Posts filed under “Really, really bad calls”

The Uncertainty Myth

One of the more annoying clichés of the past year has been ““The markets hate uncertainty.” You can always tell when you are listening to an empty-headed pundit when they trot out that old saw.

This morning, I have a Bloomberg column on that exact subject, titled “Kiss Your Assets Goodbye When Certainty Reigns.” (or, if you prefer, the older noir version of Bloomberg).

Here is an excerpt:

When Certainty Rules

Recall the dot-com era, when everyone knew that profits no longer mattered. Uncertainty seemed to be banished. An epic crash followed.

After the Internet implosion, the opposite extreme was operational: Profitable, debt-free tech companies were being traded for less than book value. In a few rare instances, they were being sold for less than cash on hand. Investors had become certain that a dollar was worth only 75 cents.

There was little uncertainty heading into the March 2009 stock-market lows. Almost everyone was sure the world was falling into the abyss. In that massive and indiscriminate selling, it seemed almost certain that no one was ever going to buy another house or car, or send their kids to school, or for that matter, clothe or feed them. How did the consensus work out in that instance?

No Reward

When we discuss uncertainty, what we are really discussing is risk. All unknown outcomes contain risk, and therein lies the possibility of loss. Risk is inherent in the concept of uncertainty. However, anyone looking for performance must embrace risk, for without it, there can be no reward.

Uncertainty is what makes alpha, or market-beating gains, possible. Smart traders know that uncertainty is where the money is. No uncertainty, no risk; no risk, no possibility of outperformance.

Since July, when the Era of Uncertainty began, the Morgan Stanley Cyclical Index — those businesses most closely tied to this uncertain economy — is up 26 percent.

Want some certainty? Go buy yourself Treasuries. You can pick up a very lovely two-year bond yielding 0.41 percent. (Good luck charging two and 20 on that!)

You can read the entire thing here (or here).

I will be discussing this on Bloomberg TV with Betty Liu at 9:15 am; then on Tom Keene’s Radio show right after.

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UPDATE: November 10, 2010 3pm

Hey, its the 2nd most popular article on Bloomberg !

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Source:
Kiss Your Assets Goodbye If Certainty Reigns
Barry Ritholtz
Bloomberg, Nov 9, 2010 9:00 PM ET
http://www.bloomberg.com/news/2010-11-10/kiss-your-assets-goodbye-if-certainty-reigns-commentary-by-barry-ritholtz.html

Category: Investing, Markets, Really, really bad calls

AEI: Continually, Unrepentently, Embarrassingly Wrong

I’ve given up reading anything from the AEI. They are idiot savants, minus the savant part. Its a bore reading the same discredited, data-free memes: The CRA caused the crisis, Fannie Mae caused the crisis, the FHA caused the crisis. Its become embarrassing to read. Their latest release combines all three memes in one giant…Read More

Category: Bailouts, Really, really bad calls

Politics and Selective Perception

Source: Red State > A friend writes: “What do you do when presented with a chart such as the one above?” My answer was simply that it depended upon who is showing you the chart: • If it comes from a hard core partisan, you laugh at the flaws in their wetware and say nothing….Read More

Category: Apprenticed Investor, Data Analysis, Employment, Politics, Psychology, Really, really bad calls

Watering Down FinReg: Corrupt or Merely Misguided?

“We don’t want them to regulate capriciously, arbitrarily, without engaging in a cost-benefit analysis.” – Representative Jeb Hensarling, a Texas Republican > The statement above is representative of a misguided economic cost/benefits analysis that was dominant during the three decades incorporating 1980s-2000s. Its fatal flaw is that it fails to include the expenses and impact…Read More

Category: Bailouts, Really, really bad calls, Regulation

Home Equity as a Percentage of Household Net Worth

> I frequently find myself disagreeing with Tobias Levkovich of Citigroup. That’s not surprising, given his firm and their investment posture. Where I really part ways is on anything housing related. Levkovich was part of the mainstream herd of strategists who, as the markets topped in October 2007, made the erroneous forecast that Housing would…Read More

Category: Analysts, Real Estate, Really, really bad calls

Founding Father

click for ginormous artwork by Anthony Freda

Category: Currency, Really, really bad calls, Weekend

Investor Advisors: Buy High, Sell Low

Jason Zweig has an interesting piece in the Saturday WSJ about the bad advice investment advisors give: “Investment professionals are supposed to exercise independent judgment; in Warren Buffett’s words, they should be fearful when others are greedy and be greedy only when others are fearful. It doesn’t always work that way. Corporate pension funds had…Read More

Category: Apprenticed Investor, Investing, Really, really bad calls

The Big Lie on Fraudclosure

Yesterday morning, I had The Misinformation Hour on TV as I got dressed for work. One of the comments that was made –  “No one was wrongly thrown out of their home” — was repeated or ignored by hosts and guests alike. This is patently demonstrably false, and yet no one challenged it. The banks…Read More

Category: Bailouts, Financial Press, Foreclosures, Really, really bad calls, Television

CFTC Judge Allegations Should Concern Investors

“It’s an open secret among my brethren that if you get Levine, he’s not going to rule for the investor.” -Steven Berk, an investor protection attorney in Washington > Michael Hiltzik of the Los Angeles Times takes Judge Painter‘s CFTC accusation against his fellow judge Bruce Levine to a new level: “It would be hard…Read More

Category: Commodities, Legal, Really, really bad calls

Oil’s Well That Ends Well?

It’s been a while since I paid over $3.00/gallon for gas, but had that pleasure once again very recently, as prices have been creeping slowly ever upward.  As the gas flowed, I thought back to a piece I’d written elsewhere some time ago (April ’06, to be exact) lamenting the fact that those who had…Read More

Category: Contrary Indicators, Energy, Markets, Really, really bad calls, War/Defense