Yom Kippur

As a midwest Lutheran, occasional backslider, yet something of a spiritual person, I am continually taken by some of my now good friends here who are Jewish.  This being the eve of Yom Kippur and watching the mental preparations in my midst, I'm treated to the understanding that there are things, rituals, beliefs, observances etc., of which I know little but have been surrounding me my entire life.

I have always had Jewish friends but I never thought of them as such or they me as a Lutheran. We were just friends.  One, a musician who had and has a famous career in the Israeli Philharmonic, I've known now for half a century and whenever I think of certain pieces of music we performed together I think of him and perhaps he does the same. Regardless of how or why, he is in my thoughts as are his family.

I'm learning a lot here and for that I am thankful.  It is a very good thing to realize what it is that is good and pure and perhaps not well understood for no good reason.  It reminds one to be curious and to ask and listen. 

I just read this - "The confession is recited silently, and with each sin that we confess we lightly knock our chest – the domicile of the heart, the seat of our passions and impulses..." 

waiting for the other shoe to drop......

Do you believe in coincidences?  Do you believe in the tooth fairy?  I long ago gave up the idea that things "just happen".  Somewhere back a bit a butterfly flapped its wings in India and then an eventual ill or good wind blew my way.

I'm perplexed that today's banner headlines highlight a heretofore hidden reactor in Iran.  It just happens to be "found or disclosed" when the President is at a G summit in Pittsburgh.

I harken back to the suddent terror alert surrounding Citibank right after the John Kerry's nomination. We now know that wasn't a coincidence.  Now we have all this "news" that, when the onion skin is peeled back, seems to have been known for a bit. So why now - why today?
What is happening at the G-summit or elsewhere that we need this shoe to drop......

There is an old civil war story of Union troops having a casual lunch when all kinds of deer and small game suddenly ran through their camp space.  The veterans took cover while the new recruits just admired their good fortune of pentiful game for the next meal.  "Why are you hunkered behind that tree Jeb, them just deer and rabbits...they won't hurt ya' a bit".  "I ain't hunkered here for fear of a deer sonny, I'm hunkered here because of the Reb army that's drivin' 'em".

At the Idyllic Island Cafe.....Please write about what's on your mind this Thursday morning

Appalachian Spring

I tumbled upon an interesting website with the rather straightforward name of "geology.com".  I was prompted to this by yet another of a week long series on NPR discussing natural gas and the huge surge in estimated inventories - now according to some eclipsing coal as our most abundant energy resource.  Some wag said we are "awash in natural gas".....and I won't give credit to a mixed metaphore no matter how appropos.

In the early and middle 70s I was teaching at the University of Kentucky.  Interesting gig. Nice town

I was friends with a 3rd year resident in psychiatry who was from Pikeville which, if you hit the link that is the title of this blog will take you to geology.com and a mape of the Marcellus Shale field in the Appalachians and Pikeville sits down in the far eastern gree area of Kentucky.  It is or was an incredibly rich/poor area dominated by big coal.  The Mercedez Benz agency there was, in the middle 70s, the highest volume dealer in the world (remember Nixon, oil embargos, rush to coal, etc.). The poverty rate was also among the highest in the nation and it was a real tug of war between those who owned coal leases and those who worked the leases.

I'm of the opinion of "here we go again" except this time we won't be taking the tops off the mountains to get the energy.  What was most telling about the NPR report was that this isn't big oil developing the drilling and recovery technology but little firms, almost mom and pops, getting in early and staying there.  Big oil ditched natural gas a while back and now they are sitting on the sidelines (although sure to eventually jump in when the scale is right) watching this revitalized energy source during the early play of what appears to be boom years.

Might not be a bad idea to write Mercedez about dealership opportunities.

At the Palm Tree Cafe.....Talk about anything you want.....

Advertising Issues Redux - wakeup call to IPG

I and members of my family were once employees of firms taken over by IPG, the huge advertising and marketing firm. Over the last year the stock has been at a year 2008 low of $2.50 or so and has moved slowly up to a $7.40 close yesterday.  One would think that things are getting better - much better.  Happily I got out in 2007.  The bad part of all this (and there is indeed a bad part) is that the revenues for an advertising/marketing conglomerate are, well fees from advertising and marketing. OHOH.

I've written several times about the "advertising upfront" and the drop in ad sales generally. Well that two edged sword not only slays the networks it slays the ad agencies. Here is how it works for a firm buying advertising time.

A long time ago networks established a professional courtesy price structure for companies  that used advertising agencies to place their media (buy ad space).  It is a "net-gross" adventure in accounting.  Agencies of record for a company buy media at the gross negotiated rate and when the bill comes due it is paid in "net dollars" which is 85% of a gross dollar. For instance, if I buy a :30 second spot on My Little Margie starring Gale Storm for $1,000 gross dollars my bill for payment, submitted to the agency will be 85% or $850.  Originally the 15% difference was the agency profit and covered the agency's costs.  With better software systems and EDS innovations, the real cost for handling advertising buying was substantially reduced and is now a fraction of the 15%.  Major accounts are either bid at a low flat rate of the gross (2-5%) or the buying is done on a flat retainer fee.  This is big trouble for an IPG.

They were being hacked to death by competetive bidding and had to reduce their commissions to the bone.  Now the raw advertising spending has dropped like a rock so not only are their margins low their dollar volume goals in gross advertising placement are hard hit.  IPG is in survival mode like almost all agencies.

The debt that they acquired in their buy out the competition is coming due just as their revenues are drying up.  It doesn't help that GM was a big account. Twisting the clock backward, they would be fine. Running the clock forward.....ohmy.

Okie Dokie...natural gas time

A long time ago when oil was $12.00/barrel for light sweet and I was living in Tulsa I got involved with some oil folks.  A lot of technology was being applied in the fracturing area to maximize well production as it was cheaper to get more out of an existing well/field than to go find a new one. I guess it is all relative but technology was developed and all kinds of enhanced recovery techniques came into play.

I heard an interesting report on NPR this morning regarding natural gas and had a deja vous moment.  It was all about technology and some cool ways to extract natural gas from schale deposits.  If you look at the US Energy Information Administration (http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm)  I would draw your attention to the wellhead price for natural gas Jan - June 2009 where the price decline has dropped about 40%.  Commercial price is down 17%.  Now it can be a supply and demand issue (dead of winter to the normalcy of a June day) but if you read the NPR article linked through the title, supply and demand may not play into things as much in the future.

The pricing has been all over the board in the last 8 years.  If the NPR report is accurate and it would seem to be, then this last move in wellhead prices may (and i stress MAY) have some feet.  All I know is that wild swings are there for either a good or bad reason and it is worth looking at under a microscope.

Things you kinda hate to hear about...Bringing Wall Street to Main Street

Of course this is all my opinion and it does not reflect the opinions of Prism Trading School, its personnel or staff or, frankly, anyone other than lil' ol' me.

I cringe at embarrassing advertising. The over the top overstatement just has no place.

There is a company that is in the "teaching business" and they say (and I'll interject some witty observations here and there):

•How to profit in any market condition


•Proven strategies for the current market  -- I'm assuming that the current market falls under "any market condition".   This is like saying you can make money 24 hours a day and then saying you can also make money at any time.

•How to start with limited funds  ... after you pay the fees that is what you will have - limited funds. if they are so sure of themselves why don't thy put up their own money....

•How to generate steady cash returns trading minutes a day   this is a hoot. HOW MUCH CASH...they leave out the fine print...ohhh and how much of a RETURN?

•How to face your fears, change your mindset and take control of your financial future   So to be eligible for their program you have to be out of your mind with fear?
 
It is embarrassing that so many people fall for crap like this.

Discipline

Discipline comes in all forms.  I just had a chat with one of the traders here who advocates pairs trading.   The sum total of this conversation was that a trader who has discipline and follows the rules will do well. the guys who do well in pairs trading are the discipline guys.  These are the guy who get out of a trade when the signs tell him to and doesn't rethink it (i.e. i made $.50 a share but perhaps if I just let the position ride I could have made $1.00 a share).  Well, dummy, you plan was to make $.50/share.  If your plan is to make $1.00 then make a plan that way. Otherwise sell at $.50 and make another plane for $.50 more cents. The disciplined guy will take $.50 and go home happy
Next time your discipline quotient runs a little thin, take a look at a violin section in an orchestra.  In the picture take a look at the position of the violin bows....mostly about half way with one exception (upper left).  I will guarantee that all bows are going in the same direction and, as they are all playing the same thing, no one is making very many fingering mistakes if any.  Violin sections in orchestras are the height of discipline.  No "straying" allowed.  16+ persons doing exactly the same thing, at lightning speed, and on a tightwire.

Sitting down and doing pairs trading is a lot like that.  Scratch that. Being a successful pairs trader has to demonstrate the same grit and tenacity (that's John Wayne speak for disclipine) as our violinists. 

An electifying compliment to a violinist is that he/she is a very disciplined section player.  Then to have a trading floor full of disciplined traders who "know their instrument"....yet another sight to behold.