The first half hour of trading was a real gut-wrencher. With the less-bad jobs report, the initial figure on my portfolio's bottom line was a huge negative number. But after the first few minutes, the losses started falling away like autumn leaves from a tree, and now the figure is……….rubbing eyes…………nicely in the green.
It's amazing what wonders a strong dollar can do on a morning like this
A couple of days ago, the New York Times had on its front page a story about how Wall Street paychecks had quickly returned to the peaks they had been in 2007.
Simply stated, it's like nothing ever happened.
What impresses me about this is that, bluntly stated, Americans are complete sheep. And they can't scale what real theft is.
If some poor soul breaks into a person's house and steals $50 in cash, no one in this country has a problem with the homeowner blowing the burglar's head off.
But if a group of senior banking executives effectively steals $50,000 from every house in America, no one says a word.
Well, that's not quite right. They do say a word. By Jiminy, they hoot 'n' holler for at least several days. Stern words are spoken! Firms editorials are printed! Goodness gracious, they get spitting mad! Let's see how long it lasts:
The graph above captures what I'm trying to say. It shows the instances of news attention focused on the 90% tax that was contemplated against AIG bonuses. Do you remember that? Yep, it was only a month ago, and hardly anyone remembers it. Because no one talks about it. Because outrage in America is measured in hours, not months.
I don't blame the Henry Paulsons, Vikram Pandits, or Lloyd Blankfeins of the world. I mean, look, if you can (a) run your business any way you like (b) be absolutely guaranteed, to the tune of trillions of dollars, that nothing you do will have any lasting consequence (c) know that the average citizen doesn't have the intelligence or patience to sustain any energy against you, wouldn't you just keep ripping everyone off? We are economically rational beings, after all. If this is a nation of sheep, why not simply keep fleecing them?
And so we shall continue to be. Because as long as Americans can get their $3 hot dogs at Costco (with unlimited refills on the accompanying soft drink), they're just fine and dandy.
There are a few folks I do feel sorry for, though. Those AIG executives who got guilted into returning their multi-million dollar bonuses out of fear that they'd be taxed out of them. Boy, I bet some of them feel really stupid. Because they actually thought Congress and the public would follow through! Wow.
Well, it's that time of year again. The time when Barron's wheels out the Barron's Roundtable, comprised, apparently, of the most consistently incorrect nincompoops in the trading universe.
Now, let me be clear. The notion of a widely-read business publication discussing the top investing ideas of world-class money managers, and then reviewing the performance of those ideas annually, makes sense to me. I'm always eager for investing ideas, and Lord knows there are plenty of people smarter than me.
But I have a huge beef with the Roundtable. Namely, that the advice completely stinks. And, just to pour salt on the wound, allow me to share the very first sentence offered in the dialog between Barron's and the esteemed panel:
"Let's forget about 2008 – and that includes most of your stock picks."
OK. Now just hold it. Let me temper myself and get this straight: Barron's interviewed these people for their investment counsel (God knows it wasn't for their good looks……….) a year ago. The entire point of the article was to glean ideas from them in the form of stock picks. And now, a year having passed, and almost every one of them doing miserably badly, Barron's lets them off the hook right from the get-go by saying forget about the entire past year? ARE YOU FREAKING KIDDING ME?
Piss.
Me.
Off.
Anyway……….there's another thing Barron's does which really puts my panties in a bunch, and that is this: they do a completely horrible job with their Report Card (that is, the summary of the members and their prior picks' performance). Among my complaints:
Well, since I have this really cool program that Barron's apparently has never heard about called Excel, I have taken part of my weekend for you, my beloved reader, to show you how sucktastic most of these Roundtable members are. Here, then, in the same order as they appear in the Report Card, are the percentage performance figures for the 2008 recommendations by the members of the Barron's Roundtable:
Scott Black -42.26% Abby Joseph Cohen (rorrwwwwww....) -18.88% Marc Faber -38.98% Mario Gabelli -35.85% Bill Gross -33.42% Fred Hickey (the only bear in the group) 22.25% Archie MacAllaster -62.47% Art Samberg -63.07% Oscar Schafer -12.7% Meryl Witmer -33.6% Felix Zulauf -17.58%
Wow. Quite a scorecard, isn't it? Take a moment to drink in the performance of these people who are paid millions of dollars a year to manage the money of others. While you're doing that, here are some fun facts:
And these people aren't just bad at picking stocks. They can say some really stupid things as well. Marc Faber offers this:
"It would be best at this point for the U.S. to have 10% less consumption. It would make people save again and follow Christian principles of frugality and humility." {emphasis added by yours truly}
Listen. I have some advice for anyone listening out there. If you're ever sitting in a room full of Wall Street types from New York City? M'kay? And you're talking? It's probably not a great idea to cite Christianity as the fount of frugality and humility. That statement probably really spun Abby's dreidel. Not cool.
And, Archie MacAllaster, having been just barely edged out for the worst possible performance, was frustrated at some of the (gasp!) caution a few members were expressing, and huffed:
"I can't believe you people can't find one good thing to say about the market, and at its low last year the market was down more than 50%. The bad news is in the market….The stock market is probably the place to be, particularly in financials……the process has created bargains."
So the logic here is that because stocks have been battered, they are bargains and should be bought. This from a guy whose sound advice yielded a 62%+ loss last year. As Edith Bunker might say, "Archie, Archie, Archie."
If the article from Barron's did anything for me, it is this: it convinced me that virtually all professional analysts and money managers are morons sub-optimal traders. And it convinced me that this bear market has a long, long way to go.
Oh, and Abby? Love the new 'do.
Here in the Silicon Valley, until recently, the "spin" surrounding startup companies and the billions of dollars in wealth they generated rivaled the b.s. level of Wall Street. Here's one of my favorites, published in one of the raggier of the business rags, Business Week:
So to the untrained eye, it appears that a scruffy, pudgy guy in his late 20s was able to score $60,000,000 in cash in the brief span of 1.5 years. Not bad, not bad!
The truth isn't quite the same. He didn't make $60 million. Or $6 million. Or $600,000, for that matter. The financial picture at his company, Digg, is more along these lines (as reported by Valleywag):
Last year, the company took in $4.8 million and spent $7.6 million, for a loss of $2.8 million. In the first nine months of this year, losses grew almost as fast as revenues: Digg took in $6.4 million and spent $10.4 million, resulting in a $4 million loss. At an annual clip, that's more than $5 million out the door a year. Keep in mind that Digg has a lucrative three-year advertising deal with Microsoft, that pays the site a guaranteed rate for its inventory. Without that arrangement, struck last year, driven, most believe, by Microsoft executives' desperation to get in on the Web 2.0 craze, Digg's losses would likely be far worse.
The company raised a fortune in venture capital, which is what permits them to lose money year after year. But, just in case any readers here still might believe the streets of the SF Bay Area are paved with gold, let me assure you that they are made of the same broken asphault as your own town.
As for the markets……….I'm starting to question just how robust the rally in Jan/Feb might be. Perhaps my anticipation of such a rally was simply wishful thinking on my part. See, for a portion of this year, the markets were remarkably easy and profitable for a bear to trade. The past month or so, it's been real work. One of my three accounts is at an all-time high, but the big one is off its highs (it still has a multi-hundred-percent gain for the year, but it's definitely slipped some).
My view of a huge rally at the start of the year followed by a merciless grind lower is a little too picture-perfect. Looking at index action lately, the only word that comes to mind is "sickly."
The markets aren't plunging. They aren't soaring. They're just sort of gasping and wheezing, this way and that. No robust base is being formed. No thrilling top is in the works. This, I suppose, is how price discovery is supposed to work. The fireworks of 2008 definitely have had a bucket of water poured on them.
There is one market left, it seems, which does smell very toppy, and that is bonds. Look at this.
A retracement to the low 120s seems almost inevitable, wouldn't you agree? And although even a four-year old wouldn't call them "toppy", commodities definitely seem vulnerable to resuming their slide:
The real puzzler is crude oil. Looking at this multi-decade chart, one might conclude that this price is, Goldilocks-style, "just right." It has lost 35 months of gains in the span of 5 months (falling seven TIMES as fast as it rose!) yet it is at a major, major support level. Perhaps, like equities, this market has reached a level where it will just grind along at these levels until some major exogenous event gives the price a reason to change.
There are only 42.5 hours left in this trading year, 97.5% of it having passed by already. I've got a couple of very cool ProphetCharts features coming down the pipeline that I look forward to sharing with you in the coming weeks.
I was up again early this morning, just to be fully prepared for the day ahead. Equity futures have been down pretty hard all through the night, with the S&P down about 20 points as of this writing (90 minutes before the opening bell). It was only a week ago today that the same market was up about 60 points based on the excitement over taxpayers getting saddled with a trillion dollars in debt to forgive Wall Street's misdeeds. Time and events sure do move fast in these markets.
In fact, that swift movement is probably is what is making things so interesting right now. Congress, bless its heart, chose not to rubber-stamp a 2.5 page memo handing the reigns of the country over to Paulson. So now it's a game of chicken. On one side you're going to continue to hear the breathless warnings about how the economy will collapse into a protracted recession unless the plan is passed; and on the other, you will have those who want to consider alternatives first (while nervously eyeing daily events, such as the collapse of the largest S&L in history last evening).
Comments reflect the rapid deterioration in focus. We used to talk about individual stock picks; then we started talking about politics (since that dwarfs earnings these days in driving stock prices, RIMM notwithstanding); and now we're talking about what kind of containers can be purchased at Target to store cash. I'm just waiting for folks to break out in discussion about the right ammo to buy.
The challenge, as always, on mornings like this is whether to take profits or let things run. I am feeling very good about the positions I am in, so I have no intention of making an exit. I have only one index position (70 in-the-money November puts on SPY) and perhaps I'll sell 20 of those early just to take some profits off the table. Anyway, I'm going to take advantage of my early awakening and read the paper. Good morning to you all.
