Marc H. Gerstein
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Latest Comments11 Comments
How Wall Street Has Failed the Individual Investor
Around the turn of the century, Joe Average knows absolutely nothing about equities -- the role of earnings, the impact of valuation, the importance of understanding what you're doing with your money, etc. -- but plows ahead anyway to announce himself as the penultimate investment genius while plunging head-first into stocks. Then, when it all goes wrong -- shares of companies that had no earnings, no revenues, etc. plummet .. surprise! surprise! -- he accuses Wall Street of having failed him.
Fast forward: Joe Average jumps into a house he knows he can't afford (he knows this because he hunts down the huckster who'll wrote him a mortgage with little or no down payment and without verifying his income, thereby, in effect, telling Joe it's OK to lie) and binges with credit card spending he can;t afford either, and.. surprise surprise... gets into trouble,and again, he accuses Wall Street of having failed him.
OK. Wall Street is not exactly benevolent. Never was. Never will be. And bankers do have a historic tendency to lend to any sentient or non-sentient being when motivated by bonuses based on loan production. And we have had a political culture that was more tolerant than many to business recklessness. So yes, there was a lot of bad behavior in a lot of places.
But at some point, we need to start pointing a figure at Joe Average as well. Until the individual learns to start taking some responsibility for his/her own welfare (simply by using a bit of common sense), pain will recur again and again and again. The flavor of the crisis will always vary, but the constant will be pain felt by people who are unwilling to behave responsibly.
GE's Immelt Buys Shares - Should You?
I take issue with the author's point-of-view: an ambiguous suggestion (or non-suggestion, depending on how you want to read it) that readers may want to consider GE when the author himself clearly thinks it's not a buy. But for what it's worth, there seems to be no problem regarding compliance with the disclosure rules.
On Nov 14 11:27 AM sumosama wrote:
> How can an investing company have no positions???
>
> SA really needs to take a look at disclosure rules.
Circuit City's Bankruptcy Is Great News for Best Buy
"I was intrigued by BBY’s latest earnings release.
'Yes, consumer spending is under very severe pressure. But it looks to me like BBY is doing extra things to worsen its situation, namely following the Circuit City approach to customer care.
'Last night, my family walked into the store on Northern Blvd. in Long Island City intending to spend $700-$900 on a flat-screen TV. After considerable frustration trying to find a sales person who would help us, we gave up and walked out empty handed.
'Perhaps BBY has been on top for too long and is getting a bit complacent re: its customers."
Four Myths About the Free Market and Its 'Demise'
I suspect it can be proven that the free market is the most effective economic system there is. The question, though, is whether that's really what we're after. There are social, political, etc. realms that also exist in our world and they, too, will assert themselves.
The goal of the generally-free-sorta-r... markets we have now may be not so much the best possible economic system but the best possible balance of a variety of interests; economic and otherwise.
Perhaps this continual balancing and tuning is one of the reasons why our society has proven remarkably resilient over the generations, and why, even in our most heavily regulated phases, our economy was able to stay a heck of a lot more open than even the most liberal among socialist economies.
Rigid adherence to any sort of dogma, pro market or otherwise, is what might prove most dangerous. In this specific crisis, I hope the Feds do whatever has to be done, economic theory be dammed, to make sure damage to Joe Average is reasonably contained. Main Street hates, but has learned to live with layoffs, retraining, rising prices, falling prices, etc. But tampering with Joe average's notion of risk-free savings . . . we really don't want to mess with that (the crackpot looking for 10% on a money market fund is one thing; someone who assumed safety with a 1% money market fund better not be told "You lose!").
Actually, this isn't really all that alien to finance. So much of the theory we utilize depends on the existence of risk-free investing as a starting point. Taking that away puts everything back to square one; all economic theorists erase everything, pull out the classic utility functions, and start over.
We grew up with the notion that FDIC was enough to suffice. But that was set up a long time ago. We may need to modernize a bit.
Jim Cramer's Branding Problem
"Bailey and I go back to kindergarten. He’s the smartest guy I know and that’s saying something."
Saying something to who?
David, your author page suggests this is your first Seeking Alpha article. Hence you should assume we don't yet know who you are. That being the case, the fact that Bailey (whoever the heck he is) is the smartest guy YOU know does not resonate with us.
You're supposed to be a branding expert (according to your bio and web links). So shouldn't you understand what would or would not resonate with your target audience?
And by the way, if you're going to assess Carmer's brand, shouldn't you do your homework first? As others above have noted, there's a lot more to his brand than the shtick he offers on Mad Money (a strategic choice of his, as described by one commenter, not the sum total of who and what he is).
Are Bank Stocks Buyable?
BTW... the reason I didn't use valuation or loan loss criteria is because right now, I'm not comfortable with the #s. Good loan loss #s may mean good lending habits, or it may mean that they haven't yet ... but will soon .. take the big charges. That would also play havoc with the valuation, metrics. Down the road, once life normalizes (however long that may take), valuation and loan criteria would definitely be important.
What's Wrong with Today's Value Investing?
I’m with you; fundamentals are critical. Look how much heat Bill Miller took (back in the days when he was still going strong) for owning Amazon in a value fund. His attention to fundamentals (which turned out to be sound) was widely unappreciated. And how many times do you see investors turning bearish on stocks that rally to higher valuations without any discussion of whether fundamentals have proportionately improved. Unfortunately, many pay lip service to fundamentals but don’t really do it, and many more don’t even bother paying lip service. Upside omissions such as those mentioned are annoying. Downside omissions, such as the ones we are more exposed to now given what’s happening today, are worse.
What's Wrong with Today's Value Investing?
I appreciate your points. Eliminating stocks with less than $250 million market cap leaves us with about 1550 Russell 2000 stocks. I do think it’s more reasonable to compare such a universe with the 2000; I think a $250 million market-cap threshold is too low to make the S&P 500 or Russell 1000 valid bogeys.
Even so, I decided to alter the tests to address the issues you raise.
Interestingly, dropping the market cap test altogether made the screen performance about 100 basis points worse meaning that value investing looks even more in need of repair.
Going back to the $250 million market cap test and comparing the results with the S&P 500 and the Russell 1000, again the value screen fared even worse. This should be no surprise. Remember the S&P 500 Value ETF underperformed the SPYDR.
What's Wrong with Today's Value Investing?
Note that this, and many other, value approach is based on the profit stream of a going concern, as opposed to a point-in-time snapshot of the asset base. Omission of financials helps now because their earnings trends have turned unfavorable (a manifestation of the bad things happening to the asset bases). I got pretty much the same result when I turned the estimate revision rank upside down: instead pursuing highly-ranked stocks, I omitted low-ranked issues. I still had some financials, but they were the better ones; in this version, eliminating financials didn’t help.
So essentially, we’re back to the notion of looking at stocks the way other investors do, that being the main part of the analysis, and then adding a value layer.
Sirius/XM's 'Chinese Inspection': Leaving the Merger to Rot?
Meet Mr. Market: Jim Cramer
Yes, he’s emotional, an entertainer, etc. etc. etc. But to call him a snake-oil salesman (even to dignify such a charge when levied by unspecified others) is inappropriate. Besides the do-your-homework instructions mentioned by others, do snake-oil salesmen offer this: www.thestreet.com/madm...
It’s a section of TheStreet.com web site that tracks all his Mad Money picks, the great, the good, the bad, the ugly and the downright wretched. He shows where he won, and where he lost. Snake-oil salesmen don’t do that. They discuss winners only.
Frankly, I believe Cramer’s disclosures put him way ahead, in terms of integrity, of most TV talking heads who say what they want but are never asked to account for the effectiveness of what they say. Heck, I best many (most?) would decline to go on the air if they knew their utterances would be publicly tracked.
Do not assume I invest like Cramer. I don’t. Actually, I’m in the value camp myself. But that’s no reason to disrespect others who approach the market differently. And as to his showmanship . . . I tip my hat. Good for him.
I wonder if the true core f the article is this: “The painful thing is that just when you think something can't get much cheaper, it does.” Yes, it hurts. But it’s not Cramer’s fault. Cramer didn’t push oil up to the levels we see today. Cramer didn’t issue sub-prime loans. And just when we thought we were getting our arms around the latter, we see other kinds of bad debt (e.g. credit card). Cramer didn’t do that. There are deep fundamental problems that justify the lower lows; falling stocks don’t need Cramer’s jawboning to do what they do.
My suggestion is to stop whining about Cramer or the fictional Mr. Market and do the best you can in assessing fundamentals (or technicals if that’s your approach). Casting blame accomplishes nothing.