Happy Monday! At least it is for the likes of James Cameron, Meryl Streep and Jeff Bridges who, among others, are savoring Golden Globe victory this morning. Not a sequel or remake in sight amongst the winners.
And yet Hollywood will be reverting to type in 2010 and one look at the list of expected blockbuster releases burst the bubble of any hopes that this will be a golden year for the movies. Harry Potter 7 (or is it 6 ½?), Iron Man 2, Sex in the City 2, Toy Story 3-D and the A-Team don’t exactly point to a big leap by studio producers.
Perhaps that’s what the financial industry should do, though. It’s not exciting to revert to tried-and-tested formulae, but at least it’s safe. Financial innovation was always seen as necessary to keep the wheels of finance running but it got us in a fine mess. Less acronyms and more vanilla may not produce the same kind of returns for Goldman and the likes, but it may make the rest of us sleep easier at night.
That said, our guest host on Squawk Box Europe Monday left me a little perplexed. Philippe Gijsels of Fortis Global Markets is a guy I’ve got a lot of time for, but he gives a great example of a conundrum that many of our guests and viewers are struggling with. The man is bearish, very bearish. Yet has still has to find stocks and sectors which his long only clients can buy.
"I think the market can fall 30 percent in the second half of the year. A slow economic recovery combined with taxation effects kicking in leave us vulnerable from June/July,” Philippe told me after the show.
Hang on a minute, 30 percent? That’s a crash isn’t it? Surely in this scenario we sell everything? Throw out the baby with the bathwater? Take the stuffing out of the mattress and fill it full of pound notes (make that dollars, dash to safety and all that)?
Actually, no. Philippe has the problem that he has to find sectors to buy for his clients. So the lesser of the multitude of evils out there appear to be good old defensives like pharmaceuticals, energy and food & beverages to name three.
And this is the root of one of the problems with the investment universe. When you are bullish you buy stocks and when you are bearish you still buy stocks. Why, after all these years of wonderful product innovation, have we not moved to a psychology where we feel as comfortable on the short side of the trade as we are on the long side? For once, I don’t think it’s just the product salesmen who are to blame. They’ve given us loads of short side instruments. No, it’s simpler than that. As a genus, species, community, call it what you will, we like buying stuff more than selling it. Blind optimism? Faith in long term upside returns? Brainwashing?
Other business today:
The Google-China wrangle continues. Isaac is following the line that everything that happens in China happens for a reason:
“Has it occurred to anybody that this is about protecting Baidu financially? Additionally, there is a need to stop Google from getting too large at which point the government will lose control. Remember even Chinese short-term strategy is long-term.”
Another winner could be Yahoo, whose stake in Alibaba leaves it in a position to benefit if Google does carry pout its threat to leave. At least Yahoo could be a winner there, unlike when its shareholders suffered from Jerry Yang’s intransigence in rejecting Microsoft’s bid back in 2008.
A lesson Darrell in Washington State believes Cadbury board and shareholders would do well to learn:
“I suspect Yahoo shareholders can give Cadbury shareholders some advice regarding management's holdout for a higher price. Give the shareholders a chance to vote.”
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