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Mark L Schemper

Tuesday, October 21, 2008

For What It's Worth

I haven't written anything pertaining to investments for quite a while. Then again, I haven't written anything in a while. The purpose of this post is to serve as a mental note to myself. If someone else finds some value in it, consider it a bonus.

Today I allocated 50% of my IRA into equities. The balanced portfolio I maintained in this account was completely liquidated into 100% cash on the week of August 17, 2007, or 14 months ago. Outside of some dubious short-term directional bets and a profitable stint in gold, I've kept 100% of my retirement account in cash, until today. As you can see by the chart, I looked like a complete dolt on the week of October 12, 2007, and I was kicking myself at that time. Obviously, that feeling subsided shortly after.

I used to write posts about now-defunct subprime lenders being on sale given their cheap P/E ratios. That sentiment changed once the shit started hitting the fan in the summer of 2007. I started to reject the overly bullish calls of certain economists (read: Larry Kudlow and his ilk) who proclaimed the subprime lending problem would be limited to the subprime housing market. I saw their claims as spin/damage-control for the idiot President they so adore - they felt Bush was not getting the credit he deserved for the economic expansion - and far from objective analysis. I feared a credit crisis.

My projections differed from what actually played out; I feared a seizure in consumer credit due to careless lending via credit cards, resulting in a recession induced by a sudden drop in consumer spending. I had only been in this industry professionally for two years at this point, and my perspective was skewed toward consumer behavior because I'd been in the consumer market nearly my entire life (I started mowing lawns for money at Age Eight, yo). I didn't realize the extent of the Credit Default Swap market, I could have never predicted a situation where there would be - for a time - no bids in the commercial paper market, and I never thought I'd see negative yields in US government debt. Pure fear and panic. It turned out those unqualified home buyers weren't the only ones borrowing too much. Everyone had too much debt.

So I'm back in equities, half way, and my exposure is entirely in a consumer discretionary ETF. I'm unsure where the market is going from here, but I don't want to completely miss a turnaround. Then again, if another shoe drops - perhaps another exotic instrument like synthetic CDOs will become the next Boogie Man - I don't want to get killed. No one wants to get killed.

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Tuesday, January 23, 2007

State of the Union

Tonight's SOTU address was a nice reprieve from what I've come to expect from Bush over the past few years. I was especially pleased that he spared us that hubris-laden smirk we have endured in years past. I suppose some humility is in order when your juggernaut has been dismantled by the democratic process.

Yet his childlike stubbornness persists through his ill conceived plans for Iraq. Only 20% of Americans support his plan to boost troop levels, a figure less than even his paltry approval rating. During the segment of tonight's speech dedicated to the subject, not even his Joint Chiefs of Staff applauded him.

In the spirit of looking forward, please enjoy some snipets from a Bloomberg piece from yesterday (1/21/07). Regardless of how his legacy play out, he will never be a forgotten president.

Bush Iraq Plan May Be Last Chance to Avoid History's 'Dustbin'
2007-01-21 19:01 (New York)

By Catherine Dodge

In a Bloomberg/Los Angeles Times poll conducted Jan. 13-16, 49 percent of respondents said Bush will be remembered as a poor or below-average president, with 28 percent ranking him as average. Only 22 percent said Bush will be judged a success.

In January 1999, when President Bill Clinton was being tried in the U.S. Senate after his impeachment, 35 percent said he would be viewed as a poor or below-average leader, with 23 percent rating him average and 37 percent calling Clinton above average.

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[N]othing short of a turnaround in Iraq can rejuvenate his presidency, many analysts say.

"If the Iraq venture fails, so also will he fail in terms of the ranking of his administration," conservative commentator William F. Buckley said in a March interview. "There is nothing conceivable, in my judgment, that could rescue him if we proceed toward disaster in Iraq."

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"He'll be remembered for his eloquent speech in the immediate aftermath of Sept. 11," says Sean Wilentz, a Princeton University history professor. "He'll be remembered for rallying the country and the world behind him. He very quickly thereafter blew it."

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Erwin Hargrove, a retired political scientist at Vanderbilt University in Nashville, Tennessee ... predicts Bush will probably go down in history as "one of our worst presidents," his reputation dragged down by Iraq in much the same way that Vietnam consumed Lyndon B. Johnson's. But unlike Johnson, who is credited with the Great Society web of social-welfare programs and for advancing civil rights, Bush, Hargrove says, "has nothing to counter-balance Iraq."

While a 2004 poll of 415 presidential scholars conducted by George Mason University in Fairfax, Virginia, found 81 percent deemed Bush's presidency a failure, several scholars say things might have turned out differently but for Iraq.

Wilentz says the invasion squandered an opportunity to unite the nation behind a concerted anti-terror strategy focusing on the pursuit of al-Qaeda. Hargrove says that "if Bush had decided to govern from the center, fight in Afghanistan and not Iraq, and reform Medicare and Social Security, he could have been a highly successful president."

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