Of Markets and men

By R.L. Avery avery1@mac.com
Irving Khan, an investor who shorted the stock market crash of nineteen-twenty- nine, passed away at the ripe old age of one hundred and eight years old this past week. His very first trade was shorting a mining stock and he doubled his money doing it. He had weathered many financial crises and he shared his insights during an exclusive interview with Richard Evans of the Telegraph last summer.
It is a short interview and well worth reading if you enjoy investing and history. I will paraphrase a few lines.
He managed to borrow some money from a relative who was certain he would not see his money again, adding that, “Only a fool would short a bull market.” It was one of Irving’s clearest memories and he said it showed how great enthusiasm in a particular stock or industry is usually a sign of great risk.
During the depression he became an assistant teacher to Ben Graham at Columbia University and consequently a value investor. He described how an investor’s first responsibility is to preserve capital. That means being patient and waiting for good companies to go on sale. When he was asked about the current market he had this to say, “ I try not to pontificate about the market, but when my son and I look at the market today, we see very few instances of value, this is usually a sign of widespread speculation.”
David Stockman wrote a scathing piece on Tesla last week. Stockman was a U.S. Congressman and Budget Director for Ronald Reagan in nineteen-eighty-one. He was the youngest presidential cabinet member of the twentieth century. It is titled Bonfire of the Money Printers Vanities and can be found at Contra Corner or Casey Research on the web. It is an absolutely fascinating piece and illuminates just how these and other highly speculative stocks come to life.
“The Wall Street casino is now festooned with giant deadweight losses waiting to happen. But perhaps none is more egregious than Tesla- a crony capitalist con job that has long been insolvent and has survived only by dint of prodigious taxpayer subsidies and billions of free money from the Fed’s Wall Street casino.”
It appears that a more than a few people read the report as Tesla’s stock is taking a drubbing. I wonder if Ole Irving Khan might have considered shorting it if he was a young man again?
HSBC has been fined again, this time for aiding and abetting tax evasion. Just a short couple of years ago the bank was fined one point nine billion dollars for money laundering. I think they did a brisk trade here in Mexico. Oh well, what else is new?
If one looks at the list of fines levied on the banks this last five years it will come as no surprise. Fraud is at the top of the list and almost every major bank booked a settlement on that account; starting with Goldman Sachs and ending with UBS. They have been fined for manipulating the overnight lending rate to rigging the price of gold and foreign exchange rates. I have heard Mexico described as the “Wild West”, but it seems to me it might more appropriately used to describe Wall Street or the financial industry at large. We don’t need Glass-Steagall back, we need Super Glass-Steagall. These boys are out of control and we need something like a super hero to rein them back in.
The current administration is trying to impose some regulation on financial advisers. They feel there is a conflict of interest when a retiree is sold a product that the advisor receives a kickback for.
Wall Street is up in arms about it, somehow they just won’t be able to do their job if they have to tell you, the client, that said mutual fund company, pays them for selling you their fund. Buyer beware and remember what Ole Irving said about protecting capital!
Bueno camino Irving and “Adios.”

One comment

  1. In a free enterprise capitalistic economic system it is of course : “Byer Beware!” however that is how money is made and accumulated. It takes big money to build the worlds strongest and richest nation without conquering other countries and taking their wealth, such as Spain did to Mexico.

    Former President Ronald Reagan called it “Trickle down economics ” where things built and purchased by the rich, provide the jobs for the working citizens. In America, citizens have the choice of being a worker, manager, boss or owner of the company. If you cannot afford college, there is the Public Library, or you can get a job washing dishes or flipping hamburgers . Some of the biggest corporations were started in a persons garage. I guess it is now, behind one’s computer and working the Internet.

    But still reading and writing are necessary.

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