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.
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.
No comments:
Post a Comment