During various stages of our twin bubbles, my daily column at FleckensteinCapital.com (subscription required) was peppered with analysis of tech stocks, due to the roles they played: the epicenter of speculation in the equity bubble and a barometer of speculation in the real-estate bubble.
However, I am not involved much with tech stocks at the moment.
Long or short, tech is dicey
I can't own them because of the business risks and how expensive they are. But I also don't want to be short them, as almost all of these tech companies are liable to make their third-quarter estimates and could quite likely sound upbeat about what the future holds (if history is any guide).That, coupled with government money printing, makes it potentially dangerous to be short tech stocks, betting they will go down. Still, I keep my eye on them because, for me, they continue to be such a useful gauge of speculation for the market as a whole.
That said, I do have a long position in Novatel Wireless (NVTL, news, msgs). Novatel was brought to my attention by my good friend Fred Hickey, who recently discussed it in his High-Tech Strategist newsletter. It's a speculative "trade" (i.e., I will probably own it for less than six months) that has a risk-reward profile I am comfortable with.
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As a consumer, I will say that I love Novatel's easy-to-use MiFi wireless mobile router (offered by Verizon), which is spectacular. Anyone who travels regularly might want to check it out.
Lehman wrought its own collapse
What one-year anniversary would be complete without mentioning the events of last August and September? Thus, a few words on the collapse of Lehman Brothers (LEHMQ, news, msgs).Last week saw an avalanche of coverage in the media, featuring no shortage of second-guessing about what should have been done and what would have happened had Lehman not been allowed to fail.
Most of this second-guessing is rather useless, as it seems as though many of the people who hold these opinions are somewhat uninformed. (For anyone who'd like to see just how out of control and completely reckless Lehman Chairman Dick Fuld was, I suggest reading "A Colossal Failure of Common Sense" by Larry McDonald.)
As an organization, Lehman Brothers deserved to go bankrupt. Which does not mean that everybody working there acted irresponsibly and deserved to lose their jobs. That is not the case.
In this instance, it looks like the bus was driven over the cliff by the folks at the very top. They were oblivious to the dangers of dubious illiquid assets, financed by the use of egregious amounts of leverage, and they refused to stop acting like drunken fools even when it was clear the subprime disaster was not "contained."
We probably would have been better off in the long run had a few more institutions been allowed to fail. Unfortunately, the problem was so huge that many more failures would have led to the vaporization of the financial system. Thus it's understandable why then-Treasury Secretary Hank Paulson pursued the path he did.
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How different would the world look now if events had been otherwise? We can't really know. All that is clear is that we are left with a do-over after the world's central banks and governments decided to print gargantuan amounts of money. We must play the hand we're dealt -- one where, sadly, the idea of "too big to fail" companies does not seem to have died yet.
Hitting the leveraged banks where they live
However, my source the Lord of the Dark Matter (who's been quoted in columns such as "Will economy's green shoots wither?") has an interesting suggestion for beginning the process of ending the horrible policy nurtured along by then-Federal Reserve Chairman Alan Greenspan and others:"So how about this for a plan: Pick a low number, tell all banks -- but especially the complex ones with hundreds of holdings companies in every jurisdiction -- that this low number will be your maximum leverage ratio, and if you are found to be above it for two consecutive quarters based upon a measure you can neither fudge nor game, then you lose your deposit insurance until you are back below it. Furthermore, if you break the leverage ceiling twice, you lose your deposit insurance forever. That should concentrate the mind of (those running the) banks."
This sounds like a great place to start, in terms of weaning these behemoth institutions off the taxpayer "put," whereby heads they win, tails we all lose.
At the time of publication, Bill Fleckenstein owned or controlled shares of the following company mentioned in this column: Novatel Wireless.
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