Baltbear on Finance markets are like marshmallows

Brent Arends, writing for Market Watch–something he evidently may be doing more of now that the WSJ has closed its Boston office, (Murdoch@work)  asks s reasonably serious question:
:”Should you take advice from someone who writes for a living? ”
well, if it can be said that a medical doctor writes prescriptions for a living, then..yes.
a “doctor” of biology who writes press releases for a living…no.
a stock board poster trying on his own behalf or that of the dogs that pay him to create the illusion that a given ticker is going to double in a month…..definitely not.
ever.
did i mention “no way, no how”??
if not, i am remiss.
one of the first rules for real houses is that there is a chinese wall between the sell side and the buy side.
that is, those with the task of recommending to people what to buy from the house or the street are not to know what advantage there may be to the house in a price run-up, beyond normal common sense.
this is a condition that can never apply to the guy on abcd:amex who is telling you he bought last year, last month, last week, and will be buying more tomorrow, but he also wants you to compete with him in order flow. that statement by itself proves the lie.
prudent speculators, as noted in a previous column, will look for stock boards and see what intelligent information can be found–about the intelligence of the posters.
Arends is discussing the “plight” of o so poor writers, doomed to make $30 an hour thinking about what they want to think about–instead of making $75 an hour, like a plumber who wades around in slop that is not his own.
prudent speculators will be, if not wading, at least visiting the shore to see the investment profiles of those writing about a ticker. if the profile is pleas to others to buy, buy, buy, it may be time to step back.
people who want you to buy are people who want to sell. that’s understood at wmt, vzn, or mcd.
it needs to be understood as part of dd.

Posted under business

the “testing” of the u.s. banking system having been “completed”, the idea that there is $75 billion hole to be filled was met by the idea that banks ahould sell stock before people realise it’s overpriced.

“U.S. banks are racing to tap equity markets that have soared since early March and may pull back soon, analysts said. Bank of America said it plans to sell 1.25 billion shares to help meet its $33.9 billion equity capital shortfall.

“You have this opportunity to sell equity now, and if you don’t and share prices fall, people will criticize you,” said William Smith, chief executive officer of Smith Asset Management.”

ok. sell stock while its overpriced or get criticised. who are these critics?
probably not the people who bought at the high price.
but then, they are the sheep, and as was noted in the maginicient 7, “of God did not want them shorn, why did He make them sheep?”
how is stealing from new shareholders a duty of an equity? cause cut thru the nonsense and that’s what it is. “sell it before somebody figures out the price is too high.” it is refreshing that an “asset manager” is saying this publicly. so, ask yourself, “is he a potential buyer or a current owner?” ad youmight get a different impulse than to run right out and buy more of anything known to be selling above a fair value estimate.

People playing biotechs and “internet” stocks might wish to be aware that rbs used to be a serious funder of such flyers, but:
“Royal Bank of Scotland, now 70 percent state-owned, fell to a loss in the first three months of 2009 after bad debts quadrupled to 2.9 billion and it took a 2.1 billion pound writedown on risky assets.”

what are “risky assets”? a good place for traders to measure is d/e, and debt terms.
what are creditors willing to take in stock to balance the books? unless you can afford to take more risks than an investment bank, you probably want to pay less than creditors will accept.

that can be done by “trading into accumulation.” it is in fact what many of the ibs do along with their direct involvement to make sure they profit.

Posted under business