Hi Everybody!

I’m sorry I’ve been gone so long.  Did you miss me?

I lost my job after watching what I considered to be a fairly secure wad of underperforming, overdividending company stock wither down to raisin dimensions.  This phase was pretty manageable, actually, especially considering the radical improvement in my commute, but when the Eagles lost to the Cardinals and then I found out my son got into a private college with a roughly $50k annual price tag, it was too much to bear.  I went into a karmic tailspin and contracted the flu, which lasted 10 days and is just now winding down.

I’ve made a pile of manure in my backyard to sit on just in case I’m covered with boils next week and have to scoop the pus out with a big spoon.  But I’m not blaming G-d.  It’s not that I think He has a plan for me.  I’ve just realized that my short-term well-being was never part of His plan.  He doesn’t care whether we’re “happy”.  And why should He?  What does our happiness have to do with getting to the Omega Point?

I’m sorry I never answered Granulous’ rebuttal on the Socialism vs. Darwinism debate.  In truth, I have little more to add.  I will say that in my recent travels outside the Matrix, I’ve gotten endless additional confirmations of the unbelievably low correlation between having money and “deserving it”.  Sure, there’s a decent short-term alignment between someone trying to get money and getting it, but after that… man, it really comes apart.  I thought I’d never say this, but the raw confiscation of wealth from the second- and third-order beneficiaries of someone else’s efforts in order to provide some relief to folks who happen to reside nowhere near “the river of money”…. not sure I can shake a stick at it.  You know, there is no money on board the Starship Enterprise, and those people seem pretty happy.

A quick scan of recent offerings here shows the grim cost of neglect — in the absence of a constraining influence, this blog drifts hopelessly into matters ethereal and effete.  It’s less than 36 hours from Super Bowl kickoff, and I haven’t seen a single thought on the likely outcome of the Bud Bowl.  The world is flat, people.  Stop trying to assign relative values to the various messes we’re in, and try to focus on the moment.

Let me try to drag all you eggheads back to reality with a few provocative musings:

I finally figured out why wealthy Democrats are comfortable with high taxes!  It’s because they have no intention of paying them!  Thanks to Messrs. Geithner and Daschle for unravelling this heretofor unexplained mystery!

We’re in another free money zone in investing, if you can just get your head out of the way!  I can’t, but maybe you can.  If you just focus on some simple facts, you cannot lose… it’s just a matter of how much you can win:

  • In the choice between gutting this thing out (deflationary), and refilling the punch bowl (inflationary), you know it’s going to be the latter.  You KNOW it.  What chance is there that this administration coupled with our Trotskiite Congress is going to vote for fiscal discipline?  Ker-NONE.  Create your own theory of instrument and timing, but I don’t see how you can lose if you short Treasuries (they HAVE to finance this thing at some point), and go long TIPs and commodities (gold being the worst choice but a likely winner nonetheless.  P.S. they just found 5 to 10 million ounces of the crap sitting around in Alaska somewhere….)
  • Get familiar with the notion of a “Texas Hedge”.  That’s where you don’t care if you lose, because you’re tossing them the keys.  Think about what can’t happen, because if it does, it’s Thunderdome time!  They don’t have money in that world, just really cool go-carts, lots of guns, and a system of justice that’s about tied with ours in terms of identifying criminals and punishing them.  My Texas Hedge now is the financials — can they go down?  Yeah, I suppose they can, but in a world where the Dow is at 3,000, unemployment is 30%, and no company is solvent, are you really worried about the yo you took on the UYG (double long financial ETF)?
  • How low can housing go?  It’s down over 25% through November (acc to Case-Schiller Composite 20 index) so is now likely down around 30%, and you can get a 30-year fixed rate mortgage for 5% if you can scrounge up a down payment.  New housing construction just hit a post-Cenozoic Era low, and people freaking have to have somewhere to live!  With inflation just around the corner, the disconnect between what it costs to build a house and what you can buy one for will hit a breaking point.  The Misery Index (inflation + unemployment) is currently at really favorable levels (0% + 7.5% = 7.5%, for Pete’s sake, nowhere near the Carter admin levels).  NOW is the time to buy a house and finance it long.  When the inflation hits, your house value is going up and the cost of your financing is going to be STUPID CHEAP.  As my friend Granulous recently told me, the answer to the question of what to do when big inflation is coming is one simple word: BORROW.  Your house won’t be a great investment, but it WILL go up in value, and living there will be super cheap.

Global Warming is nonsense.  Period.  I just got my heating bill for January — $600,000.  The average temperature was seven degrees lower than last year.  Seven.  It’s sunspots, you idiots.  Carbon dioxide is only 4 parts per 10,000 in terms of the greenhouse mass, the rest is water vapor.  The stupid model that produced fatso Gore’s “hockey stick” graph turns literally any data set into a hockey stick.  By all means, let’s conserve fuel and clean up the environment, but we have plenty of other legitimate reasons to do that.  Just shut up on this nitwit global warming thing — I’m freezing my ass off here.  I’d KILL for some global warming right now.

Technology is just amazing.  You need free time to really appreciate this.  Since I got fired I had to come up with my own Blackberry because come on, can you really function without access to email every 30 seconds?  I mistakenly got a Blackberry Storm, which is virtually unusable and I hate it, but man, the thing is an orgy of excess function.  If it had been built for human-sized fingers, you could do so many things with it you could throw out almost everything else you have — phone, computer, TV, GPS, dictaphone, space shuttle, wife, you name it.

Check out the picture my 4-year-old daughter took of her little brother with the VTech Kidizoom digital camera!  I added the caption of course, but the artwork is all hers.  If this pic had been available back then, it would now be the most popular Pink Floyd album cover:

why

You pretty much have to take the Cardinals and the points.  Right-minded people everywhere have been considering a boycott of this event to protest the absence of the Eagles from the affair, but in the end, you just can’t go there.  As my good friend Scott once told me when I mentioned I might not bet on a particular Super Bowl due to disinterest and limited discretionary funds: “Stop it.  You take a deep breath, make peace with your finances, assess the situation, and then you make your biggest bet of the year.”  I love that guy.

Some quick points:

  • You just can’t bet against the team you want, and unless you’re from Pittsburgh, how can you want the Steelers to win?  Yeah.  Love those Steelers, wouldn’t it be great if they won a sixth Super Bowl.  Big Ben should really have two rings.  A team that wins by managing field position and converting turnovers to points is the greatest.  Nothing like being bored to death for the title.  When you see Al Sharpton on TV, do you say, “Hey, there’s Al.  Love that guy.  I hope that, whatever he’s doing right now, he’s being really self-serving and opportunistic.  You get your share, Al.”
  • “Find a way to win” rarely gets a team the whole way.  The Steelers have been doing that all season.  I think a seven is about to come up for them.
  • Last year the Giants were underdogs in all four playoffs games, and won them all.  So it’s a rule now.  If you’re underdogs in all four games, you win them all.  So the Cardinals will win.
  • You have to love Kurt Warner.  Sure, he’s got girl hands and can’t hold onto the ball when he’s hit, but come on, this dude was working in a grocery store right before he won the 2000 Super Bowl, and he’s remained adoringly committed to his wife who, when he married her, looked almost exactly like him.  He’s a role model for all of us, except for the girl hands thing.
  • I bet on the Cardinals getting 7 points.  Have you read what I’ve been through lately?  Do you really want to add this to that pile?

The Kentucky Derby is only 3 months away.  There is, of course, no wrong time to be focusing on the Derby, but the important preps are starting, so try to get focused.  I’ll be all over this like stink on a muskrat, and my primary goal this year will be to select a horse that survives the race.  After last year’s sad affair, several people emailed me to say that, whatever else I do, please would I never pick them to win anything.  If you’d spent time inside my karma blast radius, you’d be equally leery.

Love to all, your working boy, Gary

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9 Responses to “Hi Everybody!”

  1. Mark Grannis Says:

    Welcome back, Tim. I certainly missed your posts, and you are after all the author of the all-time most popular post on this blog.

  2. Timothy Peach Says:

    Although it was painful to see a beautiful comeback slip away, I’m happy to report that anyone who took my advice on the Cardinals and the points cleaned up.

    That’s the way 2009 is going to be — I tell you to do something, you do it, and you get over big time.

    This is how cults get started.

  3. Charley Says:

    Tim, I thoroughly enjoyed this. Once again, you’ve provided the “laugh out loud” moment of the week for this Grannis-sponsored blog – in fact, more than one, but my favorite was your rationale for why wealthy Democrats don’t mind tax increases. Nice work.

  4. Steve Grannis Says:

    Tim, the first few paragraphs of your initial post comprised the funniest, most well-adjusted responses to life’s hard knocks I’ve seen in a while. You just got in under the wire by the way — the definition of well-adjusted is changing fast, unfortunately. Better luck in 2009 but here’s hoping it started well and you had a ton on The Game.

    I’ve been thinking about buying Tips but what if we wanted to cash in our Tips and all Uncle Sam could give us was an IOU, like my Governator is doing already? The definition of “full faith and credit” seems to be changing fast, too. A few years ago the fact that I’m asking this question would scream to me that I should buy stocks. Now when I think about investing I just want to know whether a generic is available and how many mg it’ll take to change my mind.

  5. Timothy Peach Says:

    Thanks man, and no, I did not go all in on the Cards. It was more or less a nice dinner. No complaints here.

    I think you can talk yourself out of a lot of opportunities if you succumb to the hysteria. Someone recently told me they might not use an ETF to short Treasuries because they were worried about “counterparty risk”. This is like being worried about being struck by lightning six times in a row, and making sure you didn’t buy the “five times only” lightening rod.

    If Uncle Sam hits the canvas, it’s game over, my friend. The precise status of your TIPs investment is going to be the least of your problems. I really believe you should exclude any investment concerns that are highly correlated with outcomes you might find in the last few books of the “Left Behind” series. Because in that world, nothing you thought was useful is likely to be.

    I think the best investments to protect against inflation are necessary commodities — industrial metals, energy, food, wood, beer, etc. You do have definition risk with TIPs, which is definitely worth worrying about.

    I frankly think you have to hold your nose now and wade back into the market. They say that when the time comes to buy, you won’t want to — and I sure as hell don’t want to.

    I think we’re looking at a pretty big rally here in the short-term, followed by a lengthy range-bound period as the central banks try to figure out how to soak up all this messy excess money supply to contain inflation without causing another recession. It’ll be a bumpy ride.

    Have you considered gold? It’s a “store of value” that scares people who worship fiat money. When they see it, they scream and rub sand into their eyes.

  6. Steve Grannis Says:

    Thanks for the input. Yes, gold is in the mix. (I’m related to people who may be burying goldbricks in their back yard as I write.) Stocks are still in the mix, too, after falling so hard. I’m just looking to diversify as much as possible, especially away from traditional fixed income instruments that no one will want if (when) interest rates soar. TIPS seem like an obvious replacement for bonds right now.

  7. George Peacock Says:

    Good news, Steve. I think I live near the people you are related to. I have a shovel and [NWBR] apparently has the guns. I also think Tim is right about the spread between real inflation and defined inflation. Better off with the commodities and your relative’s backyard. Well, gotta go, I have some sand to wash from my eyes.

  8. George Peacock Says:

    By the way, Tim. I like the idea of a Texas Hedge. Don’t know the best way to play it but will let you know when I do. There something foolishly romantic about that one roll of the dice.

    But when I think about the value of the house I bought in 1995 and how it appreciated, I don’t have much problem imagining circumstances where housing (my house) falls yet another 25% — and I’d still be substantially ahead. I guess it depends when the bubble started.

    Also, I can easily imagine Dow 4,000 absent Armageddon or 30% unemployment. We could have 9% unemployment (and I do think we’re headed there on the 2009 train) and a nice P/E compression to get there.

    What troubles me somewhat (and you all may have a nice, neat, answer-in-a-bow for this) is “how did Japan avoid inflation?” Weren’t they ridiculously stimulative in their efforts over the past years? And given Japan’s experience, why should we expect a nice stock market rally anyway? Can’t we languish, too?

  9. Timothy Peach Says:

    No, we can’t have Dow 4,000 without those things, any more than we could have had housing prices drop 25% with no impact on anything else. These things are all massively interconnected.

    For starters, Dow 4,000 means every pension fund in the world is permanently destroyed. That’s because pensions have more than half their money in equities, and Dow 4,000 means world equity markets are all obliterated. And by the way, this means credit markets are distended beyond recognition, all the banks have failed, and wealth destruction has left us with completely broken demand for years and years, if not a generation.

    Such an environment leads to nationalization of everything, riots, and wars. Fascism and Communism rose and fluorished in the wake of this kind of environment.

    Compartmentalized thinking got us into this mess. It won’t get us out of it.


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