Marginalizing My Buddy, Rich Karlgaard

Last month, Forbes editor Rich Karlgaard wrote this:

Throughout the crash of 2008 capitalism has taken it on the chin. The mainstream press has carpet-bombed us with headlines declaring things like "The End of Capitalism" and "The Reagan Revolution Is Dead." Ignored is an essential truth. Capitalism works only when accurate prices flow freely throughout the system. Capitalism works poorly when price signals are blocked or distorted. And that's exactly what's been happening for several years now.

Okay. Who could disagree? Note his line *accurate prices flow freely...*

On the other hand, more times than I can count, Rich has recently called for an end to mark-to-market accounting.

It's actually Step One in his Twelve Steps To Economic Recovery:

Step One - Admit our mistakes. Mark-to-market accounting rules have been a disaster. Let's suspend them or recalibrate them.

So *free flowing prices* only when the prices are *good*?!?!?!

Of course there's an argument for this hypocritical exception. Though, I have yet to see Rich articulate it anywhere.

Heck, I could even make the argument for him.

BUT then I'd have to send him an invoice.

I've written on mark-to-market accounting before in Cyclical Hypocrisy On Wall Street.

The Hilarious Jim Cramer

"My record of being right from 1980 to 2007 is, I think, unparalleled." - Jim Cramer, 11/07/08.

Hah! Very funny, Jim.

You really have to watch people with their *track records*. In 2006-2007, all you saw advertised by mutual funds and money managers was their *5 year returns*. Not a one was touting their *10 year returns* because those included the 2000 NASDAQ crash.

Similar to Jim Cramer, other bulls like Rich Karlgaard and Ken Fisher have also based their bullish bias upon the slender reed of their own 25 years of market experience.

What they failed to understand or account for, was the fact that interest rates have been declining over that time period. They overlooked the importance of multi-year bull market in bonds on their equity returns.

We're all biased by personal experience and we're all prone to get swept up by the momentum of short-term success....

So we must read history for intellectual ballast.

Note that Jim's buying Wachovia - which is the same as buying Wells Fargo - my biggest short position.

Wells just floated a secondary last week at $27.

Short term history tells us that not a single bank this year has *raised capital* and not fallen substantially lower.



The most recent example is Goldman Sachs who, in late September, sold a preferred stake to Warren Buffett, gave him warrants at $115, and then after the public waxed euphoric about the *genius's* blessing, Goldman peddled $2.5 billion in stock to the sheeple at $123.

Right now Goldman is trading 71.82 - only a month and a half later.

Wells Fargo and that turd Wachovia are going down, hard.

My record in the past 6 weeks is UNPARALLELED - if I do say so myself.

Elevating Deanna Shaw

I lost a wager with the young lady and am paying up.





She took me up on the bet (Rich Karlgaard did not)....and Obama won, just as she predicted. Comment thread here.

So here's her *singular post*. Am I done now?

Yes, if I had won, by rights there should have been a picture of my midriff atop her blog today.

You watch, she won't even have remembered our bet; she most likely won't even notice my payoff. Let's keep it quiet boys.

[Unless of course she has some vain Google Alert on her name. Full disclosure - I have three such alerts.]