Blodget & Rattner Home Investing Kit (Securities Fraud Not Included)

By Kyle Metivier - May 16, 2012 | Tickers: JPM, WFC | 0 Comments

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Prior to investing any amount of time before you read this, I urge you to watch these two pied pipers of investing talk about how clueless we are: “Individual investors are not smart enough”. You don’t have to watch the entire segment; just to the part where they belittle anyone with a brokerage account.

The analysts that are “scaring” you away from doing your own homework, rather than paying the likes of them to do it, should have their dubious bios splashed across the TV screen as though it were a Surgeon General’s warning on a carton of cigarettes.

First, we have Henry Blodget, a former tech research analyst, who happens to be banned from the securities industry. His Yale education and ability to call a split with Amazon gives him carte blanche and affords him air time on CNBC, Yahoo Finance, and he’s currently the CEO and Editor-in-Chief with Business Insider (a blog which I follow, with writers I genuinely respect). Apparently the $2M fine bestowed upon him by the Securities and Exchange Commission left him no worse for the wear, but you, “common investor”, should yield to those with experience in this game, which he has. But if he’s going to keep appearing on TV, someone in his circle should tell him to practice what he’s preaching and stop cutting his own hair.

Next up, we have proud Brown University graduate, Steven Rattner, former “car czar”. He’s the individual with the glasses his Mom bought him in 1966, and he champions the school of thought that we have no idea what we are doing when it comes to investing in individual stocks. Unlike his stock market elitist bunkmate Blodget, the “Rat” had to pony up $10M in restitution to the great state of New York, thanks to his Tony-worthy role in a state pension kickback scandal. I think he has a few years left before he is able to appear “in any capacity” before any New York pension fund. His two-year ban from the securities industry is up at the latter part of the year.

Time heals all wounds, doesn’t it? Apparently, these players are worthy of air time to let us know we have no idea what on Earth we are doing when it comes to investing. Let me state, if I come under SEC investigation, I will let you all know and silently crawl back under my rock. Until then, I am looking for a certified landscaper, as I probably have no business mowing my own lawn.

I know, in my heart of hearts, that you have better things to do than read the eloquent prose that I spout from time to time. The problem I have with these two time bandits, is that they played the “rigged” game, made blankets of money to keep them warm, got caught, and now they are back in full force, with expensive suits, proclaiming that we have no business, whatsoever, attempting to do any sort of investing on our own, other than a mutual fund or an ETF (Exchange Traded Fund). They got caught with their greedy fingers in the cookie jar, and now they are telling us we aren’t sophisticated enough to know what the cookie tastes like, since we can’t possibly aspire to reach the heights where the jar resides.

Let’s get a few things straight, I have mentioned on several occasions that I am by no means a financial analyst, a stock reporter, or any sort of fiscal wizard. I have also said that humility is a glorious characteristic to have in your possession. And now the gloves are comfortably off.

There was a moment in time when I actually followed these two and respected their words, ideas and opinions. I listened to what they had to say, on a number of topics, but even then, I took every single syllable with an ounce of skepticism. Nobody is better than you. I’m certainly not. These two sultans of scandal aren’t. Don’t let anyone convince you of anything different.

At some point in history these two were at the top of their craft. What did they do? They tried to use that to their advantage, in direct opposition of the very “common” investors we are. And they still profess to think we have no business when it comes to investing. This is exactly what I mean when I tell you to take everything with a grain of salt, even as you read this (add some pepper to anything I write), and certainly when you hear what these distinguished former trading titans have to utter on any given subject. Now get to work, and let’s show them we know better, but thanks for the advice. Unless they told you to exit your position with JPMorgan Chase (NYSE: JPM), before May 10^th, when Jamie Dimon issued a public statement that “egregious” investing mistakes were made that could “easily get worse”. Until that bit of nasty news regarding the “failed hedging strategy” was made public, not one analyst or investor knew JPMorgan would go down a healthy clip (as much as 10%; the stock opened May 10 at $41.23 and closed May 11 at $36.96). But as I have said before, moments of obnoxious, reactionary sell-offs offer opportunities. Even though Rattner stated there’s no way individual investors can possibly understand anything about valuations, I know enough to know that the $2B dollar “bad trade” amounts to about 75-cents off a $41 share price, not the 10% gashing the stock price weathered (which is probably why it moved up 1%, Tuesday, May 15). JPMorgan will still make money this quarter, despite the efforts of sue-happy investors (two lawsuits have been brought before the company due to the trading losses).

But  you wouldn’t know anything about that, since I told you to take a look at Wells Fargo (NYSE: WFC), at the beginning of the year, given the potential for any sort of housing rebound, their “favored nation” status with Warren Buffett’s portfolio and the company’s growing massive mortgage holdings post-housing bubble (currently over 30%). The share price for Wells Fargo was pretty much flat, for the trading days when the news for JPMorgan hit, and still up around 15% when trading opened 2012. JPMorgan is still up about 5% since we began the year, but well-off their high over $43 since we started the “Sell in May” phase of the calendar.

Since the “go-away” month started, it’s possible the summer might be a bit cool for the markets. Both big banks offer decent dividend yields to weather these types of storms (JPMorgan, 3%; Wells Fargo, 2.7%). And provided we are investing, rather than trading, I’m sure we’ll be fine as we head into 2013. Just don’t ask Mr. Blodget or Mr. Rattner, because I really don’t know anything.

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