Friday, January 25, 2008

Financial stocks

I've sold my Citigroup stock (C). Big whoop, you say, the financial crisis has been all over the news for months? Well here are my thoughts on the matter: I think it's best not to invest in financial stocks at any time, because the CEOs get paid for short-term results while the shareholders are left holding the bag for long-term losses. Citigroup and Merrill Lynch CEOs walked away with a bundle during the go-go years just past, leaving their companies loaded with bad debts. Surely these financial experts knew very well that all those subprime loans were going down, but it didn't matter - they just needed a few quarters of paper profits to pocket millions in bonuses.

The big problem with financial stocks is that they make their money borrowing short-term and lending long-term, and for this to work requires a conservative approach. Whereas maximizing the CEOs bonus requires a speculative approach. This fundamental disconnect makes the stocks a bad bet.

Friday, January 18, 2008

Tighter Immigration

The business papers have well noted the bearish effects of the housing meltdown. The tightening immigration situation is another bearish factor that is not often considered. Illegal immigrants work and produce things in this country, and they spend money here. They also need houses and apartments to live in. Deport them or make it harder for them to come here in the first place, and you reduce GNP. I'm just saying.