On this day in 1937 (well before my time), the King of England abdicated his throne and married the woman of his dreams. King Edward VIII went back to become a simple Prince of Whales with Wallace Simpson. Boy, do I love this story…its so Disney. I also love one of His former Highness’s quotes which brings life’s journey with all its trials and tribulations into the simplest of terms.

” Perhaps one of the only positive pieces of advice that I was ever given was that supplied by an old courtier who observed: Only two rules really count. Never miss an opportunity to relieve yourself; never miss a chance to sit down and rest your feet. ”
King Edward VIII

Today on Wall Street probably the biggest news is that Lehman Bros is getting ready to report its first quarterly loss since it went public in 1994. Street estimates vary but the guesses range from between $300 - $600 million. As a result the rumor mill (remember, Wall Street is most famous for milling spectacular rumors and tales of the fantastically ridiculous). Anyway, the elves in the mill are talking about Lehman raising possibly another $4 billion in an equity offering…the first equity offering since it went public.

OK, OK…so what about all this and the two rules for us poor folk out here baking like June bugs on hot chevy hood…and believe you me, we never miss an opportunity to rest our two dogs. Well remember yesterday we talked about never fighting the tape? And I still say its good advice… meaning that Lehman’s stock has been under considerable pressure of late. And the tape has not been kind to this venerable insititution of finance and thus very hard to bring oneself to buy it.

 But…this news presents quite possibly one opportunity. So here are the two rules as they pertain to this situation regarding Lehman.

1) Buy on the rumor 2) Sell the news. (One can also buy on bad news but thats for another blog). These two rules are tried, tested and true words of wisdom from canyon of Wall Street. Trust me on this one. I wouldst never intentionally steer thou into troubled waters. And btw… very rarely hath one gone wrong with obeying these two rules.

As for me…While I do not own any Lehman Stock, and since writing this, I will be unable to buy any for one month just by SEC Rule and ethical purposes. I believe that in the long run, Lehman is a great company, well run, and will weather this storm in fine fashion. A very good long term buy.

Oh yea…one more thing…opportunities come along every day, (don’t worry about missing one), and most certainly one should always relieve oneself when one has to. 

 Have a great day…and good luck out there in the jungle of stock market land.
 

When I was on the trading floor of the NYSE as an active broker, we had a saying about when to buy and sell a stock. “Don’t fight the tape�.  The “tape� is the ticker tape, a device to display stock prices and quotes that came into being in 1867, invented by Edward A. Callahan of the American Telegraph Company.  When I started on the trading floor, there were no computers yet.  (Yup, I’ve been around that long). Anyway…the only way one could tell what the market was doing was to read the ticker tape. Today I doubt there are many current traders on the desks of the major brokerage houses who would know how to ‘read, much less fight’ the tape. 

So what does it mean to not fight the tape?  Simply stated it means that if the prices are falling, don’t go against the trend. Which brings up another old saying from the pros on the trading floor which says: “The Trend Is Your Friend�? This saying affirms the earlier one in that one should go with the flow, and not try to go against it.

So today with the ouster of the CEO of Wachovia, and the downgrade by S&P from AA- to A+ of Morgan Stanley, Lehman, and Merrill Lynch, helped all those companies shares decline on the news. 

OK…So now we know when not to buy or sell, but when can we buy the financials. Well, that’s pretty simple. Just watch the tape, and when the volume – the amount of shares changing hands – begins to slow down or as we say in the business “dry up�, this may signal that there is a turnaround coming.  But the tape will confirm this with higher volume and a trend to the upside. 

By all signs – “trends� – this would appear to be a ways off.  So I am holding off a while. The only reason I might go against all of the above were if I were a long term investor with at least a 5 year horizon of investment. In this case, I would ‘nibble’, but really I mean very small bites at this time.

So remember “Don’t fight the tape� and “The trend is always your friend�.

Happy hunting.

With the worlds population at 6.6 billion people, and the U.S. at 302 million (that’s 4.5% of the worlds population), and with  the United States consumers guzzling roughly 14% (13 million barrels a day) of the worlds energy resources, is it any wonder that the U.S. must learn to conserve energy? 

The daily supply produced is approx 85 millioin barrels per day (Source: Energy Information Administration of the U.S. Dept of Energy), and demand is at 87 million  barrels per day. The laws of basic economics says that the prices MUST go higher.

Even if the U.S. economy experiences a slow down, it is unlikely that the economies of China and India are going to slow to the point where demand will be exceeded by the supply anytime soon. Add on top of this, the weak dollar -(down over 30% in the last 2 years against other major currencies), what Saudi Oil Producer wants to take payment for his oil in U.S. dollars? I don’t know how you say it in Farsi, but in essence I can hear the guy saying…”Well..OK if I must, but to make up for the losses in holding this green currency that is getting weaker by the month, I am going to boost the price a bit just to make sure the infidel doesn’t get the best of the deal”.  Its just business after all. Who wants to take a loss on holding a currency that is always going lower? Certianly not Shiek Bin Barrel.

My bet…is that Oil within the next 6 months settles nicely above $150 per barrel and then headlines start talking about $200 per barrel.

Can you spell $8 per gallon for gasoline?

In what I would consider to be one of the biggest shockers of his administration, President Bush actually vetoed a farm bill.

This morning, ”W” vetoed a $300 billion farm bill, calling it a tax increase on regular Americans at a time of high food prices. Best of all, is that if its not Bush whose spending money recklessly, then its the congress, as Bush’s veto is probably going to be overridden by congress. 

This year, net farm income is projected to increase by more than $28 billion, and “W” is actually correct in asking; ‘Why should the American taxpayer be forced to subsidize that group of farmers who have adjusted gross incomes of up to $1.5 million,’ Bush said; ”When commodity prices are at record highs, it is irresponsible to increase government subsidy rates for 15 crops, subsidize additional crops, and provide payments that further distort markets.”

I couldn’t agree more !

Rarely do I agree with this man, but I do in this case. See..I’m actually pretty open minded even when it comes to a guy who is responsible for tripling the national debt in just 7 years. Tough to do by yourself, but “W” had the help of a Republican controlled congress to assist.

Aside from the above…the markets today are sluggish and starting to factor more and more into the picture, the prospect of inflation. The FED raised its estimate of Core Inflation growth from 2.2% to 2.4%. I’m not sure what countries numbers the U.S. Federal Reserve is looking at, but those estimates seem totally wacky to me. A large investment bank on Wall Street is estimating that real inflation rate is above 5%.

What does one invest during an inflationary period? Well, my maven - lets call him Dr. Doright, [that’s Scottish / Swedish mix] thinks 1) being diversified is a must 2) have some overseas holdings, 3) U.S. Mid-caps (if one must invest in the U.S.) is probably the safest class of stocks to invest in.

Ok folks… that’s it for today…

Happy hunting!

It never ceases to amaze me how our elected representatives, and the President in particular blithely just keep on spending money. The national debt is now in excess of $9.3 trillion dollars, and is expected to exceed $10 trillion by January 2009. That’s $47,000 per adult (209 million adults in the 2000 Census). Everyone remember how “W” and the Republican controlled Congress for the first 6 years of this Bull S@#* - erp…I mean Bush administration just went completely wacko in spending? With this war (Mission not accomplished after $1 trillion spent and Osama still on the loose), billions in farm subsidies to grow ethanol (What’s up with giving farmers money when they are rolling in dough already??).

 Anyway… I think you get my point. Reckless spending MUST stop! Has anyone seen a headline announcing a layoff of government workers? I’m almost sorry I didn’t go into the postal service. I have a friend who after 25 years in the USPS, will be retiring at age 48 with nearly full pay and all benefits.

 Were it not my money that was paying for his retirement, I might not be writing this blog, but given that taxes are sure to go up in one form or another so that the spending train can keep on chugging along, I thought I would vent just a little.

No… I’m not talking about raising taxes on the poor middle class working stiff earning between $20k and $100k (95% of the population), who goes to bed every night worried sick about how to pay not only for the mortgage, but also for next weeks food.  I’m talking about raising taxes on those individuals earning over $350,000 per year. I’m also talking about cutting subsidies to already profitable farms. I’m talking about getting back on mission and going after Al Qaeda, and not occupying Iraq.  ( I ask you seriously …If I gave you a trillion dollars, do you think you could bring to justice Osama Bin Laden? - isn’t that the reason we’re in this mess in the first place?)

I’m talking about cutting back spending on anything NON ESSENTIAL to the operations of the U.S. Government. Look out entitlement programs…you’re in trouble in my recipe.

When was the last time anyone heard of government layoffs or thousands of jobs being cut from any one of the U.S. Government departments. These days it seems like the safest place to work…the U.S. Government.

 Consumer confidence (key word ‘confidence’) is part in parcel at its lowest level in over 26 years because of that letter in the alphabet “W” in the White House who infects the citizenry with about as much confidence as a good scare of bird flu.

Anything less than the above attitude, will only prolong the pain. And believe me, because I don’t believe there is one elected official with the courage to do so, I think we are in for a lot of pain over the next 2-4 years. Yup! you heard me right - 2-4 years OR LONGER!  before the U.S. economy is anywhere near what it once was.

If you’re in finance, a stock market investor, or just a plain channel surfer….yup, a channel surfer in the morning, I gotta believe that watching Bloomberg, CNBC, MSN, CNN ….all the “financial channels” has got to be one of the most boring - even tortuous - under-goings in life.

 Every day, there’s the cute guy, or hot woman asking the absolutely most absurdly obvious questions of ‘wall street analysts’ - those old men from Dickens fame who wore green eye shades, worked until midnight, and only got yelled at by Scrooge in the morning for being 5 minutes late.

 OK….my point…These “experts” NEVER get it right. And in many cases they don’t even come close. Take this morning for example…OIL tycoon T Boone Pickens admitted that he - the granddaddy of all oil traders” got it wrong, in a recent bet he made in the market.

 Bottom line, if your having too much fun in-the morning during your workout, or just want a good laugh, at the sheer stupidity of these talking heads trying to predict the future, turn the dial to any one of the three channels that I just mentioned. Of course, if you tune into CNN, you’ll get a bit more blood and carnage out of Iraq.

 What a way to start the day eh?….watching idiots who are worse then weathermen at predicting the future of the stock market, or watching an Iraqi child or American Trooper being rushed to the emergency medical care facility. 

  

For as long as I’ve been pacing the corridors of Wall Street …now after 30 years and considered what Eddie Murphy would say is - the ‘old man at the club’, I’ve learned a few things; one of which is sometimes bad news isn’t always so bad and may even be good news / opportunity….Emphasis though is on sometimes!

This morning the big news is that Merrill Lynch is reporting a larger than expected loss, with lower revenues, and the company in response will be cutting 4000 jobs. The CEO - John Thain is a personal friend of mine, as I got to know him when he took over after Dick Grasso at the NYSE. Well, my point is this, John is no shrinking violet, is able to make the tough decisions, and is a strategic thinker. Merrill has ample cash on hand to whether this and future storms, and well, I’m a believer in this man, and his team.

 So… this is, in my humble opinion, one of those ‘bad news’ stories that does not headline - “The End is Near” - the end of Merrill Lynch that is.

 Personally, I’m a buyer, and a believer in John Thain and the fabulous team he has assembled at this fine American Brokerage firm.

The Dow is up over 200 points as investors are heartened by encourtaging earnings news from the likes of non other than two banks JPMorgan and Wells Fargo. While the earning reports weren’t great,  that they weren’t disastrous is what got everyone into happy mode. 

 But while I’m watching the news ticker, I’m also watching the leader of the free world, President George Bush talk about global warming, and how “we are going to stop the growth of greenhouse gasses by 2025″. WOW…that’s pretty ambitious….2025.

 His lack of faith in the American people’s inability to stop the “growth” in greenhouse gases by say 2015 is so underwhelming, so uninspiring, that it literally makes me sick!

 Whatever happened to the ‘can do’ spirit of this great country?

 While I’m on the ‘can do’ spirit of the American people, I’m wondering if the Congress might catch a bit of ‘can do’ spirit and cut spending. If the dollar keeps falling pretty soon a hotel room in New York which would cost $250 a night, will cost $600 in London.

 Thanks George…you’re doing a great job….I know what I would like you to do, and that is go clear some brush at the ranch and really try … no I mean really, really try not to do any more damage than you have already to this country.

Yesterday whilst riding the subway with a good friend, we were talking about the fact that there seems to be no great deterrent to the sniping and killing of American Soldiers in Iraq. He has an idea, which I like very much.

 The Idea:

 Every-time an American or coalition troop is killed in Iraq, the United States takes 100,000 barrels of Iraqi oil and uses some of the proceeds to give to the family of the trooper who was killed, some of the proceeds to give to an Iraqi citizen who fingers the murderer, and some of the proceeds to feed the hungry and homeless in America.

The killing of 10 troopers = 1 million barrels of oil or at $112 per barrel = $112 million.

Maybe then the Iraqi government would get some spine, deal with the bad actors and create some stability within their country.

 Walter Schubert

ps….the individual who gave me this idea, wished not to be named as he is a prominent figure on Wall Street.