Yo, Aero,
Despite being somewhat bearish in this environment I find Ben Stein's piece laughable.
Since I'm not doing anything today except waiting for the Naz to fall another 116 points to achieve my predicted Naz of 1598 this month (and I have 3+ weeks to achieve that particular slam-dunk), let me look at Ben's whine:
[First of all, how DARE you quote W.H. Auden lamenting the coming destruction of Europe, world war and the wholesale slaughter of perhaps 100 million sentient beings with a little stock market fun? Harrumphhh.]
"Let's start with the ignorance and the greed, a combustible mixture. The stock market is supposed to be a way of buying the earnings of America's public companies. Thus, stocks with no earnings -- and no prospects of earnings -- should either not be on the exchange at all, or be shunned as unclean."
Wrong, Ben. The stock market is a liquidity market where people express their views. Some are dumber than others, but often it's only those who are dumbest last who get scorched. Folks don't much care about current earnings but are looking for future earnings, much as somewhat who speculates in art doesn't care too much for the current price of Van Gogh's, but rather the future price.
"Instead, completely worthless companies that existed as no more than dreams and fantasies were brought to market and touted as multi-billion-dollar entities by people and investment houses whose job was to defend against exactly such viruses. This sucked in multitudes of little guys, making the bubble look like a sure thing, and then even cautious people came into the market."
Benny, all companies started out as pretty much completely worthless companies. How much cash was invested in MSFT when it began, how much along the way? Not even a sliver of what went into Bill's house, not even a sliver. Lots of people got "sucked into" MSFT along the way and made a lot of money. Quitchercryin.
"Among the worst offenders were the managers of mutual funds. Supposed to look for value and intrinsic merit, enjoined by law and custom to be prudent with their investors' funds, they instead joined wildly in the raillery, got their own rewards for buying the garbage and then ran ads about their great success to suck in still more money from the unwary."
Gimme a break.
"None of this happened by accident. Some people got fantastically rich from the fraud, and people do not usually get rich from fraud by accident."
Ben doesn't know what the normalized meaning of fraud is, much less its legal definition. What he's saying (and he says it quite clearly at the end, is he got greedy and he was stupid and he was punished. Doesn't sound like fraud to me, sounds like justice.
"At the same time, the insiders were also amazingly ignorant of the ways of markets and of simple laws of gravity. When I appeared on many panels with Wall Street movers and shakers in the past five years, I was appalled at what they did not know, and far worse, at what they thought they knew that was not so. They really thought an Internet portal like Yahoo! (YHOO:Nasdaq - news - commentary) should be priced at thousands of times earnings -- even as it was being pushed into obscurity by AOL (AOL:NYSE - news - commentary). They really thought that AT&T (T:NYSE - news - commentary) did not sell itself into oblivion by buying cable systems at three or four times their value with the pipe dream of using them for local telephony -- even as the whole business became a commodity enterprise."
Ben, you appeared on panels? And what value did you bring? Analysis of this high level? Harrumphhhh.
"Powerful Wall Street players really did believe that there was a "new paradigm" in which earnings would grow 10 times as fast as national income forever. They not only did not know history, they did not know simple arithmetic. And they pretended that they knew more than the old hands, when they knew less."
No comment.
"Warren Buffett said a few years ago that he would like to give a business school exam asking students to value an Internet company. Anyone who gave an answer other than "I don't know" would fail."
Uncle Warren also never bought MSFT. He (WB) doesn't KNOW everything.
"Most of the people one saw daily on CNBC touting worthless Internet junk would have failed miserably -- and did. They took the little guy's money with them ... but the Wall Street players are still rich, and some got rich exactly from touting garbage, from stock options, cheap stock, or other conflict of interest payments."
More bellyaching.
"While all this was happening, where was the Securities and Exchange Commission? The SEC, with unequivocal broad oversight powers over brokers and investment bankers to stop any scheme or artifice to defraud, to supervise illegal payoffs and bar them, to make sure all lawful disclosures are made, slept soundly."
Now, Ben says, "I want my mommy, the SEC, to do more and more to protect me. How about guaranteeing me some gains?"
"There is much that bears SEC scrutiny: failure to disclose improper connections between issuers and investment banks, failure to disclose payments to analysts, failure to disclose specific as opposed to boilerplate risks, routine placement of the interests of the fiduciary -- the bank or broker -- ahead of the interests of the customer."
Bullshit. The prospecti were quite clear, if you read them, that there were SIGNIFICANT RISK OF LOSS OF CAPITAL from each of the dot bombs. Benny was looking at the pictures and dreaming of 4 figure returns.
"Where is Congress? Where are any friends of the little guy? Where is Congressman John Dingell? Where is Congressman Billy Tauzin? Where is Congressman Edward Markey?"
Lord, deliver me from Congress in all its forms. Btw, where is Gary Condit?
"One thing we did learn that was positive: The ordinary investor, by reading and studying and applying basic rules of common sense, can tremendously outperform the "geniuses" of the mutual funds. (My sainted parents were all in blue-chips and bonds and just laughed at the bubble. Their son was not as smart.)"
Eggzactly. Their son is an idiot. It finally comes out.
"The Pecora Commission was set up to study wrongdoing that led to the Crash of 1929-33. Why not another one right now? Why not one to write a book about how this debacle happened, with subpoena power over witnesses?"
Oh pulleeeeeeeeeease.
"What happened did not happen by accident, and a full accounting is owed those who were fleeced."
Benny boy, clean up your pants and read the above commentary once more, slowly. It's okay, you can move your lips as you read. What a maroon.
(None of this is directed at you, Aero, unless you agree with Ben, and then only with a lot of LOLs thrown in).
Regards,
Kb |
