Really Bad Call: SubPrime Doesn't Matter, Buy Bear Stearns
In light of my earlier rant about PHSI, we introduce today a new and continuing series: Really, Really Bad Calls -- in research, print or TV.
A few ground rules: We are not talking just a single bad call, or even a few -- but rather, a person's entire oeuvre. When a guy with a good track record gets a call wrong, we give him the benefit of the doubt, and he gets a pass. When some idiot insists that Housing is bottoming for 3 years, they are fair game.
No, we are talking serious fuck ups. This is not for merely messing up a bit -- we are looking for something truly special in terms of money losing idiocy. Not just wrong, but brain injuring, wildly embarrassing, astonishing examples of bad analysis. Wishful thinking, cheerleading, politically polluted economics, and similar ilk. Stuff so god-damned bad that reading it actually lowers your IQ dozens of points. The kind of wrong that leads to a strike-them-from-your-list-of-people-to-ever-read-again-or-you-will-go-blind bad. Or as my Texan friends say, shit-the-bed-wrong.
David Lereah type wrong.
Consider this marketplace of ideas in action, bringing a little accountability to those irresponsible pundits who are costing the investing public money.
Now, people who live in glass houses shouldn't throw stones, and I
can be, and all-too-frequently am, as wrong as the next guy. Hey, we expect to be wrong. But I
consider myself merely run of the mill dumb, and taken as a whole, readers
here have made money. What we are looking for is stupendous, horrific, jumbo money losing stupidity.
Which brings us to Ben Stein.
I know I swore off Stein a year ago, but I stumbled across this piece from 12 months ago, I had to remind you of exactly how myopic and, well, just plain incompetent the guy is: From August 2007 Ben Stein: SubPrime Doesn't Matter, Buy Bear Stearns
The rate of loss in subprime mortgages keeps climbing. In time, perhaps it will double, maybe back to $67 billion. This is a large sum by absolute standards, and I would sure like to have it in my bank account.
But by the metrics of a large economy, it is nothing. The total wealth of the United States is about $70 trillion. The value of the stocks listed in the United States is very roughly $15 trillion to $20 trillion. The bond market is even larger.
You can read it paragraph by paragraph and discover something wonderfully wrong in almost every sentence . . .
Really, why the hell does the NYT insist on publishing this guy? He is a political hack, a terrible economist -- and an enormous money loser.
And thats this week's Really Really Bad Call...
>
Previously:
Farewell To Ben Stein (January 2008)
http://bigpicture.typepad.com/comments/2008/01/farewell-to-ben.html
Source:
Chicken Little’s Brethren, on the Trading Floor
BEN STEIN
NYT, August 12, 2007
http://www.nytimes.com/2007/08/12/business/yourmoney/12every.html
Friday, August 08, 2008 | 11:30 AM | Permalink
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BR. Can you adjust your language in your posts. I force my 15 year old son to read you and Sedlak's blog every day. He doesn't quite understand everything (yet) but I figure he will be light years ahead of anyone listening to Cramer and the CNBC morons. (excluding Santelli) Thanks
Posted by: colonoscopy | Aug 8, 2008 11:37:51 AM
JJC certainly has to go on that list of money losing call champions...though he redeems himself by simply acting as if he never said what he said...or wrote what he wrote..on a daily basis...and then he will tout his Bernanke meltdown as clairvoyance
Posted by: brasil | Aug 8, 2008 11:39:15 AM
Once the NYT finds someone they like, they use them forever as a spokesperson for whatever part of the culture they supposedly represent.
It's really quite annoying.
Posted by: b | Aug 8, 2008 11:44:19 AM
The total wealth of the United States is about $70 trillion
Here we have a basic mistake of taking valuation for wealth.
Wealth, at its most basic, is human knowledge and hard goods that satisfy human needs and wants.
Market caps are not "wealth", they are simply the product of price per share x number of shares outstanding. In times of speculative excess the valuations can get way away from the intrinsic values, the actual wealth of the company and nation.
Land values are a particularly ephemeral type of "wealth". Just ask the guy who paid billions of yen for real estate in Ginza 20-odd years ago.
Posted by: Troy | Aug 8, 2008 11:50:41 AM
Finally someone said it – Ben Stein is a joke! Cheers to that!
Posted by: Penguin | Aug 8, 2008 11:51:14 AM
Yes, yes, yes. More of this is needed. CNBC just had Joe Lasagna (I mean LaVorgna) Chief Econmist from Deutsche on trying to explain away his bad calls (and others) and why he and many of his Wall St. car salesmen/flacks had it so wrong. Their (Pisani, etc.) was that most of the "good" research analysts had left the sell side for the buy side, namely hedge funds. It was a bit weak, but at least a start on their part.
Posted by: Jeff | Aug 8, 2008 12:08:26 PM
I wonder if ol Ben used any of "Ben Stein's money" to BUY Bear.
As for bad calls - I'm trying to figure out why ANYONE is buying financials today - Umm, didn't Fannie just report a loss that was more than twice as large as expected? This entire 'rally' is a world record bad call..
Posted by: Michael | Aug 8, 2008 12:11:06 PM
Isn't Ben Stein an actor? I thought he was just role playing in a paid gig?
Did somebody actually take him serious?
Good lord!
Seriously, he has the same problem as many, no ground level intelligence, no idea what is really going on on the real world, no idea how bad the fraud was, how out of control the greed was, no idea how removed from consequences those writing the loans were. Many like Ben Stein, Larry Kudlow, etc. simply had a blind spot for this because they did not see it on the ground and they ignored those who did.
Posted by: Rich Shinnick | Aug 8, 2008 12:15:00 PM
BR,
I too encourage my kid (14) to read your blog. It's not like he's never heard bad language--I'm a most talented cusser myself--but still.
In an attempt to (sorta) clean up my act, I recently changed expletives. Since most are based on religion, I turned to using the first name of the head of the secular religion of my home state, Nick Saban (Alabama's football coach), anytime I would otherwise use an expletive, e.g., Nicking, Nicked up, Nick you, etc.
Perhaps you could do something similar w/ Ben Stein? Benning, Steined up, Ben you.
Just a thought.
Posted by: Donkei | Aug 8, 2008 12:15:27 PM
Michael: Am trying to figure out the same thing. Anyone have any answers? Do the actual financial results even matter anymore for the financial stocks? Is this as a result of the "no short selling rule by the SEC and/or the implicit guarantee the government has given the financial services sector as a whole? Other than that, how can the rally in financials be justified?
Posted by: Jeff | Aug 8, 2008 12:17:08 PM
Tom Brown on subprime. Fish in a barrel. Virtually anything he's written at bankstocks.com or said on TV will do. And the scary thing is he's back on calling a bottom in financials.
Posted by: Namazu | Aug 8, 2008 12:27:20 PM
I believe the concept behind this column is flawed. Ben Stein is a shill. As are the rest who make these idiotic statements. They are PAID to say these things. Plenty of people will lie for money. They know what they are saying is wrong as far as the predictions they are making. They don't care that it is wrong according to most ethical standards.
Does anyone honestly think Yun just happened to be that stupid and completely unable to analyze the housing markets AND ended up in that job?
Yun, Stein, Kudlow, etc. You think they are wrong. But from their perspective everything is going perfectly well. Their pay is not tied to their predictive ability, it is tied to their ability to sell the talking points of their corporate masters. There are never any recessions for the members of Shillville because it pays so well.
They know they are lying.
Posted by: 12th Percentile | Aug 8, 2008 12:30:05 PM
Woah! What a hatchet job!
He never said that we were nearing the end of the subprime crisis. He said, instead, that he didn't know how big it was going to get.
He never said to buy Bear Stearns. Instead, he said that he didn't know how deep their problems might run.
What he did say is that he thought the market was over-reacting to the information that was available. A year later, that's harder to believe, but this show isn't finished yet. The market can stay irrational for a long time.
Posted by: NoTimeToThink | Aug 8, 2008 12:30:51 PM
You guys with the 14 and 15 year olds have to stop being in denial. They aren't reading any language here that they're not currently using with their friends. If anything Barry's use of colorful language probably increases his cred with them.
Anyhow, Barry is writing a blog for the investing public, in other words adults, so please do not ask him to make it kiddy proof. His candor makes this blog more readable and interesting and sometimes he says what needs to be said. If you want your financial info sugarcoated, there's plenty of other outlets for you to force your children to read.
Posted by: That Guy | Aug 8, 2008 12:36:13 PM
Some encourage their teenage children to read this blog and be exposed to some financial realism yet cringe when a little cussing is used. Keep it real Barry. Ben Stein is a major fuck up and no other word best describes him.
Posted by: notsofastfriend | Aug 8, 2008 12:36:51 PM
Bravo Barry!! It's about time someone introduced the idea of competency into the world of finance. How about a web site with a running accounting of calls titled Evaluateyourfinancialexpert.com?
Posted by: gloomy | Aug 8, 2008 12:37:41 PM
NoTimeToThink: No, Stein did in fact explicitly write and say that this crisis was no big deal and that it would have a negligible effect on the market and wider economy. I remember it vividly because I read his column every other Sunday in the Times (yes, I still read it for another viewpoint, of which I don't always agree and this was one case where I thought he had it dead wrong from the get-go).
BR: Might be time to pull out some of those old Stein columns and post them here.
Posted by: Jeff | Aug 8, 2008 12:38:09 PM
Bravo Barry!! It's about time someone introduced the idea of competency into the world of finance. How about a web site with a running accounting of calls titled Evaluateyourfinancialexpert.com?
Posted by: gloomy | Aug 8, 2008 12:39:15 PM
What? No Cramer comments? This guy is a total joke - right about as often as Ben Stein. Remember telling people to stay in Bear Stearns the Friday before the collapse?
Posted by: AnitaMan | Aug 8, 2008 12:40:50 PM
Another thing here - please don't allow these ne'er-do-wells (to steal a phrase from Kass) to revise history and explain away their brutally bad calls or blame others/other factors for these atrocious calls (e.g. "the markets and economy woudl be fine if not for housing, lack of liquidity, the Fed's misquided policies, etc.). These folks should factor in such variables when making their forecasts and need to be called to the carpet now.
Posted by: Jeff | Aug 8, 2008 12:42:55 PM
I am shocked, SHOCKED that Ben Stein would be prone to spinning pollyanna-ish propaganda, self-delusion and disastrously poor analysis.
I mean, if being a longtime Republican party hack and proponent of creationism isn't a stellar track record for intellectual prescience, I don't know what is.
Posted by: Mike G | Aug 8, 2008 12:48:21 PM
Can you adjust your language in your posts?
Sometimes it is impossible to express one's feelings about the shills/idiots without using swear words. I'm surprised Barry didn't tear his keyboard apart with his teeth, getting blood all over the post, as he wrote this.
Posted by: Mr. Flibble | Aug 8, 2008 12:51:13 PM
NoTimeToThink -- I read all of Ben Stein's columns -- and then invested against it.
He has been very very wrong.
Posted by: Scott | Aug 8, 2008 12:53:21 PM
Barry,
Neat idea for a post, I'm sure you will be able to find plenty of people to choose from.
I agree with many above, you've got to put Cramer on here. Barron's sort of beat you to that with the cover story they ran some months back. I think his most recent call that I laughed at was after a recent market spike up I watched Mad Money and he was yelling about THE bottom, it was a bull market, blah blah blah, the very next show, and after the market dropped some 200 pts a day later, he then said "I didn't say EVERYTHING was at a bottom" I get a kick out of the shows daily themes which basically just have to do with whatever the market did that day, reactionary as opposed to forward looking. I believe his last "big" suggestion was to dump everything and put all your money in biotech.
But hey, he's not trying to make friends, he's only trying to make YOU money.
Right.
Posted by: ben | Aug 8, 2008 12:53:46 PM
donkie,
Your post was real funny, I actually laughed out loud.
Posted by: ben | Aug 8, 2008 12:55:47 PM
