Mom and Dad Lose Their Shirts While Hank and Mary Become Famous (The Collapse of the Stock Market, Part 3)
Posted Tue Mar 20 00:49:26 2001 by steveg |
(Note: this is Part III of this week's multipart series on the collapse of the stock market and its effect on IT.)
By Steve Gilliard
CNBC: Spawn of Satan
Brokers and traders keep CNBC on the way newsrooms keep CNN on, in
case something bad happens. But they don't take it seriously. They have
their own sources of information. Much of which is inside knowledge.
Not insider trading, which is illegal, but inside knowledge. They know
when Jim Smith of X firm releases his analysis of Jimbo Jones Inc and
says "a slight decline of income potential" means sell this piece of
crap NOW. They get the winks and nods which are as common across Wall
Street as it is in any other business.
As much can be told by tone and action as by direct statement. In
most cases, the institutional investors are 20-25 steps ahead of mom
and dad.
CNBC gave the illusion of being inside the markets. Which was just
that, an illusion. Most journalists have zero special training in
finance. Few hold MBA's or experience either as a trader on the floor
or having passed the Series 7 exams which gives you your broker's
license. They talk to people.
Take Maria Bartiromo. She graduated NYU and worked for CNN. Lou
Dobbs wouldn't put her on camera, which is no shock, because CNN is
dominated by sleek, TV friendly Southerners who wear too much makeup,
Maria's New York friendly looks were not seen as an asset. She moved to
CNBC as a producer and then got on camera at a place far more friendly
to a New York sensibility.
While her popularity exploded, and CNBC exploited her as the "money
honey", real brokers laughed. She was a reporter, she knew what she was
told and little more. When she married into the Steinberg family,
owners of Institutional Investor, whose patriarch, Saul Steinberg was
once a financier and now had to worry about losing his furniture, she
now had a personal stake in the market. Her in-laws were players in
both the equity markets and the dotcom world.
Thus she had neither the skill, ability or interest in finding out
the real stories behind these high flying IPO's. Her husband, Jonathan,
was trying to cash in on the boom. One could ask why she was involved
with someone who's family was so closely tied to the market, but that
would be unfair.
Viewers thought she was the cute girl on the floor of the stock
exchange. They trusted her because Americans trust TV. When Mark Haines
and Ron Insana would interview Mary Meeker and Henry Blodget, viewers
thought that they were being introduced to inside information, stuff
that CNBC could provide to them like they could the insiders. After
all, every broker had it on, every Schwab had a TV on with it.
The fact is that Blodget and Meeker were selling the stocks they
pimped. Their companies were major backers of the dotcoms they were
praising. Once upon a time, analysis was supposed to be separate from
brokerage. Now, sell side analysts, like Meeker and Blodget are no
better than Ron Popeil (Editor's Note: Ron Popeil is the
entreprenur behind innovative technologies such as the Pocket Fisherman
and the the Showtime Rotisseri Grill), except Popeil actually sells, not offers "investment advice" to the unknowing.
TV: Bad For Your Wallet
The thing which makes CNBC so dangerous is that it concentrates so
much on single stocks. Betting on single stocks is so dangerous for
most investors that they are routinely warned off from them by
professionals.
Why?
Building a portfolio on single stock investing is a hard business
for the hard-minded. You have to be ready to dump a stock in a
heartbeat when it loses value. Most people don't have the heart for it.
Instead, people invest in companies that they love and they stick
with them, even when they are losing money hand over fist. A simple
glance at the Yahoo or Fool bulletin boards rages with debate over the
future of these beloved companies. One could say, with little fear of
correction, that half of the investors have no idea of the real value
of their company's management or their future plans.
TV discourages the one thing which could haved saved people
millions -- research. This is not the hoodoo voodoo of Value Line and
P/E ratios. It's real simple: how is the company doing and how is it
run? That is the simple answer. You can figure this question out by
reading the Wall Street Journal or the Financial Times. Forget the
numbers; look at the performance of the company and its products. It is
really that simple, and that critical. It takes work, the kind of work
that most people will not do.
Let's go back to Krispy Kreme for a minute.
Why is this a sound investment?
+ Product relatively immune to economic cycles.
+ Expansion with a slow, steady rollout into major urban centers
+ Quality control a major corporate issue.
+ Limited investment in costly marketing/advertising campaigns
+ Well-defined product segment and targets
+ Experienced management with a track record of proven success.
You'll Have to Be Patient, and TV Doesn't Teach That
I had a teacher in High School, Ira Marienhoff. He died in 1996,
having survived World War II and teaching in New York City for four
decades. An Ohio farm boy who got a scholarship to Columbia, he was
conservative. When his will was read, he had made over $2 Millon in the
market. This was a guy who never bought a good suit, lived in Teaneck
and drove a beater. Didn't have a wife as far as we knew.
But I will always remember him fondly because he took his fortune
and gave it to Yeshiva University, not my alma mater, Hunter College
High School. Why? He didn't trust the administration to spend it
correctly. I don't even think he was Jewish. But in that, he taught two
lessons: one, wise investment pays off, two: if you want to benefit
from it, you might want to be smart about how you run your affairs.
Now, I have nothing but good feelings for my alma mater, but it was a
telling lesson in character.
Now, saving $2 Million is pretty hard, and it took him a lifetime
of careful, long-term investing. Which is not good TV fodder. But it is
the way to make money in the market over the long term.
The problem is that when my teacher invested in stocks, he was one
of the few to do so. He was a middle-class, Ivy league educated white
male, who had access to the information and advice on stocks he needed
in the 1950's and 60's. The markets were not a common investment well
into the 1980's. But now, with 48 percent of all Americans invested in
some way in the market, the rules have changed and the potential for
real disaster looms.
Part IV
The portent of doom
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Name:
Email:
Date: Thu Mar 22 12:20:00 2001
Comment: continued by Lou...A Story of Stock Manipulation
I was a Penny Stock Promoter around 1994-6. Of course we never
thought of ourselves as "promoters" we liked to envision ourselves as a
'a strategic growth public relations company for
dymanmic...' blah-blah-blah. Its painful to admit
that I desgined this little boutique to 'pump and dump' Our rainmaker was a blond shark who could
sell anything to anybody and slept in a coffin.
I wrote copy and laid out print material and quite a bit of client
contact. The apex was when the stock moved to the Nasdaq Mico-Cap
index. We were
worth like 500K on paper for just 6 months of work. Then I tried
to sell some stock.That, my friends is where 'the rubber meets the
road' your asking for cash...and THAT is real. So the guy says
'ahhhh.You don't want to buy? Ahhh, lemme get back to you' End of
story. Ever see the movie
"Boiler Room"? Well, thats about as true picture
you'll ever get of Wall St. Now, granted, when you
go up the ladder, things get more genteel, but the
dynamic is still the same...only the numbers are bigger. So what have I learned about investing?
Well,I can tell you that the other lead articles onNet Slaves are,
in my opinion, pretty good advice. My big lesson learned was that
people
are simply not to be trusted. The whole experience
led me to accept Jesus...yeah, I know 'Jesus is
for loosers' but, dare I say ' Ive seen it all'
and he was the only way. I now have money and happiness. Go figure. Louie
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Name: elvismademedoit
Email:
Date: Wed Mar 21 16:35:48 2001
Comment: Another worthwhile read:
Crisis Control
Seven Key Principles for Your Financial Prosperity
Larry Burkett
He practically predicts the internet bust in this book.
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Name: Ertischek
Email:
Date: Wed Mar 21 10:01:14 2001
Comment:
Honestly, does Blodgett lok like he needs the money? Probably heir to
soem old Brookline fortune or soemthing..What's his bio? Where do these
hustlers come from anyway? |
Name: MasterPo
Email:
Date: Tue Mar 20 16:02:25 2001
Comment:
Honesty is RARELY rewarded too.
Case in point: Recently a protential customer contacted me about
the services our company offers. He wanted to know if we supported two
specific types of technology. I know what the technology is but haven't
had any first hand experience developing with them, muchless the two
combined. So I told him the truth that I wasn't sure and, rather than
give an inaccurate answer (and take his money and run) I suggested he
direct his question to our tech support people. The customer then
starts lambasting me saying how I'm an idiot for not know the two
technologies can be combined and that we can't really offer or support
them if I didn't know that (it was a trick question from him). I'm not
in tech support so I couldn't answer his question for sure. I suspected
the two could be combined but wanted to be sure and so I directed him
to the proper source. I was honest and it get me a chewing out and a
lost customer. So much for honesty! Next time I promise them the world!
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Name: Stepehen Ertischek
Email:
Date: Tue Mar 20 13:42:54 2001
Comment: Lou..you've hit on what's wrong with the system..people who want to sell u things..who needs em?
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Name: Lou
Email: louisgdh@att.net
Date: Tue Mar 20 13:00:00 2001
Comment: People who want to sell you something are always
saying things like 'Now is the perfect time to
buy!' They never talk about the people who bought
in 1929 and were not whole until 1940's. The bottom trough can be long...10 years in Japan.
By the way, I was a penny stock promoter...belive
me boys and girls, Wall Street is full of liars.
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Name: Stepehen Ertischek
Email:
Date: Tue Mar 20 11:52:30 2001
Comment: All of u must read The Divine Right of Capital, by Marjorie Kelly..a Common Sense for our time..awesome stuff
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Name: MasterPo
Email:
Date: Tue Mar 20 11:16:50 2001
Comment:
Even before CNBC and CNN I watch NBR (Nightly Business Report) on
PBS with Paul Kangas. Good market run down stuff and did get some ideas
for stocks to research more. But I wish I had a dime for every time
they had a market guru on who said interest rates will do this or that
so you should buy/sell/hold whatever. Hell they couldn't even keep
Orange County from going down the tubes so what chance do you and I
have???
Indexing, the best way to go....
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