Quick summary of yesterday’s markets. One day following large advances in ALL asset classes stocks struggled to hold the gains. Every index except the Dow (which had a high 4 points below Monday’s) had an INSIDE day (lower high, higher low than the prior day). This is NOT what you want to see after a breakout when the Dow rose above the 50% retrace of the decline. Not only that but the S&P 500 remains just above 1100 and just below 1121 – its 50% retracement. There were only three ‘real’ movers’ and they weren’t impressive – again – the buying appears to be ETF’s for liquidty purposes and to avoid headline risk. IF the rally is to continue it had better do so soon, and the lack of even average volume over the past nine sessions says there is no thrust.
TB saiz: “You lead by your deeds, not by your words.”
Isn't it rich?
Are we a pair?
Me here at last on the ground,
You in mid-air.
Send in the clowns.
Isn't it bliss?
Don't you approve?
One who keeps tearing around,
One who can't move.
Where are the clowns?
Send in the clowns.
Isn't it rich?
Isn't it queer?
Losing my timing this late
In my career?
And where are the clowns?
Quick, send in the clowns.
Don’t bother – they’re here.
- Words and music by Stephen Sondheim
…no need…they are on the set! But which set of fools? The ones calling for Dow 15000…or the ones calling for Dow 9000? Take your pick but before you cast your vote consider:
Those that tell you to simply close your eyes and buy were telling you that all the way down…and what did that get you…yet they are the brilliant ones now as we hover at just a 50% retracement of the selloff from the 2007 highs…isn’t that special?
Or do you listen to the other ‘clowns’ the ones the fools think are fools? You know the ones, Nouriel Roubini and Meridith Whitney among others. Sure they were right but even a broken clock is right twice a day. What do they know? Perma-bears! Bah! Humbug!
The best way to decide is to put your thinking cap on and ask which group has your interests at heart. Sadly, that does not include the new, improved (sic), Warren Buffett.
You have to consider your pain threshold and take yourself back to that not-so-distant point in time when your guts were being ripped out by the markets…think from last September to March. It was painful…but is it like a root canal that we forget as soon as the pain goes away? TB admires those who had the guts to buy from September to March, but they were betting the farm…applying fundamental values to companies when there were no fundamental values. Could it be that they were thinking: if the global financial system collapses it isn’t going to matter what you own so why not go for it?
There is a sense of intellect there (“if you can keep your head while all those about you are losing theirs”), but TB doubts it applies in a market that is up more than 60% in less than nine months – yet still down 50% and with horrible 2,3,5, year total returns.
But what is it about ridiculing people who were right? Has Nouriel Roubini lost his touch? Has Meredith Whitney forgotten all the principles of financial analysis that served her so well? Is Mark Faber just an old man who doesn’t get it anymore? Ah, how about Warren Buffett there is a sensible man. Yes, but is he sticking to his own values? Apparently not. He talks of morals but then invests with Goldman Sachs…because they are an honest group? No, because they are the biggest and best…so let me get this straight, Warren: how you make money and how you reward your shareholders doesn’t matter? Have you gone daft?
TB was furious when he was asked at the CNBC sponsored Town Hall at Columbia Business School if capitalism was broken. “No,“ he said, “…it is as it always is…sure there is greed but no more than usual. The worst thing that could happen is for government to do more regulation.” Well excuse TB but in his 37 years experience he has never seen anything like this. Were derivatives to blame? “No, there was just a little too much leverage.” A little too much, Warren? 40:1…that isn’t leverage, that is priced to perfection…in an imperfect market. Why don’t you tell us what you really think Warren?
Can you say with a straight face…and a couple of your guffaws…that no one did anything wrong? That if the government studies what is wrong and tries to set new regulations that will destroy capitalism?
Perhaps TB is being too harsh on him…after all he doesn’t care about the short run…only what happens over the next twenty years or more. If Diogenes were seeking a long term investor his search would have been over. The ultimate long-term investor. OK, except for that foray into ForEx when he was a dollar bear…cost: $15 billion. How about his turnabout on derivatives (“financial weapons of mass destruction”), now he has learned to love them…even made a long-term bet on stock options…what a guy!
Tb would not be writing this were it not for a friend forwarding Arianna Huffington’s piece on this. A leader takes the opportunity to right the wrongs, Buffett had the opportunity and chose instead to give a rah-rah speech to young students, sounding more like Ivan Boesky in his famous “greed it good” speech to business school grads at Cal.
Perhaps he wanted to keep their outlook positive, but then why the very next evening did the air on Bloomberg with Charlie Rose and say exactly the same thing. Rose tried to fish it out of him but no such luck. Nobody did anything wrong…this is normal…the system does not need fixing – period! But wait…stop the presses this just in:
Goldman CEO Lloyd Blankfein just announced that mistakes were made and apologized for their role in the crisis, “we participated in things that were clearly wrong and have reason to regret.” Why thank you for your candor. He went on to say they “are very concerned: about the criticism because “our reputation is very important to us.” (yes, as it was to Mustang Ranch owner Joe Conforte and bordello madam Sally Stanford). To atone for these ‘mistakes’ they will set up, in conjunction with…you’ll never guess…Warren Buffett, a plan to set up a fund to counsel and provide assistance to small businesses.
This from a man who last Sunday told the Times of London he was doing “God’s work.” TB would believe conviceted televangelist Jim Bakker before that. The true statement was that they are concerned about their reputation…after all they are a financial company – no…much more than that…THEY are a bank!…one that doesn’t lend or take deposits.
Here is how concerned they are about their reputation:
*they took the TARP money because it was thrust on them…they had no need for it so they repaid it this year…with dividends on the preferred…forget the savings from federal guarantees on $21 billion of long term debt…which not only did they save several percentage points of interest on, but underwrote it…sold it to hedge funds who immediately flipped it (in fairness, BofA and the others did this too…another Paulson failure to protect the taxpayer).
*one year after the problem they pay huge bonuses…spend enormous amounts lobbying and were the largest contributor to the Obama campaign with a smaller but significant amount to McCain – covering the bases.
*a NY Times article on the audit of the AIG bailout by Neil Borofsky faulted the NY Fed for giving away the store…paying 100 cents on the dollar on credit default swaps to dealers. One creditor, UBS, offered to take an undisclosed cut but quickly silenced by –Goldman Sachs (who was also advising the U.S. Treasury and Paulson was talking to Blankfein every day). Fearing a collapse of AIG they hedged their hedges with others and were thus paid double! Borofsky said that without the bailout their other hedges would likely have not paid off – read they were gone without the bailout. Then NY Fed President Tim Geithner was asked about the UBS offer but said he had no recollection of it but would trust the statements of Fed staffers. Who was the NY Fed Chairman at the time? Stephen Friedman, then and still a director of Goldman and a former partner. You may recall he bought 400,000 shares of GS stock during the crisis while the AIG situation and converting GS to bank status were being discussed. (unlike Martha Stewart, without admitting guilt, he resigned from the Fed but said these were just normal purchases – Martha went to jail…he remains a GS director…is this a great country or what?)
*did Goldman advise Paulson and Friedman influence the Fed to not bail out Lehman? We may never know but that was their biggest competitor….also did they influence the Obama administration on CIT? Interesting that CIT was main lender to small and medium sized businesses…and now Goldman is going to help small businesses?
*Friedman and Blankfein’s trophy wives were involved in a hissy-fit at a Hampton’s charity auction last summer as they didn’t feel they should have to wait in line with the other women when they arrived early. You lead by your deeds, not your words.
This is a company trying to re-image itself while at it’s heart it is still the same old Goldie. If all the above reminds you of the turn of the twentieth century robber baron’s you aren’t far from wrong…after amassing great wealth and continuing their deeds they created lasting legacies of buildings, colleges, etc. Rockefeller gave dimes to the poor.
As a rebuttal, former SEC Chairman Arthur Levitt, an advisor to Goldman, said that Blankfein is the real deal…he is sincere…and he trusts him implicitly. You go, Art! (Note: he is also senior advisor to the Carlyle Group, aka the ex-president’s club)
Sorry, Warren. You are either blind or going daft…the system is broke…and you know what else? It ain’t capitalism! No, it is more like an oligopoly…think about it! Sorry to burden you, dear reader, with this crap…and it is crap…as TB has said for months: the worst enemies of capitalism are it’s strongest advocates.
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TB apologizes for the tenor and length of today’s tirade, but there are so few willing to stick their necks out. Matt Tabibbi was first and was crucified…but others are now speaking out against Goldman (sadly none like Warren who need it for his businesses, not to mention his own holdings thru Berkshire).
TB will be out of the office until Tuesday so he may or may not post in the interim.
Last week TB credited “we will sell no wine before it’s time” to the Gallo brothers but an astute friend recalled where it came from: the now defunct Paul Masson winery with the late Orson Welles doing the speaking. Well done, General!
Hope you all have a good week and that the market gods smile down on you.
TB
Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful. Copyright TBD Capital LLC, © November 18, 2009.
