Investing the Big Picture

Smell Bad Make Money (originally appeared in March 26, 2007)

Pretty amazing. Early in the going this morning, the market was down about 12 points. I was closely watching UnitedHealth Care and Dell, and was ready to trade out of both, apparently none the worse for my UNH greediness on Friday, since UNH was now above where I had initially intended to sell.

At the time, the market was on an uptick, so I took a little breather. Straying away is not good. I don’t know how day traders do it. Actually, I do know. They don’t do it very well and it is incredibly stressful. Or so I think. Maybe they wear those astronaut diapers.

And so, about 20 minutes later I returned, only to find an additional 95 point drop. What happened? Where did this stink come from? I certainly smelled better thanks to a wonderful Proctor and Gamble product that is not allowed in carry-on bags, as per TSA directives. Personally, I think that if an individual fits the terrorist profile, if they are found in possession of any anti-deoderant, gel or otherwise, the working hypothesis must be that it is to be used for evil purposes and not for odor control.

Now the blame was being put on bad housing numbers. How is anyone surprised? That’s all that’s been in the news lately. High home inventories, sub-prime debacle, falling home prices. Once again, where is the news here? Of course, just a couple of days ago all of the homebuilders were up big. Does any of this make sense?

Not to me.

What does make sense is that, at best, this is a zero sum game. Never mind up and down volume statistics, never mind the direction of the indices at any moment in time. Someone either wins or loses. And even winners may be losers. All it takes is defining your terms. A winner can feel like a loser if he sells too early and could have gotten a higher price. That is also called “greed”. I think it’s one of those deadly sins.

But, I suppose that losers can consider themselves winners if they got out of a stock just in time, before it really tipped down. I don’t think “whew” is a deadly sin.

So the housing market is in the dumper. How exactly does that cause a $9 turnaround in Google? Google is constructing an empire, but not made of framing timber and drywall. There must be a connection somewhere, although I think I can find a connection to Kevin Bacon much faster than to homebuilding.

As far as Google goes, it turns out that some analyst has questioned their first quarter numbers. No one gets Google yet. It’s got an amazing network that continually is monetized, as more and more people enter into the cyber-world marketplace. I’m living proof. I pay Google. Szelhamos Rules has been posted more than 30,000 times in 1 week. Incredible ! I don’t know if that moves anyone to action, but you can’t say that they didn’t have the opportunity.

Everyone on Wall Street was upset with the upstarts at Google, since they chose not to give guidance. As with most everything else Google does, they’re ahead of the curve. What does Blackstone announce on Friday? This mega-billion private equity company is going private. And guess what? They’re not going to give guidance. Did anyone hear the outrage? No. Only the clamor to get in on what is perceived to be a good thing.

The brokerage houses made a sudden downturn, as well. At least I can understand that. Maybe.

Anecdotal evidence alternates between being worthless and prescient. But yesterday, when my younger son and I went cruising, in preparation for his road test, I had a rare opportunity to be a passenger. All I saw was endless evidence of home building. Each development bigger than the next. I’ve even started seeing the unheard of “4 car garage” popping up. And the Washington, DC area is supposed to be one of those bubble areas.

It seems that the surprise was a big error in projecting the number of new home sales by 15%. They must have involuntarily retired weathermen making those projections.

So why should Blackstone, Google and what will certainly be a growing list of other companies give guidance? How good are “projectionists”? Based on today’s housing numbers you know the answer to that. I’ve railed against “futurists” before. It just gets re-inforced each day. I still like my derivative play on futurists. Futures on futurist projections. Go short. Or am I repeating myself?

So the day wears on, and what happens. My greed is rewarded. Nothing better than re-inforcing bad behavior. In what can only be described as irony, I traded out of UNH, a healthcare company, for the Altria when issued shares. Don’t know Altria? Think Phillip Morris. Don’t know them? Think Marlboro Man. You remember him. He’s the guy with the artificial voicebox.

Ironic. No? Plus, chronic use of their product will also leave you with an odor. Once again, the same old dilemma, with apologies to James J. Cramer. Smell Bad Make Money.

At the close, Google has recouped everything. The Dow ended up right where I left it when cleanliness called. And once again, Apple and NYSE were really strong. Remember those deep in the money NYSE options? Too late, now.

I think that the ultimate lesson to be learned is “don’t exercise personal hygiene” when there’s a trade to be made. Any news can take us in any direction. But more importantly, I now believe that personal hygiene belongs in the deadly sins category. I’m certain that the person who will be sitting next to me on my flight this evening would rather that I missed a trade or two. But they probably don’t really understand what’s at risk. The same goes for a good smelling terrorist in the seat next to you.

To truly see the big picture you have to suspend some of your senses. Perhaps olfactory should be the first to go.