Another Blogger's Take on the Dow hitting 10,000

A blogger whom I greatly admire and post often on is Ann Althouse a law professor at the University of Wisconsin and  a somwhat frequent guest on the NYTimes editorial pages.    Here is her thread:

http://www.althouse.blogspot.com/
The Dow tops 10,000.

And:

A year after accepting a bailout from Washington, a resurgent JPMorgan Chase reported another round of surprisingly strong profits on Wednesday, strengthening its position at the pinnacle of American finance.
... $3.6 billion in profit for the third quarter...

I was happy to read this as it was the same source areas that I drew from. But she has 80,000 hits a day and I have 30.

How now DOW..10,000 and percentages

My expertise is in advertising – certainly not trading. In that area we, very much like traders, live in a sea of numbers e.g., ratings, cpms (cost per thousands), shares, HUTs, PUTs…all that stuff that is so boring and so uncomplicated.




What we are pitched by the networks and cable nets etc., is percentage growths so we look at that very closely. For instance, ION Network showed perhaps a 15% growth year on year in the lower end of the adult 25-54 market. They pointed out that the major networks either stayed the same or dropped, particularly in the lower end, and at as much as 6%. So ION up 15% NBC down 5%...so it makes sense to buy into ION to catch the younger crowd. Right? Wrong.



Percentages, often quoted on the financial networks is horribly misleading and this little thread is to warn you to think about it before it influences.



The market hit 10,000 yesterday. The 5 year high is 14,000 and some and the 5 year low was about 6,600. (I just heard a pundit talk about the S&P up 50% or something this year so case in point).



The DOW is down about 29% from its high and up 50% from its low. It is the “up from it’s low” that makes the difference and is always the suspect number. It is easy to demonstrate. You have $100 and take a 10% loss. Now you are at $90. If you make a 10% gain you aren’t even, you are at $99 and have lost $1.



Percentage shifts that go up at the same rate they go down always give you less money or less of anything. Always. It is simple math. The guy who bought in at 14,000 and saw it go to 6,600 saw a 53% loss. Now the DOW is up 50% from the low and he is still 4,000 in the hole. See what I mean.

The silly season of "online pricing"

An associate of mine, Michael Kingsbury, who is head of sales here at Prism showed me a very interesting slide that he uses in powerpoint presentations. I call it the batteries not included slide and here it is:

The kicker to me is the keeping $25,000 sitting there if you buy just a little bit daily.  Why do they do that? (rhetorical) but if you have accounts that aren't long term buy and hold situations, why would anyone use these folks?

A feisty Bernie Madoff

I just want you to know the lengths that this blog goes to keep you informed.  I heard a snipet on the radio about this fellow getting into a scuffle over of all things, the stock market.

I tracked it down and above is the link.  There must be a certain freedom in Madoff's life now. His fate is sealed and I'm reminded of that old Monty Python movie scene in the Life of Brain where a woman was senteced to being buried up to her neck and stoned to death by the crowd. She started screaming at the judge and jailer who kindly said "stop complaining or you are just going to make it worse for yourself". 

There is a very good blog which I frequent (althouse.blogspot.com) that discussed a fair sentence for Madoff.  The solutions ranged from making him live in a cardboard box (as he has made more than a few...the rat) to having someone knock on his cell at precisey 6pm every night (martini time) and instead of providing libations, punch him right square in the nose...every night for the rest of his life.

One thing for sure, this little scuffle won't likely be his last.

Gresham and Copernicus

Gresham and Copernicus have the commonality about "bad money drives out good money" as our astronomer friend actually came up with the core of it some years before Gresham's Law made the rounds.

I've been reflecting on this for several weeks and came to the realization that I misunderstood.  There is a relative aspect to what constitutes good and bad money.  In the most extreme good would be goverment tender and bad would be conterfeit. In this case people would hoard the good money and not mix the two for fear of by chance picking up a load of the bad stuff.  The bad money drove the good money "out of circulation".  Ok. clear enough, but that isn't what Gresham really meant.

I am now thinking that what was meant was when there were two forms of currency in circulation when both the good and the bad were worth the same under legal tender laws that the good money became a commodity.  Indeed our friend Copernicus was involved in turn coins into melted down commodities.

If a loaf of bread sells for a silver dollar you get a good buy if you pay for it with bad money and you get taken if you buy it with good money.  Perhaps the commodity level is reached when the disparity is such that the value of the good money isn't affected by melting it down into a gold bar as you can't in any way produce a method "intra currency" to swap good for bad.

When I was in Russia during the 80s dollars coming "in country" had to be declared and exit had to equal entry.  You could, however, convert dollars to rubles so that the government effectively decided that the dollar was good and the ruble bad. If you decided to risk it and pay locally there in dollars you got far more than the conversion rate would indicate and as there were laws about citizens there owning dollars these we driven out of circulation - not exactly Grisham/Copernicus's thinking but a modern day equivilent. 

I'll think some more on this and get back to you.

Awash in Natural Gas?

Heard an interesting piece on NPR this morning referencing the World Gas 2009 conference in Buenos Aires.  Of note that I heard but haven't yet verified is that we now import liquified natural gas to satisfy about 1% of our needs. (NaturalGas.org).  With the new fracturing techniques reported early on this blog it appears that the stage is set for all this to change.

Hydrofracturing (forcing water into shale which breaks it apart in lateral fracture lines) seems to be the pot of gold.  We really shouldn't underestimate that potential for helping us out of the energy dependence mess as some experts predict that we will simply overflow with this source.  Not a bad prospect.   Amazing.

Christoffa Corombo

Christobal Colon, Cristoforo Colombu or Christoffa Corombo in his native Genoa...whatever.  Thanks for making the trip.