Why Are Regulators Allowing Talking Heads To Say This Market Is Going A Lot Higher From Here Without Giving Us The Factual Basis Or Track Record?

The politics of money has now become a scorecard, says the President’s chief of staff. Is it really “Us versus Them” as in the quote by Rahm Emanuel or all they all prostitutes in the same bed, not wanting to be seen with their john?

We’re not taking on a fight; we’re taking on a multiple-front fight because we’ve taken on a series of entrenched interests across the waterfront - from education to health care, and the defense industry, and the lobbying industry as a whole… There will be a scorecard at the end of which ones we won and which ones we didn’t, but every one of those policy challenges have been initiated by us.

http://www.tomdispatch.com/post/175114

I’ll leave this for you to decide; other than being disgusted by what Washington has become, I have to move on. Wealth management and the capital market has become particularly challenging these days.

You want to know why Main Street missed the equity market cycle top in the fall of 2007; the major media, like politicians, became bought-and-paid-for cheerleaders. Ask yourself why Bloomberg-TV yesterday had to re-run maybe 100 times in 24 hours the “We’re going a lot higher” speech of Laszlo Birinyi?

http://tinyurl.com/knooh3

Is it because Birinyi is a star money manager or top-tier self promoter who happens to be on the right side of what Wall Street wants Main Street to hear right now? It can’t be because he’s got a crystal ball because he called S&P 750 the bottom in December, which promptly (next three months) lost -11.2% for his followers and, I presume, clients. That call necessitated a gain of +12.6% just to get back to scratch.

http://tinyurl.com/9uaosb

Or is it because he wanted to go on air to tout Wells Fargo (WFC), JP Morgan (JPM) and American Express (AXP)?

I point this out because at the present time, I happen to have zero interest in buying shares of WFC, JPM or AXP. Simply put, I don’t understand the risk involved in these companies. It was only a few months ago the US taxpayers had to bail them out with billions of dollars and scholars like nobel laureate Joseph Stiglitz are now saying they are in worse shape than before the Lehman collapse, and it was the Lehman positions these banks were holding at the time.

http://tinyurl.com/5bzcn9

All I know is that Birinyi and his Wall Street pals are leading the march to higher prices and I am basically still positioning myself on defense.

Let’s look at what was happening through the period of December-March, when Birinyi was strutting his stuff in Barron’s and CNBC, Bloomberg and whichever other puppeteer’s instrument would pay him attention. As noted above, the Birinyi call sunk wealth by 11 to 13% over the next three months. Starting from 100 at the beginning of December, the month Birinyi made his pronouncement, the S&P plunged to 89.02 through March, while my two oldest reasonable size accounts (since we had just started then) lifted to 106.26, according to records that have been filed with regulators. And you know through this time, I was no bull fighter (or manure spreader). The truth is that I was ultra-cautious - just like I am today.

Back then, in March, my construction worker friend “invested” all $100,000 of his savings in Citigroup (C) at the price of $1.00 and that stock traded well over $5 in the past couple weeks. Yes, it hit a high of $5.43 on August 25. Does that performance make my friend a smarter investor than me or even Wall Street favorite Birinyi? No; it makes him a gambler. He might also have used his savings to buy lottery tickets and won an even bigger prize. When you gamble, winning is a matter of luck.

At the end of the day, wealth management is first and foremost a job of understanding and managing risk. Only second does that burdensome task come down to seeking opportunity. As we all know, those opportunities don’t come along often. I will tell you today, with as much confidence as Birinyi appeared in the 100-odd Bloomberg-TV re-runs that buying Wells Fargo Bank (WFC) at 28-half six months after it closed at just over 12 is not appealing to me. I don’t see the opportunity.

If WFB investor Warren Buffett was my in-law, I might close my eyes and stay in the stock. After all, the RSI-7 this morning is 69.9, 66.1 and 62.2 for the Daily, Weekly and Monthly, and rising. Otherwise, if I really did have a position, I might write the Oct 30 calls and buy the 27 puts for no cost. If the stock is lifted by the Wall Street gang past 30, and I have my stock called away, my gain in a month is over +5%. If we have a big pull-back, I know WFC was trading below 27 this month, and would have a difficult time surviving a market sell-off; so, I’d be happy to be able to stick somebody else with a 27 price. But I do not have a position, and more importantly I would not be happy if I did.

Unlike the President, and maybe Birinyi, I don’t have to be in that bed, positioning myself to look good.

I do have to remain nimble though because these are very challenging days.

Btw, people are asking for my track record, but the problem is that (i) I don’t run a fund or pool assets; I manage individual accounts for the owners of those accounts, some of them wanting more or less risk, some being taxable and others non-taxable, some being $100,000 and others over $1 million, and all of them coming to me at different times, some in cash and some in securities, and (ii) whatever I publish as a performance record must be acceptable to securities regulators. I have a meeting with regulators tomorrow, where I intend to bring up this issue because people want to know.

One thing I would like to know from the regulators is why they allow Talking Heads to say this market is going a lot higher from here without giving us (i) a three-month track record every time they make these pronouncements in the major media, and (ii) the factual basis on which they made their determination, and I don’t mean I want to hear that the Boys got together on the phone and said they could squeeze a little more out of this market.

But, come to think of it, the market has become, like Obama/Emanuel says, a place of Us versus Them.

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