Perry Glasser

Archive for October, 2008|Monthly archive page

Equity Shares, My Sweet Keister

In Business, Economics, Economy, Politics, Wall Street on October 25, 2008 at 1:24 pm

As the word economy circles the bowl, and such countries as Finland are simply going bankrupt, American Buccaneers are queuing before the Weasel-trough. The hope is to suck up some of the newest sugar, the notion that Citizens will “take equity positions” and thus save the perquisites of Buccaneers who in a better world would be facing hard labor in jungle penal colonies.
The idea is spun like this: in exchange for preferred equity shares, Citizens will receive a dividend and, at some future date when the equity shares will be worth more and the Easter Bunny comes calling, that position will be sold.
What could be bad? The idea has 3 selling points:

  • Corporation receive much-needed cash infusions at a time of crisis;
  • Citizens avoid the horrors of Evil Red Socialism, which would be like, you know, government ownership of key industries run for social benefit, a situation we cannot have because in America (just like Jesus and John Wayne would want) key industries have to be run for private benefit, unless of course the Buccaneers screw up, at which point we want public bailout BUT no public benefit;
  • As we navigate this rough patch in the ongoing growth that Wizards would have us believe should have no end, responsible Weasels may quietly restore a regulatory climate that will make the open seas a tad more difficult for unrestrained Buccaneer navigation. As former Wizard of the First Rank and Speaker in Tongues Greenspan testified yesterday, “I made a mistake in presuming that the self-interest of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders.” Gee, Alan, you think?

Dollar$ notes that Citizens around the world are universally responding to the elixir of public equity of private industry by screaming into their phones, “SELL!”
As usual, blowing the smoke of Wizard and Weasel rhetoric away clears the air. The man behind the curtain has no powers we do not grant him ourselves.

The Cost.

The trough is filled with Citizen money. Only children and hermits recently emerged from caves believes the official Weasel Estimate of $700 billion. These folks could not lead a Boy Scout Troop out of a well-lit unlocked room. There are 300 million people in the United States. When the price tag creeps up to $1 trillion, our cost will be $3,000 for every man, woman and child in the US. Children do not work; for productive Citizens, figure the cost of digging Buccaneers a safe harbor is $5,000 each.

The Plan.

Selling equity to raise capital is what stock markets are for. Building a steel mill in your garage poses some challenges, and the capital required is far more than can be saved in a coffee can. Selling shares is a great idea, but Dollar$ suspects that forced sales to unwilling buyers (that’s you and me, Binky) are doomed. Someone, someday, will need to decide that the shares we are now buying need to be sold, but expect the future Buccaneers once again sailing on a deep sea of forced money to scream, “Nay!” They will pointedly ask, “What will be the effect of a forced sale of $1 trillion in equity?”
They will have a point. Somewhat like Georgie’s War on Goatherds, the current iteration of the bailout plan has no clear exit strategy.
Buccaneers are as likely to buy back their own preferred shares as they are to drink sea water. The key word is “buy.” One buys when things are cheap—not dear. If our Citizen equity has risen, what self-respecting Buccaneer will not prefer to payout 10 percent in dividends? If the shares go down…why Citizens get screwed as Buccaneers buy their way out of obligation? If our too-big-to-fail public portfolio cannot meet its dividend burden…who shall then bail them out?

Dividends?

Your local Weasel will protest that at least Citizens are getting something for their money, that juicy 10 percent dividend will flow into the Treasury for at least a decade.
Adjust your goggles—we are flying into smoke.
The US government is already a partner of every successful corporate venture in America. We call those dividends into the Treasury “corporate taxes.” It seems we already collect 36 percent of every corporate dollar in profit. In fact, over dinners of fine wine, aged steak, hash browns and creamed spinach, Buccaneers like to remind of us their noble role.
But remember: corporations collect taxes, they do not pay them.
From the Buccaneer side of a balance sheet, taxes are a cost of doing business. A cost of doing business is passed along to consumers. If you sell brownies and the cost of walnuts soar, you raise the price of brownies. If you sell airline tickets and the price of fuel rises, you raise the price of tickets. If your profits decline because taxes go up, you raise prices.
Look, Binky, the sad fact is that the only people who pay taxes are Citizens.
Ah-ha, some bright-light out there will point out that the price of brownies may be frozen by competition, and so profit margins will be shrunk even in the face of rising costs. Uhhhhmmm…maybe in an unfettered open market, the kind Weasels and Wizard and Buccaneers would like us to believe exists, the better to have us hand over our cash to them so they can lead us through the treacherous seas, but when “too big to fail” is the philosophy of the land, we are no longer in an open sea. We are in a bathtub.

DOLLAR$ Vision.

The bailout money we are paying to buy corporate equity in companies too big to fail will have never be recouped by the sale of that equity: there’s no market.
The dividends we are allegedly harvesting will in fact be paid by us in the form of higher costs.
Around the world, they shout SELL! for good reason.

Spend and Invest and Tulips

In Business on October 23, 2008 at 7:43 am

Right now, the economy is like a tulip. Examine our own behavior
We look for the best price for goods that will do the job because if you save money we can buy other items. Most of us buy goods we consume. We buy bread, iPods and wallpaper. Eventually, a consumeable good is…well… consumed. It’s done. Some stuff lasts longer than others. Milk lasts a week; your car lasts a few years. The car is a durable good (unless you bought an American vehicle manufactured on a Friday).
Because we want our money to work for us, when we have excess capital, meaning money that is not needed to purchase immediately necessary consumeable goods, we also invest. We purchase assets with the expectation in the future we can sell it for more than we paid for it. Diamonds and shares of stock are assets purchased with the expectation of sale.
Never confuse the purchasing and investing.
Oh, confess–you do it all the time.

Tulips

In 1636, Holland discovered the tulip. They were imported. People went crazy for them. Everybody wanted them. No one could get enough of them, and the more rare they seemed, the more valuable they became. The cost of tulip futures for some bulbs rose to prices worth more than 20 acres of land. I am not making this up.
It’s easy to laugh, but open your closet and count your Beanie Bag Babies stash. How many collectibles have you bought recently? Holy bananas, have you been buying fake money and stamps with baseball players on them from small Caribbean states as family heirlooms?!?
Don’t laugh. Drop that Blackberry.
In our culture, various sharks will try to persuade you that you need a cell phone on which you can play a variety of stupefyingly moronic games while reading headlines from Thailand or viewing pornography, and that this device is worth hundreds of your dollars. God forbid an hour goes by without email. No one needs a 42″ television. No one needs $200 running shoes. If you believe you need pornography, try your imagination and shift to your left hand.You’ll find the entire experience…elevating?
Never borrow capital to buy consumer goods. Keep your credit card pristine. It’s a convenience, not a borrowing mechanism.
Borrow for investments, but only if you believe the eventual return will be greater than the interest you will pay.

Big Money

When Elected Weasels borrow money for nondurable consumeables, they are throwing your money down a well. Lately, they do this with wheelbarrows.
Insist that they borrow money with the expectation for greater wealth later. Insist that they build infrastructure that will make life better, easier and more productive.
Look, Binky, societies that borrow for immediate consuemables fall prey to evils such as revolution, totalitarian government, and charismatic leadership that promises the end of woe with no intention or capability of delivering it. They stood on parapets in Paraguay. Hitler promised living space. Lenin exited the train at the Finland Station and shouted, “Bread!” which got Czar Nicholas and his whole family shot to death in a basement.
The examples are many and scary.

Where We Can Invest

Education is an investment because it creates smarter people able to function more productively. Let the Weasels borrow for it.
Mass transit is an investment because if people can get to and from jobs quickly, cheaply and without damaging the environment, we all benefit. Let the Weasels borrow for it.
Healthcare is an investment because terrified and sick people produce very little. Let the Weasels borrow for it.
Wars waged against Shepherds and Goatherds protects us from nothing; exporting democracy to people who consider women’s rights to be religious heresey is fruitless; don’t let the Weasels borrow for it and be very afraid when they do.

Barron’s Gets a Wizard Award!

In Personal Finance, Wall Street on October 18, 2008 at 11:36 am

With great fanfare and a full page house ad in all Dow Jones & Company publications, Barron’s, a DJ pub, for a mere $795 annually will now email any Citizen Barron’s Daily Stock Alert. The newsletter promises a “clear and compelling …smart investing idea each trading day so you can achieve impressive long-term gains.”
That’s a promise of 200 good ideas per year. Four bucks each. What a deal!
This service is aimed at Citizens; big players have their own research arms.

But don’t reach for your wallet quite yet: Dollar$ points out that the role of tout sheets is to induce participation, to bring new Citizen money in, to seduce the unwise, not to assist with investment choices.

If the White Queen could believe in six impossible things before breakfast. then The Daily Stock Market Alert seems tame — if compared to Carroll’s character Alice in Wonderland .

Headed by Wizard-in-Charge, Fleming Meeks, former editor of SmartMoney, the ad features their March 27 newsletter headline “NVR: A $1,000 Stock?” and shows it was selling in that date for $577.25 per share.
Yesterday’s close on NVR was 510.60. Not terribly imporessive. And by Nov 30 — $434.

Maybe it was too late to call the typesetter?

Bet that Meeks and Company dismiss that 17 percent loss explaining that “long-term” cannot mean “six months.”  After all, the newsletter is “focused on opportunistic stock ideas with long-term growth potential.”

But potential for growth describes every stock traded on every market. In infinite time, every investment has the potential to grow. Barron’s and other touts will eagerly tell you is that in the long term, stocks outperform every other asset class.

They are not lying.

They are also failing to point out the reality.

Unlike the stock market, you and I are mortal. Our time is finite. We don’t decide when to turn 65; we cannot decide to delay ageing; we cannot choose a market peak to coincide with the moment our kids turn college age; we cannot choose to be ill only at market peaks. Furthermore, as even a cursory glance will reveal, the march upward is gradual. The downturn is a sudden crater. Gains of a decade are lost in 30 minutes of computerized selling. The markets often move sideways for a decade at a time.

Nothing in the Barron’s ad promises recommendations to Sell. Not ever. Just 200 good ideas each year. Buy, hold, and wait. Ahhhhh… but taking money off the table…that’s up to you. For readers of Barron’s Daily Stock Alert, there will be no days when there are no good ideas.

So

A Dollar$ Wizard Award to Dow Jones & Company for perpetuating a destructive myth designed to fleece the unwary!

  • Markets do not grow to the sky.
  • Good ideas cost more than $4.00.
  • The moment you read a “good” idea in a newsletter–everyone else knows it, too — which means it is no longer quite as good.

Executive Spanking

In Business, Economics, Wall Street on October 15, 2008 at 10:57 am

In today’s Wall Stret Journal, Joann S. Lublin and Aaron Lucchetti share a byline for a story that begins:

Government investments in financial institutions could crimp executive pay..and hinder firms’ ability to attract and retain top talent.

The article also tells us that the nine big-bank CEOs who “agreed” to being partially nationalized last Tueday, collectively were compensated $289 million last year.

Dollar$ is not chewing his fingernails over the prospect of this executive spanking. Does anyone expect  impoverished leadership ro resign for lack of adequate compensation? People willing to earn an average of $30 million plus…not counting perks…are not in short supply. Why, for $10 million, a 66 percent discount, which Citizen would not for a year or two be willing run a multinational into the dirt before whining for governemt assistance?

One of the favorite Buccaneer myths in recent years has been that leadership is skill so rare that vast fortunes and perpetual benefits have to be paid to men (mostly men) willing to sit at the head of a table and listen to reports from other men (mostly men) paid only slightly less.  True, watching most PowerPoint presentations requires financial incentives, but millions?

  • Their decision-making talents are such that they exposed the companies to fiancial instruments they now claim they did not understand.
  • Their talent for negotiation led them to playing Monoploy for Grown-Ups, a sport also called Merger and Acquisitions. M&A makes companies bigger, and the promise of new efficiences (Dollars$ no BS Defintion =”put people out of work”) are rarely realized. Somehow, the firings never adds up to the promised money saved because the survivors all get substantial raises for accepting greater responsibility.
  • Their financial acumen when their companies were flush with cash consisted of stock buy-back programs, a tacit admission of the failure of imagination for developing or exploring new lines of business, investing in Research in a meaningful way, or (gasp!) distributing profits to shareholders as dividends. This idiocy is usually justified by claiming it increases shareholder value, a strategem that is at best short term and not-so-incidentally gooses the value of executive board options by far more percentage points than shareholders see on any brokerage statement.

Now that the Fed has made an these Buccaneers an offer they cannot refuse, we can only hope Joann S. Lublin and Aaron Lucchetti have editors eager to set them out on a story to find executives resigning in protest at diminished salaries.
No more sushi, guys.

Trust: The Squandered Asset

In Business on October 11, 2008 at 6:57 pm

Reassurance that the economic maelstrom will soon end is an attempt to create a self-fulfilling prophecy, but when assurances come from the mouths of Weasels, no one is reassured. Trust is gone. The global run on banks is rooted in that fact.

  • Super Weasel Dick Cheney in December 2002 testified before The House of Weasels that, “Deficits don’t matter.”
  • Weasel in Charge Georgie Bush declared the War on Goatherds because they harbored weapons of mass destruction. This turned out to be a wooden slingshot found under a rock near the Kurdish border.
  • Weasel in Charge Georgie Bush shifted the need for the War on Goatherds to the necessity of exporting democracy to people for whom the concepts of self-determination and freedom constitute heresey as applied to women.
  • Weasel in Charge Georgie Bush is eager to tell any who listen that the War on Goatherds is making the world safer…while Osama bin Laden scoots from cave to cave in Afghanistan, invisible to spy satellites that can count the fleas on a camel’s ass.
  • Weasel in Charge Georgie Bush and Super Weasel Cheney tried to privitize Social Security, an idea that transported Wizards into hot dreams of endless new money that could be raked…alas, the plan did not succeed.
  • Super Weasel Paulson told Citizens that the cost of bailing out AIG would be $85 billion, but within days the price soared by another $37 billion–AFTER the US nationalized the company by seizing 80 percent of its equity. This is like your taking home the new car, and getting another bill for invisble costs two weeks later.
  • The House of Weasels first voted down the $700 billion bailout, but then voted for it, and the international community, knowing how well the US Treasury estimate costs, suffered its worst week in history.

We are already on the hook for $2,000 for every man, woman and child in the US, and, given Weasel success so far, who would doubt the price will go higher?
So when Georgie says, “Trust me,” the eagle on the the dollar holds its beak and looks away.

Would You Like Fries With That?

In Business, Wall Street on October 10, 2008 at 11:15 pm

The price of a share of General Motors stock, or a share of Ford, is less than a McDonald’s Happy Meal.

This fact is a tribute to the clowns that run American Industry.

For Dollar$ readers, it raises a question about some standard Wizard advice–which is that the path to wealth for the common Citizen is to buy shares of major US coprorations, then hold for the long term. 

If you’d followed that advice and bought shares of GM at the time Ozzie and Harriet were weaning Ricky Nelson, right now, you’d be even.

The advice–BUY & HOLD!!–is Holy Writ, but notice that no Buccaneer or Wizard bidding for your money will engage that strategy. While feeding algorithms to their computers, they need less agile investors sitting still the better to suffer losses. Shooting fish in barrels is more sporting.

Meanwhile, over at GM, according to USA Today, Rick Wagoner, the Laff Riot King and CEO of GM, in 2007 made $15.7 million.  up from $9.57 million in 2006.  That’s probably for the sterling leaderhip that has made GM innovation the envy of every auto manufacturer in the world.

Wagoner sells cars in the same markets as Toyota and Honda, so there is no question of an inhospitable market or restrictive regulatory climate. Why create fuel efficient cars? Just because the oil supply is diminishing? 

Do you think Wagoner should get an orange fright wig? Floppy shoes? Do you think he will resign in shame?

Naaaaaahhhhhhh….when the dead cat bounces, he’ll claim a performance bonus.

LATE BREAKING NEWS


The day after Dollar$ posted thoughts on GM and Wagoner, The Wall Street Journal confirmed that GM was in talks to acquire Chrysler. Chrysler, readers will recall, is the asset that Daimler-Benz acquired and then discarded when it proved to be toxic to the German corporate culture. Daimler erroneously believed that an American car company was interested in manufacturing quality as opposed to marketing autos that fall apart after three years. Wagoner is desperate.

Transparency & Deregulation

In Economics, Politics, Wall Street on October 10, 2008 at 1:05 pm

Expect the same financial advisors who once sold their expertise and accepted your assets to manage to be smiling like undertakers and shaking their heads that as a buyer of their services, you should have listened.
We bought their expertise, and when markets rise, they claim to be heroes. When markets sink, howver, they point at us for our ignorance.
Let’s be less ignorant.

TRANSPARENCY

Worshippers at the Holy Open Market like to use the word transparency. Finding this word in the mouth of Weasels and Bucanneers is a lot like finding a nail in your breakfast cereal. After initial revulsion, a Citizen asks: How did this get there?
When political Weasels cannot find a reason to educate American children to basic financial concepts, they leave us at the mercy of financial Buccaneers.
Worse, when Weasels, Wizards, and Buccaneers collaborate in designing an arcane vocabulary to cloud transparency, allegedly transparent markets are in fact con games. Blowing smoke is blowing smoke, and doing so deliberately is called “fraud.”
An open market requires buyers and sellers be equal parties. Either has to be able to walk away and say, “No deal.” Captive buyers are not members of a free market economy–they are its victims. When Weasels allow:

  • old age to be a time of terror by allowing what were private pensions to become 401k investment vehicles;
  • when Buccaneers are allowed to restructure and cancel what were solemn covenants between workers and corporations to improve profits;
  • when Buccaneers rake 500 and 1,00 times the compensation of line-workers;
  • when employment is the only means to obtain subsidized health insurance;
  • when healthcare is not a universal right;
  • when 23 percent of every healthcare dollar spent in America goes to non-providers called “insurance companies”;
  • when retirement vehicles that are allegedly conservative are managed by Buccaneers and Wizards who wrap that vehicle in rhetorical gobbledygook deliberately designed to obscure the vehicle’s true nature;
    Such a market is far from open. No amount of transparency will remedy that.

DEREGULATION

Weasels who philosophically embrace deregulation do so as a rhetorcial dodge. Dollar$ No BS translation: deregulation = The strong shall no longer protect the weak.
Proponents of deregulation whine that regulation limits (gasp!) profits: they do so while standing in the ruins of the American economy, an embarrassment to their teachers at Yale, Harvard and other leadership factories where History was taught.
Regulations were created  in response to bitter lessons. While times indeed change, no one has yet repealed the Business Cycle–Boom, Panic, Depression. Regulations were designed to smooth those cycles out–never to eliminate them. Wizards and Buccanners who dismantled the regulatory system to earn an extra buck have pushed the world economy over the brink.
Wizards engaged in inventing new financial vehicles are NOT engaged in financial innovation, but in brinksmanship. Their chief tool is faster than light computing; they are in and out of highly leveraged vehicles in minutes. Markets were created for human interaction, not for a war of algorithms.
Dollar$ No BS translation financial innovation = promoting a financial vehicle that purportedly does one thing but in fact does another. Thus, Citizens may be deceived and fleeced:

  • Citizens who conservatively save in a money market are dismayed to learn that the Buccaneer in charge has used the Citizens’s money for risky investments. The buck gets broke. The Citizen can’t send his kids to college. The Buccaneer retires to the Caymans
  • Citizens naively believing that the insurance industry is sleepy and safe learn after the fact that credit swaps are insurance on debt, but are called anything but “insurance” to avoid insurance regulations. Shepherds are unaffected; the rest of us are in a worlwide conflagration that will lead to political unrest, totalitarianism, fascism, and the abnegation of human rights.
  • Buccaneers who chafe at short selling regulations induce their Weasel colleagues to change the rules, the uptick rule dating from 1932 is banished, and in 2007 what was once a reasonable tool for hedging risk becomes the naked short, a light-speed computerized lever able to grind a company’s stock into the ground.
  • Weasels garnering votes push the American Dream by forcing Freddie and Fannie to make “subprime” loans, only for Citizens to later agree that “subprime” means “uncreditworthy” and that America itself has been mortgaged. Foreign governments holding American paper start to worry about repayment. The dollar plunges in value and worlwide credit dries up as banks horde cash. Even Georgie’s War on Shepherds seem imperiled.

What’s next? Well, the Chinese curse comes to mind: May you live in interesting times.

Bailout Hijinks

In Business, Politics, Wall Street on October 9, 2008 at 11:35 am

Weasels who acted to nationalize AIG a few weeks ago discovered today that the pricetag for putting The Firm Too Big To Die on life support has leapt from $85 billion to $123 billion. Like Inspector Renault in Casablanca, they are shocked–shocked!–to discover that gambling was occuring in the reinsurer’s back offices.

At least, that’s the pricetag they are willing to admit to, so far.

Weasels prefer words like bailout because it sounds kind, even heroic. Since the chief obligation of a Weasel is to be re-elected, being perceived as kind and heroic never hurt–though actual kindness and heroism need not be embraced. Note carefully that no Weasel was ever elected or re-elected for honesty or plain speaking. They don’t employ advisors called spinmeisters for nothing.
Weasel re-election is, however, in fact, accomplished in two ways:

  • by deceiving Citizens into believing Weasels work on their behalf;
  • by actually working on the behalf of deep-pocket Buccaneers who fork over sufficient money to deceive citizens. Bands of Buccaneers do this via trade organization, lobbyists, etc.

Dollar$ hastens to point out that AIG was not bailed out. It was nationalized. Neither heroism or kindness was in play. We showed up at the fire sale and we bought the ruins. We bought 80 percent of the reinsurer.  We cannot now “lend” ourselves an additional $44 billion–who is paying it back?? You cannot take money from your left wallet and put it in your right as a loan. This, folks, is a change in cost of a sale price, AFTER the deal was closed.

Either we bought AIG in expectation of an eventual profit, or we have bought a very, very expensive ruin in order to quell panic. Well, we have the panic anyway, and we will pay the full price either now or later. In what is correctly being called a crisis of confidence, a little confidence in Weasel accounting methods might go far.

Don’t hold your breath. Do hold your nose.

Look–if AIG had been an American concern in one of those weird places where short, swarthy-skinned people have the bizarre idea that they are masters of their own destiny, we’d have invaded at any hint of nationalizing our property. We’d have sent the Marines to live in their houses. GPS eyes in the sky would be so focused that no one could tie a burnoose oddly without the Pentagon going on Red Alert.  Our Air Force would be deployed to bomb the crap out of shepherds in need of the blessings of democracy, only incidentally defending our right to make profits on oil, bananas, coffee, pistachio nuts, sheep dip, or whatever vital American interests shepherds had been nationalizing to their own nefarious devices.

Back home, the sudden, dramatic increase of 44 percent on the AIG pricetag and its discovery in mere days can be explained in only a very few ways:

  • the Weasel accountants who estimated the original costs were inept or engaged in fraud;
  • the AIG accountants who supplied Weasel accountants with misinformation were inept or engaged in fraud;
  • Weasels are inept and engaged in fraud;
  • Weasels are in fact engaged in a bailout–of Buccaneers.
  • All of the above.

Missing by 44 percent takes some doing. This is akin to throwing a wild pitch and somehow braining your own left fielder. Who is at home…in another state…on the disabled list… nowhere near the ballpark.

Expect to see Weasels on CSpan, CNN and wherever arc lights shine. They will make angry, indignant noises; a good Congressional Invetsigation Circus and Clown Show helps Weasels with their primary goal in life–which is to remain elected as Weasels.

Since actual action is risky to Weasel secondary goals, expect nothing to come of it–except the bill to pay for the Congressional Invetsigation Circus and Clown Show.

Dollar$ Buccaneer Award!

In Politics, Wall Street on October 6, 2008 at 8:13 am

Sometimes, all you can do is hold your nose and look away.
Today’s Wall Street Journal does an effective, lucid investigative report on the machinations of Richard Fuld Jr., the CEO of Lehman Brothers. Mirabile dictu! they’ve got it on page 1.
Fuld, a First Rank Buccaneer, set his company sailing on the unregulated sea of credit swaps, those derivatives that are really insurance policies written to guarantee repayment of loans that do not exist. They are unregulated because the Wizards who cooked them up scrupulously engaged a rhetorical dodge: to never, ever use the word “insurance.” To do so would invite (gasp!) Federal regulation, and how could they make a buck with the Fed looking over their shoulders?
With Federal Weasels praying at the Holy Church of the Open Market, such shennanigans are blessed.
See… with a credit swap you insure a borrower’s ability to pay off a loan. Derivatives are a hedge against wide price swings on a real underlying asset, right? But with credit swaps, we abandon the underlying asset, those uncreditworthy loans flooding the market from 2001- 2007 (aka: subprime) because real assets, especially risky ones that may not perform, are an impediment to our making HUGE dollars REALLY quickly. Instead, we trade in the naked derivative! No asset! Just the idea of the asset, and just as if a real underlying asset existed, since derivatives are leveraged, we can sell those derivatives.
We can sell the crap out of them! Package ’em! Sell ’em to pension funds! Sell ’em to municipal governments! Sell them to slow-moving investors with deep pockets and serious fiduciary responsibilities! Sell them to slow-moving investors because as Buccaneers, we can have our computer algorithms turn on a dime and leave those sorry bastards floundering in our wake!
How many billions can we sign you up for? Heck, the swap is written against Fannie Mae and Freddie Mac, so what can go wrong? Sign here, kid…
Better than Girl Scout cookies.
The FBI is now investigating Buccaneer Feld. It seems they frown upon utterances about Lehman’s liquidity and strong balance sheet issued to shareholders on Sept 10, the day AFTER Buccaneer Fuld was turned down for desperately needed cash by the Bank of America, HSBC (Hong Kong, Shanghai Bancorp) representing the ruler of Dubai, and the sovereign wealth fund of China, the China Investment Corp. Fuld was trying to sell Lehman’s notes to entities already choking on American paper issued to finance Weasel-in-Chief Georgie’s War on Goatherds Who Need Democracy.
The Journal’s investigative team, Mollenkamp, Craig, McCracken and Hilsenrath deserve fan mail. Read the article.
Right after you read it, maybe, OK ,OK, we should wait for the FBI, but Dollar$ likes to plan.
Richard Fuld Jr., stand! You, sir, deserve Dollar$ Buccaneer Award!!
Who will bring the pitchforks? Who has the torches? Tar? Feathers? Come on now, don’t be shy!

Wall Street Myth$

In Business, Finance, Personal Finance, Wall Street on October 5, 2008 at 11:12 am

If you read any traditional financial news outlets—The Wall Street Journal, Business Week, Forbes, the green section of USA Today, Forbes and the like—you have read a rhetorical device called anthropomorphism.
Anthropomorphism ascribes human characteristics to things not human. It makes good poetry, cute Disney cartoons, and helps children understand thunder as just some old guys bowling in Heaven.
But as a rhetorical device describing the stock market, anthropomorphism and its handmaid personification enable the Wizards who cast illusions from behind curtains to suck money from our wallets.
Dollar$ hastens to speak plainly.

Advance & Retreat

The stock market does not advance nor does it retreat. For every buyer, there is a seller. When buyers and sellers agree to prices, they set asset values. Buyers buy with the expectation of future profit; sellers sell when they believe continued ownership of an asset constitutes a risk no longer commensurate with possible reward. No one is under compulsion. Wall Street is not a battleground for territory. It is not an adversarial contest. But Wizards and Buccaneers require small investors to believe that generals understand the battlefield and so deserve your trust and your fees.
But there is no battlefield. It’s a market.

Market Sentiment

There was a time when tickertape was paper. A parade in New York City meant overtime for street sweepers.
There was a time when backroom ledger operations were performed by men on high stools wearing eyeshades under bright lights. They used two ink pots—one red and one black.
There was indeed a time when investors dialed their brokers, and there were indeed days when lots of investors shouted, “Buy!” or “Sell!”
All that is gone.
The vast majority dollar operations on Wall Street are performed by computers. Indeed, for the NASDAQ, the so-called market of markets, there is no meatspace. Whether New York Stock Exchange or NASDAQ, networked machines monitor every price tick and move great mountains of capital for millions of worldwide financial vehicles. The machines buy and sell when their algorithms tell them it is time to do so. There is no human sentiment involved. This is especially true of the derivatives and futures markets where the sums of capital are so vast that only the super-rich, hedge funds and governments participate.
This is why when you as a small investor get the news of sharp price movement, it is too late to act. Unless you think and decide at light speed and are plugged directly into markets, that is.
Machines do not agonize over decisions such as Buy, Sell or Hold. Machines have no hearts. They do not succumb to sentiment. They do not read the newspapers. They do not hold on to send their kids to college or because there is no other way to get the down payment on a house.
Yet Buccaneers and Wizards want us to believe market sentiment exists. If we believe that sharp moves on prices are caused by sentiment, we will be deluded into thinking we are on a level playing field. Surely, sentiment will eventually turn in our favor. All we have to do is keep giving our money to the Buccaneers.
So while our money trickles into pension funds, 401ks, college funds, health insurance funds, and all the rest of the vehicles invented by Wizards to lure us with illusions of safety in an uncertain world, machines–owned and operated by those same Buccaneers–are selling. The machines sell in torrents. We look for 7 to 10 percent each year, but when the alogrithms indicate “Sell,” prices drop 20 to 50 percent in minutes.
Sentiment? Level playing field?

The Warning

Dollar$ is aware that sharp price moves can be precipitated by events. Nine-11 and hurricanes preceded sharp price drops–all followed by sharp rises. Sharp price moves are never about mass sentiment about the state of the economy, job prospects, or any kind of long-term consideration. Panic is not a reasoned response to conditions: panic is not “sentiment.”
This is why reasoned investors await blood on the floor before buying. Warren Buffet is buying GE. Bank of America is buying Merril Lynch. Citicorp and Wells Fargo both want to buy Wachovia.
Note: these transactions are not the product of computerized algorithms. They are decisions by human beings in executive suites.
Buffet is a conservative Buccaneer with an enviable track record. They guy lives in Omaha, for Goodness sake, and he drives his own car to work.
That’s human intelligence at work, not market sentiment.