In Search of the Perfect Investment

When people borrow money to buy shares, the shares go up.

Today the world is deleveraging — reducing its outstanding debts.

This will take years.

Hence we are in — what they call — a secular bear market.

There are bounces in such bear markets, as happened in October. But the overall trend is down.

Theoretically you ought to be able to identify a bear market and short obvious targets — like banks,  European sovereign bonds, the Euro or technology. But what is obvious is  not easy.

The key for all of us is stay defensive. Don’t borrow against our bets and remember our old cliche — “When in doubt, stay out.”

MF Global — Corzine’s firm — has filed for bankruptcy. He personally killed that firm with dumb decisions that only a supremely arrogant man could make. From today’s New York Times:

His (Corzine’s) outsize bets at MF Global on European sovereign debt — many of which he made personally — proved the firm’s undoing because of the large amount of leverage that he used to magnify his bets. As of the firm’s filing at the end of June, it had $44.4 billion worth of liabilities; yet it only had $1.4 billion of equity. That kind of leverage was enough to scare credit ratings agencies into downgrading the firm last week, which led counterparties to stop trading with it.

Do the math. Divided 44 by 1.4 and you get a 31.43 times leverage. That number is mindblowing.

You should read the rest of Andrew Lee Sorkin’s piece It’s Lonely Without the Goldman Click here.

You should also read The Wall Street Journal’s Opinion piece this morning Pulling a Corzine. Click here.

From Bloomberg this morning:

Equities, the euro and commodities came under heavy pressure Tuesday as news
that Greece will hold a referendum on it European Union bailout package. Given the
very public opposition to the country's spending cuts, news of the referendum,
which is expected to take place in January, has sparked doubts about the deal's
approval.

Favorite view of Europe.

I’m seriously impressed with Amazon. Three reasons:

1. I’ve bought books recently from them. Their delivery speed has been awesome. I even received a package on Sunday. How did they get it to me on a Sunday? I have no idea.

2. They seem to have everything I want, and at really good prices.

3. They are constantly improving their web site. It’s easier, faster, more full-featured.

People say they’re becoming “the Walmart of the Internet.” That’s not true. They’re much better than Walmart in  both in the quality of what they sell and the service they offer.

How to delight the commuters. On May 2, 2011, the Copenhagen Philharmonic amazed commuters at the Copenhagen Central Train Station, as they created a kind of orchestral “flash mob” – performing Ravel’s famed Bolero, with the musicians gradually assembling in place as the work progresses. The video – which shows not only the assembling orchestra, but also the delighted faces of the commuters – has generated overwhelming interest, and indeed has exceeded the orchestra’s expectations. Click here. Click on full screen.

Neat interview with the investment powers that be at Notre Dame. Click here.

Mr. Corzine is not having a good Fall. From the New York Times:

Federal regulators have discovered that hundreds of millions of dollars in customer money have gone missing from MF Global in recent days, prompting an investigation into the company’s operations as it filed for bankruptcy on Monday, according to several people briefed on the matter.

The revelation of the missing money scuttled an 11th hour deal for MF Global to sell a major part of itself to a rival brokerage firm. MF Global, the powerhouse commodities brokerage run by Jon S. Corzine, had staked its survival on completing the deal.

Now, the investigation threatens to tarnish the reputation of Mr. Corzine, the former New Jersey Governor and Goldman Sachs chief who oversaw MF Global’s demise, making it the first American victim of Europe’s debt crisis.

Harry Newton who despairs that the Republicans can’t field anything better. Perry’s a nut. Cain’s crazy. The only good news: John Stewart is a having a field day. And it’s very funny. Comedy Central week nights at 11 PM. Watch.