Monday, August 20, 2007

Did Bernanke See His Shadow?

The elusive Federal Reserve chair saw the shadow cast by the current lack of money in the economy. Eight hours later he saw markets finish sharply up, and it cut at the heart of what he wanted to happen.

Market movers immediately took into account the discount rate cut as a lower cost of doing business over the foreseeable future. Financial sector leaders jumped not because of better market conditions, but because of lower expenses.

To analyze the condition of the economy don't look at how the market moved; look at the why it moved. It moved because negative elements (expenses & interest) won't be as bad. Negative elements affect the economy no longer than the memory of the previous rates by the market movers.

Gains from Friday will be wiped out by Labor Day.

Wednesday, August 15, 2007

It's a Simple Game: You Throw and You Catch

“Okay team, back to the basics.” Have you ever failed and had a coach tell you to return to the basics? It’s a simple game: you throw and you catch. For investors it’s back to the basics. Look at the ratios; look for solid companies; look to hold stock like your grandparents (the grandparents that believed in stocks). Don’t do any funny investing or doubling down, no tactics or strategy, and not anticipating. Just buy and hold.

Wall Street Makes Money on Volatility
Would you take a .04% increase in the stock market everyday? What if the DJIA gained 5 points everyday, and the S&P 500 gained .56 points everyday?

This yearning for stability would would make most people doubt my ability, but a .04% daily gain would turn into a cool 15% in a year. The next question is why does the market not move smoothly?

It’s because investors are people. The collective Wall Street movers accelerate toward a particular strategy, and a particular outcome. Wall Street keeps up with the Jones more than the typical upper-class high school student. Numbers have to match / beat your compatriot’s numbers.

We (personal investors) don’t make money on volatility.

Derivatives & ETFs
To stay with our theme of “basics:” the farther we get from the company and people making money in a company, the harder it is to put value to a particular fund. ETFs are a derivative: their value is derived not from the value of a company, but by how people feel about the value of a group of companies.

Deal directly with stocks, or mutual funds whose value is directly related to stock. The farther removed from the people making money for the company, the more risk you introduce.

I’ve heard the term “sub-prime mortgages” for the cause of all types of events, even why it’s 105 degrees in the South this summer. However, sub-prime is not the problem. I’ll leave you with this:

The market conditions are like a house that has a gas leak. The house fills up with gas. Sub-prime mortgages are a spark. The house blows up, not as a result of the sub-prime mortgages, but because of the other conditions.

Sunday, August 12, 2007

The Infusion

How can the Federal Reserve prop up an industry for a 5% loss after a 25% gain over the past year? The Federal Reserve just helped extremely wealthy people in that work on the Street keep the dream of a bull market alive.

How can the Federal Reserve lower interest rates after it said that it wouldn't lower interest rates? The Fed controls interest rates not by attaching a number to lending, but by insuring the money supply is at the correct level needed to achieve a particular interest rate. They increased the money supply, which effectively lowered the interest rates.

Is the Fed worrried about inflation, really worried about inflation? The stock market is inflated, and the infusion of cash will further inflate the stock market.

Watch what the Fed does, not what the Fed says. The Fed is worried about the big time investors packing up their toys and going to other markets.

Stocks should rally for the next week.

The major question now is: has the market factored all credit worries into the value of their stocks? Look at the market since the first sign on Feburary 28th, I would say the market has some more factoring to do.

Monday, August 06, 2007

State of the Markets

The 500 lb gorilla in the room that few talk about is not tied to sub-prime mortgages or the financial sector fall-out, but the inflation in stock prices due to the amount of borrowed money used. If a particular stock is held by 30% borrowed money, then the stock price is 30% too high. Wall Street firms can borrow to purchase new stock based on the market value of other stocks they hold to a near 100% match.

These actions essentially give the Wall Street firms the ability to print money. One draw back to this manufacturing money: no actual value is placed back into the economy. It's like the movie Wall Street: the illusion of value becomes real. An illusion of a market capitalization becomes real, and others buy into the "profitability" of particular companies.

The valuation of companies should be substantially lower; 30% lower is not outside the ability of the market to correct. 6% has been lost in the DJIA since mid-July, and I suspect we have about 20% more to go.

As far as interest rates recovering the flailing market, lower rates would further drive down the value of the dollar and spur inflation in the economy. Side note: I am a proponent of a weaker dollar to boost U.S. manufacturing, but realize there is a fine balance between a low dollar and an easily purchased U.S. economy.

Wednesday, August 01, 2007



Master of Business Administration, Finance, University of Alabama at Birmingham, 2007 - 2009
Bachelor of Business Administration, Management, University of Montevallo, 2000 - 2004


GradesFirst, Director of Operations, June 2010 - Present

Harbert Management Corporation, Network Architect, 2008 - June 2010
  • Strategically increased the effectiveness of technology at a corporate level; managed projects for business process efficiency applications: CRM, Deal Flow, Change Management, and Document Creation
  • 400x increase in client traffic to customer facing portal integrated with CRM
  • Designed and Built SOA venture capital deal flow pipeline application
  • 4x increase in efficiency of accounting process using collaborative application
  • Automated change management for auditable changes to accounting systems
  • Instituted and trained users on collaborate intranet sites
Harbert Management Corporation, Internet Services Engineer, 2006 - 2007

Oxford City Board of Education, Business Education Teacher, 2004-2006
  • Developed skills to lead, speak, train, manage, and prioritize a diverse group of individuals
  • Created and managed training programs for students and teachers
  • Trained students and teachers to maximize impact of technology

    Organizational Knowledge
    • Ability to match people's potential with output by creating an environment for motivation
    • Collaboration and communication enhancement
    • Strategic design, design paths based on corporate mission
    • Organizational culture, recognition, modification, and leveraging for change
    Financial Management
    • Corporate Cash Flow Models
    • Budgeting, cost allocation analysis
    • Corporate and project IRR, NPV, and MIRR analysis
    • Value investment methods & philosophy

    Information Technology
    • Expert in Open Source Web Technologies: Ruby & Ruby on Rails 3 years; PHP 9 years; Linux, RHCT, Apache 9 years; Javascript 9 years; & jQuery 2 years
    • Expert in Open Source Databases: MySQL, PostgreSQL, SQLite3, CouchDB
    • Expert in Web Design: HTML, CSS, W3C Standards, HTTP protocol, Javascript, DOM
    • Project Management: Source Code Management, Collaborative Technologies, Test & Behavior Driven Development, & Agile Development Methods
    • Expert using Operating Systems: Linux, Windows, Mac OS X, Solaris
    • Expert using SQL & deriving Business Intelligence
    • 2011 University of Montevallo Junior Board
    • AKL Chapter advisor
    Speaking Engagements
    • 2011 Tech Mixer University - Growing the Next Crop of Web Developers
    • 2009 Tech Mixer University - Beginning Ruby on Rails