Vegas, January 2011 Part III - The Victory Lap

Part I and Part II are readily available, if you've missed them.

By the time Dov and I woke up on Monday morning, the other 60% of our group in the adjoining room was gone - back to reality.  We rallied, packed up, and checked out, heading north to meet up with Big Show before our 3pm flights.

We banged out brunch at BLT Burger at Mirage, complete with milkshakes, and then hauled our bags across the street to the Venetian for a few hours of serious double deck blackjack.  The 65 degree sun was a refreshing change from the frigid weather I'd faced at home, and would soon face again.

I feel at home at the Venetian, as Big Show and I have given them most of our blackjack business over the past several years, on account of their face down double deck with player friendly rules (ie, double after split).  I mean, hey - you can't give away that 12 bps of edge!

Big Show, his wife, Dov and I monopolized a table and got down to business, grinding away.  Big Show ended up stuck quickly, and took out a marker for another buy in, as Dov tilted both of us by being super slow and deliberate with his "decisions."   I tilted the dealer by showing him an ace and offering him insurance, which he of course declined, adding "I never take insurance."  I shrugged, and tucked a blackjack facedown.  I was playing two hands, and found another blackjack in my second hand. I again offered him insurance, and again tucked the blackjack facedown.  I signaled to Big Show that I had a few winners, and sat back to await Chang's reaction after the hand as he turned up my blackjacks, which of course the player is supposed to turn faceup instantly.   I feigned a shocked look, while shouting BOOM and fist bumping Dov and Big Show, who was laughing hysterically.

Dov had an epic hand where he was stuck and steaming, holding 7-7 against a dealer 3, with a big bet out.  Dov split the 7's, stacking off another bet, poker style.  He was of course rewarded with another 7, and stacked out another bet.  He proceeded to double one of the hands after receiving a 3, and then split again to 4 hands after receiving another 7 on one of the initial hands.  He ended up with 4 hands, one of which was doubled, but which amounted to only an 18 and 3 pure bluffs - hands that could only win if the dealer busted. 

The dealer, who was Dov's doppleganger, rolled over his hole card: 3.  "YES!" I howled, and started hooting like an ape, "MONKEY MONKEY MONKEY"  The dealer slapped a deuce down, making 8.  "NOOOO!" We all shrieked, and stopped the monkey whooping.  Next card:  Three, for a total of eleven.  Dov sounded like he'd been shanked in the liver, as he let out a miserable wail, but the dealer quickly painted an ace on his 11, making 12. 

Dov screamed "ONE TIME!" and the dealer slow rolled the next card.... FOUR, for a total of 16.  I banged out the gorilla whoop at the top of my lungs,.  It sounded exactly like the gorilla at the 16 second mark (and 36 second mark) of this video, only much louder:

In slow motion, the dealer turned over a king for a miraculous 7 card 26. Dov erupted from his seat, flipping it backwards, and proceeded to take a victory lap around the double deck blackjack pit (right outside the Salon high rollers area), high stepping it in slow motion with his arms raised like Rocky at the top of the Philly Museum of Art steps.

Dov's victory lap was so awesome that a pit boss from an adjacent pit came over to check things out.  "When I see a victory lap, I have to find out what's going on," he told our pit boss.  Dov stacked up his winnings, and our time was up - we had to cash out and grab a cab to the airport.  Our cabbie was a wealth of information, including the details of the odd kitchenettes in the Cosmopolitan rooms.  As he put it, from the perspective of visitors:  "I'm on vacation - I don't want to fucking cook." 

Dov and I said goodbye at the airport and headed to our respective gates.  I had a better Southwest boarding number this time: B10, but again was on the wrong side of the trade.  Instead of locking up the "known," an aisle seat next to a couple who fit comfortably into their seats, I exhibited what I think is probably normal (yet flawed) psychology in terms of seat selection - I went further back in the plane and took an aisle seat in an empty row.  This makes perfect sense if you know that the flight isn't full, but we'd already been told that this was a full flight.  Doesn't it make more sense to take the known - a seat that looks like the middle-seatmate won't be a problem - instead of gambling for the unknown, where I'd basically be allowing someone else the option of choosing to sit next to me?  Come on smallll person! Anyway, I definitely lost the gamble when the largest guy on the plane, boarding near the end,  sheepishly sat down next to me, apologizing, "sorry, no choices left."  This dude passed out quickly, and we were a lot closer than what's normally comfortable, but the jetstream had our backs and the flight home was closer to 4 1/4 hours than the 5 1/2 hour flight out.

As we landed around 11:30pm, the captain announced: "Welcome to Manchester, New Hampshire, where the current weather is three degrees."  Three?  Oy vey - I groaned - not knowing that the next few weeks would see temps dip into the negative twenties.  I layered up, pulling my hat and fleece out of the outer pocket of my carry-on, and double timed it to the parking lot shuttle, which took me to my car without incident.  

Next trip - who knows when... 

-KD

Quote of the Day: Nemo on Obama on Egypt

"Somehow, if George Washington and Thomas Jefferson and John Adams etc. were alive today, I do not think their first concern would be restoring access to Facebook."

More here, from Nemo @ Self Evident.

EDIT:  related:  Josh Brown on how the bad guys can use Twitter too, quoting from the New York Times.

-KD

NFLX - the Widowmaker

Talk about a battleground stock.  Well, I guess NFLX hasn't really been much of a battleground lately, as the shorts got their heads caved in after Thursday's 16% gap higher on earnings.  Today's late action looks to me like basic market psychology in action.  (Click for chart) The stock was right at it's all-time high at the $210 level and as soon as it took out that barrier, late in the afternoon in an absolute massacre of a general market tape, there was a march higher for the final two hours, as shorts gave up.  I can almost see the shorts and longs sitting across from each other at a table, seeing who will blink first in the battle of "do you want to hold this position over the weekend?"  It wasn't much of a fight, of course, as you can see from the chart.  Nice little straight line up from 2pm to 4pm, closing at nearly $218.

I have no position in NFLX.  I think the stock is expensive, and I think it's going higher before it goes lower. I just found the price action over the last few days to be pretty interesting and telling from a psychological point of view.

-KD

ps - If anyone has a good, simple way for me to scrape the intraday chart and embed it here, don't hesitate to share it.  EDIT:  thanks to GYC for suggesting Freestockcharts.com

Vegas, January 2011 Part II: Living In The Sports Book

Part I is here, in case you're behind.

The crew rallied Saturday morning and we headed down to breakfast at Aria's 24 hour cafe - the same place I'd eaten less than 8 hours earlier.  The breakfast burrito was perfectly adequate, but Dov and JR put me on uber-Bajungi tilt by heading off to the spa for massages and steams and other absolutely ridiculous stuff that positively should not be done while you're in Vegas with your friends and the NFL games are starting. 

The California Kid, Blazer and I headed to the sports book and used our expertise to secure seats, including seats for our spa-going compatriots who would be arriving late.  Do my readers see what I'm up against?  Big Show had ditched me, stuck all the way on the other end of the strip with his wife, and I was hanging out with some Brobos (Brooklyn Bohemians! It's like a hipster, only gayer - not that there's anything wrong with that) who ditched Sportsbook Saturday in favor of the mother f'n SPA!  Fortunately, the Cali Kid (CK) was bringing it hard, and Blazer was testing his new sports betting service that he and a friend were developing.  Blazer's boy had a "model" for sports, and we christened him The Guru. Despite my warnings that it was impossible to beat sports betting, Guru's picks went something like 18-4 on Saturday - across NFL, NBA, and college hoops.  And I"m not exaggerating.

CK and I were down on the Ravens getting 3 1/2 points, and we had the game in the bag at halftime.   Dov arrived and treated the sports book to an extended version of the Ray Lewis signature dance, but that seemed to put the Kaibash on us.   Even after Joey Flacco came out in the second half and gave the game away, our bet was still looking like a couldn't lose, even after Baltimore had a punt return TD called back on what may have been the worst holding call in the history of professional football.  But still, even after that, we still couldn't lose, as the game was tied and the Steelers were driving for a game winning field goal, which would mean we'd win our bet.  Alternatively, the game would go to overtime and we'd be sitting pretty.  All we needed was for Baltimore no NOT give up a 60 yard bomb on third and 19.  But that's exactly what happened.  Bajungi tilt couldn't begin to describe the situation.

In the late game we all pounded the Green Bay - Atlanta OVER, which started off slow but then turned into a total layup.  Unfortunately, I also got down on the Falcons, and again on the Falcons in the second half, nullifying my winnings from the TOTAL bet.  The Aria sports book is beautiful, but they really run it like a profit center.  While most casinos give you a drink ticket for roughly every $50 in bets, and the waitresses also cut you some slack after a while, Aria wanted $150 in bets (actually, they wanted minimum $150 single bets!) per free drink ticket, and the waitresses had no leeway - I think they had to pay for the drinks as the picked them up, as they required drink tickets before hand, and returned with a printed out receipt for each drink.  Beers were about $7, and mixed drinks were in the neighborhood of $10.    I took it very slow, paying $10 for a liter of Fiji, while the California Kid made up for my slack by pounding a wide array of cocktails. 

After the games, we sought out some negative EV in the Aria pits, finding a double deck blackjack game to dominate.  Most poker players are familiar with the concept of table-side massage in the poker room, but Aria brought this concept to the casino pit!  Even at $2 a minute, when you're betting $50 a hand, how can you not get a 20 minute massage?  The masseuse was actually really good, too, lulling me into a coma as I dropped 6 units in the game before heading up to the room to change for dinner.

The Brobos had booked a foodie French dinner at Andre's in the Monte Carlo, which is adjacent to Aria, yet still a 25 minute walk.  I've written many times about the signature smell at the Venetian, which drives me crazy in a bad way, but Monte Carlo's signature smell was miles worse. It was like a heavily perfumed diaper powder or hand lotion.  It made my eyes sting.  Andre's was good food, highlighted by the waiter, who described every dish in a thick Spanish accent, "eeees AMAZING."  "Is there anything that's not amazing?"  I cracked, but withdrew the question quickly upon seeing his confusion.  After dinner we rejoined upstairs to a nice little cigar/whiskey bar for an aperitif, before making our way back out to the jungle that is the Aria casino floor.

I wandered by the poker room and saw a 1-2 half NL hold'em, half pot limit omaha game.  How could that be a bad idea at 3am?  I sat down and was sad to watch the two fish immediately get up, which left me, a not-so-fearsome player on my left, a rocky pro on my right and a Finnish PLO assassin two to my right.

"Do you guys want to just make it PLO?"  One of them suggested.  "Suuuuuure."  Why not?  I have never booked a winning session in this game (0 for 2), but it provides action at least.  "How about a mandatory $5 straddle?"  the other suggested.

I laughed. Sure. No problem. I managed to get stacked within 40 minutes, after I got all in on the flop with a flush draw and a straight wrap - and was drawing DEAD!  That's actually somewhat tough to do in 4 handed PLO, probably, and it went like this:  I had 2-3-4-6 double suited (spades/hearts) on a flop of 5-7-9 with two spades.  I had the 6-2 of spades, led out, and called a pot-sized reraise that put me all in, explaining "Maybe I"ll get lucky."  My opponent had 6-8 with bigger spades.  Nice hand sir!  I headed up to bed to regroup.

SUNDAY

Sunday morning me and Dov woke up to find that the crew in the adjoining room had ordered room service breakfast.  We were way late for the 10am PST Bears-Seahawks game, so Dov and I hit the buffet at Aria, which looked better than it tasted.  We then executed a perfect "Operation Seats" in the sportsbook, securing ample space for the big Pats-Jets showdown.  I was repping the Steve Grogan throwback jersey, and held down a few seats with a nice angle for the big screen.  Dov made eye contact with me from another side of the room, and I summonsed him, but he shook his head and made a bird motion, implying that there were a bunch of Seahawks fans who were getting ready to leave and we could take their seats too.

Cali Kid, JR and Blazer joined us.  Blazer had the Jets as a Guru pick, while Dov and I bet the over.  I didn't want to lay the 9 points, and I was trying to find a bet that I couldn't lose in the unlikely scenario that my Patriots managed to lose the game.  I decided that there was no way that the Jets would win if there weren't a lot of points scored, so I bet the over (I just couldn't bring myself to bet the Jets).   We were drawing dead the entire game yet somehow got there in a miracle 4th quarter scoring spree.  Erik the Nit (who is not actually a nit, he would like me to clarify) needed to get some action on the second half over, and asked us for the halftime total. "21 1/2" we each told him via text.  He called Dov with an order to get $300 on the over ASAP.  We had a problem though, as the line was moving like lightening.  22.  23.  Everyone was hammering the over, and Dov was still 3rd in line.  I called Erik and said "dude - the numbers are flickering on the screen - it's going crazy - 23 now - WHAT DO YOU WANT TO DO?"  "MARKET ORDER! BUY IT!" He replied, and I gave Dov the signal.  Erik ended up with a winning ticket at 2nd half over 23.  Oh, that reminds me - the Aria was not sticklers about people using cell phones in the sports book.  One guy even had an Ipad in there.  Usually that's a big no-no.

As the Patriots drove for a late touchdown that was meaningless to everyone in the world who hadn't bet on the game's total, I muttered "this place is going to EXPLODE if the Pats score."  The guy next to me groaned "not me, I have the under."   I was wrong though, as Brady's touchdown pass was greeted with utter silence except for me getting up and jumping into the air while screaming, as Dov came flying in from 15 yards behind me an did a superfly over the chairs in celebration.  We spent 5 minutes watching people bite it on the Aria sports book's camouflaged step before we left.

We had planned to head downtown to kick it old school on Sunday night, and after ditching the Grogan throwback, we cabbed it to the Venetian to dominate some double deck blackjack and pick up Big Show.  The Cali Kid put the dealer on bajungi tilt by tucking a blackjack facedown, but he got away with it by feigning ignorance, which he set up nicely by demonstrating novice tendencies earlier.  "The customer is always right!" CK fake-yelled at the dealer.  After dominating the game for 2 hours we headed downtown to the Golden Nugget - Steve Wynn's original baby.  

We ended up at some steakhouse which I believe was in the California.  To get there, we had to walk around the corner, off Fremont street, which isn't the best neighborhood.  We were so out of place that a stretch limo hummer pulled up and asked us if we needed a ride.  That wasn't the unusual part.  When we declined, he urged "are you SURE?"  Fortunately, the Brobos all had Iphones with navigation, and we followed the little red dots to the California.  We implemented the Buddy System - only travel in pairs down here - including restroom trips out in the casino's general population, away from the confines of the steakhouse.  Amazingly, even here, the steakhouse had center strip prices - $45 or so for steaks - but we all indulged in their secret special - 22 ounce porterhouse, salad, desert, sides, for $22!

It was probably around 10:30pm by now, and there was only one other occupied table in the restaurant.  When the waitstaff brought out desert for them while singing Happy Birthday, we joined in for a raucous rendition.  The peach melba birthday desert looked pretty good, and the guy explained to me "When I was in high school, peach melba meant something dirty."  I eyed him quizzically, and he told me "look it up," which I did, to no avail.

Big Show and his wife headed back to the Venetian, while the Brobos crew went to Brobos heaven, aka, the Cosmopolitan.  "How do you say "hooker bar" in Russian?" I asked out loud, and Dov replied "BAR," making everyone laugh.  We had a round of drinks at one of the many bars, and Dov actually argued with the waitress when she brought our bill, insisting that it couldn't be ours because it was too cheap!  "The beers are only $5," the waitress replied, and we were only too happy to comply.

Dov continued to pound out jokes about the Euro-hipster ambiance at the Cosmo, explaining that at their sports book you could only bet on soccer and tennis.   "No cricket?" I inquired, "of course - seasonal," he replied.  "You should see it up there - they have a bronze statue of Novan Djokavic,"  and we laughed at our own jokes.  Nearing 4am, we tired of the scene, and exited the way we had arrived, into the underground Cosmo cab staging area, which I knew wasn't right.  We were staring right into our room at Aria - literally, all  we needed was a grappling hook - but there was no way to get there. We wandered around the multi-lane side highway for 20 minutes before I bailed and walked back through Cosmo, up the stairs, and through the maze that is the Crystals shops.  Crystals is Aria's super high end retail stores, and the vacancies are staggering.  I would love to see the financials for these stores - the rents and revenues - and for the mall real estate too.

I plopped down in bed and prepared for the final 1/2 day in Vegas.

-KD

Dennis Kucinich Could Learn From Gil Meche

A little more than 6 months ago, I expressed surprise on these very pages when I found out that MLB pitcher Gil Meche was under contract for more than $11MM per year.  Today, we're brought the story of Meche's retirement, courtesy of the NY Times:

“When I signed my contract, my main goal was to earn it,” Meche said this week by phone from Lafayette, La. “Once I started to realize I wasn’t earning my money, I felt bad. I was making a crazy amount of money for not even pitching. Honestly, I didn’t feel like I deserved it. I didn’t want to have those feelings again.”

Meche had a guaranteed contract and could have shown up, chewed some sunflower seeds, maybe pitched the occasional inning of relief, while collecting his 10 figure salary.  Instead, he manned up and went out with dignity.

Congressman Dennis Kucinich, on the other hand, is exhibiting tendencies that I certainly wouldn't vote for in an elected official:

"Rep. Dennis Kucinich has rapped a U.S. House of Representatives cafeteria with a $150,000 lawsuit for selling him a vegetarian sandwich wrap in 2008 that he says caused dental damage when he bit into an olive pit. 

The lawsuit that the Cleveland Democrat filed Jan. 3 against operators and suppliers of the Longworth House Office Building cafeteria says the sandwich he bought there "on or about" April 17, 2008 "contained dangerous substances, namely an olive pit, that a consumer would not reasonably expect to find in the final product served." 

Now - I'm quite sure that Mr. Kucinich is correct, and that the olive pit was a dangerous substance, and I do think that his medical bills should be paid for.  Although I was not privy to the details of Mr. Kucinich's pain and suffering, and I'm sure the olive pit encounter was quite unpleasant, I do not think that his $150k lawsuit for damages is something that represents the qualities that I'd want one of my elected officials to exhibit.  All you legal eagles can click the link above for the actual lawsuit.

-KD

The Only State of the Union Summary You Need

Turn up the volume, unless you work in a place that hates freedom:




-KD

Vegas: January, 2011: Alone in the Desert

As usual, when I planned this trip to Vegas I put a lot of thought into analyzing my flight options.  I'm an easy 30 minute drive from Manchester (NH) airport, which offers one direct flight (Southwest) daily.  The problem with this direct flight is that it leaves NH at 7am, arriving in Vegas at 10am Left Coast time.  The alternative was to take a circa-5pm flight out of Logan, but that would require driving to Boston in Friday rush hour, which was something I didn't even want to mess around with.  

Thus, I found myself getting up at 4:30am on Friday, after having tossed and turned since 2am, paranoid about sleeping through the two alarms I had set (which would have been impossible, as my dogs go nuts when the alarm goes off).  Zombified, I cleared security, choosing not to offer a wise-assed retort when the TSA Frisker asked "Anything tender or sore?"  And headed to grab a bagel breakfast sandwich.  "You look like you're still asleep," the cashier told me, and I explained, "Yeah, I'm kinda trying not to wake up - MUST sleep on the plane."

My friends derided Southwest's "Communist" tendencies, and I blundered as I entered with my B45 boarding pass, panicking and snagging an aisle seat in row 5 next to an elderly couple.  I should have continued toward the back of the plane where there were still aisle seats available, but instead dove into this seat next to the husband who was in the middle seat, and who turned out to be far too large for his seat.  The flight was uninteresting, aside from the old lady pulling out a Nintendo DS about 90 minutes from landing, where she proceeded to give Mario Brothers a severe cursing out.  I thought she was going to smash the system on the tray table.

Landing in Vegas, I quickly arranged lunch with The Chairman, and headed over to Aria to check in.  After dropping my bags in the room, I sat for an hour in the 1-3NL hold'em game, (played with normal $1 and $5 chips, not the $3 peach chips the Wynn uses) as I waited for The Chairman to pick me up for lunch.   I played one hand of note, when an old European man stepped into the path of the KD Express.   He'd somehow managed to avoid going broke on the prior hand when his 66 flopped bottom set against an 8-9 flopped straight (6-7-T), and both players slowed down when the turn brought a potential flush.

This hand, I raised it to $10 with QcJc in early position.  The OE (Old European) called me, as did one other.  When the flop came 9c-8s-2c, I bet my overcards, gutshot and flush draw:  $15.  The OE made it $60 to go, and I paused to count his chips.  "He's got about $95 total?" I asked out loud, and the dealer countered "more like $135."  Jeez - bad counting - I'm out of practice.  I took 35 seconds, shoved out a few stacks of red chips, enough to put the OE all in, and he called.  The Qd peeled off on the turn, which was good enough for me to drag the pot.  A nit in the 2 seat piped in "So that's the kind of game it's gonna be?"  Huh?  What did you expect me to do - fold?  Please. DYKWTFIA?

I spent a few minutes chatting with one of the Floor managers in the poker room, who I knew from The Mirage.  "You're here full time now?"  I asked, and she replied "Yeah - that place is a sinking ship."  Oy - so sad - the Mirage used to be one of the centers of the Vegas poker universe.  Now they struggle with $3-$6 limit games and 1-5 Stud.   I spotted David Oppenheim in Ivey's room playing in what I believe is a 200-400 limit mixed game.  I didn't recognize any of the other players in the shorthanded game.

The Chairman arrived in short order and we headed 150 yards around the corner to Todd English's PUB - Public Urban Bar - an upscale bar with 35 beers on tap.  Our waiter asked "Have you guys been here before?" And when I replied "No," he proceeded to spend 5 full minutes explaining the menu.  This put the Chairman on BAJUNGI tilt, and he explained, "Jeezus - I haven't eaten HERE, but I've been to a RESTAURANT before! I know what a MENU is!"   My burger was incredibly disappointing - a small patty on a large bun - with undercooked streak fries to boot.  I didn't return to give the PUB a chance at redemption.

After lunch, I said goodbye to The Chairman, and had a problem.  You know that feeling that you have on Sunday morning of a standard trip to Vegas, after two nights of fitful sleep and excessive partying?  Well I felt like that at 2pm on my first day.  Major issue.  I returned to the room to regroup and wait for reinforcements to arrive.  Dov, who I was sharing a room with, had smartly noted the Fallacy of "Saving It," and explained that we would be hitting it hard that night.  The Fallacy of Saving It is as follows:  When everyone arrives at 9pm on Friday night, the tendency might be to say "Let's just hang out tonight, gamble, drink, but save the big club night for tomorrow."   No. That doesn't work at our age.  You have to hit it hard the first night, right off the bat.

So I napped, poorly, until around 6pm where I rallied and returned to the Aria poker room for a little 2-5 NLHE action.  I sat in the 2 seat next to a young gun in the 1 seat who was fully "local poker pro'd" up:  hoodie over trucker hat, sunglasses, etc.  He wasn't a douche though, and the table dynamic was pretty decent.   I later described the game to Big Show as "sneaky good" - it was a game that appeared horrible at first, until you realized that guys would call you down with second pair, and you just had to make thinner value bets.   Of course, I didn't realize this until I had a multi-barrel bluff called down, which made me nod, shrug, and alter my game plan.  The young gun (YG) had shown a propensity to make a big button raise after multiple players limped: he did this at least 3 times, once showing 8-9 offsuit after continuation betting the flop and taking the pot down.  So as I sat in the small blind with pocket tens and about $330 in my stack, I decided to pop him back after 4 people limped and he made it $35 to go.  I 3-bet to $135 and everyone folded back to the YG who went into the tank.  I shuffled my chips for a few minutes, then stopped and waited.  He finally called.  I had less than a pot sized bet left and pretty much planned on shoving any flop.  When the flop came K-T-9, my plan didn't change, and I was INSTA-called.  I turned my hand faceup as the dealer quickly peeled off the 4c and the Jd.   The player two to my left started to say something, and I quickly put up a finger to hush him, mouthing "shut. up."  He paused, and then couldn't contain himself, blurting that he had queen-ten and would have called if I hadn't reraised preflop.  The YG wasn't the kind of player who would overlook the 4 card straight on board, but everyone is capable of making mistakes, and I tried to politely explain to Mr. QT that he should keep his mouth shut until the pot is pushed.

YG held his cards, shook his head, and mucked.  "I had you crushed," he muttered, and I was temporarily confused: KK-QQ-JJ all still beat me.  "You really had AA?"  "I've played like 4 hands all night," he replied.  "Hey, you set me up," I explained, "all those button raises, and you showed the 8-9 earlier!"   He smiled and shook his head, explaining "that wasn't by design!"    He proceeded to pester me for about 20 minutes - would I have called a preflop shove?" (yes) and lament about the beat.   

After another hour, I picked up from the game and cashed out, needing to get changed for our pending night out at Marquee, the club next door at The Cosmopolitan.  First, I stopped by the sportsbook to check the NFL lines, and marveled at the camouflaged step that Aria installed in the entrance to their sportsbook.  I am willing to bet that within 6 months you will either read about lawsuits regarding trip and fall accidents about this step, or you will see it turned into a 8 inch ramp.  If you're bored at Aria, just stop by the sportsbook and count how many people almost eat it when they miss the step - you won't have to wait more than 5 minutes.  Steve Wynn would never let that happen!

I returned to the room and changed, as The California Kid, JR, and Blazer arrived in the adjoining room in short order.  Dov was stuck at McCarran, awaiting his checked bag, and Big Show was on his way over, with his wife in tow.  The team finally fully assembled, and I had to shepherd Dov to make sure he didn't primp and preen too much, finally managing to get him out of the room and on towards Marquee, which was next door, yet a 25 minute walk away.   The scene outside was a total zoo, of course, and even with our table reservation we had to wait for a half hour.  The Cosmopolitan is a hipster hell, trying WAY too hard to be the hot new place.  Of course, that's how Vegas works - there's always a hot new hip place (Hard Rock and The Palms have previously held that title) - the key will be to see if Cosmo can maintain the image.  I have some history with this place, as I had a refundable deposit down for a condo-hotel room there at the peak of the bubble in 2006.  Fortunately, I bailed, and the project proceeded to get foreclosed on, and is now owned by Deutsche Bank.   Although they had sold a full tower and part of a second tower, I think that the condo-hotel concept is now gone, and that they're all hotel rooms now - (yep - confirmed) 

Thankfully, our table was in The Library at Marquee, which turned out to be much better than being in the main room, which offered up colon shaking house music spun by DJ Chucky - as if I know who that is.  All I know is that it was "untz untz untz" hell, and louder than anything I've ever experienced.  Being in the "side" room Library was a blessing, even though we were out of the thick of it.  We polished off our bottles of booze, and Blazer and I went to wander around the club.  When I returned, Big Show had ditched me, so I decided it was time for food.  I wandered out alone, and ended up at the Cafe at Aria at 4am, where I enjoyed a perfectly acceptable steak and cheese sub as I listened to the drunk girl in the booth behind me blubber to her boyfriend about how she totally liked him, but like she was worried about what would happen if she got pregnant and then he was mean to her, and like what would she do then, and like she'd lose all her friends, and like then the alcohol took over and she was just bawling.   Ahhh.  Vegas.

I trodded back up to the room, where I found an early-Saturday-morning-East-coast-time text from Erik the Nit, begging for status updates.  "Got it it in bad, sucked out, bottles, noise. Standard."  I replied, before dozing off to prepare for Saturday.

-KD

Persistent Partisan Politics

News alert:  Congress may get a teeny bit less partisan during the President's State of the Union address this week, as members of the rival gangs - sorry, political parties - are actually going to, get this: SIT TOGETHER in the House chamber!    The NY Times intro is cute:

Mary from Louisiana asked Olympia from Maine because they are BFFs, but had a backup in Bob from Tennessee in case she was rebuffed. Kirsten from New York went the Sadie Hawkins route and asked John from South Dakota, and thus the deal between two members of the Senate with seriously good hair was sealed.  

The talk in the West Wing may center on what President Obama plans to say on Tuesday in his State of the Union address to Congress about the still-ailing economy, or United States-China relations, or his education agenda. But here on Capitol Hill, the talk for the last few days has been all about the seating for the president’s speech and just who will be next to whom. 

Ever since Senator Mark Udall, Democrat of Colorado, pushed for lawmakers of both parties to mix it up rather than sit among their own in the House chamber as if the other side has cooties, there has been a mad scramble among lawmakers for just the right partner. 

 

Holy cow - amazing, right?  If you can't detect the sarcasm here (and yes, I know it's hard to detect online sometimes, I didn't use my Sarcmark), I apologize, and I hate to be a cynic, but why is it such a great step forward that our elected officials are actually going to sit together and perhaps even attempt to lead our country together (sorry, I'm jumping to conclusions)???  Shouldn't this have happened a long time ago?

Mind you, I'm not complaining - this is a good thing - well, unless you want to form it into a vast Liberal conspiracy.  Shocker: some people DO want to form it into a vast liberal conspiracy!  Back to the NYT article:

“I already believe very firmly that it is a trap and a ruse that Democrats are proposing,” Representative Paul Broun, a conservative Republican from Georgia, said in a radio interview. Other Republicans have also scoffed at the idea as childish and irrelevant, calling it an effort to muzzle Republicans and prevent them from expressing reservations about Mr. Obama’s speech. 

Ah - so Mr. Broun doesn't like the fact that if he wants to sit out a standing ovation during the President's speech, he will be visible as someone "sitting" amongst some "standing" (presumably) Democrats, rather than just another face in the vast crowd on one side of the aisle acting in unison.  Guess what - tough luck Mr. Broun - you should be held accountable for your decisions, and not rely on the ability to hide safely in numbers in a crowd.   It's not a "trap" or a "ruse" when everyone can see what you stand for, Mr. Broun  - that's how the system is supposed to work.   

Stand for what you believe in, sit for what you don't. 

I. Hate. Partisan. Politics.

-KD

Ice Ice Baby Too Cold

I went snowshowing with my wife yesterday.  Yep - that's just how I roll - try finding another member of the financial blogosphere who went snowshoeing this week.  Even Josh Brown can't touch this.  It's starting to feel like the Overlook Hotel up here, with a new dosing of snow every week, and roadside snowbanks piling ever higher.

The forecast for tonight is for a negative 15 degree temperature (EDIT:  new forecast is negative 23!).  Not windchill - mind you - temperature.  That's friggin' cold.  I'm pretty sure it's the coldest weather I've ever been in anywhere I've ever lived, and I've lived in the Northeast for my entire life.   I will attempt to warm myself by cranking the below video and busting out some vintage dance moves:

-KD

Muni Finances - Fix The Underlying Problem

I started to write a post about this topic this morning, but deleted it in frustration.  Instead, I'm just going to bang out a short and simple one on the topic: Muni Bankruptcies.  

Here's the bottom line - the current talk about municipal bankruptcies is designed to fix the past problems - obligations we've already rung up -  but doesn't address the underlying problem which, uncorrected, will guarantee that we have this discussion again in 15, 30 or 50 years.  That problem is defined benefit pension plans which are based on overly aggressive underlying return assumptions.

All the bankruptcy chatter is designed to alleviate the past obligations - but we also need to fix the FUTURE obligations, and I don't see that being addressed.  I come from a family of teachers - my father, my mother, my sister, my brother in-law - all teachers.  My sister says "But I contribute more to my pension than Mom did,"  and I reply, "Yeah, but that extra 2% doesn't make up for the fact that the return assumptions internal to your fund are higher than reality is likely to deliver."  I've addressed that part of the equation previously.  Switch to defined contribution plans (and yes, taxpayers, once the deficits are shored up, can provide matching funds if needed), and let the employees invest it however they want, or even have the pension fund manager invest it for them.  That way, if the return assumptions turn out to be accurate, they'll reap the benefits anyway.

End defined benefit plans in favor of defined contribution plans.  Otherwise, we're destined to repeat this pension boom-bust cycle indefinitely. 

-KD

ps - There are other modifications that should be made too, of course, like ending the "gaming" of baseline salary numbers by employees who collect massive amounts of overtime in their last few years of work and receive annual pensions based upon an inflated baseline.

Guard Rail: 1, Kid Dynamite: 0

A question I will delve deeper into later this week is the one: "Why blog?"  But hey, I don't want to get too existential or too far ahead of myself.  One of the biggest benefits of this blog has been that I get to soak up the knowledge of my readers, who, by definition, have more experience than I do.  Although I consider myself a blogging jack-of-all-trades: perhaps the only guy out there who can write about his dog's anal glands, giant tomato hornworms, ETF mechanics, high frequency trading, and a conversation with Treasury, I need my readers' help, and I ask you for it now! Specifically, if you're involved with auto insurance or have ever filed a claim with your auto insurance company for an accident where no one else was involved (ie, you skidded off the road into a tree), then this one is for you.

Last night, my soccer team had our playoffs in an adjoining town.  Of course, up here, "adjoining town" means a 20 minute drive, and last night the roads were about as bad as I've ever seen them, even on the highway.  Before our semi-finals loss, I texted my wife: "Roads are terrible."  And after the game, I urged my teammates, "Guys - PLEASE drive safely - the roads are AWFUL."  Somehow, still, I managed to be the one spinning out and crashing my car on the way home.  Crash may be an overstatement - I was going about 35 mph on a road that's normally 65mph, but had signs for "45MPH Winter Conditions."  The road was flat out awful, and I was in the left hand lane, a mile before my left hand exit.  The right hand lane looked better, but I didn't want to switch, as I though the toughest part was the strip of snow and slush between the two lanes, where I would be most likely to lose control.  I'm driving the official NH State Car, by the way - Subaru Forester, 2010, all wheel drive.

Anyway, I'm driving along, thinking "Don't crash the car," a mile from the exit, when all of a sudden: FUCK.  It's over.  I'm sliding diagonally toward the right late, and I have no chance.  STOPPPPP - but no - it's not stopping. I'm sliding on black ice/slush, and the guard rail will be mine.  I somehow hit the guardrail with my front right corner, and then, quickly, my right rear corner.  This was my first accident ever!  I put it in park, hit the hazards, and noticed a car behind me instantly coming to a stop. I got out to assess the damage, and the guys behind me came running up to make sure I was ok, explaining that they'd just done a triple 360 in front of an 18 wheeler up the road.  I assured them I was ok, and continued home - the car was still drivable, with damage to both the front and rear right bumpers, front headlight, and rear quarter panel.

Today, I took it to a body shop and got an estimate - $4k - while my wife and I debated if we should eat the cost or submit a claim ($500 deductible  + potential rate hikes).  We didn't want to submit a claim and have our rates go up - or have a claim like this make any future serious claim (ie, where someone else is injured) cost us much more.  Eventually, I got a hold of my account manager who told me that in an accident like this (we were speaking HYPOTHETICALLY, of course), as long as they don't have to pay out damages for property or medical bills to someone else, my rates don't change.  I pestered him with questions: "but you will have to pay for my property."  "Yes."  "And I won't lose my safe driver discount or preferred rate, or be assessed a surcharge?"  "No, not in an accident like this where no one else was involved."

I got him to put that in writing, which is obviously not a legal doc, but he wrote:

"If your accident is not at fault and we are not paying out for damages to someone else’s property or injuries, generally there are no impact on the rates.

If you are at fault in an accident and we have to pay for injuries or damages to property, then you may experience a potential loss of safe drivers discounts, loss of preferred ratings and potentially a surcharge to your policy."

Now, obviously, a guy like myself who can read and comprehend immediately worried "what about if it's NOT a "no-fault" accident and they don't pay out damages to someone else?  That could be the description of this accident - I have no idea - I mean, I was going well below the posted speed limit, but if it's not my fault, whose fault is it?  That's not really covered in his email, but the email isn't a policy statement or legal doc anyway, so I proceeded and filed a claim.  I am hoping that I can get them to label this no fault based on the weather conditions, my speed, and my record (perfect!), but that's where I ASK THE AUDIENCE. (Basically, I just want to make sure that my account manager is correct when he says that my rates won't go up based on this event.)

My account manager also told me that if I filed a claim for this, it wouldn't effect any future claims in terms of making their impact on my policy cost more severe.   The first thing I don't understand is, obviously, if I skid off the road once a month, my insurance company isn't going to just eat the cost every time without raising my rates - so how does that jive with what my guy told me?

My wife thinks that this story will end with them jacking up my rates at renewal time, and me going into a rage (and she's right, I will, if that happens).  What say ye, my readers who have experience in this area?

note:  I'm pretty much looking specifically for those of you who have filed auto insurance claims in similar circumstances: ones where the damage was covered by collision insurance, and where there was not another car involved.  I can't wait to hear your stories in the comments - I hope I'm not about to get screwed (ie, that I won't see my rates increase when my policy comes up for renewal)...

-KD

Back from a Long Weekend

A Vegas Trip Report will be forthcoming in the next several days, bu here's what caught my eye from the weekend reading:

 - Calculated Risk: 2005 FOMC Transcripts: Flip That House as  Bubble Sign

"I offer one more piece of evidence that I think almost surely suggests that the end is near in this sector. While channel-surfing the other night, to the annoyance of my otherwise very patient wife, I came across a new television series on the Discovery Channel entitled 'Flip That House,'" economist David Stockton said, prompting a roomful of laughter according to the transcript. "As far as I could tell, the gist of the show was that with some spackling, a few strategically placed azaleas and access to a bank, you too could tap into the great real-estate wealth machine. It was enough to put even the most ardent believer in market efficiency into existential crisis. [Laughter]"

The Fed, the home of many of the most ardent believers in market efficiency, did not go through an existential crisis, however, and did little to slow down surging prices or warn consumers that "the end is near."

- 60 Minutes Piece:  Billy Walters - Professional Sports Bettor.  Cullen Roche has a markets analogy on this one too.

- IBM's Watson computer plays Jeopardy.  And Nemo is wicked impressed.

- Bloggers Quitting What They Call A Demanding Task with Few Rewards.  I can definitely relate to this one!

Related:  Felix Salmon:  Why is Seeking Alpha Paying Its Contributors?  I will have much more on this one in the coming days. EDIT:  Felix has a new post about me specifically, based on some questions I sent him.

-The Epicurean Dealmaker on how banks don't actually exist solely to crush their clients.

-KD 

The Daily Show - Dirty Bird Special

Any report that has the word "cunnilinguism" in it is a must watch.  This is very well done:

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Dirty Bird Special
www.thedailyshow.com
Daily Show Full Episodes Political Humor & Satire Blog</a> The Daily Show on Facebook

Video is here if you can't view the embedded.

-KD

Vegas Martin Luther King Day 2011 - PREtrip Report

We have a first here at Kid Dynamite's World.  After I sent this story to my most loyal reader, Bones, he replied "PRETRIP REPORT!!!"  And so it is...

So I'm going to Vegas NEXT weekend, MLK weekend (Jan 14th).  Dirty Dave and three of his friends are coming, along with Big Show and his wife.

Sitting around at home last Friday evening (Jan 7th), I suddenly got the idea to screw with Dirty Dave.  I sent him a text "I'm here. Aria poker room. Text me when you land."

Then I sat back and giggled and waited.  As we all arrive in Vegas, there are always a barrage of texts sent back and forth to establish where everyone is.  45 minutes later, I sent him another: "Just got stacked via a sick cold deck. gonna take a walk. maybe i'll make it to In'n'out burger.  Call me when you get to the cab line."

30 minutes later, my phone rings.  It's Dave.

dave: "Hey - where are you?"
me (music on my computer playing in the background). "Huh? I'm in Vegas.  Where are you?"
dave: "What?  When was the last time you talked to Big Show?"
me: "This afternoon.  Why?"
dave, mumbling: "what did he say?  when does his flight land?"
me: "he said he's retired. his flight lands at 8pm."
dave, knowing it's NEXT week that Big Show lands: "TONIGHT?"
me: "I mean, I ASSUMED it was tonight! What are you talking about?"
dave: silence.. then "oh man - my heart is SINKING right now. I can't believe this."

Sadly, I'm a horrendous bluffer, and while I should have taken it another three minutes, let him explain that it was NEXT week that they were all coming, and then lament how I was going to have to sleep in the IP parking garage, I let him off the hook and told him I was just messing with him...

He said "I mean, I looked back at all the emails after I got your texts, and everyone said "I'm in, Friday to Monday," but no one put the dates! I figured if anyone didn't know the holiday wrap weekend, it would be the guy who's out of the system!  I was wondering how you were going to explain to your wife that you were doing a NINE DAY Vegas wrap once you figured it out"

I said "I was going to tell you that I was going to Wal-mart to buy a sleeping bag and a box of cereal bars and sleep in the IP parking garage."

anyway, it could have been an all time legendary one, but I am a bad bluffer so it was just GOOD.

Stay tuned next week for the post-trip report!

-KD

Breaking News: Slot Machines May Addict Their Players! Shocker!

I couldn't believe this hysteria on 60 Minutes last night.  Embedded video:

And the summary: "Lesley Stahl reports on the proliferation of gambling to 38 states and its main attraction, the slot machine, newer versions of which some scientists believe may addict their players."

Some scientists believe that slot machines may addict their players?  File this one under: NO SHIT SHERLOCK.  They are, and always were, designed to do EXACTLY that - from colors and the specific tones of the sounds, to the randomized reward schedule. 

I actually watched this on 60 Minutes last night, and thought that Lesley Stahl's report was almost a joke at first: "The main attraction at these casinos is now the new slot machines."  And guess what - THEY ARE ADDICTIVE!  This is not news! That's how it's always been!  Slot machines, somewhat incredibly, are the cash cow of the casino, and they are based on some of the simplest tenets of human and animal psychology.

I am quite sure that I'm not the only one who ever took a class in basic psychology.  Randomized reward, bayyybeeee.  Rats learn it, pigeons learn it, octopuses learn it, dogs learn it, and people learn it.    Apparently, Lesley Stahl never learned it, because she was shocked - SHOCKED I tell you - to learn that slot machines can addict people!

Gambling can be highly addictive.  Slot machines in their very existence are designed to feed this addiction. I guess it can't hurt to remind people of Psych 101 though.   

The 60 Minutes report mentioned the penny slots, which gives me the perfect opportunity to give my readers some real value added content here - I can tell you how to BEAT THE PENNY SLOTS!  For real... If you've read all of my past Vegas Trip Reports, you already know this answer - it's a classic, mostly unknown arbitrage that's available to you.  I'll leave it up to you to figure out how to scale it into a profitable business idea.  Ready?  Here goes:  when you cash out your penny slot balance (under the new ticket-in-ticket-out system that is abundant), the casino rounds you up to the nearest nickel when they pay you out at the cashier's cage!  Ie, if you cash out $1.26, they give you $1.30.  HOLY FREE F*CKING MONEY!  Go forth and reap the profits, my dear readers. (*note: I should clarify that this is how it was at the WYNN when my wife did it several years ago.  I somehow doubt that they have been overrun by an army of low paid workers who are paid by a master syndicate to take advantage of this arb and bankrupt the casino, although it's possible that they have been forced to change their rules.  Please report back anything you find out!*)

I'm intentionally avoiding a debate on the meat of the rest of the 60 Minutes piece, which is a variant of the "If we give kids condoms, does that make it easier for them to have sex" argument, in my mind.  The actual topic was basically "Does having casinos that are closer to where we live make it more likely that we will gamble (and become addicted)."  The condom analogy is actually pretty apt, as I think that one revolves around "We might not want our kids to have sex, but if they do have sex then we want them to have safe sex, but at the same time, by providing them condoms we don't want them to think that we are encouraging them to have sex and we don't want to make it easier for them."  The gambling tract is "We don't want our citizens to become addicted to gambling, but if they are addicted to gambling and are going to gamble anyway, we might as well keep those revenues in state, although that might result in even more gambling in and more gambling addicts."

I think that ease of access certainly makes it more likely that people will go to the casino, and that more people going to the casino probably means more people getting addicted.    I also find it pretty hypocritical when states with lotteries take such a hard stance against casinos.  I'm not about to argue that scratch tickets (or lotto drawings) are as addictive as slot machines, but they are absolutely addictive as well - same principles of randomized reward, just not quite as fancy in the implementation.   Then of course, there are cigarettes, which is a whole other story.  I have yet to see any state propose a ban on the sale of cigarettes, although that product is also designed to not only addict, but KILL the users!  We know why no state is proposing such a ban, of course: money. Tax revenues - which gets right back to why more states are considering expanding legalized gambling.

-KD

Silver Irony - PSLV, SLV

I should have given this post a hysterical, hyperbolic title, like "SPROTT'S PSLV - PHYSICAL SILVER TRUST - ADMITS TO NOT OWNING PHYSICAL SILVER!"  But as usual, my goal is to educate, not spread hype, fear and misinformation.

From Sprott Asset Management today, (manager of PSLV): 

"TORONTO, Jan. 10 /CNW/ - Sprott Asset Management LP is pleased to provide investors with an update on the delivery status of silver bullion purchased by the Sprott Physical Silver Trust (NYSE ARCA: PSLV, TSX: PHS.U) ("Trust"). 

As of November 10, 2010, the Trust had contracted to purchase a total of 22,298,525 ounces of silver bullion. As of December 31, 2010 a total of 20,919,022 ounces of silver bullion had been delivered to the Trust. The Trust expects to take delivery of the final 1,379,503 ounces of silver bullion by January 12, 2011 and will subsequently publish the serial numbers of all bars held by the Trust on its website: www.sprottphysicalsilver.com. 

"Frankly, we are concerned about the illiquidity in the physical silver market," said Eric Sprott, Chief Investment Officer of Sprott Asset Management. "We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver.""

Reminder:  PSLV is a closed end fund - that means that new shares cannot be created by anyone except the fund's manager - Sprott.

So let's get to the irony:  One of the most repeated urban legends of the internet is that SLV doesn't actually own physical silver, or doesn't own all of the physical silver that they claim too.  (It should come as no surprise to regular readers that I believe that SLV holds 1) only physical silver bullion and 2) holds all of the bullion that they claim to hold.)  Eric Sprott, in a fit of genius, capitalized on this hype by launching his own fund - PSLV - that holds only "physical silver" - he was even smart enough to name it the Sprott Physical Silver Trust.  I admire Sprott for this genius - he capitalized on the fear and hype, and managed to launch his own fund to compete with a dominant existing product.

There's only one problem:  PSLV, by Sprott's own admission today,  doesn't actually hold all of the physical silver bars that they are supposed to! PSLV has now been conclusively proven to hold promises for silver.  SLV, on the other hand, despite all the fear and paranoia, has never been proven to lack the silver that they claim to hold.  In fact, the holdings are even audited, and you can view the audit report online.

Talk about irony - PSLV exists largely because internet-miseducated investors feared that SLV was a terrible product.  PSLV trades at a significant premium to it's Net Asset Value (more than 11% at the time of this writing!), and yet, has been proven to demonstrate the exact flaw - not actually holding physical silver -  that it was supposed to solve. Meanwhile,  it has never been demonstrated that SLV actually has that flaw!

Now, in an effort to avoid rehashing old nonsense, I want to remind the critics of a few things: 

1)  This post is about holding PSLV vs holding SLV, not about holding  ETFs vs holding physical bullion.  I will never be able to convince the doubters that SLV is as good as holding bullion,  and if you want to hold it for your grandchildren, it's probably NOT as good as holding bullion.  This piece is written specifically for the "SLV = bad, PSLV = good" crowd.

2) This news out of PSLV today is not my opinion - it's a fact - PSLV owns CONTRACTS for silver.  

3) Who cares? I certainly don't -  I'm sure Sprott will get the silver on Wednesday when he's due to.  My point is that while people have been running around like chickens with their heads cut off screaming "SLV SUCKS, BUY PSLV,"  it was PSLV which in fact owned paper silver.  

4) Please do not post excerpts of the standard disclaimers in the SLV prospectus.  As I illustrated clearly on a previous thread, PSLV's prospectus has nearly identical disclaimers. 

5) You can buy whatever you want to buy - I don't care - it's your money.  I happen to own SLV.  I have previously tried to short PSLV, but was unable to borrow shares, and thus could not short PSLV.  To me, it makes positively ZERO sense to pay an 11% premium to NAV for PSLV, and I would short it vs. an SLV long if I were able to.

-KD

VOLCKER RESIGNS! AGAIN!

Throughout my career at my former employer, there was a running joke on the trading floor.  Whenever someone erroneously yelled out a headline they thought was breaking news, but which in reality had already been announced, they'd be met with a chorus of "VOLCKER RESIGNS," as if to say "no kidding, dipshit, old news," referencing Paul Volcker's 1987 resignation from The Fed.  An example might be if someone was off the desk while a stock was halted for news pending.  While they were gone, the headlines would come across, and the trading floor would get the news and discuss it.  When the late-news-repeater returned, he'd eagerly shout "RUMOR THAT QCOM IS BIDDING FOR ATHR,"  and people would reply "Volcker Resigns," or simply "VOLCKER."   

Well, today, Volcker resigned again!  I wonder what my former colleagues are doing with this headline... For at least one day, ""Volcker Resigns" was timely news again.   If you want a  terrific blast from the past, and to play "If only we knew, in hindsight..." go back to the original 1987 Volcker Resigns article and read what they had to say about the incoming replacement... Alan Greenspan.  Quick gem:

"In his attempt to prevent high inflation rates, he is more likely to apply monetary brakes earlier rather than later."

-KD

An Ipad in Every Pot

I would expect that some people would have strong opinions (both ways) about this NYT article about the increased use of Ipads in schools.  Here, I'll just pull some uber-excerpts for you, and let readers go to town on their own (note - these quotes have been pulled from the article - they are not contiguous. I alternated text colors to distinguish the block quotes).

"ROSLYN HEIGHTS, N.Y. — As students returned to class this week, some were carrying brand-new Apple iPads in their backpacks, given not by their parents but by their schools. 

A growing number of schools across the nation are embracing the iPad as the latest tool to teach Kafka in multimedia, history through “Jeopardy”-like games and math with step-by-step animation of complex problems. 

As part of a pilot program, Roslyn High School on Long Island handed out 47 iPads on Dec. 20 to the students and teachers in two humanities classes. The school district hopes to provide iPads eventually to all 1,100 of its students..."

"Technological fads have come and gone in schools, and other experiments meant to rev up the educational experience for children raised on video games and YouTube have had mixed results. Educators, for instance, are still divided over whether initiatives to give every student a laptop have made a difference academically. 

At a time when school districts are trying to get their budgets approved so they do not have to lay off teachers or cut programs, spending money on tablet computers may seem like an extravagance. 

And some parents and scholars have raised concerns that schools are rushing to invest in them before their educational value has been proved by research..."

"Daniel Brenner, the Roslyn superintendent, said the iPads would also save money in the long run by reducing printing and textbook costs; the estimated savings in the two iPad classes are $7,200 a year..."

" Roslyn administrators also said their adoption of the iPad, for which the district paid $56,250 for the initial 75 (32-gigabyte, with case and stylus), was advancing its effort to go paperless and cut spending. In Millburn, N.J., students at South Mountain Elementary School have used two iPads purchased by the parent-teacher organization to play math games, study world maps and read “Winnie the Pooh.” Scott Wolfe, the principal, said he hoped to secure 20 more iPads next school year to run apps that, for instance, simulate a piano keyboard on the screen or display constellations based on a viewer’s location. 

“I think this could very well be the biggest thing to hit school technology since the overhead projector,” Mr. Wolfe said. 

The New York City public schools have ordered more than 2,000 iPads, for $1.3 million; 300 went to Kingsbridge International High School in the Bronx, or enough for all 23 teachers and half of the students to use at the same time. 

More than 200 Chicago public schools applied for 23 district-financed iPad grants totaling $450,000. The Virginia Department of Education is overseeing a $150,000 iPad initiative that has replaced history and Advanced Placement biology textbooks at 11 schools. And six middle schools in four California cities (San Francisco, Long Beach, Fresno and Riverside) are teaching the first iPad-only algebra course, developed by Houghton Mifflin Harcourt..."

"But technology advocates like Elliot Soloway, an engineering professor at the University of Michigan, and Cathie Norris, a technology professor at the University of North Texas, question whether school officials have become so enamored with iPads that they have overlooked less costly options, like smartphones that offer similar benefits at a fraction of the iPad’s base cost of about $500. 

Indeed, many of the districts are paying for their iPads through federal and other grants, including money from the federal Race to the Top competitive grant program, which administrators in Durham, N.C., are using to provide an iPad to every teacher and student at two low-performing schools. 

“You can do everything that the iPad can with existing off-the-shelf technology and hardware for probably $300 to $400 less per device,” Professor Soloway said..."

-KD

disclosure: I have no position in AAPL

The End Is Near

The End of Days is definitely coming.  If it wasn't enough that I legitimately agreed with Paul Krugman on something yesterday, today an even scarier indicator has reared its head.  Are you sitting down? I'm just going to throw it out there real quick, like ripping off a bandaid:  I agree with Maxine Waters on something!  The Fannie/Freddie/BankAmerica settlement IS another bad deal for the taxpayers, with a mega-bank as the beneficiary.  For more on why, see Ritholtz here.

Just for sanity's sake, let's get in the time machine and look at some of Congresswoman Waters's greatest hits. First, the "Captains of the Universe."  The part about "fees" around 5:30 is classic.  Ken Lewis gives her an exasperated "I don't know what you're talking about" and Vikram Pandit talks to her like she's a ten year old:

And this one where she tries to talk to Bernanke will make you bang your head on your desk:



-KD

Insider Trading Revisted Again: "If We Had to Mark to Market We'd Be Bankrupt"

Here's a quick story for discussion, since I've written about the topic of the gray line of insider trading before.  In November, 2008, I was minding my own business, driving around the Berkshires looking for a house to buy, when I got a call from an old headhunter we used to deal with on my trading desk.  This time, she had a job she thought I'd be good for, and she was right - it was a position that was tailor made for me, if only I'd been eager to jump into the fray.  I interviewed with the firm, and went back at the end of December to discuss more details with them.

I was sitting in the cafeteria with the head of trading, talking about the state of the financial crisis, which was in full bloom at that point.  Markets were getting crushed.  I made a comment about how I wasn't a fan of extend and pretend and abandoning mark to market, and this guy told me, verbatim, "If we had to mark to market we'd be bankrupt."  My jaw, literally, dropped.  Dude - if you want me to come work for you, especially in a trading capacity, that's not the kind of thing you tell me.  Especially since I come from a background trading instruments which were always marked to market daily (equities, options, futures).  My counterparty quickly backpedaled, clarifying what he meant, explaining "held-to-maturity" classifications, etc - I don't really want to debate mark-to-market, although Barry Ritholtz has a thread on it today, if that's what you're interested in.  In any case, this wasn't the kind of thing I'd expect to hear from someone in a head trading role.   Market prices are the life blood of a trader, in my opinion. 

Anyway, we left it with "we need to clean up our year end stuff, and we'll settle this in the New Year."  Basically, I assumed that the job was mine if I wanted it, and I was agonizing over if I actually wanted it!  Less than three weeks later, this firm reported earnings, wrote down marks on billions of dollars of assets, and saw their stock price get cut in half.  That was the end of those job discussions - I never even followed up.  But I was kicking myself and shaking my head that morning saying "Jeezus - the head of trading basically TOLD me that the stuff was worth way less than they were pretending it was worth - this was the easiest short in history."  But would it have been legal if I'd traded on that?

Let's review important criteria that we discussed in my prior pieces on this subject:  1) Did the Tipper, my interviewer, have a fiduciary duty?  Yes, of course - to his bank.  2) Was he violating that duty by telling me this?  And was it even non-public information?   Hmmm... Who knows - it was probably common knowledge that all the banks were pretending that their pile of  balance sheet crap was worth a lot more than it really was - almost every bank continued to write down their assets further, quarter after quarter, for several quarters in a row starting in mid 2008.  He didn't tell me "In three weeks, when we report earnings, we're going to write down the value of our fixed income portfolio by $5B."

Since many of my readers have expertise in this matter, I'll leave the question for the comments:  could I have legally gone out and shorted this company's stock based on what my interviewer said to me: "If we had to mark to market we'd be bankrupt" ?

-KD

Readings and Signs

I couldn't help but thinking, as I watched portions of MTV's New Year's Eve coverage which featured the cast of the Jersey Shore, that it's hard to be bullish on America.   Why?  Simple answer:  Jersey Shore Season 3 - the mere fact that it exists.  That alone is bearish. (My most faithful reader, Bones, will be very unhappy to hear me slander the Shore crew like this, but hey - I call it like I see it)

Anyway, I also tend to somehow want to infer some sort of warning signal from the fact that the 7-9 Seattle Seahawks made the NFL playoffs and will host the 11-5 defending Super Bowl Champion New Orleans Saints on Wildcard Weekend.  But hey, the Seahawks are just playing by the rules they were given - one could even make the case that the AFC West Champion Kansas City Chiefs' 2-4 division record is as much of an abomination, although that probably wouldn't be much of a case.  538blog quantifies just how bad the Seahawks are. 

Also troubling to me is that fact that I very much agreed with Paul Krugman today - at least on one point:

"But then again, not so much. Jobs, not G.D.P. numbers, are what matter to American families. And when you start from an unemployment rate of almost 10 percent, the arithmetic of job creation — the amount of growth you need to get back to a tolerable jobs picture — is daunting.

First of all, we have to grow around 2.5 percent a year just to keep up with rising productivity and population, and hence keep unemployment from rising. That’s why the past year and a half was technically a recovery but felt like a recession: G.D.P. was growing, but not fast enough to bring unemployment down."

I've had a related discussion with some colleagues multiple times.  My friend Ginger Ted asked me what my GDP prediction for 2011 was.  I replied, "Who cares?  It's all Government spending anyway,"  my point being that you can't value companies based on unpredictable government spending and transfer payments.  How can everything be hunky dory when we are at (un)employment levels that we basically haven't seen for 70 years?  Which leads perfectly to my next reading, the Barron's interview with GMO Strategist Ben Inker. 

Q: When it comes to how investors think about asset allocation, what do you think some of the common mistakes are?

 

A: There are a few things that people tend to get wrong. One of them is an obsession with comparing stocks to bonds. So if you are in a situation like today, where bond yields are very low, people say, "Well, that makes stocks look cheap." It doesn't make stocks cheap. It is possible for stocks and bonds to be simultaneously cheap or simultaneously expensive. So you really don't want to fall into the trap of assuming that because bonds stink, you should be in stocks.

This highlights a point that most of you have probably heard 25 times over the last 6 months, and which drives me crazy every time I hear it.  Just because bonds are unattractive doesn't mean that stocks are attractive!  Now, there's a caveat here, because most money managers aren't going to hold large cash positions (like GMO's 30% current cash position) - in fact, most pension funds and insurance companies probably can't legally hold even 1/3rd that much cash. (anyone know the exact details of their mandates?)  Which of course, is precisely the problem: they chase returns because they have to buy something,  and then when things blow up, they need to be bailed out.  Rinse, repeat.

Well, for now, the (S&P) trend is higher.  I wrote a post 13 months ago about momentum vs. mean reversion, and I am going to try again, even harder in 2011, to follow my own advice on that front.  Don't fight the Fed, don't fight the tape, don't try to call the top.  They say that stocks take the stairs up and the elevator down - watch out when that cable breaks.  I do believe that the backdrop for a rough correction is still in place, since I don't think we solved the problems that caused our crisis in the first place,  but I'm not short at the moment.

-KD