Sunday, October 22, 2006

Decision of the Year

Yesterday I joined my family for a viewing of the latest Robin Williams movie, Man of the Year. It was quite entertaining but not necessarily his best piece of work. The movie reminded me to check on the latest 2006 election polls when I returned home.

Right now the Democrats are clearly ahead in the race for the House. As for the Senate it is too close to call. If you count Joe Lieberman as a Democrat (though I am not so sure he will be siding with the party that just abandoned him), we could be looking at a 50/50 split, which means a 51 - 50 Republican advantage as the Vice President (President of the Senate) will cast any swing vote according to the Constitution

My own political views aside – for full disclosure I consider myself a Reagan Republican – my concern with the elections are the impact on the financial markets. Nancy Pelosi and Charles Rangel will no doubt in my mind seek to turn back or eliminate the Bush era tax policies. In danger are the dividend exclusion, low capital gains tax rate and final elimination of the “death tax”. They will also push to raise taxes though increased marginal tax rates or through other means. A totally Democratic Congress would make those politicians’ ambitions an ever greater probability.

When I look at the economy and the financial markets, I am not concerned with the Federal Reserve Open Market Committee’s monetary policy or corporate earnings or the housing market or even the consumer. The one single concern that I have that would cause the biggest and most immediate blow to the economy and the financial markets is a Democratic majority in both the House and the Senate. I am not talking from my own political perspective but from economic realities and the psychology of the stock market.

If a Democratic party sweep become a reality, it would trigger an investor rush to the exits. As for the 2008 Presidential elections, don't get me started.

Wednesday, October 18, 2006

Back To The Future

I recently visited the offices of CTS Trend a real-time market data technical analysis services company located in New Providence, NJ. At Seton Hall University we run the CTS suite of technical analysis solutions: Net; ViewNet; ScanNet; and, TickNet. I highly recommend the CTS for both the technical based trader and the trader/investor who desires to add technical analysis to their arsenal of trading tools.

As it turns out I spent some time with CTS President and Founder, Dr. Frank Soong. CTS is an interesting enterprise. Not only does it develop and market the technical analysis products but Dr. Soong also manages money for some large banks using his own proprietary statistical based models. Here is how the day became interesting. Early in my career when I was at Morgan Stanley I worked under Nunzio Tartaglia and Gregg van Kipnis who together pioneered “Pairs Trading” and "Black Box" statistical arbitrage trading in the 1980s. From that group came David Shaw, founder of the highly successful DE Shaw hedge fund. While also at Morgan Stanley, I worked with the team of professionals who developed the global program trading business. As Dr. Soong began to describe his trading systems and ravel off some names of people who he has worked with or subscribe to his models, it was like a flashback my early days on Wall Street at Morgan Stanley. Dr. Soong did not know or know of Nunzio Tartaglia, the very gentlemen who broke ground for people such as Dr. Soong and David Shaw. After all of these years, it is quite heart warming to see that the legacy of these early pioneers lives on in a new generation of statistical arbitrage money managers.

Monday, October 09, 2006

Spamalot Was A Bargain - CSNY Was Scamalot

Recently my wife and I attended a Broadway presentation of Spamalot. Spamalot is a stage adaptation of the movie Monty Python and the Holy Grail with some bits thrown in from the movie Life of Brian and the original Monty Python's Flying Circus BBC television shows. It was delightful and I wholeheartedly recommend catching the show on Broadway, in London's Theatreland or on a road show. We sat in the orchestra in seats that cost $110 (plus the $1.25 facility fee) each. The show kept us entertained for 2 hours and as is the trademark of a successful Broadway musical, other members of the audience were heard singing or humming the tunes on the way out.

Let's contrast this with this summer's CSNY or Crosby (David), Stills (Stephen), Nash (Graham) and Young (Neil) Concert. Titled the Freedom of Speech '06 Tour which we caught this summer at SPAC (Saratoga Performing Arts Center). Let me be very clear, I am not here to discuss politics. Rather I want to discuss the poor value offered by this year's CSNY concert tour. For $176 per seat, we also sat in the orchestra for what I hoped would be an enjoyable 3 plus hour concert with some old college friends. To begin with, Stephen Stills should have stayed home. His voice was shot and frankly reminded me of the ballplayer who limps onto the field well past his prime. About 90 minutes of the concert was devoted to CSNY's politics and anti-Bush diatribes. To add insult to injury, they did not sing many of their classic tunes including, to my astonishment, Suite: Judy Blue Eyes. Anyone who paid the top dollar that CSNY was asking for this concert deserved to hear the group’s greatest hits and not a litany of political musings. If I wanted political commentary, I would turn on the television on Sunday mornings and listen to many political views for absolutely nothing. CSNY should be ashamed for charging exorbitant prices and not delivering a consummate product.

Monty Python's Spamalot or CSNY Scamalot. The choice is simple. We Won't Get Fooled Again (Sorry, that's The Who or what's left of them, who also toured this summer). As to CSNY, here's a message from Monthy Python and myself - Always Look on the Bright Side of Life. That's my Freedom of Speech.

Tuesday, October 03, 2006

McCarthyism comes to Major League Baseball

While I am appalled at the use of steroids in major league baseball (and all sports for that matter), the whole turn of events in the steroid investigations feel like a flashback to McCarthyism. Back in those dark days, if you were accused of being a communist you either gave up the names of other "communists" or were blacklisted. Now we are seeing the same type of activity when focused on steroid use in baseball. It all started with the Balco investigations. This led to retired baseball player Jose Conseco telling all in his book Juiced. In it Conseco points fingers at all of the "users" around him using spotty facts in the process. The intent besides selling books was to deflect attention away from Conseco to others such as Mark McGwire and Sammy Sosa. Now we get the accusatory finger from journeyman pitcher Jason Grimsley who (likely with the help of his defense attorneys) implicated sure-to-be Hall of Fame pitcher Roger Clemens and his close teammate Andy Pettitte. Grimsley's house was searched after he admitted to using human growth hormone (HGH). Grimsley then agreed to cooperate with investigators, no doubt agreeing to give up other names in exchange for his own freedom. Sounds to me like McCarthyism in the ballpark.

I hope this does not take away from the most joyous time of year for baseball fans - the playoffs and the fall classic, the World Series.

As for my picks this fall, here they go:


Detroit Tigers vs. New York Yankees - The Bengals had the best start in MLB under manager extraordinaire Jim Leyland. However, they also managed to stumble their way in the last half of the season losing the division title on the final day of the regular season after getting swept by the inept Kansas City Royals. The Yankees are too deep to fall victim in the best of five ALDS. Yanks in 4.

Oakland Athletics vs. Minnesota Twins - As bad as the Tigers were since the All-Star break, the Twins were one of the best teams (along with the Yankees) in the back half of the season. Oakland has a good pitching staff but their bats don't scare opposing pitchers. The veteran Frank Thomas is several years removed from his prime but could show flashes of his old self in a short series. Twinkies in 5.


Minnesota vs. NY Yankees - Both teams were hot in the second half of the season with the Yankees sporting the best record in baseball along with the cross town NL rival NY Mets. Hitting advantage goes to the Yankees. The starting pitching is even and a Johan Santana (Twins) match up with Chien-Ming Wang (Yanks) could occur twice and create some classic pitching duels. When it comes to hitting the Yankees are head and shoulders above the Twins. The Homer Dome in the Twin Cities could be a sandbox for the Yankee Hall of Fame lineup. Yanks in 6.


NY Mets vs. LA Dodgers - The Mets were the best team in the NL and the most consistent throughout the season. The Trolley Dodgers ended strong to capture the Wild Card. While the Mets will go without Pedro Martinez in this best of five round, I believe that the Metropolitans are still the better team without him. LA has a nice line-up of veterans players but the power in the Mets lineup will more than compensate for Martinez' absence. Willie Randolph will also out manage Grady "I Should Not Have Left Pedro Martinez In" Little. Amazins in 4.

St. Louis Cardinals vs. San Diego Padres - A very religious match up. The Pads sport the career saves leader Trevor Hoffman. That still does not make him the best reliever of all-time or at the current time for that matter. Despite the Cards late season swoon they still have the best hitter in the game, Albert Pujols. Pujols will make sure that Hoffman does not get to do his job. Red Birds in 4.


St. Louis Cardinals vs. New York Mets - In a 7 game series I believe that the starting pitching advantage swings to the Cardinals favor as: the Met's Martinez is out; Tom Glavine only has one start in his tired arm and his career in the post season is spotty at best; and, Steve Trachsel is unreliable. This leaves only the ageless El Duque to carry the starting pitching on his shoulders. The Mets bullpen will be tested. The Cards still have Pujols. I predict an upset with the Cards winning in 6.


St. Louis Cardinals vs. New York Yankees. A rematch of the 1964 World Series in which Bob Gibson led the Cards to a victory and was well documented by David Halberstam in October 1964. Starting pitching, bullpen, hitting, manager, coaching advantage all go to the Yankees. Sure the Cardinals have Pujols but the Yanks have perhaps the most potent lineup with Damon-Jeter-Abreu-Sheffield-Matsui-Rodriguez-Giambi-Posada-Cano. Not close but I will give the Cards a game. Yanks in 5.