In Search of the Perfect Investment

Good Friday update: Markets are closed. Hence no column today. But you should read this New York Times story on the report of the Senate Permanent Subcommittee on Investigations. The article is called “Masked by Gibberish, the Risks Run Amok.” And it begins

Can anyone manage a big bank these days? Should anyone try?

Or should we simply conclude that playing in the modern world of derivatives is best left to those whose survival is not critical to the nation’s economy, and who do not benefit from government-backed deposit insurance?

That question is brought to mind by a reading of the fascinating – well, to me, anyway – story of how JPMorgan Chase got into the mess of the London whale trades that dominated the financial news last year, as told in a report by the Senate Permanent Subcommittee on Investigations that was released last week.

Much of the attention has focused on what Jamie Dimon, the chief executive, knew and when he knew it, and the extent to which the bank intentionally deceived regulators and investors as the investment strategy was blowing up.

I, on the other hand, was struck by the sheer incompetence and stupidity documented in the report.

You can read the entire fascinating article here.

Now to a repeat of yesterday’s column:

I have no idea what to do about he medical business in general and Medicare specifically, which I’m on. The whole system is seriously out of control. I visit a doctor in Hudson, NY. He charges Medicare $129 for an outpatient visit. Which is fair. But then he has his hospital charge another $129 for the same outpatient visit.

Now, it so happens that the hospital listed on the bill is exactly two miles away, according to Google Maps. I never went near the hospital, yet my doctor billed as  though I did. I guess he’s affiliated in some way with the hospital.

I can stare at all this in genuine amazement. Or do something about it — what? The last time I called my doctor on an outrageous bill — $4,500 for one visit to my dermatologist, I was told “It was a mistake. It was the billing company’s mistake. Not to worry. You won’t be paying.”

This sort of outright theft in the medical business will bankrupt the country.

Meantime, maybe we ought to do what Cramer suggests: Buy Bristol Myers (BMY), Celgene (CELG), Biogen Idec (BIIB), and Gilead (GILD).

You’ll freak when you see their charts — parabolic up in recent months. You’ll freak when you see their P/Es — BMY (35.1), CELG (34.3),  BIIB (31.7) and GILD (29.1).  Wow!

If you play these, please keep ultra-tight stops. This stuff could turn on a dime. For now, money is pouring into the stockmarket.

Two good shorts:

I can’t see any redeeming value in these two stocks given the onslaught that’s called Amazon. Business Insider did a piece called “Ten Mind-Blowing Facts about Amazon.” One is “Amazon’s warehouses have more square footage than 700 Madison Square Gardens and could hold more water than 10,000 Olympic Pools.” Click here.

Amazon, by the way, is doing a far better job at getting positive PR than Apple. If you don’t believe me, here are “The 10 Biggest Mistakes Of Tim Cook’s Tenure As Apple CEO,” also from Business Insider. Click here. I am increasingly less impressed with Mr. Cook.

There are four lessons for us all in Cyprus:

1. Don’t be too brilliant. All those clever Russians with money in Cyprus would have been better off keeping their money in Moscow. That gives irony a whole new meaning..

2. Diversification still works. Having lots of eggs in one basket only works if you control the basket.

3. Financial crises blow up overnight. Nicholas Taleb is right. Black swan events are happening more often.

4. A little in cash saves aggravation. The poor people of Cyprus are restricted to withdrawing 300 miserable euros from their bank each day. Remember Harry’s Mattress Bank, no matter how little interest it pays.

Cyprus banks open today. But their stock exchange doesn’t. It’s closed indefinitely. It looks like a complete wipeout for anybody owning stocks listed on that ill-fated exchange. Might be a nice, cheap place to vacation this summer.

Weekend reading.

+ Cruel and Unusual Punishment: The Shame of Three Strikes Laws. While Wall Street crooks walk, thousands sit in California prisons for life over crimes as trivial as stealing socks. This is Matt Taibbi’s latest expose piece in Rolling Stone. Click here.

+ Marc Faber says “Not Even Gold Will Save You From What Is Coming” of course, it’s nonsense. But you ought to read it. Click here.

+ The Brilliant Life and Tragic Death of Aaron Swartz. He was a child prodigy, an Internet pioneer and an activist who refused to back down – even when the feds tried to break him. Click here.

I’m hooked on these things. You get them at Trader Joes.

They are heart clogging, but delicious:

Wonderful example for us all. This man was playing on the court next to me.

He’s taking a lesson, improving his game. He’s 96.

Another memorable one.
A construction worker accidentally cuts off one of his ears.

He calls out to a guy walking on the street below, “Hey, do you see my ear down there?”

The guy on the street picks up an ear, “Is this it?”

“No,” replies the construction worker, “mine had a pencil behind it.”

Impeccable logic of fishing.
A man was stopped by a game warden with two buckets of fish leaving a lake well known for its fishing.

The game warden asked the man, “Do you have a license to catch those fish?”

The man replied to the game warden, “No, sir. These are my pet fish.”

“Pet fish?” the warden replied.

“Yes, sir. Every night I take these here fish down to the lake and let them swim around for a while. I whistle and they jump back into their buckets, and I take em home.”

“That’s a bunch of hooey! Fish can’t do that!”

“Here, I’ll show you. It really works.”

“Okay, I’ve GOT to see this!” The game warden was curious now.

The man poured the fish in to the lake and stood and waited. After several minutes, the game warden turned to the man and said: “Well?”

“Well, What?” the man responded.

“When are you going to call them back?” the game warden prompted.

“Call who back?” the man asked.

“The FISH!”

“What fish?”

Harry Newton who will probably pick up some Bed Bath and Beyond (BBBY) today. I love shopping there. Better in many respects than Whole Foods (WFM) which I also own. I’ll also short Best Buy.

Have a great weekend. Exchanges are closed tomorrow. I’ll see you Monday.