Market Musings and Lessons

There are many events that should cause us to learn, but no one seems to be paying attention.  These are things in my notebook.  All are interesting, but not providing enough for a full article.

If you spend a minute thinking about these questions, you will be a stronger investor, but there might not be that Internet Gold Standard — Actionable Investment Advice.  You might have to digest the information and keep it in mind as you evaluate future events and data.

Whatever happened to…..

• Due diligence.  Reports show that the UBS rogue trader wrote on Facebook that he would "need a miracle…"  Were his bosses the last to know?
• The big question about who would buy US bonds after QE II ended?  Yes, I know that Bill Gross admitted that he was wrong about leaving Treasuries out of his portfolio, but that is not the point.  As an opinion leader he did a bogus comparison — Fed purchases versus Treasury issuance — and implied that there would be no buyers.  The right comparison (which I wrote about regularly) is Fed action to total trading, a vastly smaller ratio.  This was so obvious, and totally missed by the uncritical media.  The story has quietly disappeared.  Meanwhile, even Rick Santelli gave today's 30-year auction an "A" grade.
• The White Sox late-season surge.  Oops….
• David Rosenberg's 100% recession call last year based upon the ECRI data.  This happened in spite of ECRI denials about the interpretation.  A reader asked me about Rosenberg's most recent recession forecast — another 100% call using new and improved methods.  I wish I could remember who gave the example of a Neil Diamond concert.  The audience demands "Sweet Caroline."  I'll get more interested when Rosenberg gets a step closer to the mainstream, but meanwhile he has an adoring audience including those interivewing him on CNBC.
• The Meredith Whitney avalanche of municipal defaults.  Wasn't that supposed to happen right after June 30th?  Here is a question:  Has she made any accurate forecasts since FAS 157 was limited?  Just wondering.
• Hard-hitting questions.  Jimmy Rogers got the typical softball treatment in his most recent CNBC gig.  He stated that the rise in M2 proved that the Fed was in the market, probably lying about their actions.  This just goes to show how people can make a lot of money without knowing anything about government.  There is no way that the Fed can or would conduct secret operations.  Has he ever read the transcript from a meeting?  Does he think that there are 100 or so co-conspirators on this?  Sheesh!  Meanwhile, David Faber let this preposterous remark pass, and no one else seemed to notice.
• US profit margin compression.  Still waiting on that one.  My guess is that it will happen eventually, but only after employment, revenue, and gross profits start growing more rapidly.
• The collapse of the Euro.  We started hearing the predictions that it was going to parity with the dollar in May of 2010.  It is still about the same.  Meanwhile, some market pundits embrace the verdict of the thinly-traded CDS markets while rejecting the result of the deep and liquid foreign exchange market.  One sees what one wants to see.
• The S&P downgrade, which did not seem to reduce appetite for US paper.

My favorite take on that was from last week's Mr. Boffo.  The quote of the day was as follows:

"Best & Fine" — Original name before truth in advertising downgraded them to "Standard & Poor."

And finally — I wonder…..

What would have happened if Dominique Strauss-Kahn had gotten back to Europe on his originally planned schedule.  While it is nice to see the strong position from his replacement, Christine Lagarde, no one is asking "What if?"  His arrest and detention was  a serious blow to the European stabilization effort.  It caused immediate selling both here and abroad, breaching technical levels and calling the entire effort into question.  Many weeks went by while the leadership void was addressed.  Has anyone else noticed this?

If I (or any other investment manager) had known what was going to happen to him, I would certainly have been short the market.  I suppose this was a tough one for getting inside information.

Enough musing about the unreal world of market commentary.  Back to the data!