We have always known that finding data is the Footnotes is, for most investors who are without our patented Research Platform, like searching for needles in a haystack. With XBRL, the only difference is now investors can search for digital needles in a digital haystack. Funny how little things change.
As follow-on to my 3-part Market Outlook series of posts, I am highlighting a quote from GaveKal research's Daily note today which supports my assertion that the "Easy Money Days Are Over" and that success in stock-picking will rely on superior analytical skills as opposed to the market-timing skills that have predominated most of the past 25 years (see Market Outlook Part 1: Rise of the Speculative Movement).
The end of the Speculative Movement and the momentum-investing fad means we are entering an environment more conducive to value investing or, more specifically, an environment where skill in assessing the true economic profitability and valuation of companies will determine the success of stock-pickers.
I believe that most of the traders and speculators who have been successful enough to stay afloat will be forced to exit the business or shift to a value investment style - an endeavor in which I expect very, very few to be successful. And though there will be fewer speculators, enough will remain to keep the markets from being too efficient.
Since the early 1990s, we have seen huge growth in the number of speculators and their impact on the market. Belief that it was easy to make money in the stock market was the primary driver of this boom in speculation. As shown in Exhibit 1, it was VERY easy to make money in the equity markets from 1986 to 1999.
In case you needed proof beyond the Global Research Settlement that Wall Street research cannot be trusted, Morgan Stanley delivers by admitting "inadequately disclosing conflicts of interest on the part of its research analysts."
Boomerang Capital Partners provides a great resource for tracking and benchmarking investment returns for hedge funds in general and the many different hedge fund strategies. Here is the link to the page where they offer a free report called the Periodic Table of Hedge Fund Returns.
The takeaway: the TED Spread indicates the financial system is relatively safe these days with no imminent danger. It has recently fallen from recent highs related to the debt issues in Europe and it is no where near where it was during the sub-prime crisis which led to the Lehman crisis when the TED Spread hit historic highs.
As highlighted in LPL Group excellent "Mid-Year Outlook for 2010", the economy is moving from 'recovery' mode to 'expansion' mode, which is very different from moving from 'recovery' back to 'recession' - a prediction made by many attention-seeking alarmists these days. We are still growing, just not as fast.
Here is a free copy of our report on SCHW for Ask Matt readers. This report provides details behind Matt's analysis of SCHW in his recent article in USA Today:
In April, GM bragged about having paid back the balance of its $6.7 billion loan under the Troubled Asset Relief Program. In truth, the did nothing of the sort. They simply pirated taxpayer funds to cover their losses.
You have to read this to believe it: "SEC Porn Problem: Officials Surfing Sites During Financial Crisis, Report Finds". And we wonder why Wall Street stays a several steps ahead of the regulators.
Most of the time when I meet with investors (large and small) and explain what I do and New Constructs does, they are astonished about what I explain as the reality of the investing world. They always ask: "What are regulators doing?"..."How can they allow these things to go on?"
The answers to that question are:
"Close the revolving door between the S.E.C. and Wall Street. At every turn we keep coming back to an enormous barrier to reform: Wall Street’s political influence. Its influence over the S.E.C. is further compromised by its ability to enrich the people who work for it. Realistically, there is only so much that can be done to fix the problem, but one measure is obvious: forbid regulators, for some meaningful amount of time after they have left the S.E.C., from accepting high-paying jobs with Wall Street firms."
Unlike the typical research firm, New Constructs aims to help our customers not exploit them. New Constructs only makes money by selling reports, no investment banking or trading fees pollute our research.
Watch this video. "The Warning". The description of the video from the website: "In the midst of the 1990s bull market, one lone regulator warned about the derivatives dangers -- and overnight became the enemy of some of the most powerful people in Washington..."
In June 2009, I went to DC to meet with Senator Corker, the SEC, the Senate Banking Committee, the FDIC, the Congressional Oversight Panel and the Public Company Accounting And Oversight Board.