Just say no to bonds
by ilene - August 27th, 2010 2:51 am
Baruch’s part two – not only are equities the asset class of the future, bonds can be taken out and shot for all the trouble they’ve caused. – Ilene
Just say no to bonds
Courtesy of Ultimi Barbarorum
In these pages we have often defended equities against their naysayers in the great bonds vs stocks debate that seems to be currently raging. But defence is only half the job. It is time to go on the attack! Note well, dear reader, that I know very little about bonds, and I don’t want to know any more in case I have to change my views. However knowing very little about an asset class doesn’t stop bloggers from talking about it with authoriteh, especially if it is bond apologists harping on about equities. So I, Baruch, am going to give them a dose of their own medicine.
OK, so some of the stuff below is a bit tongue in cheek. But tell me if any of it is actually untrue:
1. Bonds are zero sum games. Baruch doesn’t get out of bed on an investment if he doesn’t think he can make 30%. Ex junk, about a 10-15% swing move is the best you can hope for with bonds. Bonds don’t really make you very much money; they shouldn’t. After all, the basic proposition is you lent whoever it was a certain sum of money, and they promised to pay it to you back. Except for the interest, and you can also forecast the nominal amount of that to the penny, they’re not ever going to pay you any more than that amount. The only way you can make any real bucks on a bond is after something has gone wrong, and the poor schmoe who bought it at par sells it to you and takes a loss. Then you hope it gets better again. This means that for the most part. . .
2. To make any real money off bonds you have to be levered up. Ironically, most bonds are quite illiquid, except of course for government paper. Illiquidity and leverage are amusing bed partners and when together can create incredibly spectacular blowups. This means that bonds’ susceptibility to Black Swan events is much much higher than you think. Positive Black Swan events won’t help you so much when you own bonds…
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No Stock Recommendations here; move along
by ilene - March 28th, 2010 1:43 am
Whatever you may think about Cramer is secondary. Baruch’s main argument is that being a consistently successful non-professional investor requires enormous effort and is quite challenging. And the odds of finding good advice are far less then guessing the outcome of a coin toss. As an analogy, you need to learn to swim really well before jumping in with the sharks, and then, the even the best swimming skills only go so far. – Ilene
No Stock Recommendations here; move along
Courtesy of Ultimi Barbarorum
Baruch found himself commenting on Wall Street Cheat Sheet like ten days ago, on a post by Damien Hoffman, who seems to really dislike Jim Cramer. The post was about some investigation of TheStreet.com by the SEC, which Damien thought highly amusing, perhaps because he also runs a competing subscription-based financial edutainment site. Now, Baruch doesn’t pay attention to Jim Cramer on TV, but in fact quite likes him in print. He reads his posts on theStreet.com, and respects his track record as a hedge fund manager and pioneer econo-blogger. So Baruch felt a brief moment of annoyance about seeing someone he liked being unecessarily trashed, but soon his heart was filled with forgiveness and understanding again. We must not be too harsh; snark is Damien’s job, what he gets paid for. He is a financial blogger-journalist, and being cheeky about mainstream media figures is part of that David and Goliath thing blogging used to be all about.
Anyway, this post is only a bit about Jim Cramer and Damien Hoffman. The exchange got Baruch thinking about the differences between journalists/bloggers (or whatever you want to call them) and investors, and what it means to communicate about investments with the public. Baruch finds this terribly interesting, because of course as an amateur econo-blogger and a professional investor, he has a foot in both camps.
Some of Baruch’s best friends are, or have been, financial journalists and commentators, on blogs and print. Baruch in his time also attempted a bit of journalism, before he found his true calling (which isn’t blogging, by the way). Being a financial journalist is a good, interesting job, and very important to the proper functioning of a marketplace. Journalists can do things, find things out, and explain things the public and investors need to know in ways investment professionals can’t, at least without risking jail.
But in the end…
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Econobloggers need their crisis back
by ilene - March 8th, 2010 6:52 pm
While Ultimi Barbarorum‘s Baruch would probably rather me argue a fine point in his sadly overall true post, I happen to agree with him. However, not be overly picky, he missed Phil’s Stock World in his list of bloggers who still care. Oh, and let’s not forget two of my favorites, JESSE’S CAFÉ AMÉRICAIN and Mish’s Global Economic Trend Analysis. (And all those others I’m missing.) - Ilene
Econobloggers need their crisis back
Courtesy of Ultimi Barbarorum
I think so, dear readers. With the advent of peace and plenty, as we move to the broad sunlit uplands of The Recovery, I fear some of the spice has gone out of the commentary on sites like this one, and its friends. Where people used to read econoblogs to actually understand a crisis that CNN and Fox News soundbites didn’t seem to encompass anymore, as the meltdown recedes into the past there’s now just a dull ennui. And with that, the econoblogosphere is moving back to where it used to be, which is to cater to a niche, broader than most, but a niche nonetheless, with a circumscribed influence.
The high point of bloggy “power”, we shall probably find in retrospect, was when a number of bloggers were invited to the US Treasury department and fed some by all accounts delicious cookies, as well as being ferociously spun to by the Goldmans guys whose turn it was to be on sabbatical at the Treasury that when it came to financial reform and what had gone wrong in the banking sector they did in fact Get It, whatever It was.
Since then, of course, we have had Obama praise the bonuses to “savvy businessman” Lloyd Blankfein, who as we all know is doing god’s work; mind-numbingly massive “trading” profits from all the big commercial, investment, commercial, investment banks at the same time as accepting government and Fed largesse*; an even more hideous clusterfuck over finance reform than exists over healthcare reform in the US; and this despite none of the proposals under discussion seeming likely to properly change anything worthwhile, other than maybe the Volcker prop trading rule and this last seems fairly dead in the water.
What really rankles this blogger is that the Great Spinozist Republic is being subverted again. Regulatory capture is one thing, the total inability of a political system to make any steps to reform itself when what is wrong…
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Blogger Backlash to the Backlash Begins
by ilene - December 2nd, 2009 10:37 pm
Blogger Backlash to the Backlash Begins
Courtesy of Joshua M Brown, The Reformed Broker
Let’s say that you’re a market commentator or financial blogger…
If earlier this year you predicted that unemployment would climb higher than 10% and that the market would be crushed, would you now be considered half-right or half-wrong by your followers? Will you be rewarded for nailing the unemployment number or hated for keeping readers out of the biggest market rebound of all time?
We’re starting to see the beginnings of the backlash against many financial bloggers, especially those of the gloom/ conspiratorial kind. Most of the hate is actually coming from other bloggers.
For all of 2008 and the beginning of 2009, we were being force fed troughs full of lies and obfuscation about what our true financial picture was and what was being done behind the scenes. It was in this environment that many in the investor class turned to more, shall we say, alternative voices for a different take on the parade of financial meltdowns.
Bloggers were no longer relaying the news, they were digging for the truth in the data and making the news.
Now, 7 months or so removed from the bottom for most financial assets, many are tired of the conspiracies, even if they contain some truth and even if they do constitute an incredibly unlevel playing field. The attitude is starting to shift more toward the traditional “Hey, I know these guys are stealing and screwing me and are pulling all the strings, but what the hell? I can make money in the market now, too, and what can I do about it anyway, might as well join the party.”
The Fly said recently that he hates these gloom bloggers, and if CNBC also hates financial bloggers, than by the transitive property, he must love CNBC. He said it 20 times cooler than I could paraphrase, but I can totally relate to that notion
Sean O’Brien (Ex-Wirehouse), now writing at The Davian Letter, recently laid it out for the “tin foil hat and black helicopter crowd“:
It is with curious amusement that I have watched the explosion of the Govt/Fed/Vampire Squid conspiracy theory genre within the bloggeratti and the mainstream media. They all act as if they have just discovered something so secret and nefarious. They (and I
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Citizens On Patrol: The Blogosphere As Regulator
by ilene - November 11th, 2009 11:07 pm
Bloggers also coin new words, for example, "embiggen." – Ilene
Citizens On Patrol: The Blogosphere As Regulator
Courtesy of Joshua M Brown, The Reformed Broker
Tonight we witnessed a watershed event in financial blogging, and it concerns The Case of Who Front-Ran the 3Com Takeover.
By now, the only people out there still trying to use options contracts to profit from inside information are the brain-dead and the citizens of non-extradition countries. As is well known, I am a huge proponent of the financial blogosphere and this evening’s 3Com options bust just gave me goosebumps.
The story is this:
At 4pm, shares of telco equipment company 3Com (COMS) were halted followed by the announcement of an acquisition by Hewlett-Packard at a 40% premium. The financial blogosphere sprang into action, immediately pointing out that today’s trading volume in 3Com’s options was triple its 4-week daily average. Options are the weapon of choice for the inside information crook as they give you the most bang for your buck on a near-term jump in a stock.
OptionMonster.com’s Jon Najarian picked this 3Com options activity up, probably first, and posted the below via Twitter:
(click image to embiggen)
From OptionMonster.com
Najarian’s revelation was immediately followed by separate but equally incisive comments from some of the biggest and most influential market commentators out there. None of this was coordinated by a producer at CNBC nor was it orchestrated by the editorial staff at the Wall Street Journal.
Rather, it was an organic meme that spread around the financial web by means of Twitter, WordPress, Blogspot and Typepad.
The mainstream media picked up on this insider trading angle only AFTER the bloggers nailed it, at least from what I’ve seen based on the times of the articles and posts.
Now we don’t know for sure whether or not illegal activity took place, but if it quacks like a duck…
Congratulations to Jon Najarian of OptionMonster.com, Tyler Durden of Zero Hedge, Andrew Ross Sorkin of DealBook and Karl Denninger of Market-Ticker.
UPDATE: Reader MarketAddict informs me that:
OptionRadar on StockTwits tweeted the unusual call volume during the day today:
Ladies and Gentlemen of the stock market, I give you your new citizen-regulators.
Here are the referenced links:
Najarian’s TwitPic (TwitPic)
1.5 Million in Blatant Insider Trading Activity (Zero Hedge)
Whispers About 3Com (DealBook)
Blatant Insider Call Buying (Market-Ticker)
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Moronic Bloggers
by ilene - July 24th, 2009 2:38 pm
Moronic Bloggers
Courtesy of Condor Options
Dear CNBC,
Your last best hope to sustain any measure of relevance is to ally yourselves with the smartest minds in the financial blogosphere and start opting for quality rather than volume. But we’ve gone over suggestions for improvement before, and you’d clearly rather create feature shows about the business of pornography. Fine. If you want to wane into a sputtering, swooshing, brightly-colored perpetual self-parody, go ahead. But there’s no need to telegraph your fear of obsolescence with displays like this: [skip ahead to 2:30 or so].
This isn’t an isolated incident – Dennis Kneale has generated some heat (and certainly not any light) with similar comments. But in fairness, maybe we bloggers are all “moronic” when it comes to the core competencies of a Kneale, a Gasparino, or a Caruso-Cabrera. I certainly don’t know the first thing about reading from a teleprompter, about parsing Goldman Sachs press releases as journalistic content, or about providing unenlightening extemporaneous verbiage without any embarrassment or shame.
Sincerely etc.,
Jared
P.S. “Tyler Durden – it’s probably not even his name!”
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site