Wednesday, December 31, 2008


After a brief return to the trading desk from familial duties before the bowl game today. I noticed that the senior bond of Phoenix was up almost 50% today. Win some, you lose some.  I did quickly unload the 100 in my IRA but still have the other 100.
The news today had to do with recent steps taken to improve Phoenix's capital position. Yahoo! Finance  I am really not the person to ask whether the rally is justified by the reinsurance deal with Swiss RE.  Phoenix did say that this deal, along with selling some stocks, increased its statutory risk based capital by 35 to 40 percentage points.

I would take issue with James Stewart's column in the WSJ, which sort of sounds like a shill for some of these investment advisors that led their clients to Madoff. From what I have read, most of the money was funneled through hedge funds and investment advisors.  To the extent Stewart is talking about any of them in his column he is way off base. I would agree with him that most individual investors lack the sophistication to see a scam operated by someone with expertise like Madoff.   But professionals and highly sophisticated individual investors would know that the returns claimed by Madoff using his purported strategy were just not possible.  The degree of due diligence required for investment advisors examining an operation like Madoff's has to be at an extraordinary level due the lack of independent checks and balances, including matters related to the in-house generation of brokerage statements and the identity of the broker conducting the trades.  A view of the accountant's office would have been enough of a red flag as well as the use of such a low profile firm.  While having a big accounting firm is better than the one Madoff used, Stewart is way too over-reliant on that one factor.  It was after all the big firms that certified the statements of Enron, Worldcom and virtually every other disaster that has come down the pike during the greed decade.  The main protection has to be independence at the source, meaning an independent brokerage firm conducting the trades and issuing the statements.   I am not sure why Stewart is shilling for those advisors who steered their clients to Madoff.  If he wants to make a distinction in the standard of care between your average individual investor and the so called professionals, then he needs to make that distinction clearly in his column.   I am very disappointed in Mr Stewart for writing that column.  He has gone way down in my opinion of him. 

It may have been better to go with TROW this morning rather than FII.  I did note prior to buying FII the recent downgrade of FII by JP Morgan and a criticism of that downgrade. Yahoo! Finance
Morgan's downgrade had to do with the fall in money market rates which might cause Federated to waive fees for its treasury offerings. 

I can not find anything else in my account that I want to sell for a tax loss.  So, I will finish the year in the black as far as short term gains go, and maybe I just need to give myself an award for a large number of positive short term trades in a terrible year. I have knocked the ST gains down to about $2,000.   

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