The Wall Street Journal needs to brush up on its Shakespeare. Maybe that would help it realize, as did Launcelot, Shylock's disloyal servant in the Merchant of Venice, that you can't hide the truth forever. Launcelot says, "Murder cannot be hid long... at the length truth will out."
"At the length" can mean years, but this morning, the Journal was found out instantly...
From the New York Times' website this morning:
Citigroup's Struggles Continue in Third Quarter... After pulling off two consecutive quarterly profits, spiraling consumer losses overwhelmed Citigroup's strong trading results in the third quarter.
Same story, but from the Wall Street Journal's website this time:
Citi Swings to Narrow Profit... Citigroup reported a narrow profit on a gain from its securities-exchange efforts, but had a per-share loss of 27 cents in the latest quarter.
Same company. Same earnings report. But where the Times is content to report the loss Citi actually took, the Wall Street Journal spins the story in every direction it can, like a dervish playing roulette while riding a Ferris Wheel.
So... what really happened to Citigroup last quarter? The answer is simple, incontrovertible, and impossible to mistake: Citigroup lost money. The alleged "profit" reported in the Wall Street Journal was net of $288 million of preferred dividends and a debt exchange that sends 34% of net income to Washington. How they can call a preferred dividend a one-time extraordinary charge only Citi and the Journal know for sure. Apparently, though, the Wall Street Journal – allegedly the world's premier financial information source – is more than OK with it. They're thrilled about it.
When you read the Wall Street Journal, beware the spin.
Sign of a top for gold? Harrods, the upscale English department store, will start selling gold bullion and coins over the counter today in its West London store – as the precious metal trades near its all-time highs.
Chris Hall, head of Harrods Gold Bullion, said: "The financial environment has kindled a new demand for physical gold among private investors in Britain. For many people, this is a new and unfamiliar asset class that demands absolute trust. Until now London has had no well-recognised name serving this market." Another employee claims Harrods is "the only location in London where investors can purchase a 12.5kg gold bar 'off the shelf'."
Toppy as gold looks, I have to admit that, if I never say the words "top" or "bottom" again as long as I live, I'll be a better, smarter, and happier man. I buy gold today at $1,000 for the same reason I bought it 10 years ago at $300 – because I like to save what I earn. What Mr. Market or anyone else says about gold's value relative to the U.S. dollar is the last thing on my mind. If the dollar price of gold falls back to $300, my gold buying will continue unabated.
With the world obsessed with metals and mining stocks, I started thinking it was time to consider all the ways mining speculators will lose their shirts... So a couple days ago, I sent out an e-mail to a half dozen or so of the world's most successful and knowledgeable mining investors and analysts. I asked them for a list of the top 10 mining scams because I know in a raging bull market for metals, scams multiply like teen groupies at a Jonas Brothers concert.
The response to my request for scam stories was so overwhelming, I've yet to collate them into a usable form. Some of the responses, in addition to being useful and insightful, were also hilarious. One respondent warned of management teams who tout their years of mining experience, even when that experience has nothing to do with their current mining activities. He then commented, "Proctology and dentistry are both medicine, too, but choosing the wrong specialist could leave a bad taste in your mouth"... or come back to bite you in the derrière, I couldn't help adding.
It's good to be Goldman Sachs. (And with Warren Buffett and the U.S. government on your side, could it ever be bad?) Goldman announced quarterly earnings today, more than tripling its net income to $3.19 billion.
Meanwhile, net revenues in investment banking and financial advisory fell 31% and 47%, respectively. Goldman made up the slack by betting huge with the firm's own money. Goldman's Trading and Principal Investments department (its legendary "black box") was responsible for $10.03 billion, or 81%, of total revenues. In other words, Goldman ratcheted up risk in its proprietary trading department – making five times as much money as it did last year – because Komrade Obama is using your paycheck to guarantee the megabank and its zillionaire executives against losses.
And once again, Goldman's employees will buy more yachts and Ferraris than its customers. Goldman put away $5.35 billion, 43% of total revenue, for employee compensation in the quarter. So far, Goldman has earmarked $16.7 billion for compensation in the first three quarters, up from $11.4 billion last year.
The Social Security Administration announced today there will be no cost of living increase for retirees. But it didn't say a word about the four "loopholes" in the system that could allow you to boost your Social Security checks on your own, by up to $700 per month, maybe more. Steve Sjuggerud and his research team have written up the full story. Get the details here...
It's become just about impossible to find a stock cheap and safe enough for the Extreme Value Model Portfolio, where prospective investments have to jump high hurdles just for the privilege of sitting in the waiting room.
Using the Wilshire 5000 index of all U.S.-traded public companies as a gauge, we find U.S. stocks trading at 29.5 times earnings, paying a cash dividend yield of 1.88%, barely visible with the naked eye. At 1.88% per year, you'll get your money back in a mere 53 years. If I bought today, I'd get my money back by my 101st birthday. I'm as long-term an investor as you'll find anywhere, but I draw the line on investment payback at 51 years... 52 max.
Friend and hedge-fund manager Whitney Tilson isn't finding any new long ideas, either. He's finding new short sales... Tilson said yesterday he's doubled his short position in U.S. stocks. "We've doubled our short book from 30% to 60%, and we've trimmed our long book from 120% to about 90%," Tilson told Reuters. (It's possible to be more than 100% long by using leverage.)
Tilson says the Dow's brief rally above the psychologically important 10,000 level has no bearing on future direction, as he believes investors are overly optimistic today. Tilson also predicts banks, particularly small regional banks, will have huge losses for up to five years... "Investors are thinking that the losses are going to start to diminish fairly quickly over the next year or two, and our best guess is that losses remain very high for the next couple of years," he said.
A quick chart to support Tilson's thesis that investors are too optimistic, and stocks are due for a fall... 87% of S&P 500 stocks are now trading above their 50-day moving average, compared to a little more than 80% at the S&P's peak on October 9, 2007.
Also, on October 9, 2007, only 10 of our portfolio stocks closed at 52-week highs. Today, two years later, 25 of our portfolio stocks are trading at 52-week highs – and the breadth of sectors is much wider (technology, oil & gas, bonds, consumer products, precious metals...).
Here is the list from the October 9, 2007 Digest: Advisory Board Company (ABCO), Alnylam (ALNY), Google (GOOG), Gen-Probe (GPRO), Janus (JNS), McDonald's (MCD), Occidental Petroleum (OXY), Petrobras (PBR), SK Telecom (SKM), Verizon (VZ).
Now compare that to today's...
New highs: Vanguard Inflation Protected Securities (VIPSX), iShares S&P Index (IVV), iShares Hong Kong (EWH), Morgan Stanley Emerging Markets (EDD), Patterson-UTI (PTEN), iShares High Yield Bond Fund (HYG), Visa (V), Kinder Morgan Energy Partners (KMP), Coca-Cola (KO), Microsoft (MSFT), Intel (INTC), Longleaf Partners (LLPFX), EnCana (ECA), Enterprise Partners (EPD), POSCO (PKX), Portfolio Recovery Associates (PRAA), Sprott Resources (SCP.TO), WD-40 (WDFC), 3SBio (SSRX), Silvercorp Metals (SVM), Silver Wheaton (SLW), MAG Silver (MVG), Eldorado Gold (EGO), Rex Energy (REXX), International Tower Hill Mines (THM).
Not much in the mailbag today, folks. Don't be shy. Write in and tell us about all the little mining stocks you've bought in the last few weeks so we can make fun of you in tomorrow's Digest: feedback@stansberryresearch.com.
"One of your readers stated that over 1 million people move to Mexico from North America. Mexico is in North America. Is it illegals returning home with their booty? I lived in Mexico City for a year in 1989 and traveled extensively, it is a nice country and nice people, but the crime is horendous, especially the Police." – Paid-up subscriber Peter Courtenay Stephens
"To take a true Contrarian view. New record on the Glenn Beck Show: 9 ads for buying gold in 50 minutes. I have never seen anything like it. Even my UPS Man asked me about where to buy GOLD. I think it is a B wave maybe $1,100 but if it breaks $1,000. We are going to below $700. I just love being wrong." – Paid-up subscriber Littleton
Ferris comment: I like gold. When the price in U.S. dollars falls, I can buy even more.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and Baltimore, Maryland
October 15, 2009
Launcelot and the Journal... Toppy gold... On proctology and dentistry... Goldman's yachts, customers not... Sjug's Four Social Security "loopholes"... Tilson's big shorts...