Current Commentary

What the SEC/Goldman Sachs Tussle Means for You

I've never tolerated arrogant management in companies we own, nor do I care for lack of transparency and the outrageous incomes earned by the stewards of public corporations, bankers, oil companies, insurance companies or industrial companies. I refuse, however to assume that Goldman Sachs is guilty of a crime until the facts are aired and the court decisions are made. Like California Congressman Darrell Issa, I also am suspicious of the timing of this SEC action against Goldman, coming as it does while Congress is contemplating legislation to more strongly regulate Wall Street ( legislation that, in principal, I support ). This being said, I find that an editorial by economic commentator Larry Kudlow on CNBC, Wednesday April 21, 2010 brilliantly sums up the issues. I happen to agree with Kudlow's warning about government overreaching, presenting a threat to one of America's most successful industries. I'm reproducing his commentary below, and urge you to read and consider what he has to say.

“We could see a statistical recovery but a human recession” - Indira Noori, CEO Pepsico, quoting Lawrence Summers, Director, White House Economic Council, on CNBC TV, March 22, 2010

Consider that one year ago, Bailout Nation was gaining speed, with huge subsidies provided to a gasping  banking system, insurance giant AIG accepting its fourth bailout from Uncle Sam and  two of the three remaining US car makers careening toward oblivion.   Every Friday, new bank closures were announced.  Having lost the argument in late 2008 that no bailouts were appropriate, those who believe in less not more government were ringing their hands in dismay, certain that financial and social disaster lay ahead.  On March 3, 2009 an editorial in the Wall street Journal accused the Obama administration of frightening business away from new spending with its threats of health care reform and a carbon tax to curb global warming.  The following graph was offered as proof that the new administration was a disaster for our economy:

In this video, Warren Buffett and former Treasury Secretary Henry Paulson have an economic 'power lunch' chit-chat, live at the Chamber of Commerce annual meeting in Omaha. Recorded by CNBC.

So far, the stock market correction we have witnessed in the past month appears to be normal in scope. In contrast to the "sky is falling!" mentality that prevailed one year ago, signs that our banking system would survive began last spring an overly ebullient reaction by a significant number of investors. Now that Optimists must deal with evidence of a very slow recovery, and economic ignorance on the part of many politicos, a negative reaction has set in, with the flow of new money into equities more than offset by profit taking. It appears to me that the Recovery appears to be playing out along the lines suggested by most economists, including those in government: slow, with fits and starts. 

Washington Turns to the Dark Side
With economic recovery too slow to save Democrats running for re-election, a wholesale verbal and strategic assault on the pillars of a sound economy is underway. Despite this the stock market, a good predictor of the future, is holding up relatively well. 

I consumed two fat books on the life and investment strategies of Warren Buffet this past year, both of which improved my already considerable knowledge of his approach.  Buffet sniffs at index investing, and especially at trend followers.  His does the challenging work of company-by-company financial analysis. Consider that while the S&P was losing 20% over the past 10 years, [...]