For this weekend’s open thread, where you can discuss whatever you like, there will be no videos or cartoons. No, this week I am giving you my list of top 3 movie westerns of all-time:

1. Once Upon a Time in the West: Sergio Leone was, in my opinion, the greatest director of westerns ever. His films included The Good, the Bad, and the Ugly, Fistful of Dollars, and For a Few Dollars More. But Once Upon a time in the West was by far his best.

Henry Fonda played Frank, who was arguably one of the most evil characters I have ever seen in any movie. Darth Vader was a cream puff next to Frank. Charles Bronson was “Harmonica”, the hero, and I question whether Clint Eastwood (who was a regular hero in Leone’s films) could have played this role as well as Bronson did. Jason Robards played Cheyenne, who was a half-indian gang leader. Cheyenne and Harmonica clash at first, but eventually work together to defeat Frank.

This was the first movie that ever made me feel like I was watching a piece of the old west. The depth and detail of the film is awe-inspiring.

2. Unforgiven: I have always been a fan of Clint Eastwood, and always a fan of his westerns. But Unforgiven was the best of them all. Eastwood directed and starred as Will Munny (that even sounds like a name from the old west!), an old gunfighter who retired years ago. The key to this film was how Eastwood made Munny look like a normal person, yet still capable of great things.

But like all great westerns, the key to this film was Gene Hackman’s deliciously evil turn as “Little Bill”. Westerns have traditionally used the “white hat versus black hat” as plotlines, and that is here. Yet it is never quite so simple in reality, and Unforgiven gives it’s characters the depth necessary to make a simple “white hat vs. black hat” story so much more real to the viewer.

3. The Shootist: John Wayne’s last film was also his most heart-felt film. One can argue that this film was almost typecasting, having John Wayne, who knew he was dying in real life, playing a dying gunfighter. But this was Wayne’s only film that left me feeling more than just entertained. It is a poignant view of death, and how we deal with it.

Even better, Wayne’s supporting cast is a who’s who from Hollywood: Lauren Bacall, Ron Howard, Jimmy Stewart, Richard Boone, Harry Morgan, John Carradine, and Scatman Crothers. But make no mistake, this movie was Wayne’s final farewell.

I won’t be making any kind of market analysis today, because it could all go out the window with the quarterly options expiration today. We could see a short squeeze that sends the markets up, or it could just keep dropping like it has. Unless you are playing the 3 minute technicals, like Trader, I would avoid today’s market.

However, if you are looking for a decent trade, any short index play should be good at the end of the day today going into next week, which could be a very ugly week for the markets. However, if you are concerned that our imperial leaders could actually solve all of the world’s problems over the weekend (quit laughing!), you should be able to buy a short position on Monday and still do very well with it.

This quote, from Gillian Tett, is why I think Ben Bernanke is an idiot:

Slightly more than a decade ago, I spent many hours at the Bank of Japan talking with officials about the paradoxes of ultra low rates. At the time, BoJ officials faced intense pressure from politicians and markets to boost growth; so they were duly implementing quantitative easing or their zero interest rate policy.

However, the more they experimented with Zirp, the more skeptical they seemed about whether it really worked. The essential problem, they moaned, was that Japan’s financial system was so broken that it had become bifurcated: some companies desperately needed cash, but could not borrow because the banks were too risk-averse to assume credit risk, with or without Zirp.

However, healthy companies that did not need loans were finding it laughably easy to raise money. The result was a classic liquidity trap. And, as such, it left men such as Masaru Hayami, then serving as BoJ governor, privately joking that he really ought to raise rates – not cut them – since that, at least, would make long-suffering savers happy.

Ironically, Hayami’s joke was the solution. If you want to increase demand in the economy, you need to get savers off the economic sidelines. When they are liquid, they will be more likely to spend. If you take the Keynesian view that demand drives the economy, then you have to increase the liquidity of the consumers, NOT the banks, especially when the banks are being hamstrung by regulations.

There is historical precedent for this too. Look at how Paul Volcker’s Federal Reserve raised rates in the early 1980’s, and the economy took off after that.

But this point is moot, since all Bernanke has is his Zirp hammer…

The Dow 500?
We could be looking at the “Dow 500” soon, as McGraw-Hill, owner of the S&P 500, and CME, owner of the Dow Jones Industrial Index, are in talks to merge the two indexes. However, the way the indexes have been performing lately, that could be a “lipstick on a pig” move…

China’s manufacturing contracting
For the 3rd month in a row, China’s manufacturing continues to contract. The question is whether this is a sign of the world’s economy contracting, which is the common speculation, or if it is just China having an economic hard landing? My guess is it is a combination of both. But my view is the world economy for the next year will be flat.

More on Cain
I confess to being fascinated by Herman Cain. There was a great editorial by Daniel Henninger about Cain yesterday. What struck me was Henninger’s description of Cain’s business career:

In the late 1970s, Mr. Cain was recruited from Coca-Cola in Atlanta, his first job in business, to work for Pillsbury in Minneapolis. His rise was rapid and well-regarded. He joined the company’s restaurant and foods group in 1978 as director of business analysis. In the early 1980s, Pillsbury sent him to learn the hamburger business at a Burger King in Hopkins, Minn. Then they assigned him, at age 36, to revive Pillsbury’s stumbling, franchise Burger King business in the Philadelphia region. He succeeded. According to a 1987 account in the Minneapolis Star Tribune, Pillsbury’s then-president Win Wallin said: “He was an excellent bet. Herman always seemed to have his act together.”

In 1986, Pillsbury sent the 41-year-old Mr. Cain to turn around their Godfather’s Pizza business, headquartered in Omaha. The Herman Cain who arrived there April 1 sounded like the same man who roused voters last Sunday in Florida: “I’m Herman Cain and this ain’t no April Fool’s joke. We are not dead. Our objective is to prove to Pillsbury and everyone else that we will survive.”

Pillsbury sold Godfather’s to Mr. Cain and some of his managers in 1988. He ran it until 1996 and served as CEO of the National Restaurant Association from 1996-1999.

I have known people like Cain in business, and they are the executives who know how to fix any broken business. These are the kind of people who you want in charge of a struggling company, because they combine innovative thinking and great leadership skills (Steve Jobs comes to mind as another example).

Or, as Henninger describes it:

Unlike the incumbent, Herman Cain has at least twice identified the causes of a large failing enterprise, designed goals, achieved them, and by all accounts inspired the people he was supposed to lead. Not least, Mr. Cain’s life experience suggests that, unlike the incumbent, he will adjust his ideas to reality.

Herman Cain is a credible candidate. Whether he deserves to be president is something voters will decide. But he deserves a serious look.

I got up this morning, all ready to start trading on my new Interactive Brokers account. I open up the trading platform, and I put in a small order on BX4 (the leveraged short on the CAC 40), and I get an error message, stating that I have $0 settled funds. I think this is probably just a simple mistake, since I took care of this last Friday. So I call up one of their customer service drones on their live chat system, and he informs me there is a 7 business day waiting period for checks to clear, and my account won’t be open for trading until October 4th.

Consider these facts:
1. IB received the check from Vanguard prior to September 23rd. Otherwise, they would not have known it was there on that day.
2. They deposited the check prior to September 23rd. I know how check-processing centers work, because I used to work for a bank.
3. They did not PROCESS the deposit in their system until September 23rd, yet they still applied the same holding period rule.
4. It does NOT take 7 business days for a check to clear. EVER.

Ergo, the 7 business days is an arbitrary rule, being applied in a situation where it shouldn’t be. But bureaucrats will be bureaucrats…

IB gets the bear for this one:

This reminds me of one of my favorite old jokes:

In the Old West, a couple just got married, and are riding off to their honeymoon in a horse-drawn carriage. As they are riding along, the horse suddenly rears up for no apparent reason. The husband says, “That’s once,” before calming the horse down, and then they continue on their way.

A few miles further, the horse rears up again for no reason. The husband says, “That’s twice,” before calming down the horse once more. The wife considers this odd, but says nothing, as they continue on their way.

An hour later, the horse rears up again. The husband says, “That’s three times.” Then he pulls out his gun and shoots the horse.

The wife is horrified by what she has just seen, and says frantically, “Why did you do that? That was a perfectly good horse? Although he was a little nervous, he was still a fine horse!”

The husband turns to his wife and says, “That’s once.”

As for Interactive Brokers, that’s twice.

In reviewing my “paper daytrades”, I learned something about myself, and my trading style: Don’t try to swim upstream.

Here are the results of the three trades:

SPXU: +4.75%
SPXU: +1.15%
UPRO: +0.02%

The key there is the two SPXU trades went with the overall market trend downwards, while the UPRO trade was there to catch a bounce. Even though I got lucky not to lose anything on the UPRO trade (although trading fees possibly could have put me in the red on it), it could have just as easily been a loss at the end of the day.

Here is what I said this morning: “I expect the markets will start up, with the S&P 500 eventually reaching the 1170-1175 area, before coming back down. I won’t be surprised to see the S&P back near 1150 by the end of the day.”

I knew what I was doing with the SPXU trade. The markets cooperated nearly perfectly with what I thought would happen (the high today was 1175.87 before it started down). Even now, the S&P 500 is only a little above 1150.

For me, I have to remember that I don’t necessarily need to, as gymnasts would say, “stick the landing”, but I do need to remember the general direction of where the market is heading. Don’t get cute and try to play a bounce for a little profit.

The way I daytrade is to make money on small moves by using the overall trend as my backstop. This way, if the technicals lie to me about an entry point, I can still wait for the momentum to shift with the overall trend. If I get into the trade way too early, I can also use dollar cost averaging as a further backstop once the momentum shifts.

The number of years, in percentage terms, since 1800 that Greece has been in default or rescheduling it’s debt: 50.6%
(From economists Carmen Reinhart and Ken Rogoff, via Bloomberg)

“My keys for today — aside from atoning for my many sins — is to watch the breadth, the volume, and of course, be wary for any late day reversals. Watch the markets when Europe closes. Perhaps most of all, keep an eye on the news. Not the news itself, but see how markets react to new news — that is far more important.

This phase of the cycle is a trader’s market — not a buy & hold investor’s environment.

To the nimble go the spoils.”–Barry Ritholtz

Yesterday was a lesson for me in daytrading, even though I didn’t even make a paper trade. My prediction of a flat market was based on a total lack of confidence in the market’s direction. When you don’t know where the market is going, there is only one way to daytrade it, and that is on the shortest technicals you can find, otherwise known as “Trader’s system”. To me, that is kind of like trying to fly an airplane with no visibility and only the radar to guide you. If you’re used to “flying by radar”, like Trader, then it can work. But I want to see where the market is going.

This morning, I see the stock futures are up, just like yesterday. I see good, albeit temporary, news in Europe. I see U.S. GDP grew more than expected in the 2nd quarter (1.3% vs. expectations of 1.2%), while new weekly unemployment claims came in at a lower 391,000. So the news is all positive. 

But I still see dark clouds on the horizon, and we are heading right for them. Greece isn’t resolved. The U.S. political system is a mess where the only thing they can agree on is what to have for breakfast. Drumbeats of China’s economy having a hard landing are growing stronger. And like yesterday, I suspect the markets know all of this too.

I expect the markets will start up, with the S&P 500 eventually reaching the 1170-1175 area, before coming back down.  I won’t be surprised to see the S&P back near 1150 by the end of the day.

One more thing to consider about yesterday’s fall: Tomorrow’s quarterly options expiration becomes less meaningful with every big drop like that. In other words, a short squeeze play which sends the markets shooting up becomes less likely.

The passage of additional support for Zimbabwe-on-the-Aegean (aka Greece) by the German Parliament means Europe can breathe easier for a little while. Naturally, this is a “kick the can down the road” move, and will only last until Greece blows through the latest round of money, or one of the other PIIGS pokes their debt up through the swiss cheese holes that constitute the European economy.

The next important date is October 3rd, when the euro-area finance ministers “decide whether to release the next aid payment for Greece.”

My advice to them would be to heed the words of Yogi Berra:

“If you don’t know where you’re going, you might not get there.”

The tautological wisdom of Ben Bernanke

“This unemployment situation we have, the jobs situation, is really a national crisis…We’ve had close to 10 percent unemployment now for a number of years and, of the people who are unemployed, about 45 percent have been unemployed for six months or more.”–Federal Reserve Chairman Ben “Captain Obvious” Bernanke

Amazon gets it
Generally speaking, people won’t be replacing their computers with tablets. Any tablet, whether it is an iPad or a Galaxy or a Kindle, just lacks the computing power that a pc has. Maybe when cloud computing becomes viable (read: when the internet has the bandwidth to handle larger applications), then a tablet will be all anyone will ever need. Until then, spending $500 on a tablet just doesn’t make sense to the more budget-conscious among us. However, spending $200 could make sense, at least from a gift-giving standpoint.

That is why Amazon gets it. By pricing their Kindle Fire at $199, they enter my radar for tech toys I would be willing to buy.

Maybe it is just me, but $500 is the price where I look at an item and ask, “Do I absolutely NEED that? Can I live without it?” For a pc, I would spend $500 (or more). For a tablet? Sorry, it’s functions are duplicative of my pc (except for the camera, but I don’t NEED a camera).

But at $199, the Kindle Fire gets my attention. For an “optional” tech toy, that price is in my reasonable range. I won’t say I will buy it, but I would consider it, whereas the $499 iPad doesn’t merit my consideration.

Rare earths to get rare usage
Say goodbye to the super hot rare earths market. With prices too high, companies have started looking for alternatives, especially in cars, where Toyota and GM are switching to induction engines.

It was a fun ride while it lasted, but the rare earth companies have learned one of the basic rules of economics: When you charge too much for something, people will find an alternative to your product.

Dumbest idea of the day
The winner (or loser, depending on how you look at it) today is New York City Mayor Michael Bloomberg, with the following quote on diet and health:

“There are powers only governments can exercise, policies only governments can mandate and enforce and results only governments can achieve. To halt the worldwide epidemic of non-communicable diseases, governments at all levels must make healthy solutions the default social option. That is ultimately government’s highest duty.”

An argument can be made that a government’s highest duty is to defend the rights of it’s people, or to defend them against foreign aggression. If someone chooses to make unhealthy choices with their lifestyle, including their diet, that is THEIR choice, not their government’s choice. If Mr. Bloomberg wants to tell me how I should live my life, including what I should eat, I will happily tell him where to shove it…

If you have ever read the book or seen the movie Barbarians at the Gate, then you should be familiar with KKR Financial (previously known as Kohlberg Kravis Roberts). With nearly 4 times debt/equity, and total debt of $6.8 billion (on a market cap of $1.35 billion), this company has been beaten silly by the markets. Currently trading at $7.75, which is near their 52 week low of $7.36. But if you are willing to wait for their turnaround, KFN pays a sweet 9.1% dividend with a very safe payout ratio of 27%. However, their 52 week high of $10.60 might take awhile in the current market.

Don’t consider this a recommendation unless you have a high tolerance for risk.

DISCLAIMER: I do not have a position in KFN, nor do I plan to get one within the next few days.