March 17, 2008
There is something odd, yet comforting when I watch a classic Bruce Lee or Godzilla movie. The people’s lips are moving and while I hear words, the two don’t quite match up. In spite of that, somehow it works anyway and is a reminder that what is happening on the screen is far fetched and should not be confused with reality. Perhaps a good lesson applied to last Tuesday’s $200 billion announcement to Sunday’s $2 news.
As I read the horrifying news of JP Morgan (JPM) and Bear (BSC), I suddenly thought about the (former) masters of the lip-sync world, Milli Vanilli. Remember them? Rob and Fab were the gorgeous singing duo who had a hypnotic effect on a global scale. When they sang, fans were awed. When they danced…well, actually let’s not go there.
Where are they now? As soon as they were outed in 1989 during a live MTV performance of their hit song, Girl You Know It’s True, they fell quickly and painfully. It was a sad end to one life and the two careers of men who will forever be remembered as talentless puppets.
Our trusted government and its agencies have now taken over as the Milli Vanilli of Finance. Who in the hell is calling the plays? Who is making these abhorrent decisions to hide information from the public and allowing for a multi-billion dollar company to to fail over a weekend? How are we going to have trust in the system if they pull a fast one like this? It is now more obvious than ever that we are in bad shape and the lack of either:
1) The people in the know, knowing or
2) Trust for the system
is going to hit hard. Bear Stearns (BSC) is another casualty that could have been avoided. But, instead of going through steps that could have been taken as that is meaningless at this point, maybe we should be thinking about what else is coming and work on a plan to protect ourselves. Thinks about it…it is now every person for themselves as lips are moving by Ben-n-Bush, though they are not saying anything.
So, as a protective measure, use a hedge against a market nosedive – assuming it is not too late. As was suggested on 3/12/08 (Bernanke’s Junk Exchange), look at (SDS) (SKF) and (QID) as some short-ideas that will give you the best bang for the short buck. Don’t stop there though as there is surely going to be further fallout.
Lehman (LEH) is in the same trouble as Bear since they have somewhat similar business models. JP Morgan is absorbing a massive amount of debt that will continue to be difficult to value. Look no further than the Bank of America (BAC) and Countrywide (CFC) fiasco as a foreshadowing of what is in store for JPM. While the far future may be lined with profits, JPM shareholders will need strong constitutions during the short-term. Be careful to hedge these positions if for some reason you do not want to sell outright. More can be found in this top10binary.net binary options website if you want to learn about binary options trading or brokers.
During the next few days, amazing trading opportunities will probably arise as rumors and speculations will run Read more
February 25, 2008
WARNING AND IMPORTANT ADVICE on how to protect your portfolio and your cash. Andrew brings back essential knowledge from the Reuters Summit on Housing. In this episode we hear what is on the minds of advisors and other noted speakers of significant influence who all had their opportunity to discuss how they believe we arrived in this dreadful position while at the same time looked for solutions. Thanks to Microsoft for inviting Andrew and providing the opportunity to attend as a guest of the MSN Money team.
Stocks mentioned: (TOL) (PPD) (BAC) (C) (MBIA) (MSFT)
** NOTE: Andrew is teaching: PORTFOLIO MASTERY on February 28 (free) Register Now. Also calls are being accepted for the upcoming advice-only episode. Leave your information and question by calling 877-623-8473. In this episode, listen for details on how to get a free audiobook. **
Audio clips are sprinkled throughout this episode from the panelists included Short Seller and Seabreeze Partners head Doug Kass, home-builder and CEO of Toll Brothers Bob Toll, Neighborhood Assistance Corp. of America CEO Bruce Marks and MSN columnist Jim Jubak.
The basic discussion surrounded the basic questions:
– Should the government bail-out home lenders and owners?
– How much further can prices fall?
– Will the consumer continue to hold up or will this trigger a recession?
– Who should take the blame?
If it was a movie, The American Dream has been renamed to: A Nightmare on Elm Street. Unfortunately, the focus of who will really to suffer has not been addressed as this quickly evolving housing situation has focused on the financial industry, lenders and Wall Street.
– Trouble for investors with certain Money Markets and other traditionally safe short term debt securities
– Credit seizure in all areas could prevent local economies/governments from running
– Pension Plan losses due to inability to price auction and asset backed investments
– State Pools (an other emergency funds) freeze if they have funds in sub-prime, junk bonds, auction-backed and asset-backed
– Student Loan market crisis looming
– Muni bonds will cost significantly more to issue as credit agencies are untrusted, driving rates down and interest payments up
– Opportunity in Rental Real Estate for investors
– Fallout for Retail and Travel/Tourism industries
– Run-on-the-bank scenario starting to build
– South Florida banks that should be on watch list
– FDIC – concern over if they handle another S&L type emergency
– South Florida auto industry implosion ( pricing, limited credit, excess inventory, poor floor-planning, tighter credit requirements)
– Mutual Fund distribution freeze for illiquid fixed income investments
– Section 8 housing flood on market as next investment opportunity as it is a possible beneficiary under one bailout idea.
– Sovereign debt drying up as a foreign countries are not only feeling their own problems, unwilling to risk in potentially illiquid positions
– Lawyers will benefit from Foreclosures, bankruptcy and liability lawsuits – Investment IDEA!
The Disciplined Investor is available at Amazon and other fine retailers.