Talking Your Book
There is a phrase on Wall Street--"talking your book"--which essentially means you are spreading information that would help the positions you have in the market. The most obvious example is shorting a stock and then saying the company is heading to bankruptcy. A lot of people are talking now about a new great depression or are saying that the Recovery Act is just a waste of Tax payer money. A lot of them are "talking their book". Take George Soros and Newt Gingrich for example. Here's Soros.
Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.
I will guarantee you that Soros' Hedge Fund is positioned to benefit from the fall of banking stocks and has made millions on the short side in the last three weeks. And how about Newt Gingrich?
"You are loyal to the nation," he said, "not the temporary possessor of power. I think any president deserves the opportunity to make a proposal, and that proposal should be listened to seriously. But it is foolish for a president to assert that they have prime ministerial authority."Besides, there are political gains to be made by standing tough. Mr. Gingrich sees the stimulus bill as his party's ticket to a revival in 2010, as Republicans decry what they see as pork-barrel spending for projects like marsh-mouse preservation. "You can imagine the fun people will have with that," he said.
When Gingrich says the Obama recovery policies will fail, he is "talking his book" for the 2010 election.
The reason I raise this is that when you dive down below the daily fluctuations of the equity markets, things are actually beginning to improve, especially in the credit markets. Richard Berner, Morgan Stanley's Chief Economist is no cock-eyed optimist, but here is a bit of what he had to say on Friday (warning-this material has no unique URL, as Morgan Stanley's web site is still in the dark ages).
The macroeconomic impact of policy stimulus may surprise us by its strength if the Financial Stability Plan is quickly strengthened and executed. Consequently, investors should not rule out the chance that policy initiatives will quickly come together and promote a traditional, vigorous rebound.... Restarting credit markets, repairing viable lenders' balance sheets and liquidating others, and foreclosure mitigation are essential. Some believe that lingering concerns about credit availability are overblown, with monetary policy at full throttle, interest rates down, unsecured interbank (Libor-OIS) lending spreads below 100bp, and some markets functioning again. The evidence on this point is mixed: Over the past six months, fewer banks tightened lending standards for the first time in three years. Corporate bond markets are more accessible, with overall corporate issuance up 8% so far in 2009 (US$95 billion YTD) versus US$88.2 billion for the same period in 2008, and non-financial corporate issuance is up 68% YTD (US$73 billion versus US$43.4 billion in 2008).But small business surveys (from the NFIB) report that credit is harder to get than at any time since 1981.
Long ago, the brilliant Texas investor Richard Rainwater taught me about "the self-fulfilling prophecy" and it's clear that both Gingrich and Soros are engaged in this game. But to a larger extent, so is every news outlet and blog that repeats the great depression trope. A year ago, I think I was justified for warning of disaster, and in full disclosure I have never been a short seller, so I had no book to talk. But now I think we all have to be wary of the motivations of people "talking their book".
market forces, if they are given complete authority even in the purely economic and financial arena, produce chaos and could ultimately lead to the downfall of the global capitalist system George Soros, The crisis of Global Capitalism
I think in Soros's case it has more to do with literally "talking your book". He has spent the last decade trumpeting global capitalism's coming self immolation. I think his goal at this point is posterity. Some respect as a economic philosopher and maybe a place in the Cannon for his prized reflexivity theory.
Newt- Well he served divorce papers to his cancer stricken wife in the hospital. You don't get more shameless than that. I don't know why we even talk about him.
February 22, 2009 1:38 PM | Reply | Permalink
Agreed. I don't get the feeling that Soros is just trying to make money. But shape the direction of the discussion.
Jesus our outlook is dismal. I hope we're not all living like Clive Owen in CHILDREN OF MEN in 10 years.
February 22, 2009 2:24 PM | Reply | Permalink
The day Soros pulls out of his fund activities and puts it all under an indepedent foundation is the day I'll join the Soros-lovefest and believe he is talking his "book" vs "talking his book." The media coverage massages his ego when it comes to giving speeches and talking on panels about democracy and human rights. His acumen as a financial oracle measured by his returns makes him a superstar within his own circle of powerbrokers. He will have it both ways until he hangs up the gloves for one or the other.
I thank JT for calling these folks out, and the media that gives them the platform (if only to fill time).
February 23, 2009 5:22 PM | Reply | Permalink
Soros has already admitted to making a ton of money in the past 3 months from shorting stocks.
And here he is at Davos talking about using oil as a weapon against opponents of the prevailing world order (Russia, Iran, Venezuela) At 3:35
http://www.youtube.com/watch?v=kao5vH4m5ec&eurl=http://www.infowars.com/soros-admits-lindsey-williams-assertion-oil-is-a-weapon/
February 22, 2009 2:02 PM | Reply | Permalink
Soros is NOT "talking about using oil as a weapon" at least not in the Youtube link provided above. He is talking, very sensibly, about the fall in oil price weakening the leadership of oil exporting countries, and speculating about what might happen to them. The link is a sloppy distraction from Taplin's main point which is about the near term economic future of oil IMPORTING countries, and Soros et al "talking their book" about THAT.
February 22, 2009 6:55 PM | Reply | Permalink
It is always appropriate to investigate a witness' bias and interest, but ---
In the end Taplin's produced an ad hominem argument.
The sky really, really is falling!
February 22, 2009 2:28 PM | Reply | Permalink
Although maybe the posting was just an excuse for self-promotion as in ---
A year ago, I think I was justified for warning of disaster . . . . [link, above]
On the other hand inasmuch as nothing in the post Taplin linked to, no matter how generously read or how fancifully interpreted, suggests he was "warning of disaster," maybe not.
February 22, 2009 2:52 PM | Reply | Permalink
Ellen- Maybe this earlier post for January 2008 will suffice.
http://jontaplin.com/2008/01/02/entering-financial-hell/
February 22, 2009 5:56 PM | Reply | Permalink
Your letting her get to you Taplin. Stay strong.
February 22, 2009 8:45 PM | Reply | Permalink
I'm not sure quoting Warren Buffett excusing himself for dithering rather than biting the bullet and closing down General Re Securities when he ought to have qualifies as "warning of disaster" -- and especially, when the "warning" comes with a large question mark, attached.
N.B. I don't think Buffett's 2008 letter to his shareholders excusing his most recent performance is out yet (his annual letter is usually released in the first week of the following March). BRK-A closed Friday almost 5% below its 6/15/1998 price (Berkshire-Hathaway doesn't pay dividends) -- not a good 10+ years for the Wizard of Omaha.
February 22, 2009 10:06 PM | Reply | Permalink
Down by "almost" 5%, so not a full 5%, eh? 4 and some change? Yeah, that sounds terrible.
I wonder how the rest of the market did?
Lessee... On 7/1/1998, the S&P 500 closed at 1017.01
On Friday, the close was at... 770.05
Which is a drop of 24.3%
So Buffett is outperforming the market by "almost" 20 points.
{blink}
You're right -- it's amazing he manages to sleep at night.
Or, um, not.
February 23, 2009 4:12 AM | Reply | Permalink
Did you include the dividends paid on the S&P 500? Thought not.
As they say -- probably with your case in mind Hal O'Brien -- a little knowledge is a dangerous thing.
N.B. Equaling the market's performance hardly makes one a "Wizard."
February 23, 2009 3:20 PM | Reply | Permalink
Nope. Neither have you, so far.
In the spirit of doing your research for you, though, here's a source for the S&P 500 Total Return Index, which closed in July 1998 at 3272.81 Here's today's close for the same index, at 1244.72.
That's a drop of 62.0% Which would mean Buffett is overperforming the market by... what? 58+ points? (Since, as you point out, BRK.A doesn't have dividends, so there's no adjustment on that side.)
If you have better data than this, I'd welcome it.
Which is why I almost always hedge my statements, and welcome being corrected with better data.
However, in order to persuade me, you actually do have to produce such data.
No doubt. Good thing Buffett's surpassing the market's performance by 50+ percentage points, isn't it?
(And continues to do so even in the extreme short term -- ie, today. S&P down 3.47%, BRK.A down 1.82% I've worked in an environment where a market shrinks, but one's employer is shrinking more slowly than the market as a whole. Yes, one becomes a bigger and bigger fish in a smaller and smaller pond, but it ain't pretty.)
February 23, 2009 8:24 PM | Reply | Permalink
Apples and Oranges.
The S&P 500 dividend history is readily available -- lets try an approximate number. How about $221.497 total dividends from 1998-2008 (might want to reduce the number by $4 or so since we're beginning our comparison in June 1998).
Add the dividends (not to mention the interest earned on those dividends) to the index value and the Wizard doesn't look like a wizard.
February 23, 2009 10:10 PM | Reply | Permalink
Regrettably, Standard and Poor's disagrees with you.
I'm afraid I'm going to say they're more authoritative about their index than you are.
February 23, 2009 11:43 PM | Reply | Permalink
The rest of the article you quote:
"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."
His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.
Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.
"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.
Soros was one of the few who saw this coming (a British analyst warned of the financial markets collapse in 2004). Yep, Soros and Gingrich, two peas in a pod.
February 22, 2009 2:39 PM | Reply | Permalink
Careful -- Taplin doesn't do irony.
February 22, 2009 2:54 PM | Reply | Permalink
Morgan Stanley quoted:
Followed by JT:
February 22, 2009 3:26 PM | Reply | Permalink
Sometimes talking one's book is also telling the truth and an accurate prediction, not a self-fulfilling prophecy. And it's of course reasonable to invest according to your outlook on the market.
Morgan Stanley talks its book too, yet Taplin cites wobbly opinions from MS as some kind of authority to justify his optimistic "things are actually beginning to improve". But as I read the MS extract, it's rather mixed and limited at best.
Newt is cited: "it is foolish for a president to assert that they have prime ministerial authority" and that applies to Bush/Cheney so it's not clear what the heck that quote is supposed to be about here.
Taplin also cites a mention of Soros. Soros is definitely an expert on self-fulfilling prophecies (his pet theory of reflexivity and fallibility). Yet Taplin failed to note from the same article, "[Soros'] comments echoed those made earlier at the same conference by Paul Volcker..." Volcker is advising Obama. What is their book?
It's good to question authorities when they make pronouncements. From my point of view, Soros is pretty accurate here but mired in his pet theories and lacking in a deep understanding of economics (he admits this in his recent book in which he again tries to describe and promote his pet theories). He definitely went short some markets as of August 2007, so it's a little late for him to now be trying to squeeze the last drop of blood out of the corpse.
The main problem I see besides the obvious housing bubble collapse is that trillions of $ of spending have been removed from the markets as overly and even criminally loose lending stopped. Not last fall, two to four years ago. All that borrowed private money kept an ailing economy propped up for something close to a decade (or longer in some views), to the tune of a trillion or so a year. A lot of the cash flow was funneled through home equity loans and late purchases of real property at inflated prices. The sellers and borrowers have spent or invested their cash, but cannot do so now.
A deep fundamental contraction and rebirth is necessary.
February 22, 2009 2:58 PM | Reply | Permalink
When a large percentage of banks hold securities that cannot be valued at their true market value without those banks being insolvent, I think one can safely say that the economy still has a lot of shaking out to do. And, since the problem is worldwide, one can safely say the world economy is in trouble.
I haven't figured out my book yet, other than that I hope to be able to have a source of income sufficient to live relatively comfortably (no cat food, thank you) for my remaining years. So, am I talking to my book? (Writing to my book?)
February 22, 2009 4:34 PM | Reply | Permalink
I don't think this is exactly about the next election. These off the wall attacks are reported on by media and talked of by talking heads. I think these attacks on Obama are basically about establshing the control of a para goverment which is outside Congress. The neo-con para government is really at war with government. I think there is this fanatasy amongst second tier neo-con elites and amongst the Washington neo-con para government that Josh talks about that the US has to be governed by a para government that the people are too unruly and that any set of policies that establishes the control of the para goverment regardless of the damage done to the US is somehow in the best interest of the US in the long run. Basically the para goverment is threatening elites now. Elites will be attacked like Obama regardless of the necessity of the policies advocated unless the elites get on board. Regardless of the damage done to the US the damage will be done to establish the para goverment. Get on board or sink. Basically the message is probably really directed at people other than Obama. Obama is clearly seen as a lost cause with the neo-cons. Top tier neo-con elites don't give a rat's ass about the US or the West. Leo Strauss is the model here. By the way, I think it is very suspicious that Soros keep benefiting from disaster too.
February 22, 2009 4:36 PM | Reply | Permalink
I think Obama realized that power of the neo-con para government and attempted to connect up to a set of elites who actually support the government and the US. Rubin and Summers may have made some mistakes and Stiegltiz may be the better economist but Stielgitiz is Mr. Maverick and Obama had to connect up to elites to balance the neo-con para government. Rumesfield said something about one goes to war with the army one has or some such. I think to an extent Obama has to 'go to war' with the elites that are available when taking office. If Obama had failed to connect up to the Clintonistas and national security elites such as Gates Obama would be having a rougher time than now and psycho attacks are being lauched on Obama such as the birth certifcate attack as is.
February 22, 2009 4:56 PM | Reply | Permalink
To be fair to Soros, in his case "talking his book" is hard to separate from "he eats his own cooking," in that he's at least putting his real money where his rhetorical mouth is.
And, to be fair... he has already made one big crisis mistake -- he, like a lot of other well known value investors, bought Bear Stearns on the way down to or towards zero.
I both think and hope that Soros is wrong about our current situation but... I bet he is honestly believes what he's saying and is not, cynically,
"talking his book."
As for Gingrich... yeah... he's going for 2010 and hoping for the worst.
February 22, 2009 9:37 PM | Reply | Permalink
I think comparing Soros to Limbaugh is unfair. What motivates Limbaugh is dark and hard to ananlyze, but, aside from his philosophical bent, Soros is pretty easy to read. First of all, and above everything George Soros is a speculator, that is what has made him rich and finally that is what has made him famous. As destor23 says he puts his money where his mouth is. What would be weird is if he were talking one way and investing another. And certainly Soros is not the first person to notice a certain symmetry between the collapse of the Soviet empire and and what appears to be happening to ours.
February 23, 2009 6:48 AM | Reply | Permalink
Soros is also a wannabe philosopher who knows his limitations and accepts them (at least philosophically - I don't speak for him as a market player). The New Paradigm For Finanacial Markets is his book from last year (I hear he is putting out a revised edition now, since he went to press around May 2008). The philosophy is weak but I believe sincere.
February 23, 2009 4:33 PM | Reply | Permalink