Investorwalk

My Ten Predictions for 2010 [12/28/2009]

I have been making my 10 predictions for 2 years now, since 2008. I initially got this idea from Byron Wien who has been publishing them every year since the 1980s, when he was with Morgan Stanley, then Pequot Capital , and now with Blackstone. My first picks for 2008 were accurate and had anticipated almost all major trends, substantially better than Byron’s -something I called beginner’s luck. For 2009, Byron beat me with his  correct predictions. In this crystal ball reading business, no one wins them all. Nevertheless, I think it is a fun thing to do, especially when the right calls are made.  I intend to continue my predictions every year, whether or not I get most of them right or wrong the year before.  Without further delay, please find my ten predictions for 2010 below.

My Second Visit to NYSE

Today thanks to the invitation from a firm recently listed at Amex, I had the opportunity to visit NYSE again.  Today is a special day. It has been exactly 8 years since 9/11. About 5 minutes before 9:30am, there was a 2-min silence devoted to the 9/11 victims by everyone on the floor. Instead of ringing the opening bell by a listed firm as normally done, this morning, the opening bell was rang by NYSE staff and September Concert, a grass-root non-profit organization in support of peace by music founded a year after 9/11. It was quite a special moment and I am very honored to be there and to see this special event by my own eyes right in front of the podium at this famous and gigantic NYSE trading floor.

The Beginning of the Gold Era

Gold has had an amazing run for a week, and on Tuesday morning (9/8) at HK market around 2-3am EST, Gold finally broke $1,000 again, an important key resistance level. It seems that the monthly chart has given a better resistance and support levels than the daily or weekly chart, from a long term perspective. Please see the monthly close chart to now from early 1970s when U.S. finally gave up the gold standard linking gold to US dollar.

Huron Consulting: a bad omen to name Huron from the beginning?

For people scanning the large stock movement last Monday (Aug 3), they must notice Huron Consulting (HURN) dropped 70% that day. And the news announced was bad. Huron has to restate their earnings since 2006, lower their 2009 guidance, and the whole top management team resigned, including Chairman and CEO, CFO and CAO. The key thing causing this is the very disturbing accounting treatment of so-called “redistributed earnings” to few key employees who have been involving in M&A acquisitions, along with a few other accounting irregularities such as allocation of chargeable hours.

Two Cartoons on "Cash for Clunkers"

Courtesy of www.ritholtz.com




Courtesy of Caglecartoons.com

Their Pocket or Our Pocket

There is a very interesting article “Wall Street profits from trades with Fed”, published at Financial Times’ website last night. It confirms my long time suspicion on the reality and truth about “profit” announced by a few major Wall St. banks these days. As we all know, most of their profit is now coming from the so-called “trading” area. This FT article demystifies at least partially what they are, and where they are coming from. They are actually coming from the Fed, since now Fed is their largest customer (not the public). So it is the trading profit generated within this shadow banking system, or playing games among themselves.

What Really Happened at Goldman?

Last week when I was traveling outside the country, someone brought to my attention of a very strange report.

Usually Goldman Sachs is #1 on top of the NYSE program trading reports, including the week ending June 19, and program trading volume by investment banks is about half of NYSE trading volume. So everyone knows Goldman is NYSE’s largest customer. However, suddenly for the week ending June 26, Goldman went from #1 to a no show, not even on the list at all! It seems something totally went wrong at Goldman that week, and what was that?

What's to Be Done About Citigroup?

FDIC Chairwoman Sheila Bair has indicated last week that she is pushing to purge Citi’s top management, especially its CEO Vikram Pandit. It shows that the regulators in the government are losing patience with the snail's pace of “reform” at Citi.  In many of my previous posts at SeekingAlpha, and from day one of his appointment as CEO, I voiced strong disagreement and still think it is the single worst decision ever made by the Citi’s board.

How Much of Banks' Earnings Are Real?

Last month, many banks reported strong earnings. Market sentiment has changed substantially. Only a few months ago, the collapse of the whole US banking industry threatened to bring the whole global economy down. Now, suddenly, the picture looks rosier than ever and this financial crisis seems to be over. Or is it?

 

With very limited transparency of bank earnings, there are several so-called earnings areas investors should question whether they are sustainable, and a few other areas investors should ask whether they are even real. They are as follows:

 

How did Derivatives Get Cities & Counties into Trouble?

There are two articles at NYT on municipal financial situation yesterday. You can read them here and here. The first one is that Moody’s Investors Service assigned a negative outlook to the creditworthiness of all local governments in the United States, the agency said Tuesday, the first time it had ever issued such a blanket report on municipalities. This kind of message will usually lead to many downgrades of municipal bonds in the near future.

The second article is more interesting. In Tennessee, a single investment bank, Morgan Keegan, sold $2 billion worth of municipal bond derivatives to 38 cities and counties since 2001, dominating and monopolizing this market there. What is more interesting is that Morgan Keegan wears several hats at the same time and engages in all phases of selling the derivatives.