Bill Cara: Dubious comments from the industry today, Mon., Nov. 7, 2005, 3:36 PM

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November 7, 2005

Dubious comments from the industry today, Mon., Nov. 7, 2005, 3:36 PM

Maria Bartiromo showed a clip of her interview last week with Charles Schwab. She started by asking why Mom & Pop ought to be happy in the market today with all the risks, yada yada. Chuck never missed a beat; he replied that if all the people who enjoyed good portfolios in 1999 had held through the bear market, they'd have portfolios that today would be back to par (he acknowledged these portfolios would still not be ahead).

Is that not the dumbest thing you've heard today? After you factor out the tens of millions of capital owners who have passed away in the past six years, or become sadly disadvantaged and will never be there at the end of Chuck's story to achieve the dreams he sells, and after you factor out the true inflation over this time, and the opportunity cost of asset values that would have otherwise prospered in real estate... Oh Chuck, give me a break.

Give me a break!

The Charles Schwab I saw in that interview is the same person I was, and my peers were (and are). The customer's pain is like water off the duck's back.

A little earlier, Morgan Stanley's chief global economist Stephen Roach was interviewed by Bloomberg or CNBC (can't recall), and I heard him utter the words: Inflation is so yesterday."

The average family income in the most prosperous cities/towns of America is something like $68,000. All of these people, I venture to say, understand the concepts of inflation and bear markets, and how their capital has suffered great damage over the past few years. A few have even committed suicide or had emotional breakdowns because of what Maria Bartiromo was referring to.

So why is it that Wall Street is run by idiots like Schwab and Roach who just don't get it?

Well, there you have it; two new recipients of the Cara Dubious Feat Awards.

One final thought; I learned in my career to let the business guys and the economists do their thing. Just stay out of the trading room, and away from the customers.

Posted by Posted by Bill Cara on November 7, 2005 03:37:08 PM | Category: Cara Dubious Feat Awards

Discourse

Bill-
I find it interesting that after a long sleep BRK is awake again. Smart money going defensive?

Posted by: MarkM at November 7, 2005 3:58 PM [link]

Mark,

Isn't it interesting that Warren Buffett's BERKSHIRE HATHAWAY HOLDINGS A (NYSE:BRK-A) is attracting trader interest, given that he is sitting on about 35 pct CASH.

I have said before that if, as and when Buffett decides to invest that cash, that might be an opportune time to commit more funds to the market.

It could be that Buffett is now interested in buying more shares in Wells Fargo Bank, which has been the rumour du jour.

Posted by: Bill Cara at November 7, 2005 4:13 PM [link]

BILLIONS. If he can't find any bargains maybe he can just buy a country or two.

A couple of observations. The energy sector is getting better values, and did more of the same today. I was actually able to do some put writing there (at some pretty safe values.)Finally, are you just about pulling your hair out over that crazy XLF? This is all-time high territory.

Posted by: MarkM at November 7, 2005 4:37 PM [link]

Mark, I was short FRE and FNM in the summer of 2004. Another headline article, and for months I got killed. Then recently I went bearish on XLU, and I got killed there too. Same with the homebuilders at times.

But you know, when you make decisions based on common sense and intelligent thought, good things usually happen.

As to XLF, I have stated my case. The RSI/STO is very high. I don't want to be an owner (investor) of any long or short position (except for the core holdings in my portfolio). I'd rather be an active trader. But let's give this one, like the others, some time to work out.

Traders can be, and ought to be, just as patient as investors you know.

Posted by: Bill Cara at November 7, 2005 4:58 PM [link]

Oh, I think it will too. I was short XLF at or about the same time you entered as well. My comment was only to point out the absurdity of it all. I looked at a three year chart and measured the highs. Every time it has stalled out here, just as you have pointed out. There is no way (IMHO) that this price is around come, say, April after the 3Q profits have been long forgotten. I'm with you on this one, Bill. Logic wins out.

Posted by: MarkM at November 7, 2005 6:56 PM [link]

Reminds me of this spoof about Wall Street brokers on Saturday Night Live:
http://www.turtletrader.com/SNL.wmv

Posted by: JIM at November 8, 2005 9:24 AM [link]