Archive for August, 2009

CBS foolcast

Saturday, August 8th, 2009

On Monday August 3, CBS news Katie Couric remarked that the DJIA went up 115 points as if that means positive news or a recovery. A little over a one percent move means nothing. It’s called market noise. Her fellow CBS colleague then comments that the Nasdaq index is over 2000 and the S&P 500 index was as low as 666 in March. He refrains from calling it a recovery and then reports that some analysts are predicting… Wait! Some analysts are always predicting something – it means nothing!  Then the news reports on the Cash for Clunkers rebates. I’ve got news for you: People aren’t turning in Japanese cars.The next news report is the $7 billion post office losses (Now, they’re up there with Worldcom with large losses) and the possible closing of hundreds of post office locations. Hey, fire the guys running the operation. I still can’t figure out why the postal service wastes money advertising on TV. One low flat rate? If, by low, you mean high, and then multiple flat rates making consumers fuss around with different size boxes – then yeah, there might be one flat rate that is relatively low for a box that’s probably too small to ship most things in. Email isn’t diminishing the postal business as the newscast reported – it’s mismanagement, running useless ads, and government efficiency. In the 1980s the post office briefly offered an email service, there wasn’t sufficient demand for them and they canceled it. If they would have gave the email addresses away for free and charged the advertisers instead of the consumer they could have had a business on the digital side.  

So, where’s the broad economic recovery? A contact of mine commented last week about his surprise regarding some of the large and or record profits for some of the large Wall Street investment firms. He remarked that maybe they would be hiring and that could spark a slow recovery. “What if those profits were boosted by special arrangements and it has no bearing on translating to jobs? What happens on Wall Street does not significantly translate to the average family on Main Street.” He hadn’t considered a jobless recovery. For all the speculation about protracted contractions or recoveries it does nothing to address the most overlooked issue, there is some natural stability built into the system – rich people still want to be rich – so I don’t fear any sort of collapse.  

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Here’s an interesting comment from an unrelated post, partly relevant to our topic:

7-30-2009 @ 5:04PM Iridium said…There is nothing that could have happened in the past 24 hours that could cause this type of volatility. The global economy doesn’t work on a 24 hour basis. People don’t have 24 hour jobs and corporations don’t have 24 hour profits. The way the market works you would think that 100 million people are hired and fired everyday.

The market can rise or drop 100 points for no apparent reason. This disconnect from reality needs to be remedied. You can’t have a sell off in oil caused by a real fundamental reversed 24 hours later because of some rampant speculation of future economic activity.

I have no doubt in my mind that the traders at Goldman Sachs already have the GDP data. The rest of us are left wondering, are they buying up shorts or buying up longs? No matter what they have the advantage that will make them billions tomorrow.

Wall Street capitalism, gambling, and a house of cards

Monday, August 3rd, 2009

Despite losing billions in 2008, 4,793 bankers and brokers who work there got paid at least $1 million. Many of these folks worked at firms that lost money. Where did the companies get the money to pay the bonuses if they lost money? Was it from a government bailout – $700 billion TARP?
The worst of the group is Citigroup and Merrill Lynch. Citi paid 738 bankers and traders at least $1 million in 2008 even though it lost $27.7 billion it paid $5.33 billion in bonuses. Merrill Lynch which lost $2.76 billion in 2008 while paying $3.6 billion in bonuses. Merrill’s new parent company, Bank of America, paid a total of $3.3 billion in bonuses on $4 billion in earnings.
Then there were the “winners” who made money in 2008 and paid themselves the biggest bonuses, which resulted in the companies reporting a loss – Goldman Sachs Group, Morgan Stanley, and JPMorgan Chase:
· 953 Goldman bankers and traders took home bonuses worth at least $1 million — it earned $2.3 billion and paid bonuses totaling $4.8 billion;
· 428 Morgan Stanley employees got bonuses over $1 million — it earned $1.7 billion and paid $4.5 billion in total bonuses; and
· 1,626 JPMorgan employees got bonuses of at least $1 million in 2008 — it earned $5.6 billion and paid $8.69 billion in bonuses.
What stock investors sometimes miss is that these companies are run for their employees not for shareholders.
Here’s a great comment from an unrelated post:7-23-2009 @ 9:40AMBHarrison said… The reality of our national economic situation is that our primary and most prestigious financial institutions orchestrated what amounts to massive fraud and pyramid schemes that undermined our economy, and continue to undermine our economy. The American people are tacitly allowing our Federal government to further undermine our economy by bailing out the criminal management who orchestrated these frauds and thefts. The end result is the devastation of our businesses and the loss of jobs and job opportunities for all Americans, especially the younger generation. The pivotal question is how long will the American people tolerate the government allowing these criminals to continue profiting from the crimes that they orchestrated and perpetuated? The American people need to vote the vast majority of Congressmen out of office if they want to break the influence of the financial corporations and the pharmaceutical industry on our government. Anyone who thinks that the government “is the solution” obviously is overlooking the fact that all of these economic problems occurred because the government failed to exercise reasonable and prudent oversight and management of the financial institutions and the pharmaceutical industries.