Brett Buckley

Brett Buckley
Contributor since: 2010
Thanks.
Yeah, I remember 2007 vividly. For me, noticing the "problem" came in April that year, when Bear threw the walls up and wouldn't release funds to Merrill that had invested in one of Bear's mortgage-related funds. The rest, I guess is academic.
Speaking of 2007, Mr. Borenstein, can you send me a link to the 2007 interview? I would like to watch it. I can only find the 2009 one - after of course everything hit the fan and the whole world knew the world was blowing up. And Asiel... we used to do a TON of business with them...
Got it. Thank you.
There's no doubt in my view the Fed was complicit in causing the stock market crash with their tight policy of 1928-29. The economy was weak then, commodity prices were deflating, farming - 1/4 of the US economy then - was already in a years-long depression by then, as competing European crops came back into market after WW I. And they screwed up again in 1931 by raising rates to defend the run on exchange of dollars into gold - resulting in ~30% contraction of the money supply, exacerbating deflation.
I get all that. Thanks so much. That is one, of several factors that caused and accentuated the 1928-33 downfall.
Also in my view another big piece of it was the over-extension of credit to farms that started failing, and bank exposure to that. The actions of the Fed helped to catalyze all that for sure. The extensive exposure to large bad debts prolonged it. As did the fear. As did the absence of social safety nets.
So yes. I spoke to only one aspect of what can define a depression. And you are right that I did not also enumerate every other one. But SA tries to keep it below 1,500, so I can't write an entire essay about the Great Depression. But I could have written that one sentence better, I suppose.
Beyond that, I'm really not sure what is erroneous or ridiculous about my assertions. Nor am I sure what your point is. Most of your points I believe are in the zone of factual accuracy and I would agree with many of your assertions.
I think the results of the Fed's actions are unclear, yet I believe positive and absolutely necessary. At least someone's doing something about this mess.
So happy to hear your thoughts that might better define your point.
Maybe read my report about FB on the day after its IPO.
I believe the insiders own the B shares. The A shares were what was IPO'd. The B shares have a super-vote - 10 votes for each share. The A shares have one vote. That's what gives the insiders 95.9 (Zuckerberg personally 55.8%) of the combined vote.
Which is why I referred to the shares, from the minority public shareholders' point of view, as really a commodity - something with intrinsic value that may go up or down. But they are not public owners of the company, like what stocks are supposed to be about, if they can't remove their board members for bad performance and such.
I wouldn't use the bond analogy, as you suggest to deviate from. Bonds offer fixed returns - a contractual obligation to pay interest and principal. Commodities don't. That's why I used the commodity analogy. Thank you for your thoughts.
Total Enterprise Value - the metric I use in stock valuations - accounts for cash (and debt). To your point, paying attention to large cash balances is important. And PE ratios don't do that. Many colleagues of mine, when using PEs, subtract the cash per share value from its market price to account for that. It it helps.
Glad it was in some way useful.
Yeah. Nothing wrong with buying 20-30x revenues, if you live to be 115, I suppose.
Thank you.
Sorry, I can get wordy. SA tells me to keep it to 1,000-1,500 words. This one I think is more like 1,700-1,800.
As soon as you can locate a borrow.
Welcome. I feared that if FB went to mid $40s, I would have been lambasted. But this just my perspective - who really knows at the end of the day.
Welcome. I hope it came out in my writing that I do think it is a good business, and formidable with one billion users. Companies are living organisms. Their one goal is to survive. So when threatened, they adapt, or die. It would far harder to kill off Facebook with all those users than it ever would be AOL, or MySpace as I alluded to. What if, e.g., FB just one day decides to be the Huffington Post as well, if you will, delivering news media content all of a sudden to a billion people? More clicking, more ad revenue. It's still grossly overvalued, despite its many prospects.
Much of the buying was retail. However there are institutional investors that don't care about valuation - they trade momentum. Perhaps those types were just hoping to ride a run into the $50s after its primary issuance. I've been an institutional "trigger-puller" for approaching 20 years. One thing I've learned, when the valuation is already trading at absurd levels, there's no explanation or rationale anymore. If it can be trading $38-42, an absurd valuation, then why not $52?
I admit I was being a bit "cute" comparing AOL to Facebook in my writing. The comparison I was trying to illustrate was the frenzy about AOL in the market place of the late 1990s v. that of Facebook today. You make several good points. And it is dangerous to get in front of a one billion strong herd, when they are cornered, and have nowhere else to go.
It's always so tricky to find the balance between a "proper" valuation, and a proper story. Facebook indeed is a good story, in my view. It's that its valuation has gone so far beyond the story itself. I feel you are prudent to "stick to your knitting" and own things at levels that make sense. If the story is good, yet the valuation is too high, in time it will come down to Earth, then you can buy it there.
It's over-valuation I believe has been in no small part "cheerled" by CNBC. They have this long-standing MO of allowing the hype to feed through their broadcasting on the way up. And then when it finally cracks, they suddenly enter "we told you so" mode. Saw it in the tech bubble aftermath in the early 2000s with them too.
I've been continually impressed by Apple's ability to reinvent itself and stay relevant, hip and cool over the decades. They have their occasional down patches - but it seems one is rewarded far more often than not to own their shares.
Yeah. I kind of made the title up quickly. And the Seeking Alpha editorial staff tends to change stuff around too, without letting you know - never substantive though.
Good points.
For anyone actually paying attention: My answer "yes" to "should continue spending so much" is a typo. It should be "no". I don't think we spend properly and we spend too much. Sorry for the sloppiness.
All really good points. It's tough to write something and stay within ~1,500 words without wanting to touch on everything that is also relevant and important.
I would agree that cutting spending is much better for our economic health than raising taxes would be.
And I said expenditure averages 21%. The 18% is the revenue average. But I always want people to be on my numbers - I can make a mistake like anyone else, and I'd rather know and fix it and be a little embarrassed than not.
Thank you for the comment.
If you include Fanne/Freddie debt, you would want to include the cash flow that they take in that services the debt as well - if you want to keep a sort of debt/GDP comparison "apples-to-apples".
Since they are now nationalized, their debt is now explicitly guaranteed.
Good thoughts - especially on gold. I've been watching it (and silver) in nearly 60 currencies. I had wanted to do something on fiat currencies v. gold recently - I'm just not sure what my conclusions are on that this juncture. Thanks for the insights.
Regards,
BB
We'll see the follow through. The Street is really talking up the end of 2010 now that they have this last chance for a positive return year.
There will always be some bad eggs, but I believe most of this marking discrepancy is more noise than sinister intent.
What if the last trade at 4PM (arguably the least liquid moment of the day for any stock, as participants cancel buy and sell orders) prints outside the best bid-offer spread? We would take the average of the bid-offer in that case. More conservative types might take the bid, if long, or the offer is short.
What if there was breaking material news after the bell? If actively trading, we might take those subsequent prints (or again the average of the bid-offer) because that new price obviously is most accurately reflective of value, as the new news is in the market.
Both instances will likely result in something different than some machine taking a picture at exactly 4:01PM. And both instances happen not infrequently. In a relatively small portfolio of 100-200 actively traded US stocks, we might get 2-10 of these "anomalies" every night. That's a ~1-5% "mismatch" right there.
And we would apply the same methodology irrespective of whether it went against us. But I suppose here is where there is oppotunity for managers to act self-interestedly - which is why I am not surprised to find that the study skews to the benefit of the manager. This reminds me of how, in our trade break reports we would receive every morning regarding the prior day's activities, everything that was incorrectly reported by our counter-party almost invariably went against us. Go figure?
However neither of those instances suggest "foul play". They are reasonable business judgment decisions exercised, spelled out and approved in signed investor agreements, in the pervue of the managing member. That same method can be applied to marking less liquid securities and instruments as well with complete above-boardeness, it's just that the bid-offer will be wider and thus appear to be a greater disparity.
And then it just gets down to GAAP. Like one commenter stated, at the end of the day, the mark you got paid on is reviewed by the fund's auditor before the financials are approved - not just the formal annual, but also the less formal quarterlies. They would literally go down each instrument and security that we priced, and if our price deviated one penny from their price source, they would question us. We would then have to explain what happened, why we chose the price we chose, and show the physical backup for the discrepancy (a copy of a Bloomberg screen showing the live bid-offer versus the out of market last print at that time, for example).
We couldn't issue financials - and thus get paid - until the auditor signed off on each mark. The only way offshore entities would have greater latitude would be if they complied with a standard less stringent than GAAP - which is ultimately an issue the investor should weigh before deciding to invest.
Just, having done it for nearly two decades, for whatever it is worth.
A well thought out article. If I may add - you addressed this time of year as difficult; it made me think of this time of decade. The reduced rates on long term capital gains are expiring on Jan 1, 2011. That means, unless you hit a bid before then, you are going to lose 13 points of an 83% rally on the S&P from March 2009 through April 2010 (now 61% through last Friday). I wonder how that plays into this year-end financial market calculus as well.
Having said that, in this election year, wouldn't it be a most welcome overture to extend those reduced rates another couple years. I am suspicious we might wake up and see that headline some time before November, but I am pretty sure the reduced income tax rates for higher incomes will sunset.
You raise something very interesting to watch, with all the talk of deflation nowadays. I guess that pipeline gets shut down if businesses can't pass it on to consumers/customers - resulting in more layoffs and cost cutting to maintain profit margin. We'll see what happens. Thank you for the insight.
That's another good point. Regarding temporary stimulus, I had argued that tax credits to small businesses that hire (and retain) new people include a flexor based on whether the new hire raises or lowers the average base compensation of the business. In other words, the tax credit afforded the hiring business increases if you say, hire someone to do payrolls who has several years of experience, rather than someone to answer the phones. I felt that was a good idea, especially in the context that we have 8 million people out there right now with the very level of experience to start working on day one at the wage they are accustomed to - the higher wage, if you will.
Your're right. Underemployment is much higher than that official unemployment figure. Generally speaking, I just don't like the unemployment rate as an analysis tool, as it it can be fraught with false signals. The unemployment rate can decline when people just stop looking for jobs, without having gotton one. I think a not insignificant portion of the recent decline in the unemployment rate is from that, as we have record duration of unemployment in this current period (whatever we're supposed to call it).