Bloomberg's strangest headline of the day, "It's Time to Meet the Subprime Devil We Don't Know: Caroline Baum"

Is this perhaps a slightly awkward headline? I always figured she was perfectly nice. (Just kidding now.)

Seriously, she has a very substantial point: Is the lack of transparency which goes with certain investments such as some mortgage-backed securities, sufficient to make it very difficult to evaluate the risks present in the financial markets? Sufficient to render problematical proper evaluation of the risk present in heavily-leveraged, quantitatively-driven portfolios of such investments? Evidently.

Sufficient even perhaps to alter the "riskiness", i.e., volatility, of even other asset classes? In the short run, apparently. Did Stephen King ever write anything as scary as that?


Bloomberg.com

The other side: TheStreet.com's James Altucher rebuts Barron's, sort of...

Yes, it is a cute response. Meaningless, but cute! Altucher's test period is too short, ridiculously so, to "prove" anything. But I do believe him as to Cramer's picks being better than those of Barron's! Oh, well.

Both, using Altucher's methodology, underperformed the S&P 500 over the chosen "sample period". You would have done better with one buy of SPY. Better still, probably, if you then held it for a year and a day. Any of these people ever hear of transaction costs? Spreads? Income tax on short-term capital gains? The value of your own time, which could be spent having a life? Active investment management? Just another way of saying "negative alpha"? Has anyone ever started a recovery group for Street Addicts stock pickers?

Putting Cramer's Mad Money Picks to the Fire

What Was the SEC Thinking??

I'm with Larry Kudlow on this. In a time when we have a naked (essentially fraudulent, If you ask me,) short selling problem in the markets, what on earth was the SEC doing making it easier to short sell? Eliminating the up-tick requirement can only make for more brainless volatility, and it's mostly mom and pop main street investors who get hurt in wildly volatile markets.


Kudlow's Money Politic$: More on What Was the SEC Thinking


Here's the link to the WSJ story he mentions.

Cramer's picks haven't beaten the market--Barron's

No kidding!

I credit Jim Cramer with working very hard at what he loves. And with being a fine communicator, and an under-appreciated writer. And he is likable, when he is not being completely nutty. But the market is just too efficient for him. No argument exists on this, the numbers are in. Only trading "true believers" are willing to commit money to trading approaches for which there is no rational basis to expect bigger gains after taxes as a result.

Because he is on after the markets close, and because the more naive of his viewers are immediately buying his picks, in after-hours trading, a number of day traders will be right there in after hours action, catching those market orders, shorting his picks as those folks buy in. I know that he says not to do that. They do it anyway. Guess how that works out.


Cramer's picks haven't beaten the market--Barron's: Financial News - Yahoo! Finance

IHT: 'Size doesn't keep Goldman fund from gyrating with market' -- Or is it, gyrating the market?

So, is it a fair question, if your portfolio was down last week, was it largely Goldman's hedge fund's selling to raise cash that did it for you? Presumably, anticipating big redemptions, with Global Alpha now down something like 33 percent, perhaps more, over last year and this YTD, and since there is now rather limited demand for subprime-"backed" debt, needing to sell genuinely marketable securities, down, down, we go.


Size doesn't keep Goldman fund from gyrating with market - International Herald Tribune

Vindication isn't so great.

Anyone who's read this blog before knows that I don't think much of hedge funds. Re: the Goldman story, this is of course unconfirmed as of this time. Perhaps it's not that bad. Nobody would want this to happen to folks.
Bloomberg.com: "Goldman's Global Alpha falls 26% in 2007, People Say" So, hedge funds are just a great way to go, huh? When the redemptions have been paid out, and the investors lick their wounds, how will they come back in? One of the hedge funds which come out relatively unscathed? This time. Or in a somewhat more traditional investment approach?

What to Do if You Can't Reach the Broker -- WSJ Free article

What follows is not investment or trading advice. It's just common sense. If you're worried sick about a market drop, you are most likely too aggressively invested. You can use asset allocation to limit your overall portfolio volatility by diversifying. And you should. When you see on TV or hear on the radio that the market is having a really bad day, that is probably not a good basis to freak out and go and start selling stuff willy-nilly. Because probably tomorrow it will go back up. And you'll not be in there for the bounce-back. You'll be worse off than if you had stayed the course. Do this a lot and it will devastate your returns. Staying in and not selling is a viable choice, presuming you have reasonably good diversification. If you don't know whether you are diversified or not, you should attend to that. Are your stocks all US large-cap growth or tech stocks? Are you heavily into China or Russia or emerging markets? Are you (I hope not,) heavily into junk bonds? If you are an investor, you should learn what real diversification is. Here's a start: Investopedia on "diversification"

The article should have risen above fostering knee-jerk selling.

WSJ: What to do if you Can't Reach your broker