The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Friday, July 31, 2009
You See What You Want To See
Hat tip to Financial Armageddon and Immobilienblasen for this little bit of comic relief. Actually, it perfectly sums up the current wave of optimism in which good news is good news, bad news is good news, no news is good news, and insightful financial news is nonexistent.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Sunday, July 26, 2009
With Leaders Like These...
Another wonderful example of the brain trust leading our country to financial ruin. Is it any wonder that Stark represents the great and bankrupted state of California? Stark must be thrilled with the massive "wealth" increase we've experienced this last year.
link to video
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
link to video
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Friday, July 24, 2009
High Frequency Trading
Two hours is the new long-term holding period. 2% of traders are responsible for 70% of the activity. It makes me pine for the days of Pong and Atari. Nevertheless, you should know what you're up against.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Thursday, July 23, 2009
Earnings Season Progress: Perception vs. Reality
The lunatics are back in charge. First we had Meredith Whitney upgrade Goldman Sachs. She was rather cautious on the fundamental prospects of the banking sector, but did anyone care? No.
Next, we learned that Meredith has a pretty good contact at Goldman as they reported a blowout quarter. Of course, they're benefiting from the "unfortunate" demise of a few of their key competitors which has resulted in widening spreads and terrific near-term trading profits. How many other large "banks" will benefit from this? A couple. Commercial and residential loans continue to deteriorate. Does anyone care? Not really.
Intel followed. Nice quarter. Revenue was better than expected which helped boost gross margin. Of course, Intel is at the back end of the supply chain and not the best company to listen to when it comes to tech industry guidance (I'd happily wager that they guide down revenue before their next report). We also just learned that AMD posted a fairly poor quarter, so Intel clearly benefited at the expense of a key competitor. That's a different story than a general tech rebound. Does anyone care? Doesn't look like it.
Apple was next to release. Not surprisingly (they always guide low), the company posted a strong quarter with particular strength coming from iPhones. Despite the recession, this is clearly the hottest consumer gadget on the market. Does this have any bearing on technology consumption in general? Not much. In fact, it could easily be argued that the money that cash-strapped consumers are spending on iPhones and monthly calling plans is money not being spent on other products. Does anyone care? Not much.
Plenty of companies have already reported. In general, we're seeing continued weakness on the top line (revenue) with pretty good cost cutting. With analysts having low-balled estimates (at times without company guidance), we're seeing plenty of headlines heralding a slew of earnings beats. With each beat from a high-profile company, the market charges higher.
The bulls contend that corporate America will be nice and lean when the imminent rebound occurs thanks to aggressive cost cutting. Margins will rebound strongly as will earnings. We've also seen a few of the quieter bulls pop up in the media recently. Bill Miller and Mario Gabelli have just sounded the all-clear. In addition, plenty of analysts have been upgrading stocks to "Buy" on the heels of these "wondrous" earnings. Interestingly, these folks were awfully quiet earlier this year. Now that the market has jumped 35% and many stocks have more than doubled, they're telling us that it's safe to wade back in. Different business cycle, same self-serving lemming behavior.
Yes. A few large well-known companies have reported decent earnings, but these companies are not at all indicative of the earnings prospect of the S&P 500. There are unique and one-time explanations for these results, and the weaker reports of many lesser-known companies confirm this. Even the almighty Google reported nearly flat revenue growth. Where was the concern? The market barely budged.
For those of us with a less sanguine view of our economic prospects in the next few years, the continued weakness in revenue is a serious concern. Costs can only be cut so far before margins are impacted.
We've been steadily reducing our exposure to equities during this rally. We were getting paid well to incur risk back in February and March. That's no longer the case.
Does anyone care? Not at the moment. At some point, they will. Sentiment can drive the market in the near-term, but the fundamentals will eventually reassert themselves. Until then, be wary of the lunatics.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Next, we learned that Meredith has a pretty good contact at Goldman as they reported a blowout quarter. Of course, they're benefiting from the "unfortunate" demise of a few of their key competitors which has resulted in widening spreads and terrific near-term trading profits. How many other large "banks" will benefit from this? A couple. Commercial and residential loans continue to deteriorate. Does anyone care? Not really.
Intel followed. Nice quarter. Revenue was better than expected which helped boost gross margin. Of course, Intel is at the back end of the supply chain and not the best company to listen to when it comes to tech industry guidance (I'd happily wager that they guide down revenue before their next report). We also just learned that AMD posted a fairly poor quarter, so Intel clearly benefited at the expense of a key competitor. That's a different story than a general tech rebound. Does anyone care? Doesn't look like it.
Apple was next to release. Not surprisingly (they always guide low), the company posted a strong quarter with particular strength coming from iPhones. Despite the recession, this is clearly the hottest consumer gadget on the market. Does this have any bearing on technology consumption in general? Not much. In fact, it could easily be argued that the money that cash-strapped consumers are spending on iPhones and monthly calling plans is money not being spent on other products. Does anyone care? Not much.
Plenty of companies have already reported. In general, we're seeing continued weakness on the top line (revenue) with pretty good cost cutting. With analysts having low-balled estimates (at times without company guidance), we're seeing plenty of headlines heralding a slew of earnings beats. With each beat from a high-profile company, the market charges higher.
The bulls contend that corporate America will be nice and lean when the imminent rebound occurs thanks to aggressive cost cutting. Margins will rebound strongly as will earnings. We've also seen a few of the quieter bulls pop up in the media recently. Bill Miller and Mario Gabelli have just sounded the all-clear. In addition, plenty of analysts have been upgrading stocks to "Buy" on the heels of these "wondrous" earnings. Interestingly, these folks were awfully quiet earlier this year. Now that the market has jumped 35% and many stocks have more than doubled, they're telling us that it's safe to wade back in. Different business cycle, same self-serving lemming behavior.
Yes. A few large well-known companies have reported decent earnings, but these companies are not at all indicative of the earnings prospect of the S&P 500. There are unique and one-time explanations for these results, and the weaker reports of many lesser-known companies confirm this. Even the almighty Google reported nearly flat revenue growth. Where was the concern? The market barely budged.
For those of us with a less sanguine view of our economic prospects in the next few years, the continued weakness in revenue is a serious concern. Costs can only be cut so far before margins are impacted.
We've been steadily reducing our exposure to equities during this rally. We were getting paid well to incur risk back in February and March. That's no longer the case.
Does anyone care? Not at the moment. At some point, they will. Sentiment can drive the market in the near-term, but the fundamentals will eventually reassert themselves. Until then, be wary of the lunatics.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Tuesday, July 21, 2009
New Yorker: Goldman Parody
From the New Yorker:
Internal Memorandum No. 8121b
ATTN: Employees of Goldman Sachs
We did it. Bottom of the ninth, down by three, bases loaded, and we cranked another grand slam to the moon. They may have shot Lennon, but nothing can kill the Beatles.
I admit things looked bleak for a minute there. We had to convert to a bank holding company and were forced to accept a taxpayer bailout. It felt un-American. Terribly unbanksmanly. But we accepted the money, knowing that we could magically weave it into a much larger mountain of money.
We had a few hard months there, didn’t we? They regulated our corporate jet so that we could no longer use it to fly from hole to hole on the green. Dave had to drain his money pool to half capacity. I stopped injecting gold into my blood. They don’t call it a recession for nothing. One day, we’ll look back on the year we received only five-figure bonuses and laugh.
Wanting to celebrate our renewed success is natural, but it’s important that we don’t go crazy here. Remember, ten per cent of the non-bank country is unemployed, and even those who are working have “real” jobs, where payment is proportional to the creation of a “product” or a “service.” Those poor bastards. So I ask that, in celebrating our raping of the stock market, we show restraint in the following ways:
- Please limit high-fives and chest bumps to a dozen a day.
- Don’t wear your crowns, except around the office.
- Stop paying for things in Monopoly money—I understand it is the same as real money to us, but there have been some complaints.
- For now, let’s take down the giant scoreboard that reads “Main Street: zero. Wall Street: a billion gazillion bajillion.”
Furthermore, to avoid drawing criticism from the press, this year the bonuses, expected to be comically large, will be distributed in blood diamonds, which can be easily concealed in a briefcase so it looks like we’re working.
I’d like to thank everyone who made this possible—for a second time. Respect to President Obama for keeping us in the green. Thanks to the big guy upstairs (me). And let’s not forget all the ordinary Americans, who, for some unfathomable reason, have refused to put us behind bars. We are literally taking money out of their wallets. Seriously, with these returns we are making Madoff look like a little kid with his hand caught in the cookie jar. Amateur!
Yours in money,
Lloyd Blankfein, C.E.O., Goldman Sachs
link to article
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Sunday, July 19, 2009
The Importance Of Saving Money
Thanks to D.D. for sending this one along.
Click here if video does not appear
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Click here if video does not appear
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Thursday, July 16, 2009
If We Could Only See Keiser vs. Whitney
Apparently, we have to go to Europe to find some financial programming worth watching.
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The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Click here if the video isn't visible
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Jack McHugh on BAC and Ken Lewis
It's amazing how our largest bankers are in the process of rewriting history to show that, at worst, they experienced a minor hiccup last year and never really needed any of the assistance provided by the government. This is obscene. Although I believe that these banks should have been temporarily nationalized in one fell swoop, there is little doubt that many of them would have failed were it not for the money and guarantees provided by the government. Jack McHugh offers some solid commentary on Bank of America's latest ploy to avoid paying the U.S. taxpayer for the government guarantee they clearly benefited from following their announced deal to acquire Merrill.
Jack McHugh:
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Jack McHugh:
Your word is your bond; a deal’s a deal. We all learn these lessons well before we become adults and pursue various ambitions. Even bankers live by this credo, especially when they are on the collecting end of a contract. Now comes Ken Lewis and the Bank of America, looking the American people straight in the face while claiming a deal isn’t a deal without a signed contract. I’m referring to the U.S. government guarantee of the assets BAC assumed after acquiring Merrill Lynch. Negotiated in the dying light of the Bush administration in January of this year, BAC trumpeted the news during a press release on January 16, containing, among other things, an awful Q4 earnings report (see stories below). The assets receiving this taxpayer-funded backstop amounted to $118 billion. It cushioned the blow of the earnings report and helped buy BAC the time it needed to raise fresh equity (which it did in May).
Coffers replenished, Mr. Lewis and his behemoth bank are trying to claim there is now no need for this guarantee, and besides, no full contract was ever executed. BAC wants to renege on paying the $4 billion it owes the taxpayers for the backstop, line of credit, insurance policy, or whatever we want to call it. “We didn’t draw on it, so we don’t owe anybody anything” seems to be BAC’s defense. I wonder if a similar defense would work if I decided not to pay my insurance premiums this year because my house has yet to burn down. And yet, the Charlotte-based banking house Mr. Lewis helped build was indeed smoldering, if not on fire back in January when he agreed to the deal and announced the following:
“In view of the continuing severe conditions in the markets and economy, the U.S. government agreed to assist in the Merrill acquisition by making a further investment in Bank of America of $20 billion in preferred stock carrying an 8 percent dividend rate.
“In addition, the government has agreed to provide protection against further losses on $118 billion in selected capital markets exposure, primarily from the former Merrill Lynch portfolio. Under the agreement, Bank of America would cover the first $10 billion in losses and the government would cover 90 percent of any subsequent losses. Bank of America would pay a premium of 3.4 percent of those assets for this program.
“On a pro forma basis, this additional capital would boost the company’s Tier 1 capital ratio to approximately 10.70 percent.” (source: BAC press release, January 16, 2009)
Remember these reassuring words you sent zinging around the world, Mr. Lewis? You wanted everyone to know that Uncle Sam stood behind you and that Bank of America would be one of the government’s hand-picked survivors of the financial crisis. Your stock closed at $8.32 on January 15, the day before this press release. This lifeline helped you raise fresh capital and your stock closed today at $13.42 — a tidy gain of 61%. And now you say you owe us nothing for this help, even though you announced the payment terms in your press release? What are you trying to claim — that you are invoking some sort of Material Positive Change clause?
Your “no signed contract” defense won’t wash, either. As any lawyer will tell you, contract law is based every bit as much on what two parties promise to do and how they perform on those promises. A signed piece of paper simply memorializes the deal and helps fading memories should a dispute arise at a later date. As your press release so clearly shows, we all know the agreed upon terms. We the People performed in allowing our leaders negotiate on our behalf; We let you make the claim We were behind you; and you used this claim to help ward off the demons that sank companies like Lehman Brothers. We performed; you and your company benefited. That, my friend, is a contract.
But if you still are unclear as to what I’m talking about, let me give you an example that hits close enough to home for you to understand. When BAC issues a company a revolving line of credit or a standby Letter of Credit, BAC receives both an upfront fee and an annual maintenance fee — WHETHER OR NOT THE LINE OF CREDIT IS EVER DRAWN UPON. If a client tries to renege on paying these fees because the line isn’t used, you would take them to court and demand payment.
Isn’t it bad enough that your poor stewardship of one of America’s premier banking franchises contributed to the mess we now find ourselves in? The financial crisis has cost taxpayers trillions of dollars and cost millions of workers their jobs. You’ve kept your job, Mr. Lewis, so do yourself, your shareholders, and the American people a favor and pay up. It shouldn’t require a U.S. Congressman to tell you it’s the right thing to do. Bank of America’s founder, A.P. Giannini, hated Wall Street in part because of behavior like this. I’m guessing he would be appalled to see what you’ve done to what he used to call “the people’s bank”. For Mr. Giannini, a deal was most certainly a deal, and his word was always his bond. Care to reconsider now, Mr. Lewis?
full linkThe Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Wednesday, July 15, 2009
This Is What A Housing Bubble Looks Like
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Tuesday, July 14, 2009
Goldman: Calling A Spade A Spade
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Monday, July 13, 2009
Meredith's Goldman and Banking Call
Yesterday's nice move in the market is largely being attributed to Meredith Whitney's upgrade of Goldman to a Buy as well as some positive comments she made about the short-term outlook for the banking sector. Meredith made a name for herself at Oppenheimer by being one of the first sell-side analysts to warn about the banks. She made a very good call, started turning up on CNBC regularly, left Oppenheimer, and started her own firm providing research on the financial sector. At the very least, we can call her savvy.
Americans are always in search of a new investment guru, and Meredith is one of the latest to wear the crown. Many have come before her, and all but a handful have flamed out. We all want to believe that one big call will lead to a steady stream of big calls, but the evidence just doesn't bear that out (remember Elaine Garzarelli). I suspect that when we are able to examine Meredith's investment recommendations over the next 10 years, we'll find that they were fairly average. In other words, I seriously doubt that she is the second coming of Warren Buffett (assuming Warren Buffett is in fact the first coming of Warren Buffett).
Back to her call. I listened to the interview and was underwhelmed. First of all, upgrading Goldman AFTER the stock had climbed nearly 200% from its low strikes me as a little late to the party. How can this be viewed as a timely or insightful call?
Also, many of the facts behind her call have been known for some time:
This strikes me as a classic CYA marketing call. She begins by stating that "it's actually a bearish call, but a bullish call on the stock." She goes on to say that the financials could rally 15% (remember, they've already doubled from their lows). The fundamentals remain weak, but there are a lot of accounting issues which will help near term. Capital may get a boost near-term, but could turn down again a few quarters out. Put it all together, and there's something for everyone. It's the type of call which allows you to claim some success no matter what happens.
I don't know who Whitney's clients are, but if she's like most research shops, her clients include plenty of large institutional buy-side shops. Most of these firms are long-only shops. It isn't easy going back to your client base time after time and telling them she has no actionable ideas for them. At least now, she'll be able to "sell" Goldman.
One last side note. The reaction to her call is modestly distressing. It seemed we'd finally moved away from an environment where a personality (Cramer) could move stock prices by flapping his jaws. That would have been healthy. If investors were actually buying yesterday because of Meredith's call, this would be a step backwards. Bear markets tend to end with disinterest and loathing, not excited speculation.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Americans are always in search of a new investment guru, and Meredith is one of the latest to wear the crown. Many have come before her, and all but a handful have flamed out. We all want to believe that one big call will lead to a steady stream of big calls, but the evidence just doesn't bear that out (remember Elaine Garzarelli). I suspect that when we are able to examine Meredith's investment recommendations over the next 10 years, we'll find that they were fairly average. In other words, I seriously doubt that she is the second coming of Warren Buffett (assuming Warren Buffett is in fact the first coming of Warren Buffett).
Back to her call. I listened to the interview and was underwhelmed. First of all, upgrading Goldman AFTER the stock had climbed nearly 200% from its low strikes me as a little late to the party. How can this be viewed as a timely or insightful call?
Also, many of the facts behind her call have been known for some time:
- Less competition with Lehman gone. Hardly new news.
- Goldman is big in the fixed income market, and struggling states will be issuing more debt. Widely known.
- These stocks trade on a multiple of tangible book. Well, they were cheap on that basis months ago.
This strikes me as a classic CYA marketing call. She begins by stating that "it's actually a bearish call, but a bullish call on the stock." She goes on to say that the financials could rally 15% (remember, they've already doubled from their lows). The fundamentals remain weak, but there are a lot of accounting issues which will help near term. Capital may get a boost near-term, but could turn down again a few quarters out. Put it all together, and there's something for everyone. It's the type of call which allows you to claim some success no matter what happens.
I don't know who Whitney's clients are, but if she's like most research shops, her clients include plenty of large institutional buy-side shops. Most of these firms are long-only shops. It isn't easy going back to your client base time after time and telling them she has no actionable ideas for them. At least now, she'll be able to "sell" Goldman.
One last side note. The reaction to her call is modestly distressing. It seemed we'd finally moved away from an environment where a personality (Cramer) could move stock prices by flapping his jaws. That would have been healthy. If investors were actually buying yesterday because of Meredith's call, this would be a step backwards. Bear markets tend to end with disinterest and loathing, not excited speculation.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Wednesday, July 8, 2009
Audit the Federal Reserve
Too few Americans understand what the Federal Reserve is and does. It is arguably the single most powerful organization in our country, yet few realize its impact on interest rates, the inflation rate, the value of the dollar, and the economy. At the very least, the American taxpayers should demand an audit of the Federal Reserve. Fortunately, this has wide bipartisan support in Congress. Kudos to Senator DeMint for standing up for the audit and for pointing out the hypocrisy in the bill under discussion in the following video.
link to video
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
While Rome Burns
I have to admit to being torn about the following article. On the one hand, it's simply outrageous that the Senate is actually spending time on such a ridiculous issue with all of the real problems this country faces. On the other hand, the more time they spend on such ridiculous issues, the less time they have to further screw up the economy.
From a CNN article:
A Senate subcommittee Tuesday tackled one of the most contentious issues in U.S. sports: the fairness of the Bowl Championship Series that decides the top college football team each season.
Full article here.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
From a CNN article:
A Senate subcommittee Tuesday tackled one of the most contentious issues in U.S. sports: the fairness of the Bowl Championship Series that decides the top college football team each season.
Full article here.
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Monday, July 6, 2009
Quote Of The Day: Hedge Funds
Good line from Niels Jensen in defense of hedge funds:
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"If you prohibit private investors from investing in hedge funds which on average use 1.5-2 times leverage but permit the same investors to invest in banks which use 25 times leverage and which are for all intents and purposes bankrupt, then you either don’t understand the world of finance or you don’t want to understand."
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Sunday, July 5, 2009
Sternlicht on Real Estate
Very good and balanced view of the real estate market. Good discussion of risks and an intelligent primer on how money is made in real estate. Video is about 27 minutes long.
link to video
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
link to video
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
Thursday, July 2, 2009
Quote Of The Day: California IOUs
From Dr. Housing Bubble post:
"We are going to give people monopoly money so they can go and deposit their funds into a bank that is broke so it can then lend it out to people with no money! This is the solution to the $26.3 billion shortfall."
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.
"We are going to give people monopoly money so they can go and deposit their funds into a bank that is broke so it can then lend it out to people with no money! This is the solution to the $26.3 billion shortfall."
The Market Rubbernecker is affiliated with Aspera Financial, LLC, a registered investment advisor. Please read the disclaimer on the home page of the Market Rubbernecker site.