Random market thoughts + interior designers = bad
Its been a busy month or so since my last blog. I bought a business (bar/grill) from a distressed seller (not due to the economy, due to a wife who apparently found out about some illicit behavior in the back room) for roughly 1.3x ebitda. I don't know of any stock that cheap, and I do know a gentleman who is a friend, with a terrific work ethic, and experience owning a bar/grille (but no ability to attain a loan to buy one at the current time, as the banks are all but useless to the world around them). So I bought it, and upon recouping the cost of buying he and I will be 50/50 partners. It should be fun, its been in biz for 55 years.
And beyond that I met a commodity trader one day, nice kid, mid 20's, started a fund. So I hired him to work with me on investments. This should pay off in simply having some company, and perhaps in contributions from the guy should he prove to be bright. Nice guy, all of the pros and cons of youth - bold and eager and somewhat brash.
So I'm an employer again, in 2 weeks. This will come with pros and cons, to be sure, and in looking at the records from the bar/grill, the staff there is stealing some amount of product, so some firings will need to be made. Those are absolutely no fun.
Beyond that, I had a thought while driving a month ago or so, and I posted in Binve's blog, and ultimately have come to the conclusion that of all the schools of thought on economics and monetary systems and monetary policy (austrian, keynesian, whatever), its really just Modern Monetary Theory that describes the way our system functions. To put in point-blank, there is ZERO chance, no, -ZERO- , chance of this whole "china stops buying our bonds and all hades breaks loose" theory ala Peter Schiff, Glen Beck, etc. Zero. There is no debt crisis, and in all honesty (whether MMT recognizes this or not) there is for all practical purposes no debt. In fact if you wanted to define a "money supply", the federal "debt" is probably roughly the money supply, and traditional thoughts of monetary base, etc., are almost certainly plain wrong. Beyond that the fed is literally incapable of printing money, and QE2 sort of anti-prints money. Its congress, if you want to panic about inflation and hate on somebody, pick congress: its the deficit that is money printing and potentially inflationary. Its also the wall between us and some serious economic misery. More on that later, no desrie to debate it today.
For the year I am up about 12% in my brokerage accounts, excluding cash set aside in my brokerage accounts to buy my condo and pay taxes and the ongoing disaster that is RJET, I am up about 15%. My two pilot hedge funds are carrying the bulk of the load here, up 35%+ and 15%, the last time I commented on those the one thats up big now was underperforming, the reversal occured as predicted (both just a question of mean reversion). Another mean reversion will be forthcoming, but probably not tomorrow.
My holding of financials (heavily concentraded in a giant basket of BDCs, XL, HIG, CNO, with lesser positions in various others) are not impressive relative to any of dozens of other things I could be holding. I remain of the view that they remain some of the cheapest stocks on the market. Being long some BAC jan 2012 calls for a year now that I was, about 54 weeks ago, up 80% on, now down substantially, is not all that cool. I mean, it doesn't impress people at cocktail parties.
Related to a few posts I made a month or 2 ago about historical statistics about commodities and the epic run that they have had, I am for all practical purposes out of commodity and energy related stocks, aside from inclusions in aforementioned hedge fund strategies, which are nothing more than calculations.
I am short silver on a small scale via ownership of some SLV (and other ETF) options. No reason other than it has gone parabolic and even if it parabolas anew to even more dramatic highs, I think its going to get a slap to the face first. I will add to that position if/as it rises.
Beyond that I don't mind the idea of short brent and long WTI, from a few weeks ago.
And I haven't run a stock search in a few months, because I got focused on the biz purchase, the 2 strategies, and my general contempt for the market. That general contempt has faded as of late, and I am back to ambivalent. Its reasonably pleasing to note that my dislike of the market was follwed by a period of ugliness... One of the few times my timing was ok.
I plan to sit here and if I start to dislike the market again OR if it turns ugly, quickly unload the bulk of the rest of my non-financial holdings and then hedge my financial holdings and enjoy the summer.
hope everybody is well.