Financial Commentary – Public

Here is an interview that does a good job of expressing my thoughts regarding the current state of investment opportunities. In a nutshell it reminds us to take the daily financial headline, both bearish and bullish in stride.

Who to blame for the mess we appear to be in? Greedy Wall Street bankers? Fatuous Europeans who expect to retire at age 55 after a lifetime of loafing? Inept oil drillers fouling America’s southern coastline? When times are tough you can count on politicians to score points by blaming everyone in sight, rarely noticing that many of our problems today are the results of legislation enacted by previous Congresses. No one seems to want to accept individual responsibility-it's always the Other Guy's fault. I'm convinced that this nation's greatest enemy are those who insist on seeing the glass as half empty, whatever their political persuasion.

I love my clients!  Shortly after the market closed, on one of the wackiest days in memory, I shot out a reassuring e mail to my clients (reprinted below). Here is a sample of the responses that came back from some of them:

“Wow!  From my perspective you wrote the following and responded in less than a minute from the time I sent my email to you! “  

“Stay with it! You’re the man!!!”

“I know  you are on the job, and I trust your judgment. I rode out 1987 with you.”

“Thanks for the info you have been sending today Gary.  We have been trying to keep up with everything, but it is great to hear your explanations.  You certainly express yourself extremely well.”



Aren’t I somethin’ !?

But really, it feels good for me to  know I’m needed and respected for the work I do.



Now, for your interest, is my perspective on what is going on in the markets from the above referenced e mail sent to clients earlier today:

What the SEC/Goldman Sachs Tussle Means for You

I've never tolerated arrogant management in companies we own, nor do I care for lack of transparency and the outrageous incomes earned by the stewards of public corporations, bankers, oil companies, insurance companies or industrial companies. I refuse, however to assume that Goldman Sachs is guilty of a crime until the facts are aired and the court decisions are made. Like California Congressman Darrell Issa, I also am suspicious of the timing of this SEC action against Goldman, coming as it does while Congress is contemplating legislation to more strongly regulate Wall Street ( legislation that, in principal, I support ). This being said, I find that an editorial by economic commentator Larry Kudlow on CNBC, Wednesday April 21, 2010 brilliantly sums up the issues. I happen to agree with Kudlow's warning about government overreaching, presenting a threat to one of America's most successful industries. I'm reproducing his commentary below, and urge you to read and consider what he has to say.

“We could see a statistical recovery but a human recession” - Indira Noori, CEO Pepsico, quoting Lawrence Summers, Director, White House Economic Council, on CNBC TV, March 22, 2010

Consider that one year ago, Bailout Nation was gaining speed, with huge subsidies provided to a gasping  banking system, insurance giant AIG accepting its fourth bailout from Uncle Sam and  two of the three remaining US car makers careening toward oblivion.   Every Friday, new bank closures were announced.  Having lost the argument in late 2008 that no bailouts were appropriate, those who believe in less not more government were ringing their hands in dismay, certain that financial and social disaster lay ahead.  On March 3, 2009 an editorial in the Wall street Journal accused the Obama administration of frightening business away from new spending with its threats of health care reform and a carbon tax to curb global warming.  The following graph was offered as proof that the new administration was a disaster for our economy:

In this video, Warren Buffett and former Treasury Secretary Henry Paulson have an economic 'power lunch' chit-chat, live at the Chamber of Commerce annual meeting in Omaha. Recorded by CNBC.

So far, the stock market correction we have witnessed in the past month appears to be normal in scope. In contrast to the "sky is falling!" mentality that prevailed one year ago, signs that our banking system would survive began last spring an overly ebullient reaction by a significant number of investors. Now that Optimists must deal with evidence of a very slow recovery, and economic ignorance on the part of many politicos, a negative reaction has set in, with the flow of new money into equities more than offset by profit taking. It appears to me that the Recovery appears to be playing out along the lines suggested by most economists, including those in government: slow, with fits and starts. 

Washington Turns to the Dark Side
With economic recovery too slow to save Democrats running for re-election, a wholesale verbal and strategic assault on the pillars of a sound economy is underway. Despite this the stock market, a good predictor of the future, is holding up relatively well. 

I consumed two fat books on the life and investment strategies of Warren Buffet this past year, both of which improved my already considerable knowledge of his approach.  Buffet sniffs at index investing, and especially at trend followers.  His does the challenging work of company-by-company financial analysis. Consider that while the S&P was losing 20% […]

UNEMPLOYMENT TOOK A SURPRISING TURN DOWNWARD WITH LAST MONTH’S REPORT RELEASED ON FRIDAY.  GIVEN THE STATISTICAL MANIPULATION (SEASONAL SMOOTHING) AND REVISIONS THAT HAPPEN REGULARLY, THE REPORT IS TO BE TAKEN WITH SOME GRAINS OF SALT. STILL, WE MAY HAVE SEEN A MEANINGFUL DECELERATION IN THIS IMPORTANT NEGATIVE TREND.  RISING EMPLOYMENT IS THE CORNERSTONE OF A […]