Happy New Year

1 plus 1/2 ounce of good gin.

1 ounce of green creme de menthe

1 ounce of cream.

Shake with ice until the metal container is just too damn cold to hold onto any more.  Then poor into a tall cocktail glass.

The above is my newest creation to fight off the gloom of massive winter storms. Let it blow outside. Let it snow.  Let it it be miserable.  You'll have a delicious summer cocktail with the heater turned up to 80.  I'll be in sunny CA dong the same thing.

Happy New Year.

The Right Resources

Woodworkers and investors have to cull hundreds of articles to find experts.  I recently purchased a used Jet bandsaw.  It's in excellent condition for its age and the previous owner added all the features I wanted:  mobile base, Cool Blocks and fence.  It was always my intention to replace the high tension spring.  Well, trying to sift through the sales puff and the facts led me to The Source:  Iturra Design of Jacksonville Florida.

Louis Iturra is the owner and apparently shuns the web as he has no web site!  It's like almost 2011 and he operates like it's the 1970's.  I called and left a message requesting a catalog.  It took several weeks but when it arrived, what a surprise.  It's thorough covering every aspect of bandsaw maintenance.  It's technical but not incomprehensible.  It offers high quality parts at reasonable prices.

If you own a bandsaw or are looking to buy one, contact Mr. Iturra at KALL@comcast.net.  I'll be placing my first order for the high tension spring and four other parts next week.

Now, onto the resources for investing.  You would think that this would be easy given the number of web pages devoted to stocks.  But it isn't.  There are very few reliable resources that provide independent research.  I can recommend several:  Credit Suisse (offered through TD Ameritrade); Jeff Saut at Raymond James and Matthew Bradbard at wbwealth.com.

Today the markets sold off.  Because of the advice of both Mr. Saut and Mr. Bradbard, I placed trailing stops on my largest holdings.  Both were triggered allowing me to preserve gains of over 13% and 15%.

You Wouldn't Use a Bone Saw to....

I started this week's blog with a simple concept:  picking the right tool for the job.

Marshaling all my imagination I decided to analogize saws.  And to what extremes could I go?  That was easy: amputation in a surgical suite versus cutting framing lumber with a mitre saw.

I Googled "bone saw" and found a 1998 posting where a bone saw was being used to repair guitars!  So much for the first creative thought for the week!

But, the topic of picking the right tool for the job is still important.

For investing, you would think the job is much easier given the plethora of timely information on the internet.  But take a look at the price movements in two stocks, both significant in their respective markets:  Blackstone (BX) and Seadrill (SDRL).

I've been all over the web looking for new analysis on either. Zippo. Nothing.  The tool I need right now is one that tells me the enterprise or target values.  Both are in movements up yet I have no idea whether to buy, hold or sell.

So, much like using a framing hammer to tack carpet, I'm using Bollinger Bands to decide what to do. Need the right tool.

Disclosure:  Long both BX SDRL.

Mariage and Gas?

I watch the relationship between oil and natural gas.  It has traditionally replicated a marriage:  some ups and some downs but pretty much in touch with one another .  That just isn't the case today: it's a divorce.

On a BTU comparison, natural gas has never looked better as an alternative energy.  Yet, the price continues to collapse.  Why?  simply supply.

The divorce rate is somewhere between 50 and 55% for first time marriages and much higher for  multiple times around. Pessimism is deserved.  But does that keep somebody from getting married again?  Of course not. That's why the divorce rate is significantly higher for subsequent marriages.

And, investing in natural gas just may be the same.  It's one failed investment opportunity after another.

Too many crabs. Too many crabs. Too many crabs.  I'll stay on the sidelines.

Past Themes and Today's Performance

The Dow and S&P 500 rose about .51 and .61 respectively.  Our account rose .67 resulting in us outperforming both, 4 out of 5 days.  This trend will not continue. I sold about 1/3 of our position in oil resulting in a 13% profit.

Next week is anyone’s guess as is any other week.  Gold is clearly over-bought.  Our two diversified commodity holdings will suffer as gold is sold off.  If there is a correction, I will add to both positions. Our two week results in these positions is 5.19 and 7.37.  Both positions are very small and the returns insignificant relative to our portfolio.

Your account manager was Salieri, knowing that at his best, he could not equal the big boys. The noise around me all week was just too much and I couldn’t pull the trigger.  The crabs are still pulling me down.

Amadeus or Salieri?

The headboard awaits the purchase of fabric and installation.  In the interim, it sits in the living room, subject to review by friends, family and a few of my wife's clients.  It is amazing what they see:  some are overwhelmed by its size;  others appreciate the fine hand rubbed oil finish; while others see mortise and tenon joints with 1/64th of an inch gaps.  Their observations reflect whether they are big picture or detail oriented personalities.  I thought I would enjoy discussing the construction but analyzing how our guests visualize quality, promptly replaced any opportunity for bragging.

The equity markets turned in a rather unusual September, outperforming any other September in some 70 years.  Yet, observers on the cable programs and the web saw weakness.  Few spoke up during September or better yet August, to recommend risk.  Now, in the first week of October, the opinions range across the entire bell curve of human nature.

What do the observation of the headboard and the equity market have in common?  

A few of us will be Salieri, worrying about the details and conflicts, the timbre and rhythm, knowing that our headboards are the best they can be, and that at our best, there will be imperfect mortise joints, losses on good stocks and a few gains here and there.  

We will be, unfortunately,  paralyzed by mediocrity.

But if you are willing to risk the criticism of the masses, the crying of the dumb dumbs and the crabs in the bottom of the pot, maybe, just maybe, you can reach for excellence.

The moldings on the headboard are perfect.  Seriously perfect.  The Pytagorean Theorem tells me the diagonal is spot on.

The homework and diligence is beginning to produce decent investment results.  The balance between conserving cash (or notes) and scoring (pun intended) profits is euphoric.  

Reaching out and touching Amadeus, if every so slightly, is the prize.

Another Contrarian Point of View

Is it just me or is there a new trend toward "truthiness"?  Here is another op ed piece dispelling conventional wisdom.  It's well worth the read.

http://finance.yahoo.com/career-work/article/110775/time-to-stop-worshiping-small-businesses;_ylt=AhTimDExEUDetEMvOu01IJy7YWsA;_ylu=X3oDMTFmNGc0bjh2BHBvcwMzBHNlYwNleHBlcnRPcGluaW9uRHluYW1pYwRzbGsDbGV0c3N0b3B3b3Jz

Good Economic News

This is the most under read, least publicized good news story I've run across.  A "must read" for those os us who still believe intellect is more important than ideology.

http://seekingalpha.com/article/225164-the-budget-deficit-is-falling

I Just look Old

One thing most of us have in common is furniture.  And, for most of us, it's old.  It's from family members who are now collecting pensions;  it's from college and we've kept it around for memories of good times that we couldn't remember anyway, and; we mistakenly believe every piece was a Chippendale or Tiffany or of such great value it will propel us through our last years.

Nonsense. It's old crappy furniture. Get rid of it!

Two months ago I carefully placed my original iphone in the glove compartment and gently closed the door.  Unfortunately, the glass shattered.  I was not happy primarily because I'm cheap.  I researched replacing the glass and it simply wasn't worth it.  So, I did what I thought I would never do:  I taped it together.

Ever seen the old guy sitting in a diner with his glasses taped together and said "damn that just looks awful, I'll never do that"?  Well, I did it to an iphone.

My "daughter" and her friend-boy returned from a short vacation last night.  They were over at the house and we were discussing new eye glasses.  They were very sweet in convincing me that I needed to shed the old style glasses and get something more modern.  They basically called me "old furniture" and suggested I discard my taste in eye glasses!

In two weeks or so I'll be wearing some "Tom Ford" look a-likes for reading.  I'm still going to look well over 70, at least until they sponsor a face lift, hair replacement and new dentures.  But, I'll have those glasses!

I managed to find my all time favorite glasses.  I had them hidden for about ten years.  Very cool looking rimless.  Very classy. Matches all the wrinkles around my eyes. Covers the drooping eyelids.

Off to the repair store.  I'll teach those kids a lesson!  New lenses, some restorative work and I'll have them back in service.

So, I didn't throw out all of the old-I kept just one.  They'll make a nice contrast to the new ones.

There are some things worth keeping no matter how old they get:  ME!

Happy Birthday Mr. Investing Woodworker!

Rules, Regulations and Am I in Big Trouble! (again)

Several years ago I attended a family dinner with my in laws and their relatives.  We were in a lovely restaurant in a warm foreign country and I was on my very best behavior.  The check was about to arrive when I motioned to the waiter to give it to me.  My wife's cousins were given the check and my father-in-law gave me a lesson.

You see, in this Korean family, there are "regulations".  I almost violated one of those regulations by intercepting the dinner check.  Apparently, the custom is for the children of the person celebrating a special birthday, to pay.  This made no sense.  Their children are both working but hardly have the sort of discretionary money to just throw around.  Besides, even if they did, why shouldn't they spend it on a nice Chanel hand bag?

Last week we were in New York City to celebrate a wedding with the same family.  Sure enough, I discovered more new "regulations".  This time, I was kibitzing with a young person when my wife demanded I return to her. OBG, I had violated a regulation that I didn't even know existed!  Hell hath no fury like a .... Well you know what happened.

So, since I yearn to be accepted into my wife's family,  it is about time I codify mine.  First, for the investor:  Reg 1:  never act on a tip; Reg 2: Homework; Reg 3: There is no one single best approach to success; Reg 4:  Don't fight the Fed; Reg 5: sell your losers.

Well, I have at least 25 more  investing "regulations" that I self impose on myself every day.  But, this is not the place to bore you.

In the shop, "regulation" number one is always Safety.  Reg 2: measure twice, do it again and then cut once.

But here is my point:  regulations have to make sense.

They just can't be traditional and passed from generation to generation to be followed blindly-with one exception:  Thou Shalt Always Listen to She Who Must Be Obeyed, even when she is falling over drunk, screaming insults at cabbies and leaving DNA at the curb.

Of course, I wouldn't have the courage to write this unless I was sure nobody was reading it!  Hello, don't dare forward this to you know who!!!

Mr. K-thanks for a great time in NY!

Pleasure is Found Wherever

Have you ever so escaped reality that you couldn't hear Tina Turner singing Only The Best in the background?  Have you ever left the real world to awaken feeling so relaxed you had no idea the time of day?

It was worked to perfection.  Two mortises, one at the top, the other just at the waist.  It was smooth and sleek.  Her natural color is blonde but with age, will turn darker.

She wasn't alone.  Along side of her where her two friends of 4/4 cherry polished to a sheen with the most perfect tenons I've ever seen.  When together, they measured slightly over five feet tall and 76 inches across.  Before me rests the perfect headboard.  Sensual, sharp, rich with natural color waiting for the interior decorator to choose the fabric.

Damn, it's 6:30 pm and I've been in that garage all day long.  I have to return to reality.  Who turned off Tina? I must have Tina in the background if I'm expected to create!

Some days, even when you haven't finished everything, you just have to stand back and appreciate the zen like state you've achieved for the moment.  The reward for all your hard work can't be measured in the dollars in your account.  It has to be measured in the pleasure you bring others.

When the headboard is finished "she who must always be obeyed" (did you love Rumpole of the Bailey?) will give her all too understated blessing providing me with the sliver of gratitude I must call pleasure.  What else could a man ask for?

Photos of the headboard to follow next week, lacking the fabric.

The Crabs Keep Pulling me Down

As you may have noticed, I'm often amazed by how, as Einstein once said (loosely paraphrased), "we do the same thing but expect a different outcome".  It really is insane.

That brings me to an observation about the economy based upon the wisdom of my mother-in-law.  Her Korean ancestors taught her this:  why is it that when crabs are in a clay pot, the ones at the bottom always pull the one near the top down?

Is there something about human nature that simply abhors success?

The stock market fell today based upon nothing that was new: seriously, there was nothing.

Did anyone NOT think that the Fed would continue QE 2? Did anyone believe that global growth would exceed 3%?  Or that China could continue to report extraordinary results?

I continue to invest expecting a different outcome when the crabs on the bottom keep pulling me down.  I'm either insane for expecting something different or my crab pot roomies are just plain evil.

The key to success in this turmoil is to break the cycle through capitulation.  Once the bottom crabs realize that life can be better at the top, they will create ladders, leaving only a few behind.  The market volatility is temporal and necessary.  It creates time for others to learn.  I'm adapting and changing my expectations.

I visited my all time favorite lumber store, Austin Lumber in Santa Ana California.  It's a terrific store with several employees who have been there for 29 years!  They know what they are doing, always offer help and would never live in a clay pot.

I needed some 6/4 and 4/4 cherry.  Steve, their guru of wood supply, immediately brought a fork lift and lowered an entire pallet of stock for me to choose from.  Can you imagine a fellow investor doing that for you?  No way-they are too busy pulling you back into the pot!

Business was obviously slow for them.  Construction has dwindled to nearly nothing.  But of course, that shouldn't be news to anyone.  So, what did Austin do?  Nope, they didn't charge me retail-they gave me the contractor's discount!!!

Thanks Austin for lending me a helping hand out of the clay pot.

Just Keep Quiet and Squeeze the Damn trigger!

Noise is all about us this morning.  I just finished reading several essays published at  Seeking Alpha (www.seekingalpha.com) and the tug of words between the bulls and bears have reached the point of an Atlas Rocket upon take-off!  It's even worse than a 25,000 rpm router!

The steady hand of an investor or woodworker requires concentration.  It requires thoughtful analysis. And, it requires knowledge.  Our markets resemble a feeding trough with our cloven hoofed friends snarling at each other over the slightest morsel of new information.  The shop is so noisy from routers, planers and saws, that you can't even measure, let alone read your plan.

Here is the problem:  too much noise and not enough conviction to squeeze the trigger.

I've measured twice but I just can't bring myself to cut the damn wood.  I keep re-checking it because something just isn't right.  I'm feeling insecure.  OMG, I may make a mistake.  As a result, nothing gets accomplished.

I read the WSJ, SeekingAlpha, CNBC and MSNBC web sites.  The talking heads have me believing that I should liquidate this week before the S&P 500 falls to 900!  No, wait, I should be buying because the S&P 500 is going to break through the 1111 mark.., No, I should be in gold.  Well, what about the technology stocks?  Shouldn't I be in them since they will lead the markets?

Enough is enough.  You need to have a plan for the long term, not for day trading.  Wood costs money (why has a sheet of paint grade 3/4" plywood skyrocketed to $40 a sheet from $25 just a few years ago? Deflation-not at Home Depot!).  You can't afford to make a mistake.  Your portfolio represents your life plan and losses, especially those made later in life, can rarely be replaced.

Stick to your long term plan.  When you triage through all the noise and filter the stocks according to your goals, buy them.

Well, Sunday in the work shop was fun.  I completed another section of the counter and will start working on the next set of shelves.  I'd show pictures but the place is still a mess.  It drives me nuts.  However, it still looks better than my sister-in-laws kitchen or my much older sister's room!

A Good Time-Out

I'm excited about Sunday.  It's going to be my day to, hopefully, finish the new counter and some shelving in the wood shop.  If I complete it, I'll include some photos in my next posting.

I've acquired the Delta mortiser and a Jessem router table and lift.  Now I just need to find room for them!  I'm still in the market for a band saw.  My indecision is delaying the bathroom vanity project.  I could buy veneer faced plywood or possibly make my own veneer from the same hardwood I'm using for the door frames. Just can't decide which makes more sense.  But, I'm in no hurry since "she who always has to be obeyed" hasn't raised her voice.

Whereas investing requires decisiveness, woodworking offers the luxury of contemplation.

So, I'm off to contemplate.  Enjoy the weekend!

New Blog--Same Old

I confess the error.  My blog just wasn't set-up correctly.  So, I've reinvented the blog, importing the past musings.  Unfortunately, if you were following me, you will have to sign-up to follow all over agin.

Noble Corp (NE)

Part of doing your homework involves listening to a company's conference call. I find the questions, mostly from analysts employed by the major investment houses, to be the most important portion. They are a great indicator of perceived concerns and values. This morning I dredged out of bed early to listen to the Noble Corp (NE) conference call. Last night earnings were released and I expected somewhat of a sell off. Sure enough, NE opened lower, down about 2.4%. However, mid way through the call, the stock turned around. An hour before closing, it's up about 4%. What accounts for the spectacular turn around in an oil driller with exposure in the GOM?

Simple: the analyst asked several key questions and liked the company's responses. First, they asked how much would it cost to bring rigs up to the anticipated new regulations by our government. Answer: less than $10 million each-and probably in the several million range. Next, an analyst asked about their safety record. The response was exactly what Mr. Market needed to hear: their employees have the authority to stop any perceived unsafe practice regardless of the customer's order.

I always try to relate investing to woodworking and today is no different. Can you imagine NOT shutting off a woodworking tool when your hand could be exposed to amputation? Of course not! Here is a company telling its employees to take the same immediate action that you and I would take in our own shops. Now that is good common sense.

But the real common sense is found deeply buried in a comment by one of their executives:

"...the more you chew, the bigger it gets...."

Hasn't that happen to all of us. We start our project with what looks like a good plan. Suddenly, the deeper we get into it, the more complex it becomes. Our understanding of basic geometry is inadequate. We have to, heaven forbid, recall some trigonometry. The more we do the worse the project becomes. We finally admit we just bit off so much more than we can chew we give up.

"...the more I chew, the bigger it gets..." yep, that's it for today.

****I currently hold a long position in NE. Nothing I say should every be relied upon. Period. Make your own calls, do your own research and good luck!

Personal Energy

This coming week should be a humdinger. The fight between bulls and bears, the debates between inflation and deflation and the non-stop arguments between liberals and conservatives. My best advice: turn down the volume. Give people a chance to be heard.

With that, I'd like to suggest my idiom for the week: there are only two types of people: those who sap energy and those who create energy.

I'm going to spend time with my niece who turns 9. Can't wait to be around all those kids. Why? Well first, I have absolutely no responsibilities to watch or supervise them. That leaves me to soak up the sun and their energy! By the middle of the week, I'll be working in the wood shop, feeling like a 17 year old, creating a shop environment conducive to producing exactly want ever rocks my boat.

The morale: it's ok to absorb some energy of others if you are committed to multiplying it going forward!

Publishing Prices

Every morning I, like so many of my generation, have a routine. I get fresh water for the most perfect dog in the world; next, I give him his breakfast, and then; fresh coffee for me.

I place myself in front of the computer and click on Google News, then The Los Angeles Times and finally, The New York Times. This Sunday morning, all three had published an article on Aetna's decision to limit choices of physicians in the San Diego area. Aetna argues that the choices need to be limited due to costs. Sounds very much like the return to the days of old when the insurers pushed HMO plans. To me, not much has changed.

Note that this was NOT a government mandate. It was free enterprise trying to control costs by limiting consumer choices. This brings me to back to craigslist.org. and the stock market-nice segue?

I research stock prices every day. it's easy as every internet outlet publishes prices throughout the day, perhaps delayed by 20 minutes. My broker provides on time pricing. When I research prices for tools on Amazon or Criagslist, they do likewise. Prices change based on demand and supply, just like we were all brainwashed into believing they should!

But when was the last time medical providers published their prices and allowed consumers to choose? Other than for some cosmetic procedures (think dental veneers, face peeling etc.), I just don't recall seeing prices. I can't shop for my cholesterol test by price. Can't do it for my EKG or treadmill either.

I just have to believe that consumers, paying more and more out of their own pockets for every medical procedure, would make different choices if they could shop using the same rationale they use to consume other services and goods.

Why didn't Aetna negotiate with their network providers to publish all prices rather than limit choices?

Don't know.

Idiom of the Day

The difference between rich people and poor people: rich people EARN interest, poor people PAY interest.

Deflation-A Value Buyer's Delight

Another very busy week.

Following up on my earlier blog, I continue to seek value in stocks and tools. So, first to stocks: volatility has changed the very nature of our markets-price action with minimal volume over seven days. A tug of war between the bears and the bulls with trading within a range. But, few market leaders to provide any direction. So, the search for value continues. This week I looked at the two Hussman funds. Very interesting approach to protecting downside risk while still being able to participate in any upside potential. However, I'm remaining in the camp of keeping your powder dry.

Is deflation the real concern with the Fed? If it is, being in cash is the best play. Most commentators fear this scenario seemingly ignoring that productivity improves while prices fall. if you have cash, it buys more. If you have other assets, they depreciate.

This brings me to the search for additional tools at reasonable prices. The Delta mortiser sells close to $300 new. I find them on craigslist.org in excellent condition for about $185. Apparently, they are not selling. Today, I negotiated a price of $100. Now that is deflation!

When is it a Bargain?

I spent most of the day researching equities. I ran across a very interesting article on valuations. It's written by Simon Lack and does justice for the case of buying equities in the natural gas sector. His article can be found at: http://seekingalpha.com/article/213594.

I think his analysis is well balanced, weighing the factors for and against investing in just a few exploration and development companies (Southwestern Energy and PetroHawk). However, his most important contribution may be in his warning: "While timing is never easy..." Timing your purchases is nearly impossible.

There are two approaches I can recommend to assist you: First, if you are looking at growth stocks, follow the market, don't try to lead it. Wait for pullbacks in price when volume is low. Secondly, if you are contemplating value stocks, average your purchases on the way down. My rule is to NEVER average purchases of growth stocks on their way down-average them on their way up.

Interesting how valuations work. I've been following the asking prices for used woodworking tools on Craigslist.org. It's a great resource for computing depreciation of your equipment and weighing the value of purchasing new versus used. Just like researching stocks, it's always a question of price versus timing.

I found a Porter Cable 893 router, never used and in the original box (retail $275+-) for $160. Was it worth it to me to wait for a lower price or to purchase it immediately? I felt that is was a very high quality product with very old units selling for not much less. Did I try to pick the bottom? Of course not. Nobody can. I pulled the trigger and bought it because: 1) it has value to me at the purchase price and 2) it serves the intended purpose.

Buying either SWN or HK as an investments makes sense on a value basis at their current price. And, if the price falls, you can add to your position since there is value. However, if the intended purpose is immediate appreciation or income, they fail.

Whether buying a tool or a stock, better know both their real values and their intended purposes.

The lawyer in me needs to remind those who follow my blog that I am an amateur investor and not a registered investment advisor. Do your own research and seek the guidance of your own experts. There, the legalize has been posted.

Mortisers

image found at www.deltaportercable.com

What the heck is a mortiser? So, for those of you who don't know, it's a combination drill and press. The drill portion uses an auger drill bit while the 'press' portion pushes a four-sided chisel that squares the hole.

A series of square holes makes a "mortise." Without a specialized machine, it's a lot of drilling and manual squaring with a chisel.

It's time to pick a mortiser! First, should I get a floor standing model? What about a tilting mortiser? Maybe just a bench top model.

I'll be researching my options with the same intensity that I research stocks and bonds. The process of selecting equipment is very similar to the discipline we use for investments: homework homework homework.

Why The Investor WoodWorker?

I'm convinced that that America has become a land of mono-mindedness. We focus on just one issue, one game or one hobby and then swiftly become bored and move on to another.

What ever happened to the "renaissance" person? A person well versed in multiple endeavors reaping the joy of creativity with an eagle eye.

Well, if you love investing and wood working, you found your new home. No mono-mindness here.

A little background just to get started: I became an active investor in 1972. I've lost money and made some. I've survived recessions and market volatility, corruption in the market place and everything Mr. market can throw at me. I did it by following rules.

My woodworking hobby started in the early 1960s. I've made some simply dreadful and some incredibly beautiful projects. I did it by following rules.

So, to start, I'm going to disclose all sorts of rules to follow when investing or woodworking. You'll see how much they have in common:

Like making a plan before doing either;

Executing the plan by "measuring twice before cutting once";

Doing your homework;

Rewarding yourself even when the outcome is less than your expectation.

Over the next several weeks, I'll be posting photos and a discussion on refacing a bathroom vanity. I'll also follow the market and provide some insight. I'm lucky enough to be retired and live in California. I get the benefit of working the market between 6:30 AM and early afternoon and then working in the shop the balance of the time.

Idiom of the day: "pay yourself first."