Jan

1

So another year has come to a close. It has been a mildly eventful year with the move to a more southerly location. We had the great truck caper of 2012 and all the attendant adventure of having everything you own stolen along with your moving fan. That resolved with the miraculous recovery by the praiseworthy North Carolina State Police and is now just another story to tell. As a side note I love the State of South Carolina. The low country area is one of the prettiest in the country but I hope I never have to drive it end to end three times in one day in a car with no air conditioning in July ever again. We have pretty much settled in here in Windermere with the gators and Mickey Mouse. As I write this it is approaching 70 degrees at mid-morning and I have little to complain about.

Moving here was the latest stage in a transition phase of my life that began at about three years ago. The years between 38 and 48 were a high speed romp through life with fast boats, horse tracks, Rush Street reviling, Manhattan misadventures and just a scotch fueled extravaganza. There are a lot of memories in there that I would not trade for anything and friendships I will have for the rest of my life but after a decade of it I was starting to lose a step. More Saturdays found me on the couch with a ball game and a cocktail than in the dock bars or hanging onto the side rails of Tic Tacs boat as he once again misjudged a wake. Like an aging fighter I could still go when the occasion called for it but it hurt more the day after.

Then I met Erin and the process moved along at a rapid clip. It is hard to justify going out when the person you most want to be with is at home. There is still plenty of adventuring and excitement but it is of a more personal nature. She is my best friend and partner and hanging out with her is my favorite activity of all. The move to Orlando has seen us settle into a pattern of life that is slower but even more rewarding on so many levels.

I do not want anyone to get the idea that I have grown up or anything silly like that. I have not gotten religion or fallen down the twelve steps. I may not have the Grouse distillery working a third shift anymore but there are several vineyards that have no doubt seen an uptick in their bottom line. We have sniffed out some of the cool funky little bars here in Florida including some dock joints and beach bars. Most evenings can find me on my little lanai with a wineglass and a cigarette in hand enjoying my palm trees. This is merely the latest and best chapter of the adventure I call life. If the kids would move to Florida sometime soon I would have everything a man could want out of life. Good wine, lots of laughter, good music, good books and someone to share it all with. Perfection.

Now onto other items of various levels of importance. It has been a strong sports year. The Orioles made the playoffs for the first time in 15 years. Navy had a winning season and took home the CIC trophy once again and Beat Army once again. The Ravens have some serious choices to make as the offseason looms but for the 5th straight year are in the playoffs and should be able to handle Indy and move to the next round. My newly adopted Florida Gators are in the Sugar Bowl and will be in the top 5 if they snuff Louisville on Tuesday. I still don’t give a shit about the NBA and the hockey strike means pretty much nothing to me. All in all a good year.

Baseball has had an interesting off season so far. As if life in the AL East is not bad enough the Blue Jays decided to out Yankee the Yankees and made some monster signings. They now have a savage lineup and strong pitching staff. This is going to be on exciting team to watch and a very tough one to beat. The Yankees look old, Boston got a little better with some key signings. Tampa Bay remains a consistently good team with an ignorant and absent fan base. So far Baltimore remains pretty much the same.

Although many are concerned about the lack of moves by the form office it may be the right thing to do. If Nolan Reimold can come back and play like he did before getting hurt we will have an awesome outfield. He hit for average and power and along with Jones and Markakis would form a solid outfield. Machado looks good at third and in addition to being occasionally Brooks like at the bag the kid can it and he is fast. Chris Davis needs to work on his position play but he is a solid bat. If JJ Hardy can get those 30 points back on his batting average we have a solid infield along with Weiters behind the plate. The hole is at second base. Brian Roberts is a mystery at this point and Andino is just adequate and lacks any pop in the bat. If there is any question about B-Rob we need to go get a second baseman with either power or speed to solidify the infield and improve the offense.

The pitching staff looks good to me. If we can bring back the same guys and the younger guys continue to improve the staff will be just fine. Dylan Bundy could break into the bigs full time this year and that would be another welcome young talented arm. I think we can ride this staff into the playoffs again.

We could use one big bat at DH. If we could get a 30+ homerun 100 RBI guy in the middle of the lineup we will be a tough team to face. The problem is that I really do not see anyone in the free agent ranks that looks like a decent fit. We will have to count on Buck to find a way to get some additional pop in the lineup. It’s a tough division and a tough league. On paper it’s the Angels and Blue jays but I like our chances of hanging around until the end of the year and maybe surprising someone.

I suppose I have to tackle politics before moving on and that means it is time for the children and overly sensitive types to leave the room. Dear Government: Please just do your job as defined. Provide a level playing field for commerce, provide for the common defense and leave me the **&* alone. The rest of this stuff is simply not your job. I do not need you to regulate my behavior and provide me with some ridiculous safety net or somehow try to make an unfair world magically fair. Dear ignorant liberal: Please quit trying to have the government solve the words problems. They cannot. Further I do not want your help or advice on living my life, raising my children or handling my financial affairs. I did not sign a social contract and you owe me nothing and I sure as heck do not think I owe you or anyone else one thing as a result of your birth. You take care of you and yours and I will do the same thing. Dear Ignorant intolerant social conservative: really? Shut the **** up. I do not care what you think of my sex life, what I do or do not do with my body or my religious views. Just shut you ignorant backwater mouth and keep your **** to yourself. If you want to sit there and believe all that ignorant stuff about people do so quietly. And quit blaming it on Jesus. If Jesus came back today he would most likely beat the ever loving crap out of your close minded hate filled selves. Above all please quit trying to legislate morality or perhaps best of all just quit voting.

It boils down to this. Quit looking for the government to solve your problems. Take personal responsibility and act as the invisible hand of the market to change society. Practice the golden rule and take care of those you love. Help where you can and don’t hurt if you can help it. Work hard, be thrifty and responsible and quit asking me to bail you out. I don’t care if you are a third generation welfare queen or large bank who made bad investments. You do not have a claim on my money so please just quit buying politicians with money or votes and leave me the heck alone. Please just leave me alone and I promise I will do the same for you. Quit ruining my world and my country in the name of fairness, for the children, to save the financial system or any other bs reason you can come up with.

Now onto markets. First off I have no idea what will happen in the stock market next year. Neither does anyone else. If anyone tells you they know what the stock market is going to do and asks you to invest based on their beliefs, stop, think and then beat the heck out of the charlatan. I know some super smart guys who use higher math and super computers and they can predict the market with a high degree of success. That is for the next few hours or maybe a day or two at most. Beyond that it’s all guessing and mental masturbation. Why so many people waste so much time and energy trying to predict the market direction remains one of the great mysteries of our time.

The truth is that if you look for safe and cheap stocks and buy during down moves you should just fine over time in the stock market. Quit chasing the popular names and focus on businesses that can be purchased at an attractive price. Prices will fluctuate daily but business and asset values more slowly. Read Graham, Whitman and Klarman and then act accordingly.

My list for the end of 2011 has done pretty well this year with an average return above 30%. I’ll take that. That doesn’t include the suggestion to buy small banks which was also a winning strategy for the past year with several takeovers and positive surprises. Lets hope we do as well with the suggestions for 2013.

Going into the year I find I am bullish on energy stocks. I am not oil expert but I see a few things. First to achieve energy independence and get the economy growing the administration is going to have to allow drilling, digging and fracking. They can pay lip service to the premature exploitation of renewables but the truth is we need oil gas and coal. Some doomsday types see oil going to $40. The Saudi oil minister is the most accurate indicator of oil prices I have found and he is pretty comfortable with the current price. I do not see prices going much lower for very long.

There my bullshit macro case for oil, gas and coal. The real reason I like the space is because so many of the stocks are cheap. Arch Coal (ACI) is trading at 60% of tangible book value. Nabors is at 70% of TBV. Swift Energy (SFY) is at 60%. Penn Virginia (PVA) is at 30%. Rowan is at 80%. Tesco (TESO) trades for TBV and has enormous upside in the oil services sector. I like the energy sector because it is cheap.

I like staffing as well. I have done okay with Kelly services so far but its still at 90% of tangible book value. One of my favorite picks in Volt Information Sciences (VISI), a provider of technical staffing to many fortune 500 companies. I do not have time to get into the nuts and bolts of this special situation but it is an uber cheap stock with several catalysts. I don’t like these stocks because I think jobs and the economy will come roaring back. I like them because they are cheap.

I like the banks again this year. I even like some foreign banks again. I have a good profit in Bank of Ireland (IRE) but I still like the stock. Its at 40% of TBV and Wilbur Ross is on the board. The stock goes a lot higher over the next decade. I am looking at Latin American banks, especially Brazil but haven’t pulled any triggers there yet. The closest I have so far are Popular (BPOP) and First Bancorp (FBR) out of Puerto Rico. They are longshots but could easily rise many multiples of the current quote over the next few years.

I am not giving up the little banks I like as I see no need to create competition for myself in these thinly traded gems. If you really want to know make cash offer and I may discuss them with you. Of the larger community and regionals I like KEY, BERK, WFD,AF, CBF,CFNB, ESSA, ASBB, CPF,FFNW, and several others I will mention from time to time during 2013. Watch this space.

A few things to keep in mind. I do not buy up tapes. You improve your odds of success dramatically by buying fear and selling greed. Markets Fluctuate. Make that work for you. I stay small, move slow and scale in and out of stocks most of the time. Insider buying is hugely predictive. I have done a lot of work on this during the past year and found it be a powerful addition to the arsenal. I own stocks for a long time so if you are looking for three month holding you are probably best following someone else.

So 2012 is coming to a close. In 2013 I hope to move ahead with a few projects, increase my money management practice, maybe introduce a newsletter or web based project, and perhaps write a book. On the business side of things my goals are modest as I do not have any wish to be the biggest or the famous but to succeed and prosper enough to have a good life for me and mine.

There are far more important things to focus on in this life. In 2013 I will kiss my wife often and tell her I love her every day. I will try not to give her too many reasons to kill me in my sleep during the year. I will talk to my adult kids often and agitate the living shot out of them until they move to Florida. I will continue to restrict my little ones access to electronic crap and make her do unpleasant stuff like homework and reading books. I will make sure she continues to love art and explores her talents in that area. I will do all the things she hates now so she can have all the things she loves later.

I will read a lot of books. I will drink a lot of wine. I will go to the beach more often. I will laugh a lot. I will make new friends where ever and whenever I can. I will avoid ignorant people. I will look for alligators every day. I will watch a lot of baseball games. I will go to more minor league games (I think there is a team called the Pelicans right down the road and I simply have to become a fan).I will listen to a lot of music. I will spend a lot of time on my lanai. I will find a swamp bar to go with the beach bars we have found. I will take a lot of naps. I will walk the dog a lot. I will do all the things I like with the people I love and together we will ride out any storms that my come our way during the year. I will try to emulate Ben Graham and do something generous, something creative and something foolish every day.

It’s a new year. A new chance to embrace life, to live, to learn, to grow, to love. Let’s make the most of it.


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