There are at least 5 things I wanted to discuss tonight, but one item in particular has bothered me all day so I will go with that and leave the heavy stuff for another post. It is Friday night after all.
Part of the Problem, not The Solution
I do not know what it is; perhaps a heady 75% stock rally off the lows, a general feeling that everything is guaranteed, or just good old fashioned grandstanding but it seems the victory lap tour is gaining steam across the financial world. The FED, Treasury, President, and many writers have taken time over the last month to preen in the glory that is a stock market rally as if that was all there was in the world. Which is fine, when you have one thing going for you you tend to highlight it.
What has rubbed me the wrong way today was a series of articles by Barry Ritholtz, who pens The Big Picture (TBP) blog, that are not only a victory lap of sorts but serve as an illustration of what ails the system we have.
Leading off, TBP notes:
Retail, Jobs Suggest Stronger Recovery
Highlights include better than expected (by whom?) same-store sales and some job growth data. This is fine, I know parsing the numbers to see the effect of massive store closings affecting the same store sale numbers (see Kid Dynamite and Mish here) is not a big deal if you are headline watching, so no big deal. My aggravation starts near the end with this:
The data continues to impress, yet many people are fighting both the economic numbers and the tape. Professionals who miss a 75% generational rally risk losing clients and assets. The danger for both bulls and bears is bringing their bias to the table, and missing the risk or the opportunity of the moment.The data is impressive? Impressing who? Anyways, what was with the quip about missing the 75% move? I have no idea. I was willing to chalk it up to "whatever" but TBP ends with this:
I still expect a 20-30% correction — eventually — but until the market internals get uglier, our bias remains to the long side . . .Huh?
Everything is getting better but the coming correction will be 20-30%? Confusing indeed. That is a weird type of recovery. Still, I have no idea what time frames TBP was talking about (he does not say) so it was a piece of information.
In the comments section some folks were pointing out the same store sales effect mentioned above as well as remarking on the enormous amount of FED/Treasury liquidity that has bought this "recovery". Some of the remarks were pretty nasty and I can understand that TBP may have been annoyed.
A bit later comes this post:
10 Psychological, Valuation, Adaptive Investing Rules
Most of it was "go against the crowd" kind of stuff but a few were pointed directly at the more bearish observers:
-After a a 55% market sell off, most of the terrible structural news that existed before the collapse is reflected in prices. (Let it go).What is confusing here is that I have no idea what TBP means. Were stocks valued correctly with the SP500 at 700? If they were and that was indicative of the structural issues in the economy, things are 75% better now? The banks are that much better off? Really?
-Market Pros simply cannot afford to sit out a 75% rally; Individuals that miss that sort of move should reconsider their investment strategies immediatelyThere is that "get with the guys that bought his rally" speech again? Looking for new clients? I have no idea. While TBP manages money for big players I would submit most small timers rode the entire 75% move up along with the smart guys, they just also rode the 50% down wave first!
These two caught my eye as TBP is a huge believer that markets can see ahead:
-Whether a premise is fundamentally true or false is irrelevant as to whether it is actionable. If enough fools believe something is so, it will impact the marketsSo which is it? The market is smart or the market is dumb? Both at some times? Again, not consistent at all.
-The markets frequently diverge from the macro economic environment. This can be both long lasting and maddening; Your job is to be aware of how wide the gap between the two is
To end the day we got this one:
Buy What You Hate (WTF?)
TBP notes that buying Citigroup, Bank of America, and Fannie Mae was/is a bold way to make a trade. While true, I was pegged at redline on the annoyance meter.
Part of the problem with Wall Street and our whole investment/gambling culture is the chasing of money at all costs. Here we have a writer that penned a book entitled "Bailout Nation" (which I read and recommended) which detailed the moral hazard that comes with government salvation of markets when they screw themselves. To turn around and join hands with that process to make a buck is indeed profitable, but just feels wrong.
A monkey throwing it's own poop through a cage at the stock ticker section of the newspaper is up 75% from the March lows. At least he could not use leverage! Everything is up and even Pets.com is coming back with an IPO (kidding, for now!). I mean BFD. A few Trillion spent has that effect.
Like zombies walking around moaning "Brains, we need brains to eat!" investment players are moaning "returns, we need returns!" Saddle the taxpayers losses for years via Fannie Mae? Buy FNM, it's backstopped! Citigroup is the worst bank in the world? It went from $2 to $3, $4 is on the way!
In my article on the Panic 1907 I noted that people fled a set of banks because the brother of one of the CEO's was involved in a failed short squeeze that lost big money. No one then wanted a part of that kind of stigma. Today we line up for the bailout and buy shares. Nothing is going to change.
As far as "fighting the tape" I would hope everyone has stopped that a long time ago. I have no positions right now (other than my long term metal portfolio), but I made out pretty good in 2009 and I did not buy one share of the bailout crowd to do it. I was not up 75%, but I also did not contribute to the flawed scam that is our "free" markets. To me a buck is not everything.
It's Friday Night Live!
Well that ran a bit long! Off to the fun!
Picture Comedy Relief
Some laughs to start out.
Yes, cats are indeed this smart:
see more Lolcats and funny pictures
This must be for medicinal purposes:
Nice!
Quiz Time
Take short quiz to find out:
What is your Superpower?
Mine was "invisibility". That would be sweet!
The "How Crazy are You" test seems useful. Big shock, I am "Kind of Crazy". Like I needed a quiz!
Quiz 3: Who remembers "The Dark Crytsal"??
Rock Blogging
Some music to get you started this weekend on the right note, pun intended!
A request from an indirect source was for the classic rock cover of "I Heard it Through the Grapevine" which I have to think was the Creedence Clearwater Revival version, which rocks:
Was that the version?
There were some Madonna requests! I actually like plenty of Madonna tunes. I used to wait for the video for "Open Your Heart to Me" for the alluring fishnets..., I mean lyrics and vocal work, lyrics and vocal work! Anyways, my favorite song is "Live to Tell" but I thought a more party time tune would be "Into the Groove":
And yes I have heard "La Isla Bonita". Who has not?
Sticking with the ladies, let's try "Girls Just Want to Have Fun" by Cindi Lauper:
See, I can do non metal songs!
My dad used to play this song on a 12 string guitar and it was awesome. Try out Kenny Rogers and "Ruby":
You know, doing these posts for years has limited the music left to play. I try to search my blog before I post a song to make sure I have not played it recently (I try for over a year, but make exceptions). How many really wonderful songs are there that I can play? I guess a lot, but I do get a block some times. Lets see what we can do.
I always loved Duran Duran's song "Ordinary World", here is a nice live version:
Not bad.
One more? Two more? Well I guess two for the road and all.
A little Tone Loc? Get loose with "Wild Thing":
You know you love it.
Last call! Have a drink? Check. Have a plan? Close enough.
Come on! You know I am closing with an 80's rocker tune! Get wild with Skid Row and "Youth Gone Wild":
Wundaful! Close second for the close was Tesla and "Signs".
Have a good night.
34 comments:
"-Whether a premise is fundamentally true or false is irrelevant as to whether it is actionable. If enough fools believe something is so, it will impact the markets" - The Big Picture
What fools?
"Given the fact that the Dow has now put in a stunning 29 new highs and the volume has not once touched the 6.8 billion mark leads us to believe that some form of extreme manipulation is taking place. It is statistically impossible for a market to put in so many new highs on such low volume without something being amiss."
http://tinyurl.com/y7h4utv
Do I believe that bankers have this much power?
That's like asking if I think they would say "tanks in the street" if they didn't get their way.
Watchtower,
first off, thanks for stopping in, have not seen you much!
Second, I wanted to stay off a real rant because I understand that some folks manage money for a living and they trade and all that. My issue is to take part in a corrupt system when you know it is makes you every bit as culpable as the top players.
The ultra low volume up days and rhe mega high volue down days; the weird bond sales that have mysterious buyers; all of this is a show to convince everyone all is well. Some jump in to help, others stay the course. What the FED/Government fails to understand is that most people lost so much in the tech bust stocks are a small % of their holdings now. Its all real estate and the efforts on that end have been weak. If BOA has 45,000 homes a month on sale via REO I will do my first short ever; home builders.
Sorry for the extended rant.
this makes me think of how Yves Smith frequently seemed to indicate that long managers in the fixed income market weren't to blame for their gross incompetence in buying crap assets, because they simply HAD to buy risky assets in a hunt for yield...
that argument makes me furious.. yeah - if you miss a huge rally you'll get fired. that is EXACTLY why it's so hard to be a good trader and money manager - it's not an excuse for bad money managers to blindly follow the herd and buy worthless CDOs because they "need" yield.
Kid,
Thanks so much for stopping in.
We really cannot get anywhere with this mindset. The term "bond vigilantes" makes me laugh out loud.
When things were bad (say down 30% SPY) everyone said "everybody's doing it!" from "Old School" the film. That players support a stock market rally with investor shares makes me sick for the result. Unreal. Ok, its Friday, I will let it go like Barry says.
you know what's the saddest thing? i'll tell you a story... i have been bearish, literally, since like 2003 - i knew that we didn't fix the problems that we had before sept 11/2001. A lot of people forget that the market was ALREADY tanking before that, and then the government reacted to the attack by cutting rates to zero and fueling the new bubble.
finally, in April 2007 (within 5% of the top!), i said "jeezus - at my age, i NEED to have some equity exposure" so i opened up a managed account where a guy ran a portfolio for me. I decided that was the only way i would have equity exposure, cause i was so bearish... well, guess what... the market f'n CRASHED... and i pulled the plug when he was down 40% right in line with the market - the portfolio was very much Dow-like.
i'm sure you can guess when that was... so sad. right around SPX 700
and the sadder part is that if i'd just left the money there, i'd have made it all back by now... instead i compounded my error by shorting the rally and losing more.
aiyahhhhhh!
I'm a portfolio manager by trade. From 2001 to 2005, I was managing a financial companies fund. Canadian and US fiancials. The difference between the 2 markets was so flagrant that I saw the US credit bubble growing right before my eyes.
I was at a GS conference (2003? 2004?) and I walked out of a the WFC speech disgusted. He was saying that US real esate would never go down because Americans love their houses and would do whatever they would need to do to hold onto them even in bad times. Of course, they were all showing us historical default rates... when people had to put 20% DOWN!
I walked out of the meeting in need of a refreshement and found myself close to the Bloomberg terminals, munching on a cookie, listening to this suspender pulling young guy bragging about his stellar Sallie Mae call. And I couldn't help but wonder how boomers would be able to sell their overvalued McMansions to Gen-X and Gen-Y when the stats show us they:
1. the under 40 are getting poorer by the decade,
2. the under 40 are loaded with schoold debts
3. the under 40 are in much lower numbers du to a baby bust.
I managed my fund and got great returns. It's easy, all I had to do was beat my index. Bubble or not, it did not matter. Who cares if the fund tanks by 15%, if I could keep it at -14%, I would get my full bonus!
For 3 years I talked about the bubble and was ridiculed. Most thought I was a negative person and many just told me to shut up, play the game and just be happy I was part of the lucky few.
That's what bothers me about Barry. He keeps on complaining about the fraud but he keeps on feeding the beast. He thinks that banks should have been nationalized but he buys them up for short term trades. He is part of the problem. I think what bothers me more is not that he is part of the problem but that he does not see it as he keeps on saying that he tries as hard as possible to keep his biases out.
I am out of the business for now. I just can't live with myself on a daily basis charging 2% MERs managing funds that should not even exits. There are many ways to rationalize this but have not been good at it. I have not been able to shut down the little woice with the wings.
I've been honest with myself. I should have been a scientist and contributed to something real and tangible but I fell into the black hole of portfolio management. The money was there. How sad.
Kid,
I lost about 40% of a investement in a Vanguard SP index fund frm 2000-2002. I sold it off and I have done all my own work since then. Nothing spectacular (except for gold/silver; Very long since 2002!) but I hit may target every years so far and not one losing year. I will not be rich, but it beats CD's! I think what is lost to the big guys is little joe six pack did not sell at the highs and buy at the lows, he has been on board the whole way and is still down quite a bit.
Moneta,
Thanks so much for the story. Being a scientist is hard too, but I would say more fun that managing money!
I think you hit what I meant by the post re Barry; What's tyhe point of being against fraud and charades if you will pounce on it to make a buck? Again, probably fine, its a free country, but whats with the cheerleading of it? Puzzling indeed.
When once asked what the stock market was going to do, J P Morgan famously, "It's going to fluctuate." True that.
Barry Ritholtz is a money manager and an investment advisor. As such, he has a fiduciary responsibility to his clients, to make as much money as possible for them and for himself. I don't have a problem with that, as I'm in the same position myself.
As an agent, I have a fiduciary responsibility to my client, the seller. It is my job to get him the highest price possible for his house. In fact, it is illegal for me to say the seller will accept less than full list price. But it does not benefit me or him to list the house at a price it will not sell for.
This is why I often take several hours in preparing a price opinion. I want the nearest, most similar, most recent sales, the most accurate valuation. I'm usually right to within +/- 5% of the eventual sales price, which is better than the average bear.
But there is a conundrum involved. True story. Back in 06 I listed a house, and this guy came in and asked how he could make an offer. I told him he needed to get his own financing and recommended several reputable local mortgage companies. I also told him the best financing would be 20% down on a 15-year note with a fixed interest rate.
Well, two days later, he came back with his financing--0% down, interest-only adjustable-rate mortgage, roll over closing costs. You see, he had this friend who was a mortgage broker.
Now, I know this is the absolute worst type of financing, so I asked him if he was sure he wanted to take out that kind of loan. Again I referred him to the more reputable mortgage companies and suggested other financing. But, no, he trusted his friend, the mortgage broker, who said this was the best loan for him.
Now, at that point, what am I supposed to do? It's not my job to be a financial advisor. It's my job to sell the house! This guy is not my client. He wants to buy the house, he wants to use this financing. So I sold him the house.
Long story short, a little over a year later, the guy lost the house to foreclosure. The mortgage broker went bankrupt. The lender which sold the mortgage on the secondary market is now under investigation for securities fraud and is being sued by investors. And I get the listing to sell the same house again, which I did.
The only one making any real money in this market is me. I'm getting paid twice to sell the same house! I do my job, I deal with people honestly and straight-up, and I'm mindful of my responsibility to my client.
In that regard, Ritholtz is in the same boat. If he misses the rally, he's going to lose clients. So he has to sell the rally. I can't question his ethics. I would question his wisdom though.
Personally, I think the stock market is rigged. High-frequency trading, computer algorhythms, big time players making moves on inside information, price manipulation, and the like, not to mention rampant fraud and questionable accounting.
And the stock market is not the economy. You're right, GYC, I don't see much of a recovery either. Where's the job creation? Where's the accountability? Where's the transparency? Seems to me it's just the same circle-jerk of clowns riding their hobby horses on a carousel.
Timing the market, any market, is a hard thing to do. And it's a game that only fools play. Every market is going to fluctuate. Prices go up, prices go down. It always has been and always will be so. The only real investment is in value.
But without boundaries, rules and regulations, transparency and accountability, it becomes increasingly difficult to know where the true value is.
I think we're headed for some rough times, in all markets across the globe. It's going to get ugly. When or how ugly is anybody's guess, but it will happen. That which is unsustainable cannot be sustained.
Still, there will be money to be made, there always is. As long as you know what you're doing.
On the banks...
It is pretty obvious that they will have to take a hit in the next year because of those millions of strategic defaults.
Let's look at some numbers:
BAC (Dec. 31):
Loans: 900B
Allowance for losses: 37B
When we calculate the weighted average of losses using the Fed delinquency rates we get at least115B.
So 115B - 37B = 78B in write-downs to come.
Equity at Dec. 31 = 231B. That would mean a 30% write-down in equity.
Of course they have been issuing preferreds to yield starved investors. They recently did one with attractive terms to guarantee a conversion to equity.
Government has forced banks to increase capital knowing full well that more write-offs are to come. Of course pension plans are buying up this stuff when it is obvious that further write-downs are to come and conversions will further dilute equity holders.
On the ones hand, government is supposed to help Americans save for retirement. On the other hand, it is using the greater fool theory to prop up the market. Selling its crap to funds and telling the world they are making profits on it.
If you ask me it's quite disgusting.
GG:
"Barry Ritholtz is a money manager and an investment advisor. As such, he has a fiduciary responsibility to his clients, to make as much money as possible for them and for himself. I don't have a problem with that, as I'm in the same position myself."
That's a rationalization. Just like when we say we'll do everything to get food on the table because we've got mouths to feed. It does not solve the problem.
Isn't it the same dilemma the resurrectionist men must have rationalized? I am stealing bodies for a good cause... The doctors are using the bodies to advance science.
Doctors should have been pushing to change the laws and not paying grave diggers.
I'm a pragmatist. I know that changing laws and attitudes can take time and you sometimes need to cheat to force the system into change. But people who complain about the system yet take advantage of it, waiting for others to do the dirty work irk me.
I also know I should not be throwing stones while living in a glass house.
It is disgusting, Moneta. And I think debt repudiation, especially if the debt was fraudulently induced, would be a wonderful thing.
http://www.zerohedge.com/article/momentum-growing-debt-repudiation
To my mind, the government has three constitutional responsibilities: to provide for the common defense, to promote the general welfare, and to protect the citizens from fraud.
This government, both parties going back decades, hasn't done a very good job of either. Thus, it's time for a revolution.
Another reason why I am very negative on the entire system:
1. Government putting more and more responsibility on individuals to save for their retirement.
2. Individuals investing their money in RSP and 401K paying large fees, looking for quality advisors.
Irony:
1. From a top-down approach, government knows darn well that 50% will underperform despite high fees since everyone put together is THE market.
2. I did a back of the envelope calculation using Canadian numbers. If everyone in Canada had been saving and was still saving adequately to fund a 20K revenue per year retirement (today's numbers), putting 40% in Canadian equities, we would need at least 2 trillion in market cap. The problem is that the number comes out larger than the actual market cap. And this is not even accounting for the top 5% which have more than 500K portfolios, business funds and foreign investors.
The reality is that our Canadian equity markets are not deep enough to fund the entire boomer bulge with traditional portfolio management asset-mix principles.
On top of that, if everyone had been saving, the economy would have been much smaller with less companies and less equity. This means we would have had to let emerging markets take over much faster. Politically palatable? Don't think so.
Capitalism was always meant for the top 10% yet we've been trying to convince 100% of the population to particiapte in equity markets to fund their retirement. But if everyone participates in the gains, it's not capitalism anymore, it's socialsm. The whole pension thing was doomed to fail from the beginning. From the very beginning we should have known that only 10% would have enough to retire doing it on their own.
Our public system of funding retirement has been working fine because of the boomer bulge which created a large number of workers per dependant. But this ratio has peaked. Future retirements will not look like those of the last 3 decades that's for sure.
It's not a rationalization. It's a realization.
Ritholtz has his responsibilities to his clients. I have mine.
A guy comes in, he wants to buy a house. Am I not supposed to sell him a house? That would be a gross violation of my responsibility to my client, the seller. Not to mention a money-losing proposition for me. I only get paid when I sell a house. And it costs me time, money and gas to list, market, advertise, and show a house, in addition to licensing fees, board membership, MLS dues, continuing education costs. Plus I have to give 30% of each commission to the company to pay for office space and supplies, signage, etc. Then there's taxes, 12.4% social security, at least 25% income, medicare and medicaid. It's a bitch being self-employed. Add up all the expenses, I barely get to keep a third of the money I generate. And I have to live off that.
So, what do you expect me to do? Sit there and starve, go broke, because some idiot took out toxic financing? I gave him the best advise of anyone involved, even though he's not my client, but he didn't listen to me. Oh, well, I prefer to sell the house and get paid. That is my fiduciary responsibility to my client and my job, after all.
>parsing the numbers to see the effect of massive store closings affecting the same store sale numbers.
I'm shocked that they wouldn't average in the closed store's sales going to zero.
Without that the number is clearly bogus.
He should have used the term "Sheep herders" instead of "Market pros".
GG:
"So, what do you expect me to do? Sit there and starve, go broke, because some idiot took out toxic financing?"
Obviously you've rationalized your cognitive dissonance away or else you would have quit your job and would not be asking for my understanding.
There are all kinds of things you could do to promote change but they most probably entail hardship. Maybe some could bring you more wealth or peace of mind.
On that note, let me tell you that I am not judging you. It's not as if I've done much to change the system either.
I believe that the free will we think we have is more like the best decisions our brains can make with all the "data" it has.
We might think that we are consciously making our decisions but in reality most are made without us realizing the kind of data going into the process: past experiences, environment, genetics, chemicals, etc.
Your mind is making its decision, looking for the optimal result, dependant on the input it has. And it's telling you to keep on selling.
What is the moral thing to do? I don't know. Morality is a social construct that changes through time. It is a set of rules that everyone respects to make the system work.
You have the basic 10 commandments which everyone believe in and then you have all the other rules that keep on adding up as society becomes more and more complex.
If the entire system revolves around perpetual growth but growth can not continue, can we truly expect people to continue to follow the rules of morality that worked while growth was there? Only if they think it will get them out of it. I don't think most see that happening though.
I believe that morality has its roots in survival. As we go up the pyramid of needs, the moral rules sustaining higher society become more elaborate.
But when the system breaks down, many of the rules of morality which are higher up in the hierarchy start making no sense.
Paying your underwater mortgage when banks are defaulting on their real estate loans is only one of many.
OK now, sorry for my pontification. I'll give you guys a break!
I haven't rationalized anything away. My family owns the company, and I have a moral obligation to my family to take care of it. That means keeping it profitable.
I provide the most accurate valuation possible to my client. Usually, the seller adds about $10,000 to the list price, and the seller sets the list price not me, then comes down after no offers come in. And the house eventually sells for within +/- 5% of my original price opinion. I fail to see how that's ripping anybody off. Other than the seller wasting my time, that is.
I don't do financing. I can only recommend financing. Some guy comes in with toxic financing and refuses to listen to my advice, because he trusts his friend, the mortgage broker. I fail to see how I'm ripping him off. His friend is.
I have no control over mortgage fraud, appraisal fraud, or any other kind of fraud. The only control I have is over myself, and I do not commit fraud. I provide the most accurate evaluation to the seller. And I give the best advice available to the buyer, even though he is not my client. If he doesn't want to listen to my free advice, there's not much I can do about that. Except to sell him a house which he will eventually lose, and I'll get to sell again.
I haven't lied to anybody. I haven't misrepresented anything to anyone. I give the best price opinion possible to the seller and the best advice available to the buyer. Each can decide to do what they want to do. It's my job to negotiate a deal. And a deal is a willing seller and a willing buyer agreeing on a price. Whether or not I think it's a good deal for either party is irrelevant. They each make their own decisions, and no one listens to me.
There is no morality involved here. Only business. I haven't lied to or stolen from anyone. All I did was give the best price opinion and the best advice to both parties involved.
The government is responsible here, in its mandate to protect the citizens from fraud. All I can do in that situation is vote against every incumbent, which I do.
It's easy to pretend to morality, thinking you're better than everyone else. Which is the height of hypocrisy. We all sit on a commode and take a dump, then wipe our ass.
I just conduct business straight up. I deal honestly with both parties. If neither one of them wants to heed my advice, there's not much I can do about that.
By the way, the current market value for our listings, that would be just my mother and me, doesn't include the two other brokers or six other realtors, is in excess of $9 million. Add to that, in addition to all the other listings, the current market value of the land the office is on and it's another $1.4 million. We own all the listings, we own the land and we own the company name. So our current net worth is around $15 million. The condos we live in are paid for and our expenses are minimal.
We didn't get all that by lying to people and ripping them off. We got that by dealing with people straight up. It's not my fault the government isn't doing it's job. I'm doing mine. And I'm rich as a a result of it.
Pretend to morality or superiority all you want. In the end, what are you worth? Not much, except pretense. And that isn't worth a dime these days.
Wow, lively debate!
Moneta,
Can I use some of your comments in post? I like to have permission.
I certainly have not done all I can to help change things. I do my best with this site. I have zero probelm with BR trading as he does; he is indeed a money manager and that is his job. It still rankles me though; if you read his book and then read the posts I highlighted you can see what I mean.
Look, we all are very unhappy about what has been going on, but as long as smart guys like BR that know better are chasing money in this way nothing can change. You can see the way this is played if you read FED minutes. They will say things like "clearly confidemce in XYZ is grwing as the stock price is moving up." If FNM keep getting bought it is like a YES vote for the continued subsidy of that firm. I will not cast that vote. Others will.
Gawains,
I think legally you have to be very up front in the real estate biz, so I did not see an example anywhere that you were doing anything shady. Besides, we all no it is a huge mistake to cross your mom!
Meant to say I was out in the yard all day and now I am going to grill up some food, I am glad this post got some action.
gyc:
You can use my comments. No problem.
I find it tough to get my point across. I'll try again...
I don't have a problem with what Ritholz is doing because we are stuck in a screwed up system and there is no easy way out. And we are all part of the problem.
For example, me making a killing managing funds that should probably not exist even if I worked hard and never cheated, doctors making millions on credit bubble loans used to finance plastic surgery, real estate agents making millions on credit bubble levels of transactions, etc (every sector of the economy has been infected with the credit bubble).
All of us with a good net worth, even if we worked hard, were honest and never cheated nor lied we all have dirty hands because we are all owners of dirty misallocated money. We are all part of the problem. If the credit bubble had not occured, we would prbably not have the wealth we now have.
My problem with Barry is that he is convinced he knows how to fix the system, calls out the fraudsters, yet he does not seem to realize that he is part of the problem. When he makes a short term trade which is not based on fundamentals but short term momentum he is banking on the greater fool principle. How does he rationalize his actions if the loser on the other end of the trade is a 70 year old widow?
Moneta,
yeah I was thinking on that. Say I blogged about company X because they screwed up and lost my grandmas pension money. If I blogged about for a while, then wrote a book about how the company mismanged the funds and how to fix the way this operates, then when the government figures company X is too big to fail and steps in with a bailout, I go out and buy the company X stock I had spent time and effort exposing!
I don't have any dirty hands or any dirty money.
Everything that I have I came across the old fashioned way--I earned it. And not without considerable sweat equity I might add.
I live in a small condo that is paid for. I mostly drive an old truck that is paid for. Yes, I do have a high-end RX-8 sports car, but I hardly get to drive it.
My only outstanding debt is a student loan and a car loan. That plus insurance, gas, utilities, food, association fees, property taxes, and business expenses mentioned above. I'm sitting pretty.
Wasn't the way I planned it. I was perfectly happy teaching high school and college, until my father got sick and I had to do what I had to do. So be it.
Yet some people are complaining about the stock market. They could have made so much money if they hadn't shorted it or ridden out the wave. And now they have nothing. My heart bleeds.
I'm in the middle of this foreclosure mess. None of you have any idea of what I deal with. But, hey, I take the time, spend the money and gas, associated dues and taxes, and still make a whole lot of money.
I don't need to lie to anyone, rip off anyone, compromise my ethics. I make enough money doing business straight-up, as it is. I do not participate in fraud, but as long as fraud is going on all around there's not much I can do about it. Except make money by being ethical.
The rest of you, who have no idea of what you're doing, I look upon as not my problem. If you came to me, I gave you the best advice, whether you were my client or not. And now it's all blown up in your face. And whose fault is that? Not mine.
So the market goes down by 50%. I'll only inherit $5 million, instead of $10 million.
You can bitch, moan, whine, complain about that. Like it means anything. But in the end, it all only means one thing. I took care of my clients and customers. No one got a bad deal from dealing with me. I never lied to or misrepresented anything to anybody. I closed the deal straight up.
This is the real world.
Gawains,
Absolutely. I think that Moneta would do well to review what you have written in this thread, I fail to see how what I was angry about applies to your situation at all, in any way.
Gawains,
If you took the time to try and explain how 20% down and 15 years is better than the alternative, then I think you have went way beyond the call of duty IMO.
For crying out loud we are talking about adults are we not?
I would wager that if people would have exercised half of the caveat emptor in their mortgage agreement as they did in the actual property that they were buying, a lot of this could have been avoided.
Come to think of it, they probably just plowed right into whatever home it was that they were buying too.
Only someone's 'inner child' would let them off the hook thinking 0% down is to their benefit.
If I was in your shoes Gawains, I would be pulling a Jerry Maguire i.e. "Show me the money!"
What Watchtower said.
Well, GYC, what you were angry about and what I'm angry about are two sides of the same coin.
I'm angry about fraud. Lenders ripping borrowers off, while being back-stopped by the government (i.e., the taxpayers, me included).
Everything is rigged. The housing market, the stock market, the precious metals market. If you're not on the inside, making money, you're on the outside, losing money.
The whole thing sucks. And all of us as taxpayers are paying for it.
Guys like Ritholtz, they have to sell their product. I'm not buying it, but I have no control over someone who does.
All I can do is conduct business ethically. Someone wants to buy a house? Fine. I will sell the house. If the buyer doesn't want to listen to my free advice about financing, so be it. People should know what they're getting into. If not, well, I look upon that as not my problem. I gave the best advice I could, but no one listened to me.
At some point, this will all come to a head. A lot of people are going to lose a whole lot of money. Regardless, I never cheated anyone.
Guys like Ritholtz, who are are only concerned about the money they can make, are of little consequence to me. Yeah, I want to make money to be sure, but I don't need to misrepresent anything to anybody to do so. I just give the best price evaluation to the seller and the best advice to the buyer I can. What else am I supposed to do?
Gawains,
My man, its cool. In no way have you been in on any kind of baloney, it amazes me you do as well as you do considering how up front and honest you are. Now I really wish the exchange between you and Moneta had not happened. This was a heated post and I am not surprised a heated discussion followed.
It is Saturday night after all and I am going to do a beer can chicken tomorrow. Any advice?
I will have a follow up post on all of this maybe tomorrow to pull it together. Anyone that feels I have not fleshed it out the best way can use the email on the side (economicdisconnect@gmail.com) to contact me.
Thanks for finding the Grapevine clip, that is indeed exactly the one I was talking about. Good songs!
A beer can chicken? My advice?
I don't drink beer out of cans. Only out of bottles. Heineken, green.
As far as chicken goes, the best one I ever ate was one I caught in my grandmother's backyard when I was five. She promptly snapped its neck, plucked and gutted it right in front of me. I was horrified, but it was delicious.
Anything but Tyson.
As to the heated discussion above, well, cum se cum qua.
It's never my intention to offend anyone. But if there's one thing that really bothers me, it's a pretense to superiority. That and mouthing off on a subject you know nothing about.
I just do my job, to the best of my ability. It doesn't benefit me in any way to do anything less.
By the way, a couple of years ago in a multiple-offer situation on a commercial property, one of the buyers took me to lunch and offered me $3000 cash under the table to tell him what the highest bid was. I got up and left.
This is what these people do not understand. The property is going to sell. I'm going to earn the listing commission at least. Naturally I'd like to earn the selling commission as well, but I'm not going to die if I don't.
If you do not have the capital, don't waste my time. My integrity is worth a hell of a lot more than a few thousand dollars.
If you cannot afford to make a deal honestly and up front, then you don't have enough money to do business with me. And you never will. So, bye.
Wow! 29 comments is a new record I think!
Soleil,
Glad that was the song! Thanks for stopping in and checking it out, have a great day.
Gawains,
I'll stick with the perdue pre-"conditioned" birds, HA!
This one struck me as a brilliant and amusing piece.
http://dailyreckoning.com/goldman-style-capitalism-separating-fools-from-their-money/
Here a couple of interesting articles for your Sunday reading pleasure, GYC.
First up, the failed foreclosure sale of Nicholas Cage's home.
http://www.latimes.com/business/la-fi-cage-foreclosure8-2010apr08,0,2028352.story
Comic book covers? Train sets? No room for a tennis court? Please.
This is the problem most people experience when they rennovate a home. They rennovate to their own personal tastes--some wild paint scheme or nonsensical addition, or worse enclose the garage for an entertainment room (with no a/c). Only to find out, when it comes time to sell, that no one shares their taste. So it lingers on the market until the price drops to a point where someone is willing to buy it and rennovate it all over again.
Far better to think in terms of functional and practical. There are always buyers in the market for a house like that.
I got an assignment on this house two months ago, so I went over there to check it out. It happened to be occupied by a renter, who had a lease-purchase agreement with the owner. This is the problem with these types of agreements--there is no guarantee the owner will use the lease payments to pay off the mortgage. And if he doesn't, well, the house gets foreclosed on, and you're out all that money.
But fortunately the company offered the renter a $4500 relocation payment in exchange of cash for keys. So a few weeks later I was able to gain access to the house.
It was in a nice neighborhood on a large lot with a fence and pool. But something struck me as strange before I went in--there were no windows.
Imagine an H. That's the design of this house. You walk in the front door, and you're in this hall. Ten feet in front of you is the back door. On each end of the hall are the wings--one with bedrooms and baths, the other with living, dining and kitchen. This is the most stupidly designed house I've ever seen. How much worse can it get? The kitchen had painted blue metal cabinets. Good grief.
I thought for sure that no one would ever buy this house. But shockingly it sold in less than two weeks. Maybe it was the location, maybe it was the price, maybe it was the pool, who can say? But it only goes to show, you never know.
Anyway, here are two other articles of interest.
http://www.zerohedge.com/article/looming-european-debt-wars
Looming debt wars? That doesn't sound very good.
http://www.zerohedge.com/article/guest-post-got-gold-why-owning-gld-can-be-hazardous-your-wealth
Hmmm. The problem with GLD is that it's missing a letter. The O, as in ounces.
All that glitters is not gold.
http://www.nypost.com/p/news/business/metal_are_in_the_pits_2arTlGNbMK7mb1uJeVHb0O/0#ixzz0knioYd8m
My friend Dave who writes the Golden Truth blog had a great guest post over at Zero Hedge on the GLD issues, it was very good. The NY Post running the metal story is is big time thing.
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