Friday, July 11, 2008

Predictions & Bank Failures (redux)

For the most part, my professors in B-School have all been quite liberal (even though it's business school). Which shows that being a faculty member in university academia is a better predictor of political leaning than the subject that faculty member teaches. However, my Derivatives class is the first I've had so far with a conservative professor (he announced his political beliefs in the first class). It's been strange listening to him rant about how the government has never done anything good, how it shouldn't be involved in America's capital markets and shouldn't regulate businesses at all. He even spent five minutes the other day ranting on Sarbanes-Oxley and calling it a bad thing. Weird. Anyway... Mr. Ultra-Conservative Derivatives Professor loves Jim Cramer and Cramer's site, Personally I don't think Cramer's a genius, but he's also not a bad guy. In fact his overall investment strategy is solid, if you realize there are heavy initial "qualifiers" to his Mad Money picks. Unbeknownst to the average viewer, Cramer feels it's difficult-to-impossible to beat the market index and therefore 80% of your money should be invested in 401k's, IRA's, and index funds (mutual funds comprised of blue chip stocks from the S&P 500). When Cramer talks about "Mad Money" what he's actually talking about is the 20% of investment capital you're willing to gamble and lose. Cramer's stock picks have done very well, but time is the great equalizer of Wall Street prognosticators, so long-term we'll have to see whether "Mad Money" actually knows what he's talking about. The point of all this is that I don't usually visit TheStreet, but since Finance Prof talks about it so much I've spent the past few weeks checking out the site for class discussions. The site obviously has a heavy reliance on Cramer for material, so to diversify the site's content the editors hired Lenny Dykstra (old Mets / Phillies outfielder) to write articles and make picks as well. "Nails" has performed decently with his investment advice so TheStreet's editors kept running with a good thing and hired Tim Brown (retired Oakland Raiders WR) to write a column. Now, I'm not against ex-professional athletes spouting investment opinions, they're just not the first group that comes to mind when I contemplate bond markets and interest rate swaps. Come to think of it, they're also not the second group... or third... or fourth or fifth or sixth. Actually, considering recent research showing 60% of ex-NBA players go broke after leaving the league, and the laundry list of bankrupt ex-athletes, I'd put my interest in ex-pro athletes' financial advice somewhere between the two crazy guys outside my Wawa who think I'm the President and freshly poured cement. Unfortunately, Brown doesn't do much to help the cause by writing an article comparing Intel's short-term prospects to the Raiders' short-term prospects and claiming both look good! Sheesh. I'm left not only quetioning Brown's skill as an investment analyst, but as a football analyst as well. Like I mentioned in a previous blog post, predicting the market is nearly impossible but with the sliding demand for computers, razor-thin margins in chip sales, and Intel's current lack of diversification, it would seem Brown's Intel prediction is on shaky ground to begin with... and I don't know where to begin dissecting the Raiders' abysmal short term prospects. Their egotistical primadonna quarterback who hasn't done a single thing in the NFL? The $86.3 trillion they've got tied up between McFadden and Russell? Javon Walker? Al Davis? Yuck. Just yuck. Moving on... another interesting news item surfaced today related to the post I wrote about market predictions and bank failures. According to the FDIC, Indymac's collapse this week looks like it will be the 2nd largest bank failure of all time. Which is not a good thing, but like I said, as banks consolidate and get bigger, bank failures are only going to get bigger too.


Sprizouse said...

Well chalk a win up for Tim Brown... Intel showed decent earnings and their stock price rose $0.20 yesterday after their filing. But Brown bet long on the stock... something I'm not sure about. And I still think the Raiders stink... so there.

Ryan Parr said...

If for anything, its good for a laugh. These guys should be predicting fantasy football, not stock (unless they have experience and schooling there which maybe they do, I dont know).