CheetahhhhhhhBlog Mark III

This big oil spill in the Gulf of Mexico has me very depressed, actually. It’s a catastrophe. It also looks like British Petroleum lacks the necessary technology to stop it. I actually can’t even think about it because the ecological disaster is just too depressing. The Gulf is going to be a dead body of water before somebody figures out what to do. The revelations about lack of oversight of the oil industry come as little surprise in many ways, considering Bush was an oil man, but just add insult to injury. The whole thing is just depressing. BP is going to be bankrupt by the time they clean up this mess which serves them right.

Perhaps some of my readers have taken exception to some of my remarks about Obama. Once again I will say that I’m a Democrat and I support Obama. However I was totally and completely aghast about 2 months ago when he opened up the US coast to offshore drilling. Hopefully he’s rethinking this now.

When somebody says a book is “great” or a “classic” I tend to pay attention. You look on Amazon, and there are a lot of people who say Cyteen is a science fiction classic. So I gave it a shot. 60 deadly boring pages was all I could manage.

I downloaded a complete John Le Carre collection which is quite a score, as he’s one of my favorite authors. I’m currently rereading one of my all-time favorite books, The Honourable Schoolboy. Jolly good reading, jolly good indeed.

Word to the wise, it take overseas mail almost 2 months to physically reach your Philippines mailbox. Use DHL or FedEx is you actually want your mail to go in or out.

So Teggatz Enterprises exited its position on the stock market yesterday, with a 9% profit in 2 weeks. Can’t complain. I’m taking a break now. Not going to look at anything financial for a week or two. Partly I’ve made some good profits in the last 2 months and just want a rest, but also, given the highly volatile nature of global finances at the moment, I don’t see many safe positions to take, and I only invest with a very high probability of success.

There is much discussion about the debasement of world currencies. For example the Fed is financing this huge financial rescue plan by electronically creating more money. Otherwise known as quantitative easing. The only problem here is this erodes the actual value of the dollar. Many people are looking at gold and silver as a currency now, ie, a place to hold cash in a form that retains value. There is an appeal in the shiny stuff, I must admit, though gold and silver are more properly thought of as commodities, and their value fluctuates just as much as currency. However there is a lot of speculation about gold zooming much higher because of the global economic situation. I don’t know enough about gold to comment intelligently. However I will say this. Rather than owning physical gold, which has storage fees or security problems, and is not an instantly liquid asset, I would argue that it would be more prudent to hold a gold or silver ETF such as SLV or GLD, which are liquid.

Tristan has long been obsessed with food. He’ll moan and scream the minute he sees food. It’s like we’re not feeding him. He can recognize various food containers like a yogurt container, and will get all excited and start screaming, like we might forget him or something. Now he’s taken it a step further; his favorite toy is his baby spoon. He carries it with him everywhere.

So job search recap. I had 4 offers after a month and a half of applying, which is pretty good I suppose. I also had a bunch of interest that I didn’t follow up on. The people in Turkey offered me a job and were even willing to dicker, but salaries in Turkey aren’t great, which is why I haven’t gone there a long time ago. I was halfway tempted by the College of the Marshall Islands, mostly because I like small remote Pacific islands. However again the pay was not great. In the end I accepted a contract from the American University of Afghanistan. Money’s good. Van and the boys will stay here in the Manila condo. I will go to Kabul on Aug 8. If the situation is safe and acceptable for small children, I will send for them. Otherwise we will see how it goes. I’m mildly excited actually, believe it or not. A little adventure to liven things up. Also paid in dollars when the dollar is on a big rise. Also I’m actually working for some bureau of the US government, which is good, and I will be sure to add to my resume.

This big drop in the stock market has no doubt been alarming, if not painful, for most retail investors. I gotta say, the boys at Teggatz Enterprises have been lovin’ it. We’ve made a nice chunk of change off the drop. Not a fortune, since we hedge everything. I’ve occasionally kicked myself about this; I would have made tenfold profits off this drop if I hadn’t been hedged. However the safe, slow way is the best way, and that means hedging. I always preface any prediction with the observation that predicting the stock market is a fool’s game. Same preface right now. That being said, I anticipate sideways movement through the summer, probably with continuing high volatility until various geopolitical problems resolve themselves. I have one major caution, and that is that a real bona fide crash is possible if events in Europe start to deteriorate. Because Germany is now being more self-assertive about its own interests (as opposed to European interests as a whole) this even has become slightly more probable. Needless to say I would not own the Euro or any European financial stocks at the moment. This kind of market situation is really a nightmare for most traders and it would be best to sit aside; the only person who can make money off this market is a day trader or an options seller.

Interesting article on Seeking Alpha. One writer argues we’re witnessing right now the collapse of the “Euro bubble”. He writes, “the euro appreciated some 60% from 2001 to 2008, but the currency is associated with a bloc of countries who collectively have a sketchy work ethic, even-more-intrusive government, and awesome demographic challenges… The currency rose mainly because it became fashionable to believe in the euro”. I’m inclined to agree. The euro was grossly overvalued, to the point of being ridiculous. I see the euro sinking to parity with the dollar in the long term, which makes much more sense just in terms of the value of money and what E1 can buy.

I think it’s interesting to view the euro as a bubble because when a bubble bursts, it shakes out the weak players. In this case, Greece, among others.

Anyway thankfully I own no euros. Actually I have long refused to participate in the currency, out of sheer resentment of how expensive it made Europe. Furthermore I miss the Dutch guilder, which was the funkiest currency, and I miss the Spanish peseta, which was so nice and cheap.

I have read many commentators who said that the euro was a re-branding of the Deutsmark. In many ways this seems to be the case. Germany was (until a few months ago when overtaken by China) the world’s largest exporter, and the Krauts themselves are famously frugal. Anything to be done with the euro or Europe as a whole needs the participation of Germany or it’s stillborn.

The global economic crisis is doing us as investors a bit of a favor, in that it is shaking out the weak and sketchy investments. Or what is fashionable to call a bubble. I’ll make a list.

1. the property market in US and Spain among others (already burst)
2. the euro (bursting right now)
3. the recent US stock rally, which has not been driven by fundamentals (bursting now)
4. the Chinese economy (currently overheating)
5. gold and silver
6. investment in emerging markets such as China, Russia, and India (they’re not half as economically powerful as popularly portrayed, rather, their growth has been fueled by the carry trade and generally irrational exuberance, among other things)

What are the implications of this, if indeed I’m correct about points 2-6? Eh, well, I suppose the implication is it’s a dangerous world.

Well Noynoy is president. Nothing has changed yet. The Pacman is now a congressman, which is a bit silly considering he never finished grade school, though I suppose it’s no more silly than Reagan or Schwarzenegger.

I’m reading Ian McEwan’s Solar. He’s a really good writer.

I got offered a job in Istanbul, but I don’t like the contract. I’ve been offered an excellent contract in Korea, though I have not yet received the contract itself. This is actually probably one of the best posts in Korea, so I’m quite tempted to take it. Also Van would like Korea. Also I miss kalbi and bulgogi. Surprisingly enough, after 5 years in the Middle East, Korea seems “normal” and even inviting. I realize now that my previous two years in Korea were two straight years of culture shock. I didn’t really understand this at the time. So I’m tempted to take the job. Not a bucket full of money, but money enough to satisfy me, and money is my primary concern. I’m not one of those lunatics who thinks work is not a function of money accumulation. Some people think work is about fun or personal fulfillment or something like that. For me it’s a means to an end. This is not to say I don’t like teaching, just that I do it for a specific purpose. And speaking of money, I still have an offer on the table from the American University of Afghanistan, though again I don’t have a physical contract yet, though the guy had told me that the admin is very slow.

This crisis in Europe has me genuinely concerned, as the possibility of the collapse of the eurozone is a real (though unlikely) possibility, which could be global economic crisis parte deux. It’s a real possibility because Greece and Spain and Italy are unlikely to suddenly develop fiscal discipline, though admittedly it can be done. But realistically it’s unlikely, in which case these billions of euros in rescue money are just a short term bandage. Actually the smartest thing would be for Germany to take its huge trade surplus and withdraw from the eurozone, or else for Greece and Portugal etc to drop out so they can start printing their own money to finance their fiscal irresponsibility. This would have the added benefit of making southern Europe cheap to travel in again (oh, how I miss the old days). Anyway I’m genuinely concerned in a way I have not been since the big crash. I would not take out any long positions at the moment. Probably the crisis will resolve itself into forgetfulness for a year or two before it pops up again. That’s the likely scenario as I see it. However I wouldn’t want to be on the long end of another crash.

So the world’s most chaotic democracy, as the New York Times describes it, goes to the ballots tomorrow. Go Noynoy. I don’t know his platform, I just know he’s opposed to the business interests that are sucking this country dry. Indeed I’ve witnessed going on 5 years of Gloria in office, and I can’t say I’ve seen anything to impress me. If she maybe brought sanitation services to Capoocan, or maybe repaved the damn road from Tacloban to Capoocan, or maybe if she expanded the m***er f***ing Ortigas Extension so that it doesn’t take us five hours to get anywhere… well if anything like this happened, maybe I would have a more favorable view of Gloria. But as it is, I say good riddance, and maybe Noynoy will actually do something for this country. As a landowner and husband of a Filipina & etc I have a vested interest. Though if I was a Filipino I would vote for the old guy who wants everybody to be happy.

We went to the Manila Aquapark today, had a fancy Asian lunch, and Van got a fancy purse.

Bug has become obsessed with my PSP, it’s basically his now, which is OK I suppose. I mainly used it for killing time, such as for example sitting on airplanes, killing time in my office before I have to teach, etc. Got him a new game today, Frogger. We’re trying to limit his exposure to violent media, which means most of my PSP games.

The Wall Street Journal is writing how “traders are baffled” by this mini-crash, which is complete nonsense, I was not baffled and indeed have made money off it. Phillip Davis on Seeking Alpha, who I like to read and who I generally agree with, describes the recent crash as “financial terrorism, folks, retail traders were stopped out and margined out while the pros made Billions picking up the pieces”. This is also nonsense. The market had a hyperbolic rise and, predictable enough, is now having a good pullback. It pulled back when it his the upper resistance of its previous downtrend.This is predictable statistically and through common sense. Indeed as I said I made money off it. The big question on my mind is what to do now. The smart thing would be to wait and see what the trend develops into. This is probably what I will do. The market has potential to drop more, however, because everyone is spooked. I would certainly not take out any bullish positions at the moment. The wisest thing to do is wait.

Bug had a good vomit session in the middle of the night. We are always sick here in Manila, and it’s starting to disturb us.

Tristan is not sick any more and is getting very hyper. He is Bug’s shadow, following him around everywhere he goes. Tristan is also extremely interested in the refrigerator and the bathroom, and waits for either door to open, and the crawls there as quick as he can. He is still obsessed with food and starts groaning and yapping whenever anybody has any food.

My goodness, what a drop the stock market has had. I couldn’t witness it yesterday because the internet in Pasig went out. I wasn’t worried though, as I’m still holding a bearish position, and made some more money. I would say the following. People have been waiting for an excuse to sell and take profits after the heady year-long rally. In a technical sense this drop makes sense because the indexes were butting their heads against their pre-crash levels. Also everybody was getting too lethargic, with VIX levels extremely low, and this is precisely the moment when a market will drop. Also the new worry we all face, sovereign risk, is weighing heavy on traders. For example I want to buy Lloyd’s LYG but I’m concerned about their exposure to Spanish debt. I doubt this is a second crash because all the economic signals in the US are good, aside from high unemployment. However the possibility exists that the market will re-enter its long-term downtrend. I would not take out any new positions until the market settles down. This might mean staying in cash for a while. I would wait for one day of institutional buying, which would be a high-volume up day. That would be my buy signal, and when that occurs, one must note that a lot of stocks have attractive prices now. In particular I’m interested in Citibank, which Standard and Poors sees rising to 6 in 12 months. C is a risky play and I am in a general aversion-to-risk kind of mood, but it’s very cheap so the risk is manageable. The same is so with Lloyd’s, which is our offshore banker on the Isle of Man incidentally, and which is the British Citibank, in a similar position, and most analysts see it doubling in value. Again, risky but cheap. I don’t know when if ever I will jump in on C and LYG but that’s what’s on my mind currently. Now, predicting the movement of the market is generally a fool’s game, but if I were to speculate, I would say we might see a day or two more of drops, as everyone is very jittery right now. Eventually the market will settle on some point of support, and we will probably see sideways movement or a rather anemic rise. I predict this because we are entering the summer doldrums, the seasonal pattern when the market historically makes little or no money. I also predict it because the concerns of the market have not gone away, specifically sovereign risk, increased government regulation, the probability of high taxes, the probability of the end of quantitative easing by the Fed, the possibility (unlikely but real) that the Eurozone may collapse, etc. So once again, I would probably stay in cash.

It’s election day here in the Philippines on Monday. We’re a Liberal family. I’m glad it will be over so all these damn commercials will be off TV. Van is excited about potential riots and stampedes on Monday. The big question which the Economist asks is, “Can Noynoy Aquino save the Philippines?” Van says no he cannot because Filipinos have no self-discipline. I don’t know personally, but I will say this. If somebody would stamp out corruption, there might be a bit of prosperity in this land. There is money here and resources too. Corruption though. I read in the Economist that this is one of the most corrupt countries on earth, even more than Columbia or many African nations. I believe it given my cargo container misadventure. Anyway good luck to you Noynoy, I’ll be wearing yellow on Monday.

According to Lifehacker, netbooks aren’t cool any more because of the iPad. I disagree, I love my netbook. I have an EeePC 1110. I love it except there is no graphics chip. And from a strictly practical perspective, netbooks are the way to go. The thing is this. You buy an expensive fancy laptop, and in two years it will be broken our out of date. My Dell XPS cost 3 grand and two months later the Intel Core Duo came out, for example. Now a netbook is cheap enough that you can just buy a new one. The new netbooks have a NVIDIA Atom graphics chip, and I’m sorely tempted to get one.

There was a mini-crash on the US stock markets yesterday. Note that this blog warned you incidentally. Anyway Teggatz Enterprises made a nice little packet. Would have made a fortune if I hadn’t been heavily hedged. As it stands, just made a packet in 4 days, which is nothing to complain about. I will take a few days off and relax and let the stock market calm down.

I know everybody hates Goldman Sachs. One of my old college friends was giving me crap about it on Facebook the other day. Like I said to him, I think it’s one of the best banks in the world, and I’m committed to owning their stock. Not at the moment due to market conditions, but on general principle. My college friend made some cracks about selling my soul or something like that. I don’t buy it, and I’ll tell you why.

Every intelligent investor hedges his position. You retail investors out there, you buy a mutual fund and hope the market keeps going up. Problem is, it often doesn’t. A more savvy investor hedges. I’ll give you the example of myself. Yesterday I tool out a position on the Russell, a bearish option. I’m making a lot of money right now incidentally. But I also hedged my bets. I also bought a bullish option. This way if the market doesn’t go down hard, like I think it will, I will still be safe.

Point being, this is exactly what Goldman did. And everybody who took the trouble to pay attention knew the real estate market was going to crash. Of course Goldman hedged. Of course.

Yesterday, Warren Buffet gave a defense of his firm being invested in Goldman, and he said something to the effect that “you can’t say you’ve been ripped off just because the other guy was smarter than you”. I agree 100%.

So the interview in Istanbul went well. I was impressed with the people I met. I think they will offer me a job, but who knows. This is a very difficult economic time for getting a job as we all know, and furthermore they might not want to pay me a good salary, so this is why I’m not more confident. But everything went well. Istanbul is a really cool town, I must say.

Little Tristan has German Measles, poor guy. He is not happy about it. We have all been sick a lot in Manila. I’m not sure why but I think it has to do with the condo swimming pool. The other day I dug out our scuba gear and went swimming with a snorkel and goggles. The kiddy pool was, disturbingly, a big soup of goo. I suppose with a hundred children pee-ing and goo-ing in there every day, it’s to be expected. I’m no physician but that’s my hypothesis as to the vector of illness transmission.

Tristan just said “mommy”.

I’ve been too busy for the last 10 days or so to deal with the stock market, but I will say this, since I am keeping on top of developments. The market is in a holding pattern at the moment, trading in a very volatile manner within a range. This seems likely to continue for the short term. As an options seller, this is exactly what I want, but it’s actually too dangerous to be invested at the moment. A correction is statistically likely, and furthermore, many political events are causing an unstable environment, such as the Greek/Portuguese/Spanish debt problems, and the government taking legal action against investment banks. While the tendency of the market is upward at the moment, and while it never pays to fight the general trend, one must consider whether any more gains can be realistically anticipated. I personally don’t think so. Further we are entering the “sell in May and go away” phase of the year, which is a very strong seasonal pattern which a trader should ignore at his peril. All in all, I’d say it’s smartest to be in cash right now. This is what I’m doing, and it’s painful because I can’t make money. My advice is the same that expensive financial advisers are giving right now incidentally. As always I could be totally wrong.