Posts filed under “Financial Press”

Perception versus Value

"In the short term, the market is a ‘voting’ machine whereon countless
individuals register choices that are product partly of reason and partly of
emotion. However, in the long-term, the market is a ‘weighing’ machine on which
the value of each issue is recorded by an exact and impersonal
mechanism."

-Benjamin Graham

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In an earlier post, I referenced an article from  today’s NYT, "Lehman Battles an Insurgent Investor."

The gist of the column emphasizes Graham’s first point — the voting process — over his latter point, that of the market as a weighing machine.

I think that unfortunately understates the risk Lehman presents to investors. It also may understate problems with the entire sector.

Einhorn is not trying to talk down Lehman’s stock — not if we understand his methodology, and are being precise about how markets work. Rather, he is trying to make his analysis of Lehman’s balance sheet better understood by the overall market. That is a subtle, but important difference.

Remember, Einhorn didn’t buy those mortgage backed securities on Lehman’s behalf, or lower their debt rating. He is not the one that leveraged them up 32 to 1, or festoon their balance sheet with dicey derivatives.

Rather than focus on " Einhorn’s influence on Lehman’s stock price," I suggest reporters focus on Lehman’s balance sheet, leverage, derivative exposures, counter-party risk, and P&L statements.

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Source:
Lehman Battles an Insurgent Investor
LOUISE STORY
NYT, June 4, 2008
http://www.nytimes.com/2008/06/04/business/04lehman.html

Category: Credit, Derivatives, Finance, Financial Press

Uh-Oh: Economist Cover on Oil

Category: Commodities, Contrary Indicators, Energy, Financial Press

Barrons.com Goes Real-Time

Category: Financial Press, Markets

Bad Headline of the Day: ISM Expands ?

Category: Financial Press

Punditocracy

Category: Financial Press, Psychology

The Fall of Bear Stearns

Category: Corporate Management, Credit, Derivatives, Financial Press, Trading

Herb Greenberg’s 5 Simple Lessons

Category: Earnings, Financial Press, Investing, Legal, Valuation

Macro vs. Detailed Perspective

Category: Financial Press, Markets, Psychology

Wave of Foreclosures Drives Prices Lower, Lures Buyers

Category: Data Analysis, Financial Press, Real Estate

This Bull Has (Had) Legs !

Quite a while ago, I had an interesting conversation with a smart fundie manager. We had opposing views about many things. In particular, we disagreed upon was the value of (non-price) sentiment indicators. His argument was that when stocks get cheap enough — as reflected in their Prices, P/Es and cash flow measures — other…Read More

Category: Contrary Indicators, Financial Press, Investing, Markets, Psychology