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Thursday, April 24, 2008

The Irish, Caney Fork Rainbows, and ConocoPhilips

The Irish answer the phone:
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After having dug to a depth of 10 meters last year, Scottish scientists found traces of copper wire dating back 100 years and came to the conclusion that their ancestors already had a telephone network more than 100 years ago.
Not to be outdone by the Scots, in the weeks that followed, English scientists dug to a depth of 20 meters, and shortly after, headlines in the English newspapers read: "English archaeologists have found traces of 200 year old copper wire and have concluded that their ancestors already had an advanced high tech communications network a hundred years earlier than the Scots."
One week later, "the Kerryman" a southwest Irish newspaper, reported the following "After digging as deep as 30 meters in a peat bog near Tralee, self taught archaeologist Parry O'Droll reported that he found absolutely nothing, Paddy has therefore concluded that 300 years ago Ireland had already gone wireless."
(thanks art).

CANEY FORK FISHING REPORT:
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the caney fork was magical last week as the TVA shut down center hill dam from midnight to 1pm. i was out at dawn to fish the low water. the birds were singing, the squirrels were romancing, flocks of huge yellow butterflies were darting too & fro and the rainbows were jumpin out of the water! what a great spring day. i had taken my trusty 4wt winston fly-rod and just busted the shit out of the rainbows on a #18 zebra midge. i also caught two nice browns (17" and 16"). downstream, i noticed some vicious top water action. while heading that way, i looked down and saw a pod of real big shad...grey, with black stripes, about 6 inches long. i was thinking, man, that is some big shad! then, i noticed a group of 10 or 12 rainbows that were stalking them. one of the bows looked like a submarine! he was in about 14 inches of water! it was huge, and had shoulders like a georgia tech linebacker. i looked for a grey clouser, but wouldn't you know i left them at home. but, i did have an olive wooly bugger with me (the same one i caught a big bow on at spring creek, ARK last fall), tied it on, and boom! 3rd cast i had a very agressive strike and the fish took off downstream. there was nothing i could do buy raise the rod tip high and let him take out line, reel screaming! he finally went down in a big hole to rest, and i began bringin him in. he tried to wrap my line around some boulders, then an old tree stump, but i had spotted these obstacles earlier and defty (may i say with great experience) manuevered him away from these impediments. after about 8 minutes or so, i netted the beast! nice 17 or 18 inch rainbow and FAT. best of all, when i cleaned him for mom's birthday, i discovered that he had that nice orange salmon-like meat that is sooo, soo tasty! what a great day on the river! spring has sprung!!

CONOCO PHILIPS:

COP beats street estimates by $0.20, net income per share up 17%. full release is here:

http://biz.yahoo.com/bw/080424/20080424005628.html?.v=1

how does this stock not trade over $100/share this year??
has to.

Monday, April 7, 2008

The Merk Hard Currency Fund

A few years ago I began my email struggle with the US government and financial media (CNBC, Barron's, Business Week, etc. etc) with respect to my concerns about peak oil and its potential impact on the US economy and equity markets. I was for the most part ignored. Of the responses I did receive, my favorite was from Joe Kernen at CNBC who basically called me an idiot doomsayer. When I emailed Kernan back last year to remind him that I called $100/barrel 3 years earlier, he brushed me off saying it was all "speculation" and that we should be getting 2 barrels of oil for the current price. That was big progress for Joe - his new target ($50/barrel) was a doubling of his earlier call. Slowly but surely he's moving and I suspect he'll get to $100/barrel when oil trades at $200/barrel. But I digress.
The point is, I realized that the US government and media were in complete denial about peak oil. Combined with the Republican's idiotic fiscal, tax, foreign, and trade policies I could only come to one conclusion: the US dollar was heading down and inflation would be heading up. From an investor's point of view, I began looking for alternatives to US dollar investments for my "cash". CD's and US bonds would be dead money in the coming years. Think about it, a CD yielding 4%year while the US dollar drops 7%/year and real inflation is at least 5%, and you are losing 8%, and that's before taxes! Jeez.
I soon found out it was very difficult to find cost effective ways to invest in non-US dollar denominated cash instruments. What was needed was a way to buy Euro, Swiss, or Australian denominated CD's where one could get some yield and also get a kicker from a weak US dollar. I was surprised how hard such a simple strategy was to put in action.
The Prudent Global Income Fund [PSAFX] was one solution. PSAFX primarily invests in securities issued by major industrialized nations with sound economic and financial systems. It also invests in equity securities of companies that mine gold. The fund attempts to capitalize on currency fluctuations by investing in securities issued by governments whose currency the Adviser believes will appreciate in relative value. Performance wise, the fund was up 6.8% in turbulent Q1 2008, and was up 16.9% in the last 12 months, far outpacing the S&P 500's performance. Good action. This fund was a great way for me to hedge against weak US policy and US currency.
Another fund meeting the same objectives was the Merk Hard Currency Fund [MERKX]. I was really happy to find this fund as it too was exactly what I was looking for. It invests in a basket of hard currency denominated investments composed of high-quality, short-term money market instruments of countries pursuing sound monetary policy, and indirectly in gold. The fund invests indirectly in gold through ETFs, forward and futures contracts. Just what the doctor ordered. MERKX was up 7.0% for Q1 2008, and was up 20.3% in the last year. Again, far out-pacing the S&P 500.
So far so good, but I have a bone to pick with the MERK Hard Currency Fund. Early last year I noticed MERKX did not have a position in the Chinese yuan amongst its top-10 positions. I thought this was very odd. Renowned investor Jim Rogers was very bullish on China and moved his family to Singapore to be closer to the action. The Chinese economy was and is growing at a double-digit pace and governments around the world were clamoring for the Chinese government to allow their currency to float (strengthen). Even the Chinese themselves were making noise about the unsustainability of the huge US trade deficits and their own internal inflation rates. A bet on the Chinese yuan seemed like a no brainer to me. But I'm just an engineer, what do I know about economics?
So, I went to the MERK website and sent them an email with my suggestion they add the yuan to their top-10 holdings and rationalizing why this would their fund an even better performer. To my delight (and considerable shock), I got a response within minutes from non other than Axel Merk himself. Mr Merk is an extremely intelligent fellow, and any US investor would be well served by reading his insights on:

http://www.merkfund.com/

That said, Axel's response was somewhat disappointing. The yuan was not an "appropriate investment for the Hard Currency Fund" because the trading vehicles did not exist and another objection with respect to forward contracts of both a deliverable and non-deliverable type. Ok, I was over my head here...however, I wrote back and said something to the effect of "hey, come on Axel, there has to be a way to add the yuan to the fund - make it happen!" Well, it never did happen.
You can then imagine my great surprise when Merk recently announced the new "Merk Asian Currency Fund" including the Chinese yuan (!?). Hmmm.....if Axel could find a way to add the Chinese yuan to the new fund, how come he could not find a way to add the currency to the "old" Merk Hard Currency Fund? Of course I fired off another email and got a similar response to the first email with the added recommendation that I buy the new fund to diversify. My response was that I wanted the diversification in the MERKX fund that I already own! I may indeed buy some of the new Asian fund, but why can't I have the added diversity of the Chinese Yuan in my existing positions in the Merk Hard Currency Fund. After all, that is exactly the funds objective as you state on the MERK website!
Regardless, investors can make up their own minds. Both the Merk Hard Currency Fund and the Prudent Global Income Fund are good US dollar hedges. That said, there are those out there who believe the US dollar will strengthen once the Federal Reserve gets to the end of their interest rate cuts. It may well do that, with some foreign help (i.e. massive currency intervention). However, the fundamental weaknesses of the US economy, its extreme exposure to high oil prices, and the disastrous fiscal and tax policies put in place by the Bush administration require, in my opinion, an insurance policy. These two funds are just like a good neighbor.

Disclosure: I own long positions in both MERKX and PSAFX. The performance data mentioned in the article were obtained by the Wall Street Journal's recent Q1 2008 report, April 3, 2008.

Friday, April 4, 2008

An Energy Policy that Makes Cents (and Sense)

my latest "masterpiece". send the link to your friends if you have any ;)


click the link on the upper right corner of this webpage labelled "Fitz's Energy Policy". here's the link, but for some reason it is not clickable, probably because i am an html idiot. you may however copy and paste into your browser (i am *such* a hack).

http://seekingalpha.com/article/71150-an-energy-policy-that-makes-cents-and-sense?source=yahoo

Thursday, April 3, 2008

Rock Island State Park

in an effort to satisfy my springtime urge for catching and eating white bass, i headed over to Rock Island State Park south of Sparta, TN. it was rumoured to have a great white bass run and indeed the water looked most hospitable! i fished for an hour or so without so much as a bump and began to have doubts about my ability with a spinning reel (i have NO such doubts with a fly-rod). i eventually ran into a couple guys who told me that, although years ago Rock Island had an awesome springtime white bass run where they caught "hundreds and thousands" of white bass, the white bass run hasn't come off in years. it is "over". when i asked how and why would something like a white run with millions of fish could suddenly stop they had no answer. i will go to the crossville wildlife office and inquire further. i was really sad to learn about this.

the good news is, there are apparently lots of walleye and a decent crappie run which started last week. both guys i talked to had caught between 10-20 crappie on monday before the cool front passed through and "put em down". so, i fully intend to try again next week. the rule of thumb is that the crappie run starts with the redbuds and ends when the dogwoods bloom. we'll see. crappie and walleye are the only two fish i prefer to eat over and above white bass, so there is hope (as long as i can catch them!). it's also safe to eat fish from Rock Island State Park, which is basically Center Hill Reservoir fed by the Collins and Caney Fork Rivers which join forces directly above the dam which you pass entering the Park. according to the locals and friend JimB, the way to fish here is to take a big headed jig (1/4-3/8 oz) jig with a curly tail (white or chartreuse), through it out on the bottom, and jig it back. i tried this, lost about 10 jigs on the rocks, and expressed doubts to one old timer. he said, "if you're not losing alot of jigs on the rocks, you're not fishing deep enough. there's just not biting today is all, don't get discouraged." he certainly wasn't, and just shrugged off the lack of fish. easy for him to to...he caught 17 crappie on monday.

i did alot of exploring and took a few pictures including one bird that followed me for a half hour or so. i think he wondered if i could catch something. otherwise, he was content to stop fishing and merely stand in the sun to warm up. the old textile mill in one of the pictures dates to the civil war era.

i was surprised to meet a group of very friendly kayakers working the outflow of the generating plant. there are two or three kayak outfitters when one follows "powerhouse road" which i was lucky to find just cruising the area. also, the little market at the intersection prior to the Park is rumoured to have an excellent breakfast and coffee for a most reasonable price. it's also the best place to get a local fishing report.






Wednesday, April 2, 2008

Musket News and 15 minutes of Fame

I heard back from an expert at the Smithsonian Institution wrt the musket post:

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Dear Mike,

I received your letter and photos today and looked at the photos on your blog. I couldn’t make out the “REMINGTON” marks in the photos, but what you have is a side by side combination rifle/shotgun with Remington locks. Is Remington stamped anywhere on the barrels? It is actually a percussion piece, not a flintlock. A small copper cap containing mercury fulminate went on top of the nipple. When the hammer struck the cap, the exploding fulminate sent a flame through the nipple into the breech, setting off the powder.

Beginning in 1816 Remington primarily produced rifle barrels and later on branched out into importing, and then manufacturing, locks and other gun parts. Independent gunsmiths purchased parts from Remington and produced guns to their customers’ specifications. A piece like yours was particularly useful if a hunter was uncertain what type of game he would encounter. By 1848 Remington & Sons had the capability to produce any type of sporting arm, but were devoted to making Jenks Carbines for the Navy and Model 1841 Rifles for the Army. Most historians doubt they produced any sporting arms from 1848 until after the Civil War.

I believe your rifle/shotgun was made in the 1850s by a Mohawk Valley gunsmith using Remington parts. The patch box, what you termed the ball holder, resembles those produced by Remington at the time. The overall design is very similar to a piece produced by an unknown gunsmith, now in he Remington Firearms Museum in Ilion , NY .

Sincerely,

David Miller
Associate Curator
Military History & Diplomacy


further...another response to a question from me:

Mike,

Yes, a new cap is used every time the gun is fired. The percussion
system was invented about 1807 and was in general use by 1830. It was
faster and more reliable than the flintlock system and more resistant
to moisture. A vast majority of the firearms issued in the Civil War were
percussion pieces because metallic cartridges were still somewhat new
and not as standardized as military ammunition.

David Miller

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i also had my 15 minutes of fame (again). it doesn't rate with my OJ Simpson panel discussion on KEYE News in austin, but it is more recent:

http://seekingalpha.com/article/70656-energy-inflation-and-gold?source=yahoo

"seeking alpha" is a financial blog that gets posted regularly (daily) on yahoo finance, and i assume other financial services as well. could this finally be the break i need in order to become a larger voice for the education and solutions to peak oil?