ANOTHER VIEW

Can Somebody Please Tell Congress
http://www.sciencedaily.com/releases/2013/03/130312121851.htm

Republicans Cough Up 10-Year
http://www.reuters.com/article/2013/03/12/us-usa-fiscal-ryan-idUSBRE92B02E20130312

Currency Wars Matter
http://www.businesswithoutborders.com/industries/finance-industries/currency-wars-cast-a-shadow-on-global-trade/

SNAPPY HEADLINES

Fads come and go.

 One of the latest, especially in the news and advertising business, is stories or headlines like this: "Five Exercises You Should Never Do," or "The 10 Worse Foods For Your Left Great Toe."

Here's a recent one we came across and legions of similar ones are floating around out there: "Six Sexual Moves Celebrities Enjoy To Ramp Up Their Sex Lives." Now this one, you got to know, has it all--celebrities, sex, ecstasy. If celebrities are doing it, it must be above the rim.

Here're a few picked at random from the investing world, "Six Big Myths About 529 Plans," "10 Tax Breaks For Investors," "10 Best Mutual Funds" and "4 Ways The Market Could Surprise You." The writer of this last one, I'm pretty sure, plagiarized the idea from one of my old girlfriends.

If you don't want to miss articles like that one and others pay more attention at the checkout counter or to your evening news instead of squeezing the avocados so long at the grocery.

As any blogger who's bothered to look knows, content maybe king but snappy headlines is what's it's all about. That's just one of the many ways fledging bloggers hoping to make it big are advised to fuel their online businesses.

Here's another recent example from one of the world's leading newspapers that takes itself way too seriously, the Los Angeles Times: "The Five Biggest Lies About Entitlement Programs." 

When you go to the store to buy food do you go to buy food you don't like? How about restaurants? We've written before about those red and blue election maps that pop up every four years. We pointed out there are only two types of historians, red and blue. 

The same holds for MSM. The only difference is MSM may be a bit more subtle about it, kind of like Joe Biden or Karl Rove. In the investment world it's the bulls and the bears, the red and the blue. Same story, just a different arena. Taking stocks higher so you can then short them is not uncommon anymore than pushing them lower so you can buy them cheaper is.  

Level playing fields exist but not in this dimension. Recently, the WSJ featured an article about the world's oldest investor, a successful, 107 year-old guy who still reads two newspapers and several magazines a day and practices pretty much a buy-and-hold strategy laden with quality-type companies. 

When asked why, he said: "Because I want to know more about the companies I'm buying than the guy does who's selling."

Even the dumbest stock broker knows about front running, a law against putting on a position ahead of your clients on a stock you're hawking. The regulators' answer is full disclosure, as in we don't currently own or have a position in this equity.

Most sports today except a few like boxing have replay cameras. One boxing wag, a noted former boxing judge, recently blurted on national television this gem: "Referees are trained if they didn't see it (a headbutt), call it a punch." If you don't see it, how can you call it anything. So much for level playing fields.

And too so much for MSM, stocks, news or sports.

So we'll leave you with a quote from former President Dwight D. Eisenhower who happened to be a pretty good commanding general in his previous life, but who was caught off guard as president when he gave orders nobody bothered to carry out. It's the culture.

"If everyone is thinking the same thing, nobody is thinking."

STOCK MARKET PARLANCE

In the parlance of the stock market there's something called CAPE.

No, it's not about Cape Cod or the Cape of Good Hope, though in some ways it could refer to the latter.

CAPE stands for cyclically adjusted price-to-earnings ratio. In simple terms, it's a way to use p/e to factor in the effect a business cycle has on earnings. Like a lot of things, one can use it to make a comparison.

Compare what? In this case cheap versus expensive. One of my old bosses was cheap, one of my old girlfriends expensive, but please don't tell her 'cause she was a ranked kick boxer and a former roller derby queen who knows how scuffle and bite.

So let's do it. But first we need to know the historical average of CAPE.  According to Goldman Sacs, it's a bit under 19. And now, again according to GS, we're at 24.

By comparison German and Great Britain equities have CAPEs of 13 and 12. We'll respectfully omit the respectively after 13 and 12 because we don't want to insult your intelligence.

Now like Zorro, Superman and a few other notables, we're fond of capes too. That's why we think a short-term regression might be on the horizon for those of us who disdain paying full freight.

If we're wrong it won't be the last time. If we're correct, well, there are a few long term goodies we like, at a lower price.

ANOTHER VIEW

Chinese Banking Probe Push Shares Lower
http://www.marketwatch.com/story/asia-stocks-brighten-as-japan-climbs-again-2013-03-11

Gold Losing Its Luster?
http://www.bloomberg.com/news/2013-03-12/gold-sales-from-soros-reveal-12-year-bull-run-decay-commodities.html

Business As Usual
http://www.thefiscaltimes.com/Blogs/Debt-and-Taxes/2013/03/11/Congress-Doled-Out-Bonuses-Ahead-of-Fiscal-Cliff.aspx#page1

Reverse Rotation
http://www.cnbc.com/id/100544442

Congress And Those Scarce Jobs
http://www.thefiscaltimes.com/Articles/2013/03/10/The-Biggest-Threat-to-the-Jobs-Recovery.aspx#page1

Another View: Not All Prices Rise Together
http://www.resourceinvestor.com/2013/03/11/the-relationship-between-money-and-prices?t=commodities

Forewarned Is As They Say http://ycharts.com/analysis/story/if_caseshiller_index_is_hot_why_is_its_founder_doubting

Gun Control A Broader View
http://www.csmonitor.com/Commentary/Opinion/2013/0311/Why-America-isn-t-the-only-country-that-wants-guns-for-self-defense?nav=90-csm_category-topStories

SOME JUDICIAL SENSE

Some judicial sense, finally.http://www.cnbc.com/id/100442833

A New York judge interdicts ban on sugary drinks Mayor Bloomberg and his food Gestapo tried to ram down the gullets of New Yorkers.

Not so fast. All you cheerleaders take note. Inflation seems to be kicking up in China and global growth prospects waning.
http://www.marketwatch.com/story/global-growth-has-burned-out-and-faded-away-2013-03-11?dist=afterbell

PLAYING THE BRICS

Looking for a safer way to play the BRIC world?

You might want to look at last year's Kraft spin off, Mendelez, MDLZ. 

As a recent Barron's article notes the stock, trading at $28 and change, is essentially a snack food company. Just a few of its products include Cadbury, Ritz Crackers, Dentyne, Oreo Cookies and Wheat Thins. It has many others like Philadelphia cream cheese and Dentyne.

Buffett can have his cherry coke. Offhand we don't know of a single, solitary interplanetary soul who doesn't enjoy an Oreo and a cold glass of milk?

Right off the bat you need to know we own the stock and have been slowly adding to it since acquiring shares in the spin off last year. 

Understand in our view this is not a trader but one of those God-awful, Warren Buffett-like buy and holders with a small dividend and a lot of growth potential. The current p/e, around 18, is a little high, but isn't that what expected growth is all about?

Take a look at some of its competitors, all growing slower at much higher P/E ratios. And could this be a decent currency play if the dollar tanks?

According to Barron's, with revenue in 2012 of $35 billion, 75% of its sales last year came from three rapid growing snack food categories, chocolate, candy, cookies and crackers.

 As one analyst puts it, snack foods are lucrative with good profit margins and little competition from the ever-worrisome private-label firms that continue to chew away at the margins in the grocery business.

In case you're not aware Pepsi's another snack food business, more so than many realize. Here's a little snack to consider with your Oreos and milk. Of MDLZ's 29 well-known brands, nine generate more than $1 billion in annual sales. And, yes, Oreos is one of them.

Now about those BRIC countries, Brazil, Russia, India and China. MDLZ gets about 30% of its annual sale there. When you consider the prospects for annual growth in developing versus developed countries, it's a no-contester.  And remember at least for the nonce snack foods are cheaper and have better profit margins than cars.

A possible unforeseen risk is the food police. We just toss that in so you can't say no one did.

One other quick point. Though we have not heard anything, this is just one of those wild, silly thoughts we get every once in a two-thirds moon while walking the dog, Taylor. 

You want to remember the MAINE. But recall too the HEINZ.

THE RISE AND FALL OF ANDY ZAKY

The guru rule lives.

Not that there's much joy in this story for anyone. There isn't.

It's story way beyond the rise and decline of one person or the rest of the investors involved.

It's a story about people, efficient market theory be damned.

It's a story about how inefficient investors can become.

Choose whatever terms you like. Greed, fear, ignorance, faith, it's still the same.

It's a story about people being people. And it won't be the last one.

Call just about any large firm today and you'll get a robot. Some even tell you: "I can understand complete sentences. How can I help you?"

My response is almost always the same. "Let me talk to a human being? That's a complete sentence."

But those robots have to be programmed, just like Zaky and his investors.

Talk all you want about quants, black swans and technical indicators. Talk all the regulations you want. Behind every market it's still about people.

And that's not going to change anytime soon.


http://blogs.reuters.com/felix-salmon/2013/03/07/why-analysts-should-not-be-investors-andy-zaky-edition/

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/

RESEARCH FINDINGS: TRUE OF FALSE

If you've ever fooled around in the world of medicine or business or, for that matter, Wall Street (And don't let the term, fool around, distort what we're saying here, though we know it will be difficult.), don't miss this read.

Now here's a little teaser. You need to know this is scientific prose, we use the word prose advisedly, so the water can be a little cold and the current a bit turbulent.

But as the saying goes frown a lot and bear your way through it.

"Is it unavoidable that most research findings are false, or can we improve the situation? A major problem is that it is impossible to know with 100% certainty what the truth is in any research question. In this regard, the pure “gold” standard is unattainable. However, there are several approaches to improve the post-study probability."

http://www.plosmedicine.org/article/info:doi/10.1371/journal.pmed.0020124

THE BUSINESS OF AMERICA

Here's a quote from Warren Buffett's annual report to his shareholders. Make of it what you want and will.

“American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor…Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of “experts,” or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.”

We spend much time every now and then talking about the so-called experts. Yes, they know who they are. Just ask them. Go back and look at JFK's quote about the Bay of Pigs disaster and the experts. A little history now and then doesn't hurt, either.

Remember the Guru Rule: There are no gurus. Only two things can prove Buffett incorrect: more government regulations and higher taxes all around.

If as Buffett states "investors and managers are in a game that is heavily stacked in their favor," America and its businesses are no less favorably stacked. Kill one, kill the other. 

As John D. Rockefeller once said: "The business of America is business."

MOM AND MARKETS

My mother was an RN. So it was pretty hard to wake up on a rainy, wintery school morning and feign illness. If you said you felt warm, had a fever, she'd take your temperature. A sore throat, she's get a flashlight and check.

Who knew what she knew or what she saw when she looked in there? It was a lot like one of those days that starts out cloudy and keeps getting clearer and clearer. To fool mom I was going to have to up my game--a lot. And believe me my brother and I tried.

Think of the market as mom.  And don't be fooled by the term fool. The market's been there a long time, doing what markets do. Occasionally a newcomer pulls off a stunner or two. Economists, as they do for nearly everything, have a term for that, outlier.

Most of us are hardly outliers. Now don't get your undies all twisted in a bunch. That's neither bad nor good. Just is. Most of us are basic block-and-tacklers, to use a football idiom. We get better with repetition if we keep at it. It's a basic rule of life: Whatever you focus on expands.

A lot of people probably see Warren Buffett as a genius and that doesn't disturb me. 

Another way to see it, however, is he's a brilliant block and tackler, a real Mr. Fundamentals. He's put in the time, he's consistent and the chances are way better than good he's gotten better at it.

Several years ago I shared an office with an options trader, a pretty good one. One morning when things were particularly slow, he told about his early market experiences.

When he got out of college, clutching his freshly, new-minted business degree, he started trading options, something he'd only dabbled at but enjoyed a modicum of success in school. 

Curious is as curious does, so I asked him how it went.

He told me terrible at first, just awful, as I recall. So I offered the usual assumption, laced with a trace of sympathy such occasions often require: 

"Had some big losers, huh.?"

"Oh, no !" he said, laughing. "They were all big winners. My first 8 or 10 trades went like Swiss clockwork. I thought I was a genius, knew everything.  And then...."

It's the "and thens" we all need to be mindful of that usually come without a warning, like mom with her flashlight.