Commoditization of the Big Board plays on. It’s not like music, the food of love. Rather, telescoped price changes of 10% or more over a few trading hours are vulgarly brassy and gut-wrenching.
Oops! There goes Halliburton
Boeing now is practically a ward of the state, requiring tens of billions in capital infusions. Early sixties, I remember Douglas Aircraft bankrupted itself by underpricing its DC-9 aircraft. Now, Boeing is a news-driven piece of paper that swings 10% or more couple of times, weekly.
Past Thursday, the junk bond market responded to new FRB protocols for intervention with aggressive buying support. The high-yield market opened up 5% on very-light volume. Believe me, I know, putting out unfulfilled bids. I’ve been operating in the junk bond market since late fifties when Mike Milken was my broker, on the trading desk at Drexel in Philadelphia.
Overriding hyperactivity in financial markets reflects the macro issue of how long lasting is the unfolding recession. Most operators are banking on a deep but short-lived downturn with recovery visible by the fourth quarter, at the latest. Elongated recession with slow recovery can destroy junk bonds, low-priced stocks, actually everything in sight inclusive of trillion-dollar market caps like Amazon
What’s going on here? Clearly the FRB is determined to save corporate America, maybe with trillions in credit extensions, even direct investments. Let Congress take care of the newly unemployed at Macy’s
I can play in a commodity-like setting, but prefer the good ole days which for me were the sixties. Then, you latched onto great-story stocks like Polaroid and Xerox
There were exceptions. I remember the day they red-dogged Motorola. At a meeting for analysts, management took down their numbers. Analysts fled to the telephone booths to call in the disaster. Edwin Land didn’t heed Japanese camera operators like Nikon offering great-pictorial film resolution and four-hour time for film development. Xerox succumbed to great strides in computerized printing and finally the fax machine.
Nothing is forever, but I treasured great relationships with entrepreneur managers. The list is long, spanning decades and several industries. There was “Mr. Sam,” Sam Walton at Walmart
Got to know Rupert Murdoch before he arrived on our shores from Australia, where his stock sold for $4. He bought New York Magazine from our investment group. Sam Zell used to do my tax shelters in the sixties while Larry Tisch was a monthly luncheon that covered all his short-selling ideas. Early seventies, I sold Steve Wynn my block of Golden Nugget, a reportable position.
I never saw anybody work as long a day and most intensively as Mike Milken, who brought my money-management company public and deafened my ear with high-yield debentures that nobody understood but him. Mike is the only operator on the Street who ever made me serious money.
Here’s Larry Tisch talking over lunch: “There are a hundred guys in the garment center smarter than the headmen at our big banks and brokerage houses. The only difference is garmentos can’t command the leverage the Street commands.”
Contrast all this with today’s operators at Renaissance Technologies who employ hundreds of computer nerds. They trade doggedly, minute-to-minute in all financial markets, probing for minuscule changes in prices for stocks, commodities and options. Their average holding time can be just minutes because they are closely tracked by other operators, all bent on closing discrepancies in pricing, even eighths and quarters.
Managing partners at Renaissance starting with its headman, Jim Simmons, emerged as multi-billionaires based on their proprietary operating schemata.
No Warren Buffett here, taking a position in American Express
Since the fifties, I’ve collected contemporary art. I was early but lacked even a thousand bucks for a Jackson Pollock in 1952 and later, $1,200 for a Mark Rothko in 1954. Early fifties, David Rockefeller and Peggy Guggenheim, mentored by museum heads, bought great art for a song. Early recognition and patience are pivotal variables for investors. Today’s jitterbugging is just a distraction.
For armchair investors, actually, for all of us, valuation for a property needs to be figured on earnings power averaged over a full cycle – good year, bad year and normal one. Then, slap a price-earnings ratio on the property which reflects all possible variance.
Halliburton, for example, shouldn’t sell at five bucks again unless you think it’s going out of business. The concept of a stock selling at its option value in a good year comes into play. How else determine when it’s time to buy a ragamuffin, even a Ford, General Motors
Although thoroughly schooled, my sole reason for security analysis is to fortify my courage, step up to the plate and swing for the bleachers. Don’t ever call me a statistician. The numbers are the numbers. It’s what you do with them that counts. I still don’t understand Amazon’s numbers, but I own the stock.
Analysts were termed statisticians in the 1920s, but look what happened in 1929. There were no good-entry points for years to come. No more Babe Ruths. Seabiscuit was a beloved racer because he was a come-from-behind mover. Later, Secretariat would barrel down the middle of the track, starting gate to finish line. Who knew he had an exceptionally-oversized heart? I own Microsoft, Amazon, Alibaba
Today’s market is divided into Seabiscuits and Secretariats. So far, the Secretariats are carrying all the weight, with ease.
Sosnoff and / or his managed accounts own: Halliburton, Teva Pharmaceutical, Freeport-McMoRan, Citigroup bonds, Amazon, Microsoft, Ford Motor bonds, Alibaba and Netflix.
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