You know I like Ballas. I do. Consider this however :
mircea_popescu thelastpsychiatrist.com/2008/03/economy_where_we_go_from_here tlp's sufferances as an amateur financier on an etrade account, and his efforts to cope and come to terms with it is a whole opera in and of itself. Funny how the otherwise very competent psych does not feel comfortable taking off the coat and hat, and waddling in the mud modestly, like any other amateuri .
Let's then go through with a fine brush and detail the damage almost a decade does to categorical statements put forth by amateursii.
1. I was wrong about the dollar, which continues to fall, but more important than laughing at me is understanding why I was wrong. I could not believe that the Fed, the government, would allow bank closures, would allow the dollar to fall further by waiting too late to cut rates.
- The dollar didn't really fall that much. Not that there's anything wrong with the secular expectation that it will implode, of course it will. But on the short term therein contemplated... nothing serious. Nothing like the random euro meltdown recently, for instance.
- The Fed is not "the government". The Fed is a private concern, like the funds you and five neighbours put together to get your daughters to ballet practice. Exactly like that.
- What banks failed in 2008 ?iii
Moving on :
I was wrong. I should have suspected, though,
Can you smell it ?
But any human on this planet knows there is nothing more recessionary than losing your house, except possibly losing your job and your house, or a government policy to kill off all daughters and losing your house.
This is wrong because all of Europe collectively losing their house in 1940-1945 was NOT recessionary in any sense whatsoever. And merely seeing other people lose their houses induced such an ever-loving boom in the US young adult population of the time, the damage they did to any cunt in proximity is still remembered today by the collective name of "Generation OMFG They Massacred All Cunts In Proximity", or BABYBOOMER for short, and echoes thereof informed an entire movement a decade later. Love, right ?
So I made a bet in common sense, in pride.
Funny, this is exactly what the Argentines (I do not mean the smart educated ones that can speak languages, I mean the dumb ones watching football in Spanish) thought they were doing with that entire default thing. And it also apparently reminds me of what the Greeks are claiming. Dignity, right ? Common sense, pride, what Romania's useless generation has been derping about, this discussion of "pride" mixed into economy has very unflattering connotations. It's usually what stupid people do.
Stupid people who played, lost and are now trying to argue they didn't do either. (Was it the meds ?)
No banks have failed yet, but it is generally assumed Bear Stearns is in real danger of evaporating. You should probably hide your daughters.
Article published March 13th, Bear Stearns sale to JPM announced March 16th. Apparently, 3 days ahead he gets it right.
2. I was right about GOOG, 520 was the top. Unfortunately, the PE is still 33, and has to fall to about 25 (see #5). So another 20% drop in price is to be expected, though continued (but slower) growth will offset this. See you at 400.
Amusingly, Google is still trading 500s today, seven years later. You know what the ~8ish% yearly inflation rate you had in the meanwhile did to a GOOG portofolio ?iv Hey, tech stocks are inflation proof, right ? Blue chips are a smart investment, right ?v
3. Oil is too high. It will fall fast and hard, by which I mean fast and hard. Certainly there are long term demand concerns, which means we'll never see $50 again.
You can say that again :)
But when oil rises 20% but the refiners fall 20% (see VLO), that disconnect means that the oil price isn't related to use, but to speculation. See you at $90.
This part he got right : oil peaked that summer at a whopping 140.
4. A good rule of thumb I just invented is that people will a spend little more for lattes than they will for gas. I know Brazil is supposed to have a large and delicious crop in 2008, but I don't care. I am drinking more coffee, and the Chinese are going to need more as well, if they're going to keep working to to put lead paint on all their exports. Coffee is cyclical, so wait for a pullback, but see you at 175/lb (that's cents, yo.)
Buying what you like is kinda stupid, generally, but in this case it didn't pan out : coffee never hit 175 until 2011ish, and it actually dropped (on some volatility) during 2008 all the way to 100.
Conclusion : the thing here isn't that he's entirely wrong. If he were, you could use him as a reverse signal. The thing is that he's slightly worse than a random generator. You know, like a coin flip. While such may work just fine for his professional field (I seriously defy anyone to prove modern psychiatry is actually better than a coin flip - I am pretty well convinced it isn't), it gets pretty painful once measuring sticks are involved.
Something tells me Ballas didn't end up making money daytrading on his online account. That is besides the point : had he made money he'd actually have been worse off for it, much in the manner a shaman whose cure patently doesn't work is better off than the shaman whose cure appears to be working - god help him if the king's girlfriend gets sick or something.
Update Seems Google shares actually split after all - into two unequalvi halves. It is nevertheless fair to say that a stake in Google probably covered inflation over the intervening 7 years, if nothing else.———
- This :
What we in #b-a call "six months to a year's log reading". And notice (by the visible airholes) that they're not wearing any underwear, either. [↩]
- And let's reference the seminal How to make money on the Internet while pretending you know what you're talking about and accumulating a legion of mindless followers - for fun and profit! piece here, because rarely are amateurs as disinterested as mr B. Usually they just feign it, for [a hope of] profit. [↩]
- Here's a list if you're curious :
Bank City State Date Assets ($mil.) Douglass National Bank Kansas City Missouri January 25, 2008 58.5 Hume Bank Hume Missouri March 7, 2008 18.7 ANB Financial NA Bentonville Arkansas May 9, 2008 2100 First Integrity Bank, NA Staples Minnesota May 30, 2008 54.7 IndyMac Pasadena California July 11, 2008 32000 First National Bank of Nevada Reno Nevada July 25, 2008 3400 First Heritage Bank, NA Newport Beach California July 25, 2008 254 First Priority Bank Bradenton Florida August 1, 2008 259 The Columbian Bank and Trust Company Topeka Kansas August 22, 2008 752 Integrity Bank Alpharetta Georgia August 29, 2008 1100 Silver State Bank Henderson Nevada September 5, 2008 2000 Ameribank Northfork West Virginia September 19, 2008 113 Washington Mutual Bank Seattle Washington September 25, 2008 307000 Main Street Bank Northville Michigan October 10, 2008 98 Meridian Bank Eldred Illinois October 10, 2008 39.2 Alpha Bank Trust Alpharetta Georgia October 24, 2008 354.1 Freedom Bank Bradenton Florida October 31, 2008 287 Franklin Bank Houston Texas November 7, 2008 5100 Security Pacific Bank Los Angeles California November 7, 2008 561.1 The Community Bank Loganville Georgia November 21, 2008 681 Downey Savings and Loan Newport Beach California November 21, 2008 12800 PFF Bank and Trust Pomona California November 21, 2008 3700 First Georgia Community Bank Jackson Georgia December 5, 2008 237.5 Haven Trust Bank Duluth Georgia December 12, 2008 572
Via FDIC. Out of that ~370 bn, roughly 80% was due to Washington Mutual, which failed much later (six months gives the Fed another chance to fix the rates so you can just blame that one if you want to blame such a thing) and arguably for unrelated reasons (in the sense that 0% rates would not have saved them). [↩]
- Not hard to figure out : 500 * 0.927 = 278 and change. "Not soo bad" right ? But don't worry, your kid will get twice the college for half the money. They always do.
And then he'll look around and wonder why he can't afford half the house you raised him in. You know, the sucky one you got, that is less than what your grandparents could readily afford.
How did that go, "something something homeless, something forefathers conquered" ? [↩]
- To quote the blue chip wiz, from back in the day he still spoke teh truth :
For an understanding of how the to-invest-or-not-to-invest dilemma plays out in a commodity business, it is instructive to look at Burlington Industries, by far the largest U.S. textile company both 21 years ago and now. In 1964 Burlington had sales of $1.2 billion against our $50 million. It had strengths in both distribution and production that we could never hope to match and also, of course, had an earnings record far superior to ours. Its stock sold at 60 at the end of 1964; ours was 13.
Burlington made a decision to stick to the textile business, and in 1985 had sales of about $2.8 billion. During the 1964-85 period, the company made capital expenditures of about $3 billion, far more than any other U.S. textile company and more than $200-per-share on that $60 stock. A very large part of the expenditures, I am sure, was devoted to cost improvement and expansion. Given Burlington's basic commitment to stay in textiles, I would also surmise that the company's capital decisions were quite rational.
Nevertheless, Burlington has lost sales volume in real dollars and has far lower returns on sales and equity now than 20 years ago. Split 2-for-1 in 1965, the stock now sells at 34-on an adjusted basis, just a little over its $60 price in 1964. Meanwhile, the CPI has more than tripled. Therefore, each share commands about one-third the purchasing power it did at the end of 1964. Regular dividends have been paid but they, too, have shrunk significantly in purchasing power.
This devastating outcome for the shareholders indicates what can happen when much brain power and energy are applied to a faulty premise. The situation is suggestive of Samuel Johnson's horse: "A horse that can count to ten is a remarkable horse, not a remarkable mathematician." Likewise, a textile company that allocates capital brilliantly within its industry is a remarkable textile company, but not a remarkable business.
- Unequal in that the new share (which uses the old name) has no voting rights, whereas the old share (having 1/10 of the voting rights of the management control B class) now trades under GOOGL. [↩]