The Sun Will Come Out - Tomorrow

I am on an unexpected day off so plenty of time to write, and there is a lot to write about. I've decided to interrupt my usual bad news assortment of reports with a few things I view as a positive. Of course, whether something is positive or negative relates a lot to your perspective, as we have seen. For example, gas being cheap is good from most people's perspective, but not if you are an oil company.

Hedgesville

I have seen various sites that give names to hedge funds and/or the hedge world. I am choosing Hedgesville. My great grandfather lived in Hedgesville, literally. Hedgesville, West Virginia, which is tucked in between Berkeley Springs and Martinsburg. He, poetically, built caskets in Hedgesville. From the looks of things, quite a few hedge funds are needing a good casket right now. So far, this perhaps does not sound like good news.

Well, it turns out that hedge funds have already mostly exited their equity holdings and deleveraged a bit. Now just 17% in equities. This is a good thing as increasing redemptions by investors in hedge funds would otherwise continue to put a lot of pressure on equity markets. Hedge funds should, instead, have hopefully enough in cash to meet redemptions. And a few hedge funds going under, is also probably good news, especially if you build caskets in Hedgesville.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKg2AIyWF5kk&refer=home

Bottom?

I don't know about all the technical analyses, but there are some people I follow who do, and one seems to think we are getting pretty darn close to a bottom. He at least sees a market that has a bright future ahead and that is near historic lows on various technical bases. He begins with a nice discussion of Black Swans, and the book on that topic written by Nassim Taleb. I have read Taleb's book and recommend it. An important part of the attached article is that financial institutions do not properly model for rare but extreme situations. Their models consider these to be virtually impossible, yet they happen and more often than you would think. The good news is that technical indications are that we are near a bottom - or at least in a place where there are some nice values. Not really a secret, but good to see someone with sophisticated technical analyses saying so.

http://deadcatsbouncing.blogspot.com/

Black Swan

The thing about Black Swans, rare unpredictable events, is that they can be bad or good. Sure, it is easier to imagine a one time event that has a negative impact, but there can be Black Swan events that have a positive effect. These typically take longer to have an impact, but sometimes they can happen quickly. Imagine someone finding (for real) the secret to cold fusion tomorrow. I am not expecting one but it can happen.

Think green. With the Democratic Administration and Congress, there will be a new push to green, as in alternative fuels, recycling and the like. Low fuel prices will lessen the desire to go there but it will happen much more than it has the past eight years. If the U.S. can develope the next best alternative fuel (which will likely be numerous different things) then we have a whole new industry or industries to drive our economy. This makes good environmental sense and business sense. I doubt it will happen in the next few years, but it will happen.

http://money.cnn.com/2008/11/19/magazines/fortune/serwer_stocks.fortune/index.htm?postversion=2008112020

In the interest of full disclosure, I have a few hundred dollars invested in an algae company. I think algae has great prospects as it can be grown in areas where food crops cannot be grown, it can grow in the worst imaginable water, it is up to 50% oil, and it is carbon dioxide neutral because it takes in as much growing as it releases when burned. Win/win/win in my book. Still some technical hurdles to overcome and probably a decade away, but very promising. Did I mention it is renewable. The oil from it can be converted and burned in diesel engines. Right now it is not cost effective with oil, but given its other benefits, it may make sense to pay the extra $.

Any hoot, don't pollute!