Monday, October 26, 2009

Finney at Evermay sees market breakout

Looking at a growing middle class and a fascination with entrepreneurship globally, head strategist at Evermay Securities Kizziah Finney suggests U.S. multinationals, U.S. small cap exporters, commodities, and non-Japan Asian stocks as the place to be. Quoting Finney, "The U.S. market is nuts. These people can't see the end of their noses and they are Anglo-Saxon. Who is this Bove. Does his name rhyme with stove, or ole. Have these Americans read anything beyond Elmore Leonard and the ever so tedious Malcolm Gladwell. Look at what's happening."

Rarely is an analyst so forthright, but after a quick pint of Guinness Finney continued to elucidate, "With due respect to Professor Quigley, this river is going north and that's not all bad. It will break through, break on through, break on through...". Finney feels that most economists are by nature conservative and have a view that it is always better to be wrong with a rigid construct than right "with your ass hanging off the rigging". Finney is upbeat.

Evermay Securities is not a licensed broker dealer and broadcasts its opinions for the benefit of like minded opportunists. Kizziah Finney is a self described savant whose stability has at times been in question.

Today's mid-day market swoon

Equities were humming higher and then at around 11:30am they fell and the Dow stayed around 100 down for the rest of the day. Reasons for the decline voiced in the constant media flow were many---oil prices down means global economic weakness; concern about the extension of the new home buyer tax credit; Bove downgrades more banks and accuses the government of targeting BofA with abusive tactics; former S.G. Warburg investment head looks for 40% market decline; Faber sees absolute collapse of the dollar; and who knows what else.

All of these shoot from the hip media reasons for the decline may be partially correct but there are two trends that will steadily influence the market in the coming weeks. First, for funds and private investors there is the usual portfolio management before the year end tax books close. Losses are taken and gains are booked based on portfolio allocation decisions. No alert investor waits until December to deal with this and then risk being caught with limited options. Second, the fall into the abyss by stocks until early March and then the rise since then have distorted portfolios and investors are generally examining positions that need to be rebalanced.

Coming out of the weekend here, there were two names that were in focus. One had been a position built in the $40's and more than doubled in the low teens. The second had been established in the high teens and then tripled at an average price of $7. The former had rebounded to the $25 area and the latter to over $12. The result was that both had become positions that were outsized relative to the overall portfolio even though they were still in favor here. With the strong start to the morning 25% of both were sold. There is nothing, absolutely nothing, going on here that is unique.

There will be many reasons mentioned for the ups and downs of the market, markets which will have ups and downs that are normal. As Sonny Boy said, "whole lotta people talkin', mighty few people who know".

Thursday, October 22, 2009

The manifest destiny of U.S. Bancorp

U.S. Bancorp is a large mid-west, plains, and northwest bank that is the sixth largest traditional banking franchise in the country. It is well run, repaid its forced on TARP money, and has a balance sheet and business that makes sense post crisis. What's next?

For now the company is focused on add-ons, some FDIC give-aways of deposits and branches, some whole troubled institutions. They say that's enough. That's not likely. With any further reverberation in the credit markets this firm is ready to expand, add to its geography, and extend its U.S. Bancorp image.

One could say that they are by management and cultural experience, even financial analysis, not ready for the Northeast. Good guess perhaps. That leaves Regions, Suntrust, and BB&T as the southeastern banks that would make complete sense. Each bank is on the precipice of trouble with the investor world waiting to see how much of the small commercial and mid-sized commercial real estate exposure that each company has becomes troubled and stresses their capital position. It's unclear. Suntrust has huge Florida exposure which is not a good thing, Regions is showing stress, and BB&T is having a hard time with the Colonial pick-up while its Chairman, former CEO, spends his time going around being the leading espouser of the Ayn Rand philosophy, giving away the company's money to support college programs for further study. They no doubt are impressed that he was handed the CEO job at BB&T on a silver family platter when he was 41.

That's another story, best left alone. U.S. Bancorp will expand.

As flawed as the three choices are, the bet here is that BB&T's low key arrogance brings it down and U.S. Bancorp gets a valuable footprint in the mid and south east. BB&T is the best franchise of the three and their self-regard may lead to a stumble.

Indian summer High Line

Manhattan's High Line was just perfect today. It's a new version of one of those urban creative catch-ons like Canal St. Martin in Paris, relaxed and integrated into the scene. Without the crowds of the opening months it's a gem, not too special, just special enough. Maybe, who knows, I will finally get photos there for my blank blog and Facebook pages.

Wednesday, October 21, 2009

Bove rattles market?, sends it down

There it is in the market wrap-ups at Bloomberg, Yahoo Business, Fidelity, and Schwab. "Influential" analyst Dick Bove sent the market tumbling in the last hour after downgrading Wells Fargo to a "sell". There may be something more to this story, or it may simply indicate the hair trigger this market is on.

Bove's strength seems to be that he is just about the last man standing among the group of bank analysts that ruled from the late '70's to the Spitzer castration of the research function. By working at minor firms for the last 15 years and being satisfied with his Florida lifestyle Bove stayed beneath the radar screen and now has become "influential". That Bove was influential at some point in his career is likely, maybe when he was at the rough C.J. Lawrence firm. When I first met him in the late '80's he was already on the fringe of power, using off-base rumors and contrarian calls to get attention, attention that he craved. Today the old analyst skills of picking the right and most vulnerable market spot to get the most attention and catering in a certain way to clients is a "strength" that few have, and Dick still knows the old ways. At least that's my guess and why I think that there was ammunition already locked and loaded that put momentum behind his call today. He may be "influential" and he may now be picked up by CNBC and others as a smooth grey haired voice of experience, but broad respect for Bove was never there among institutional investors. Hedge funds may be another matter, and some of his old C.J. Lawrence cronies are still big in that investor segment.

Dick is doing well these days, so good for him. Still, there's more than meets the eye here, so I think.

The strange Raj Rajaratnam case

The Feds actions against Raj Rajaratnam are disturbingly suspect. After missing the Ponzi scheme of the century with Bernie Madoff, how do the Feds choose a pudgy and brown immigrant who has done extremely well to be their poster child of hedge fund insider trading. The New York and Connecticut hedge fund markets are full of well known, highly interconnected managers and traders who push the edges of legality all the time through collusive trading, well placed lies(referred to politely as rumors), and anything else that they can get their hands on through intimidation and just ahead of the market information from brokerage and trading vendors. The Rajaratnam case stinks of race and immigrant fear exploitation, of throwing the public a bone that they will love to chew on without disrupting the political opinion and funds flows from the corrupt and manipulative powers within the industry that have great influence.

Apart from that, the case as presented appears shaky for several reasons. First, insider trading requires that the accused be trading on material non-public information. Proving that information is non-public is the issue here. Information that comes from someone within a company that is known by some but not widely disseminated is the company's problem, a violation of RegFD. Insider trading generally requires that someone related to the company is exploiting "inside" information for their benefit, not a complete outsider who acts because, in fact, the information has become public through a company's violation, inadvertant or not, of the RegFD standard. It is completely unclear whether Rajaratnam has broken any law even if his firm's actions seem to be based on an unfair advantage relative to the broader public. Second, the government's case revolves largely around an analyst who is not directly related to the firm, Danielle Chiesi. She appears to be an industry hustler who is scrapping to be relevant in some way. At both her current residence and her prior one over the last few years she has been sued for non-payment of fees and maintenance. Relative to the many in the industry who have power and influence, she is a minor and unstable player. Third, Rajaratnam has not been accused of defrauding his clients in any way. Finally, in the aggregate he lost money on the "insider trades" that he is accused of benefitting from.

With the "strength" of that evidence, the Feds have acted and destroyed Galleon's business. More than one billion dollars of withdrawals from the Rajaratnam funds have already been requested and most observers have suggested that virtually all funds not invested by Rajaratnam and his employees will leave. The business is destroyed and it is not because investors have an opinion about guilt or innocence. They simply know that once the government decides to destroy someone no good will come of it.

This case stinks. The truly corrupt bullies within the hedge fund industry must love it, a sacrificial lamb on the altar of public opinion now and they can continue business as usual.

As more information or if more information becomes available, aspects of the opinion stated here could change but the overall suspicion voiced here will not.

Postscript---next day news---Roomi Khan, witness #1, is compromised on many fronts by illegal activities, a perfect foil for the Feds

Tuesday, October 20, 2009

Bigs caps trail big time

Bespoke Investment Group detailed the following year to date performance results for two major indexes last week, comparing those ubiquitously quoted market cap weighted indexes with parallel equal weighted results:
---S&P 500 index year to date, plus 20.42%; equal weighted S&P 500 year to date, plus 38.95%
---Russell 3000 index year to date, plus 22.31%; equal weighted Russell 3000 index year to date, plus 56%.

Simply stated, these results show that the biggest companies in these indexes have significantly, very significantly, underperformed the smaller ones. In recent years a widely observed phenomenon has been that some of the largest companies with the strongest balance sheets, most profitable global franchises, and attractive dividends have been lackluster stock market performers. Waiting for the expected break out to reflect the strength of these companies has been a boring and minimally rewarding ride. JNJ, for one, is a prime example of this type of company. The accepted rationale for this situation is that huge companies can no longer, by virtue of their size, have high growth rates that attract the leading steer investors. That reason is lame from a corporate finance analytical standpoint but it may reflect the reality of the mindset of today's investors. Apart from this, why is there the incredible divergence between market weight and equal weight performance in 2009? Possible answers related to this performance are:
---the smaller caps fell faster and harder in 2008 as their balance sheets were more suspect during the credit seizure. Therefore they had more room to climb back to some norm in 2009.
---the thinner liquidity of the smaller caps subjected them to extreme volatility during both the panic downturn and 2009 rebound.
---less liquidity also made some of these stocks more vulnerable to bets and rumors planted for market manipulation by traders, especially on the downside during the panic.
---many of the large caps, on the other hand, declined more gently in 2008. There were of course names like AIG, C, and others that imploded but on the whole the large caps had a shorter distance back to reach a more normal valuation in 2009.
---large caps are much more subject to a hostile set of regulatory, legal, and political issues in this climate that follows the financial panic and continues with the extended recession and high unemployment rates. That the President and members of Congress tend to make broad brush comments about corporate greed and irresponsibility is not reassuring to investors in general when looking at the large caps.

The guess here is that while the smaller caps have significantly outperformed the large caps in 2009 to date, the gap in performance will narrow as aberrant valuations in the small caps are addressed. The smalls will slow down, the larges will plug along, the VIX will continue to moderate, and blood pressure rates will decline into the holiday season. Is that really possible???

Sunday, October 18, 2009

Joe Arpaio should be arrested, charged, indicted

Sheriff Joe Arpaio should be arrested by the Feds as soon as possible. He should be handcuffed, photographed, finger-printed and given an orange-suited perp walk. The Feds should charge him with violating Federal law, and seek an indictment as soon as possible. The Mayor of Phoenix and the Governor of Arizona should be publicly visited by the FBI and investigated as co-conspirators to violate Federal law with Arpaio.

The Associated Press reported yesterday that Arpaio illegally launched a crime and immigration sweep of northwest Phoenix just one half day after the Federal goverment limited his powers to make Federal immigration arrests. The government must respond. Arpaio's violations of human decency, his policy of widespread intimidation of the entire Hispanic community, his prisons with abusive, humiliating, and cruel conditions for all prisoners(even for those with the most minor offenses), each of these facts has all been thoroughly documented over the years. Arpaio is proud of his abusive behavior. That his "sweeps" do yield some illegal immigrants is a minor accomplishment relative to the number of American citizens that he brings in on charges like loitering or resisting arrest for no real defensible reason other than ethnic harrassment.

A majority of voters continue to elect Arpaio and that seems to be the rationale for everything in the eyes of many. The people of Arkansas elected Ross Barnett but that did not keep President Eisenhower from sending in Federal troops to enforce the law. That was a courageous act on that President's part, far more than anything that the Kennedy brothers did with their tepid and eventually non-existent support of the Freedom Riders and their support of the FBI efforts to link civil rights efforts to Communist influences at the same time that they smiled and took credit for standing up for what was right. President Obama's unfortunate choice of now former Arizona governor Janet Napolitano as Head of Homeland Security complicates all efforts. Despite her generally respected credentials, she spent six years as governor compromising with and some would say enabling Arpaio, actions which some say contributed to her convincing margin of victory in 2006 relative to her squeaker in 2002.

Arpaio should be dealt with swiftly. Take your pick: violating a just issued Federal ruling; a broad based pattern of racial profiling and intimidation as protected against by the Civil Rights Act; or violation of the Eighth Amendment of the U.S. Constitution's ban on "cruel and unusual punishment". He is breaking the laws of our land. Maricopa County, Arizona cannot be allowed to act as if it has seceded and is beyond the reach of Federal law.

Writing the obvious here will not make anything happen and it is wishful thinking to even hope that the Obama administration would enforce the law in the state of John McCain and their Homeland Security choice. That said, now is the perfect time to act, as in tomorrow, to stomp on Arpaio's open defiance when it is legally and even politically indefensible. He has crossed a line. He is not just an unattractive bully. He is committing crimes.

Saturday, October 17, 2009

Stock picking prowess?

Individual investors often have the discussion or debate over whether stock picking or just sticking with the low expense ratio indexes is the best approach to having equity market exposure. The view here is that well managed low expense index funds like those run by Vanguard and Fidelity are valuable to any portfolio. Stock picking, however, can be advantageous as well.

For stock picking, the issue of expense is more or less moot if an investor is not a constant trader. With $8 commissions widely available for almost any trade, cost is not a big factor for those who intend to buy and hold unless a gain or loss threshold is reached or there's a fundamental change in the security's prospects. During the turmoil and terror of the last year both sides of the index versus independence choice could have been experienced. On the downside if a stock picker had a portfolio with an unfortunate percentage of firms like AIG, CIT, WM, LEH, or other names that are irreparably damaged or done, an index performance would look like heaven. On the other hand, watching a group of stocks that one knows well and being able to pare back a few early on and increase positions in the gloomy times of those firms with a solid balance sheet and a viable business long term could have led to significant outperformance over an index approach.

The safest approach to not feeling stupid is the index one. Pare back the index if it seems appropriate and add when the time seems right. For the individual investor with no insomnia issues, the more entertaining approach can be to follow a group of stocks regularly, make informed decisions, and keep a rabbit's foot in a jacket pocket. All of this, however, can mostly feel like a crap shoot for the individual and even for those on the institutional side with the exception of those who are either brilliant(a few) or are playing a rigged game(they far outnumber the brilliant).

What's done here is clear from this commentary, some indexes, some stock picking, and overall porfolio diversification. While relative results are ok, there are occasions when it becomes clear how opaque the world of investing can be, how luck can be important, and how little I know.

A month or so ago I was traveling in a land without wireless where there were limited periods of access to a shared computer. Information about one of my equity investments disturbed me. It was an investment made eight months before and it had a slight gain. It was a spur of the moment decision and when my turn at the computer came I sold the entire position, locked in the gain and removed loss exposure that I felt was probable near term, or so I thought.

When I returned home a few days later and reviewed my portfolio I was shocked to see that I had actually and accidentally bought the stock a few days before and doubled my position. I was also surprised to see that the stock had risen 5% in the days since the trade. At this point the stock is up 25% since the day I "astutely" doubled the position. Nailed it.

It's easy to laugh at this now, and write about it, but if things had gone the other way you the reader would never know --- stock picking prowess? --- LUCK!

Thursday, October 15, 2009

Muni bond market breaking

With the prior post in mind, the first crack in the wall of fixed income is tax exempt municipal bond obligations. Money market funds in this area yield next to nothing and intermediate term securities are backing up. States like California, many others as well, are loading up on potential new issuance, hoping in some cases for salvation and in others for liquidity before the manure really hits the fan. There will be too much supply, too little reward when the market settles after issuance, and so this market is in deep trouble. Principal will be returned unless all hell breaks loose but this is no place to have money.

Just a guess of course.

The dollar's continued decline

The U.S. dollar sinks and does anyone care. There's a big risk here.

Yeah, U.S. exports become more competitive, U.S. multinational profits in overseas locations translate into higher profits, U.S. workers become more competitive with foreign workers, and dollar debt can be paid back with a less valuable currency. All of these factors can help revive and stabilize the U.S. economy in the short term. Debasing the currency was an unspoken policy in the Bush administration and it remains one in the Obama administration. One could say that Bush had a choice and Obama came into a situation in which he did not, but in either case it has happened and continues.

This situation is the key to the making of our next bubble. Bubbles happen because there becomes a belief that some asset class is a sure bet. The sure bet now to the still burned and risk averse is fixed income, medium term and short term. Debasing a currency has historically not been a hallmark of powerful nations and there is a reason for that. A debased currency ultimately leads to inflation, higher interest rates, and a greater disparity of wealth among the population that often leads to political unrest.

We'll see what happens, but I'm darn glad we took a trip to Europe in April. It was on sale then.

Wednesday, October 14, 2009

Recent reading of note

---Today's New York Times OP-ED page has side by side columns that are worth reading. One is "Wall Street Smarts" written by Calvin Trillin and he is truly back in form with this one. Although the time frame of the change described is a bit more elongated and the picture painted is maybe a little exaggerated with welcome humorous intent, it's 100% true. The other is Tom Friedman's commentary on Afghanistan, "Not Good Enough", which details the key issue in the hopelessness of any further commitment to that country without some significant change, regime change is the word applied to other countries.

---"The Given Day" by Dennis Lahane was briefly recommended in the Paperback Row column of the Times Book Magazine on Sunday. That was an airport pick-up here, influenced by the inside cover reviews of this as a break-out historical novel by a writer mostly defined by the crime genre. It's worthy of the good reviews. today has a lead article, "Rural Economies Must Change or Die" written by Karl Stauber, that looks at this issue from the perspective of towns like Danville, Virginia(often discussed here), as Stauber is head of the Danville Regional Foundation. It's thoughtful and informative writing.

Friday, October 09, 2009

Michael Steele, out of perspective, a punk commenting on the Nobel prize

The Republican National Committee Chairman Michael Steele made remarks today that are difficult to comprehend. As one of the leaders of the two major parties in the United States of America, he characterized the Nobel Prize decision as wrong, unjustified, and ignoble. Why not, as an American, have some pride and look ahead and speak about the possibilities of dealing with the huge problems and challenges that we face globally, and the desire to work cooperatively to achieve necessary goals. Being above the parochial fray seems to be impossible for many members of both parties.

With this award the most important issue now is to find an exit from Afghanistan. The place is hopelessly corrupt and ungovernable. The U.S. prescence there exacerbates problems in the region. We now protect 90% of the world's heroin production, how about that, and if Karzai and his cronies aren't stoned to death before they can leave they will be living with immense wealth in Switzerland or some other morally blind U.S. protectorate.

A commentary in "The Nation" this week, "An Open Letter to President Obama" by William R. Polk, is a straightforward and historically informative analysis of the situation in Afghanistan and Pakistan. It's worth reading, and I say this as someone who has trouble with "The Nation" at times, especially their cryto-Stalinist columnist Alexander Cockburn.

Thursday, October 08, 2009

Consumer Christmas

Consumers have been seriously shaken. They are saving, they are strapped at some levels, and they have been holding back, by necessity. That said, what's coming in the next few months may be something big.

The comps from last year should be easy. It's not yet so special but last year at this time the financial terror was beginning to take hold. It accelerated through December. It was rough. What's possible in the consumer psychology now is that those who have jobs, 90% by some optimistic estimates, have been postponing purchases to the holiday season. Gone may be the days for many when an IPhone purchase, the Urban Outfitters gift card, the new bicycle, the pendant wrist bracelet, the idea of a change of cars, or many other purchases were viewed as an anytime gratuitous event, part of life's lucky credit cycle, as opposed to saving for a traditional time, a time for children, close friends, and other loved ones.

Savings now may mean a compensatory holiday season.

Pelosi's old pol self-centered style

During the market trading day Nancy Pelosi suggested that there was House support for a windfall profits tax on insurance companies. Therefore in a market rally insurers fell 7% within the hour and big cap financials all dropped off gains and receded into negative land. If a corporation would decide to give market moving news mid-day Reg FD rules would apply, and the SEC would be on the case. Members of Congress are not subject to this protocol or ethical behavior and those like Pelosi delight in the evidence of their power.

A windfall profits tax is not unprecedented but it's been a long time. In a global economy it will drive away investment. Companies that have followed all accounting rules and broken no laws are assessed because they were profitable. That makes no sense to most market participants. The laws under which the insurers are operating, and to some extent they are poor and porous, were agreed upon by Democrats and Republicans alike at federal and importantly state levels, and the insurance companies are not in question as to fraud or malfeasance in some way or an illegal scam(scams in some sense are there but not illegal, ignored by politicians and regulators). The windfall profits proposal is, by some, justified because even though companies followed the rules they made money.

Change the rules. That's what all of this health care debate is about. Dems talked about this windfall profits tax during the last election related to energy companies. Take resposibility and change the rules. We all know that insurance companies are there to make large amounts of money and that they are not public servants. Who in their right mind doesn't already know this.

When Pelosi independently raises a windfall profits tax she threatens all industries. Today she also front-loaded the House suggestion of extending the credit for new home buyers earlier in the day leading to a 6% jump in housing stocks. This may be a good move but why not share credit with others. She is completely partisan and malisciously savvy about or ignorant of comments during market hours.

One thing is a fact. She goes out of her way to promote herself and make her Republican colleagues more irate than ever. She continues to undercut President Obama's efforts.

Wednesday, October 07, 2009

JPMorgan Chase management changes

There continue to be articles in the business press about management changes announced at JPMorgan Chase last week. Here are a few observations:
---The departure of Bill Winters represents the loss of a valuable member of the firm, as all press coverage has concluded. In temperament, tenacity, confidence, and decisiveness it could be said that he is comparable to Jamie Dimon.
---The naming of Jes Staley as head of the investment bank was a surprise to many. Staley has never managed a sales and trading operation in equities, derivatives, fx, or bonds, areas that represent much of the risk of investment banking. Apparently he is highly regarded by Dimon.
---Media conclusions that Staley is now heir apparent for the CEO job are unlikely to be accurate. He certainly would be one of a number of candidates and at the moment it is convenient cover for a Board that wants some succession clarity from the dominant and demonstrably capable CEO Dimon.
---Suggestions that Dimon may become Secretary of the Treasury at some point seem far-fetched. He thrives on direct executive management and decision-making. Seeing him in a government role that requires compromise or at least the appearance of compromise as well as kowtowing to the many seriously limited members of Congress at every turn is hard to imagine. Unless he ultimately has a secret desire to be President, of it all, the powerful Treasury job would be a stepping stone to nowhere for the 53 year old.

One could conclude from all of this that CEO Dimon now has the time to devote the majority of his attention to the investment bank. Over his several years as CEO he has cleaned up both the weak and the too outspoken in executive corporate staff and he has fully revamped people and process in the consumer banking areas. His career with Sandy Weill for many years was primarily in-house M&A in building the Weill conglomerate and then he was eventually running Smith Barney. His strongest interest may be investment banking and he can now go at it full tilt with his longtime buddy Steve Black in a supporting role, Staley as his guy, and Winters no longer there for an occasional clash.

This is all conjecture from afar, maybe accurate, maybe not.

Sunday, October 04, 2009

Roubini signals what?

The man in his fifties who decorates his Tribica loft with walls of plaster vaginas and who glorifies himself on Facebook with very young women has now called for another set-back in the financial markets. Personal stuff aside, this guy was negative forever and finally got it right. Who knows what the markets might do near term. There's not much new. Everyone for the most part knew that unemployment would continue to rise near term and that a recovery would be slow. Equities still remain beaten up and while some say they are priced at an extreme, hey, wait til you see the year over year comparisons coming up. For whatever reason, the TALF money has been mostly allocated, but $600 billion apparently remains to be spent, a stimulus not yet realized.

Commodities, another Roubini target, are under pressure but that is a short term phenomena. Short term? one month, one year, two years? barring a global economic collapse commodities have pent up value, from mining to agriculture.

The short term attention seeking of Roubini and his NYU colleague Taleb are provocative and worth some attention. The characters involved are not.

Friday, October 02, 2009

AIG's Benmosche takes charge

On Thursday it was announced that AIG fired McKinsey & Co. as an advisor for the insurer's restructuring. What a breath of fresh air, even in the morass of AIG's challenges. McKinsey is the ultimate crutch for a weak CEO and Board. Prada and Gucci for the insecure. They are immensely expensive and their brand is impeccable. Generally they do nothing except play provocateur and look ten years or more into the future to determine the "strategic landscape" and the "drivers of competitive advantage". Taking no responsibilty for the present, McKinsey is essentially above being held accountable.

AIG, of course, is living day to day, month to month, trying to salvage as many of the valuable parts of its franchise as it can, at least trying to get as much value as possible for parts they must sell to repay the government or even keep pace with the government's huge dividend and interest bill. Worrying about the insurance industry landscape out to 2020 is on the back burner for now.

It take a tough guy to go public with a dismissal of McKinsey. That firm's research capabilities are legendary and the degrees held up and down the firm are off the charts, all from the premier schools around the world. They are arrogant and condescending and they think that's what they've earned. They spread rumor and innuendo as much as any human beings. Kicking them out was the right thing to do. They were a total mismatch for AIG's problems as they are for most firms that hire them.

Only firms with a CEO, Board, and staff that can match wits with McKinsey would really benefit from an interaction with them and, with a huge amount of work and luck, Benmosche might be able to justify bringing them back a few years from now.

Stieg Larsson's visually textured vibrant storytelling

Stieg Larsson's two books that have been posthumously translated into English, "The Girl with the Dragon Tattoo" and "The Girl Who Played with Fire", are unusually vibrant and compelling fare for the crime genre. As is the wont with this genre, there are murders to be solved, plenty of bad guys, also corrupt ones, offset set by the well meaning folks and the brilliant but eccentric heroes. These books, however, are different.

Larsson's narrative is focused and relentless. His writing assumes intelligence. There are no digressions to explain history or science or theology or politics, a common feature of so many novels that supplement simple prose and a straightforward story line with diverting prattle to give the appearance of a book with some literary merit. Larsson's main character's are finely and fully drawn and to the extent that they have certain comic book action hero characteristics, they are damn good ones. The books have pace, build momentum, and integrate threads of the story seamlessly.

What is almost bizarre about the books, from this perspective, is that they create a memory that is more visual than a linear story. Having read "The Girl with the Dragon Tatoo" well over a year ago, my thoughts about this first part of what ultimately will be a trilogy came as if I had seen a film. Did I see this scene or just read it. It created an unusual impression.

"The Girl with the Dragon Tattoo" was absorbing, but its resolution evolved into a Hannibal Lector like hideous chaos. Like much of this genre the ending seemed somewhat contrived, with too much work to tie up all the loose ends. "The Girl Who Played with Fire" has no such flaw. The story never lets up and the ending speaks for itself, a cut without any epilogue type conclusion. It's a much stronger novel than the first one, although the background of the first book may have set the second up for a faster break from the gate.

Thursday, October 01, 2009

More than economic stats lead to rough market day

Today new economic statistics were viewed negatively and the equity markets fell broadly. Behind the top line stats reported there were some positive signs in the numbers but they were obviously ignored and a profit taking sell-off ensued. It is likely that some non-statistical news items contributed to the market's anxiety today, among them:
---Bank of America, the nation's second largest bank and largest retail bank, announced that CEO Ken Lewis is resigning as of year end and no succession plan is in place. Some investors applaud the move but once announced a CEO's power is virtually nil. Who's in charge.
---CIT is on the brink of bankruptcy again. As the nation's largest factoring company to small businesses this raises the issue of a new dimension to the credit crunch and it is unlikely that other institutions will rush in to fill the breach.
---The Saturn deal with Penske fell apart, leaving 350 small businesses across the country(the dealerships) with a one year life and the likelihood of business dropping off a cliff almost immediately.
---JPMorgan Chase, the nation's third largest bank and a bulwark of safety during the darkest days of the financial crisis, announced a management change that has many that are in the know scratching their heads.

These are not immaterial reasons for investors to pause before buying the dip, so when prices fell today the support was not there.