to or even trusts you with their money, the company can go bankrupt. This won't be good, but I don't really see too many other banks offering alt-a or subprime junk and liar loans that are still solvent today. Those loans actually caused this real estate bubble by adding buying power to inexperienced first time or even experienced investors. This problem is especially bad in California, where houses worth about $100,000 here in Kansas City go for several multiples of that, about $600,000 there. It's ridiculous. There are some people that just moved out of there and are now living off of the greed of an inexperienced buyer. It's not the first time people have lost money in real estate. But there are an ignorant few that would rather walk away and put it to the lender like it is their fault for making a foolish purchase. Just cause your down is no excuse to walk away. I doubt you'll ever be loaned money again if that's the attitude you take.

The buttons to the side

2008-07-10T20:43:00.001-05:00

If I could, for a moment, talk about the links on the side of the blog. There are four links that will give you more information. One is the collective2 link, that will take you to a trading system I manage, and a wiseradvisor.com link that shows my profile as an advisor. I also have a timertra.com medallion that currently does not have enough data to track, but will on July 23rd.