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by Bill Singer
By Bill Singer
First off, a happy and healthy New Year to all of you! Let's hope that 2009 doesn't even come close to 2008 --- I mean, geez, can the coming year be worse? Let's hope not!
Now back to the BrokeAndBroker.com blog.
You know how you sometimes do or say something, and at the time you do or say whatever it is that you did or said, you don't think much of it -- and then, afterwards, it turns out that what you thought was a fairly mundane act or comment suddenly gets blown up out of all proportion? No??? Oh well, then you're just not going to get my point here so you might as well go surf somewhere else on the Internet. Enjoy the porn or the puppies or whatever else floats your boat. As to my loyal readers, if you are nodding in knowing approval about the morphing of the banal into the off-the-charts, then you will appreciate this brief blog entry.
A few weeks ago, I participated in a Forbes Intelligent Investing Panel entitled Common Market Myths (December 24, 2008). Editor David Serchuk asked me what I thought was a somewhat innocuous question: What's been missed during the current financial crisis? To which I gave a somewhat thoughtful (but what I thought was a fairly mundane) reply. Go figure. My answer has prompted a flurry of emails to me. I also see that my comment has been posted on some blogs/sites. Not that it's given me an ego trip or anything, but, please, in the future, have your people call my people. We'll do lunch. Ciao, baby.
If you've seen only part of my comment or you've heard about it, please read the verbatim quote below. You can view it in full context at this link:
Bill Singer: For me, the one thing the public must learn is that there are no omniscient market gurus who know everything and can always predict the market. Far too many know-it-alls missed the coming crash and will likely miss the coming recovery (if and when that is). Moreover, while the public is often dazzled by Wall Street into believing that investing is a science, recent events have shown that it is far more an art, at best.
As I have so often lamented during my career, public investors will spend hours online searching for a model of a car to buy, will compare hundreds of prices, will visit many dealers and then browbeat the car salesperson into chopping away at the minimum sticker price; but, that same consumer will buy some unknown stock from an unseen stockbroker from an unheard of brokerage firm, and all too often do so based upon a television commercial or a glitzy Web site.
The lesson of this crash is that you must do your homework, you must retain a vigilant skepticism of easy riches and you must never invest money that you cannot afford to lose. Finally, just as most veteran lawyers learn to believe nothing that they see and nothing that they hear but to personally test and investigate everything, investors must now return to the markets with that same mistrust. There are intelligent folks out there who understand the markets and who make a professional effort to select worthwhile investments. Find them but don't trust them beyond your commonsense instincts. However, there are also plenty of Bernie Madoffs out there. Avoid them and don't trust the assurances of others.
By Bill Singer
Forbes' Editor David Serchuk puts together another no-holds barred Intelligent Investing panel (nationally known regulatory lawyer Bill Singer, Stephen Roseman of Thesis Capital, and Robert Froehlich, Vice Chairman of DWS Securities). These three Wall Street pundits tackle the controversy over the Securities and Exchange Commission's apparent failures to effectively regulate and the Obama Administration's nomination of FINRA chief Mary Schapiro to assume the SEC's Chair.
In Forbes' December 19, 2008 article: Is Schapiro Enough For The SEC?, the Intelligent Investing panel concurs on some points but frequently disagrees on others. Read the viewpoints and decide for yourself.
Some of Bill Singer's typically blunt assessments are noted below:
Virtually all government agencies waste much of the funds they have. They overpay for their office supplies, they hire cronies and politicos with little understanding of the industry they are overseeing, they take far too many junkets to exotic lands at taxpayer expense, and they pay too much money to clueless managers and far too little to the grunts in the field.
Worse, promotion is often gained through corruption or awarded to those who have simply stayed longer on the job rather than produced superlative work. There is room for cost-cutting at the SEC and FINRA. Our whole society is belt-tightening. They can do so too.
http://www.forbes.com/2008/12/18/intelligent-investing-sec-schapiro-madoff-panelDec19_3.html
I would ask Dr. Froehlich to simply consider the disgraceful situation involving Gary Aguirre, Esq., and the interference he encountered from his SEC superiors, and the ultimate firing of this whistleblower. That had nothing to do with more money. That was corruption at the SEC.
Also consider the SEC's failure to investigate Bear Stearns--as was cited by the SEC's own inspector general in an historic report. And remember that the commission then had an [administrative law judge] whitewash the [inspector general's] finding by "concluding" that the staff hadn't really done anything wrong. That blind denial, that SEC partisanship, had nothing to do with dollars and everything to do with incompetency, negligence and failure.
By Bill Singer
"Forward, the Light Brigade!"
Was there a man dismay'd?
Not tho' the soldier knew
Someone
had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Death
Rode the
six hundred.
The Charge of the Light Brigade, Alfred, Lord Tennyson
Former Secretary of Defense Donald Rumsfeld infamously said "As you know, you go to war with the army you have, not the army you might want or wish to have at a later time." You only need to visit military cemeteries and Veteran's Administration hospitals to comprehend the stupidity, if not true horror, of that quote. Inadequate vehicle armoring. Insufficent numbers of and defective combat vests. Failed tactics. Failed strategy. Still, one thing remains constant: young men and women get sent into war and they defend their country with great courage, while politicians and officers far removed from combat posture and pose for the cameras.
In listening to the unseemly jousting between former SEC Chair Arthur Levitt and current SEC Chair Christopher Cox over where to point the finger of blame for the SEC's apparent failure in the Madoff affair and other similar lapses, we are told that the SEC lacks adequate funding. Lacks staffing. Lacks support. Is overwhelmed with work. We are asked to believe by career regulators and career politicians that the solution to the SEC's failures is a simple one: more money. As if bureaucrats ever have any other suggested fix! It's always the same refrain: more money, more money, more money. Well guess what---the refrain of these times is to make due with less and to get more out of it. Yeah, it's tough, but it's not anything new for the private sector. It's the challenge of productivity and rational planning--concepts apparently foreign to career regulators. In Washington, DC the art of the "sound bite" is now a substitute for competency. And all those appointed Chairs and Commissioners and Secretaries, well, they continue to blunder while their subordinates ride into the valley.
Well, guess what, fellas, we all need more money and if you folks had done your jobs, maybe there would be a bit more cash around for the rest of us. Oh sure, from time to time, these regulator types go before Congress and moan about the lack of funding or how they need more staff; and the response is typically tepid or a rebuke. And that's generally the end of the wailing.
The challenge of regulation was best stated by the theologian Rheinold Neibuhr:
God grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.
This might be a fine time for those running or seeking to run our nation's regulators to start drawing lines and accepting some rational limits before they burn out their staffs and unleash yet more havoc on the investing public. What we don't now need are those who when handed command, blindly accepted the situation on the ground. If you didn't make the effort to remedy things on the job, don't parade around afterwards with suggestions that you didn't implement. Similarly, don't start pointing the finger at your subordinates for whatever failure comes into public display after you gave them the Rumsfeld speech. You chose to go to war with the army you had. Now, don't complain about your troops.
I am a former regulator. I was frustrated in that role by the organizational politics that suffocated my efforts to aggressively pursue my caseload and by the entrenched cronyism that too often promoted those who were toadies and sycophants over those who came in early, went home late, and gave their all to the task of regulation. There are many good folks still in regulation. There are many industry veterans willing to do a turn in regulation. The challenge for the SEC, for the CFTC, for FINRA, for all regulators is to promote and reward those most deserving, and to attract skilled, qualified, veteran staff, and to retain them with fair pay and rewarding work.
All of which brings us to today's announcement that Mary Schapiro will be the next SEC Chair. At first blush, there are a lot of things I could say. Many positives and some negatives. I heard Charles Gasparino's comments on CNBC this morning and can't say that he's off base on many of his points. Gasparino thinks it's a bad choice--more of the same old tired crop of regulators with their now discredited approaches (and he says that she's being pushed by none other than former SEC Chair Levitt).
On the other hand, I actually know Mary Schapiro--I've met her, I talk to her, we have exchanged emails--and she is a very skilled, intelligent regulator with an amazing history of accomplishment. Unfortunately, she and I have often crossed swords during her tenure at NASD and now FINRA, and we have certainly disagreed about how her organization dealt with (and deals with) dissent within its membership.
Is there anyone more qualified than Schapiro for the SEC's top job? Probably not--she's former CFTC, SEC, NASD, and FINRA, which will likely prove a very useful panorama. Still, are we getting yet another career regulator from the same mold that produced Levitt and Cox? Is this the much bally-hooed "change" we were told to expect from the Obama administration?
I am holding the scale before me and see it wobbling up and down as it balances Schapiro's track record against the internal politics that remains at FINRA, her professional demeanor against her hardball response to dissent, her promise of reform against the uneven FINRA history of regulatory favoritism for the big and powerful. This is a tough call. Let me think on it a bit more.
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