Pazdziernik II

2007 World Series Champions

Well, not much to say in this post. We’re all very happy in New England that the Red Sox won their 7th World Series Monday morning. The red banners outside Fenway Park will now include: 1903, 1912, 1915, 1916, 1918, 2004, and 2007!

The Sox were by all accounts the better team versus the Colorado Rockies. The 13-1,2-1, 10-5, 4-3 sweep showed, perhaps, that $145 million in salary is indeed a better value than $61 million in salary (Rockies).

We suspected the 2007 season was special when Ramírez, Drew, Lowell, Varitek hit back-to-back-to-back-to-back home runs in April.

Related posts: 2007 American League Champions , Baseball 2007: wrap

Photo: October 30, 2007: A mini "Mike Lowell" at the Red Sox victory parade in Boston (by Liam O'Leary)
Tags: Red Sox, World Series

Investing in Bonds

Like many others, monitoring an IRA or 401k can be certainly nerve-wracking (so to speak?). Last August’s market turbulence got me thinking thoughts of “just how much will I have at retirement?” “Did I pick my funds correctly?” “Should I re-adjust my portfolio”? “How often should I re-adjust?” “What risks are my monies actually taking?” “How can I increase financial certainty?”

This motivated me to seek out alternatives. For some time, I have been interested in giving bonds and bond funds a closer look. To this end, I chose Bonds: The Unbeaten Path to Secure Investment Growth by Hildy and Stan Richelson (2007 Bloomberg Press) to help me dive deeper into this area.

Hildy and Stan Richelson readily deliver on their stated “main purpose” of Bonds: “to debunk the many myths surrounding investing in stocks and bonds and to provide new thinking for you to consider when developing and carrying out your financial plan.”

Stock investing provides for an unknown future value. In short, investing in stocks is highly speculative. Investing in bonds is predictable. At a future date one knows the value of his investment and one is certain that the bond will pay a certain rate, although the bond itself may rise or fall in value in its lifetime. This is mostly a concern if one wants to sell the bond early.

The Richelsons, through Bonds, certainly provide contrarian — and quite refreshing — thinking about investing. (I like “contrarian”!) They advocate an all-bond (plain vanilla, high-grade, no junk) portfolio to all classes of investors and provide case studies of how to carry these plans out in concrete terms. I found Bonds extremely helpful in understanding the fundamentals of bonds, the variety of bonds available and concrete ways to invest in bonds.

Except for U.S. Treasuries, individual bonds, like corporate and municipal varieties, must be bought through a broker. They can not (currently) be bought individually on-line through the internet, like stocks. The Richelsons focus on the purchase and investing of individual bonds, not bond funds, although they cover bond funds as well.

Here are the fundamental “myths” that the Richelsons take-on:

1. Old Assumption
The historical annual return of stocks is around 10 percent.

New Thinking
The actual annual historical return on stocks is much less than 10 percent when taxes, transaction costs, and bad timing of the stock market are taken into account.

2. Old Assumption
Stocks will outperform bonds in the future.

New Thinking
It is uncertain that stocks will outperform bonds in the future.

3. Old Assumption
Stocks are not risky if you hold them for ten years.

New Thinking
The risk of a severe stock market decline increases as the investment period increases. Stocks are riskier and less predictable than bonds.

4. Old Assumption
Bonds are for income and stocks are for growth.

New Thinking
Bonds can provide both growth and income.

Bonds confirms that bonds are a nice alternative to bank money markets and CDs because of the comparable or better interest rates and because of their similar liquidity. They are surely more liquid than stocks especially if one has monies tied-up in either an IRA or 401k.

Bonds also has me re-thinking the flat tax. Municipal bonds are attractive to those in higher income tax brackets because these types of bonds are generally free from federal and state taxes. These tax advantages encourage people in these higher income brackets to invest their monies in these municipal bonds even if these bonds pay less than corporate or other type of bonds. Makes sense to me.

However, a flat tax would eliminate these tax advantages. The municipal bond market would certainly suffer greatly if a flat tax were enacted because people would divert their funds to higher-paying corporate bonds and the like. For cities and towns to compete with the corporate they would have to raise taxes. Yet tax rate increases are limited by law in many places. (Massachusetts residents … Prop. 2 1/2 anyone) Cities and towns would be pressed for funding of public works and communities would suffer.

Perhaps I should modify my thinking from a flat tax to a flatter-but-not-exactly-flat so-called flat tax? In any event, Bonds was an enjoyable read. I’ll be returning to it to shore-up my understanding of bonds. In a stock market decline I may just be sitting pretty!

Bonds is extremely well written. (Their text is very precise in wording so careful reading is required.) For a novice with little or no experience in bond investing this book is a great primer. Bonds is well organized that it can readily serve as a reference manual with great ease.

Finally, the internet web-sites that Bonds presents are worth the price of the book itself. The fruit of the 1999 Bond Price Competition Improvement Act (H.R. 1400), investinginbonds.com , is a great place to compare prices of individual bonds. A broker will certainly take his cut for corporate and municipal bonds and the like. However, U.S. Treasuries (I bonds, for example) can be managed through individual accounts for free.

Related posts: The Mortgage Crisis: SIVs and M-LEC, Stem Cell Cover-up

Tags: bonds,Stan Richelson,Hildy Richelson,investing

2007 American League Champions

The Boston Red Sox Game 7 victory over the Cleveland Indians 11-2 at Fenway park last night was outstanding! Thursday, Saturday and Sunday's games in this series were some of the most enjoyable baseball that I have witnessed in recent times: all Red Sox victories (7-1, 12-2, 11-2). In 2004 I was away from Boston so their World Series victory over St. Louis was more of overcoming a lifetime of heartbreak with no particular attachment to the team. This year was different.

Back in the New England area this year, I followed the boys all year long (on radio mostly) and certainly had more attachment this time around. Of course, I will always have attachment to the Sox. I suppose familiarity allows for a level of enjoyment that can not be bought or imagined. Through the good and the bad we're with them. Fortunately good times are here again! — No. Not J.J. and Thelma, but J.D. and Josh!

All Sox fans, whether familiar or not, had reason to celebrate as well: Sox nation soaks up victory !

Let's go Red Sox **clap** **clap** *clap* *clap* *clap* !!!!

Photo: J.D. Drew October 20, 2007 Red Sox 12 Indians 2 Game 6 at Fenway Park (Matt Campbell/European Pressphoto Agency)
Tags: Boston Red Sox

The Mortgage Crisis: SIVs and M-LEC

Those who are conscious of financial and economic matters know that this summer a crisis of “sub-prime lenders” hit the United States mortgage market. I knew that bad mortgages were written and people bought homes they could not afford. At a summer barbeque this topic came up when I spoke to some businessmen. (I am not a businessman but rather I am under the category of professional — the best I can tell.) We all agreed on the facts but they were at a loss that I did not understand why the banks, in particular, would be so concerned. My position was that since the banks essentially owned the homes they can just wait until more favorable economic conditions. Eyes were rolled toward me and the conversation was essentially shut down —although I never received an adequate answer.

Sure, like many others, the specifics of what happened eluded me. Beyond bad loans / can’t pay / in default I wanted to understand this crisis a bit deeper. Now, fortunately Floyd Norris has come to the rescue on these questions. His article 3 Major Banks Offer Plan to Calm Debts in Housing (NY Times October 16, 2007 ) provides the best explanation I have read to date in answering the fundamental questions of what happened without overloaded financial jargon!

At issue is a borrowing crisis facing a group of institutions known as structured investment vehicles, or SIVs, that were little known even to many on Wall Street until the credit crisis erupted this year. These vehicles essentially are private banks, albeit ones without the benefits of deposit insurance or the right to borrow from the Federal Reserve. They lend long term, and borrow short term. If they cannot borrow money, they are in trouble.

The vehicles, often started by banks like Citigroup, were financed by issuing commercial paper, a form of short-term credit, for 90 percent or more of the value of their securities. The expectation was that the cushion of 10 percent or less would be enough so that the commercial paper could readily be sold at low interest rates, often to money market funds. Because commercial paper usually matures within months, not years, it is necessary to sell new commercial paper as the old paper is paid off.

Now, however, it is practically impossible to sell such paper, and the SIVs are faced with the threat of having to sell many of their securities into a market with few buyers

Norris explains cogently how three major institutions (banks that also offer SIVs I believe) are proposing to remedy this crisis without federal government monies but with federal help: Citigroup, JPMorgan Chase and Bank of America.

Rather than “liquidate” the SIVs they want to “restructure” them in the form of a new financial vehicle: a Master Liquidity Enhancement Conduit (M-LEC). This proposal is essentially a re-packaging of SIVs: creating and opening a new financial spigot to “fund the SIVs”. I've read that this plan would want to raise around $80 Billion! (I also read reports of $200 Billion.) Bloomberg reports that SIVs have $320 Billion in holdings.

Well, the M-LEC plan is not universally hailed. In short, my position (from the summer barbecue) has been vindicated by Josh Rosner, “an expert in mortgage-backed securities at Graham Fisher, an independent research firm in New York.”:

“If they really believe these are good assets being mispriced in the market,” he said, the banks could just buy them and wait for the asset values to recover. “This raises the question of whether the banks are doing this [creating M-LECs] just to avoid taking their losses.”

Avoiding a government bailout is desirable in my estimation. Re-packaging SIVs as M-LECs may take patience. Its feasibility is beyond my grasp, although I understand its desirability. I suspect this may just be postponement of the illness. Waiting for market appreciation of housing assets would be my course, although I understand that banks want to avoid “write offs” and the like and continue their cash flow. This course of holding may trigger further housing market deterioration and affect other economic sectors.

We'll wait and see. In the meantime I’ll be sure my guy does not have me directly invest in either SIVs or M-LECs.

Update December 21, 2007: The so-called Super-SIV plan is dead. See Banks Abandon Plan For Super - SIV (N.Y. Times, December 21, 2007)

Photo: ©Rachel Dewis
Tags: Floyd Norris, M-LEC, SIV, mortgage crisis

A Soul Finds "the box"

Utter Muttering presents very nice testimonial on how he found his way to the confessional "box" after a long absence! He responded to Our Lord's initiative and received His healing, forgiveness and mercy through the ministry of His ordained priest. Perhaps his soul is alive again (I'm not sure if he had any mortal sins to confess). Regardless, his "soul of the soul", anima animae, is alive. This surely won't make the news but the world had changed for the good today!

Actually helping people and making burdens easier ... quite edifying indeed to say the least! Dear Catholic readers, when was your last Sacramental Confession?

The confession (or disclosure) of sins, even from a simply human point of view, frees us and facilitates our reconciliation with others. Through such an admission man looks squarely at the sins he is guilty of, takes responsibility for them, and thereby opens himself again to God and to the communion of the Church in order to make a new future possible. (Catechism of The Catholic Church No. 1455)

Photo: © Elena Korenbaum

The Cold Steel of Don Feder

Don Feder is an Orthodox Jew and former opinion and political columnist for the Boston Herald (1983 –2002). He is currently available on-line with his Cold Steel Caucus Report. He is certainly a friend of Catholics and all others who sincerely care about the common good.

Don Feder conveniently provides a self-description of himself for those who are not familiar with either his person or his writings. I'm sure he's a tad hyperbolic here:

I’m to the right of [Ariel] Sharon on Zionism, to the right of Pat Buchanan on immigration and Americanism, to the right of Mother Angelica on abortion, to the right of Chuck Heston on Second-Amendment rights, and generally make the legendary Atilla look like a limousine liberal.

I personally avoid the terms liberal, moderate and conservative; left/ right as well. I don’t apply them to myself and try not to apply them to others. These political labels are too easily abused because they can be understood in different senses. In many ways they war not helpful to get to the root of things. (Hmmm. "root" in Latin is "radix" ..."radical".) Nonetheless, they are helpful in describing one’s approach to the problems of our day or generally gauging one's political (or otherwise) worldview.

I can't recall having a fundamental problem with any of his columns — knowing that he expresses himself much differently that I would — because at heart he presents an unqualified solid Judeo-Christian foundation through his writings. (I hope and suspect that this is true in his person as well!) Certainly with an "unqualified solid Judeo-Christian foundation" one can hold different concrete approaches to the issues of the day while remaining grounded toward the true common good. Unfortunalely, this point is often overlooked or not discerned in approaching so-called political or social writings.

Feder’s October 8, 2007 on-line column, 10 Impossible Things Liberals Believe Before Breakfast, is an accurate description of the state of popular ideas. His full column expands on why these ideas are bad. It is really good read and deserves the merit of a post in this blog because it provides 1.) rejoinders to consider if you are already in agreement with Feder's "bullet points" or 2.) a different perspective that would rarely find light of day in the MSM. Regardless of one's initial reaction to Feder's list, it provides a point of departure for consideration of the state of these wildly popular and assumed true ideas. Here’s a summary of Don Feder's Top 10 list (with some of my commentary):

1. Conflicts are due to misunderstandings.
2. Peace through weakness — or, weapons cause wars.
3. Guns cause crime. [Saying "It’s not the gun. It’s the bullet that causes crime," usually puts things in perspective. ]
4. Health Care is a human right. [There are alternatives to state-sponsored-and-mandated socialism.]
5. Global warming is man-made.
6. Condom distribution in the schools promotes responsible behavior.
7. The Courts are champions of democracy and human rights.
8. Gay marriage will have no discernible impact on the institution of marriage. [Feder reminds us of no-fault divorce, state welfare, and cohabitation.]
9. Another amnesty is the solution to the illegal immigration crisis.
10. The way to end political corruption is to get money out of politics.

Photo: Ellsworth Kelly. (b.1923). Red and Blue from the series Line Form Color. 1951 (The Museum of Modern Art)
Tags: Don Feder

Sam Adams Imperial Pilsner

After a 3 week search I finally found Sam Adams Imperial Pilsner in Nashua, NH ($8.99 for 4). I am very curious about this “strong hoppy-to-the-max” brew — at 8.8% from what I gather. Will report back soon…

Update: Saturday October 13, 2007: This brew certainly lived up to its "super hoppy" expectations and quite strong in effect as well as expected. It had a very nice color, texture, flavor hold. This Imperial Pilsner was quite a nice experience for a single or two at a sitting. It should definitely be sipped and enjoyed. Overall it was very refreshing and a good value for its price. I recommend it for any serious and discerning beer enthusiast of legal drinking age!

Review: Samuel Adams Hallertau Imperial Pilsner

Related Post: Brew Masters' Private Reserve

Photo: beer.themanroom.com (Bruce G. Owens, Jr.)

Stem Cell Cover-up

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The State of California announced yesterday that they have already sold $250 Mil. of bonds to individual (41%) and institutional investors (59%). These monies are towards $3 Billion over ten years for the manipulation and destruction of human life. (California's Proposition 71 in 2004 passed allowing for tax-payer funding of human embryonic stem cell "research". This "research" will kill humans at early stages of development. Their body parts will be used for "research.")

Check out the "MarketWatch" story (Stem-cell bond sales take off in California by Kristen Grencher, October 4, 2007) with the "appropriately placed" advertisement (that can not be removed) when the story mentions "religious" and other objections to this "effort."

Here's the link: link to MarketWatch. Let me know if you have any success in removing the advertisement.

Here's the covered-up portion of the text:

Scientists believe stem cells, which have the potential to become any kind of cell in the body, may hold the keys for treating or even curing a number of diseases such as diabetes, cancer, Alzheimer's and Parkinson's. Many say stem cells derived from embryos offer the greatest benefit because they are the most malleable or "pluripotent."

The pursuit of embryonic-stem-cell research has been a political flashpoint in recent years. Some religious groups object to it, saying it destroys human life. Many medical experts say those embryos would otherwise be discarded by couples who decide to donate their extra embryos after they have successful in vitro fertilization.

President Bush twice vetoed legislation that would have allowed the use of federal funds for embryonic-stem-cell research. As a result, researchers have been restricted to using adult stem cells and a small number of existing embryonic-stem-cell lines, which many say has put them at an educational and competitive disadvantage.

Update Saturday October 6, 2007:

Carl Olson of Ignatius Press worked this story nicely into a recent post.

He [Christoph Cardinal Schönborn in his book Chance or Purpose? Creation, Evolution, and a Rational Faith (2007)] notes that "the alternative 'evolution or creationism' is too simplistic", that what is really at stake "behind the debate about creation and evolution" is "the great question, decisive for our future, of basic ethical guidelines capable of underpinning a high-technology civilization and its capabilities, which threaten our very existence. It is a matter of whether science can be combined with a sustainable responsibility for creation. For science, understood correctly, is a practical application of the first divine commandment to men: 'Subdue the earth.'" The truth of that remark is evident when considering stories such as this one out of California, which describes how that state's "stem cell research initiative" is being funded by billions of dollar's of public funds.

Tags: Stem Cells, MarketWatch, Kristen Grencher

Baseball 2007: wrap

Back in March I made my predictions for the 2007 Major League baseball season. Let's see how I did... 3 for 6! ...Much like a typical Ryan Howard night (or day) at the ballyard.

AL
East: Boston Red Sox
My pick: New York Yankees. I'm not disappointed in the least that I got this pick wrong! The Red Sox were in first place for the most consecutive days during a season in their history. Their lead dwindled quite a bit in September— we all expected the usual collapse— but the Sox were able to win their first division championship since 1995 with two games remaining on the regular season schedule.

Central: Cleveland Indians
My pick: Cleveland Indians. ...Yeah baby. I nailed this one! It's not a big surprise. They have been rebuilding smartly for the past few seasons. Their pitching staff that includes C.C. Sabathia (19-7 3.21), Fausto Carmona (19-8 3.06) and Joe Borowski (45 saves) was among the best in the majors this season.

West: Los Angeles Angels of Anaheim
My pick: Los Angeles Angels. ...Yeah baby. I nailed this one! Manager Mike Scioscia had the team play aggressive and his gambles paid off with a Western Division win.

NL
East: Philadelphia Phillies
My pick: New York Mets . Well. Well. Well. The Mets led their division by 7 games with 17 to play and completely collapsed! It was perhaps the biggest collapse in baseball history. The Phillies got hot, winning 13 of 17 late in the season and on the last day they pulled it out.

Central: Chicago Cubs
My pick: Chicago Cubs . ...Yeah baby. I nailed this one! I'm not a Cubs fan. However, I am really pleased that I got this one right. With Alfonso Soriano, Derrek Lee, Aramis Ramirez, Carlos Zambrano, Ted Lilly, the Cubs have simply all-around good roster. In addition, this season they got Kerry Wood back on the hill as a bonus!

West: Arizona Diamondbacks
My pick: Colorado Rockies . With a record of 89-73 the Rockies recorded a season of most wins in their club history. They won the NL Wild Card after beating San Diego (also 89-73) 9-8 in 13 innings in a one game playoff. I think that it can be said that my 2007 out-on-a-limb™ pick paid off, no? ...For the third straight year nonetheless.

Arizona, under manager Bob Melvin, turned around a 76-86 12-game-out-season from last year (2006) into a surprise 90-72 2007 season! OF/utility player Eric Byrnes should certainly be given serious consideration for comeback player of the year or something.

Now for the batting and pitching Triple Crown categories... (I also included runs scored, although it is not a Triple Crown category.)

AL
Batting: Magglio Ordonez, Detroit (.363)
Home Runs: Alex Rodriguez, New York (54)
RBI: Alex Rodriguez, New York (156)
Runs: Alex Rodriguez, New York (143)

Wins: Josh Beckett, Boston (20)
Strikeouts: Scott Kazmir, Tamps Bay (239)
ERA: John Lackey, Los Angeles (3.01)

NL
Batting: Matt Holliday, Colorado (.340)
Home Runs: Prince Fielder, Milwaukee (50)
RBI: Ryan Howard, Philadelphia (136)
Runs: Jimmy Rollins, Philadelphia (139)

Wins: Jake Peavy, San Diego (19)
Strikeouts: Jake Peavy, San Diego (240)
ERA: Jake Peavy, San Diego (2.54)

Now for my World Series™ prediction:
Colorado Rockies vs. New York Yankees

Related posts: Baseball 2005: wrap, Baseball 2006: wrap

Photo: Ryan Howard, September 25, 2007 (Rusty Kennedy/AP)
Tags: Boston Red Sox, Colorado Rockies