CheetahhhhhhhBlog Mark III

I started spreading currency risk 2 months ago. Should have done this years ago but live and learn, you know. 2 months ago I started buying physical gold in pound sterling, while hedging it with DZZ in US dollars. Now I have started a program of putting a small amount of savings into euro and sterling each month. All this is to spread risk. I have a general idea to hedge the US dollar at some point in the future with an ETF as well, given that I’m paid in dollars yet a bulk of my operations are not actually in dollars. Thus the devaluation or fluctuation of the dollar affects me. Now, in spreading risk, I’m doing it in small increments over time. This averages out the effect of short term movements. I bought euro and sterling yesterday at good rates, the dollar seems to have a head of steam going at the moment (surprisingly enough).

If you look at a 2 year daily chart, the SPX is in a cup-and-handle formation. This is the only chart pattern I find to be truly reliable. I expect consolidation in the near term, with the market moving within a range, perhaps through December (that’s a guess). After this I expect a strong breakout to the upside. Historically this would imply a decline in the dollar and gold, but all bets are off in the current environment. So in other words I’m predicting a bull market for next year.

The Europeans are in crisis mode and Germany characteristically is making it worse by grumbling about having to pay the lion’s share. This is the price you pay for rebranding the deutsmark into the euro. What I mean by this is Germany is the leader of Europe now and this was cleverly done through finance, after failing to accomplish it twice through war. What this means is despite German grumbling, they will bail out Europe, because if they don’t, they will lose their dominant position. This seems fairly obvious to me and so I find all the crisis talk a little overblown. I anticipate the European crisis will blow away like smoke in the wind, primarily because Europe has little choice but to bail out its member states and their banks. Indeed the current talk is a replay of the Greek and Spanish crises which, indeed, proved to be overblown. I am inclined to buy Irish banks such as AIB and IRE for this reason and I don’t see it as very risky. Perhaps I won’t see a profit for a while but this is bargain shopping and I’m prepared to wait. And I hope I’m right because Teggatz Enterprises will soon have a small but significant portion of its assets invested in the Emerald Isle.

So yesterday my house got a generator. This is a pretty big deal in a city where the electricity goes out several times a day and it’s starting to get very cold. I watched the crane lift the generator over the wall and onto our yard with some enthusiasm. Anyway they just delivered the generator, they didn’t actually hook it up. So last night, I get home and the house is pitch black and freezing. I sadly crawled into bed with no food and my laptop as a small light. Soon the university maintenance staff were running around the house, hooking up the generator, monkeying with circuits, etc. I fell asleep before they actually fixed it. I woke up about 4AM and the heat was blasting and all the lights were on, and in the background was a distant hum…. the generator.

The head of English abruptly quit on Sunday. This has thrown the department into great turmoil and confusion. It gives me a headache. This job is difficult enough already.

There’s not much to buy here but they do make rugs. I was chatting with one of the women on staff, I think she’s a business professor, and she said she’s spent all her salary so far buying kilim (sp?) rugs. I think I might get one for the living room for the kids. The living room floor is marble, which is fine in summer, but right now the living room feels a bit cold and desolate. A big kilim rug, like 20 by 20 feet, is apparently around $300-400 according to this woman.

Staff meeting today and I could not help but reflect to myself that even in the middle of nowhere in a war zone in a city that in some ways still lives in a previous century… even here there are the same problems and turf squabbles and bureaucratic nonsense that you’d find at a university in, say, Chicago. You’d think it would be different here, just because of circumstances. But no, American academics will by instinct fight over small patches of turf, argue about the same things, etc etc… of course we have other practical problems like getting a generator hooked up to my house. But still, the things that academics are fretting and spatting about in Chicago… we’re fretting and spatting here too.

Back in Kabul. Not entirely happy about it, but only 25 days to go. There is some crazy dust storm going on, dust everywhere, dust to the point where it’s choking you. I am mildly allergic to dust and perhaps thus more sensitive than most. Put the maid to work cleaning dust today.

I am quite bearish on the US dollar for a variety of reasons, suffice it to say I think the dollar is going to take a real plunge. I hope I’m wrong since I’m paid in dollars. I am giving serious consideration to hedging the dollar, eg buying UDN.

So first of all, am running a 30% profit on Allied Irish Bank. Am inclined to add to the position. This is essentially a value trade, which is unusual for me.

So I’ve been in Manila for a week and fly back to Kabul tomorrow. Really surprising to see Tristan walking. Although I knew he was walking from video, seeing it in person was a shock. He is, of course, like any freshly-walking kid, a real handful, climbing everything, running around at the mall (in Manila kidnapping is a serious security threat), etc. I was really looking forward to the pool but it’s a tad cold. Now if I was acclimatized to Wisconsin, I suppose I’d find the pool warm as blood. However I’ve been in hot climates for so long that it chilled me to the bone.

Anyway this return to Kabul is just for 3 weeks actually, and then we’re off to Bora AKA according to Bug “beach island”. This will be a quickie. Dug out all my cold weather clothes and am mildly excited to wear them for the first time in… God, years and years… Leaving my tropical wardrobe here of course. Also thanks to my food poisoning episode recently, I have lost a lot of weight and a lot of clothes fit again.

We’re moving apartment units Dec 1st. Actually the new unit is better. We would have stayed where we were for simple convenience, but the crazy bitch of a landlady here pulled an endless stream of nonsense and ended up screwing herself out of P32,000 which we would have been contractually obligated to pay her through Jan. Not going to go into details on this but it shows you that being a crazy bitch is bad for your karma, and P32,000 is a good chunk of money (about $750).

Went to several doctor appointments here in Manila, have a generally clean bill of health, which is good. The older I get, the more I grow concerned about my health, perhaps just paranoia. Anyway my dentist is the dentist-to-the-stars in Manila and shockingly I have a cavity. Haven’t had a cavity in 20 years, literally, have to go back in Jan after Bora. Shocking.

It’s Eid and I fly out early tomorrow. Apparently this is the time for gift giving in Afghanistan (ie tips) and I am a bit irritated by the additional expense, I have enough expenses to deal with already at the moment. Seriously, being bled dry on several fronts. Nevertheless I want my drivers and guards to think well of me so I have spread around small Eid gifts. Anyway I’m at work again, however it’s the day before Eid and the university feels a little half-occupied already.

And now for your market comment…

I read yesterday that professionals appreciate the excessive volatility of the market in recent times, because it is only through uncertainty that you can achieve alpha (market beating profits). I believe I read this in the Wall Street Journal Market Beat Blog but I could be wrong. Anyway I have pondered this statement a bit and find it to be pure rubbish, indeed I wonder what prompted a financial professional to write such garbage. Maybe his brain has become skewed by 2 years of excessive volatility. However if there is one thing a professional investor wants above everything else, it’s predictability and stability. Seeking alpha through excessive volatility is simply gambling, in which case I’d say go to Vegas, where at least you have free drinks.

Now volatility itself is a statistic, aside from cataclysmic statistical aberrations such as the recent flash crash, the crash 2 years ago, or the 2001 crash of the NASDAQ. Aside from essentially unpredictable events such as these, volatility itself is a statistic, and so is predictable, in that there will be a strong tendency for volatility to move in wave-like channels around a mean. I am reluctant to use volatility predicatively with the market in that volatility is a derivative of the underlying itself; I personally do not, for example, use the VIX to predict movement of the SPX, nor do I think it advisable to do so. However volatility itself can be traded, such as VIX options, VXX, etc. At the moment I would not use volatility to predict a fall in the market. I would, however, buy calls on volatility (ie I would predict a rise in volatility).

The rise in gold has been unstoppable and my trading plan of shorting gold (see sidebar) has never gone into full implementation. I am short gold a few shares of DZZ but losing money on the trade. As per my trading plan, I only went in a small amount at the start, so my current losses are small and actually don’t concern me because I do expect gold to fall at some point, at which my few shares of DZZ will be extremely profitable. Let’s say, however, that gold continues to rise. Such as it is doing.

First of all, there has been some talk of using gold as a measuring standard with major currencies, which I applaud as a notion. This is not talk of returning to the gold standard but rather talk of eliminating the politically and financially driven manipulation and devaluation of currencies currently going on, referred to by professionals as “the currency wars”. The Wall Street Journal Market Beat Blog writer is self-admittedly very anti-gold for no logical reason and goes on a bit of a rant about the stupidity of this. I have also pondered this comment quite a bit and again am forced to conclude that this is simply not so. What is stupid is the US dollar being at near parity with the Canadian dollar, for example; this makes no sense whatsoever. What is stupid is the US dollar losing 15% of its value since June.

Now gold is a proxy currency, for one thing. I own gold grams on GoldMoney for example, where we have gold as a literal currency. Gold is however also a commodity, used for a variety of purposes, and the major drivers of this commodity market are India and China, where there seems to be an insatiable appetite for gold.

On the other hand, the actual volatility of gold and silver shares is rising in tandem with the rise of gold and silver itself, which is generally predictive of an asset bubble.

So first of all just for trivia, my driver tells me that Cure Hospital is a French operation.

Anyway correction to last post. I suggested this food poisoning was the worst thing I’d ever experienced. I forgot about dengue fever in Laos. Amazing that I could ever forget about dengue. That was the worst. I sincerely thought I was going to die. I did not even have the strength to crawl out of bed to seek help. Now this time with food poisoning, I was frakkin sick, but I did not ever think I was going to die, and I did have the strength to put on my shoes and call my driver.

I am still on the mend. Ate some yogurt today and still felt like vomiting, but didn’t, which is good. I called up the office and said “I can work but I still feel like vomiting, so the question is how bad do you need me?” They said go back to bed.

I’ve been reading JV Jones Sword of Shadows series. A fictional Scotland with clans plotting against each other. Enjoying it quite a bit. On book 4 now, will be sad when I finish it, because finding truly interesting and original reading is difficult.

So on Saturday night I got hospitalized for acute food poisoning, dehydration, and shock (shock as in my wind pipe was closing up). Really one of the worst experiences of my life. I could stretch my brain back almost 41 years but I doubt I could find much to compare with this. Went to Cure Hospital in preference to the German Clinic, because the German Clinic appears, by all accounts, more a money-making than life-saving operation. Cure hospital was OK. Before they’d let me in the door, I had to pay $50, but after that they were all over me quickly, hooking me up to saline drips, pumping me full of drugs. Cure is also a teaching hospital and every morning the lead doctor, who looked Afghani but spoke like an American, lead 7 doctors through the wards. One of them was female I might note, an important detain in post-Taliban Agf. Cure was modern enough. I have been to less clean or modern hospitals (Eg Mission Hospital in Manila). The only complaint was that they served no English food. I was given flatbread and a large bowl of broth with piece of boned leg meat floating in it. This was breakfast, lunch, and dinner. (Is this really what Afghanis eat for breakfast, lunch and dinner???) On Monday afternoon I felt terrible but insisted on being discharged because I wanted to go home and eat some food. They were reluctant to discharge me but appeared to be unwilling to restrain me as I slowly hobbled toward the door.

Now if you’ve been following my Twitter you’re up-to-the-moment with my investments. I bought physical holdings of gold and hedged them with DZZ. The physical gold is doing quite nicely while its hedge is (of course) losing a little.

I bought Allied Irish Bank. Some people might think this is a crazy purchase, but these are the same people who would have called Ford or Citibank a crazy purchase back when they were below a dollar. And I made a bit of money off Citibank I might note. My logic with Allied Irish is simple. The European Union cannot afford to allow a member state to become insolvent, and the Irish government can’t allow its major bank to go belly up. Simple logic for a long term play. I bet you in 5 years AIB will be trading over 20, which would be an over 2000% profit for me, though of course only time will tell. And given that I hedge everything, my hedge with AIB is that I simply haven’t put much money into the venture.

Forgot to mention (it’s 6AM in Kabul and I have insomnia, so my brain isn’t firing on all 12 cylinders) that I’m extremely irritated about the latest devaluation of the US dollar yesterday. (The euphemism for this that they use instead of the ugly word “devaluation” is “quantitative easing”. The euphemism helps prevent riots and voter discontent.) Anyway thanks a lot guys. Thanks a bundle for that invisible pay cut. Now if you’re staying in the dollar zone it’s not so immediately painful, but give it a month for commodity prices like food to go up. We all just got a pay cut and you’ll feel it soon enough. Me, I operate both within the dollar zone (Afghanistan, where the dollar is legal tender) and outside the dollar zone (I conduct operations in the UK and Philippines) and I must say, my operations outside the dollar zone have been steadily growing more expensive. And thanks a bundle Uncle Sam, how many more times must I endure this bullshit?

I have anticipated this and have started accumulating small holdings of physical gold and pound sterling, though my holdings here are small and hardly offset the long-term losses of the devaluation of our currency. Problem is, I have a lot of expenses now and can’t take the appropriate investing measures I normally would.

It’s the weekend in Afghanistan and thank God for that. It’s been a bit of a week. I won’t bore you with tedious details, but it’s been a bit of a week.

Anyway a week to go and I fly home to Manila. Excellent.

I have purchased my tickets for December also, and paid for our hotel in Bora, and I might note that more than an entire paycheck has gone to airfare and hotel. Not complaining. Well yes I am, but what can you do.

I like my flavors.me page http://flavors.me/cheetahhhhhhh which has my favorite Scottish castle in the background. What I like about my flavors.me is the flash interface. Now, I have updated T2 (www.teggatz.com mark II) a tad in the last week, fairly superficial changes. I don’t have the time or energy to really update the thing to a flashy standard we’d now expect on the web. T2 is very 2004. And it’s likely to remain very 2004. I am planning to add some new pics though. The thing about T2 (in case you haven’t noticed) is that it’s a showcase for my international travel pics. Going to add a few from Dubai and Oman, and get Tristan onto T2. Some day perhaps I’ll hire my sister or somebody to make T3, something all nice and flashy.

Yeah, I will say, my actual free time is very limited these days. I’m on several committees at the university for example, and this consumes a good portion of my time. What little free time I do have mostly goes to managing my personal finances. Indeed I might note that I have little time for the pleasures of life, and I sincerely hope I can alter this sad state of affairs soon. At the moment, however, I’ve got a lot on my plate.

I haven’t used my stomach medication in 10 days, in the hopes that I didn’t need it any more, and simply because I would prefer to not constantly be taking a medication. However for the last 3 days I’ve had pretty bad acid reflux, so I’m off downtown to pharmacy road to find some protein pump inhibitors. Thankfully I have a gastro consult at the Makati Clini in Manila in 2 weeks.

This is the smallest town in Asia. By which I mean everybody knows everybody’s business and there is more gossip floating around than you even know what to do with. Everybody’s gossiping, too; the expats, the Afghanis, NATO, the US Army, etc etc etc. It’s the smallest damn town on earth.

Bought Allied Irish Bank and will probably buy some more. Long term investment, premised simply on the fact that the Irish government will not let the bank fail. Much like Citibank, which was very profitable for me.

Counting the days… less than 2 weeks and I fly to Manila. Purchased my December tickets too. You know, have very few expenses here EXCEPT airfare, and considering Kabul is in the middle of nowhere, the airfare ain’t cheap.