Half Sigma

Reverse commuters

For some reason, I am intrigued by this NY Times article about hedge fund employees who "reverse commute":

The center of power in finance has shifted in recent years, and in one sense that shift is geographical. Some of the most powerful traders in the market can be found miles away from Wall Street, in Greenwich, Stamford, and Westport, Conn.

“If you look up and down the train line in Connecticut you will see all the hedge funds concentrated right along the line,” said Thomas Torelli, a corporate real estate agent in Greenwich.

Those funds are there because their founders and top managers live nearby. But thousands of their employees do not and as result do what to the rest of Wall Street is a reverse commute.

(1) As usual, bosses get to do what's convenient for them and not what's convenient for their employees.

(2) Manhattan is such a great place that people will put up with a long reverse commute in order to live here.

(3) The hardest part of running a hedge fund is getting people to invest. After that it's easy money. Do hedge fund managers actually add any value to the economy?

Contrarian investing vs. value investing

Confused about the differences? Read my post about value investing vs. contrarian investing at my Contrarian Investing Blog.

Is Google the most overvalued stock?

This topic is addressed at my new Contrarian Investing Blog: Is Google the most overvalued stock?

Overpaid CEOs

Read about overpaid CEOs in my new Contrarian Investing Blog.

Big Mike's Contrarian Investing Blog

Big Mike's Wedding Blog was a complete failure, so I decided to recycle the url and use it for Big Mike's Contrarian Investing Blog.

So now there won't be any more investing posts at Half Sigma, you'll have to visit the investing blog. This blog will stick to politics and other miscellaneous non-investment related topics.

Buy LIZ

I recommend that you by Liz Claiborne (NYSE: LIZ). The most recent quote is $35.60. The low P/E ratio with consistently solid income year after year makes the company a decent but boring value stock.

But I am excited about LIZ's ownership of Juicy Couture which could be the next Big Brand.

No more student loans

I paid off all of my student loans yesterday. The burden has finally been lifted.

My advice is not to borrow money on such a bogus "investment" like education. If I had invested that money into the stock market instead, I'd be able to retire by now.

Buy OrthoLogic (OLGC)

I wrote a while back that I would write some useful posts. Today's useful post is a recommendation to buy OrthoLogic, ticker symbol OLGC. Right now it is trading at $4.19 per share.

I suspect that not a single person will buy any based on this blog post, but I will be able to refer back to it in the future to write that I told you all so.

I should mention that I used to work at OrthoLogic, but that was a long time ago when the company was a medical device company. Now it's a pure biotech company and I had nothing to do with any of the biotech stuff. I never even got to see the famous "rat lab." I have no current inside information about the company. 10% of my portfolio is currently invested in OLGC.

OrthoLogic's has completed a phase III clinical study on Chrysalin, a drug to be used to speed the healing of bone fractures. There are millions of fractures every year in the United States. It's a huge market, and the stock is severely undervalued with a market cap of approximately $160 million. OrthoLogic has a stockpile of approximately $80 million to continue funding its research. To find out more, view the webcast, but do it quickly becasue companies tend to take those things offline after a short perdiod of time.

Buy Harken Energy (HEC)

My most recent stock buy was Harken Energy (HEC). Fourteen percent of my portfolio is invested in HEC. While a lot of other oil and natural gas stocks are near all time highs, HEC has been lagging, despite the big turn around during the last two years. HEC could easily double from it's current price.

As I write this, HEC is trading at a bid of 0.62 and ask of 0.63.

Make money by reading my blog

Tired of reading blog posts where I complain about how stupid Bush was to nominate Harriet Miers, or where I reminisce about my former high school teachers?

A much better use for the blog is to give you my amazing insights that will help you make money. People who have heeded my bullish postings about oil and natural gas, which stretch back for two years, and invested their money in oil and natural gas stocks are now rejoicing at their good fortune instead of whining about how much money it's going to cost them to heat their home this winter.

So from this point forward, I'm going to write more about how you can profit from the idiocy around you.

My post important predictive post is From information economy to marketing economy. You need to read that post to understand where our economy is heading in the long run.

Now for the short run:

Nearly all of my money is still invested in oil and natural gas stocks, even though I am beginning to have doubts about the short run. In the long run, due to the coming peak of world oil production and the peak, which may have already been passed, of North American natural gas production, oil and natural gas stocks remain good investments. In the short run, the coming recession will take down the price of oil and natural gas and the stock prices along with it. The stupid people who don't see the future the way I do will say "see, the rise in oil and natural gas was just a temporary price spike and not any kind of long run thing" and they will sell. I will post to the blog when/if I bail out of oil and natural gas.

I remain bullish on gold, and I recommend Durban Roodeport Deep (DROOY) as the best gold stock investment, but not one without risk. DROOY is based in South Africa, a country beset with a great deal of political risk. I don't trust the government, and one day the people running the country will probably make some law that will totally destroy the investment value of South African corporations.

I am bearish on real estate. Do not buy a house right now. If you are lucky enough to own a house or condo, this is the time to sell, downsize, move into an apartment and wait out the coming collapse in residential real estate prices. Yes, this is incovenient and difficult, but who ever said that getting rich would be easy. You need to sacrifice now for the future. Unless you work in marketing, your job will be exported to China or India one day and you will need to live off your accumulated capital.

Why doctors are clueless about investing

Warren of Coyote Blog writes:

At Harvard Business School, I had a great investment management class with a professor who has schooled many of the best in the business. If an investment we were analyzing turned out to be a real dog, he would ask us "who do you sell this to?" and the class would shout "doctors!"

Doctors are clueless about investing because they know absolutely nothing about the world of business. They are not required to take any classes in accounting, finance, or economics, and then they work in a socialist sector of the economy.

Yet at the same time, doctors have huge egos. Part of it comes from making life and death decisions, and part of it comes from working at hospitals where everyone treats the doctors like they are superior beings. So they get it into their heads that they know everything, even everything about investing, when in reality they have no clue.

Stockbrokers love to have doctors as clients, especially the type of doctor who likes to think he’s a bigshot. The bigshot doctor feels like a real bigshot investor while the stockbroker churns away his account.

So when the author of Coyote Blog notes that he heard a dentist (even worse than a doctor) giving out residential real estate investing advice, this is a sure sign that we’re near the top of a housing bubble.

Why do people think stocks will beat Social Security?

Bryan Caplan writes:

Is the typical American brainy enough to beat Social Security? The answer is clearly yes. Buy bonds, stocks, managed funds, index funds, dart-throwing funds - whatever. They all beat Social Security in the medium- and long-run.

I don’t buy it. The ability of the government to make Social Security payments is based on the taxing power of the United States. Why should shares of corporations grow faster than the government’s taxing power? After all, a large part of the taxing power is based on taxing corporate income!

Merely looking at past performance of stocks is not a sufficient basis for saying that stocks will outperform Social Security. One of the basic mantras of investing is that past performance is no guarantee of future results.

The past performance was based on an elite few voluntarily buying stocks in a free market. We don't know what performance will be like if the government forces every citizen to invest in mutual funds and also decides what mutual funds they will be allowed to invest in.