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Madoff's Secretary Spills
Tweet Share on Facebook May 6, 2009 Comment (4)Vanity Fair goes for broke with a 9,000-word story co-written by Bernie Madoff's long-time secretary Eleanor Squillari. According to juicy bits teased by VF, Bernie was sorta sleazy. The lowlights:
On his personality:
The way Madoff handled stress was “by saying something nasty: You look terrible. You’re gaining weight. You’re stupid. I never took anything he said to me personally, because I knew it wasn’t about me, it was about him.”
On his seamy side:
“Bernie was irresistible to women” and “had a roving eye.” Squillari once caught him perusing the escort ads in the back of a magazine, and he frequently visited massage parlors. “Once, I looked in his address book and found, under M, about a dozen phone numbers for his masseuses. ‘If you ever lose your address book and somebody finds it, they’re going to think you’re a pervert,’ I said.”
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Elizabeth Warren On Wall Street In Denial
Tweet Share on Facebook May 6, 2009 Comment (4)Elizabeth Warren, chair of the Congressional Oversight Panel overseeing the bailouts and a Harvard Law professor, tells Tech Ticker today that bankers still don't get it. Bottom line: They're taking taxpayer money, and there will be consequences. Her ire is refreshing.
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Shadows Over Green Shoots
Tweet Share on Facebook May 5, 2009 Comment (2)Stocks are rallying, the economy looks like it's (possibly) bottoming, and Ben Bernanke says growth could resume this year. So what's not to like? One word: Credit.
In a lengthy post, ContraryInvestor.com (re-posted in full at Zero Hedge) outlines why a sustained recovery in the credit market remains the province of wishful thinking. Without the Federal Reserve's help, sickly markets for mortgage- and asset-backed securities and even commercial paper might still be threatening to swamp the entire financial system just as they did during the worst of the crisis late last year. Scarily, stocks might simply be ignoring that fact. From the post:
The equity market has certainly caught the attention of the investment community as of late. Time to take a much needed and very important detour in this discussion. Right to the point, let’s review the character of the credit market. Certainly a general sense of optimism has risen as the equity market has levitated as of late. And that sense of optimism engenders the thinking that the economy and general financial market conditions MUST be getting better because rising equities are simply foreshadowing such an outcome. In other words, history has taught us that equities lead and so if equities are rising, the implication is better days lie ahead. But in the current cycle, we all know that credit market issues have been the locus of distress and the exact cause for a dramatic loss of wealth in financial assets really globally. So although it’s certainly fun to watch the equity markets romp higher, it’s the credit markets that deserve a really big piece of our attention. Better days lie ahead as a generic comment when both the equity and credit markets are healing in simultaneous fashion.
This should give bullish investors real pause. We've slowly been creeping back into picking stocks, touting fundamentals, eyeing breakout sectors, and all the rest of the usual analysis that gets done when the threat of systemic market disruption is absent. It isn't, and we should take care not to pretend otherwise.
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Selling At The Bottom
Tweet Share on Facebook May 4, 2009 Comment (1)Today the WSJ looks at the safe(er) spots in the market including money market funds, stable-value funds, short-term bonds where investors are stashing cash in an effort to protect their shrunken nest egg. None of them look great. Then there's this:
The concerns are cropping up at a time when many retirement-plan participants, facing devastating losses in their stock portfolios, want to preserve what is left of their nest egg rather than betting on a market rebound. In March, 90% of the money transferred in a large group of 401(k) plans tracked by consulting firm Hewitt Associates LLC went into stable-value funds.
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Weekend Reading: Warren Buffett Edition
Tweet Share on Facebook May 1, 2009 CommentIt's Berkshire-palooza time again, when some 35,000 souls make their way to Omaha for Cherry Cokes, discount jewelry at Borsheim's and Warren Buffett's latest batch of investing wisdom. Here's a few folks who'll be attending (and blogging) plus some of the accompanying Buffett-related news:
Andrew Ross Sorkin is Twittering. (You can send him questions for Buffett).
WSJ says Charlie Munger doesn't get enough credit.
Is the Omaha lovefest overblown?
The Guardian predicts some themes including the usual (Buffett's succession) and the obvious (Berkshire's derivatives exposure, and its sinking share price).
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Is The Bull Market Back?
Tweet Share on Facebook April 30, 2009 Comment (1)More brave souls are willing to call an end to this bear market, a notoriously tough moment to catch given the fear and uncertainty that marks the switch from downturn to rally. But with the Dow up more than 25 percent since those March 9 lows, more people are starting to see a bull market in the works. Here's a rundown of the recent optimism:
Anthony Bolton, president of investments at Fidelity International, via Bloomberg:
Low valuations indicate advances that began in March are the start of a bull market, Bolton said. He favors financials, consumer cyclical, technology, and “value stocks,” such as retailers, automakers and construction-related shares.
“All the things are in place for the bear market to have ended,” Bolton said in an interview with Bloomberg Television in Hong Kong. “When there’s a strong consensus, a very negative one, and cash positions are very high, as they are at the moment, I’d like to bet against that.”
And his contrarian take:
“Nearly all the broker research I read says ‘bear-market rally,’ that’s one of the other things that makes me think it’s the beginning of a bull market, not a bear-market rally,” Bolton said. “When everyone is extremely negative, I want to bet against that. If you wait for things to get better, you’ll miss the rally.”
CBS head Sumner Redstone sounds bullish too, who told the Milken Institute conference, "I think we're in the beginning of a bull market. When a bull market begins, nine months later the economy turns around." (via Reuters). More:
"It was always tough, but today we are in the throes of something we have never seen in our history. It's clear in recent times the market is looking for a bottom."
"The news was extremely bad on the GDP and the market went up. In a bull market, the market ignores bad news. Today, we ignored extremely bad news," Redstone said in a Q&A session with CNN's Larry King.
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Swine Flu Fallout: Stocks, Trade And The Economy
Tweet Share on Facebook April 28, 2009 Comment (2)As fears of a swine flu pandemic increase (emphasis on fears) market jitters are rising accordingly due to the uncertain scale and cost of the current outbreak. Citigroup strategist Tobias Levkovich today takes a stab at just what sort of sickness swine flu could inspire in stocks, trade and the global economy.
While we do not want to diminish the human cost of such awful developments, the investment community is more likely to focus on the economic price. Health care stocks could benefit, while economically sensitive ones could suffer. In addition, we have worried about protectionist policies coming to the fore and it is plausible that some “America First” types may push for more aggressive action on the Mexican border and on immigration, with a populist flavor behind it. Again, we do not see that kind of legislative effort as being perceived as welcome by markets. US-Mexico trade is significant and the Mexican economy is already being hurt by a drop in tourism, exports to the US and weaker oil prices. Accordingly, the news cannot be seen as good for stocks in that country. We would refer investors to the research put out by Citi’s Latin American strategist, Geoffrey Dennis, who has been cautious on Mexican names and underweight the market since mid-December.
But:
We do not see the swine flu development as the factor that will derail the rally, but we are aware that many investors have not participated in the move and thus want some sort of pullback, so they do not underperform. In that sense, we would expect some in the investment community to seize on swine flu as a reason to argue for selling into the rally. We continue to think that skepticism is the dominant feeling in the marketplace and any pullback should be taken advantage of by investors who have been surprised to the upside by 1Q09 earnings thus far.
The report outlines a few investing themes:
Possible losers: The pork industry. Industries that deal in travel or "confined spaces" (airlines) or highly public places (hotels, restaurants, retailers, etc.).
Possible winners: Drug makers (Gilead, etc.). Less obvious: home entertainment plays including "video distributors, video game producers and even pay-per-view movie distribution (through cable and satellite television providers).
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Bank 'Stress Tests' Expose Cracks
Tweet Share on Facebook April 28, 2009 Comment (3)Banks have until May 4 to appeal the results of the government's "stress tests" designed to determine whether they've hoarded enough capital to continue functioning. Already, the results seem to hint the financial crisis will continue. All of the 19 largest U.S. banks under scrutiny are expected to "pass" but that's not really the point. Some are still expected to be forced to raise new capital no matter their grade.
Which brings us to Bank of America and Citigroup, two banks reportedly being urged by the government to raise capital. That banks are undercapitalized is no big secret. Unfortunately, new concern for two institutions that have already taken a combined $95 billion in bailout money could increase the chances they'll come back for more. The longer their capital structures are questionable, the less chance the pair will be able to convince investors to come creeping back especially as the perception problems plaguing the sector remain firmly entrenched. Officials say they don't want the market to look unfavorably on banks required to up cash reserves, or to consider them insolvent. But that is unlikely.
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Good News From Alex Tabarrok
Tweet Share on Facebook April 27, 2009 CommentMarginal Revolution's Alex Tabarrok takes the long view of our economic history and sees lots of reasons to be encouraged. Ideas and markets save lives.
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Geithner Was The Right Choice, Geithner Should Go
Tweet Share on Facebook April 27, 2009 Comment (8)The NYT has the lengthy rundown of Treasury Secretary Tim Geithner's cozy relationship with Wall Street. You should read the whole thing. It's less about new revelations (other than Sandy Weill offering Geithner the top job at Citi, which Geithner promptly turned down.) The play-by-play is thorough (and thoroughly exhausting) so let's get to the point:
With his deep connections among senior finance execs and (relatively) well-respected stature as an honest regulator, Tim Geithner was the guy to call during the early days of the financial crisis. He knew the players, could get them in a room, and he understood (at least partly) what was at stake. The choice made a sort of sense, despite the unavoidable fact that the New York Fed under Geithner missed an alarming number of chances to regulate before the crisis exploded. The passage below illustrates his role, and his successes and failures:
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