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Rob Rigg

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #25 on: December 20, 2008, 12:33:22 AM »
Shivas,

It is easier to invest in an index or a fund than pick companies (usually, unless you want to earn 5-8% per year in which case you can buy MO and be done with it).

Alpha, Beta, etc. does mean something.

If you invest in the S&P 500 via index you are beta neutral - meaning you essentially get the return of the index and are taking no additional risk.

If you want to pay someone to manage your money, beta managers just adjust their mix slightly above or below the overall index which is almost useless because it is so tough to gauge.

A good alpha manager "adds value" to a portfolio and earns their 90+ bps in fees over the long term because they ACTUALLY have a strategy THAT WORKS if they are good.

Most people should just buy the index not 1 or 2 companies, diversification provides safety to your portfolio because it reduces volatility.

This is not BS, it is information to invest by.

If you want to invest in a couple of companies that you are passionate about then take 10% of your portfolio and go for it.

What I am talking about is the OPPOSITE of what Wall Street would have you believe because they do not make ANY money of it. Buy and Hold is bad for Wall Street, they want people churning and burning their portfolios.

Cramer, Fast Money, all the talking heads, CNBC etc. are the worst thing that ever happened to long term investors. They create the desire to trade, volatility, etc. that makes money for big firms.

The culprits are many in this scam of Main Street investors.

mike_malone

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #26 on: December 20, 2008, 11:31:27 AM »
 I have said the bottom will be reached when the names of the shows are changed to " Slow Money" and "Sane Money".
AKA Mayday

Kalen Braley

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #27 on: December 20, 2008, 03:54:49 PM »
Shiv,

I can't possibly agree more with your assesment in that last post.

Wall street has turned into a game of sorts instead of "building" things.

RJ_Daley

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #28 on: December 20, 2008, 04:10:53 PM »
I agree with most of what you're saying Dave.  But, what was the alternative to the SOX reaction to the unethical and unparalleled deceptions of governance and accounting that took place? 

If compliance with SOX has driven the IPO market offshore for a less cumbersome harbor to comply, then what happens when now that the rest of the world is seeing the collapse of our market functions to the relentless unethical efforts of our own Wall Street, that they too put into place more draconian regs to report and be transparent in corporate governance? 

Is there a period of time and a synthesis whereby SOX compliance can be achieved and provide the transparency and ethical governace as a rule of thumb, or will draconian methods be all that 'the street' understands. 

I get most of the arguments about SOX requiring much higher upfront costs to meet requirements for companies wishing to go public.  But, what about the old ways of IPOs worth any rational speculation going to favored clients of the underwriters, and entreprenuerial Joe Blow getting no part of the IPO, only sucked into the speculation of the aftermarket?  After a while, when all the juice is taken out of an IPO by the big boys, and the chitlins are left to the suckers, that game gets old, and who is left to sympathise with the syndicates of underwriters and insider favored clients who got the cream? 

Even the most adept and successful cheating gamblers know that there have to be winners, and the more the game is perceived to be rigged, the less people play.  So, the gamblers get religion and join the temperance movement and go about smashing and shutting down the casinos, bars, or wherever the vice is occuring that they once got burned in.  SOX is the Billy Sundae - WCTU temperance movement of Wall Street, it seems to me. 
No actual golf rounds were ruined or delayed, nor golf rules broken, in the taking of any photographs that may be displayed by the above forum user.

rboyce

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #29 on: December 20, 2008, 04:16:54 PM »
There's a good scene in "Bonfire of the Vanities" where the dad, who is an old investment banker, lectures the modern day investment banker son on what Wall Street used to be and is supposed to be. And, how long ago was that written?

Rob Rigg

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #30 on: December 20, 2008, 05:25:36 PM »
Shivas,

Check - sorry, I did not grasp what you were saying the first time.

« Last Edit: December 21, 2008, 02:56:30 AM by Rob Rigg »

RJ_Daley

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #31 on: December 20, 2008, 09:44:14 PM »
Dave, I'll mention to all my confederates at the 'rage against the machine' convention that we'll have to hold our future meetings in bigger quarters.  It seems that this last year has caused ordinary investors to apply for membership in our committee of outrage by leaps and bounds.  

Bernie Madoff has insured that everyone coming out of law school with orientations towards corporate tort law and securities litigations will be fully employed for many years to come.  

And, Hankie Paulson and his bailed out chums will probably push the mood of the country to dark suspicions and no confidence and a sense of re-regulation to a point that will be drastic.  

But, don't blame anything drastic that comes along on the vast majority of good folk that had trust and faith in the government, the market, the justice system to care for their hard earned investment savings for a future now dashed.  Blame those WHO DID THIS, punish them; then find a new ethic and move on.  We all must live with the consequences now.  Only a new ethic will do to move us all forwar - not the same old blame those who were damaged and victimized and make fun because they are outraged.
No actual golf rounds were ruined or delayed, nor golf rules broken, in the taking of any photographs that may be displayed by the above forum user.

RJ_Daley

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #32 on: December 20, 2008, 11:35:29 PM »
Dave, in my mind your first statement is like, "if the tree falls in the woods, and you are not there, does it make a sound".  So I think "all these guys" you mention have not been discovered.  And, I can't really cite if those that did get discovered got off too lightly on an overall basis.  But, Mike Milliken was sentenced to 10 years and served two in a country club fed facility.  Boesky did only about 2-3 years in similar CC.  I'd have to ask how many people in failures of various companies like K-mart, who participated in accounting fraud and misrepresentation, conspired in stock tauting and the like should have gone to jail? You will never convince me that if tape recordings would ever surface of the meetings that took place just this year with Paulson, Greenberg, Fuld, and that whole cast of characters of corporate pirates and their ilk, that we wouldn't fill the fed facilities up to such a degree that CCFAWSECF (country clubs for a wall street exec corrections facility) would be the largest growing 'infrastructure' program possible for stimulating a new economy in the coming years.

So, no one should have faith in wall street investments in the first place?  Great.  Next you'll tell me that the full faith and credit of the US government will be administered selectively, as well.  And we should know it...  ::)

The cost to the economy was the 'need' for SOX because a whole class of corporate pirates got way too powerful, created a new perception with no ethic and abused the American investor.  And, bringing all that are culpable under your cited securities laws, or new regs similarly ignored, will cost the American taxpayer even more. 

Nope, to recap... I don't think they are all going to jail, that those that do will be appropriately punished, that current law is adequate in the light of weak enforcement, tht new law will be efficient or sufficient, and comparison of one disaster to another will help.  Only a new ethic will do.
No actual golf rounds were ruined or delayed, nor golf rules broken, in the taking of any photographs that may be displayed by the above forum user.

JESII

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #33 on: December 20, 2008, 11:47:21 PM »

Nope, to recap... I don't think they are all going to jail, that those that do will be appropriately punished, that current law is adequate in the light of weak enforcement, tht new law will be efficient or sufficient, and comparison of one disaster to another will help.  Only a new ethic will do.

RJ,

Is any level of law or regulation sufficient to make up for inadequate enforcement?

Tell me about this "new ethic".

Lou_Duran

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #34 on: December 21, 2008, 01:52:04 AM »
"What Wall Street has conned us into believing is that buying the stock of Established Company A instead of Established Company B is actually a value-add to the economy, even though neither investment creates jobs or contributes to R&D or does anything positive to the economy, other than pay for a place in the Catskills for some flunkie money manager who can't beat the S&P...."

I read this three or four times only because I believed that the man who made the statement was incapable of such nonesense.  Hopefully it was a brain freeze.  Or is there something in the water in Chicago that makes even relatively smart folks into lunatics?  Maybe we are all just losing our minds.  Will this pass?  Ran, please show me some pity, take my password away and block my IP so I can't login.  Really, I can't take it any more! 
« Last Edit: December 21, 2008, 01:53:48 AM by Lou_Duran »

Craig Sweet

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #35 on: December 21, 2008, 09:17:37 AM »
Shivas...studies show that cutting taxes for the rich does nothing to stimulate the economy and create jobs...

Sorry...but that is fact.
LOCK HIM UP!!!

Craig Sweet

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #36 on: December 21, 2008, 09:53:10 AM »
Is someone confusing the stock market with the economy again?

Sadly, people are very greedy...and in a nearly unregulated market, with little oversight, EVERYONE is going to push the products that generate the most perceived wealth...and in fact their compensation (the peddlers) is based on pushing the most product, with the highest perceived value, out the door...

It is the system that needs fixing....you are NOT going to change human nature....but the system can be fixed....lets start by increasing oversight and regulation..and lets say to the banks that want to be bailed out that they have 90 days to come up with a viable plan for making changes in how they account for money.
LOCK HIM UP!!!

Craig Sweet

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #37 on: December 21, 2008, 10:01:54 AM »
Sorry that this might seem to be a thread hijack, but did anyone else see this?

http://www.thenation.com/doc/20090105/thompson
LOCK HIM UP!!!

Carl Rogers

Re: The trouble with Wall Street.
« Reply #38 on: December 21, 2008, 10:16:12 AM »
Some of you are ignoring the basics.

The incentive of the 401k is the company match which offsets the fees that are way too high.

The incentive of a Roth IRA is that you never pay taxes on it.

Large segments of the public have to get control of their financial lifestyle.

The real alternatives for the small investor (people with less than $5 million)are:
- the mattress which looses to inflation ... not an option
which leaves:
- the FDIC insured CD
         or
- or the ultra low cost broad scope equity fund(s) with some debt exposure with a comonsense allocation model that will allow for downturns (you might not get all of the upturn when the market is booming)

John Keenan

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #39 on: December 21, 2008, 10:25:37 AM »
Shivas

I agree with your point that buying stock does not directly help a company. To the tail of the  dog  idiom bidding up shares can allow the company to issue more shares but really this is an indirect benefit. VC and their like are extremely direct, they fund the creation of companies and to a lesser extent some of the early growth.

There is a link though that unless people have faith and trust in the stock market VC funded companies cannot go public and obtain funds to grow.. Additionally if stock prices are low other companies cannot buy VC funded companies as stock is the currency most often used in these acquisitions.

As to SOX being the problem yes it is an added cost but if it adds in making the company more transparent it is a value. Trust me I am far too knowledgeable on SOX and Rev Req then I ever wanted to be. ;D

 On going public on non-US exchanges yes that is an option but not an extremely viable one for small technology start ups. The NASDAQ really does not have a counterpart .

In the end there is a tight linkage between VC, start ups and Wall Street. Sadly I suspect it will be many years before WS  gets the retail investor back. This potential overall weakness in the stock market may impact VC as one key exit strategy may no longer be viable. VC are not about running on going enterprises they are about starting them.  The impact of this change could be quite significant
The things a man has heard and seen are threads of life, and if he pulls them carefully from the confused distaff of memory, any who will can weave them into whatever garments of belief please them best.

Bill_McBride

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #40 on: December 21, 2008, 08:24:50 PM »
Some of you are ignoring the basics.

The incentive of the 401k is the company match which offsets the fees that are way too high.

But now companies are suspending their matching contributions with no recourse for employees.

The incentive of a Roth IRA is that you never pay taxes on it.

Except that you pay taxes on the income that goes into a Roth, where regular IRA's are funded with pre-tax dollars.  Pay the IRS now or later, you're going to pay them either way.

Large segments of the public have to get control of their financial lifestyle.

The real alternatives for the small investor (people with less than $5 million)are:
- the mattress which looses to inflation ... not an option
which leaves:
- the FDIC insured CD
         or
- or the ultra low cost broad scope equity fund(s) with some debt exposure with a comonsense allocation model that will allow for downturns (you might not get all of the upturn when the market is booming)

Investors have been buying zero return Treasury notes.  With FDIC protection at $250,000, the CDs sound better.

CJ Carder

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #41 on: December 21, 2008, 11:49:09 PM »
The incentive of a Roth IRA is that you never pay taxes on it.

Except that you pay taxes on the income that goes into a Roth, where regular IRA's are funded with pre-tax dollars.  Pay the IRS now or later, you're going to pay them either way.

Don't forget that Roth IRA's don't have the minimum required distribution attached to them.  So at 70 1/2, if you're not ready to take your money out, fine, let it keep rolling on and use it as an estate planning tool - and a darned good one at that.

And I'd always rather pay the IRS sooner rather than later.  Taxes on $5,000 per year are a lot easier to stomach than taxes on $500,000 40 years down the road.

Rob Rigg

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #42 on: December 22, 2008, 01:47:59 AM »
Based on the past few years - big shops on Wall Street are running out of "products of value" for their clients.

This is when/why CDS showed up. It is complicated and at the end of the day it was BS because the CDS market was larger than the under lying bond market. CDOs are another BS financial instrument that the world would have been better of if it had never been invented.

The problem at the end of the day is that these big i-banks needed to make money, their revenues from facilitating trading went to almost zero with the rise of the electronic trading platforms, so they needed something else to sell.

If the government had not been in the pocket of the banks and realized that basically NO ONE realized what the F these instruments were, we would probably not be in the current situation. Why? CDS and CDOs allowed companies to leverage up more than ever and provided liquidity where it should not have existed.

People are greedy, thus we need someone to play watchdog so others do not get hurt, especially those who cannot even play the game.

Phil McDade

  • Karma: +0/-0
Re: The trouble with Wall Street.
« Reply #43 on: December 22, 2008, 03:16:47 PM »
Shivas

Sand Hill Road in Palo Alto has taken the place of the suppliers of capital to new and emerging industries.  When Silicon Valley was starting WS had no interest in it. That gave rise to some excellent I Banks and VC that started in SF to cater to this industry.

WS seems to more more focused on financial engineering. Those bring young MBA have a full and complete understanding of business and risk. The can model risk and eliminate it or structure instruments that greatly lessen it.

I've argued precisely this point many, many times, going so far as to say that Sand Hill Road IS Wall Street, at least what Wall Street once was. 

This from the Wall St. Journal.....

http://online.wsj.com/article/SB122990472028925207.html

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