Thursday, May 31, 2012


I lived in a unionized family for alot of years.

There is so many words written in so many media that to believe that my words have any impact on others would be folly. So you could say that I write my blogs as a record of my thinking to myself. Very few people care what I say nor should they. I'm just one person that does some good stuff but slides along in the vast cauldron of life along with all my readers.

A newspaper in New York runs so many articles that are replete with misleading information. A particular article I am referring to is "The College Gap Leaves Some Cities Behind".

If you dig a little deeper you would see that the largest number of union workers live in California and just over half live in just six states.

One of those six states is Ohio. Ohio is the state in which the city being referred to in the article is located. National statistics show that black people have the highest union membership rate in the country and they also have a lower college graduation rate than other races.

When we fix the reasons behind the unionization and lower education levels we will go a long way from not having to write distorted articles in national newspapers.

For those of you that may think this sounds like a biased article I remind you that I was not only brought up in a unionized family but I also spent 10 years in the Fifth Avenue Armory in the midst of Harlem. There were three white guys in my unit. I can say that I was never better treated, accepted and had tons of friends.

If we don't look at the real causes of headline articles we will never fix the real problems that show up on the surface but are not even close to the cause.

Wednesday, May 30, 2012


Some people are always perpetual victims. It's my teacher's fault, it's my father's fault, it's my mother's fault, it's everybody's and everything's fault but my own. If you stay up late, if you don't concentrate, if you don't set reasonable goals, if you make wrong decisions and you know that they are wrong, you are responsible and even more as you grow older.

Set three good goals such doing well in school, jumping an extra foot and improving your social behavior.

Love ,

Thursday, May 24, 2012


From time to time we like to keep track of the investment performance of our old associate, Lew Sanders.  This has academic interest to me since he truly is a real smart guy,.  If man with his brains can't outperform the S & P 500, it speaks volumes as to the difficulty of the "Average Joe" trying to outperform the market.

The only real access we have to his portfolio performance is a website called Tickerspy which aggregates the portfolio holdings of investment firms based upon SEC filings. Sanders Capital, his recently formed investment firm, seems to have been under performing the market averages in most time frames that I can find reported on the Tickerspy website.

For example, figures on Tickerspy show that the S & P 500 return is approximately down 3% for the last three months, while the Sanders portfolio seems to be reported down 8%.

For the latest 6 month period the S & P 500 shows a return of about 12 1/2 %, while the Sanders portfolio shows a return of about 3 to 4 %.

If these figures are close to  correct, they don't say much during this short time frame for the value added by the Sanders Capital group.

In my opinion, there is no such thing as value investing and since Lew is as good as it gets, in terms of academic knowledge, indexing is still alive and kicking.  

Thursday, May 17, 2012


This blog may be highly controversial.  I will keep it short. For whatever my blogs may have been worth, I consider this to be by far the most significant.

For whatever reasons, justified or not, antisemitism towards Jewish people has been a long term historical reality.  In the mid 1800's after a relatively long period of Jewish attempts to integrate into European society, it became apparent that no matter what methods of assimilation the Jews tried, antisemitism remained.

Out of this period grew a series of Jewish responses; Jewish enlightenment, Socialism, Immigration, Zionism and Westward migration.

I have had a difficult time trying to really put my finger on why I didn't like President Obama.  He is educated, young, a family man, hardworking, likes dogs and kids, etc. and certainly not stupid.  A politician par excellence.

And now for the kicker.

Unfortunately a very significant number of the Jews became socialists, communists and today would be called left-wing liberals.  There was a strong feeling that if all people became very similar, the universal man if you will, then the Jews would be able to blend in and antisemitism would disappear. We all know that this assimilation attempt failed.

Today we know that the antisemitism against Jews was a prejudice and generally not predicated on Jewish failings, any more or less than any other group.  If you go and watch the TV today you will see our President calling for "prejudice" against people he believes to be rich, rather than explaining to the masses how our system works and how we tend to benefit immensely from creation, entrepreneurship, investment of wealth, etc.

Just as the Jews tried to leave their areas of settlement and find new homes to not be attacked, you will find more and more builders of this nation looking for ways to separate.  The Facebook founder who gave up his US citizenship to move to Singapore is the very beginning, no wheres close to the end.

So in summary, I hate to say it but our President looks to me like a bigot who instead of attacking the Jews, has chosen a campaign strategy of attacking the successful, both were small minority groups.

Let's hope that this bigotry will be just as unsuccessful as antisemitism.

Wednesday, May 9, 2012


My original blogs were meant for young people starting their careers. Negotiation among people is a complex matter.  Most of us, when we are young, know next to nothing about the strategic and emotional concepts of negotiating contracts.

This little vignette is dedicated to protect you from predators (including yourself), in the give and take of contract signing.

The original contracts at the founding of Sanford Bernstein and Company were endlessly thorough. I was able to have included many protections against partners who could turn out to be devious.  At that age, I did not grasp the full extent of the causes of human aggression and deception.

Bernstein was smarter than I was and had included in the contract, a minimum ownership under all future possibilities.  I was naive enough to cave into pressure from two of my partners and accept a lesser form of ownership rights after 72 hours of intense negotiation.

In the end there was a loophole that enabled Bernstein, Hertog and Sanders to vote to diminish my responsibilities.  I should never have agreed to that loophole and it was a serious learning experience which I vowed to never do again.

Along the way while I was President at Bernstein, I was discussing with Martin Sosnoff his joining of the firm as Chief Investment Officer and significant shareholder.  He decided to stay with his own company where he was in partnership with someone else.

Finding my situation at Bernstein not to my liking I left the firm.  I had six other offers of significance to join new firms but decided because of close friendship with Martin (a brilliant and unique man) that I would help him build his company, Atalanta.   Several people would join me from Bernstein including their Chief Financial Officer Harvey Siegel, an extraordinarily bright operations executive.

Not wanting to repeat the same contractual errors I made in the Bernstein negotiation, I insisted on a much stronger contract with Atalanta and was given a substantial portion of the firm, for which to this day I am grateful.

Through the efforts of several people we were able to build Atalanta from about $150 million in assets to almost $6 Billion from 1980 to 1986.  The firm was extremely profitable and I estimate had the highest assets under management per major owner in the industry.  Along the way we went public.  That is really the episode that I suggest caused the firm to go from $6 billion in assets when I left to only $2 billion a few years after my departure.

The point is, although I had a much stronger contract in many respects than my preceding contract with the Bernstein organization (which in my opinion would not have existed had I not joined the firm), as it turns out the new contract with Atalanta was not strong enough.

Although Atalanta was one of the largest money managers for the Catholic Church, Mr. Sosnoff decided to become a major shareholder in Caesars World.  Most of his shares were held in margin accounts.  During the market decline of 1987, Caesars went from about $30 to $10 which caused huge margin liquidation, wiped out a fortune and resulted in a depletion of the Atalanta assets.  Unfortunately these assets didn't recover to the 1986 highs for many, many years later.  I don't believe the firm was ever as close to as profitable as it was when it was a private entity.  There are three major ways to become wealthy, build a profitable business, take the business public, and make concentrated investments using as much margin and leverage as you can.

But today's kind of long vignette is really about Green Mountain Coffee and how ego traps even brilliant people. Recent history is replete with the effect of leverage on the downside, the most recent of which is Green Mountain Coffee.  Caesars World recovered in price. Although I don't know the Green Mountain story, it may also recover. Even Chesapeake Energy, which is a similar leverage in reverse catastrophe, may live to see another day.

In my next blog about Atalanta I will tell you what happened.

Thursday, May 3, 2012


Yesterday an analyst at a major brokerage firm forecasted that the price objective for Green Mountain Coffee was $51.  When the report was written the stock was trading in the high $40's.

Today Green Mountain is trading at $27 a share, down from the high $40's in one day.  This analyst is still predicting a price objective above $50.  If we want to clean up the research side of the investment business one way to do this is to tell this analyst to take his entire paycheck and buy Green Mountain stock in the $20's.

Who wouldn't  do that if you could double your money?  It's a strange world.

Wednesday, May 2, 2012


It wasn't long ago that a company called OpenTable was a "hot stock" selling at over $100 a share.  It recently was trading at $36.  It wasn't long ago that American Airlines was considered the premier airline.   American recently filed for bankruptcy.  Research in Motion was the leader in cell phones and sold at $140 a share and now trades in the low teens.  General Motors had double its market share. Microsoft was being sued for antitrust right before competition for its operating system exploded. First Solar and the other solar companies were hot stocks selling for many times their current prices. Netflix was a $300 stock a year ago and is now $75.00.   Green Mountain Coffee was a $100 plus stock six months ago and is trading today for $28.   Don't let anybody fool you because when each of these things were occurring very few, if any, forecasters predicted negative change for these companies, only continuation of the existing circumstances.  I can make a list of the demise of hot companies that would run page after page. 

This is especially true in stock brokerage firms most of which have disappeared over the years.  There was EF Hutton, Dupont, Lehman, Bear Stearns, Kidder, Bache and Soloman. Even Merrill Lynch is no longer a stand alone.  Ask yourself the question if these brokerage firms knew anything much more that the rest of us about investing how could they have not had made their fortunes in purchasing what they had been recommending.
We recently wrote a blog about the perils of machines trading of hundreds of millions of shares of stock daily.  This blog didn't get much attention. Machines that have no intention of investing in companies, waiting for dividend growth or probably in most algorithms not knowing anything about each of the companies their trading in.  These machines make it even more difficult. 

There was a recent event that might seem quite unimportant in the scheme of things and wasn't even in this country.  If you are familiar with the canary and the mine story it should not be overlooked.  I will just quote the headline for you and I suggest you keep it in mind because it's another example of what's going to happen. 

The headline was "MEXICO'S BENCHMARK IPC INDEX PLUNGES AFTER WRONG ORDER".  Within minutes the index dropped 2%. 

But now the real story.  With all the mistaken research opinions (it just happens to be part of the business) the SEC, in it's political wisdom, led by a Chairman with substantial ties to Bernie Madoff, has chosen to allow an inquiry into a firm called Egan Jones.  This is a recently started firm in the bond rating business.  It also happens to be the firm that was the first to lower the United States' bond rating.  In this mornings press, Bill Gross of Pimco, confirmed his views that the US bond rating would come down again.  But the SEC has chosen to go after this Egan Jones firm on the basis of what seems to be some minor misinformation in a 2008 regulatory application with administrative charges.  The three major bond rating firms, one of which we wrote about at length and will repeat the blog shortly, are not even mentioned.  There are serious issues in our Securities businesses as there are serious issues in the political business. 

How in the world did Obama appoint as the head of the SEC a person with such close ties to Bernie Madoff, who is now beginning to prosecute a case against a small bond research firm before it even concludes whats going on at the three large firms responsible for American Bond ratings.  All of which  I believe have high personnel turnover so that many of their ratings, at the very least, are done by a changing group of people which  tends to make them close to worthless.  Very few of them had the courage to call what occurred in the housing market just like very research analysts have the courage to call radically priced investment concepts unworthy of investors money..  The same concept applies to municipal bond debt which if they were being issued by companies would  be considered junk. 

The bond raters are no different than the stock recommenders.  The public should understand that Wall Street ratings and recommendations are a product being sold for profit not a guarantee or anywhere close to that of investment success. 


Shepard Osherow. All Rights Reserved