Thursday, July 31, 2008

Beautiful Day

So I just ran the preliminary numbers for July and things look good. Entertainment kicked me in the ass, but I saw more movies this month than in the entire rest of the year combined. Add in the costs for Projekt Revolution, and I took a big L in this category. However, not all is bad. My calculations are based on a rent payment of $2150 (even though my portion is only $1650; the rest is paid by my roommate). So if we consider that I spent $229.91 on entertainment this month, and subtract out the $500 difference between my rent charge on my credit card and my actual portion, we find that I am really up $270.09.

Not too shabby.

As well, running calculations for my food expenses (overshot my budget of $600 by $48.38 although some of that probably should fall under entertainment), medical expenses (only charged $14.10 against a budget of $75) and fuel expenses (charged $257.84 against a budget of $700) yields a savings of $454.68. That figure includes subtracting out the food overage from the medical and transportation budget savings. This amount has now been transferred to my emergency account, for use on my trip to Trinidad for Carnival next year. I think I've covered over 50% of the expected expenses for that trip in the last 2 months of savings. Its a very nice feeling.

I'll have more on this later, but right now, I'm off to the movies. :)


Wednesday, July 30, 2008

Regrettable Comments by Bank CEOs

How rich! Pure comedy, I swear. I don't often link to Portfolio, but this one is worth a mention just for the humor factor.

Tuesday, July 29, 2008

New Private Racetrack in NY

I saw this and almost started crying. Just to be able to spend a day racing at this club would be a phenomenal experience. Of course, I imagine its Bring Your Own Supercar (BYOS) even at a daily pass rate of $2500. Since I happen to be short of the supercar, I guess I'll just have to read the news coverage, if any.

Friday, July 25, 2008

Analyst Arbitrage

Well, not exactly, but it sounded good. :)

Seriously though, I was reading this piece in the SJ Mercury News about Frank Quattrone's return to technology finance, and something that Frank was reported to have said caught my attention. Here's the paragraph from the article:

But the result has been that a large number of analysts have left investment banks to join hedge funds and private equity firms, Quattrone said. The remaining analysts have focused on covering bigger corporations, rather than small start-ups, because there's no money and little recognition in covering the smaller companies, he said.

At first blush, you may agree with Frank. However, that analysis is counter intuitive to me. While what Frank said here may be true (I don't know), it appears to me to offer an opportunity for someone to profit. See, if there is less analyst coverage of smaller tech firms (especially those with real businesses, revenues and profits), then a studious operator can use the lack of coverage to their advantage.

Every trader, portfolio manager, or even small investor, is looking for an edge. The analyst rules implemented in the wake of the Blodget and Grubman scandals create a vacuum of public information around small companies, according to Frank. So the operator who is peering into the cracks, doing the due diligence, and sniffing out the promising companies that have minimal or no analyst coverage, has a better chance of finding a "hit" before the market does. Its a perfect arbitrage play. Of course it takes courage to do, but isn't that the point? The successful operators feel fear like everyone else, but they don't let that fear stop them from making good, well reasoned investments (or trades). So the operator that steps into this information void, spends the time learning about the company, and generates an investment thesis for it is taking a huge risk. However, that risk is mitigated somewhat by the fact that s/he's got a larger margin of safety to work with while the stock is undiscovered.

None of this means that our hypothetical operator can't be wrong. The investment thesis could be bogus. The timing could be sub-optimal. Any number of things can go wrong; that is the risk of the market. However, finding an unloved gem is the kind of investment everyone wants to make. So analysts' failures to cover these small companies creates an opening for the intelligent and courageous operator to profit handsomely. Shouldn't we be glad that these information arbitrage opportunities are being created? If we are the competent and capable operator, we should be giving thanks and showing gratitude for such situations, so I would think.

I don't feel bad for the sell-side analysts. If their work is any good, they'll get known for it. Meredith Whitney and Dick Bove come to mind. The good analysts will have options. Hell, even the less-than-best analysts will probably land on their feet too, usually within a hedge fund or private equity firm, as Quattrone acknowledges, or some other buy-side entity. The analysts creating forgettable research will fade into obscurity within their firms, and the typical retail investor will probably place (misguided) value in/on their work. I don't see how life is so bad for our sell-side analyst. Will it be as easy as it was during the go-go 90s? No. Will it orders of magnitude harder for them to make a living? I doubt.

Its too easy to tag along on the words of the great Frank Quattrone, given his reputation and past success. I think Frank misses the mark on this one, though. However, Frank wasn't a trader. He was a banker. As such, he probably never had to consider this issue too closely. In Frank's world, the sell-side coverage was probably proof that he was doing his job (and well). It probably justified the expense that the IPOing startup went through to work with Quattrone and his gang at CSFB. All of this would serve to burnish Frank's reputation as the go-to banker, which made him more prized and valued by whichever firm employed him.

I don't know if he's just looking at this void through the eyes of a banker, or if he has really evaluated the pros and cons of the reduction in sell-side coverage for smaller stocks (across industries, but especially in technology). I hope he has, and that he saw something I missed. In that case, I would LOVE to know what I overlooked. However, I don't get the feeling, from reading this (very) short article, that he did that evaluation.

Until next time, good people...

Tuesday, July 22, 2008

Covered Bonds and Bank Failure

So does anyone REALLY know what happens to covered bonds if their issuing bank defaults? I ask because based on the brief description from, Wikipedia, and the European Covered Bond Council, it sounds like a securitization that has to stay on the books of the issuer. Now, if the issuer fails, what happens to the bonds? I mean, it sounds like they are already overcollateralized, which is how they get the superior ratings, but I haven't seen any mention of the outcome of issuer failure. Maybe I just need to read a bit more.

However, these things sound pretty attractive so far, if you can look past the fact that a NRSRO had to issue the rating on the bond. As we know, until recently, the 2 NRSROs that the market listened to most closely were Moody's and Standard & Poor's. Their collective track record on ratings isn't exactly spotless. Still, these covered bonds that are already trading (not necessarily those of FNM and FRE, should they actually come into being) sound promising based on their yields. I sense a lot of fear around these things, just based on the the names of the issuers, and that indicates a potential opportunity to me.

At times like this, I wish I had access to a Bloomberg!

Thursday, July 17, 2008

Financial IQ Test Score


That's including the bonus point. Not nearly as good as I thought, but it shows me what I need to work on. Credit/debt, shopping, and financial planning would appear to be my weak points. Time to get to work, it is.

I encourage everyone to roll on over to Moolanomy and take the test. I printed it out to make it easier to record my results next to each question. Do whatever works for you, but then turn that knowledge into action!

Until next time...

Wednesday, July 16, 2008

Trading Up

Well, it took me forever and a bloody day, but I finally got my options application in to the mail today. Yay me! We'll see whether I get approved. Cross your fingers. Since I don't plan to write any options, and especially not puts, I think it should be ok.

I'm also looking to lighten up some of my funds today or tomorrow. We'll see how things look near the close. I plan to close out my TREMX, PRMSX and RPIBX, as I prepare to trade into Teresa Lo's satellite portfolio (with a few minor differences).

Anyway, more on this to come. I need to go sleep!

Monday, July 14, 2008

Thoughts of IndyMac

This is exactly why I scoffed and avoided any bank offering a rate greater than the rate HSBC has been offering for their online savings accounts. It was pure asset gathering, as these institutions, in their race to the bottom, were trying to generate enough lendable capital to generate enough revenue to offset the risk of failure. As if there was enough time for such machinations to work! E*Trade Bank and Capital One come to mind as well, along with IndyMac.

Wednesday, July 09, 2008

Eurozone Birthrates

I'm not an economist, and I'm thankful for that, but this just makes me think that the eurozone has MUCH bigger problems than the ECB's monetary policy. I mean, they're pretty fscked anyway with the collapse of credit and housing markets in their most dynamic economies (never mind what's happened to everyone else -- German banks?). I wonder if they can pull off the trick of getting their economies to slow down faster than their birthrates?

I guess I should just be glad I'm where I am. Barely.

Tuesday, July 08, 2008

Damn You Japan!

Sold off SPXJX at $14 yesterday. Good riddance!

Preliminary June Analysis

Since I had some time before going to sleep, I figured I'd try to throw together some quick and dirty reports about June's financial performance. So far, things look good. I spent $405.84 on food, when my budget allows for $600. I spent $201.04 on gas, which is WAY beneath my ceiling of $794.62. If not for the Misc category, which blew a complete hole in my numbers, things would look great. Add to that the fact that I will be moving next month, so by September my rent will drop from $1650 per month to $1234 for my own 2 bed/1 bath apartment, and I'd say things are in excellent shape.

Anyway, I plan to work with the numbers a bit more and get a better idea on what worked and what didn't. My new diet seems to have had a very positive impact on my finances, if I had to take a guess from these numbers. I front load carbohydrates and finish the day with a salad. Even with a pre-packaged salad, I'm not loading up on sugar-laden food which becomes fat while I sleep. Those pre-packaged salads cost only a few dollars as well, so I can buy a bunch of them for work and still leave room in my budget for eating out the rest of the week (if I choose). Sweet!

Anymore, more to come. Until next time...

Sunday, July 06, 2008

Heads Up

I know I've been off my game recently. However, I do have a new update coming soon. Now that the first half is done, its time for a quarterly wrap up and some other activities. Also, there is a big position sale in my future. Gotta love tax loss selling! I don't see Japan going anywhere significant anytime soon, so...

Stay tuned!