Friday, September 14, 2007

Captain Renault on Wall Street



Captain Renault: I’m shocked, shocked to find that gambling is going on here!

Croupier: Your winnings, sir.

Captain Renault: Oh, thank you very much…. Everybody out at once!

—Casablanca



It appears that Wall Street’s so-called economists are shocked—shocked!—to discover that retail sales in America declined last month.

These are the same folks, you may recall, who were shocked—shocked!—just last week to discover that payrolls in America had likewise declined last month.

And were shocked—shocked!—at the recent collapse in housing starts...and were shocked—shocked!— at...well, the list is too long even for the virtual world, including as it does
not just the sub-prime bubble and the sub-prime collapse, but also the fact that the sub-prime rot was not contained inside the realm of sub-prime assets, as virtually every Captain Renault on Wall Street maintained it would be, but has spread throughout the world, from Spain to the UK to Asia.

What gives here?

Do these experts not read the papers? Listen to earnings calls? Visit companies? Talk to their neighbors? See the “Open House” signs that sprout up around town on weekends?

Or is it just that, like Captain Renault, they’re part of a system that always seems to find the horse has left the barn and disappeared across the back forty before it decides to firmly close and lock the door?

After all, like Renault, who is shocked—shocked!—at the gambling yet takes his cut before shutting down the joint and leaving the other winners holding the bag, they're still going to get paid, even while the poor shlubs who relied on their sage advice take a write-off.

.

What’s next...Entertainment Tonight is shocked—shocked!—when Britney Spears loses her record contract?


Jeff Matthews
I Am Not Making This Up


© 2007 NotMakingThisUp, LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

6 comments:

Gordon said...

Next thing up that will shock Wall Street--4Q earnings declines for economically sensitive stocks when all those other shocking details start to hit the economy.

whydibuy said...

Britney loses her record contract... the question should be how she ever got one to start with!

TheColonel said...

I fear that the real shock will come next week , after the Fed meeting.

We shall see then who rules this country. I am guessing our rulers are the bond traders. What a shock ! Round up the usual suspects !

len said...

Jeff,
You are right on the "money"!
Wall Street has a mission to persuade us to invest in their latest GREAT NEW deal. They can't possibly report on reality. The job of Wall Street's Finest is to have a "believable" story whether it's accurate or not.
Len,
Houston,Tx

Sam E. Antar said...

You wrote:

"Do these experts not read the papers? Listen to earnings calls? Visit companies? Talk to their neighbors? See the “Open House” signs that sprout up around town on weekends?"

My response:

Most so-called experts basically plagiarize each others work and rarely engage in thorough independent research.

Have you ever heard of the expression, "Herd mentality" used to describe the collective wisdom of the markets?

It's not enough to "listen to earnings calls." Information derived from earnings calls must be cross checked against other information contained in the financial statements, footnotes, previous conference calls, and other sources such as trade journals. When possible, it is important to visit a company and “kick the tires,” too.

As a crook, I learned to read backwards and upside down when spying on my auditors. The same may be said when you analyze companies. For example, start with the earnings conference calls, then go to the footnotes, and finally analyze the financial statements.

Respectfully,

Sam E. Antar (former Crazy Eddie CFO & convicted felon)

yanor said...

Let's not go to far; Brittany lose her record contract?