He was at Salomon Brothers when a rogue trader used false bids at Treasury auctions to corner the market in some government bonds, a scandal from which the venerable investment bank never really recovered.
At Enron he was one of the few who tried to warn top management of the financial house of cards created by Andy Fastow's off-book partnerships and the inadequate capital the energy company had to support its extensive trading operations.
So why doesn't it work?
Second, you have to change the culture and incentives within the firm (monetary and career incentives). You can celebrate the guys who bring in the big money, but you also have to celebrate the people who save you from disaster.
I think the directors are somewhat to blame as well. They are supposed to be the wise outsiders. And when they see a particular line of business is suddenly delivering outsized profit margins for what looks to be modest risk and involves no great skill or originality, a light should go off. And they should engage someone from the outside to take a look at the business and decide if there are inbedded and unacknowledged risks in the line of business that need to be addressed.
Maybe I'm naive in thinking directors can do this. But they are the best candidates I can think of who might have enough distance that, when a company is raking in the money, doesn't think that the only reason is because of the brillance of management."
Interesting reading!!
By Jane Bryant Quinn
Nov. 7 (Bloomberg) -- How good an investor are you? If you're like the average Joe or Jane, you think -- for sure -- you're better than most. You remember every one of your winners, in detail. You bury your losers. You never average the two together, which means you have no idea whether you're beating the market or not. If asked how you're doing, however, you'll probably say that you're ahead.
This confident approach to investing does wonders for your self-esteem. Where it leaves your portfolio is another story. We all know we're not supposed to trust our emotions when we buy a stock. What we didn't know is that our investing brain is a traitor, too.
We're hard-wired to kid ourselves. If you doubt it, take a look at ``Your Money and Your Brain,'' a new book by Money magazine writer Jason Zweig. He visited the scientists who study the neural circuits that switch on and off when we invest. It turns out that our brains amount to a hostile environment. To be better investors, we have to work against what our minds want most to do.
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INVEST FOR THE LONG HAUL If you are a smart long-term investor, do not pay any attention to short-term developments. They are often reported by people whose motivation may be to scare you (screaming about the subprime “crisis”) or to make you giddily greedy (screaming about that one certain stock you should buy to retire rich).
Some articles may scare you into selling, or not buying, at the wrong time, because the worse things are, and the worse the mood of speculators, the better the time to buy. Or some may motivate you to buy in excess — sort of like drinking in excess — at exactly the wrong, “irrationally exuberant” time. The people who write some of these articles often know very little about markets, are way too young to have learned much, have no money to invest anyway or just like to act like big shots with your money.
In the very long run, stock prices plus dividends (in the postwar period) have rewarded patient, long-term, careful accumulation of broad indexes, mutual funds, exchange-traded funds and variable annuities (with a careful eye on fees). They have not rewarded short-term trading. Such trading based on tips seen on television shows — even shows whose hosts are true comic geniuses with bald heads — or read in magazines can be potentially disastrous. The short term is no place for the ordinary investor to trade.
AVOID INDIVIDUAL STOCKS The data on this is as clear as a bell, and has been compiled by high-end thinkers ranging from Nobel laureates to the best friend the ordinary investor has ever had, John C. Bogle of Vanguard. Basically, you and I cannot pick stocks, except for Berkshire Hathaway. I was recently on a panel with the stock guru Ray Lucia, who offered overwhelming data about how impossible it was to pick stocks, trade in and out of them and fare as well as the market. His data was terrifying.
The people on Wall Street do many questionable things. They reward themselves extremely well. But they have, in the last couple of decades, made it possible for almost anyone to get good results in stocks: buying very broad-based mutual funds, index funds, exchange-traded funds and (with an eye on fees) variable annuities and holding them for a long time. The evidence that this form of investment does better over long periods than trying to pick stocks is simply staggering.
Yes, maybe some gurus at a hedge fund can do it for a while. Maybe your cousin claims that he has done it. Don’t try to do it yourself.
Wall Street, and especially Morgan Stanley, with its fine exchange-traded funds, and Fidelity and Vanguard, with their super-low-cost index funds, have made it possible to be a really good investor. So have many other companies with broad-based mutual funds. You can buy domestic funds, foreign funds, foreign developed markets funds, foreign developing market funds — all at amazingly low transaction costs.
Just for my own bad self, I suggest the Fidelity Spartan Total Market Index fund (FSTVX), a very broad index fund of domestic stocks; the iShares MSCI Emerging Markets Index fund (EEM), an exchange-traded fund that invests mostly in developing countries’ markets, and the iShares MSCI EAFE Index fund, for Europe, Australasia and the Far East (EFA),which invests mostly in highly developed in Europe, Japan and Australia. This has allowed the rank amateur to take advantage of the long fall of the dollar because the stocks are priced in foreign currencies that have appreciated against the dollar.
If you feel like throwing around money speculating on individual stocks, go for it — but only after you have several millions in index and other mutual funds and exchange-traded funds and variable annuities. Just as you might stop to gamble $300 as you pass by the craps table at the Mirage on your way back from the meeting to your room, feel free to take a flier on a few stocks just for laughs. But keep it limited.
KNOW THY LIMITATIONS Be aware that there are almost no investment geniuses. The only ones I know of are Warren E. Buffett and John C. Bogle and Jim Rogers. If you want to buy Mr. Buffett’s individual stock, be my guest.
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Term Life Insurance - Use this site to see the detailed criteria you must meet to qualify for each company's term-insurance rates.
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Blogs
23/7 Wall Street - 25 Best Financial Blogs
1. Mish’s Global Economic Trend Analysis
(7,903 links). Although Mish (aka Mike Shedlock) is not an economist by
training, he adroitly gets into the thick of economic data. Mish looks
at comments made by the major media, so–called experts and government
officials and serves up trenchant analysis based on his impression of
their relevance and validity. The author is not afraid to attack
conventional wisdom.
2. Footnoted.org (598
links). The blog’s author, Michelle Leder, digs through SEC filings
and comes up with some of the best insights about the “hidden” comments
found in 8Ks, 10Qs, and other government filings that rarely get as
careful a review. This is one of the oldest financial blogs, founded
in 2003.
3. Bill Cara’s Cara Community
(389 links) analyzes the capital markets, stock movements, and the
economy with an eye to technical guides including volatility, cash
flows, trading volume, and price performance and is prolific almost
beyond comparison.
4. Infectious Greed (3,822
links). Blogger, Paul Kedrosky, is considered one the preeminent
financial market pundits. His site reflects the perspective of a
former technology analyst, institutional money manager, and venture
capitalist. Infectious greed provides a running commentary on global
markets, economic trends, and emerging business trends.
5. Bespoke Invest,
also known as “Think Big” (6,112 links), is the blog for a money
management and research firm. The site provides a combination of
technical analysis and commentary on macroeconomic trends, major
sectors of the stock market, and currencies.
6. Angry Bear (2,447
links) is the product of a half dozen Ph.D economists, an historian,
and financial professionals. The writers provide individual
perspectives on broad sectors of the economy based on their unique
training. They look at topics as varied as worldwide trade and
industrial production as well as US government programs and regulations
like Social Security.
7. The Big Picture by Barry Ritholtz (11,223 links) has recently moved from his long-standing site on typepad, where he's been since 2002, to http://www.ritholtz.com.
Ritholtz is one of the most well-respected market and economic pundits
and bloggers who manages money as his day job. Multiple posts a day on
subjects as diverse as criticisms of the business press, digital media,
and key economic indicators. Sophisticated analysis made clear by an
unmistakably irreverent voice and excellent use of charts, tables, and
graphs.
8. Naked Shorts
(833 links) covers ETFs, hedge funds, monetary policy, and current
events. Bangs on hedgies and the accounting profession and its
practices. Not fond of the practices of many US government agencies.
9. A VC (2,777 links). Long-time
venture capitalist Fred Wilson passes along his opinions on new
technology and how it converges with emerging parts of the economy.
Wilson talks in detail about where he is investing his venture capital
money and why. His Union Square Ventures has taken positions in new
ventures including Del.icio.us, Feedburner, and Twitter.
10. SeekingAlpha (63,563
links), the grandfather of financial blog aggregation, also has its own
editors and columnists. This is by far the largest collection of
financial blog posts in the world. Readers who want to find articles
from hundreds of sites get a one-stop-shop at SeekingAlpha. If it were
not for this web site, a large number of blogs would have almost no
readers.
11. Clusterstock
(1,613) links) follows and comments on business, the stock market, and
economic news throughout the day. It has a staff of several
outstanding writers lead by Henry Blodget. Articles by John Carney are
particularly good. It is now combined with another strong site called
Silicon Alley Insider.
12. 1440 Wall Street
(1,216 link). Although the site is “intended for the institutional
equities crowd,” we won’t hold it against them - it’s still very good.
Covers money markets, sell side, buy side, private equity, Wall St.
research, and media. Strong analysis. Strong on multimedia.
13. The Kirk Report
(1,571 links). This is one of the oldest financial blogs and it has
been consistently good. It has a number of articles which are simply
links to other sites. Strong on stock analysis, market
recommendations, and volume investing. Too bad some of the content
requires being a “member.”
14. Calculated Risk
(11,057 links) is among the most thoughtful and thorough financial
commentary on the internet. Period. Tears apart poor economic
assumptions. Gets to the heart of the elements that move the economy
and markets. Big focus on housing and economic analysis
15. Abnormal Returns
(1,009 links). Disregarding our own rules for what blogs should be on
this list, this site is the only one that simply provides lists of
links to other financial sites. However, there’s a reason we’re making
an exception as these are carefully selected and come with good short
intros. Links are regularly organized by subject.
16. TraderFeed
(2,437 links). The author, Brett Steenbarger, is one of the most
intelligent voices in the financial blog business. Strong on technical
analysis, broad market commentary, and the psychology behind trading
behavior.
17. Alpha Trends
(1,046 links). Extremely strong technical analysis. Good video
commentary which it claims is the highest subscription membership for
financial videos on YouTube. Covers stocks, ETF, and index movement.
18. Econbrowser (6,597
links). Run by two professors, both with economic backgrounds. What
readers would expect from academics looking at the markets. Indepth and
often complex analysis of a broad range of topics from infrastructure
to policy making to consumer spendings. More than any other site on
this list, Econ Browser is not for sisses.
19. Peridot Capitalist
(192 links). Written by a money manager, one of the oldest and better
regarded financial blogs. Good corporate earnings analysis and looks at
undervalued stocks.
20. Information Arbitrage
(957 links) The author has been in the M&A and derivatives
businesses for some time. Strong and rich commentary on current
financial events, investment risks and rewards, and the current credit
and economic crisis.
21. Maoxian (290 links). Strong
pieces on day trading, technical trading, balance sheets, and ETFs.
Strange graphics. Writer tries to be anonymous, but it hasn’t worked.
22. 10Q Detective
(277 links). Writer has been an equity analyst. Good at digging through
government filings to find information for investors which is both
helpful and sometimes amusing. Good place to read how public companies
“game” the process of SEC reporting.
23. Ticker Sense (538
links). This site may be the most well known for its weekly poll of
financial blogger sentiments about the market. Written by money
management firm Birinyi Associates. Has excellent analysis of global
economy and major sectors of the stock market. Use of tables and graphs
is among the best.
24. Upside Trader
(356 links) Good technical analysis which follows the market carefully.
Strong charting on individual companies. Great place for day traders.
25. Carl Futia (133
links). One of the best financial forecasting blogs. Employs various
technical analysis including some he has developed. Notable for his
thoughtful and approachable writing. Posts very regularly.
PKS Miami Blog
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Commodities
ICE - contracts based on crude oil and refined products, natural gas, power and emissions, as well as agricultural commodities including cocoa, coffee, cotton, ethanol, orange juice, wood pulp and sugar, in addition to foreign currency and equity index futures and options.
Day Trading (NOT recommended!)
SMB Capital (mentioned on Wall Street Warriors)
Betting (NOT Legal in the US)
The Unlawful Internet Gambling Enforcement Act of 2006 made it illegal for banks and other financial institutions to process online wagers. The goal was to find an indirect way to regulate offshore casinos [… and sportsbooks… and real-money prediction exchanges…], which are outside the jurisdiction of American law enforcement. In short: the casinos are out of reach, but not the banks in the United States that process their transactions.
Bet on the Markets
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