Saturday, November 29, 2008
Friday, November 28, 2008
Like Middlebury, my brother's alma mater:
Dork - This was pretty much the best weekend I've had in a while. (2 min 15 sec)
I went to school in the CITY OF PHILADELPHIA. No one played video games. No one played drinking games (we went to bars). AND, no one played made-up games from children's movies like Quidditch (Harry Potter).
Extending childhood for 22 years is a gross distortion of human nature.
It's no wonder some people never, ever grow up.
I say send the children back to the coal mines!
Dork - This was pretty much the best weekend I've had in a while. (2 min 15 sec)
I went to school in the CITY OF PHILADELPHIA. No one played video games. No one played drinking games (we went to bars). AND, no one played made-up games from children's movies like Quidditch (Harry Potter).
Extending childhood for 22 years is a gross distortion of human nature.
It's no wonder some people never, ever grow up.
I say send the children back to the coal mines!
This is always a big week for market moves. 2008 proved no exception.
From last Friday, this has been the biggest 4-day stock rally since 1932.
On Monday, I whacked a rallying Wells Fargo, again. Shorted at 24.82, then had second thoughts, and fortunately covered it at 24.95.
The same goes for the QQQQ. I shorted some at 27.87 and not long after took the small loss at 28.10.
I dumped my FSLR at 105.20. Bought at 104.57 last week and watched it immediately drop to $85. [Today, it's traded as high as 127.77 - so I was right about the *alpha*!]
I also I already mentioned what I did with my Citigroup on Monday.
On Tuesday, I went right back at Wells Fargo - shorting it at 27.09. I covered that day at 25.87....and then shorted it yet again at the end of the day....at 27.00.
I also started nibbling on old friend, SKF, the Ultrashort Financials ETF. I bought at 157.25 and 154.66.
I dumped the Google I bought last week. I sold my *254.00 stock* at 272.08. [That was too early...Google hit 296.45 this morning.]
I dumped a slew of mining stocks: NEM, KGC, AEM, AU, ABX, and FCX. These I bought a month ago when the XAU was roughly 77. I sold them this Tuesday when it was trading roughly 98.
I sold CDE, my disastrous silver mining investment at .58. Yeah, that's right 58 cents. I bought it long ago, probably 4 or 5 dollars higher. This sale was to generate some much needed *capital losses*.
Note that at this is the point in the year I don't necessarily root for my positions.....I'd rather they move in my favor come January for tax reasons.
On Wednesday, I was already in New York. We drove into Manhattan (absolutely no traffic) around noon. But not before I made a couple trades.
I covered that WFC that I shorted on Tuesday a $1.12 lower at 25.88. Then before I departed, I put out a couple of more offers to short at 28.25 and 29.00 in case the market rallied. The market did pop and I got off the 28.25 sale.
I also put a 142.00 bid in for more SKF. That too got filled while I was with my kids at FAO Schwartz.
Today, Friday, I covered that Wells short at 27.57. Three flips in one week....should I go for four?
I also shorted the S&P 500 by buying SDS at 90.03.
Remember without Big threats....there's no need for Big Government.
Thanks to David K. Fuller for compiling those clips - even if watching that 10 minute reel felt like 4 hours in the dentist's chair!
Thursday, November 27, 2008
Click the pic to enlarge.
Yeah, while I'm down in NY for a few days, I'm trolling craigslist for *bargain* furniture. This is what you can do....when you possess the spacious Chevy Suburban.
We just drove through New Hyde Park not an hour ago. I should have found out if the guy had a decent set of golf clubs that she wanted to liquidate!
Taylor, sounds like Alexandra is available - and feisty to boot. Give her a buzz. No excuses. This is precisely the type of stuff I did when I was your age.
Wednesday, November 26, 2008
Tuesday, November 25, 2008
Monday, November 24, 2008
The market soared on *Obama picks*??? (link)
I defy Businessweek to find 4 people anywhere on this overheated planet who bought stocks today because Barack Hussein Obama nominated his economic team.
They just make sh*t up out of thin air.
It's been 3.5 years now since I dumped Businessweek or, as I called it back then Anti-Businessweek.
Click that link to read a young, unrefined C-Nut smacking down *agitprop*.
Addendum - Okay, Kfell...yeah, Harry Lange more than likely bought some stocks today on the *Obama picks*. He probably bought the *close*!
You know, when a courtroom judge has a *conflict* that might even be perceived as faintly prejudicial,...he recuses himself from the case.
But here we have this disastrous Bank of America / Merrill Lynch merger and the biased Morons who will be voting on the combination.
Click to enlarge the commentary of the Ken Lewis fan club.
There is palpable unrest, disgust, and fear from Bank of America shareholders towards the proposed Merrill Lynch takeover. Yet their voice, their vote will be offset come vote time by *cross-ownership*. Read Markets See BofA’s Deal for Merrill Lynch as Increasingly in Doubt and be sure to peruse the comment thread.
Supposedly, there are plenty of fund managers who own shares of both companies. Merrill shareholders won't in any way be voting against the merger - as their stock would in all likelihood be ZERO without the BAC lifeline, er deposit base. So, if they have proxies on the BAC side as well, they'll most definitely be voting *in block* for the merger; they'll be canceling out dissent on the Bank of America side and cementing the marriage as a *done deal*.
Now as I write this, I realize that my thesis is somewhat ill-founded.
Theoretically, funds that own both companies could sell their Merrill shares AND then vote against the union on the BAC proxy. For sure, if Bank of America backs out of (or votes down) the merger, the stock will pop. I'd say at least $5-$8 per share.
And, presumably, many funds that owned both when the merger was announced may have already dumped Merrill back the deal was announced - if they didn't like what Ken Lewis *acquired*. Make no mistake, MER is what's dragging BAC down. Go on and try, just try to find someone at Merrill that's blaming the merger for their stock's descent. If that alone doesn't tell Ken Lewis that this merger is Moronic, I don't know what would.
So I guess the bias of *cross-ownership* may already be defanged within this shareholder vote.
But then again, why should we dare underestimate the stupidity of anyone who owns BOTH of these pieces of crap???
If anyone does still own them both today, their best bet is selling MER and voting the merger down. If the merger falls apart, their BAC stock will pop considerably.
AND, if the deal goes through anyway, when BAC drops to $4 a share like Citigroup, well then they'll only have lost half of their money!
Wait. Check that. Their best bet is probably to sell them both and cut their losses.
Then they should dump the scant proceeds into commodities...
Quite frankly, I hate it. It looks bad. It's unpleasant to the touch - or so I've heard. I can't stand *them* - never could. I just can't imagine anyone - particularly from the sub-species they are supposed to impress - falling for this obvious con job.
I would posit that nine out of ten *enhancements* should never have been done. Yes, I acknowledge, it may be an *economical* dose of self-esteem when weighed against Big Medicine's cost of psycho-therapy. But still....
I know - this stance is thoroughly fascist. So go on ahead and boot me out of the libertarian society.
On this, I'm with the organic crowd!
[Note - *they* wouldn't help the damsel above one iota.]
Citigroup is up early this morning. It closed on Friday at the scary price of 3.77.
I just sold my *6.28-stock* at 5.90 at 8am this Monday morning.
I knew, I just knew that I should have bought a chunk more. There was no way the Big Government wasn't going to jawbone a *rescue* over the weekend.
However, this changes very little. Any bailout of Citigroup will require hundreds of billions of dollars. Citigroup is definitely a *short* here at $6.
Though, it might easily become a *much better short*. I'll do nothing at this price.
Expect a second, several hundred billion dollar *bailout*, er stimulus, to make its way out of Congress very soon.
Expect it to distract investors from reality and politicians from their profound incompetence.
And expect C-Nut to get short the market again at more favorable prices.
If you meet someone for the first time and converse....
I would say that after 31 minutes, if they haven't asked you A SINGLE QUESTION about yourself - where you're from, what you do for work, etc. - I think you can safely deem them an arsehole. You can be sure that this is a person you'd never want to be friends with, ever.
Ruminate on this rule of mine; you'll realize I am 100% correct.
Now, concerning our residual self-absorbed friends....there's not much we can do about them - 'cept divorce.
[Remember my Jack Welch-ian rule - shed the bottom 10% of your friends EVERY YEAR.]
My wife dialed up one such *good* friend of hers about six years ago. She let her friend prattle on about herself and her frivolous *life* for about an hour before the friend asked what was going on with the future Mrs. C-Nut.
Mrs. C-Nut - Well,...[pause]...I got engaged.
And, if only for a moment, the *friend* became embarrassing self-conscious.
Above is Echo and Narcissus. Learn some etymology, will y'all?
Saturday, November 22, 2008
That my 65 year-old father COULD NOT find the pause button on the remote control. Even when I pointed it out to him, he defended himself by saying, "How could I know that those two lines meant 'pause'?!?!?!"
I still don't know what to do with this one. How many years have we had remotes and VCRs? Twenty-five at least.
The next time you are talking to your cable company's technical assistance, ask them how many calls a day they get from *seniors* who can't operate the remote control. I think it's very well half their workload.
Categorically 'old coots' and 'old bags' are stumped by the *TV power*/*cable power* mind-boggler. Invariably, they leave one of them on permanently.
JPMorgan Chase : "This remains the most attractive bank stock in the book. This is the best bank in the world right now."
Since Cramer pounded the table for JP Morgan Chase on November 4th, JPM has declined a whopping 50%!!!
I may be a Moron for covering my short at $34.71 one week before it dropped sub-$20....
BUT I DIDN'T TELL ANYONE TO GET LONG.
From The Big Picture's disclosures:
The second reason is that if your investment philosophy is dependent upon what you read in the media or even worse, on a blog, well then you definitely need to go back and rethink your investing philosophy. Pronto. Or, you may simply be an idiot (a high probability bet).
Point of Fact - just about all I do for trading/investing research is READ BLOGS - prominent among them is Barry's!
So Ritholtz calls me an *idiot* for reading his own blog!
This is sort of like the guy who'd never join a club that would have him as a member.
Barry, you'd be *wise* to read Marginalizing Morons - and take action upon my advice.
I went for a my walk this morning and froze my tail off. With the wind chill, it was 5 degrees. I had to walk backwards into the wind. This just HAS to be unseasonable weather - even for Boston.
Note the *Tanning Index* was terrible as well.
Maybe this will finally be the year that we finally get a cold winter up here.
On that note, I want to announce that I, MIGHT, finally be getting my annual wish of a Floridian winter. Mrs. C-Nut has to do a lot of work in Manhattan for the foreseeable future so I've wrested the go-ahead for winter in Naples.
Okay, for the month of January anyway.
No condo is rented as of yet. I'll make a last minute decision and have my real estate buddy down there snag me a *deal* in early December. He told me I could rent what I need for anywhere from $900 to $2,500 a month. So the plan is for me to take the two kids down and have my wife fly down for a couple of extended weekends.
I might very well not come back!
In his latest Forbes column, Gary Shilling writes:
Moreover, commodity prices are collapsing as global demand falls and as those who thought commodities were a legitimate investment rush out even faster than they charged in.
Okay, so in his opinion, commodities are not a *legitimate investment*.
So, Gary, what the heck is?
Mutual funds? Currencies? Your house? Floridian condos?
According to Rich Karlgaard, in this comment thread, Gary Shilling:
...has made the bulk of his returns, he claims, in 30-year Treasuries, which he rolls over every year.
Good luck with that one Gary! When the long bond market implodes I am coming at you with *Treasuries were never a legitimate investment*.
William Tanona was Goldman's banking/investment banking analyst. He burst onto the scene about a year ago with a very bearish report on Citigroup. The market sold off December 27, 2007 a couple hundred points. Many bubbleheads blamed Mr. Tanona. His over-the-top bearish report proved to be 100% accurate shortly thereafter. Instantly, William Tanona vaulted to the top as a *credible analyst*.
I didn't blame Tanona for that little sell-off - I praised him. I was short that day and made a bundle.
So why did Goldman Sachs layoff a star analyst? All we can muster for a reason is conjecture. He could have just been caught up in the firm-wide layoffs. He could have been *overpaid*. Who knows what really happened?
One possibility, could be the firm's perception Tanona got lucky with his short calls on the investment banks. He did wax bullish on Morgan Stanley around May(?). Or he could have just not been *in* with the higher-ups. It wouldn't be the first time Billy got screwed. Despite being 6'8 he got cut from our high school basketball team I believe sophomore and junior years. The coach felt compelled to put him on the team senior year but that's it; he got no run. Billy then walked on the team at Villanova. How many guys can walk on a Big East basketball team but couldn't play in high school?
Another possible reason Billy got the axe is that with the demise of Lehman and Bear Stearns, THERE ARE NO INVESTMENT BANKS LEFT TO ANALYZE.
Yes, you read that right, Billy went to my high school. Haven't seen him in a few years but when I do, I'll buy him a beer - a premium beer - for all the dough he made me last December.
I wouldn't worry for a minute about him finding another lucrative position. Goldman guys land on their feet, every time.
Goldman Sachs traded down to 47.41 this week - a nadir below its 1999 IPO price of $53 a share.
From MSN Money:
Buffett's Huge Derivatives Bet Proves Costly
Shares of Warren Buffett's insurance holding company are on the ropes this month, plunging 30% in part because the famed investor dabbled in an area of the market he has long publicly derided: derivatives. And due to a tangled web of financial relationships, they may be taking Goldman Sachs shares down with them.
Investors are concerned about a $37-billion bet that Buffett made last year that U.S. and world equity values would be higher in 15 to 20 years than they were then, when the Dow Jones Industrials were trading around 13,000. Through his firm, Berkshire Hathaway, Buffett sold option contracts, known as "naked puts" to an undisclosed group of investors for around $4.85 billion, reportedly using Goldman as broker.
Because of its solid-gold credit rating, Berkshire Hathaway was not required to put up collateral to make this trade. But now rumors are flying on Wall Street that the owners of the contracts have demanded that broker Goldman Sachs put up collateral for the rest of the amount due. Since the value of the trade could be infinite, the collateral demands are said to be large, and fears that Goldman will struggle to make good on its obligation has panicked shareholders. Indeed one theory making the rounds this week is that Buffett put $5 billion into Goldman at around $125 per share in September not as an investment but to help provide funds for the collateral.
Okay, and this is the only slight *defense* of Warren Buffett I'll put forth, selling *naked puts* is not equivalent to credit derivatives and CDOs - those are what Warren was referring to by "weapons of mass destruction". He's not a hypocrite, just a foolish perma-bull.
Why would Warren want to add a *$37 billion long* to his portfolio. HE'S ALREADY FREAKING LONG THE MARKET. No doubt his insurance companies are already FREAKING LONG THE MARKET via their investments.
Warren simply made a large bet, levering up his portfolio - AND he did it at bad prices. He should have at least waited until this year, when the Dow was 5,000 points lower. Do y'all even think he'll be alive in 15-20 years?
Now here's John Mauldin:
"Isn't this the oracle that called derivatives, 'financial weapons of mass destruction'?"
I personally think that Warren made a very good bet. I would be shocked if the Dow was not at 13,000 in 20 years. Inflation will do most of that heavy lifting. But it does make for an interesting discussion now.
Okay, John. It most certainly WAS NOT A GOOD BET. His timing sucked. So not only did he get a sh*t strike price, now that the market is substantially lower, instead of buying *oversold* stocks, he has to deploy his capital to a margin call.
Why do these guys all lick each other's jocks?
Friday, November 21, 2008
For a day anyway.
Got beat yesterday. With the Dow dropping 440 points to near 7,500, my *spread* went against me.
I am essentially long oil and oil stocks which got hammered. I am also short long term Treasuries through TBT. Both of those positions killed me.
Against that I have my massive short position in Wells Fargo. With Citigroup dropping like a stone, Bank of America threatening single digits, and JP Morgan falling off a cliff, Wells Fargo dropped a mere 1.87 yesterday. If it traded in line with the other banks, down 3-4 points, I'd have fared okay.
Instead, I lost a good chunk of money Wednesday and Thursday.
Luckily, today I made it back.
The Dow rallied 500 points in the final 90 minutes to close at 8,046.
Here's what I've been doing since Tuesday:
With the market tanking, I went *bargain* hunting.
I bought Simon Property Group, yeah the mall REIT I've been short most of the year, at 41.86. Sold it yesterday at 43.65. Today it traded as low as 33.79. That stock was $100 two months ago!
I added to TBT, my long term Treasury short ETF. Was a horrible purchase. Bought at 57.74. This thing dropped below 50 the next day! Remember, this is a long term disinvestment. Who's going to keep buying 30 year Treasuries yielding 3.7% going forward? Can't wait to see the international reaction to our *Federal tax receipts* come the new year.
I got long the XAU synthetically at 77.00. In this *baby with the bathwater* selloff it fell to 67.48 yesterday. This morning it opened up 6 or 7 points. I dumped my position at the equivalent of 76.70 in the index. And, what do ya know, it ran up another 10 points. The index closed up 18.72 today to finish at 88.80. [Gold, the physical commodity, rallied 54 bucks today to close at $799 an ounce.]
I bought a smidge of FSLR at 104.57. Was trying to buy a little *alpha*. It didn't work.
On Thursday, just about the only good thing I did was sell my NASDAQ-100 position, the QQQQ at 27.22. It closed yesterday, at the multi-year low of 25.56.
Then today, I bought it back at 25.46 and sold it at 3:51pm - after the big rally, at 26.42.
Now as for Wells Fargo....did I pick the wrong bank to short or what?
It was down 4.5 points the past two days. Meanwhile, JPM dropped 9 points between Wed and Thur, AND was down another 3.5 points today.
Furthermore, Bank of America fell 25% over Wed and Thur. AND Citigroup positively imploded falling from 8.66 on Tuesday afternoon to close at 3.77 today - a loss of 57%!!!
For kicks, I bought 1,000 shares of Citigroup at 6.28 on Wednesday. I figured, what's the worst that could happen? I could lose $2,000-$3,000.
So here I am, two days later down $2,500!!!
It's a real test of fortitude not to buy a *chunk* more and try to scalp it. So far I have resisted.
Make no mistake...this is scary. If depositors start lining up to take their money out of Citi who knows what that will do to our fiat ponzi scheme. This keeps me up at night - AND I don't even own anything; no home; no mutual funds. Ignorance is bliss!
Another from the *alpha seeking* file was STP - Suntech Power Holdings - a Chinese Solar Company (who cares what it is really?). I bought some at 5.80 on Thursday. I was actually reading an *old* Forbes magazine and I read Jim Oberweis' recommendation to buy it. In the October 27th issue, he said to buy it AT $35 PER SHARE!!!!
In his defense, he wrote the column on October 2nd. So that 83% he lost his readers actually occurred over 1.5 months. So he's vindicated, right?
Oh yeah. In that same issue Ken Fisher said to buy Bank of America at $34. What a total bleepin' idiot!!! BAC flirted with single digits today (down to 10.01) before closing at 11.47. The sheeple have given this man, what, something like $46 billion to *manage*?
Also, Ken Fisher said to buy Citigroup at $25 in March. Listening to this guy would have absolutely killed you!!!
I covered my tiny BAC short at 13.84 the other day. It was tiny because it was hard to implement with all the *rule changing* (i.e. short banning) in September. I was short from 30.50.
I added to my erstwhile, flailing oil long, DXO. My average price is now 4.18. Funny Circus Bears was absolutely right when he claimed, 11 days ago, that I was a "little early".
However, I left myself plenty of room to average down. Still have more bullets if needed.
As for being early....I was early on SKF too. Early getting in, and waaaay too early getting out. That thing traded above $300 today. Of all the bunker-digging, end-of-the-worlders that I read, NO ONE, I mean NO ONE had a $300 target on the SKF. $200 or $250 are the high numbers I recall.
I almost forgot. I covered two-thirds of my Wells Fargo short today. I sold my January 22.5 puts for an average price of 4.91. Bought em at 1.55 in July.
And I covered my short stock position in WFC at $21.75. My cost bases I'd have to dig up - though the profits on this were far from spectacular. If memory serves me, I started putting some of this short on at 23.95 back in July and then some more around $27.00. Recall this stock spiked to the insane level of $44 in September. Of all my trading losses over the years, that *paper loss* was the most brutal. So it was a victory just get the money back.
This stock is definitely heading lower. I just needed to lighten up on it given my presumption that the overall market is due for a bounce. Of course I could buy the *market* against it - as I've been leaning that way on a short term basis, BUT I'd rather just clean up my account. I still own Jan 30 and April 30 puts on Wells.
The stuff I have now - oil and short Treasuries - are *investments* as much as they are trades. I'm comfortable holding them 6 months to a year.
One last *alpha seeker*....today I bought Google at $253.95. Dumping my long term holding near $450 has proven prescient, to put it mildly.
Wasn't talking about the stock market...
Above find one *composting* toilet.
Did you know the average person spends three years of their life on the "john"???
And who knew there was a World Toilet Summit???
Below find one *envirolet*:
It'll cost you between $1,500 and $1,800 bucks. At that price, I wouldn't risk letting my *Dad* use it!
Ain't nothing like turning defecation into a sacred ritual.
The website says:
Operation is sanitary, odor-free and environment friendly.
Odor-free? From a waterless toilet?
Just don't tell these eco-pagans that 70% of all water *consumed* is for agriculture.
What kills me is that I am the biggest environmentalist of anyone I know.
I work from home AND I've got my whole family peeing in the shower!
Wednesday, November 19, 2008
So last Thursday I went to one of the five (?) local bars. The Patriots were playing the Jets; it was almost a full house.
I'm sitting in the middle with three other dudes and I notice behind me, in a booth, was a *mom* I recognized from my son's *pre-school*. She's there, all dolled up (why?), with a gentleman I assume is her husband. That's how everyone rolls out here - married.
Maybe an hour later she walks by to go to the can, on her way back I said hello. Of course she knew who I was - though we'd never so much as swapped names.
So now we're talking about the *teachers* and other nonsense, meanwhile her husband is right behind us. She didn't introduce him or pay him any mind. After a few minutes it's apparent that she's *over-served* as she kept gabbing and putting her hand on my shoulder. Something here was off. What should have been a 90 second hello was pushing 10 minutes. I'm giving her short answers and glancing toward the football game - any little hint I can think of to remind her that I was out with my buddies, and she with her husband.
It was slightly weird, but nothing extraordinary for a bar, on Earth.
Much later in the night, I myself have to use the *comfort station*. The seal was getting broken.
So I'm in there, and some dude comes in, "What's up?", he says snidely to me. It was the *mom*'s husband.
He engages the urinal beside me and eerily starts flopping around his manhood.
"Are you [airhead's] husband?"
He responded in the affirmative and started giving me all sorts of unnecessary attitude.
Whatever bro....I certainly don't need to take crap from some random insecure dude.
So this couple decided to move from the nearby booth to the end of the bar. Another 45 minutes or so passes. It was getting late, the Patriots had lost, and the band started playing. Next thing I know, the *mom* has left her hubby and gone down to sit at the other end of the bar, all by herself, 7 feet from moi.
Now she's down here for a long time. Obviously they were having one of those *drunken couple arguments* - with an innocent CaptiousNut somehow interjected into the middle of it.
That's just great. This was so not my end-game for a Thursday night at the bar. I had to see the guy's member for crying out loud.
A few songs later, the husband approached his wife and they seemed to have somewhat of a reconciliation.
You know what probably happened?
This hammerhead husband had, more than likely, just seen that movie!
Cynical market participants talk about the PPT all the time.
I have no opinion on the matter. Nothing would surprise me.
Plunge Protection Team - The Working Group on Financial Markets (also, President's Working Group on Financial Markets, the Working Group, and colloquially the Plunge Protection Team) was created by Executive Order 12631, signed on March 18, 1988 by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence".
Here's another video of the PPT being discussed on CNBC.
As I have been getting older (wiser?) I've accidentally become more tolerant of the full gamut of *loon* hypotheses.
Tuesday, November 18, 2008
Pretty cool submission - and description - on Flickr.
I'm just wondering how this guy got a shot of The Great Lawn with nary a soul in sight!
If memory serves me, the Feds wired Ivan Boesky and he tried to get Michael Milken to say something incriminating on tape.
Unlike the movie, it didn't work in real life.
Disgraced *john* Eliot Spitzer wrote an op-ed piece in the Washington Post the other day.
How To Ground The Street
The Former 'Enforcer' On the Best Way to Keep Financial Markets in Check
President-elect Barack Obama will soon face the extraordinary task of saving capitalism from its own excesses, much as Franklin D. Roosevelt had to do 76 years ago.
But these are all mere manifestations of three deeper structural problems that require greater attention: misconceptions about what a "free market" really is, a continuing breakdown in corporate governance and an antiquated and incoherent federal financial regulatory framework.
First, we must confront head-on the pervasive misunderstanding of what constitutes a "free market." For long stretches of the past 30 years, too many Americans fell prey to the ideology that a free market requires nearly complete deregulation of banks and other financial institutions and a government with a hands-off approach to enforcement. "We can regulate ourselves," the mantra went.
Those of us who raised red flags about this were scoffed at for failing to understand or even believe in "the market." During my tenure as New York state attorney general, my colleagues and I sought to require investment banking analysts to provide their clients with unbiased recommendations, devoid of undisclosed and structural conflicts. But powerful voices with heavily vested interests accused us of meddling in the market.
Time and again, whether at the state level, in Congress or at the Securities and Exchange Commission under Bill Donaldson, those who tried to enforce the basic principles that would allow the market to survive were told that the "invisible hand" of the market and self-regulation could handle the task alone.
The reality is that unregulated competition drives corporate behavior and risk-taking to unacceptable levels. This is simply one of the ways in which some market participants try to gain a competitive advantage.
No major market problem has been resolved through self-regulation, because individual competitive behavior doesn't concern itself with the larger market. Individual actors care only about performing better than the next guy, doing whatever is permitted -- or will go undetected. Look at the major bubbles and market crises. Long-Term Capital Management, Enron, the subprime lending scandals: All are classic demonstrations of the bitter reality that greed, not self-discipline, rules where unfettered behavior is allowed.
[But what about the fraud, malfeasance, and greed at Fannie Mae? Oh, that's right, still a Democrat first, I guess.]
Those who truly understand economics, as did Adam Smith, do not preach an absence of government participation. A market doesn't exist in a vacuum. Rather, a market is a product of laws, rules and enforcement. It needs transparency, capital requirements and fidelity to fiduciary duty. The alternative, as we are seeing, is anarchy.
One of the great advantages U.S. capital markets have enjoyed over the decades has been the view -- held worldwide -- that there was an underlying integrity to the representations market participants made, because the regulatory framework in which they were made was believed to provide genuine oversight. But as we all know, the laws requiring such integrity are meaningless without a government dedicated to enforcing them.
But these old boxes and formalities still determine how entities are viewed and regulated. It should surprise nobody that capital found the crevices in the regulatory framework. That is what capital is paid to do. But we failed to respond with a regulatory framework flexible enough to plug the leaks.
We do not need additional fragmented areas of federal regulation to handle hedge funds, sovereign wealth funds or derivatives. We need a unified approach that addresses the underlying issues: what kinds of leverage we wish to tolerate, how to measure risk, how much disclosure various trading products should provide.
We began to try to craft such a unified model in New York, as did Treasury Secretary Henry M. Paulson Jr. in Washington last year. But it is urgent that we finish the job. Having flooded the market with cash and seen the government take a chunk of many of our largest financial institutions, we now need to craft the rules that will apply to all market participants.
First, we need better control of systemic risk.
[Oh boy! Systematic risk again. The only way to rid ourselves of this 'risk' is to rid ourselves of 'systems'!]
Second, investors must be protected with adequate, accurate information. Firms must offer transparency both to individual investors and to government regulators.
[Like the banks AND the government not telling us who's borrowing money at the Fed window?]
And third, as Eric R. Dinallo, the superintendent of the New York State Insurance Department, has wisely pointed out, we will have to step back from the current environment in which government has become a guarantor of all major risk. The so-called moral hazard will serve to devalue risk in the market, and this too will have a debilitating long-term effect on capital flows. Only if private actors have to bear the real risks they incur will the market function properly. We are now perilously close to nationalizing risk.
[That's about all I can agree with!]
Here's commentator "ac" from Calculated Risk:
"Those who truly understand economics, as did Adam Smith, do not preach an absence of government participation. A market doesn't exist in a vacuum."
I think sensible critics of the government in recent years have argued that the government's failure has been to act in such a way to promote market excesses rather than restrain them.
In other words, in major national or international crises it seems that the unifying force of easy monetary policy emanating from government agencies is what is coordinating and promoting these extreme excesses.
While it may be popular pressure or special interests that are in some way "forcing" these agencies to take actions that they may think is unwise (as seems to be the case with the Fed in the 1920s), it doesn't fundamentally change the fact that some government apparatus is playing a central role in creating a mass hysteria.
This is what governments frequently do, after all. How is acting to coordinate an unwise bubble any different than acting to coordinate an unwise war?
If we did the latter, why is it unlikely to think we would also do the former if in the short-term it demonstrably provided economic growth?
ac 11.17.08 - 9:05 pm
Indeed, Eliot blames all our financial ills on selfish greed and a lack of *proper* enforcement.
I submit that greed, "for lack of a better word", is merely a function of the stakes. The height of the stakes in our wealthy society is what invited graft and recklessness. Eliot's complaint is one of human nature - which, by the way never changes.
As commentator *ac* insinuates, probably the best we can hope for from Big Government is that it just not feed the frenzy.
That would mean that it should never have been lowering interest rates in the early part of the decade; that it should never have been propping up subprime housing via FHA and Fannie Mae.
The more I think about it, the more I am inclined to believe that we need fewer laws, fewer agencies, and less regulation in the financial world. I'd even take it a step further and propose an end to publicly traded companies.
Because once the MASSES start consuming something - make that anything - (here, investment products) all it does is open the door for MASSIVE government interference.
Click here to read what I've previously written on *john* Eliot Spitzer, aka "Client Number 9".
Sell it. And when it's down, buy it.
That seems to be the formula for trading success these days.
I did no *trading post* yesterday because, well, I made no trades.
Today, I doubled up my NASDAQ-100 long when the market sold off. I bought the QQQQ at 27.73 and I dumped it after the close at 28.87.
Remember I still have my 28.54 stock that I bought after the close on Friday. For a minute this afternoon, after the market had reversed hard off its low, I thought about staying *really* long for tomorrow. [The Dow rallied 319 points in the final hour of trading.]
Then I wussed out and dumped today's additional stock.
Coming in real long hasn't been a winning formula for a while now.
Though I am seeing palpable signs of exhaustion - in oil service stocks and also in Home Depot and Lowes. By exhaustion I mean they've been holding up in the face of continued crude weakness, and, in the case of the home improvement duo, both HD and LOW rose on horrible earnings reports.
On the other hand, the financials are still a problem for the overall market. The UltraShort Financials ETF - SKF traded up to 200.96 this afternoon!
I just came across a funny website - geekologie.com
The above pic is from their post Prevent Drunk Emailing: Google Mail Goggles.
I also liked Good Idea!: Man Submits Drawing Of Spider Instead Of Payment For Overdue Account.
Tool around that site. Let me know if you find any other good ones.
New York City, like everyone else, is in dire fiscal straits, again.
The Morons in charge are floating the idea of a commuter tax, again:
NEW YORK (CBS) ― The City Council wants to balance the budget on the backs of commuters with a new tax that's a lot like an old one. They want to make people that work in the city, but live in the suburbs pay.
The state Legislature killed the commuter tax in 1999, but some City Council members think making people who work in the city pay for the services they use is better than making city residents bear the brunt of the city's budget crisis.
City budget director Mark Page seemed exasperated Monday at a City Council hearing where the head of the council finance committee demanded the reinstatement of a commuter tax to balance the budget.
"Clearly that's a tremendous revenue stream that should directly go to the city of New York," Councilman David Weprin said.
Estimates are that a new commuter tax could bring in $715 million next year.
"As New York City's budget director I'm always eager for money we don't have to pay for that we can spend and the commute tax, if we could get it back, fits that," Page said.
Tax the unborn, tourists, the dead, commuters...tax anyone or anything that can't vote you out of office.
This seems to be the extent of our politicians' skill.
This is the very opposite of optimal taxation - which would directly tax usage. In other words, people who use the subway, should pay the full costs of the subway via their fares. People who use the schools should ideally pay for those hoosegows. Now that the statists have created this labryinthine third party system of giveaways, the great illusion has set in on the public mindset - the illusion that since SOMEONE ELSE is paying for it, personal entitlements are free.
Getting back on track...
Why can't we get a budget director who's EAGER to cut expenses - instead of EAGER for more money to *spend*?
NYC is going to be in serious fiscal trouble for the foreseeable future. They've been living off Wall Street tax receipts for ages, BUT many of those firms, the ones still solvent, won't have any taxable earnings for years - due to loss carryforwards.
Remember this boob, Ara Hovnanian? He's the face of Hovnanian Enterprises a homebuilding concern. Here's what he said the other day:
"Housing starts went down. We're proposing a temporary, 30 year, fixed-rate mortgage at 3 percent. That would be for next year. The rate would go up to 4 percent in 2010."
Who's going to *give* everyone 3 percent mortgages?
Well, the government of course!
Yeah, let's just ignore the fact that low teaser mortgage rates are a huge part of what got us into this mess in the first place.
"A lot of focus has been on foreclosures. But that is not going to solve the problem. There is a problem of supply and demand. Supply will be out of balance until we can stimulate demand."
Or, Ara, how about we reduce supply? How about we sit back and watch a bunch of arrogant homebuilders go bankrupt?
Plus, one could stimulate demand all they want - if there are 3.5 million more homes than households, what the heck difference will that make?
Look at what this dimwit offered as a *housing prescription* last July:
"‘Raise prices,’ said (CEO) Ara Hovnanian. ‘Buyers aren’t buying because they think you’re going to lower prices again. There’s interest but there’s fear. Raise prices 3-4 percent. And quit giving discounts.’"(link)
When I wrote that post, Ara's company was down to $1 billion in market value. Today it's trading at $2.79 a share and is down to a $216 million stock. Even at that *reduced* price, a full 50% of the float is still shorted. Zero here we come!
We came home at 1:30pm on Saturday to find a message on the answering machine. It was a recording from the police alerting us to a *manhunt* in our area. They said the suspect tried to break into an occupied home only 3 doors down from us. So yes, they gave the actual address and a description (grey sweatshirt, etc.) of the suspect.
The message said that the "resident scared him off". Anytime someone tries to break into an occupied home it's a little bit scary. You're thinking, "are they strung out on drugs?" or "a rapist?".
This guy is lucky that I wasn't home as I'd probably have *taken him out* long before the police arrive. The back of the targeted house is almost within my line of sight right now, sitting at my PC. Of course, if I had subdued the suspect in my backyard I'd have whipped out my camera and blogged it for y'all!
I just thought the reverse 9-1-1 was pretty darn cool. Why has it taken them so long to implement something so simple and so potentially fruitful?
What probably wasn't cool, however, was the fact that they nabbed the guy essentially in my backyard. They caught him two hours later hiding in the woods with my turkeys. According to the paper, the hood had a *long criminal history*.
I tried to find a good pic for *manhunt* on google but only found crap about inverted men and some violent (oft banned) video game. Enjoy the kitty instead.
Monday, November 17, 2008
The wires today were abuzz with the report of Mark Cuban being charged with insider trading. Four people emailed or messaged me within the first hour of the announcement.
Put yourself in Mark Cuban's shoes.
You own a bunch of Mamma.com stock. They call you up and ask if you want to participate in another, dilutive offering (PIPE). Why are they raising more capital, you might ask? Why can't they get their act together? They should be able to fund growth from cash flow by now. This thing smells....so you think.
[Point of fact, EVERY SINGLE COMPANY that raised equity capital this year is trading below the *prints* - with the exception of Wells Fargo, for now.]
So if I'm Mark Cuban, I'm thinking I have to get out of this stock/investment. Is it technically illegal for him to sell now that he's learned of an upcoming PIPE? I'm no lawyer. I haven't the faintest idea. But such a law seems like veritable extortion.
Hey Mark, can you give us some more money ? No? Okay, by the way you can't take action on the knowledge of our upcoming dilutive secondary.
Can Mark even refuse the solicitation? How this works I'm not sure. Intuitively, it seems that by even courting existing investors for funds, Mamma.com was distributing inside information that rightfully should have been publicized first. Again, I'm no attorney - I'm just pointing out apparent inconsistencies.
So yes, if I'm Mark, I sell the stock. Worried about insider trading? No way. In the oft chance you ever get caught, you merely have to give back the profits - or in this case, the savings.
Don't expect for a second for Mark to settle on this one. He's a fighter; a self-righteous crusader if there ever was one. If anything, for a million or two bucks, I'm sure Cuban is basking in the notoriety of the moment.
Clearly, Mamma.com - which is now Copernic Inc, a bankrupt .28 a share company - clearly CNIC ratted Mark Cuban out. They're probably pissed at him; they probably blame his exit for their company's demise. Yes, this is how these clowns really *think*.
If this is indeed the law...if it's indeed true that large investors can't dump their stock before a dilutive print...
Then if I was such an investor, I'd be using caller ID to screen out management.
Okay, Forbes' article pretty much confirms everything (above) that I assumed about Mark Cuban. Who needs the news when I can infer the truth from blurry data points?
In the blog, Cuban writes, "I'm not going to discuss the good or bad of PIPE financing other than to say that to me it is a huge red flag, and I don't want to own stock in companies that use this method of financing.
"I don't like the idea of selling in a private placement, stock for less than the market price, and then to make matters worse, pushing the price lower with the issuance of warrants. So, I sold the stock."
Addendum - Cynics are alleging that this *case* is government retribution for Mark's new website bailoutsleuth.com that is seeking to shed light on, well, Wall Street's *bailout*. In less tumultuous times, yes, this is the crap they like to pull. BUT today I'm not sure the thugs are nearly coordinated enough to scheme for retribution. Make sure y'all check out that site - it's pretty interesting.
Well, at least it WAS WORTH around $50 billion for a moment there back in September.
Today, Merrill Lynch's market cap is about $19 billion. The stock is down from to 11.78 as I type this. Initially, the Bank of America bid valued MER at roughly $29 per share.
Don't even for a second tell me that BAC is what dropped Merrill Lynch. Merrill would probably be bankrupt otherwise.
When I tell y'all that they're laughing at Ken in Manhattan....I'm not exaggerating a little bit. I've got hearsay evidence from the *trenches*.
It would have been bad enough if Ken Lewis agreed to take over MER at a price of zero. Instead, he diluted his stock to the tune of $50 billion.
Though it was said by many at the announcement of the merger, I'll say it again here:
If Merrill Lynch needed to be taken over...then it certainly didn't warrant a premium.
But it's time now for Ken Lewis to walk away from this deal. He's been duped by the more sophisticated Wall Streeters on this one. John Thain appealed to Ken's gargantuan ego and it worked like a charm. Lewis may as well have been a fanny-pack wearing tourist at a professional poker table - he was bent over that easily.
Note that today, at $65 per share, the venerable Goldman Sachs is worth less than $25 billion - half of what Kenny bid for Merrill!
If only Ken had waited....
Alright Kenneth Lewis, last chance, back out of this ill-fated Merrill deal to prove that you are at least slightly smarter than a box of rocks.