Dear rss free blog,
There
was more from Barrons’ Chevaliers de la Table Ronde this week,
and it all sounded a bit dated after the huge sell-off. The magazine
holds its gabfest over one day (at the Harvard Club no less) but then
publishes the text slowly.
Last
week I berated the panel (and moderator Lauren Rublin) for failure to
riposte to Marc Faber’s stating that the U.S. Government intervenes
in stock markets. Given that the panelists apparently did not notice
Herr Faber’s illusion, I assume they share it. For the record,
Washington operates on Wall Street only indirectly, by creating money
which boosts liquidity and stock prices. High stock prices are not
important to the White House or Capitol Hill.
So
it is not too surprising that none of the experts foresaw the selloff
linked to Washington’s planned measures to rein in the banks. If you
think the Administration really wants higher stock prices, then you
could not foresee that it would go populist, tax banks, and bring on
Paul Volcker’s Rule, all of which smashed the market.
This
week is key. If stock prices don’t pick up, we face the January
prediction effect: as January goes so goes the year. So far today the
bulls are ahead but it is touch and go.
In
the magazine too, David Goldman characterized the Volcker rule as
being “like nailing the barn door shut after the horses have
escaped, and locking yourself inside”. He also predicted “continued
misery in terms of employment”, not “a New Normal” but a “New
Dismal”. Goldman is not enamored of Obama’s administration.
Goldman,
who sometimes channels Spengler on the Decline of the West was too
polite to say it, but “the New Normal” is a term of art invented
by one of the Barron’s Knights, Bill Gross of Pimco.
Gross was in dialogue with Faber when the conspiracy theory was
bruited, but we haven’t yet heard what his stock market outlook may
be. I suspect he is not as bullish as the gang quoted so far.
I think (and hope) there will be another installment but Barron’s
doesn’t say.
Preparing
the charts, I saw also an unusual disconnect between the net asset
value of exchange-traded portfolios in the charts over the weekend.
Contrary to prospectuses and practice, institutional investors
(authorized participants in the jargon) did not intervene to
re-balance the prices of ETPs to their net asset values late last
week. The looming gap means several ETPs are trading significantly
below the NAV of the shares they own. Shades of closed-end funds!
Since
institutions earn money by closing the tracking error, it is odd they
aren’t. Perhaps they feared (wrongly) that Wall St. would slide some
more today. To learn more, read my report on ETPs for sale on our
website, www.global-investing.com
Or
maybe they got discouraged because they will face the Volcker Rule
and new regs. (In my
opinion, to defend its shabby regulatory credentials, and to keep
Bernanke in place, the White House had to do something.)
Our
experienced Thai correspondent, another Swiss but one with more market sense than Faber, comments on the selloff: “in
the medium to longer term, growth in earnings and dividends is what
makes stocks move more then anything else! My favorite Thai share
moved up in value despite all the political commotion…coups, the
airport closing etc..and not least US induced and global financial
crisis. Hence its wrong to follow the broadly negative press and to
get caught up in that rut.” Paul Renaud writes
www.thaistocks.com and keeps
me and my readers apprised of his ideas.
Barron’s
also does a number on one of my favorite Indian stocks and favorite
CEOs. Comment on that is only for paid subscribers.
