Musing on the Markets : Quotable Quotes

Quotable Quotes: Faith

Vinny Catalano, CFA — Fri, 29 May 2009 14:58:00 GMT

As equities close in on a third up month in a row, a few words on investors' faith that better times lay ahead.

“Faith means not wanting to know what is true”
Friedrich Nietzsche

“Skepticism is the beginning of Faith.”
Oscar Wilde

“I know God will not give me anything I can't handle. I just wish He didn't trust me so much.”
Mother Teresa

“Faith is taking the first step even when you don't see the whole staircase.”
Martin Luther King, Jr

"...at the beginning of new bull markets investors are driven more by faith than fundamentals, as they seem to prefer Billy Graham over Ben Graham."
Sam Stovall

Have a good weekend.

Quotable Quotes: WTF?

Vinny Catalano, CFA — Fri, 03 Apr 2009 18:46:00 GMT

Here are two excerpts from yesterday’s FT article “Bailed-out banks eye toxic asset buys” that are certain to raise more than a few eyebrows:

“US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.

The plans proved controversial, with critics charging that the government’s public-private partnership - which provide generous loans to investors - are intended to help banks sell, rather than acquire, troubled securities and loans. Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions ”gaming the system to reap taxpayer-subsidised windfalls”. Mr Bachus added it would mark ”a new level of absurdity” if financial institutions were ”colluding to swap assets at inflated prices using taxpayers’ dollars.””

“Officials want banks to sell risky assets in order to cleanse their balance sheets and attract new investments from private investors, limiting the need for the further government funds. Many experts think it is essential to take these assets from leveraged institutions such as banks that are responsible for the lion’s share of lending, into the hands of unleveraged financial institutions such as traditional asset managers, where they will have much less impact on the flow of credit to the economy.

Banks have three options if they want to buy toxic assets: apply to become one of four or five fund managers that will purchase troubled securities; bid for packages of bad loans; or buy into funds set up by others. The government plan does not allow banks to buy their own assets, but there is no ban on the purchase of securities and loans sold by others.”

To read the complete article, visit http://www.ft.com/cms/s/0/358e479a-1fbf-11de-a1df-00144feabdc0.html

Have a good weekend.

Food For Thought

Vinny Catalano, CFA — Fri, 27 Mar 2009 16:40:00 GMT

Wrapped around the daily trials and tribulations of the markets and economy, and often lost in the forest for the trees, are three great debates that investors may want to tune their ears to. These debates – the future of Finance, the future Economic model that leads the world economy, and the future Socioeconomic model that drives America – frame the particulars within which economic, political, and investment decisions will be made. I submit them for your consideration.

Future of Finance

The first great debate raging is one between new finance versus the small banking model. Paul Krugman notes this in his current commentary when he states “…it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.”

Krugman’s protestations notwithstanding, if Secretary Geithner has his way the new finance model will ultimately win the day as the dysfunctional components of the new finance model are remedied (via the Risk Czar) and complex financial instruments live another day: this time with better supervision and, hopefully, fewer financial catastrophes.

Interestingly, Mohammed El-Erian apparently supports the Geithner view. As noted in his excellent book “When Markets Collide”, the PIMCO CEO reveals his thinking when he states that the one area in finance that he would recommend his daughter pursue is structured finance. Well, it seems hard to image a bright future for structured finance without a robust financial model. And that is something that you don’t’ get with the small banking model expressed by Meredith Whitney.

Tied to finance is the second great debate area – the future economic model.

Future Economic Model

With the demise of “cowboy capitalism” what will be the reigning economic model? Will it be the European socialist model? Some revised American model? Or will a hybrid model emerge out of the multi polar world, with America, Europe, and China sharing and influencing power? The answer to this question will likely not be clear for several years. Moreover, it will greatly influenced by how the future finance model evolves. The third great debate is solely a US issue.

Future Socioeconomic Model

This great debate area can be summed up in the following phrase, “Never let a good crisis go to waste”. Here the debate is divided along US political lines with Republicans warning of the third wave expansion of government intrusion while Democrats insist that their hands (and motives) are clean and necessary given the economic mess left by the Republicans. The blame game always rules politics.

Note: I believe there is much to the argument being made by the Republicans. Power is a very strong force and human nature never changes, regardless of campaign rhetoric.

The chronological center point of this debate is the Great Depression. Advocates for greater government spending say the New Deal saved the country while opponents say that is false, that it took World War II, and not the New Deal, to lift the US out of its deep economic funk.* Then there is the subplot to this debate: with greater government intrusion comes greater government power. This is where things like infrastructure spending come into the picture. You don’t stop a road or a bridge in mid construction. Therefore, those that institute the spending will exercise political power for years to come.

Food For Thought

What I have articulated above is meant to be a listing of key issues that investors might want to better acquaint themselves with, and obviously not a comprehensive examination of the subjects noted. A little food for thought.

Have a good weekend.

*In this area, readers may want to acquaint themselves with the writings of Amity Shlaes as one who has been a good source for understanding the Republican argument.

Quotable Quotes: As January Goes, So Goes the Year?

Vinny Catalano, CFA — Fri, 30 Jan 2009 18:54:00 GMT

The well-worn Wall Street axiom, “As January goes, so goes the year”, is about move to the top of the financial media’s list in the coming days. For, barring a supernatural rally in the next few hours, stocks will turn in a negative performance for month (actually worse than last January). Down 6.29% (S&P 500 total return) going into the day, the odds favor a bad 2009 for stocks. Here are some facts courtesy Sam Stovall, Chief Investment Strategist with S&P:

“Since 1945, whenever the S&P 500 advanced in January, the market continued to rise during the remaining 11 months of the year 85% of the time, posting an average price advance of 11.6% -- substantially more than the 8.2% return recorded by the S&P 500’s 12-month price appreciation for the past 64 years. Whenever the market declined during the opening month of the year, the S&P 500 fell an average 2.2% for the remaining 11 months. Its frequency of success, however, was no better than a coin toss at 48.”

Sam goes on to note that “…the January Barometer offers correlation with causation for behavioral reasons.” I take this to mean that there is a certain self-fulfilling quality to the January barometer. However, correlation is not always causation and the past is only prologue, not destiny. Therefore, investors would be prudent to take a skeptical eye to the idea that stocks are destined to rise or fall based strictly on historical facts, especially during times of great uncertainty and change.

Have a good weekend.

Quotable Quotes: Dr. Doom (Nouriel Roubini) is 100% in Equities?!!

Vinny Catalano, CFA — Fri, 05 Dec 2008 12:32:00 GMT

"I am not in the Armageddon camp". So states the one economist who got the current economic climate right for (more importantly) the right reasons. Given that fact, however, why is his personal money 100% in equities?

To hear Dr. Roubini's comments from this morning Yahoo! Finance "Tech Ticker",click here

Have a good weekend.

Quotable Quotes: Luna-cy

Vinny Catalano, CFA — Fri, 24 Oct 2008 10:18:00 GMT

Blame it on the moon.

If you are looking for a reason why the markets are in freefall, then the 1998 Charles Dow award winning paper has the answer. With the 28th day of the 7th lunar month occurring on Saturday, October 25th, a major selling climax is likely either today or Monday, October 27th.

To read the Charles Dow award paper, click here

Have a good weekend.

*To learn about "Sectors and Styles Strategy Report" newsletter and other subscriber benefits, click here.

Quotable Quotes: Sun Tzu

Vinny Catalano, CFA — Fri, 15 Aug 2008 13:29:00 GMT

As aquaman (a/k/a Michael Phelps) seeks to make Olympic history in Beijing, the advice from a Chinese champion from another era and another discipline is ageless. Be it sport, politics, business, or war, a few words from Sun Tzu.

"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat."

"Speed is the essence of war. Take advantage of the enemy's unpreparedness; travel by unexpected routes and strike him where he has taken no precautions."

"Pretend inferiority and encourage his arrogance."

"What the ancients called a clever fighter is one who not only wins, but excels in winning with ease."

"Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win."

Have a good weekend.

Quotable Quotes: Paris Hilton's Energy Plan

Vinny Catalano, CFA — Fri, 08 Aug 2008 11:51:00 GMT

In the time honored news tradition of man bites dog, Paris Hilton, pool side in a leopard bikini and gold pumps, demonstrates that she can actually speak in whole sentences as she shares with us her energy plan for the US.

Only in America.

To view the video, click here.

Have a good weekend.

Wonderland: Is John McCain Stupid?

Vinny Catalano, CFA — Fri, 01 Aug 2008 06:46:00 GMT

As the Obama campaign has to deal with Ludacris' latest ludicrous rap "song", one of the most popular postings in the online edition of yesterday's Wall Street Journal with the above title is sure to provide the McCain campaign with its own set of headaches - this one self induced.

In the media dominated world of politics, words and image matter a lot. So, when a presidential candidate provokes comments from a usually supportive voice like the Journal, it is worth noting.

For those of you who do not have a WSJ online subscription, here is Dan Henninger's commentary - quotable quotes the McCain campaign could, no doubt, do without:

Is John McCain losing it?

On Sunday, he said on national television that to solve Social Security "everything's on the table," which of course means raising payroll taxes. On July 7 in Denver he said: "Senator Obama will raise your taxes. I won't."

This isn't a flip-flop. It's a sex-change operation.

He got back to the subject Tuesday in Reno, Nev. Reporters asked about the Sunday tax comments. Mr. McCain replied, "The worst thing you could do is raise people's payroll taxes, my God!" Then he was asked about working with Democrats to fix Social Security, and he repeated, "everything has to be on the table." But how can . . .? Oh never mind.

Yesterday he was in Aurora, Colo., to wit: "On Social Security, he [Sen. Obama] wants to raise Social Security taxes. I am opposed to raising taxes on Social Security. I want to fix the system without raising taxes."

What I'm asking is, does John McCain have the mental focus, the intellectual discipline, to avoid being out-slicked by Barack Obama, if he isn't abandoned by his own voters? It's not just taxes. Recently the subject came up of Al Gore's assertion that the U.S. could get its energy solely from renewables in 10 years. Sen. McCain said: "If the vice president says it's doable, I believe it's doable." What!!?? In a later interview, Mr. McCain said he hadn't read "all the specifics" of the Gore plan and now, "I don't think it's doable without nuclear power." It just sounds loopy.

Then this week in San Francisco, in an interview with the Chronicle, Sen. McCain called Nancy Pelosi an "inspiration to millions of Americans." Notwithstanding his promises to "work with the other side," this is a politically obtuse thing to say in the middle of a campaign. Would Bill Clinton, running for president in 1996 after losing control of the House, have called Newt Gingrich an "inspiration"? House Minority Leader John Boehner, facing a 10-to-20 seat loss in November, must be gagging.

The one thing -- arguably the only thing -- the McCain candidacy has going for it is a sense among voters that they don't know what Barack Obama stands for or believes. Why then would Mr. McCain give voters reason to wonder the same thing about himself? You're supposed to sow doubt about the other guy, not do it to yourself.

Yes, Sen. McCain must somehow appeal to independents and blue-collar Hillary Democrats. A degree of pandering to the center is inevitable. But this stuff isn't pandering; it's simply stupid. Al Gore's own climate allies separated themselves from his preposterous free-of-oil-in-10-years whopper. Sen. McCain saying off-handedly that it's "doable" is, in a word, thoughtless.

Speaker Pelosi heads a House with a 9% approval. To let her off the hook before the election reflects similar loss of thought.

The forces arrayed against Sen. McCain's candidacy are formidable: an unpopular president, the near impossibility of extending Republican White House rule for three terms, the GOP trailing in races at every level, a listless fundraising base, doubtful sentiments about the war, a flailing economy.

The generic Democratic presidential candidate should win handily. Barack Obama, though vulnerable at the margin, is a very strong candidate. This will be a turnout election. To win, Mr. McCain needs every Republican vote he can hold.

Why make it harder than it has to be? Given such statements on Social Security taxes, Al Gore and the "inspirational" Speaker Pelosi, is there a reason why Rush Limbaugh should not spend August teeing off on Mr. McCain?

Why as well shouldn't the Obama camp exploit all of this? If Sen. Obama's "inexperience" is Mr. McCain's ace in the hole, why not trump that by asking, "Does Sen. McCain know his own mind?"

***

In this sports-crazed country, everyone has learned a lot about what it takes to win. They've heard and seen it proven repeatedly that to achieve greatness, to win the big one, an athlete has to be ready to "put in the work."

John McCain isn't doing that, yet. He's competing as if he expects the other side to lose it for him. Sen. McCain is a famously undisciplined politician. Someone in the McCain circle had better do some straight talking to the candidate. He's not some 19-year-old tennis player who's going to win the U.S. presidential Open on raw talent and the other guy's errors. He's not that good.

There is a reason the American people the past 100 years elevated only two sitting senators into the White House -- JFK and Warren Harding. It's because they believe most senators, adept at compulsive compromise, have no political compass and will sell them out. Now voters have to do what they prefer not to. Yes, Sen. McCain has honor and country. Another month of illogical, impolitic remarks and Sen. McCain will erase even that. Absent a coherent message for voters, he will be one-on-one with Barack Obama in the fall. He will lose.

Have a good weekend.

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Quotable Quotes: Investing 101

Vinny Catalano, CFA — Fri, 18 Jul 2008 15:48:00 GMT

As equity investors in emerging markets get a taste of the bear (see yesterday’s image from the Pakistan stock market), the lessons of successful investing are learned the hard way.

“I am upset because I am constantly losing money and there is no one ready to help me.” Naeem Jehandad, equity investor in Islamabad.

“For me, this is just a murder for my economic future.” Usman Khan, a lift operator who returned from the Middle East last year and invested his savings of Rps350,000 ($5,000) in the KSE.

“I'm only rich because I know when I'm wrong.” Goerge Soros

Have a good weekend.

Quotable Quotes: Oil Vey!

Vinny Catalano, CFA — Fri, 27 Jun 2008 08:31:00 GMT

As the price of oil bubbles ahead, a few words on the crude stuff.

“The stars, that nature hung in heaven, and filled their lamps with everlasting oil, give due light to the misled and lonely traveler.”

John Milton

“The use of solar energy has not been opened up because the oil industry does not own the sun.” Ralph Nadar

“It is clear our nation is reliant upon big foreign oil. More and more of our imports come from overseas.” George W. Bush

“Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!” Golda Meir

Have a good weekend.

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Quotable Quotes: Lucky Day

Vinny Catalano, CFA — Fri, 13 Jun 2008 08:38:00 GMT

What else on Friday the 13^th?

“I think we consider too much the good luck of the early bird and not enough the bad luck of the early worm.”

Franklin D. Roosevelt

“I'm a lucky guy and I'm happy to be with the Yankees. And I want to thank everyone for making this night necessary.”

Yogi Berra

“America's health care system is second only to Japan... Canada, Sweden, Great Britain, ... well all of Europe. But you can thank your lucky stars we don't live in Paraguay!"

Homer Simpson

“I know what you're thinking. "Did he fire six shots or only five?" Well, to tell you the truth, in all this excitement I kind of lost track myself. But being as this is a .44 Magnum, the most powerful handgun in the world, and would blow your head clean off, you've got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”

Dirty Harry

Have a good weekend.

Quotable Quotes: Traps

Vinny Catalano, CFA — Fri, 06 Jun 2008 11:07:00 GMT

Yesterday’s middle of the trading range stock market surge (replete with weak momentum, MACD, and slow stochastics, as well as narrow sector leadership – Energy and Basic Materials) has the look and smell of a bull trap.

So, how about a few words on traps.

"With the monstrous weapons man already has, humanity is in danger of being trapped in this world by its moral adolescents”

Omar Bradley

“Here we are, trapped in the amber of the moment. There is no why.”

Kurt Vonnegut

“We all live in a house on fire, no fire department to call; no way out, just the upstairs window to look out of while the fire burns the house down with us trapped, locked in it.”

Tennessee Williams

“A mouse trap, placed on top on of your alarm clock will prevent you from rolling over and going back to sleep.”

Anonymous

"I don't want the cheese, I just want to get out of the trap."

Spanish proverb

Have a good weekend.

Quotable Quotes: Drilling for Answers

Vinny Catalano, CFA — Fri, 30 May 2008 13:10:00 GMT

Have you noticed just how impossible it seems to be to get a straight answer to the simple question – how does one determine the fair value of oil?

A few words on answers.

“When the gods wish to punish us, they answer our prayers.” Oscar Wilde

“I was gratified to be able to answer promptly. I said, "I don't know."” Mark Twain

“What if a demon were to creep after you one night, in your loneliest loneliness, and say, 'This life which you live must be lived by you once again and innumerable times more; and every pain and joy and thought and sigh must come again to you, all in the same sequence. The eternal hourglass will again and again be turned and you with it, dust of the dust!' Would you throw yourself down and gnash your teeth and curse that demon? Or would you answer, 'Never have I heard anything more divine'?” Friedrich Nietzsch

“If you ask me a question I don't know, I'm not going to answer it” Yogi Berra

Have a good weekend.

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Quotable Quotes: The Art of Deception

Vinny Catalano, CFA — Fri, 23 May 2008 09:44:00 GMT

It is fascinating to listen to all the pundits wonder just when Senator Clinton will drop out of the race. What amazes me is how they accept at face value her statement that she will stay in the race “until we have a nominee”. To most, that means whenever either candidate reaches 2026 delegates. However, for those of us schooled in the language of Clinton-speak (the meaning of is is), perhaps it means when the Democrats actually have a nominee – which, by the way, isn’t until the convention in August.

Therefore, to the beer –chugging Senator from Arkansas (via New York) on this Memorial Day weekend in the US let me offer these words from a person who did not dodge a bullet from a sniper:

“You may deceive all the people part of the time, and part of the people all the time, but not all the people all the time.” Abraham Lincoln

Have a good weekend.

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