Random Thoughts On Events Of The Day
"Those who stand for nothing fall for everything"
--Alexander Stephens
I put that quote at the top of the post for a reason. That reason? "Group think" is most definitely is flaw of human nature. Be it the current crop of professionals on Wall Street that appear to have no grounding in reality, their black box trading systems that are fundamentally flawed, politicians who seem to believe pollsters and gaming voters are more important than genuine leadership or even economists who base the foundation of much work on unreliable or outdated theses.
As if it weren't predictable, the markets gyrated higher yesterday. That trade has been a no brainer for years. Right on time at exactly 2:15pm. No time to analyze any of the Fed's statement. Pure gamesmanship. Just hit the buy button. As if any of the problems facing the economy were somehow magically fixed by lowering interest rates. Lowering interest rates while oil is up 800%, gold up 300% and industrial commodities up hundreds to thousands of percentage points off the their late 1990s lows. Anyone care to see how many times we have seen this from a historical perspective? Now, the Fed obviously has to do something in some attempt to instill confidence in the financial system but what if I told you there was nothing anyone could do and the outcome to this cycle was likely framed by events unfolding ten years ago. Framed meaning macro factors not the specific events unfolding today. Would you believe it? That all of the nail biting, analysis and mind power working out whether the Fed will be successful accomplishes nothing? The answer from most would be one of emphatic disbelief. Why? Group think? Too frightening for many to believe their future cannot be controlled? Fear of some unknown force at work? Faith in science and by implication the Fed? A belief in part of their core value system is broken? Just something to ponder.
A quick perusal of some stocks I watch shows US Steel up nearly 2,000% on an annualized basis from yesterday's action. That's sustainable now isn't it? (My absolutely favorite stock I recommended to a friend over three years ago as my top pick for him to replace his left over dead beat bubble technology stocks. US Steel was up over 1,000% this cycle. He never listened. Still got those dead beat technology stocks Mister?)
More group think? We've talked about how many on Wall Street were actually bearish in 2000. Today? Same. How many technology executives bought their own cooking into the technology bubble? John Chambers, the CEO of Cisco surely did. His quotations at the bubble peak were, "The brightest people in the world didn't see it coming". "It" being the technology bubble crash and subsequent crash in his business. Chambers and Cisco paid dearly for being blind sided with massive inventory write downs, over hiring and a total miscalculation of future business opportunity.Today? The media quotes Chamber's bullishness as a reason to believe the global economy is in great shape. How foolish is that? More group think and conclusions from an unreliable historical data point.
And as for the ratings agencies, who was willing to stand up before we got to a crisis and give an honest assessment of this credit garbage being passed around? Not one. How many financial firms of any ilk were willing to do so? None. Why? Group think? Because they would have been ostracized? Do you know the few executives on Wall Street who were publicly bearish in 1999 and 2000 were generally relieved of their duties? Or lost billions because clients wanted in on "the game"? How does being honest help financial firms acquire more of those wonderful management fees? Well, here's one nugget you should always believe: When everyone agrees, no one is thinking. S&P, the blue chip Wall Street firm is no different than the rest of them. How unfortunate. Here's the title to three articles from the same source:
Commercial Paper Boom to Continue: Study - February of 2007
Commercial Paper to Remain Strong: S&P - May of 2007
Report: Commercial Paper Takes High Dive - August of 2007
It's quite amazing to me that almost every single investment mind is as bullish today as they were in June. A recent study of investment advisers was very bullish. What were they most bullish of? Oil stocks. Mark that.
--Alexander Stephens
I put that quote at the top of the post for a reason. That reason? "Group think" is most definitely is flaw of human nature. Be it the current crop of professionals on Wall Street that appear to have no grounding in reality, their black box trading systems that are fundamentally flawed, politicians who seem to believe pollsters and gaming voters are more important than genuine leadership or even economists who base the foundation of much work on unreliable or outdated theses.
As if it weren't predictable, the markets gyrated higher yesterday. That trade has been a no brainer for years. Right on time at exactly 2:15pm. No time to analyze any of the Fed's statement. Pure gamesmanship. Just hit the buy button. As if any of the problems facing the economy were somehow magically fixed by lowering interest rates. Lowering interest rates while oil is up 800%, gold up 300% and industrial commodities up hundreds to thousands of percentage points off the their late 1990s lows. Anyone care to see how many times we have seen this from a historical perspective? Now, the Fed obviously has to do something in some attempt to instill confidence in the financial system but what if I told you there was nothing anyone could do and the outcome to this cycle was likely framed by events unfolding ten years ago. Framed meaning macro factors not the specific events unfolding today. Would you believe it? That all of the nail biting, analysis and mind power working out whether the Fed will be successful accomplishes nothing? The answer from most would be one of emphatic disbelief. Why? Group think? Too frightening for many to believe their future cannot be controlled? Fear of some unknown force at work? Faith in science and by implication the Fed? A belief in part of their core value system is broken? Just something to ponder.
A quick perusal of some stocks I watch shows US Steel up nearly 2,000% on an annualized basis from yesterday's action. That's sustainable now isn't it? (My absolutely favorite stock I recommended to a friend over three years ago as my top pick for him to replace his left over dead beat bubble technology stocks. US Steel was up over 1,000% this cycle. He never listened. Still got those dead beat technology stocks Mister?)
More group think? We've talked about how many on Wall Street were actually bearish in 2000. Today? Same. How many technology executives bought their own cooking into the technology bubble? John Chambers, the CEO of Cisco surely did. His quotations at the bubble peak were, "The brightest people in the world didn't see it coming". "It" being the technology bubble crash and subsequent crash in his business. Chambers and Cisco paid dearly for being blind sided with massive inventory write downs, over hiring and a total miscalculation of future business opportunity.Today? The media quotes Chamber's bullishness as a reason to believe the global economy is in great shape. How foolish is that? More group think and conclusions from an unreliable historical data point.
And as for the ratings agencies, who was willing to stand up before we got to a crisis and give an honest assessment of this credit garbage being passed around? Not one. How many financial firms of any ilk were willing to do so? None. Why? Group think? Because they would have been ostracized? Do you know the few executives on Wall Street who were publicly bearish in 1999 and 2000 were generally relieved of their duties? Or lost billions because clients wanted in on "the game"? How does being honest help financial firms acquire more of those wonderful management fees? Well, here's one nugget you should always believe: When everyone agrees, no one is thinking. S&P, the blue chip Wall Street firm is no different than the rest of them. How unfortunate. Here's the title to three articles from the same source:
Commercial Paper Boom to Continue: Study - February of 2007
Commercial Paper to Remain Strong: S&P - May of 2007
Report: Commercial Paper Takes High Dive - August of 2007
It's quite amazing to me that almost every single investment mind is as bullish today as they were in June. A recent study of investment advisers was very bullish. What were they most bullish of? Oil stocks. Mark that.
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