Larry Swedroe of CBS MoneyWatch.com Slams Jim Cramer

This is a hoot!!!

Here we apparently have a participant of a major broadcast network’s financial site criticizing a participant in another major network’s financial cable channel and website.

Like … who the hell is Larry Swedroe?

“Wise Investing”???

Giving his narrow arguments in his article, Why You Shouldn’t Listen to Jim Cramer – CBS MoneyWatch.com, Mr. Swedroe pointed out some studies by TWO people, college professors, about individual investors that indicated they didn’t do that well. He also had a major gripe about Jim Cramer recommending at a luncheon that people should avoid index and mutual funds.

What I gathered from Mr. Swedroe’s warnings regarding Jim Cramer is that Mr Swedroe thinks individual investors are a dumb lot and are really stupid if they don’t allow people like him to manage their money for them.

Let’s see. Mr Swedroe works for the Buchingham Family of Financial Services, has written several books, and previously worked for Prudential Home Mortgage and CITIBANK … with more than 40 years of experience in “managing financial risks for major corporations and individuals”. It’s sounds like he is and/or has been a direct competitor of Jim  Cramer when Cramer was also a “money Manager” as someone mentioned in the comments.

I suppose Mr. Swedroe’s crystal ball is better than everyone else’s.

Like an awful lot of people, I listen to Jim Cramer and watch his show, on the average, several times a week. Sometimes, I agree with him … and, sometimes, I don’t. I think that, like those who generally do well who listen to Cramer, he isn’t my only source of information. Occasionally, I have gotten tips that have made money. I’ve found it’s usually extremely nice to be owning a stock when he recommends it on his show. Selling into the pop that usually occurs after his recommendation can turn a handsome profit. On at least one occasion, I’ve been one of those who bought a stock after hours on his recommendation and turned a very nice profit several days later.

I’ve also been on the receiving end of getting into a stock that he slammed and not being aware of his thumbs down until after my purchase. That was a costly lesson.

Some of the commentators of this article brought up the Jon Stewart episode where Cramer was shriveled into a contrite, castrated and castigated shell of himself on the Daily Show. I felt the pain and humiliation that Cramer was experiencing and couldn’t understand why Cramer didn’t just tell  Stewart to “shove it”. Since Jon Stewart is such an egocentric, self-aggrandizing prick, I kept thinking, “Who is he to criticize Jim  Cramer?”

Back to Mr. Swedroe …

So, we have a “money manager” working for a “financial services” company, working for a competing network and website, who has worked in the “mortgage industry” (Is this really something you’d want on you’re resume right now?), and who has worked for CITIBANK (another glowing item on his resume??) who is advising the public not to watch Jim Cramer of “Mad Money” on CNBC. Imagine that.

wow. (I left off the capitalization of the “w” on purpose. I’m underwhelmed.)

All I can say is that I’m one of those millions who have been watching Jim Cramer for a good while. Mr. Swedroe hasn’t convinced me with his weak arguments and tangential insults that I am guilty of being a moron for doing so. I learn things from watching Cramer and I am entertained. Jim Cramer isn’t my only source of information. To the contrary, I have found it can be costly at times NOT to watch Jim Cramer.

I’m not an NBC fan but CNBC dispenses a lot of useful information and the information is multifaceted, not monolithic. Frankly, CBS and anything associated with it has been sharply declining in credibility in my opinion since Walter Cronkite stopped doing the evening news.

Mr. Swedroe … go suck an egg.

Another “Mark to Market” Debate is Approaching

In an article published on CNBC’s website, Death To Mark-To-Market – Tomorrows Playbook – CNBC.com, it was pointed out that on April 2, 2009 regulators will again reconsider the official position on the “Mark-to-market” rule that was initiated in November of 2007.

This has become one of the most controversial aspects of the current financial crisis with support for maintaining the rule coming from such stalwarts as Tim Geithner, Ben Bernanke and Paul Volcker, all prominent players in the Obama administration.

Opponents of the “mark to market rule” aren’t without considerable financial expertise also.

Former FDIC Chair William Isaac placed much of the blame for the subprime mortgage crisis on the Securities and Exchange Commission and its fair-value accounting rules, especially the requirement for banks to “mark-to-market” their assets, particularly mortgage-backed securities.[6] Whether or not this is true has been the subject of ongoing debate. [7][8]

As mentioned in a previous article, Why Not Suspend “Mark to Market”? other noted experts such as Steve Forbes have also opposed the rule.

The issue was first addressed in this blog in the articles, Bail out, Investment or Moot Point? and Was John McCain Right About Wanting to Fire SEC Chairman Cox? « Earl says ….

Steve Liesman’s Fallacious Argument that Union Health Benefits don’t Compare to Bondholder Interest

In a disagreement just minutes ago on CNBC, commentator Steve Liesman argued that union members’ health benefits at General Motors shouldnt be compared to bond holders interest payments.

I vehemently disagree.

What’s the difference in specified health benefits for union members and interest payments to bond holders which may very well be necessary for the bond holder to afford health coverage?

None. Absolutely none.

Why Not Suspend “Mark to Market”?

Someone, please … answer this question.

Last Friday evening on Fox News Steve Forbes brought the Mark-to-market accounting issue up again. And, periodically, I hear financial analysts from around the world ask the same question, “Why hasn’t the U.S. suspended the ‘mark to market’ rule?”

Last Friday, Forbes emphatically stated that, if the rule had been in place during the S&L crisis of the 1980’s or the earlier financial crisis at the end of the 1970’s, the financial system would have collapsed at either of those times. So, what’s different now?

I have also heard at least one of the numerous commentators on CNBC mention that both Tim Geithner and Paul Volcker are opposed to suspending the rule. My question is, “Why?”. Explain it.

If 91% of the mortgages are being properly serviced, then  why do they have to be valued the same as the 9 or 10% that aren’t?

Nearly a year ago, I first became familiar with this rule when two accountants mentioned it either on Fox News or CNBC. At the time, they stated that the chairman of the SEC, then Chris Cox, had the power to suspend the rule. Later, last fall, the Senate affirmed that the chairman of the SEC had that power.

But …

The Senate in the Emergency Economic Stabilization Act of 2008 ordered the issue be studied by the SEC, Federal Reserve and Treasury Department with a report due in 90 days. That study was done and the report was announced on 30 December 2008, Congressionally-Mandated Study Says Improve, Do Not Suspend, Fair Value Accounting Standards.

So, all of the “experts” said, “No, it needs improvement so we’re going to let it stand while we study ways to improve it.”

In essence, while Rome burns, the experts want to study fire prevention.

Are these the same experts that thought all of these mortgage back securities and fragmented loans were such a good way to make money when things started changing about 20 years ago or sat idly by … possibly like Tim Geithner did as Governor of the Federal Reserve in New York … while the mess was being made?

My question is, “Why not try to put out the fire … then study ways to prevent it from recurring?”

Steve, I guess your problem is that you got your business education at Princeton instead of “Hahvahd”. Common sense carries little weight when it comes to “theory” and “greed”.

“Mark to market” makes great sense as long as a person doesn’t think there’s ever going to be the consequence of a market downturn, even a temporary one.

McCain and the SEC: On CNBC- “Where Were the Regulators?”

He was called reactionary a while back when he called for the firing of SEC head, Chris Cox.

Well, today an Inspector General’s report says that the SEC under Chris Cox has been derelict in its duty failing to provide adequate oversight of investment banks.

The IG report was reported on by Scott Cohn on CNBC today. Watch the following video on CNBC:

http://www.cnbc.com/id/15840232?video=868666144 (cut and paste) or go to the following site:

Video – CNBC.com “Where Were the Regulators?”

It appears that the reactionary John McCain might have been right on the money in demanding the firing of the SEC chairman.

Maybe Chris Cox will just do everyone a favor and simply resign. It appears obvious that, in some way, he might not have been doing his job. There’s nothing like being “a day late and a dollar short” … or $700 billion short … or a $1 trillion short.

Now he’s calling for scrapping the voluntary regulation program for the investment banks … and the meltdown has been going on for how long … nearly 11 months?

OPEC Countries expect to Take Home $1.6 TRILLION This Year

That’s right … $1,600,000,000,000 (TRILLION).

I just checked in on CNBC to find out what was happening at the close of the New York Merchantile Exchange (NYMEX) today with the price of crude oil and was struck by this little tidbit.

View the segment of CNBC’s “Street Signs” with this prediction for OPEC:

http://www.redlasso.com/ClipPlayer.aspx?id=4d209572-ae65-475a-9bb4-d75e496026e2

I wonder how much of that $1.6 trillion is going to be pulled out of the U.S. economy … along with our trade deficit with China.

Doesn’t it make you wonder how Congress can sit idly around while the country is being drained?

Since Nancy Pelosi and Harry Reid have effectively said they aren’t going to listen to any of President Bush’s proposals, basically stripping him of most power other than the veto, this fundamentally puts the responsibility of what is happening squarely on their shoulders.

Note in the clip that Goldman Sachs has predicted that crude oil will reach $200 a barrel within two years. Imagine the effect that will have on the U.S. economy. I’m assuming that their prediction is based on Congress continuing to do nothing and may possibly take into account the possibility of the White House and Congress being controlled by Democrats … probably, at a minimum continuing to do nothing or possibly exacerbating the situation by doing the wrong things.

The 50% increase in the cost of living within a year of the Arab Oil Embargo of 1973 will look like a picnic compared to the effect of oil prices increasing 250%  with a concurrent increase in the cost of living between 2007 and 2009.

I wonder how much that will increase the poverty level?

Bush’s Upcoming Proposal to Overhaul Financial Regulation

Knology – News

Like John McCain, I’m no economist or financial expert. Neither are Barack Obama or Hillary Clinton. Both of the Democratic candidates are quick to point out John McCain’s statement that he doesn’t know much about the economy. McCain’s honesty is refreshing and should be lauded rather than ridiculed.

After spending several years of retirement watching CNBC and Bloomberg trying to figure out the best way to make investments, I’ve come to the conclusion that the so-called “experts” don’t really know that much about it either.

That’s not to say that economists with bachelor’s, master’s, and doctorate degrees don’t have a lot of knowledge regarding economic history and theory, but it’s also very apparent that there are as many opposing views about economics and the application of economic theory as there are political opinions. Everyone, well, almost everyone, has 20-20 hindsight. There are some out there that will still argue that the sky is green and not blue.

It almost humorous to watch CNBC (my current favorite) invite economists and financial experts with opposing views onto their various programs to “duke it out”. It’s sort of like, “If you get enough views expressed on your program, in all probability, one of them will be proven to be true … in a given circumstance.”

I’ve noticed also, if the market is down on a particular day, CNBC will get the nay sayers, the prophets of doom and gloom, to come on and say, “I told you so.” If the market is up or showing signs of improvement, they’ll get the preachers of “good times are here forever” on their shows to match the market sentiments. When the market is “iffy”, get ready for both and a string of heated arguments. Then there’s Cramer, Jim Cramer. This guy’s so influential that you can’t afford not to watch him. But, hold your breath. If he happens to trash that favorite stock you just purchased, get ready to watch it plummet to the bottom of the cesspool. If you’re really lucky, you’ve done your research ahead of him and his callers and are holding a stock that he mentions favorably on his show that everyone’s been ignoring. Then you can watch it climb astronomically in after hours trading as his listeners try to get the jump on the next morning’s trading. I think the only group that may be more fanatic are the followers of Warren Buffett’s portfolio. Simply look at Burlington Northern as the latest example of Buffett’s influence. Warren Buffett could buy stock in a company that packages dog poop for party favors and the stock would go up 20 points.

I manage several portfolios for my mother so I have the responsibility to her and my siblings of not loosing the family inheritance. It’s a formidable responsibility to try to maintain and enhance her fragile investments which are a significant part of the sum of her life’s work and savings.

I am old enough to remember the out of control economy of the Carter presidency with nearly 10% unemployment and interest rates passing 20%. I was in the unfavorable position of having to buy my second home at an interest rate of nearly 15% in 1983.

The facts above really make me wonder at the demagoguery of Democratic pundits complaining about the current 5% unemployment and the “high” interest rates running between six and seven per cent recently. You would think all of them were born yesterday. Or, more accurately, they’re treating the American public like we were born yesterday … with short attention spans and even shorter memories. I give my dog credit for a better memory than they seem to attribute to the American public.

The fact that so many people have been getting into trouble with minimal increases in interest rates on their adjustable rate home loans and the massive crisis this has caused in banking and investment institutions is a reflection of the lack of adequate oversight by the federal regulatory bodies who have been given that responsibility.

There are already laws on the books regarding proper lending practices and these have been completely ignored by the lending institutions and the federal agencies who have the responsibility to exercise that oversight. This is criminal and the justice department should have enough investigations and pending cases to keep it busy for a very, very, very long time. These should include not only corporate personnel but the bureaucratic bumpkins responsible for the oversight.

Adjustable rate mortgages are not new. I don’t know whether the subprime lending practices are new, but someone in a position of responsibility should have been diligent and alert … sensing that the real estate bubble wasn’t going to last forever and someone eventually would be left holding the bag … like a chain letter.

Anyone over forty years old should remember the real estate bubble that burst in the late 1970’s. That’s just not that long ago.

I can recall when, even in the rural community where I grew up in central Georgia, agricultural land appreciated to valuations ranging from $1200 to $3000 an acre. This was 50 miles from any urban centers. The land became practically too expensive to buy for farming. When the bubble burst, the land depreciated to a more realistic $200 to $300 an acre … and that was the best land. The current crisis was predictable.

Fortunately, I became very uneasy about what was going on in 2006, a full year before the meltdown began, and got my mother out of banking and financial stocks and resisted the temptation to jump into the blind elation that was rampant during 2007 which ran these stocks up before their sudden collapse.

I was no more prophetic in 2006 exercising caution with financial stocks than Barack Obama was in 2002 when he spoke out against a war in Iraq. There was one big difference in our actions, though. My actions were based on experience and his was based in ideology.

Barack Obama has already vaguely outlined a plan, or at least his desire, to increase the regulation of financial institutions. The Democrats may oppose the Bush recommendations simply to forestall President Bush from stealing their thunder. That, in itself, would be reprehensible since there is an immediate need to fill in any gaps which may exist in the ability of the government to oversee the financial markets. Any improvement in this ability is better than none. The politicians shouldn’t be “playing politics” with this crucial necessity. I don’t know that they can be trusted to resist the temptation … probably not.

By the way, someone should inform Obama that having his picture taken with Warren Buffett doesn’t make him a financial guru. Maybe Obama and his wife should get an IRA or 401-k (which neither have according to their tax returns) and see what it feels like to try to invest for the future. Even a little experience would help if he’s going to be president. I suppose he’s counting on the federal retirement system to take care of that problem. That’s arrogance … or stupidity. Take your choice.

Regardless, the current crisis isn’t simply a product of the Bush administration and has nothing to do with his economic views. It has resulted as a lack of proper oversight and could have been deterred to a large degree, if not in entirety, if existing laws had been enforced. This is the responsibility of a career bureaucracy which is little, if any, changed from administration to administration. It is also the responsibility of the Congress which has been too busy with political bickering, both Republican and Democratic, to fulfill their responsibility to the American public. Frankly, I’m sick and tired of their finger pointing.

Some bureaucratic heads need to roll … from low to high. And … people need to be held accountable and criminally prosecuted if warranted from property appraisers and loan officers to high corporate officials.