Washington is the Biggest Impediment to US Growth

Portfolio Breakdown:
APP - 3.2%
BAC - 14.4%
PRGN - 2.5%
TBT - 5.3%
ITUB - 12.2%
AOB - 14.5%
COIN - 1.5%
TAMB - 30.1%
HOGS - 35.62%
SDX - 5.3%
OCNF - 3.6%
MBI - 18.7%
TRLG - 8.8%
ES - 2.7%
COIN Warrants (C024064) - 0.5%
CAD Cash - 2.9%
USD Cash - (64.2%)

Portfolio Performance:
Return Since Last Update - 5.24%
Return Since Inception (June 30, 2009) - 183.84%
S&P 500 - 1109.17
S&P 500 Return (June 30, 2009) - 20.71%

The Prior Week of Trading:
Both the heart and the substance of the policies coming out of Washington continue to amaze me, and not in a good way. The populist rhetoric coming from President Obama seems to be never ending; I was particularly struck by a recent comment he made at a News Conference when describing his vision for health care, stating that he ran for President "Not to do what was popular, but what was right". This chilling statement would be enough to give any proponent of democracy pause. The office of the President of the United States is not given through divine mandate, it is held by an elected official as the head of State and representative of the county. When speaking on health care reform, a topic that most agree needs attention, he uses that opportunity to denounce the notion of proportional representation of ideals through government (albeit, tongue in cheek) to attempt to assume a higher moral standard. In contrast, when speaking on issues of financial market reform, he bows to current populist pressure and completely ignores sound and proven economic principles. The duopolistic nature of the policies projected by the President are outrageous and are the biggest threat to growth in the US. The words of David Hume are as poignant today as they were 4 centuries ago when he said that it is a just political maxim to assume all politicians as knaves and that constitutions should be drawn upon that assumption.

More clarity was given on TAMB's earnings (or lack thereof) last week, which have caused me to substantially alter my target price for the stock. Net charge offs for the company was 35.8 million for the quarter causing them to set aside an additional 50.8 million in new provisions for loan losses; this was the main source of losses which were enough to erase the book value of the company. I am mainly concerned that given the loss of shareholder equity and pressure from the FDIC to raise its regulatory capital ratios TAMB will most likely have to initiate a secondary common or preferred equity offering. I would conservatively estimate that given the order to atain a Tier 1 capital ratio of 9%, TAMB would have to issue around 30 million dollars worth of new equity; this would dilute the current share base by about 10 times. At this point I should stress the unavailability of raw information from which I can derive accurate conclusions, the numbers I have listed are only an estimation. To effectively place a large secondary offering, TAMB would most likely reverse split the stock before the offering to maintain its status on the NASDAQ. This action would undoubtedly bring out the shorts to force a short term loss in price to much more than the dilution would warrant. The risk to the downside given these circumstances that I see as both necessary and inevitable is large while the upside normalized earnings scenario now effectively is cut by a factor of 10. I will be looking for opportunities to dispose of my share position daily while being mindful of the market impact I may face in the process given the stock's very low volume.

I added a small position to an old favorite PRGN last week and will look to accumulate in the low to mid $4 range. I believe that earnings for this company will continue its positive trend and see the possibility for a reinstitution of the dividend under a normal operating scenario. I last disposed of this position when the stock traded over $5; given the lower price and my continued positive outlook I believe it is time to add this back into the portfolio. Energy Solutions, ES is a company I have been watching for a while; the stock has been hit recently because of the resignation of the company's CEO (for personal reasons) and I believe this is a good entry point into an attractive stock in an attractive industry. COINU was delisted from the NASDAQ and the security's stock and warrant components were split up, which explains how they are now accounted for in my portfolio breakdown.