Showing posts with label tips. Show all posts
Showing posts with label tips. Show all posts

Thursday, April 9, 2009

The emperor still has no clothes

I don't know about you but back in late 99, early 2000 I started investing for the first time. Now when I started invested like any other bright eyed and bushy tailed rookie I would watch the various financial channels, and hang on the commentators every word like it was gospel. I'm sure I'm not alone in this initial fascination with these people who are on TV and talk about stocks, bonds, mutual funds, and commodities. Now as I was listening, memorizing what they had to say, and takin notes here and that for stocks I might wanna purchase later I would constantly hear one phrase being repeated over and over again:


Do your DUE DILIGENCE before ever investing in a position

Wow I was amazed I was like hmm this must be important, so I treated it like sage advice. But as I started to take this sage advice I began to realize something if I did do my own research(thats what due diligence means) many times what they were saying on TV about the company and what I would come up with on my own would not match up. Now granted we can all read numbers differently, and maybe the info I got was just a better hunch on my part then what they got. But then I started to notice a pattern, it wasn't just off it was almost deliberately off. Some of the things they were saying were in essence meant to get people to react a certain way, as if they were being told what to say and how to present things instead of doing the due diligence as they were instructing you to do.

Now yes of course some of this can't be helped I mean some companies for the longest time during the early part of the 2000's were masters of the accounting tricks. It started with enron, then it crept into the housing bubble, and now it has fully reared it's ugly head in the mortgage crisis. And do you know what the funniest thing is, if you go back and listen to the "analysts" on most of the financial channels, they didn't seem to see a single thing wrong. They were all too happy to inform you about the new math and the new metrics, and how you could ignore old methods of capitalization and valuation because we were in a brave new world.

Problem with their brave new world, it seems math didn't exist in their brave new world. Okay that is slightly unfair math did exist just not 1+1=2 math or if jimmy has $5.00 and he goes to the store and wants to buy a few snacks and an apple costs .75, a bag of chips costs .35, a soda costs 1.35(remember when a soda was only like 1.00 tops with tax wow) and a pack of cupcakes is like 1.50(let's not even talk about cupcakes). well the first part of the question of course would be does little jimmy have enough. Now he's got 5 bucks looks like he should have enough right if he gets one of each he should be straight right be about 3.95. thats regular math, thats the math we would have gotten a 100% on in grade school.

Thats not the math they were using, because they would be talking about little jimmy having that same 5 dollars to buy those same items at that same prices but tripling how much he bought, and saying it's okay if we know he's only got 5 bucks because we're on that new math and mystically magically in a few days, weeks, months yadda yadda little jimmy will magically have turned that into a 50 dollar profit. Okay slight simplification on how he would have done it but NOT on the attitude. Now the fact that up until saaaaay february of 08 most of these guys had no clue how bad things had gotten were still talking up these companies who were about to tank due to credit default swaps, and being undercapitalized for the amount of debt they had taken on, you would think that they would be A sorry as all hell because the looked like grade A fools and B more vigilant about what was going on after that point. But no most of them had that same mindset immediately after the crisis hell many of them continually look shell shocked.

To make matters worse many of them still want us to believe they have some amount of expertise in the subjects that they are speaking. Ladies and gents if say me or you blew it as bad as they blew it we would be out of a job. You saw the coach of the detroit lions, hell the interim coach neither one could win a game all year they both got the axe, neither one of them cost their teams the amount of money the blunders in the financial market cost. I mean yeah the owner may look at his 3-4 or 500 million dollar investment with it's 300 million dollar payroll and think damn did I waste my money this year. But as the arizona cardinals showed(as did the stl rams, oakland raiders, tampa bay buccaneers, boston celtics, tampa bay rays, boston red sox and on and on and on) you can have a bad year, or a string of bad years and then the next year catch fire and whip either everybody in your path or everybody but 1 team. So you might dump the coach but maybe with the right leadership your players can go from bums to heroes. and if you did decide to give the current coach another chance humble pie would be his everyday dish.

Not the idiots on the financial channels, yeah they did some mea culpa's for a few days but as I was watching a promo for one of the shows(today it was suze orman but some days it's kramer, or maybe the closing bell yadda yadda) and she was like let me tell you what you and everybody else was doing wrong. And I'm looking and I say, um if the persons answer isn't " Listening to you suze" they ain learned nothing over the last few years. Because most folks were calling suze, or they were calling kramer, or they were tuning in to bloomberg, CNBC, Fox business what have you, only to get information from people who have proven to know no more if not even less then the people watching them. Because it seems for some of them the fact that they got to smooze with some of the big wigs they forget to check and see if the persons darting eyes looked energetic or nervous, was it actually hot in the room or was the person panicking.

I call this the emperor has no clothes because these folks are at it again. These guys are talking like they have all this expertise that you should listen to when, the time to have exhibited expertise has passed and these folks ladies and gentleman failed that test miserably. They weren't just surprised at the level of chaos in the financial world they had no idea how it had gotten there. I mean think about it if you did something every day or your life, and were paying attention to how things worked the ebbs and flows wouldn't you through nothing else but watching it over time see when things were maybe going a little off? Shouldn't you at least have had an inkling that hmm damn I mean I hope I'm wrong but this just doesn't smell right?

Or maybe I am expecting something else of these talking heads that is unfair, some common human decency and humility. If you screw up apologize and get down off your soap box and join the rest of the crowd as we try to fix the mess. Don't act like nothing went wrong and it's cool again for you to act all intelligent and high and mighty. Sorry you had your chance to be soothsayer of the economic world, but if your barely doing better then a dart thrown at the stock section of the paper why exactly should I listen to you? Everybody looks good when the market is steadily going up, only people who can guage whats good or bad, and will recover faster or not at all when this are looking bad get "authority" credit.

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