November 5, 2009

1) I almost stepped on a rattlesnake last night. I finish up most days slinging on a 60 pound pack and clocking 1,000 feet of climb on nearby Mount Diablo. But since my days drag on as I search for more illustrative charts or that elusive statistic, I usually leave late, which means coming down the mountain in the dark. Last night was particularly rewarding, as I caught the rise of the full harvest moon in its pale glory. When I hike, I am in a semi transcendental state, as I subconsciously process the day?s data intake, until ?Eureka!? a trade crystallizes out, and I can?t wait to rush home and write it down. It was the reptile?s conspicuous rattle that broke my trance, as the three footer slithered away into the underbrush, making continuous ?S? shapes in the soil.?? A few inches to the left, and I would be writing this letter from an emergency room, minus one leg. I have been struck by Western rattlers before, but they never got past my Justin cowboy boots or the hem of my Levi 501?s. Which all leaves me wondering, are there snakes of a different variety lurking in the markets today? Many of the great long term plays I baled from on October 13 are suddenly a lot cheaper. The Canadian dollar (FXC) has plunged from $97.50 to $92, crude (USO) has backed off from $42 to $39, Baidu (BIDU) cratered from $440 to $355, and First Solar (FSLR) got whacked from $164 to $120. At these prices, are they golden nuggets waiting to be scooped up from the ground-or are they venomous vipers, coiled and waiting to strike an outreached hand? I vowed I would stay in cash for the rest of the year, until I lock in bonus payout. But if the best of breed investments drop much from here, I will be sorely tempted to nibble.

 

2) Ian Bremmer, President of the Eurasia Group, the world?s preeminent independent risk control consultant, passed through town to promote his latest book, The Fat Tail: The Power of Political Knowledge for Strategic Investing. The book details how money managers must become cognizant of, and deal with, foreign laws, regulation, government turnovers, civil unrest, expropriation, terrorism, and war, in order to survive in this increasingly complex and interconnected world. Globalization ground to a screeching halt during the financial crisis. Governments are now more important than multinationals in influencing our economic future, and a new form of ?state capitalism? is emerging. We are shifting from a unipolar to a nonpolar world. Iraq is morphing from war into a peace keeping operation, while Afghanistan is rapidly moving in the opposite direction. Geopolitical risks are rising. With crude at $80 a barrel there is no Iran premium currently in the market, and $20-$30 could price in very quickly. China and Brazil are the long term winners in the new set up, and the dollar is the big loser. The greatest risk to the US is its overdependence on borrowing from China. This is a must read book for any hedge fund manager struggling with his global risk exposure and looking for some great long term plays.

 

3) I spent a sad and depressing, but highly instructional evening with Dr. Stephen Greenspan, who had just lost most of his personal fortune with Bernie Madoff. The University of Connecticut psychology professor had poured the bulk of his savings into Sandra Mansky?s Tremont feeder fund; receiving convincing trade confirms and rock solid custody statements from the Bank of New York. This is a particularly bitter pill for Dr. Greenspan to take, because he is an internationally known authority on Ponzi schemes, and just published a book entitled Annals of Gullibility-Why We Get Duped and How to Avoid It. It is a veritable history of scams, starting with Eve?s subterfuge to get Adam to eat the apple, to the Trojan horse and the Pied Piper, up to more modern day cons in religion, politics, science, medicine, and yes, personal investments. Madoff?s genius was that the returns he fabricated were small, averaging only 11% a year, making them more believable. In the 1920?s, the original Ponzi promised his Boston area Italian immigrant customers a 50% return every 45 days. Madoff also feigned exclusivity, often turning potential investors down, leading them to become even more desirous of joining his club. For a deeper look into Greenspan?s fascinating, but expensively learned observations and analysis, go to his website at www.stephen-greenspan.com.

 

4) It?s been a busy year. Call me a celebrity groupie, but I never fail to garner valuable market insights from these meetings, which I happily pass on to you.? I am including below a list of interviews that I have conducted with important market movers this year. To access each interview, just type the name into my data base search function by clicking here .

Robert Reich-former Secretary of Labor-January 14
David Hale-CEO of David Hale Global Economics-February 13
Arnold Schwarzenegger-Governor of California-March 13
Jim Lehrer-National Public Radio anchor-April 8
Nancy Pelosi-Speaker of the House-April 16
Dr. Paul Ehrlich-Stanford University population expert-April 17
Dr. Robert Heller-former Governor of the Federal Reserve and CEO of VISA-April 30
Jack Welsh-for CEO of General Electric-May 12
Ian Bremmer? The Eurasia Group- May 15
Richard Haas-President of the Council of Foreign Relations-May 21
Ellen Tauscher-Undersecretary of State-May 29
Carl Pope-President of the Sierra Club-June 12
Christine Romer-Chairperson of the Council of Economic Advisors-June 9
Bill Gates, Sr.-Trustee of the Bill and Melinda Gates Foundation-June 19
George Schultz-former Secretary of Treasury, State, and White House chief of???? Staff-June 19
Janet Yellen-President of the San Francisco Fed-July 2
Neil MacFarquar-Cairo Bureau Chief for the New York Times-July 6
David Petraeus-Commander of the US Central Command-July 13
T. Boone Pickens-CEO of BP Capital Management-August 6
Steve Forbes-CEO of Forbes Magazine-September 1
John Garamendi-Congressman for the California 10th congressional district- September 23
David Wessel-Economics Editor for the Wall Street Journal-September 23
Bill Clinton-President of the United States-October 9
David O?Reilly-CEO of Chevron-October 12
Robert Mueller-Director o
f the FBI-October 12
Helen Thomas-White House Press Corp-October 15
Bill Fleckenstein-Hedge fund Manager-October 19
Barrack Obama-President of the United States-October 20
Zachary Karabell-President of River Twice Research-October 26
Leon Panetta-Director of the CIA-October 27
Malcolm Gladwell-Columnist for the New Yorker Magazine-November 2