Tuesday, April 30, 2013

NYT lead business article on JPM departures

Everything said here is biased and dated.  Some of it is correct in my opinion and some is just uninformed speculation.  I am ten years removed from the company but still know much about some of the people and follow it closely, for personal and financial reasons.

The lead businesss article in today's NYT details the many executive departures from JPM in the last year or two, with photos of ten at the top.  No criticism of the NYT on this one for the most part, it's a worthy news article.  Please let me get straight to the background on those ten.

On the positive side, it has already been written here that the removal of the marginally competent but talented self promoting James Staley was way overdue.  Steve Black was a really nice man with significant connections in the corporate community, but his main focus had long morphed into his wealth and his car collection.  He was a contributor and a friend of Dimon's, but not the driver of corporate success that he once was.  Heidi Miller was a success whose persona seemed to exceed her talent, smart and administratively savvy, but no hands on action and I guess with no growth possibilities.  Ina Drew was a huge loss.  She was an exceptional talent who never flaunted her talents.  Ultimately the responsibility for the huge London trading loss fell on her, but that London crowd hid their trades from everyone and she had no way to act on it.  This leads to the earlier loss of Bill Winters, who was the most talented executive by far from JPM to arrive at the combined firm.  Winters ran Europe capital markets, and if he had been there this would have never happened.  Whether his direct responsibility or not, he was a capital markets junkie who kept tabs on everything.  Whatever happened between him and Dimon, from afar I would rank that as Dimon's biggest mistake.  Bill Daley was just a political hire, no real banking experience, just corporate relationship experience in general and it did not work at all with Congress.

So those are the ones that my opinions, right or wrong, are clearly expressed here.  The other four departures were Dimon associates from Citi or Bank One or both, and all seemed by most accounts talented.  I do not have any way to judge their departures as never had contact.  There's an analogy that comes to mind, especially with the most recent departure of the seemingly important Frank Bisgnano and this may apply to the three others whose careers have not been followed here.

If in the NFL there is an offensive or defensive coordinator who works for a winning team and a good coach, it is normal that they may be a candidate for a head coaching job elsewhere.  It's just personal nature to want to be the man in charge.  Dimon has been that winning coach and he has had some exceptional coordinators.  As challenging as it could be in the short term for JPM, these losses could have been expected.  If the ladder of delegation and learning has been maintained, the challenge might be minimal.  At times, change is actually good as it allows talent that has not been fully used to flow up.  It can build an ongoing institution instead of a group of stars that throttle development.

These are just personal thoughts, never scripted here until sitting at the computer.  Their value is for others to judge.    

Monday, April 29, 2013

Fair trading rules take two big hits, on the negative side

Regulation Fair Disclosure, aka Reg FD, was initiated by the SEC and passed by Congress almost 13 years ago.  While feeling somewhat overly restrictive at the time, the pluses outweighed the minuses and that has been the enforced law for determining insider trading or selective disclosure of material information in the securities markets.

There was one major loophole.  The law explicitly did not apply to members of Congress, congressional employees, or any federal officials.  As a simple example, if a member of the FDA or a congressional oversight panel of that agency, or member of Congress, learns that a new drug will be highly likely to pass its phase 3 approval trial, they could trade on that material information before it is public.  The federal bureaucracy is obviously rife with financial decisions of who to hire to do what in Defense, Homeland Security, the list could go on forever.  All of this information could be used to trade in the equity markets before it became public(ever wonder how most members of Congress retire with millions even if they came into the House as a small town country lawyer?).

With great fanfare, in early 2012 The Stock Act was passed in January 2012.  That's the (Stop Trading on Congressional Knowledge Act of 2012).  With no fanfare, that law was significantly gutted by Congress and signed by Obama on April 15th, just over a week ago.  The rules still tacitly apply but with no teeth, meaning no penalties, and with only the requirement that such trades eventually be posted on the internet.

This is unconsciousnable and one more example of how corrupt our government employees and politicians, top down, really are.  They are now once again unequivocally allowed legally protected insider trading.

That's the first major diminishment of fair disclosure in recent weeks.  The second is the decision of the SEC to allow companies to use social media sites like Twitter and Facebook to broadcast market moving news.  Reg FD required that material new information be forewarned as to timing and broadcast only in widely available media public news releases and public conference calls.  To allow this is a stupid decision.  However widespread these social media sites are, they by no means cover the universe of all investors, especially retail investors, certified financial planners, and smaller funds without a staff large enough to monitor these sites.

It gives a site like Twitter much greater clout, as automatically programmed trading platforms will be more inclined to react to whatever comes across, from anyone.  Volatility could be increased exponentially.

Who is running this government that we have and accepting the financial responsibities that entails for the investing public???  A good guess is our "esteemed" Congress.  An aloof ever compromising President and a new Treasury Secretary eager to build relationships provided little barrier to these changes.

Sunday, April 28, 2013

Facebook user totals?

When Facebook launched its IPO the figure of 1 billion users worldwide was mentioned.  Based on SEC rules, it is certain that the figure is roughly correct as a number of those subscribed.  The question though is what is a user.

I am not an avid Facebook user and only rarely post anything, maybe once a month or a few more times.  There are times when I check in on Facebook daily for a quick look at photos of babies, children,  pets, and at times some real adult friends, and quite a few times for a few laughs from some and some thoughtful comments from others.  There are other periods when I may not check in on Facebook for a week or more.  Whenever I do, I at times check a "like" or add a comment or two to some posts. 

There are 83 folks now on my "friends" list(a couple have been added in recent months but I was excommunicated("defriended") by quite a few when after much back and forth consideration I finally decided to support Obama(or more explicitly not support Romney) - lesson - politics are really too serious for Facebook).   The majority of my "friends" rarely post at all, even less than me.  A minority of maybe 20 are active posters.  Some keep the site interesting, informative, or humorous.  Another 20 users post at my pace, just occasionally posting or making comments.  The remaining half basically never post or comment.  Maybe they just follow this site, or maybe they signed up at some point and have never looked again.

That gets to the point of this write-up.  What is a "user" and how many does Facebook really have?
I guess only Facebook would have these stats, and they are a key to understanding the value of this company.

This reminds me of a past experience when I was well aware of the credit card businesses of the first two named banks that I represented.  At the time there was competition among all of the major card issuers to promote or brag about how many customers they had.  Included in the numbers the banks promoted were many dormant accounts, cards that were issued but never used by their owners. People tended at that time to accumulate more cards than they used, often to get that 20% discount on some store purchase and then never use the card again.  In other words, a significant percentage of the card customers promoted by these banks were essentially bogus because they were hidden in some drawer and never used.

For banks, since actually money borrowed was easy to calculate, this number was accessible internally.  As a comparison to Facebook, the usage numbers are not so accessible, probably even to the company.  On second thought, Facebook obviously has an immense amount of information.  They just don't yet seem to have a way to benefit from it as a public company.  They almost definitely will at some point, but now they seem clumsy.

But the question remains for me.  How many active users are there of Facebook as opposed to those who have signed up, hardly ever use it, or have packed it in?  

Saturday, April 27, 2013

Facebook is going too far, making unreasonable suggestions...

Facebook is beginning to annoy me, that is not a strong enough word, with its invasive approach to its timeline and related contents.  Today it picked up a part of a blog that was written on my Google blog, not forwarded by me so how I don't know.  It was nothing embarrassing but what the hell and how are they taking parts of my Google blog and posting them on my timeline.  It's confusing to those who follow my work as well.  It's inexplicable.

Six months ago Amazon became a regular contributor to my main Facebook page.  Why, how?  I am a regular user of Amazon but never requested that it be linked to Facebook.  The same thing has happened with my graduate business school, Thunderbird.  They are not as prolific as Amazon and they are informative rather than just advertising, but I never "friended" that organization or asked for their inclusion on my Facebook page.  Now Etrade sponsored advertisements are showing up in the main chain of posts.  Have I ever "friended" Etrade?

The worst change of late by far is the "suggestions" link at the end of the timeline listings.  "Suggestions" for books, movies, televison shows, music, all as if they know what I would like.  They have no real insight into me, but they could give that impression.  Most of the dreck they recommend is of no interest to me, but a casual reader may misinterpret that.  When Netflix does this, give suggestions, they are actually based on derived information from my likes, dislikes, and usage.  Not Facebook.

Following that are the few photos that I have on Facebook(that's ok) and then this completely incomplete map of places that I have lived.  Thank goodness it is incomplete.  In this world of information stealers and creative users who wants all of that information public.

The worst, worst by far is the final section.  That's an extensive list of "suggested likes", probably 80% of which I do not like.  Many of my suggested likes are books and people as right wing and anti-libertarian as you could find.  Is this Facebook's attempt at an understanding of me.  If so, they are either incompetent or corrupt.

The final insult is that my few actual chosen "likes" are separated from the suggested likes only by being on the bottom line, without any annotation or even a space break.  No one could tell the difference unless they know me.

I have another big question about Facebook but that will wait until tomorrow.  For now the decision is coming down to whether just deleting this "service" or trying to change it.  Their current timeline work is insulting. 

Friday, April 26, 2013

Tax review complexity and perplexity

Today we collected the final filed tax documents from our wonderful accountant.  After two hours of reviewing what he had filed jointly for us and individually for our daughters my head was spinning and I was thinking of moving to Idaho and joining some anti-government radical group.  It's hard to believe that until three years ago I chose to do all of this work on my own.  Now even reviewing a true professional's work is mind boggling and agitating.

This will take hours to understand over the coming week.  I have this overwhelming need to at least understand the process.  It seems like a citizen's obligation.  That also gives an opportunity to see the many misrepresentations and outright lies that the politicians, from the top down, tell us.  Every election season, meaning every two years, most of them include in their pitch talks comments about improving and making tax reporting more simple and understandable.  After the election season, special deals, earmarks, purposeful punitive changes, and perhaps a few well meaning messy changes only make the system ever more complex.  In short, Congress has zero integrity on this issue and there is no serious leadership from the top.

For the large number of people in our country who pay little in taxes because unfortunately their jobs are not at all lucrative, this is not much of an issue.  But for the middle class that Obama constantly harps on, expresses support for, and wants to build, this tax system is a real mess.  For the really wealthy, they hire lawyers and experts to work through the issues, often to their benefit.

For many of us, however, this tax system should be viewed as a national disgrace.  What can you do?  Accept it and realize that this is what America has become.  I guess that's about it.

Thursday, April 25, 2013

Two holes in many portfolios

Despite the steady, not so exciting but rewarding, upward climb of the equity markets and both the positive and anxious feelings that this evokes, there are two missing catalysts in many individual and institutional portfolios that are difficult to fill.

The first and biggest is obviously Apple, a real bust over the last six months for many reasons discussed here previously(most completely in a 2/17 post).  Depite its obvious appeal to many and the fact that it is trading far below average market multiples, a catalyst is needed to reinvigorate the valuation.  Making a great COO into an inspiring CEO certainly has not yet jelled.  Vision seems to have vanished in the eyes of the market and profit taking has been rife.  This great story is certainly not over, but there is definitely a lull that affects many portfolios to the downside, and makes buying more a temptation even if our basis is on a 2003 price.

The other negative portfolio impact, not nearly as big, on many has been gold, mainly in the form of GLD but also for those who choose to hold the miners.  Since gold is simply a store of value with no particular market statistics to measure, this is simply a change of sentiment.  Maybe it's a little more than that.  With the continued rapidly increasing inequality of wealth in developing countries, those with the capacity to protect their assets through gold are feeling more optimistic, and spending more of their money.  The biggest growth market by far for high end cars---Mercedes, BMW's, Land Rover's, Audi's, Maserati's, etc. is now China.  By number of cars, not percent, there are more Bentley's in little Hong Kong than anywhere else in the world.  A final piece of the puzzle may be India, where gold is the most prized gift and possession held by anyone even in the middle class - those dowry's.  With India in somewhat of an economic downdraft and a moribund government, the demand has weakened.

The other stores of value competing with gold now are high end homes in great urban locations, and for the all important, in fact most important, central banks and major institutions the relative value of investing in U.S. equity markets, German bonds, and, finally, the resurgent Japanese securities markets is rational competition with a gold market that has for the moment seen its best moments already.

Of course the U.S. markets take their lead from watching George Soros and other economic titans lighten their positions.  They don't own the market so all of this is just a guess as to what else is behind the recent significant weakness.  

Monday, April 08, 2013

"St Petersburg Review"

Hey Libby Lou  ... apologize for this late follow up to my beginning phrase.  A personal issue intervened but now I'm back.  I realize that you are now Elizabeth L. Hodges and apparently lead editor of this impressive compendium of global writing.  Subscribed recently, received my first copy and am into it in bits and pieces.  Congratulations on your accomplishments.