Category: Uncategorized

That’s the byline of an interesting 60 Minutes piece on ‘corporate raider’ Carl Icahn (who was mentioned here before in relation to an attempted takeover of Marvel Comics). Regardless of whatever else you may think of his practices, his commentary on CEO pay in this country is spot on. It’s particularly disturbing when they try to defend their pay in light of massive, unprecedented corporate losses (in this case at Washington Mutual).

The one-year charts of various financial and mortgage stocks are pretty crazy right now. Citibank has been piledrivered to the tune of almost 65%. Countrywide Financial tanked almost 90%, which really makes me wish that I had found some way to short their stock — they have long been ridiculed as one of the worst offenders in the “subprime mortgage crisis” (even though the problems are far more wide-ranging than that). Impac Mortgage Holdings, a local stock headquartered in “highly desirable” Irvine, CA, is entering pink-sheet territory as it trades at a robust $0.90. While that is a step up from its 52 week low of $0.20, I don’t think it’s any consolation to anyone who had the misfortune of buying at the 52 week high of $6.75 and is currently eating an 85% loss. The twin juggernauts of government-sponsored entities, Fannie Mae and Freddie Mac, are both down over 70% from their 52 week highs. Bank of America and JP Morgan look good in comparison, down only about 30% from their 52 week highs.

The other day I received an interesting letter in the mail. It was an offer from Sprint (my former cell phone provider), offering me $10 for my 4+ year old Samsung A620. I’m not sure if there is some kind of government subsidy involved here (a brief search didn’t turn up anything that seemed relevant), or some other incentive for Sprint to offer that bounty, but it’s easily way more than the current market value of the phone. The offer also came with a pre-paid mailer, so it’s a no-brainer for me to recycle my old phone this way. Considering that you can currently purchase a lot of 9 of these phones for about $50, I feel like I’m getting an unexpected bargain out of this deal.

A resident in my apartment complex just had all of the tires off of his BMW M3 stolen overnight. The car was left up on cinderblocks — we saw him talking to the police earlier this afternoon. Not a good way to start your Saturday, although I was impressed — he seemed much calmer talking to the cops about it than I would have been. I remember hearing about someone who used to work at Totally Games (long before I was there) who had all of the tires stolen off of their Integra while they were having lunch at Northgate Mall, which is also pretty crazy — we’re talking about a 45-minute window of opportunity, in broad daylight.

Possible symptom of an economic downturn, or just another random crime? I don’t know.

Here’s the article.

It’s nice to see my alma mater landing a prestigious institution, but, at the same time, I, uh, wish it were a different president. If you weren’t aware, Bush’s connection with SMU is via Laura Bush, who is an SMU alumnus.

The Sam’s Club location down the street from me (of which we are members, due mainly to its proximity) recently opened a gas station. This is great for us — it’s essentially the same distance to the Sam’s Club gas station as it is to the other stations that, until now, we favored. And, naturally, the prices are quite a bit cheaper — I’m not sure if it’s an opening promotion or not, but the price differential is about 30 cents or so per gallon. Huge.

The one nagging concern is that the Sam’s Club gas station only sells regular (87 octane) and premium (91 octane) at this location. My car’s owner’s manual recommends 89 octane mid-grade gasoline, which, to this point, I have dutifully used. Note that the premium gasoline is still a lot cheaper than mid-grade at the surrounding stations, so I have no economic problem with using it. I am, however, somewhat concerned about reports of using higher-octane fuel causing issues with the emissions systems. Anybody know if this is worth fretting about?

Apparently in order to become an executive or work in finance, your humor gland needs to be removed. This article about a prank caller who strikes during corporate earnings calls is doubly hilarious because none of the victims appear to comprehend the motivation for doing such a thing — that is, the joy in simply being able to say, “gotcha!”

According to Macy’s, that is.

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A futures trader (apparently still in college) loses 40K, wiping out his account, over the long weekend on Dow futures. There are some YouTube videos on there as well, with a picture-in-picture of him superimposed over his trading software, swearing a lot. From an article linked to in comments elsewhere on his blog:

From my experience, you will fare much better in the long run by implementing a daily loss limit. The numbers just work out that way. However, forcing yourself to adhere to your own rules and actually walking away from trading once a daily loss limit is reached is one of the most challenging steps a trader can take. In my eyes, this ability separates traders from gamblers. As a trader, you must accept risk, understand the risk you have accepted and construct your own parameters of risk, knowing that one single trading day is just a small piece of a much bigger puzzle. I have been assisting clients with day trading online for nine years. I have never witnessed a situation where one single day “made a trader,” but I have witnessed many single trading days that destroyed traders.

This week is going to be very interesting, to say the least.

I was complaining late last year about how my site still wasn’t the number one search result for my name. Well, I think setting up a better default index page for my site made some kind of difference — eriknovales.com/ is now the #1 search result for my name. Yeehaw.

I noticed today that the market took another pounding today, with the Dow, S&P, and NASDAQ all giving up at least 2%. Those who are better acquainted with me will know that, for some time now, I have been convinced of the eventual collapse of the skyrocketing housing market. I do not have any real economics education background — I’ve read a few of the Motley Fool‘s books and articles, but I’ve never taken a class on the subject. I became a follower of blogs like Calculated Risk and the Housing Bubble Blog, among others, and tried to digest the steady stream of news and warning signs posted there on almost a continual basis. Even from my uneducated worm’s-eye-view, behind the Orange Curtain, I smelled funny money, as median income statistics and home prices for the area just didn’t make sense.

I thought that the demise of New Century Financial (a local high-flyer in the mortgage business) in early 2007 would be the catalyst that brought the whole mess down. Accordingly, I decided to liquidate most of my portfolio, take my dollar-cost-averaged gains, and wait patiently for a good opportunity to once again jump in. It turned out to be a temporary hiccup, though — from the beginning of March until the start of the credit crunch, the S&P went up about another 8-10%. After the first wave of panic hit and receded, the S&P closed even slightly higher in October. While I silently cursed my poor timing, the market then proceeded to get hammered in late November and late December, and the start of the new year provided no relief.

We’ve now gone below the price at which I sold my S&P index — the difference now is that the prevailing sentiment appears to be “recession,” and I agree that the markets are going to sink further before any relief sets in. I checked over my portfolio, and, on a percentage-of-portfolio basis, my timing no longer looks so terrible in hindsight, partly due to its weighting towards the index fund.

Some positive results from my March sale:

• I unloaded AMD at $14.80 (versus the $6.12 it closed at today). After the successful dual-core Athlons, my reading indicated that their products in the pipeline were going to lag behind Intel’s Core 2 series, so I didn’t feel bad about dumping it. I’m glad that I did.
• I sold EDS at $27.81 (closing at $17.86 today). I originally invested in them on advice from the Fool, but didn’t feel bad about dumping them because I didn’t feel that I personally had a good grasp of their business. Again, I’m glad that I did.
• I dumped my DELL at $23 (versus the $19.75 that it’s trading after-hours today).

Some not-fully-exploited opportunities:

• I missed potentially larger gains on AMZN (sold at $38.83, currently at $78.41 after hours), but I didn’t own enough shares to make a huge difference. (I should note that I have had past regrets with AMZN — when I first started investing in 2001, I bought a solid chunk of it at something like $7, and sold when it was a 3- or 4-bagger. Should’ve held onto it…)
• I also missed gains on NVDA (sold at a split-adjusted $20, currently at $24.80 after hours).
• Finally, I should have stuck around with PANL (sold at $12.76, currently at $16.82), as well.

Amusingly, I was going to include INTC in this list, but it is taking a convenient 15% dive after hours (following their earnings call), thereby saving me from embarrassment.

I should note that I never turned off my automatic investment withdrawals, so some of these “paper losses” have actually been partially recaptured, just with a smaller position. Overall, I feel okay about how things turned out — and I believe that the coming months will continue to hammer stocks and pave way for an eventual return in force for my investments. There will be money to be made amidst the carnage — in hindsight, I wish that I had picked up airline stocks when I started investing (post-9/11), because the returns would have been awesome.