Paul's blog

Archive for August, 2007

The reason I used a picture of Jim Cramer (Mad Money) with my previous ‘Stock tip’ post was that I totally agree with Jim’s vision on ‘stock tips’: Tips are for waiters.

Back to Mark Skousen’s recommendation at the Freedom Fest.

When I heard him give this old style barber shop ‘tip’ (he didn’t even care to call it an ‘investment idea’), I was puzzled. That’s not a thing you expect from a serious professional Ph.D. Economist Investor Big Wig who rubs shoulders with Presidents of the United States. And a man who organizes conventions where there are actually numerous speakers, themselves highly successful investors, who will spend their entire alotted time to warn you to stay away from people who give out (more ususally ‘sell’) ‘stock tips’. (More on some of these speakers in a later post)

It got worse. People asked Mark questions about the business. Smart questions. And while happily babbling on and on for minutes after each question, it became painfully obvious that he had no clue whatsoever about the company. Or if he did, he wasn’t sharing it with us. He rattled off some ratios like the company’s P/E, which is of course, without proper context, completely meaningless. And this was an investment guru with numerous highly praised investment books on his name?

Of course, one has to understand that this man is not in the business of managing money. His business, plain and simple, is selling subscriptions. Subscriptions to his extremely expensive investment news letters. And we all know how these work: you ‘predict’ a boat load of winners. The ones that turn out a loser you forget, the ones who do VERY well, you use to prove how good you are and sell more subscriptions. You only have to go to the man’s website to see what I mean. To not-too-naive people these are huge warning signs: completely ignore these folks. Although I’m not suggesting that Mark Skousen belongs to them, you will also find a lot of operators of the infamous ‘pump and dump’ schemes in this arena. (Although, I admit, I was wondering how a man, who, according to his website -which I will not link to – has made such astonishing predictions, can still tout a company like Luminent, while total lay-men like myself are already quite familiar with the huge problems in the sub-prime lender business and the (then) looming credit crunch)

So, while I left that presentation with the distinct resolution not to touch that stock with a ten feet pole, I DID decide to follow it… so as to gleefully rub my hands when its price would go where I expected it to go.

This stock, which was ‘sold’ to us as being a steal at ten dollar, however, did NOT go where I expected it to go. Within a couple of weeks it would go WAY beyond that! It bottomed out at 36 cents! Yes, thirty six cents. This is where I realized (or hoped, rather) that the market was overreacting: sure this company had some serious issues suddenly (margin calls), but it was not an Enron, so from 10 bucks to 36 cents was, IMHO, just plain ridiculous. So I put some money in it, and sold it a few days later when it was back at $1.39. Sure, I still think it can recover much more, but then, it can also go bankrupt. And I don’t invest in situations this dubious and uncertain. Yes, I may speculate in special situations like these, a quick in and out with a limited amount of money, but that’s it. Sure, I could have put everything I had in this: I would have been a millionaire by now. But I also could have been broke. I fully understood, going in, that I was trying what was tantamount to, what is called, grabbing a falling dagger. So, in the end, I think I did well.

Which probably can’t be said of all those newsletter buyers and stock tip followers who started loading up when LUM went from 10 bucks to 9.

What am I working on, you asked?
I’m looking into some voice quality issues on one of our platforms that utilizes a G.729 codec.
What is a G.729 codec?

I’m glad you asked!

A G.729 speech coder is an 8 kbps Conjugate-Structure Algebraic-Code-Excited Linear Prediction (CS-ACELP) speech compression algorithm.
Since G.729 is based on the Code-Excited Linear Prediction (CELP) model, each 80 bit frame produced contains linear prediction coefficients, excitation code book indices, and gain parameters that are used by the decoder in order to reproduce speech. The inputs/outputs of this algorithm are 16 bit linear PCM samples that are converted from/to an 8 kbps compressed data stream.

I’m sure you, too, are glad you asked.

Last month I was at the freedomfest in Vegas. There were many speakers and they covered a broad range of topics, but it was very heavy on ‘investing’.

During the ‘fest’ I learned that the organization originated in the investment world. That explained a lot. In fact, the organizer of the event was a certain Dr. Mark Skousen, PhD, Economist. Apparently a very well known figure in the investment world. I attended a few of his presentations.

Clearly a gifted speaker.

In one of the presentations he thanked us for attenting, and showed his appreciation for us showing up at his conference by giving us a HOT stock buying tip, that he recently had shared with his customers. He told us about a company by the name of Luminent Mortgage Capital Inc (stock symbol LUM). It was an excellent buy, was going to declare some healthy dividend and … well, it was just a steal! Ok, it had gone up a little the past few weeks, due to Mark recommending it to his top customers, but when it leveled out at about $10, we should all load up!

He humbly bowed to the applause.

I invested some money in it. And then I sold my stake.

I more than trippled my money in, oh, about a week’s time. Made a couple of thousand bucks. It paid for the trip and the conference and then some!

Don’t you just love ‘stock tips’?

(Yes, of course there is more to the story! Subject of a subsequent post)

Off the coast of North West Africa, close to southern Morocco and West Sahara lies a group of islands called the Canary Islands. One of its most western islands is called La Palma (the islands belong to the kingdom of Spain). La Palma is basically just a volcano. It has erupted many times (last time in 1971), and, although controversial, there are predictions of it being close to erupting again soon, with devastating results: it is thought to be very likely to dislodge a 12 mile-long slab of rock that will crash to the ocean floor, causing a dome of water a mile high, causing a tsunami, travelling at 500 mph.

It would reach the US mainland  in 9 to 12 hours and the 165 ft high waves would simply wipe Boston, New York and Miami off the face of this globe.

And, of course, Palm Bay, the town I live in, would be gone as well.

Last night I was reading about all these interesting facts and wondering why I wasn’t packing up my stuff and moving to Nevada. I may make that the subject of another post, but anyway, pondering all these fatalistic scenarios made me sleepy, so I went to bed.

For some reason, ever since my ‘heart attack’ scare back in May, I seem to need a lot less sleep than I  used to. As so many times lately, I woke up around 4am, and, also as usual, started to read.

It must have been around 5:30am that I heard a faint noise. Kind of a rumble, like a truck driving by on the nearby highway. But it didn’t fade. This is probably where this subtle noise entered my consciousness: I laid down my book, and I’m sure I must have looked puzzled: I’d never heard anything like it. It still was very faint and sounded like it came from far away, but it appeared to get louder. “There’s a UFO landing on my lawn” I thought. But I’m a rational guy and parted, with slightly sad feelings, with THAT notion.

Then I noticed the slight trembling of the house, the windows rattling… it was a VERY subtle and a barely noticeable vibration, but it was definitely there!

I got up to investigate, by now I was REALLY puzzled by it.

And then suddenly it hit me! That tsunami! La Palma! It had happened! A wall of water was headed down the street and soon it would all be over.

Then something strange happened: instead of panicing, I was overcome with a deep feeling of peace and I became extremely calm. It was something that I have experienced before .. in dreams! Where I was in situations with a disastrous, really inescapable and irreversible outcome, I would simply ‘resign’. If the outcome is truly inevitable, there is no point in wasting energy in trying to reverse it.

I have mentioned my fear of flying here before. During flight I’m constantly in a state of semi-panic. But when that day comes, that my plane’s wings fall off (and it WILL come), I am convinced that I will then suddenly become very calm again. I probably will even smile, and while everyone around me is panicing in utter chaos, I will grab my book, start reading, and think “told you so!”.

Likewise, realizing the magnitude of what was happening, I calmly walked to my computer to see what I could find out about it. What else was there to do?

And then, while the sound and vibration, while ever so slightly, became more apparent … the light went out.

Fortunately that lasted only a split second. But I had to restart my computer. While it was rebooting, I opened the front door and stepped outside in the dark … expecting strong wild winds.

There was no wind whatsoever, although I definitely could still ‘sense’ the noise, but by now it was getting fainter and fainter. There was definitely something ‘out there’. But clearly, not the dreaded wall of water that my brain had concocted. Soon it was all over, and I was standing in a quiet warm dark central Florida night, wondering what the heck I’d just experienced.

About an hour later I realized what it had been.

And I also realized that, had I stepped out on the patio, instead of the front door, I immediately would  have known what this was and I would have stood there in pure awe and admiration …

I kicked myself for picking the wrong door, and went back to bed.

In an earlier post (link) I wrote about the Irish company Steorn, who claim to have invented a working free energy device, I made several predictions, the first one being:

No demonstration of a working ‘free energy’ device will take place in July 2007 

Well, I got THAT one right (and fully expect the other ones to come true as well).

According to a statement on Steorn’s website (link):

… technical problems arose during the installation of the demonstration unit in the display case on Wednesday evening.

These problems were primarily due to excessive heat from the lighting in the main display area.

Attempts to replace those parts affected by the heat led to further failures and as a result we have to postpone the public demonstration until a future date 

As was to be expected, some really silly excuse was given for the failure. Sometimes it’s the weather, sometimes it’s too much metal in the room, sometimes it’s studio lights, sometimes it’s the presence of an unbeliever.

They went for the classical “it’s the lights” cop out.

*yawn*

Zero points for not even trying to come up with an original or somewhat ‘believable’ excuse, like “the government has stolen our device”.

This all is a text book example of the so common “we don’t understand it, so it must be super-natural” fallacy (since an over-unity device breaks all kinds of laws of nature, it is by definition super-natural).

Here’s a tip for you geniuses: turn off those lights!

And here’s another one: “when you find yourself  in a deep hole, stop digging”.

To top it off: “if something looks to be too good to be true … it probably is”