Forgive the late post; we have had a hellish road trip to Connecticut and Boston, rain all the way.
A remarkable market performance today. It overcame huge odds. The bullish sentiment I have been picking up has been felt. Gold is on a tear, although down today, and seems to have good odds of continuance. The gold miner ETF, GDX*, has been a winner but is up smartly so cozy up stops.
NS and sister company NSH comprise the largest asphalt company in the States. Both are responding to Obama’s possible road building program. Both are up over the last week but their yield may make them a continued temptation. Do some hard due dili as NS is an LP and NSH is a LLC and may not fit into a IRA or 401k. Like many such structures they can be difficult to understand. In a similar industry, VMC* has been on tear since November 24th.
Roadblock
As mentioned a couple of days ago the failure of an auto bailout would put all bets off. Interesting mix of emotions being felt from the Hill. It seems the Republicans are finished with George. He must feel isolated more than ever and probably cannot wait to get out of town. My friend David Branch is a student of these kinds of things and even he cannot understand George’s current stance towards a bailout. The most current thought is that this has now become Obama’s problem. Am now wondering how the State of Michigan will meet its obligations.
Ponzi
Bernie Maduff was a famous guy when I worked in New York. Did not know until this morning he managed money. When I knew him he had a huge business of handling listed business that firms like ours could not execute. We would get an institutional order of, say, a sale of 500,000 shares. Before total electronic trading we had to show the order to the floor. If no one was in the crowd or the specialist dropped the price, we’d trade a little to satisfy our obligation and then pull the order and go to Maduff. He may have positioned the order at a slight discount to the last sale or he would take it to work, usually on the Cinncinati Exchange. This Exchange was no more than a matching computer. So, Maduff was a broker’s broker. And he made a fortune,. Evidently, he got into money management about fifteen years ago. He was convinced that by trading huge amounts of stocks around the expiration of options he could score little gains at small risk. Not sure how it was supposed to work. His pitch to clients was a 2-3% monthly return. It didn’t work so he had to continue to attract funds to pay the promised returns. He had $15 billion under management and levered it up to $50 billion. He executed and cleared his own trades so the fraud went on for years. His fraud and failure will be a huge nail into the hedge fund coffin. Technically, Maduff wasn’t a hedge fund but he has damned the industry, nevertheless. Clients will be pulling their money from even the most “trustworthy” managers. That could pressure the market. It is hard to overstate the significance of this fraud. Individuals, charitable offices, universities and family offices have been ruined. The SEC will be under even more pressure to reform both itself and the industry. Notwithstanding the Commission’s begging for more auditors it is probably finished in its present structure.
*Long DGX, VMC.
