CONTROLLED GREED.com

Controlled Greed Notes

Several random -- VERY random -- thoughts and whatnot from yours truly.

• Is it just me, or is Jim Rogers making the media rounds big time? Looks like he's promoting his book, which I thought had been out for a few months now. But I could be wrong about that. Anyway, here's the latest interview I've seen, found through LewRockwell.com.

• A couple of weeks ago, I linked to Larry Kudlow's interview with Jim Grant in a Five for the Weekend installment. Among the most enjoyable things was that Kudlow talked with Grant alone. I haven't caught Kudlow's CNBC show from some time now. Yet in times past when he had someone of note on -- Gary Shilling or Wilbur Ross, for example -- they'd share a roundtable with 4 or 5 others, most of whom I suspect weren't qualified to tie the men's shoelaces. Hopefully a new trend has been established.

• THE best thing going on American cable news (and there's not much) is Andrew Napolitano, judicial analyst on Fox News. Unfortunately, he doesn't have his own prime time show (he co-hosts a morning radio show) and appears sporadically, usually in the daytime.

• Even in these high-tech times, the simple treasures of old tech like AM radio can be a wonderful thing. When the sun goes down, I can often pick up Bloomberg radio out of New York City in these parts of Virginia -- both at home (when the computer is off) and especially in the car. The only bad thing about summer is the window of listening opportunity is shortened as the days grow longer.

• I've re-read Jeffrey Goldberg's article on firing his broker, linked to here the other day. Or I should say I re-read the parts about the Arizona survivalist and Seth Klarman. Really good stuff and I even chuckled again in some parts.

• This won't win me any points with that Arizona survivalist gentleman, but I had to break down and put my air conditioning on over the weekend. (I usually try to hold out until closer to Memorial Day.)

• Regarding Senator Arlen Specter of Pennsylvania switching parties. I assume all those complaining about Specter were equally critical of Senator Richard Shelby of Alabama, who switched the other way some years back?

That's it for now.

What Investors Can Learn From the Swine Flu

That's the subject of Tom Stevenson's Daily Telegraph column. He lists 6 items. Here's the first:

What's in a name? A rose may smell as sweet by any other name but the tag we hang on an illness can have real economic significance. The World Health Organisation plumped for swine flu because the virus involved is more porcine than avian or human. Sorry pigs. And sorry the pig-breeding and rearing industry. A number of countries have already slapped a ban on Mexican pork exports, despite the fact that the flu cannot be passed on through meat. Previous flu pandemics have adopted the name of their country of origin but here too mistakes are made – the Spanish flu of 1918-1919 apparently started in Scotland. Fortunately memories are short and, even if this outbreak comes to be known as Mexican flu, the tourists will be back soon enough.

Read the entire thing for the rest.

Breakingviews Looks at the Swine Flu

The swine flue comes at a time when the global economy is already unhealthy. Reading this entire consideration by Breakingviews.com is worthwhile.

Here's a part:

This time could be different. Even assuming the Mexican flu strain is no more deadly than SARS, it comes at a fragile moment. The financial crisis and resultant economic contraction is already taking heavy casualties on the businesses and economies most dependent on trade, transportation, tourism and lodging, which are most susceptible to the flu bug.

Moreover, governments everywhere are managerially challenged, what with bank bailouts and huge stimulus packages to fund. A severe flu epidemic would open a fourth or fifth front. One of the good things about SARS was that Asia, at least, learnt a lot about epidemic control. Hong Kong, for example, has passenger temperature sensors at its airport that can be used to screen for people who might be carriers of such bugs.

For the sake of the global economy – and the human race – this had better be a flu that can be easily contained.

Amen to that.

Dumping Aiful and Takefuji

On Friday I sold both of my Japanese consumer lenders -- Aiful (AIFLY/OTC) and Takefuji (8564/JP or TAKAF/OTC). Here are the dreadful facts:

I first bought Takefuji in April 2006, and subsequently added to my position twice for an average cost of $49.18. I sold the shares for $5.10 each -- a loss of 90% not factoring in dividends.

I bought Aiful's ADRs in June 2007 at $6.60. I sold them for 42 cents each -- a loss of 94% not counting dividends.

These have been terrible investments. And, to think, when I first bought Takefuji I told readers my worry was that it would be dead money for a very long time. Heck, dead money is preferable to permanent loss of capital any day.

And do you know what? Back in the day when I thought this sector had appeal, I ALMOST added a third Japanese consumer lender to my portfolio.

Anyway, I wanted to add the paltry proceeds of this sales to the portfolio's cash, which amounts to roughly 18% now. I try to make each new portfolio position a 4% to 5% holding, so I've got enough dough to make three nice-sized buys. I've got a list of candidates, so stay tuned for more stock picking adventures.

In the meantime, I've got a fair amount of egg to wash off of my face.

Five for the Weekend #38

It's going to get into the nineties this weekend in my neck of the woods. Time to turn on the AC and crank out another installment of Five for the Weekend. Let's roll.

• Reading Holman Jenkins' piece on General Motors this week gave me a few chuckles. Though as a former GM shareholder battered and bruised from losing money on it big time, I guess I could say it only hurts when I laugh. Writing about President Obama and one of his supporters in Nebraska: "He might consult with the Sage of Omaha, who has become a fan of the rail business. What would make Sir Warren similarly enthused about investing in GM? The answer, we're guessing, is not more cars like the Chevy Volt. The banks get all the attention, but they have the power to earn their way out of trouble. Not GM, the way things are going. St. Warren could do the king a real service by warning him off a path with Detroit that could end up blighting all the years of his reign." If Krugman can win a Nobel, why can't Jenkins get a Pulitzer?

• Matthew Lynn writes in The Spectator about the prospect of private security companies (mercenaries) being used to protect ships and crews against pirates. Regular Controlled Greed readers will recognize one name in the article: ArmorGroup. I used to own ArmorGroup stock until the company got bought out. I made a nice gain (just over 60%) -- but that's when I used to make money in stocks. Oh well. Anyway, I no longer have a dog in this hunt. But I said when owning ArmorGroup that PSC's have a role in the world, despite what World Savers and Do Gooders say.

• Speaking dangerous places, LonZim is the Zimbabwe investment arm of Lonrho PLC, another familiar name to regular readers (I don't own either). Two LonZim investors holding about 24% of the stock want the company to liquidate and distribute the proceeds to shareholders. LonZim management is, no surprise, against the idea.

• Diversity and asset allocation are topics we've been seeing more and more in this bear market. Personal finance isn't my thing (aside from the fact we all engage in it whether we want to or not) on this blog, but I respect Jane Bryant Quinn. Her Bloomberg column this week gives a thoughtful discussion on this area.

• News broke Friday that China's gold reserves have risen sharply -- news that will certainly have the gold bugs excited. Here's the Reuters report.

Have a great weekend. See you next week if not sooner.

Schloss, Klarman, Kahn and Glickenhaus

No, that's not the name of a law firm. But four investors worth reading -- or re-reading -- because they're among the best in history. And because they keep low profiles making their thoughts something to be cherished when we come across them.

Earlier this week Sivaram of the Can Turtles Fly? blog linked to old interviews with Walter Schloss and Seth Klarman through a blog he's come across. Both are great, and even though Schloss' is with Barron's from 1985, it remains well worth your time.

Sivaram's posting jogged my memory of an article from WSJ.com last week I meant to mention but forgot. It's about three investors who endured the Great Depression and are around today. They are 103-year-old Irving Kahn, and Walter Schloss and Seth Glickenhaus, both in their 90s.

Here's a bit from Schloss:

While he understands investors' hesitation today, Schloss doesn't think our current situation compares with the Depression. Back then, he says, the economy was dependent on only a handful of businesses, like banks, railroads, utilities and oil companies. Today economic growth comes from a much broader array of industries, many of them fueled by the huge gains in technological development we've seen over the past eight decades — including communications, biotechnology and the Internet. Sure, General Electric is still a powerhouse, but so are Google and Amgen. That means a much wider array of job possibilities — and more engines of growth for our economy. If investors today "were a little less emotional, they would see that this could be a good opportunity, so long as they move carefully and keep an eye on balance sheets," he says.

The article reports Schloss likes International Paper.

Bloomberg Reviews Jim Rogers' Latest Book

James Pressley of Bloomberg reviews Jim Rogers book, A Gift to My Children: A Father's Lessons for Life and Investing. Rogers seems to be in the press lots lately. Some because of the market turmoil, and I guess some to promote his book.

Anyway, the review is good reading. A bit:

Unlike Rogers’s previous books, this volume doesn’t dwell on his travel exploits or specific investing advice, though he throws in snatches of both. He recalls trips through war zones in Angola and Sudan, the time he was served snake for dinner (butchered before his eyes, yuck), and the day he bought a diamond from smugglers in Namibia. They said it was worth $70,000; he haggled the price down to $500. The gem turned out to be a glass bead. So much for all the years he has advised people “to invest only in what they know,” he says.

And this:

Much of his advice will resonate with parents. His daughters shouldn’t get married until they are at least 28 and should avoid having drinks -- let alone dinner -- alone with the boss. They should also heed this sound principle for dealing with boys: “They need you more than you need them.”

Rogers has lived -- and lives -- an interesting life. As anyone reading his globe-trekking books well knows.

Jim Rogers Sticking with the Two C's: China and Commodities

Barron's Online has an interview with Jim Rogers. Pretty much what we've been hearing from him, and, no, he's not buying the idea of a US recovery.

Sort of reminds me of listening to Gary Shilling's interview with Jim Puplava on Financial Sense this weekend -- where Shilling said he expects the S&P to fall another 30% (if I heard him right).

Back to Rogers. He buys commodities through the Rogers commodities indexes he developed, "because my lawyer won't let me buy individual commodities."

And he summarizes his bullishness on commodities this way:

It depends on the supply and demand. And we have had a dearth of supply. Nobody has invested in productive capacity for 25 or 30 years now. The inventories of food are the lowest they have been in 50 years and you have a shortage of farmers even right now because most farmers are old men because it has been such a horrible business for 30 years. And as for metals, nobody can get a loan to open a mine as you know. Who is going to give you money to open a zinc mine? It takes at least 10 years to open a mine so it's going to be 15 or 20 years before we see new mines come on. Nobody has been opening mines for 30 years and they are not going to. And in the meantime reserves are declining. As for oil, the International Energy Agency came out recently with a study showing that oil reserves worldwide were declining at the rate of 6% or 7% a year.

That does not mean that if suddenly the U.S. goes bankrupt that everything won't collapse in price. But I would rather be in commodities because it's the only thing I know where the fundamentals are improving. They are not improving for Citibank or General Motors but the supply situation in commodities is such that when demand comes back, then commodities are going to be the best place to be in my view.

There's more. So read it all if you can.

"Why I Fired My Broker"

Over the weekend I read a great piece by Jeffrey Goldberg in The Atlantic Online called, "Why I Fired My Broker." I caught myself chuckling a few times. And chuckling WITH Goldberg, not AT him. Because most everyone has been torched in this bear market.

It is a long article, so my advice is to print it out and read the entire thing.

You'll read Goldberg meeting a mix of characters, the most amusing being a "survivalist" in Arizona.

He also talks to folks including Bill Gross of Pimco and even Seth Klarman of Baupost:

Klarman went on, “Here’s how to know if you have the makeup to be an investor. How would you handle the following situation? Let’s say you own a Procter & Gamble in your portfolio and the stock price goes down by half. Do you like it better? If it falls in half, do you reinvest dividends? Do you take cash out of savings to buy more? If you have the confidence to do that, then you’re an investor. If you don’t, you’re not an investor, you’re a speculator, and you shouldn’t be in the stock market in the first place.”

Longtime readers know I believe the concept of having an emergency fund, in a savings or money market account. Separate from everything else. Most financial people say to make it worth three to six month's of your living expenses. I think it should be six months, unless the household had two full-time earners confident of remaining employed for the foreseeable future.

It's interesting that Klarman is quoted in the article as saying a person should have one or two YEARS worth of living expenses saved in cash. And he also stores water bottles in his basement.

Five for the Weekend #37

A whole week goes by with only one post. Probably the least amount of blogging I've done since starting Controlled Greed in April 2005. I've just been swamped with non-blogging projects (a welcome state of being in this economy). And then this week was tax day here in the US. But I've still got some items for your consideration between now and Monday. Let's go.

• I posted in last week's Five for the Weekend about Peter Cundill taking the Chairman Emeritus role at Mackenzie Cundill. Morningstar in Canada has more information about the changes, and if you're an admirer of Peter Cundill, you'll want to check it out. I came across Cundill (and Tim McElvaine) in 1991 and he's been among my very favorite value investors ever since. He's much more known north of the border, a fact he may or may not relish. I wonder if he'll set up a private investment entity, the way Michael Price set up MFP after leaving Mutual Series. We'll see.

• Sivaram at the Can Turtles Fly? blog links to an interview Jim Grant did with Larry Kudlow. I've posted about and linked to countless articles and columns concerning Grant. So there's nothing I can say right now except that like anything concerning Grant, it is worth your time.

• Speaking of interviews, Jim Rogers talks with BuinessWeek about how he's investing after the financial crisis set in (HT: LewRockwell.com). Rogers says he isn't big on diversification (and I think the term opens up a can of worms because one person's diversification is another person's concentration). I think Rogers is hugely interesting, ditto Marc Faber. But as I continually caution readers, I have never bought or sold anything based on their views.

• Peter Brimelow's new MarketWatch column sticks out because it references the current views of Dow Theory Letters' Richard Russell.

• Africa Confidential reports on Jacob Zuma's ascent to the Presidency in South Africa. He's an, well, interesting guy to say the least. My hunch is that how South Africa goes will shed light on how the rest of the subcontinent goes. At least in a big picture sort of way. Anything can happen from country to country, after all, and Africa is a big continent.

That's it for now. I'm hoping to be back in the saddle and posting more in the coming week. We shall see. Have a great weekend in the meantime.