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Saturday, November 22, 2014

Private and Public

Value is, therefore, nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being, and in consequence carry over to economic goods as the exclusive causes of the satisfaction of our needs.   - Carl Menger

 Over the years of investing I accumulated a list of stocks I call "My Fetish Favorites". The list is not large, as it takes a lot for me to get totally fixated on a company. First of all it has to be a great business - I am talking a leader in its field, an innovator and a pioneer, preferably a monopoly or at-least with very little competition. Secondly, it has to have a charismatic figure at the top - not just any rich white guy, but a real cracker-jack mother fucker, the kind of person that is widely admired for smarts and determination and exhibiting vicious killer business instincts at the same time. Thirdly the company has to be making a boat load of money, have solid fundamentals and good prospects for future. All this is fine and good, but I don't get paid on feelings and I don't participate in their bonus pool - the chart set-up is what I need, but when I believe in stock that much I tend to disregard the price, which inevitably leads to losses sooner or later. Ones the 'fetish' is identified, I stop trading a particular stock, but don't remove it from watch list in order to keep an eye on future action. Usually after a period of few months or couple of years, I become disconnected enough to be able to analyze price plot objectively, find a good entry point, make a conservative bet... and lose money immediately.
Yep, fetish is a bitch.

Enter publicly listed private equity firms. Generally they involved in providing capital to existing companies for expansion or restructuring (glorified loan sharks), venture capital for growth startups (IPO scams), or leveraged buyouts with goal to rip company apart and sell pieces for a sum larger than whole (extra Gordon Gekko). There are not alot of them, with three easily identified leaders - BX, CG and KKR, collectively known as 'smartest guys in a room', connected all the way to the top, corrupt as fuck and loaded with dough up to the gills. Public doesn't follow them, except during scandals (which are rare).
Perfect investment.

My long time favorite (even before IPO in spring 2012) was Carlyle Group (CG), although it proved to be not a strongest chart of this bunch, I traded it successfully several times last year and left it alone ever since. 2014 has not been kind to PE firms, with stocks either consolidating sideways, painting incomplete topping patterns, or in outright bear market (like CG down more than 20% from February top). Hopefully its just a digestion of stellar gains these stocks had in 2012-2013, but it could be an end of their 'harvesting' cycle with much lower profits (and share prices) in near future. I haven't got a clue, and don't need one either, as I will let CSI Trend Method to sort this out.



There is PSP - globally listed private equity etf  from PowerShares with 2% expense ratio, 3 to 8% yield(?) and weird allocation.

Programming note: this theme continues under label 'CG' (fetish is as fetish does).

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