April 2009

"The Congress and the administration clearly show what gives them their joy and motivation to engage in "public service":
"It's fun playing with other people's money."


If it's the end of America then it's the end of the world, including Canada, so look out.
We'll cross the border in roving packs, steal your women and your beer!

~ Ron P.

The Professional Opinion

S&P 500 Index: 7608.92

This is proving to be a very difficult bear market.   The closing lows of 682, 683 and 676  were basically all considered what would be the maximum insofar as downside risk is concerned. Bob expects those closing lows to be as significant as the lows reached in 1974 (not that that means anything to me - I was about 17 years old).

The cause of those latest declines were in large part due to the unending news reports of the latest bad things h happening in the financial sector.  Bob is indicating that these current price levels may never be seen again, but he doesn't actually come out and say that.

Bob thinks the oversold condition is a buying opportunity and suggests that buying on weakness at these levels would be a good thing.

In almost every case, major market uptrend begin several months prior to the beginning of a stock market recovery.  Bob thinks a major market recovery is in the cards in the third and fourth quarter of this year.

There is no question that this stock market recession is on par with that seen during WWII, 1975 and 1982.  

There are several key financial programs that were implemented recently that Bob feels will have a beneficial impact on the markets at large going forward.  Pumping all this money in to the economy has caused mortgage interest rates to decline to near historic lows.  This provides the consumer with more cash in his pocket, which for those with a 100% propensity to spend, will inject more money into the economy.

The FDIC insuring monies to $250,000 is a good thing and is helping prevent a run on banks.  It has a calming effect.

Bob is waffling as to when a true economic recovery begins.  Bank failures are minimal, all things considered.  Job figures are bad, but not that bad.

Bob continues to remain fully invested and suggest buying at any periods of weakness at these levels.

SPY, VTI, IWV and DIA are still rated buy.

Everything else is rated hold.

No changes to model portfolios.

Casper, Wyoming
The sun rises  on a new AQCS job in Casper, Wyoming.

Personal Portfolio
What a difference a month makes when our beloved community organizer finally figured out that words mean things. Now he could just keep his mouth shut for the rest  the the year...

And then let's not forget the tax cheat Geithner who seemed to think the Chinese idea of a universal currency, not the US dollar was a good idea.  That of course roiled the currency markets, driving the value of the dollar down.  How much more incompetent can you get?  I'm afraid we might just find out.

What comes around goes around and I suspect the political circus is going to be most amusing the next couple years. If the conservatives can't make hay out of all this and win back some congressional seats next election, they don't deserve to be in power.

My Personal Game Plan

I side-stepped the bust with some professional help,  missed the burst of the commodity bubble on my own, bailed out of international funds with comparatively little loss and got totally caught up in the Sept cratering of everything stock related. I didn't see that one coming because I didn't understand the full impact of sub-prime paper.  Won't make that mistake again.

Since then I have been doing a fair amount of trading in volatile stocks (XL in particular) and using the profits to buy quality at greatly reduced prices.  As a result of this,  I have about 60% more shares than I did at the end of 2007.  If  I would have stayed in mutual funds as Bob Brinker did,  I would have about the same number of funds and much heavier losses.  

I am thinking that when turnarounds occur in market conditions such as this, those turnarounds can be violent to the upside. If that happens,  I think all these good companies trading at penny stock prices will make me a happy camper indeed. If the Sprint / Palm venture is a success, that will be some thick icing on the cake.

PSPFX - US Global Investors Resources


Coming out of this recession, financials are going to have to lead the way and I think I am fairly well covered there.

Commodities should be close behind, copper in particular.  I don't have any desire to play the commodities market and
leave that to the pros.  

I've made a lot of money off  this particular mutual fund and will probably buy back into it at some point. I don't know that now is the time but if you are looking at an allocation into commodities (no more than 5% of course), this one bears watching.

BLDRS Emerging Markets (ADRE)


This ETF is more concentrated than most and has a beta of about 1.5.  I've owned this one once or  twice and did well with
it.  It has a large energy component:

Top Ten

Volatile, no management fees and pays a dividend.  Could be a good choice  for energy and emerging markets.

What about those Home Builders?


In an attempt to be forward looking in terms of identifying new growth areas,  I started hearing a bit of noise in the housing
sector. On second thought that noise might well have resembled a final gasp.

Anyway, there seems to be the tiniest bit of recovery throughout the country in home sales and construction.  Not looking to spend much at all in this sector,  I finally settled on Standard Pacific at $1.00 a share.

The company has a lot going against it, not to mention another recent downgrade from Fitch:

"The downgrade reflects the current very difficult U.S. housing market and Fitch's expectations that the housing environment remains challenging for the remainder of the year and perhaps into 2010. The sharply contracting economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect persistent negative trends in Standard Pacific's operating margins and further deterioration in credit metrics, notably leverage (with some debt reduction in recent years offset by erosion in tangible net worth from non-cash real estate charges and operating losses).

Cash flow from operations will probably sharply decline in 2009 and may shift negative in 2010. Real estate impairments should moderate this year, but will persist so long as home prices decline and the sales absorption rate shrinks.

The company had $626.4 million of cash at Dec. 31, 2008. Standard Pacific generated $263.2 million of cash during fiscal year 2008 ($62.5 million during the fourth quarter), which included $235.6 million of tax refunds received during the first quarter of 2008. For all of fiscal 2009, Fitch expects the company to be slightly cash flow positive, excluding a first quarter tax refund of $114.5 million. The company has some near term debt maturities, which will deplete some of its cash balance. Standard Pacific has the following near-term debt maturities: $124.5 million in April 2009, $173 million in August 2010, and $175 million in May 2011. "

Here is a glimmer of the positive:

SPF Article

Well, that's my speculative pick for the month and it does add somewhat in terms of diversification of the portfolio.

Fools Gold
I'm sure by now you have heard those annoying advertisements on the radio urging you to send in your used gold, your valuables and even your gold teeth for instant cash.  Below is a post that has been circulating around for a while, supposedly written by an ex-employee of one of those firms.  I cleaned up the wording a bit, reformatted it and changed the name of the company to 'Fools Gold'.  It is worth reading:

I am a former employee of Fools Gold. I did not know much about the company before being hired.

On my first day I was taught the Fools Gold Scam from beginning to end:

1. We send you a 'Refiner’s Pack”, used by you to put your jewelry in and it is 'insured for UP TO 100 dollars'.            This is according to how much we feel your items are worth,  NOT what their appraised value.
2. We receive your Refiner’s Pack within 3-4 days but are instructed to tell you that it takes 7-10 business days         for us to receive it ALTHOUGH the package has already arrived.

3. Your valuables are appraised by hand, magnifying glasses, a small weight pad and a bottle of mystery fluid.
     Appraisals are not done with million dollar equipment or specially trained jewelry experts.

4.  Although the payment for your item(s) is dated within 24 hrs of testing your jewelry, we sometimes DO NOT            actually send the check until 3-4 days later.

5.  We claim a 100% Satisfaction Guarantee or your jewelry returned, BUT THE CATCH IS that the guarantee             requires contacting us within 10 DAYS from when your check is DATED. This begins with the time it takes for        accounts payable to issue the check and also includes the transit time for you to receive your check.

                    **** THE COMMERCIALS STATE YOU GET YOUR CHECK IN 24 HRS.****

6. IF you are lucky you will receive your check around the 7-10 business days AND more then 97% of the time             Customers are outraged when they lay eyes on the amount of the check. Some customers even receive a check for     one penny (TRUTH). That can include items of great value (Diamonds, Platinum/ Gold and Sterling).

7. They sometimes even receive your valuables and like them so much THAT WE CLAIM to not have received the            items just so the TOP people or even FAVORED people can get first dibs on your items.

If we tell you your items never even got here, we issue an INSURANCE CLAIM for UP TO 100 dollars
(GOD FORBID your items are worth more then a 100 dollars) and when you call in to check on the status of your items, we tell you:


We do not use an actual insurance company.  We use customer service reps as claim department agents.

8. For those who receive a check within the 10 day time frame,  GOOD LUCK trying to get in touch with a customer        service representative before your 10 days are up.

After 10 days your items are “ALREADY MELTED” or "NO LONGER AVAILABLE FOR RETURN.”

9. For the “LUCKY” people who do get in touch with us within the alloted time, we already know what you are calling about. Customers want their items returned because the check amount is so
insultingly LOW.

The first thing a Rep will ask you is “HOW MUCH WERE YOU EXPECTING TO GET BACK?”
This way we know how much to “BONUS” you.

Definition of a BONUS:

We issue low-ball checks just to have you call us back if you are smart enough to realize that you just got scammed. For the smart ones we are paid to offer a bonus up to 3 times the original amount of your of your original check and you accept.

For example: Sally Smith receives a check for $27.86 for a Rolex watch (which we don't issue value for), a class ring, a ring with diamond chips, a pair of earrings with emeralds, as well as a few sterling silver pieces and maybe a few items that were really of no value.

Now Sally Smith calls the customer service department where she speaks to a rep who seems 'so concerned' and will see if she can better the amount by speaking to a SUPERVISOR.

We then place the caller on mute and speak to our neighbors or doodle on a sheet, or twiddle with our hair for about 45 seconds while we are supposedly speaking to our supervisor about Ms. Smith’s complaint.

We then come back with an offer to BUMP UP YOUR MELT DATE or any other lies the customer service representatives can think of and offer you a total amount of $53.20, which is a little under double the amount of your original check. If you accept, the representative makes a $15.00 bonus off of the transaction. If the representative  offers you under triple the amount of your original check, she makes $10.00 in bonuses.

10. If you accept the offer, the deal is done and you are told that the call is recorded (by the way, most of the             time the record button does not work). It is a way to make your feel binded by verbal contract. IF you do not           accept the deal, you have to return your check and it takes sometimes up to a month to receive your items back         after we receive the check.

11. If you only want the items that we do not find of any value back, you may have to pay a 10.00 shipping and              handling fee to have your own items returned. It varies depending on sales for that week.

       IF sales are good, there is no fee. If we are slow, you must pay.

Fools Gold is definitely not a trustworthy or credible company to do business with. You are probably better off taking your items to a local pawn shop or shopping around for other companies. With the economy the way it is, Fools Gold seems to be a way out of financial stress for some, but in actuality becomes a stress of its own.

I would advise you think twice before sending in valuables or items inherited and of sentimental value. It is not worth it.

I am not doing this as a way of bashing their money making process :) but to issue a warning.


I guess the picture speaks for itself - your official greeter at the Casper, Wyoming airport.

Closing Comments
Last month my foul mood over all things financial and our government's ineptitude in dealing with it spilled over into of all places, a Canadian woodworking forum where I found rather disparaging remarks regarding a certain web page of mine.

I had a few choice rejoinders for that particular bulletin board and I will have to hand it to the Canadians, they are quite capable of generating love letters in return with all the impact profanity could have without the profanity itself. Well written too.

Anyway, I decided to turn a negative into a positive and provide further instruction and pics on some of my wood turning preferences.

As a result of this the page views which the Cairn Terrier usually dominates in a big way, was shattered by this woodworking page by well over 100%. The other wood working page views shot up as well.

What does any of this have to do with finance?

I think it is a lesson on the severity of impact that negativity can have on the world at large from politics, to finance, all the way down to a lowly bulletin board. 

It works.

Choosing not to participate in negativity is my usual preference but it is pretty clear it is something that not should be ignored when your finances could be affected by it and I think the media at large and our community organizer in specific were in large part responsible for driving up the last few months of losses.

On the plus side, negativity sure is a great way to drive up your web page rankings! 


In the interest of saving the company money, we elected to motorvate around in which one of these fine vehicles?