TB’s Quote of the Day: “I never got anything through that wasn’t accomplished with the help of the other party. – Sam Nunn…he worked hard with Sen. Lugar, and others. We need elected officials like these…not the ones we currently have for the most part.

News Quote of the Day: “The Federal Reserve forgot that it is a central bank for the people of the United States and not a private academy where decisions of great importance may be withheld from public scrutiny. As only Congress has the constitutional power to coin money, Congress delegates that power to the Fed and the Fed must be accountable to Congress, especially in deciding what it does with that money.” Matthew Winkler, Bloomberg News Editor in Chief on the U.S. Supreme Court in their first sensible decision of the last three (corporations can make unlimited campaign contributions, and freedom of speech near military funerals. Hear! Hear! TB

Monday’s stock rally may have caused you to believe…you have to believe…that all crises are past. This is simply untrue and serves as further proof of the markets lack of ability to focus on more than one event at a time…all else gets swept under the rug. The Dow gained 1.5% on volume of just 1B shares…892 million at the 4pm close. Furthermore, after the initial surge it had a series of four lower highs with the 178 point gain being 36 points off the session high…indicating an absence of buyers and only a few sellers. Only 3 of the Dow stocks were down: PFE, KFT, and JPM. Advance/declines and breadth ran between 3-4 times positive, while new 52 week highs ran 224:43. The VIX gapped down for a second straight session, plunged thru the 200 day (21.62) and closed at 20.61 with support again at the 40/50 day 19.17/18.73…complacent again. Little change in the markets overnight.

…is everything says Andre Agassi, while TB prefers “assume makes an ASS out of U and ME.” TB believes however there are many misperceptions about this column, so here is an attempt to clarify them as some questions from readers have come up that require it.

  1. TB is not a perma-bear – he has never, nor will he ever, tell you to sell all your stocks OR when to buy. He will however point out event’s, like yesterday’s reminder on ‘T+3’ or on options expiry of things you need to keep in mind IF you are thinking about buying or selling. On the other hand he will recommend ‘trailing protective stops’ as he did last week and continues to believe are necessary. Sure, he got stopped out on some but locked in profits. The downside to this is the 30-day rule which is moot IF you are trading in a tax-exempt or deferred account. The rebound suggests that these stops should be continued and as the market goes up so should the stops…with LIMITS!
  2. TB is not a guru…far from it. He only makes comments and observations based on events and how they relate to his forty years of experience. Experience is great but it still cannot predict a particular outcome…in fact it can send bad signals, but hubris is much worse which is why TB took John Mauldin to task. Still, TB will read Mauldin…for his Outside the Box articles like yesterday’s must read by James Montier. Like John Ralfe or Jeremy Grantham, when something seems overvalued it probably is. TB will not use Warren Buffett here because his company has grown so large that he has to make less and less value-oriented decisions…IMHO!
  3. TB treats his readers as knowledgeable and capable of making their own investment decisions. This is unlike the Jim Cramer’s and others who have to scream at you to get you do what they want you to do, which may be detrimental to your own gut feeling and philosophy. Simply don’t do it!
  4. TB does not HATE Wall Street or all WS firms. One of the good things is that many previously boutique firms have increased in stature since the crisis. This is no different than TB’s distaste for CEO compensation… it is not directed at other than perhaps the top 100 CEO’s. The rest are NOT overpaid, are hardworking and understand their businesses…they have to. They do not rely on a cadre of yes men, or those with a vested interest in getting the outcome to produce the results they want for their own short-term benefit. TB loathes Goldman, Merrill Lynch, Morgan Stanley, the former Lehman and Bear Stearns. In the ‘true’ banks, the arrogance of JPMorganChase (and its CEO Jamie Dimon who has told us that FNMA and FHLMC were responsible for the crisis…he had to look no deeper than himself), and of course Citi who is attempting to deceive investors thru a 1:10 reverse split to make the stock look more attractive to institutions by being safely above $10. Look at the dividends on these stocks and how quickly they began to pay out their absurd bonuses again when but by the grace of God and the taxpayers they would have ceased to exist!

There TB hopes that helps!

Now to the James Montier piece that Mauldin published. In a variation of “keep your friends close and your enemies closer,” TB believes that those whose opinions he admires most (himself included), can be wrong…dreadfully wrong as the only thing we all do consistently is have 20/20 hindsight. Sadly, we seldom learn from it however. It probably took 30 years for TB to learn from it while chasing the latest hot tip…usually with bad results or minimal gain. So TB takes a little from those he doesn’t admire at times, Jim Cramer, even Mauldin, however he has found very little use for Larry Kudlow.

The complete article titled The Seven Immutable Laws of Investing can be found at Millennium Wave .  The philosophy in those seven laws follows closely to what TB believes. However TB would argue that if you follow them, especially in this era of zero short term interest rates you will, using his inflation forecast, be losing 2.5% a year. So you, and he had better be right. Also, TB doesn’t believe leverage is necessarily evil, but he wants to control it (which is precisely, along with fees that are excessive that he shuns hedge funds and most mutual funds – especially bond funds!)…thus it is important when investing in ANY leveraged asset that you maintain trailing stops…bulls get rich, bears get rich, pigs get…well, you know.

One of the compelling things in this piece his the use of graphs to tell the story, although some were difficult to understand. About 40% of the article is composed of graphs and tables which is very effective. So the ten pages is not an all day read. It is the crux of value investing. Here are the seven points with TB’s comments:

  1. Always insist on a margin of safety – avoid buying at the top
  2. This time is never different – well, yes it can be…in the short run
  3. Be patient and wait for the fat pitch – but keep the bat off your shoulder!
  4. Be contrarian – don’t be afraid to not follow the herd, you know what you get!
  5. Risk is the permanent loss of capital, never a number – quants, pay attention!
  6. Be leery of leverage – but don’t fear it…just understand it and protect against it
  7. Never invest in something you don’t understand – this applies to ‘hot tips’

That should give you enough to dwell on for today…you decide!

. . .  – – –  . . .  . . .  – – –  . . .

The decision quoted above on the Fed’s lame excuse that divulging who got the TARP and TALF funds could cause a run on the banks is pompous, arrogant, and absurd. TB has no problem with keeping it secret at the time but there is no excuse for not divulging it two years or more after the crisis has abated. How else are we to know the risks that were taken in the banking system that created the crisis in the first place. TB believes it was more to protect the all-powerful financial sector and those who control it, who in turn control Congress.

TB finds it amusing that Goldamn wants Warren Buffett to surrender his $5 billion 10% preferred shares and convert them to common stock.  Over the weekend he joked to CNBC:  “I’m going to be the Osama bin Laden of capitalism. I’m on my way to an unknown destination in Asia where I’m going to look for a cave. If the U.S. Armed Forces can’t find Osama bin Laden for 10 years, let Goldman Sachs try to find me.” You go Warren, but Goldamn is more powerful than the armed forces!


Paul Krugman wrote the other day how he was amazed at how quickly Wall Street regrouped and smothered Congress with lobbyists, thus taking the guts out of all legislation and regulation. TB has commented before on Simon Johnson’s statement that in every situation where the World Bank had to bail out a country it was because the financial sector got to close to the government. If we can’t see that in our own country then there is no hope for us but to repeat the crisis again and again. Greed is what it is!

Going back to the crisis, there is one key person who could have and would have prevented it: Brooksley Born, who as head of the CFTC pleaded for regulation of derivatives…even after she left it she continued to argue and didn’t care who regulated it but someone had to and the derivatives had to be uniform and exchange traded…can you see why Wall Street fought this…with the able help of Alan Greenspan, Robert Rubin and Larry Summers? That was woman number one.

Woman number two is Elizabeth Warren who Wall Street has unleashed its fury on for trying to make regulation relevant…the fired their guns and lobbyists at her and convinced key Congressmen to attack her shamelessly and wrongfully. Note that it is only the big banks (the ones we just bailed out) who are fighting her and she is starting to gain support from community bankers who were left out in the cold by the big ‘too big to fail’ boys.

Now there is criticism of Hillary Clinton on the Libya matter. Whether you agree or not, it was an opinion…as were those of Gates and Admiral Mullen…yet she was singled out. Still a right wing article the other day questioned whether she or Obama would have been better as president.

Sarah Palin, who TB has no love or use for, is now trying to look political by traveling around the middle-east making statements so foolish that it is the right that is telling her to zip it. Then of course there is presidential hopeful Michelle Bachman from TB’s new home state of Minnesota. She too lacks an understanding of history.

TB believes that the answer to guiding this country might just be a woman. Hopefully of the caliber of the first three, not the latter two who are doing damage to women in power. Is this the glass ceiling at work? It sure appears so.

TB could argue the same happened to Nancy Pelosi but she is a liberal from arguably the most liberal district in the nation and they consider her too far to the right! Still, it was Obama who let her along with Harry Reid dictate the legislation of the first two years of his administration and who is now turning out to be a better orator than leader. This is sad as TB believed he was the last hope for change. Consider a McCain/Palin administration. Would things be better? Highly doubtful.

Have a terrific day!




  1. Yarnman said

    TB–Please don’t be too thin-skinned in reacting to your critics–they certainly do not reflect how the majority of your daily readers feel about you! I have read your blog long enough to appreciate where you’re coming from, and I can decide for myself whether to agree or disagree with your opinions. I very much enjoy your daily comments, and miss them when you’re on the road. I hope that you’re having fun with the grandkids, and that at least one crocus has popped up in your yard. –Yarnman

    • traderbill said

      No crocuses yet, Arny but all the snow on the lawn to the lake is gone…it rained last night and has been pretty warm.
      The comments made to me weren’t mean-spirited, but one asked why I wouldn’t buy under certain conditions and another who worked for a WS firm I respect didn’t like being thrown in with Goldamn and The Blundering Herd. So I felt a clarification was in order. Not a bad idea as new readers might not understand where I am coming from and my mission is to try to warn people of potential problems on the horizon not to tell them when to buy or sell.
      Thanks for reading and as always your support.
      All the best,

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