The Noble Pundit

Light Posting

Hope everyone had a good Fourth. I spent mine running around with the kids, which is why there were no posts yesterday. Today has more of the same planned, althought there will probably be some posts later tonight after I get them to settle down some.

Quick Links

The Fourth of July - an excellent essay by Thomas Sowell, well worth the read as we head into the Fourth.

Seven in 10 Are "Extremely" Proud to Be Americans This Independence Day - I'd like to talk to the other three.

Politician Arnie's right up there with the best of them - Looks like someone at the Guardian needs to do some homework. He naturalized, not a citizen by birth.

Thousands of Liberians March to U.S. Embassy, Pleading for American Forces to Restore Calm - as we go into the Fourth, our beacon stil shines out to those less fortunate. Kind of funny how we don't see them begging France to come rescue them.

Islam set direction of area man's life - and just in case you were starting to think that all Americans know how to handle their freedom responsibly.

Have a Happy Fourth and come back to visit.

More Foggy Thinking From Foggy Bottom

Stay away from the "family fight," that's the advice that Powell is giving for handling the Iranian situation.

Now I know that I had said a while back that we should let events in Iran unfold without military intervention. But there is no reason that we can't take advantage of a favorable situation when it presents itself.

Instability in Iran is our friend. We want it to be unstable; we want the clerics and thugs looking over their shoulders.

Khatami is an elected President like any good dictator. The clerics vetted him and eliminated his competition. The clerics basically appointed him. So why does Powell even entertain the thought that the Iranian President might make concessions to the protestors?

Part of it is because that's Powell's job. He is supposed to look for any and every opportunity to promote diplomacy. But part of it is because of a lack of clear thought at the lower levels of the State Department.

The State Department would probably not call a cow a cow if it might offend some bovine support group somewhere. There are so sensitive to political correctness that they seem to be afraid of the truth.

Iran is not a democracy. It is a theocracy that puts on airs of being a democracy. Their "democracy" is nothing more than a cheap sop to the Iranian people to try to manipulate them into believing that they are free, while tightly controlling their actual freedom.

I have no problem with Powell wanting to seek a diplomatic solution to the Iranian problem. That's his job and I expect him to do it.

However, he needs to understand that sometimes the diplomatic solution can be advanced by intervention on behalf of those we support.

Opportunity for intervention is fleeting, especially in today's high tech world. The recognize and respond cycle has gotten extremely short. We must be poised to take advantage of opportunities as they present themselves.

Powell needs to start looking for an opportunity to clear house at the lower levels of Foggy Bottom. The thinking down there just isn't too clear.

Got To Admire Him

I've been watching the story of Judge Moore, the Ten Commandments judge in Alabama, with growing interest. In his latest move he has decided to defy a federal appeals court order to remove the monument from an Alabama courthouse.

As I said in an earlier post, I believe that the appeals court decision is correct in a legal sense, but it's not good for the moral fabric of the nation.

But let's look a little deeper here. What is the real problem?

Is it the actual text of the Ten Commandments? If so, which one? I find it hard to believe that someone could possibly have a problem with "thou shalt not kill" or "thou shalt not steal."

The Ten Commandments aren't important because they are some special super secret Judeo-Christian bit of wisdom that no one else could ever possibly understand. No, the Ten Commandments are important because they are universal truths. They are the foundations of a civil society, of one based on laws.

So what is the problem with the monument in the courthouse?

I think that the major problem is that the words are carved into tablets, as in the Judeo-Christian tradition.

So remove the design of the tablets and leave the words. That would serve to leave the Commandments raised, but they would just be the words, not the symbols.

Perhaps around the periphery, along the recessed edges the judge could include universal wisdom from other philosophers, religions, or texts. Not major texts, but four or five word truths that apply to everyone regardless of color, creed, religion, or whatever. Then title the "new" monument "The Universal Truths" and let the ACLU try to kill it again.

I admire Judge Moore for standing up for his beliefs. And if he has another appeal planned, he should leave the monument as it is until all his legal options have been exhausted.

But if he finally loses, if he finally has to admit defeat, this suggestion would be a way for him to highlight the importance of the Commandments in our court system and our national moral character. He's absolutely correct in the need to educate more Americans about the values of the nation and I support him in that effort.

But as a judge, he should also respect the rule of law. If and when the game is up, he needs to either remove or modify the monument.

If it comes to that, I hope to be reading about his "diversity modifications." It would be a fair compromise, in my opinion.

A Timely Reminder

As we head in to the Fourth of July weekend, we find this reminder of just why it became "necessary for one people to dissolve the political bands which have connected them with another..."

Taxation without representation.

For 227 years now we've fought to maintain our independence. For 227 years we've told those who wanted to control us to take a hike. For 227 years we've been our own nation, solely responsible for our choices and their consequences.

And it needs to stay that way.

We need to tell the EU in no uncertain terms where to stick their accusations of "taxation unfairness." We need to remind the WTO that without the US, it is the functional trade equivalent of the League of Nations.

We fought, in part, to end taxation without representation. It would be a tragedy to let it happen ever again.

Investing Strategy - Part IV

Covered Calls and Protective Puts

Continuing the series on Investing Strategies, today I want to take a look at the covered call and the protective put. In my earlier Investing post on options I discussed the concept of the collar. The covered call and protective put are the two components that make up the collar. So what are they, how do they work, and why are they beneficial?

The covered call is the probably the most common type of option position taken in the market. To enter a covered call position, you must buy or own 100 shares of a stock and then you sell a call option - you give someone else the right, but not the obligation to buy your stock. If the call gets exercised you get to sell your stock for the strike price you accepted when you sold the option. If the call is not exercised, you get to keep the premium the call buyer paid and you keep the stock. That's why we sometimes described it as collecting rent on the stock. Covered calls work best in generally flat markets, as you can repeatedly "collect the rent" without ever having to sell the stock.

The protective put is a way of buying term investment insurance. Again you have to own a minimum of 100 shares of the stock. For as long as you own the put, you have insurance that in the event the stock price declines significantly, you can exercise your right (but not obligation) to sell the stock at the agreed upon strike price. It essentially sets a floor on how low the stock can go for you for a set period of time. And buying a protective put is very much like buying insurance - you pay the premium for the peace of mind that having a stock price floor brings.

Put together a covered call and a protective put and you have a collar, which essentially dictates what kind of value range your position will stay in. The call prevents it from going too high; the put protects it from going too low. Usually when entering into a collar, the proceeds from the sale of the call are used to finance the purchase of the puts, which means little to no money out of pocket for the trader.

Both of the strategies are about as safe as you can get while dabbling in the options market. As such they are the only options positions that the IRS has approved for use in IRA accounts.

Hedging a position against a sideways or down market is usually one the primary goals of every long-term investor. The covered call and protective put can both be excellent tools for furthering that goal.

Quick Links

OK, that last post got a little overly sarcastic. It must be time for bed. So without further ado (or snide remarks) here's tonight's quick links:

With Conservatives Like These On The Court, Who Needs A Liberal? - Marianne Jennings takes on Sandra Day O'Conner and isn't exactly kind.

High-Income Workers Protest Limits to Overtime Pay - Meanwhile, me being a low income worker, I protest my lack of enough pay which forces me to rely on occasional overtime to make ends meet.

Our Capitalist Economy, Our Socialist Government - But despite my lack of sufficient income, I still don't like socialism. I'm broke as of my own free will (and as each day passes I question my intelligence just a little more.....)

French to U.S.: Please love us - But I still don't have to beg for love. I know that you folks still love me (right???)

Common Sense Drowning Out Green Screamers - Know that stories about the alligators (of course you do). Ever wonder where they release most of the captured 'gators in Central Florida? Lake Jessup. The one that's just a few miles from the house and supposedly the most gator infested lake in the state.

Oh well. One more day of work left for this week.

Look At The Evil We Commit In Iraq

As part of an on-going public service that I try to provide on this site, I have been attempting to catalogue much of the evil that the US has wrought in both Afghanistan and Iraq. In today's segment we have a new listing from Accuracy In Media - Some Good News In Post-War Iraq.

So just how evil have we been? Well just look at what AIM is reporting:

Funding for the rebuilding of Iraq: it was estimated at $80-$100 billion of taxpayers money. So far, we've appropriated a mere $1.7 billion.

Schools: We awarded a contract for $62 million to rebuild Iraq's education system. They are installing new computers, buying new textbooks and new desks for the students. They are also looking at expanding education to girls.

And the list of evils goes on and on. It includes such terrible deeds as modernizing the airports and seaports. We have also put some pretty decent money into the health care system over there.

How can we continue to live with ourselves as we commit such heinous acts?

Naked Investing

As a former broker I got a good chuckle out of this post over at Electric Venom: Getting Bang For Your Buck.

Ah, for the good old days of the "go-go" market....

I'm Supposed To Feel Sorry, Why?

The more I keep reading about the .mp3/RIAA battle, the less I feel any compassion whatsoever for the RIAA and their goons.

Now it's still not right to illegally download .mp3s, I'm not condoning that. However, it's not as if the moneygrubbers are completely perfect either.

.mp3s have changed the way the music industry works. And as a result the RIAA has lost total control over the creation of anything musical in the US today. A small artist can now circumvent the RIAA, use the .mp3 format as a promotional tool and can probably end up making more money self-publishing than they would ever net out through the RIAA. Yeah, they don't get the MTV exposure, the instant celebrity status or the groupies from day one, but in the end they are better able to support themselves with a job they love.

And that scares the dickens out the RIAA. They don't want self-sufficient, intelligent, hard working musicians because those deviant musicians could prove that there is an alternative to the monopoly. The effect could ultimately be more damaging than a successful anti-trust suit. The RIAA wouldn't get broken up; it would cease to exist.

The author of the article is obviously a fairly frustrated musician with an axe to grind. And that's ok, he doesn't exactly go out of his way to hide the fact - you pretty much know exactly where he's coming from.

But he does bring up some excellent points about the inferior quality of today's "music." Much of it is a blatant rip-off of a 70s or 80s tune. Much of today's music does seem to be more focused on shock value than on any actual musical quality.

That's why I basically stopped buying CDs. Why waste $20 on an inferior product?

Want me to start buying again? Come out with something worth buying. Until then, I'll use my money to pay down bills or to buy books so that I can learn more about stuff I like.

Why?

Why are we "exploring all options" when it comes to sending troops to Liberia? What is our real interest over there?

I am a big believer in using military force to impose solutions, in most cases. But before we can do that, we have to have a clear understanding of the problem and a clear solution to it. So what is our problem in Liberia? What is our great national interest in putting our military in harm's way again?

Howard Dean tries to argue that it's humanitarian. But I'm not buying that. Especially not from him (who thinks that the Iraq war was not humanitarian despite the discovery of mass graves and executions in the days right before US forces entered Baghdad).

Iraq had a humanitarian crisis that could be solved by military force. A small group of men was brutally murdering thousands upon thousands of defenseless citizens. Some were being killed through government-induced famine. Some were dying because of a lack of adequate medical care. Many were flat out executed, often times in unspeakably horrible ways.

Liberia is not Iraq. Liberia is in a civil war. Armed combatants for both sides are killing civilians and each other. Removing Saddam virtually ended the insanity in Iraq; removing Charles Taylor will not achieve the same in Liberia. Liberia is not about Charles Taylor; it's about tribalistic slaughter.

You cannot impose a solution to a civil war with a mere 5000 peacekeepers. That's too much to ask, even of our soldiers. If you want to end the civil war, you need to send in a large number of troops or you end up like the French in the Ivory Coast - protecting a few special people while watching the slaughter continue around you.

But that still leaves the question of why go in the first place?

Dean argues that al-Qaeda is trading "conflict diamonds." OK, I'll accept that. But how do we know that it involves Liberia in anyway? How does taking over Liberia put a crimp in their operation? Give me some names, some cities in Liberia, some idea of how the system is working and why Liberia is so important to its success. Show me why we can't pressure the buyers of these illegal diamonds. I don't want a divulgence of sensitive information or means of collection - we should never jeopardize our safety like that - but I do want something more than a claim of a "credible report." Or is there something that makes Dean's "credible reports" more credible than Bush's?

Sending our men and women into conflict is never a decision that should be taken lightly. In the run up to Afghanistan and Iraq both there was a significant national debate about sending them. With Liberia, that's not true yet.

We still need to know what they will be fighting for. What is it that is worth our soldiers' lives?

That question needs to be better answered before we commit the first soldier.

Well, It's One Way To Cut Spending

So someone in Washington has finally woken up and has decided to enforce our national sovereignty. In a fit of brilliance they have decided to suspend military aid to certain nations that have not signed Article 98 exceptions with the US.

Some of the affected nations include: Brazil, Venezuela, Columbia and South Africa. Sure it's only $47 million, but why were we even giving these guys military assistance in the first place? What value did we get for our money?

And further, why did we exempt NATO and a few select allies? Do we really trust the French or Belgians to not abuse the ICC in a pique of non-relevance fury?

The ICC is a bad idea. Its lofty ideals will be turned on their head and it will be used as weapon by every two bit radical running around who doesn't like the leader du jour.

We can't stop the insanity of the ICC, but we can protect our citizens from it. It's refreshing to see our government actually looking out for the people for once.

A Pleasant Fiction

Every once in a while I like to pretend that I can actually write. Not commentate on world events or the voices in my head, but that I can actually create an interesting and creative work. Today was one of those days.

I probably won't do this very often, but I really kind of wanted to do it today. So I've put it in with an extended entry link so that those of you here only for my commentary and political/current event thoughts won't have to scroll through the whole thing.

In the meantime, I'm going to indulge my fantasy:

The Great White Light

This is essentially a rewrite of story that I wrote during my senior year of high school. Some things will have changed but not too much.

Jim sat quietly on his seat watching the trees whip past his window. The rhythmic pounding of the massive connecting rod along with the rapid-fire exhausts of the engine were slowly lulling him to sleep. The fog was ever so gently filling in between the trees giving the whole forest a quiet, almost serene, appearance. It looked like a Gil Reid painting as they made their way through the night on the Long Pond Branch.

Jim was a fireman. It was his responsibility to ensure that there was a nice even fire going in the firebox at all times. His job was much easier tonight than most nights - this engine was equipped with an automatic stoker. All Jim had to do was to occasionally take a look in the firebox and maybe place a heel of coal in the corner.

They were rolling along with a 40 car transfer run. Nothing real important or exciting. It was just a normal nighttime run.

Until they suddenly felt a jerk. Frank, the engineer, knew immediately what had happened.

"Get the spare knuckle ready there Jim. Think we just busted one," he said as he applied the brakes to bring the train to a halt.

Jim was less than thrilled. The cab of the engine was nice and warm. It was downright cold out there tonight.

As the engine crawled to a stop, Jim clamored down the ladder and dropped to the roadbed below. He immediately started to swear as he sensed the steepness of the grade he was on. They must have been further up the line than he thought. He knew from the shape of the roadbed that they were in the middle of the swamp along Long Pond. One wrong step or slip could send him tumbling down into the snake infested cold waters below.

Jim began to make his way back to broken knuckle. About 20 cars or so back, he found the conductor already there having come up from the caboose.

"Nice clean break," said the conductor. "Should be fairly easy to fix. I'm guessing we only lose 45 minutes to an hour gettin' this done."

"Well, let's get up to the front and get the spare down," sighed Jim.

And the two men began the walk back to the front of the train.

Jim was naturally a quiet man. He wasn't a man to engage in conversation just simply to hear someone talk. He liked being alone in his thoughts. He still harbored dreams of someone - anyone - recognizing his intelligence for what it was. But he also knew that it wasn't likely to happen. He was a fireman. That was his pigeonhole, his lot in life. And he had grown to accept it.

One of the things Jim had noticed on his walk back to the broken knuckle was how still everything was. The fog seemed to absorb everything. There was no sound, seemingly no life, anywhere around. It was almost a spooky stillness.

As Jim and the conductor began the walk back to the front of the train, Jim heard a foghorn. It was off in the distance and very faint to be sure, but it was distinctly a foghorn.

But then Jim started thinking. Other than Long Pond, there really wasn't any water around. Why a foghorn with no water?

"Did you hear that?" Jim asked.

"Hear what?" replied the conductor.

"The foghorn."

"I didn't hear no foghorn. Why would there be a foghorn around here? It ain't like there's any water around that could have a boat with a foghorn."

"Yeah, I know. Musta been imagining things."

But he knew that he had heard it. It just didn't make sense.

So he continued to walk in silence, thinking about mysterious foghorn. Where was it coming from? What was it?

He was so engrossed in thought that it startled him to feel a pressure against him. A vibration really. Like the kind comes from a truck going past outside your house. It's a sound, but one that you feel more than you hear. That was what grabbed Jim.

It was a deep sound. Very deep. And it was all around as it was nowhere around. It was on him as it was far away.

Jim's eyes started darting, looking for something, anything, to materialize between the trees. But all he could see, no matter how hard he looked, was the all-enveloping mist.

Suddenly, they were back at the engine. Almost immediately Jim relaxed and climbed up into the cab to grab the broomstick and the spare knuckle.

"You OK, man?" asked Frank.

"Uh, yeah. I think so. I musta been hearing things down there. Kinda got me worried a bit, ya' know?" replied Jim.

"Yeah, these woods at night can be pretty frightening sometimes. Take it easy man. There ain't nothing out there 'cept some trees, frogs and fog. Don't let it get to ya' You'll get hurt that way."

"I know, Frank. I know. Just got to clear my head, that's all."

And with that he passed the knuckle down to the conductor and climbed back down to the steep, rocky roadbed.

Suspending the spare knuckle in the middle of the broomstick, Jim and the conductor each lifted an end of the stick onto their shoulder and began the trek back, the conductor leading; Jim following.

As they started walking, Jim heard that lonely wail of the foghorn again.

"You hear that?!?" Jim yelled.

"Hear what?"

"That foghorn."

"There ain't no foghorn, man. None. Give it up already."

Jim started to feel a bit of panic welling up inside. What was that out there. He couldn't see anything. He willed himself to see something. Was that a man coming out of the woods? Or was it some kind of animal? What kind of monster could be coming out of those trees?

And then the pressure began again. That same vibratory pressure. Was it to the left? Or was it to his right? What's that behind me? It seemed to be getting louder, more intense. It was right there but he couldn't see anything.

And then he heard the foghorn again. Twice this time. It seemed to be a bit closer this time, but he still couldn't see anything. He kept looking, looking for anything. The panic was becoming intense. It just kept growing.

Then, that low sound suddenly sped up. Jim's head began to snap over to his right, over towards the woods when he suddenly lost his footing.

Down he went, right on down the roadbed, hitting his head several times. And as he lay there in the cold wetness of the swamp, he felt the ground begin to shake. The sounds were now incredibly loud, all around him. Whatever it was, it was about to take him. It was there and he felt himself slowly slipping into unconsciousness.

Just as he was about to completely lose it and go totally unconscious, his world lit up. It was the brightest light he had ever seen and it was coming towards him like a runaway freight train.

"God has come for me," was his last thought before Jim slipped into the slumber of unconsciousness.

As he slowly started to open his eyes, Jim noticed that everything around him was white. White was all that he could see in every direction.

"This must be heaven," he thought.

But then as his eyes began to focus, he realized that he was looking at ceiling tiles. He was in a white room, with a white ceiling, on a white bed, with a white floor.

"He's awake now," a voice called out.

Slowly Jim realized that he wasn't dead, he was in a hospital.

Frank walked in and took a look at his fireman.

"Man, you gave us a hell of a scare. We thought you were dead for sure."

"I thought so, too," Jim replied. "What was that out in the woods? Did anyone ever figure it out? I can't go back out there at night without knowing what that was."

"Well," said Frank. "Turns out that the Pennsy was testing some new fangled diesel engine over on their tracks. We had forgotten that they even had tracks over there. They almost never use them, so they figured that they were the ideal place to test 'em."

"So that growl?" Jim trailed off.

"That was the diesel engine."

"And the foghorn?"

"Their electric horn."

"But what about the light? I thought for sure that God had come to take me."

"Turns out you come down right where their track turns to head away from us again. It was coming straight at you, but then it turned off and went away."

"Oh, man. You have got to be kidding me."

"Nope, Jim. That's what it was. So, when you think you're going to be coming back to work?"

"I don't man. I don't know," he replied as he turned over to go back to sleep.

Quick Links

Events have conspired to prevent me from doing much blogging again tonight, so here are some of the articles I was looking at:

The Figures Which Show Europe's Gun Culture Rivals US - A few more guns than I thought, but they still don't "rival" the US. Misleading statistics, too.

Ala. Judge Loses Ten Commandments Appeal - I don't really like this as it takes a little bit further away from our founding ideals. Legally, it's a correct decision, but for the strength of the country - I'm not so sure.

White House Weighing US Military Mission to Liberia - I have yet to see a good reason why we should go to Liberia. As of right now, I'm not seeing the strategic reason for going there. Show me why we should go and I'll consider it. But right now it looks like we would simply be going over to save a nation from a civil war.

I'm taking the laptop to work tomorrow so that I can get some free thought blogging in so that I can just upload that stuff and I'll be able to concentrate my more normal blogging.

Hemingway, Meet BART

So Saturday night, we hung out in downtown San Francisco until fairly late - nearly midnight - before heading back out to our hotel in Walnut Creek. We, in a fit of environmental correctness (and convienence), were, of course, taking BART, the Bay Area Rapid Transit system.

As we went through one of the stops in Oakland (I think the first one as you come out of the tunnel under SF Bay), a gentleman got one the train. Heavyset, he was wearing a bright red T-shirt, jeans, a ball cap, and a pair of the Coke bottle glasses. In many ways he reminded me of the guy from the movie Office Space. He was also carrying his little cooler lunchbox. All in all, he looked like he was probably a dockworker, probably a very good one. He seemed like the kind of guy whom you could give direction to and walk away knowing he wouldn't stop until your job was finished. He also, and I don't know how to put this politely, seemed to have a few neurons that weren't quite firing right.

When I used to work in the model train store here, I met quite a few people like this guy. Some people would say that they don't know much, but let me tell you, for the stuff they know, they know it. And this guy knew BART, down to virtually every detail.

He may not have been able to utilize polished communication skills. He may not have been able to throw around big words like they were confetti. But, for someone with BART, this guy could be a wealth of information. He could pick up on details of the operation that no one else would even think to look at as potential problems. If only he could talk with the higher-ups at BART.........

Saturday night, he could. There was a BART supervisor on the train, sitting directly across from him.

Now I've been in the position of the BART supervisor; I've had many, many conversations with folks like the dockworker. Sometimes, when you're in the right frame of mind, it's a wonderful, informative conversation. Sometimes, you just can't get into it. When you can't get into it, it might end up feeling painful to listen to the person or you might find that you're talking down to them. Not intentionally, mind you. It just seems to happen.

The supervisor was quite obviously in the latter state of mind. He seemed to alternate between one word answers, "you should forward that to BART administration," and the occasional condescending remark. He didn't ignore the guy, but he never fully devoted his attention to the conversation. He was very polite and accommodating, but also fairly cold and disinterested.

I could completely empathize with the supervisor. He was supposed to be off work, on his way home, and here's this guy, again, talking to him at length about the length of the trains, bicycle policy, the number of out of service doors, where trains were turned, and a whole myriad of other issues. Frustration, interest, boredom, and an over-riding desire to be polite at all costs were driving the man.

As I sat there watching the conversation unfold, I was, for the first time, able to see the conversation from the point of view of the dockworker. Normally when I see these kind of conversations happening, I steer well clear, unless I'm in the frame of mind to join the talk. But this time was different, as I saw both sides of the conversation taking place, I found myself almost hurting for the dockworker.

It brought back memories of Ernest Hemingway's A Clean Well Lighted Place. The dockworker was the old man. The supervisor was the young waiter and I found myself naturally falling into the role of the old waiter.

I found myself sympathizing with the situation of the dockworker. I found myself wanting to see him have a successful conversation. I found myself gaining a much deeper understanding of him.

The supervisor was perfectly polite. Yet I felt a pain at watching him slight the dockworker. I don't think he ever did it intentionally, but the coldness of some of the replies........

The train finally pulled into Rock Ridge, all of about four stations up the line, and the dockworker got off after a very friendly goodbye. I watched him walk along the platform, a little extra spring in his step, thinking that he had made a difference. For a guy getting home from work at midnight, he was extremely happy.

Then I turned in time to see the reaction of the supervisor. It was the sigh of relief that comes with the expulsion of any memory of the conversation. He turned to look out the windows on the other side and slumped in his seat, drained after a long day of work and what for him was obviously a difficult conversation.

It just didn't seem right; didn't seem fair. Here was the dockworker bounding down the steps in the bliss of making a difference, of being important to the world in some small way, at the same moment that his whole conversation, his whole attempt to contribute, was relegated to the dustbin of bad memories.

Now maybe I'm reading the supervisor wrong. Maybe I'm imposing some of my previous actions on to him unfairly. Maybe he went into work on Monday or today and took some bit of information and used it as part of his attempt to make BART better. I really, really hope so.

As I got back to Walnut Creek and laid down to go to bed, I found myself lying there wide awake, thinking. Part of it was about the absolute stupidity that was happening back home at work (that's a story for another time), but mostly I was thinking about the interaction I had witnessed. I resolved to try harder to not be like the supervisor - even though he really did nothing wrong (if that makes sense!).

And I found myself in the role of the old waiter again:

...he would go home to his room. He would lie in the bed and finally, with daylight, he would go to sleep. After all, he said to himself, it's probably only insomnia. Many must have it.

Investing Strategy - Part III

Short Selling

Short selling is an interesting strategy to use. Essentially, it takes the idea of buy low-sell high and turns it on its head - sell high-buy low (in that order). It is certainly one of the most risky strategies that you can undertake in the market, as your upside is absolutely limited (the stock can only go to zero), while your risk is absolutely unlimited (just like the stock price itself). So how do you go about short selling and why would you want to do it in the first place?

Most investors are in the market to make money. Period. They don't really care all too much where it comes from so long as it goes into their account. As a consequence, they're constantly on the lookout for something that will allow them to make money in a down market, as well as an up market. Enter short selling.

With short selling, you are actually borrowing the stock from someone else and selling it, with the intention of buying it back at some point for less money than you sold it for. Pretty simple, huh? So why is it so risky?

First of all, you have to be able to borrow the stock, which is not always easy to do. On volatile stocks it is not uncommon for your broker to tell you that the stock isn't available. But that's not so bad. At least at that point you're not into a trade yet.

When you have found stock to borrow, if the original owner decides to sell the stock, your broker will have to work on finding some more shares to cover your position. If the broker cannot find more shares for you, you can get caught in what's known as a short squeeze. If that happens, you end up buying the stock back at the current market price whether the resulting trade is profitable for you or not.

Now even if you find the stock, and you don't get squeezed, you're still not out of the woods yet. In order for this strategy to be successful, the stock must go down in price. If it does not go down, you lose money, and it can go very, very quickly. The worst I ever saw was a fellow who managed to blow his entire account, plus another $250,000 beyond shorting Yahoo! on the way up. It was the only time in my brokerage career that I actually saw a firm take a client to arbitration to try to recover money for losses.

Think about that for a minute. He played the game and lost. He lost everything he had plus a quarter million. Buy a stock; you can never lose more than your original investment. Short a stock; you can lose everything and then some.

And that's not all. Remember, you borrowed the stock. The original owner is expecting to receive all the benefits of ownership. But you sold their stock. How do they continue to get things like dividends or stock splits?

Easy, you pay them. You short the stock, you pay the dividend. If it splits two for one, you get to buy back twice as many shares.

When the risks are acknowledged and understood and proper research has been done, shorting a stock can be a great tool for enhancing your returns in a down market.

The important thing to remember is to beware. Generally the risk is outsized in relation to the potential return. Make absolutely sure that you're comfortable with a short before you enter into it. And if the trade goes bad anyways, don't be afraid to cut your losses.

Maine, Canada, Kyoto

This was written twice somewhere between Atlanta and San Francisco. The worst feeling in the world is when the computer decides to reset just as you get ready to hit the save button on a masterpiece.

OK. Maine, Canada, and Kyoto.

Had a nice long, well thought out post written and then somehow lost it, so this one may be fairly short and to the point as I don't want to rewrite the same thing, again.

To recap, Maine and several other Northeastern states got together with their Canadian counterparts and devised an agreement to implement the Kyoto protocols in their region, despite the fact that the US Federal government is not a signatory to the treaty.

Bottom line, in my opinion, is that the law is good, but the agreement itself was unconstitutional.

First, the agreement. The Constitution clearly states that foreign policy and agreements with foreign nations will be the purview of the Federal government and that the States of forbidden from entering into transnational agreements. The agreement between the Northeastern states and the Canadian Provinces is an international agreement and as such it is illegal.

The Federal government needs to take the signatories to court to censure them and to defend the Constitutional separation of State and Federal rights, but also to get the agreement nullified. The last thing that we need is for some envirowacko to use this agreement in front of a sympathetic judge that's looking to create law from the bench. The risks of not nullifying the agreement are fairly substantial. The agreement was wrong and it needs to be declared as such fairly quickly.

But the law itself should be allowed to remain in force. If the State of Maine wants to be known for being unfriendly to business, that's their choice. If they want to have these onerous restrictions in place, that's fine. So long as they don't try to force them upon companies operations in states other than Maine, their fine. I think that the law is not really all too bright, but if that's what the people of Maine want, who am I to say that they're wrong?

Now I'm sure that someone is probably wondering how I can condone the law when the agreement that brought it about was itself unconstitutional. I actually believe that the law was probably being considered before the meetings with the Canadians, and it is not unconstitutional for a state to decide to implement the terms of an unsigned treaty, so long as they don't sign the treaty itself. It's a fine line, but I am not convinced that Maine wouldn't have passed this law even without the agreement with the Canadians. Unless the Feds can convince a court otherwise, the law should be allowed to stand.

This is certainly not the most brilliant move that could have been made by Maine. Implementation of the most restrictive environmental laws this side of California is going to do some real damage to their economy.

But the people of Maine, the ones who actually have to live with the consequences of this lunacy, have recourse if they don't like the effects of the law.

They can vote out the folks who put the law in place.

And that will be the best condemnation that anyone can make against this kind of lawmaking.

I'm Back!

Sorry about the no posting over the weekend, we had some pretty packed days running around San Francisco and the East Bay. Most nights I wasn't getting to bed until after midnight-1 am PST. Combine that with the hassle of getting the laptop out and hooking it to a dialup line and that's why there were no posts.

But it's not that I didn't write anything, and I'll try to get them posted tonight. Over the next night or so I'll probably also have some personally-type posts along with some of my usual political stuff.