Still no recession

0.6% growth? not high, but certainly not a contraction.

In fact, as anyone who has been following my blog knows, I've been putting money in stocks recently. If it's a bear rally as most folks believe, I'll get hammered. If it's a signal of having hit bottom or near bottom, as I do, I'll have good returns.

With that said, I have recently experienced one thing that will cause a recession, and that worried me greatly. About that in a moment.

Before I go there, I have a theory about why the financial wise-heads keep missing the true sense of what's going on, both on the downturns and the upturns. Have you noticed this? all those greyhairs with tremendous experience and knowledge of the markets are continually - this is not the first time - stumped when markets sour, just as they are when they start smelling like roses. It's as if they just can't get a handle on this stuff, and their frustration about it shows in their analysis and op eds. Why? it's not like they don't know what they are doing.

Here is my theory. What used to work until the late 80's no longer does, for one reason - technology. Technology is what allowed day trading to occur, then become common place. Note that this deterioration of the ability to predict or even have a reasonable assessment of what's going in the very near future has been gradual - and about 20 years in the making. The thing is that capital can now move a lot - a lot - faster than it ever did in history. We are talking orders of magnitude here. And yes, the common folks do matter here, because as a group they can move equities. And they don't have to call their broker, they go online and with two clicks they buy or sell, or trade options, or do a whole bunch of stuff that used to take time before. Larger investors in the same position, and they all try to "beat the market" and "be contrarian" and most importantly, get ahead of everyone else. The actual access to the world's capital markets has been significantly democratized and liberalized, which means that folks act faster, and money moves at a tremendously increased velocity. when taken together, they all create an effect that serves to do four things:

1) changes in markets are much more rapid
2) changes in markets are much more extreme
3) changes in markets occur earlier
4) changes in markets occur more frequently

In other words, if a typical downturn would cause a 20% drop in equities which would take 3 years to correct itself in 1970, now the same exact downturn (from a fundamentals perspective) can be 40% and take 6 months to correct. The band narrows. Why? because technology allows money to much more easily move out of the market, then move back into the market. And remember, everybody tries to predict what's gonna happen, so it tends to cause the downswings and upswings to occur earlier in the cycle - much earlier, in fact. Lastly, because of this convenience factor, the capability to move much larger amounts of money much faster around the world, changes in markets occur more frequently, the role of market makers increases, and hedge funds (which essentially specialize in one thing - taking large gobs of money and move it around as fast as they can) can bloom.

But to economists who are classically trained, none of this has an impact on their thinking. So they are continually surprised as to the speed and force of movements in markets. They are simply not used to thinking in terms of technology as an enabler.

And this also explains in a simple manner (I like simple) why recessions tend to be shorter these days, even if they feel quite severe. But it's exactly what's happening, it's not a surprise, it's simply the net effect of technology supporting rapid, vast movements of investor money. Take this recent housing one - the actual numbers should not have caused a meltdown like they did (including the Bear Starnes and Citigroup fiascos), except that they did, and note the surprise on those CEO's faces. Note their comments: "we don't understand how the credit markets could seize up so quickly", and "this has never happened before". They were right, in a sense, but they ignored the impact of technology. Call me naive, but I really believe this effect is quite severely underestimated by many economists and Wall Street types.

And now back to my comment earlier about what will cause a recession.

Last week I tried to use my Bank of America credit card to pay for my lunch, as I do every day. The charge got denied. I was surprised; I have had that card since 2000, with a prime + 2% rate, and a $30,000 line, and I had less than $4,000 balance. Anyway, I used another card and called BofA.

First I got transferred to fraud control, but they looked it up and said nothing was wrong on their end. Then she said I was at my credit limit. I asked her to tell me what it was, and she said "$3,900". OK, that's a problem. I asked to get transferred to underwriting, and spoke to Kevin.

Here is what transpired. Sometime in the middle of April, without notice and without warning, BofA decided to slash down my credit line from the one I had for years to what I owed rounded up to the next $100. Why? his excuse was high outstanding revolving balances. Well, sure, I have $60,000 in those because they are all at low fixed rates - from 0% to 3.9%. I don't want to pay them down quickly. It's cheap money, why shouldn't I use it? he agreed that made sense. So he asked about my income. I told him what it was. He said that was just fine. But he still could not approve raising it back to the $30,000 limit. We literally spent an hour dancing around this issue, with me rebuffing every one of his claims about why they took it down but at the end he didn't change anything, going back to the high revolving debt mantra.

I told him I'd be happy to support an actual underwriting process, sending him documentation to back up my finances. At some point he agreed to take the paperwork. I asked "what would I need to prove to change your decision?". He started dancing again. So it was just to get me off the phone.

I called my friend who is a VP at BofA and asked him about it. He told me what I was expecting: the bank was in complete, utter and absolute panic mode. They are looking at all their credit card holders as risk now, not profit centers, and have done this to apparently millions of their customers at once. He was disgusted by the whole affair, but he was on the retail side so could nothing to assist me at all. He also said that even if he had any influence in credit, it most likely would not help at all, because the risk managers at the bank were in total panic. He also suggested - remember, this is a VP at the bank - that I take my consumer dollars elsewhere, because the current mood at the bank is so sour, he doesn't see it changing any time soon.

Like, wow. I love having friends in the know who can be candid with me, and I sort of expected this, but it was an interesting set of comments. And if anything will cause a recession, this will; consumers need to get money from somewhere in this environment, and credit cards are the most reliable engine they have had to dealing with downturns. That is why they have been such amazing profit engines for the issuing banks. Cutting down consumers' feet in this way, with no warning and so severely will cut spending in such a brutal fashion that the economy will shrink. We are, luckily, not dependent on this line, so I could shrug it off. But what about people who are? the poor souls who lost their jobs and need their line to tide them over for 2-3 months before they find a new one? I don't know whether this level of panic us unique to BofA, but if it isn't, things could get ugly.

NoScript

Folks, if you are using Firefox, download and install NoScript now.

Trust me on this.

There are well over half a million sites out there right now that are compromised in such a fashion that NoScript will protect you from.

And if you use Internet Explorer, you're out of luck; there is no protection mechanism available. Sorry. Tough luck. Use Firefox.

Ubuntu

So Hardy Heron is here... and finally, I am ready to make the switch. The new version of Ubuntu is finally, in my opinion, "good enough" to be worth replacing Windows - something I have admittedly wanted to do for a long time now.

I have my shiny new Ubuntu CD ready. I just need a day to make the switch; I'll let you all know after it's done sometime in the next few weeks. If one of you folks who know me wants the CD and don't feel like downloading the 700MB ISO, ask me for it, I'll burn it for ya.

It's like in the commercials:

High-speed DSL line - $30/month
Blank CD - $0.10
Removing the shackles of Microsoft forever - Priceless

Let wiser heads prevail and all that

So earlier this week I mumbled something to the wife about how if Obama got the nod from the democratic party, I will likely end up voting for McCain, for the simple reason that even without an economic agenda, he stacks up a hell of a lot better on the economy than the illustrious senator from Illinois.

As an aside, democratic party super-delegates, could you please show complete favoritism and give it to Hillary? you know she's better for everyone. By far. And you want to give her the nomination. You have balls, you just need to remember to use them. And for those of you that don't, I think we're on the same page already. Right?

Anyway, I think wife was a little rattled by my comment cause she just sent me this piece. It's so darn funny I had to share it with the three folks who haven't read it yet. Um, you.

Made my day

Came back from the Web 2.0 Expo in San Francisco a couple hours back... not exactly the kind of conference I normally attend, but my colleagues thought we may be able to pick up the odd client there.

While this may still be the case - and I also got to reconnect with an old colleague that I haven't seen in almost 8 years - one thing did occur that made the whole day worthwhile.

Generally, I tour conferences aisle by aisle, stopping occasionally - rarely, actually - to speak to folks in booths that for some reason catch my attention. It's difficult to catch my attention, as I tend to process each booth very quickly, not just on what is said, but a lot of intangibles that give me a sense of whether it would be a waste of time or not. Or at least I like to think so. In a conference like this one, where I already feel like a fish out of water, this process tends to break down a bit, as I end up avoiding the vast majority of presenters.

But for whatever reason, I stopped at this one. For the record, it was one of four total (out of a lot more). I'm glad I did. Not because I have a particular liking for what they do - it's a virtual, hosted, browser driven operating system - although they certainly seem to do it well if that's something you're looking into.

No, the reason was... well, as I was chatting up one of the guys I detected an unmistakable, even though relatively well-hidden, Israeli accent. Peeking at the name tag confirmed that this was indeed an Israeli, so I exchanged a few words in Hebrew before reverting back to English for the benefit of my colleague traveling with me.

Then the other guy came back from talking to someone else, and I caught his name - Adel. Now, Adel is an arab name. Rare in itself, but I've worked with a couple of Israeli Arabs (as well as Druze) when I was still in Israel in high-tech. But then I got the surprise, when the Israeli guy off-handedly mentioned that Adel was a Palestinian. I grabbed his business card and looked. Indeed, he was from Ramallah.

Folks, I don't know if you can grasp how huge this is, but here was a tech startup from Israel's "Silicon Wadey", that was co-owned, co-managed and co-worked by Israelis and Palestinians. I was so damn excited I think I became giddy. If for nothing else but this reason alone, I wish them all the success in the world. I hope they win big time. Because bridging this sort of gap at a time like this requires more than just good people. It requires a lot of patience, determination, and desire to look the rest of the world around you straight in the eye and say "screw you, we know better" - and be right. I asked Adel if it was difficult to have meetings, and he laughed and admitted that months can pass between two face-to-face meetings simply because of road blocks. No shit, I can imagine.

So to the folks of G.Ho.St - I wish you all the best. I do hope your solution is good enough to make you all rich. Maybe I've become too americanized, but in my world money translates to influence. And it is folks like you that I want to have the influence. And to everyone else - go check them out. If you were looking for a virtual OS, see if this one works for you. It uses the Amazon compute cloud, so it is at the very least both reliable and reasonably secure. And it's free. And it's created and run by really good people who, without even realizing it (they were kinda shy about it), and without it having to do anything with what they set out to do, are changing the world for the better.

Taking my chips

Probably a mistake but... I'm out of Dexcom at $7.25. But this stock was such a positive surprise I'll be following it closely in the coming weeks.

For security geeks only

This was just forwarded to me with no attribution, so I don't know where it's from, but it's damn funny (if you are a security geek, anyway).

I'm scratching me head now

... in puzzlement.

Dexcom just hit $7.25. That makes my $4.20/share investment on 3/31 rise... what, 70%? If only I poured serious money into it rather than "love these folks" appreciation funds.
Google is rising, crossed $540.
Netgear is now rapidly rising towards $21 (which would indicate another 10% gain in what, a week?)
Even Pinnacle is starting to show signs of life after being depressed for many months.

No one can be this lucky. I'm starting to feel like I'm sitting in a Vegas blackjack table and getting a series of blackjacks. Do I pull them chips off the table and go relax with a free cocktail for a little bit?

Sorry, never meant to make this blog about stocks, but this is just so darn unusual. For me anyway.

Now this is becoming funny

Remember I told you about my stroke of good luck with Dexcom shares?

Well, it happened again. About three weeks ago I bought Google at around $450 a share; this time I had better reason, namely that I think it's still a growth stock, but many do not agree. Well, today they changed their minds, apparently, as the stock flew to almost $530 after hours, and seems to be headed even higher following earnings.

I'm not used to being this lucky with stock picks. I'm probably jinxing it by even posting. But here we go: my two other recent purchases have been Netgear (at $19) and Pinnacle Airlines (at $8), both purely on financials.

This is more for amusement value, by the way; I bought all of these with the intent to hold for a while. So daily fluctuations don't really matter. But it's still funny.

Addictive

Warning: this is highly addictive

My personal best currently stands at 22.500* seconds, which is laughable. I'm told some folks can do this for over a minute.

* previous 20.797

More Dexcom knowledge

So my calibration cable has died.

Now this sucks big time; it means the Dexcom is basically slowly becoming unusable, as I cannot provide it with calibration results. I really can't wait for the software update that will allow me to enter calibration results without requiring the cable connection.

I spoke to tech support who are sending a new cable out, but the lady also provided another useful tidbit of information: she suggested that I keep the cable inside the One Touch at all times, which should prolong the life of the cable's wiring.

This does make sense in a way, although one begins to worry about the life of the tip as it gets compressed a bit in the compartment. We'll wait and see. All I need is for the darn thing to last another two months or so, anyway.

Also, I want to say this again: Dexcom is an awesome company, at least from my point of view as a customer. Many kudos again and again to all the folks there. I can't praise you enough.

Dexcom on the rise

OK, this is almost too funny to be true.

As you recall, recently I wrote about how impressed I was with Dexcom, so impressed that I decided to buy some shares in the company for nothing more than my belief that a company with such a great product and customer focus deserves to succeed. I really hadn't looked at fundamentals much, and anyway, companies at this stage are usually still destined to fail.

I picked up the shares at $4.20. Remember, this was about a week ago.

Imagine my surprise today when I looked at Yahoo Finance and since I checked Dexcom a week ago when I bought it, the quote came up automatically. It closed the day at $5.48. That's a, what, 30% increase in a week?

How funny. My sentiment was apparently prescient. Now I'm going to actually examine the company's financials and such; may end up that I found a golden nugget by completely and purposefully not looking for it. One thing I already saw; the three analysts covering it have a median target price of $10 in the next 12 months.

Huh.

Might be worth picking up a lot more. I guess what they say is true... better be lucky than smart.

On Israel

I believe this is what we call... in a nutshell

Through the eyes of a tourist

I wrote this about a day and a half ago, and although it is highly emotional (read: schmaltzy), I was so surprised by my overall reaction I thought I'd share.

Oh, jeez, I am not making much sense. Just read it. Or not. Whatever.

==========

It's my third - no, actually fourth - day here, in Israel, where I was born, raised, and never belonged. I used to believe it was their fault, them being Israeli society and Israelis at large. But it was as much my own for never wanting to belong, because belonging meant being a part of something that I hated, allowing dependency, losing flexibility... so much better, I thought, to be a "citizen of the world", a cosmopolitan, and also a citizen of America, the greatest nation, the only place that matters.

Oh, for the follies of youth and foibles of growing up.

I'm not entirely certain what triggered this, but ever since I went down to breakfast this morning, my emotions have been rising like a dot com in 1999. I should have realized what was going to happen when I was reading the Economist, my back to the view of Haifa bay, all the while having to reread every third sentence because my mind kept screaming at me - "turn around! look!". I was at first first bemused by the behavior of the staff, who were as nice and practical as they know how, only to keep taking away my silverware every time I went back for more of the phenomenal breakfast offerings, the unbelievably tasty vegetables, the creamy white soft cheese that easily eclipses every other in the world but can only be bought in Israel because, you know, it's just white cheese and who would want to buy it anywhere else anyway? the Bourikas, Israel's experimental and highly successful version of the Bulgarian Benitze, served right next to and mixed in with the cold hard eggs, sweet filo dough cake, and herring, creating a salty and sweet combination that is as quaint as the apparent thoughtlessness of putting them together. Yet somehow, in this country, it all makes perfect sense. This sort of schizophrenia - the knowledge that its food is fantastic coupled with a deeply bred shame about it when ostensibly compared to the food in much more admired countries and cultures - is something that is so much a part of Israeli life, it would be difficult to imagine the country without it.

And as I came to realize later in the morning, I love it. I truly, deeply, unabashedly love it.

I finished my breakfast, thanked the wait staff who so obviously did not know what to do with me, that they reverted to uncomfortable English almost on cue, even though I had spoken Hebrew to them a few minutes before. I could see their genuine confusion mixed in with an eagerness to help. They all want to help, they just don't know how to stop or rather, tell when I don't want any, missing the subtle - and often not so subtle - clues that are so important to European and American cultures. It can be irritating, but now I mostly find it charming.

I tried finding my way out to the promenade, and the host saw my apparent confusion and explained with exaggerated hand signals and perfectly reasonable but heavily accented English how to get out. I did not want to embarrass him so I stuck strictly to English as well. Having been trained for quite a few years now in the art of picking up on subtle clues (as an aside, I must my wife to think of opening a school for American integration), I could see the relief on his face when I did so, as he stole a glance at his two colleagues looking at us with interest from the side. A look that said "see? He’s an American alright".

Explanations aside, getting out meant leaving through the one main entrance, as all the rest were locked, the hotel tower being situated inside the middle of a small but important mall, and an obvious target for terrorism. It being the Sabbath, the mall was closed. I had forgotten about the implications but as I faced one locked door after another, I was overwhelmed by the bravery of these people, living as they do in the constant fear of war and terror, yet somehow manage to create and develop and expand and make a life on this tiny piece of land that is enviable by most countries' standards. And I felt a bit of the camaraderie that I never felt when I grew up here, the spirit of togetherness that is so critical to Israelis daily life, their existence. They can't live otherwise. Individualism is a great concept, if you can afford it. But this is country that is deeply wounded and constantly under threat of extinction, fighting every day for its life, and indirectly for the well-being of hundreds of millions of Europeans and Americans who could seemingly care less. For them, even if this is not so frequently admitted, it is convenient to have Israel around, to draw the ire of radical Muslims and away from their own countries. Yet Israel has to continually justify and defend itself for the mere act of trying to exist, and so it is the collective that must rule. There is simply no other way.

As I walked out the main door, I realized that in the simplest of terms, it is unfair to be an Israeli. To always take the blame for the world's problem when all you are really trying to do is survive. I grew up knowing only survival. We don't really know how to relax, in Israel. There is no room for it. You have to be alert, or your life is in danger. All the time, everywhere. Is it a wonder that Israelis fly all over the world so much?

Is it a wonder so many want to get out?

Yet somehow, in sixty short years of merely existing, Israel has shot from nothing to being a developed country; its currency is being accepted next month to the list of 17 global freely traded currencies, an indication by CLS that Israel's economy has made the switch from developing to mature. I will be able to buy and sell shekels in my local Wells Fargo branch, just as I can Euros, or Australian dollars. They did it by putting to use the Jewish fondness and insistence on education, their chutzpah, and a resourcefulness that had been developed for thousands of years for much the same reason - survival - and creating a high tech industry that rivals that of Silicon Valley. For a country that has no natural resources, fewer friends than sworn enemies, more war than peace time in its tremendously bloody history to date, this is a truly outstanding achievement. Israel - and Israelis - deserve their pride. It is well earned. Oh, and in another example of Israeli Schizophrenia, I always find it curious that a country with such an advanced tech industry, infrastructure is generally poor, and hotels still think it makes sense to charge $25 a day for Internet access.

I stepped out and walked the mostly empty street, the Sabbath still being strong in the fabric of Israeli society. Most everything shuts down on the Sabbath, not because the country is overly religious - eighty five percent consider themselves secular - but because the collective agrees that the state must retain its Jewish character, that it is essential to its long-term prospects. I used to think this was hogwash. Now I fully agree, and for no more reason than that the Sabbath allows Israelis to calm down a bit on a weekly basis. The radio stations do not blurt out hourly newscasts, the newspaper with its frightening headlines does not get printed, the television does not discuss the news for almost 24 hours, and there isn't much else to do than sit around and enjoy the relative quiet. The serenity of a Saturday morning in Israel is nothing short of amazing. I would hate to see them lose it. I hear America used to be that way on Sundays. We should try it again.

I turned the corner onto the promenade overlooking Haifa bay, and started walking slowly, inhaling the views stretching 50 miles northwards, all the way into Lebanon. It is a beautiful day today, sunny and warm, with just the right amount of wind to stop the air from getting too hot. The deep blue sea was gently rolling, the waves lapping Haifa's beach, where I could see a few people strolling from afar. Everything was quiet; quiet in that unusual way that you can't really find inside of an American city, even at three in the morning. I could clearly hear a child laughing more than a half a mile away down the street, and if I strained my ears, I could make out the distant sound of waves crashing ashore.

And then, with no provocation or apparent reason, I started crying. I couldn't help it. I felt so lost. How could I have become so hostile to this place? I was privileged to be born here. It is unique. I could finally see the country through the eyes of a tourist, and understand how overwhelming it could be, as layers of history screamed at me from everywhere. The eclectic mix of old buildings and new, put together with the careless care of Israelis who just try to figure out how to make something work without a lot of long-term planning, because no one has time to plan for a future that is so uncertain. In my last exhibit of Israeli schizophrenia, the culture combines this short-term thinking with a high aversion to risk on a personal level, with a deep hatred of debt and a high savings rate. Regardless, somehow it all works out anyway, with ingenious little solutions of roads carving impossible paths inside neighborhoods that grew organically in the truest sense of the word. It is a bit like Florence, that amazing Italian town that I love so much, except that the residents of Florence have a deep regard for their town and its history. In Haifa, it's almost maddeningly casual. They don't even realize how beautiful and special it is, a place truly like no other in the world. If Haifa were on the west coast, you couldn't buy in for less than a few million anywhere.

I kept walking, got back into the hotel, and went out to the pool. The emergency exit door was, of course, propped open, because, well, any terrorist who got the bright idea of climbing the surrounding fence to try and get into the hotel from the pool would be taken down by the Israelis sitting there before he took five steps inwards, these same Israelis who propped open the door in the first place. A tremendously courageous people are Israelis, a courage born of necessity. The hotel staff, of course, ignored it too. The sign was put there more as a show for American tourists than anything, tourists who still possess a somewhat mystical presence for many Israelis.

I took off my shoes and sat at the edge of the pool, letting my feet into the water. It took me by surprise, as the pool was not heated, even though it is a 5-star hotel. After a moment's reflection it made perfect sense, because the weather is warm here, and the water would heat up anyway in no time during the day. After a few seconds of sitting there the sense of this was made clear, as my feet cooled my body down against the sun. I was looking at the couple sitting thirty feet away feeding their young child, and I started crying again, because underneath the gruffness and, to American sensibilities, militaristic parenting style, there was a lot of love. Children grow up fast in Israel, because they have no other choice if they are to make it to the age of conscription. There is no time for niceties, or softness, or letting them develop their own selves. They need to be brought up to this intense reality, so that they can then be thrown into places like Gaza and try to maintain their sanity for at least the three years of mandatory service. And I cried because I finally understood why I could never belong, because I never went to the army, and it wasn't their fault for not accepting me afterwards. The army is truly an essential part of the fabric of this society, it is the bond of the collective soul that nourishes and ensures survival. There is no malice in it, no condescension like I used to think. It's just the way it is.

Men don't cry in Israel, and it became obvious that I was making the few folks around me uncomfortable. I got up and went back inside, and as I was making my way slowly back to the elevators to go up to my tiny "executive suite room", I heard the unmistakable singsong of Jewish prayer. I felt inexorably drawn to it. I turned towards the sound, rounded a corner, and found myself looking at a congregation covered in prayer shawls and wearing Yarmulkes, praying for the Sabbath. I covered my head with my hand, and moved closer to listen. Jewish prayer, I suppose, must seem pretty unusual for Christian ears; it is as much about the music as it is about the words, and often you can't even make out the words as they are sung by the man leading the prayer. There is a very special rhythm to it, a cadence, and the back-and-forth movement comes naturally. It is beautiful and uplifting and sad at the same time, transcending time, encompassing as it were the many thousands of years of the Jewish history in its lilt. I had heard it many times before, of course, but this time I was greatly moved. I stood there, leaning against the wall in the corridor, taking the yarmulke offered me but otherwise refusing to step into the conference room turned into makeshift temple, tears streaming down my face as I stood and listened. It was then that I finally felt that I did belong, that these people would still accept me if I asked, that being Jewish actually meant something more than my ethnicity. I yearned to touch the Torah, something I am allowed to do as a member of the tribe of Cohen, but that would have entailed me revealing that fact, and I wished to remain as unobtrusive as I could.

As I left to head back up to my room, I was filled with more emotion than I can begin to describe. I am writing all this and yet I cannot convey anywhere near what I feel. I do admire these people, and I cannot make the distinction anymore between Jew and Israeli. I feel a little stupid, a little shameful, and more than a little in awe. I may never really belong, but I am privileged to still be a part of it. Because for all its faults - and there are many - Israel is and will forever remain like no other place on the planet.

I will never move back, it is too late for that, and there are still far too many things that irritate me enough on a regular basis. But I will certainly visit again, as a tourist, if for nothing else than to revel in the country's richness. And as a side note, I think I finally discovered what a spiritual experience feels like.