Keep the Fed?

 Reuters Reports:

Even with a smaller size, Highfields [Capital] will still rank among the $2.4 trillion hedge fund industry's biggest players in part because it is not alone in deciding it is better to be smaller and more maneuverable.

This is good because we want the rich people to spend more money. Wealth accumulation has reached a ceiling with current interest rates held in place by the Fed bond purchase program. Successful hedge funds are returning capital to investors to better accommodate current market rates in a way that doesn't sacrifice their fund's return potential. If rich people start spending their money again, the conspicuous consumption effect will shift tastes and preferences of consumers -- a determinate of demand. It's not class warfare if we are all on the same side, and we are all part of consumer demand.

Credit Card Regulation

Yet another instance where government regulation has hurt consumers and businesses…wait. I think I got that one backwards.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 has been reported to better protect consumers from credit cards they cannot afford than they were before Congress passed the law by the Consumer Financial Protection Bureau.

If read about what the act does for credit consumers you might realize that Senator Tom Coburn, a Republican from Oklahoma added an unrelated rider to the bill to prevent the Secretary of the Interior from enforcing any regulation that would prohibit an individual from possessing a firearm in any unit of the National Park System.

I’m not sure why this was needed to pass the bill, the rider seems very incongruous with the idea of the law. I will never understand politics I am not a part of.

Consumers are protected from credit card companies charging opaque fees for going over allowable credit limits in order to create a market where consumers can see the costs of each card upfront.

Since 2009, Visa (V) is up 162%, MasterCard (MA) is up over 200%, American Express (AMP) is up 130%, Capitol One (COF) is up 95%, and Discover (DFS) is up 280%.

Due to a law passed by a Democratic Congress and White House, consumers pay less penalties for late payments and other unexpected fees, credit card companies have seen EPS soar, and American’s can no longer be charged for hunting in the King’s forest.

FAME to Black

The 4-week value strategy I am working with this month includes 7 equities. The metrics to create this sample of stocks were a Price-Earnings using a 12-month Earnings per Share ratio, quarterly Earnings per Share this quarter and the quarter prior ratio, and the Zacks “Rating Change and Estimate Revision Factor.”

According to J O'Shaughnessy in What Works on Wall Street, the Price-to-Sales Ratio “is the best,” measuring the price of the company against annual sales instead of earnings. This means that it is “’an almost perfect measure of popularity.’ Only hope and hype will increase the price of a stock with a high PSR.” (He is quoting the author of the 1984 book Super Stocks.)

I learned quickly on my second attempt trading with my brokerage account to put the trade at least one day ahead of the price you want for your security. The market ended high last Friday the 27^th and I got Friday’s ask price. Monday, today, the first of October, awoke to a “shut-down” federal government. The market was at a three-week low and I got those bid prices, too.

The Economist uses hyperbole, calling the current Congress with a rodeo clown compared to a country once considered a stalwart of good governance. Also noting:

If America were in real danger of missing a debt payment it is likely that President Obama would find some constitutional justification for ignoring Congress rather than set off a financial meltdown.

I followed the advice of David Darst, director and Chief Investment Strategist of Morgan Stanley Smith Barney: “Buy the pancake; sell the spike.” He spoke at an annual FAME Conference at San Francisco State University in November 2012 and I was fortunate enough to be part of the Student Investment Fund in attendance.

After one day I have already recouped my trading costs and am in the black. However, I realize how quickly the market can turn down, wiping away any positive gains I return after the first day of trading.