I cannot remember if I have disclosed this before, but I own some Goldman Sachs stock. It is not a particularly large position, less than 1% of my net 
worth. But it worries me. I came close to selling yesterday and might just let it go today.
It is not that I don’t think Goldman is a great company. And it is certainly not that I think the stock is overpriced. With a trailing PE of less than 7 and no obvious threat to near term profits, it is, or ought to be, compellingly cheap.
The problem is that there is a chance, maybe not a big one, but a significant one, that the stock will go to zero. Not because of a problem in Goldman’s business, nor because the firm did anything it should not have, but because the federal government will decide to destroy it. Basically, I am worried that Goldman will get lynched.
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Once, in a now faintly remembered time, we were obsessed with house prices. Even as recently as a year ago, such obscure arcana as the Case-Shiller Home Price Index was closely followed. Looking back it is hard to
understand why. It was almost as if we thought that houses were a significant slice of our national wealth, that a change in their value might actually effect consumer sentiment and spending, and that a sharp drop in house prices, of all things, had set off the Great Recession. As if.
Of course, now we know that the Great Recession was started by a mid-level employee in the London office of Goldman Sachs.
Yesterday S&P released the monthly Case-Shiller numbers for February. It did not get a lot of coverage. True, that may be partially attributed to sharing a business news cycle with surprisingly strong consumer sentiment numbers, a turn for the worse in the Greek Crisis, and the ritual sacrifice of Goldman execs to appease the mid-term election gods. But it is hard to escape the conclusion that we have simply lost interest in house prices.
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“Past performance is no guarantee of future results.”
This is one of those legal incantations of gravity and vague importance that 
have become so familiar that we do not fully appreciate the meaning. “You have the right to remain silent.” is another example.
The past performance phrase is often spotted at the bottom of mutual fund ads. The rest of those ads, of course, generally do little else than tout past performance.
You cannot fault the fund companies for their focus on old return numbers. When you get down to it, there is not that much else to say about a mutual fund that would make good ad copy. Airbrushed glamour shots of the fund manager will not sell many shares.
Alas, the Wall Street Journal’s Fund Track column recently carried the argument, lifted from a recent academic paper, that the past performance disclaimer is obviously not adequate.
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This past weekend the Wall Street Journal managed to concoct a little excitement around something only a nerd like me could find exciting, the rolling over of 401k accounts. The article, variously titled “The Grudge Match Over Your 401(k): Employers and financial firms vie for control of your savings.” or “The 401(k) Wars: Fighting for Investors Cash” uses photos of an NFL player for illustration. (He is quoted at the end.)
The gist of the piece is that after years of acting with relative indifference to ex-employees taking money out of their 401k plans, companies are suddenly trying to discourage this behavior.
A company might want you to keep your assets in the 401k it sponsors because it wanted its plan to be a large as possible, which might lower average costs. This is a fairly modest incentive, however, as evidenced by how long it has taken for most companies to get around to doing anything about it. And for some employers, the cost of keeping an ex-employee in the system might actually be greater than the savings from having a bigger plan.
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This past weekend the Wall Street Journal carried a somewhat confused article on what we hip investor types call cash. Just to be clear, what we refer to is not literally cash, not slips of paper with pictures of dead politicians, but rather highly liquid assets we can use to buy stuff. Like a checking account.
I say the article is confused (and confusing, for that matter) because although it starts with important reminders about how chasing slightly higher yields on cash caused many investors great pain in the fall of ‘08, and then repeats the equally important principle that “the only way to boost yield is to take more risk” it promptly explains how to boost yield by taking more risk with your cash.
Generally speaking, the interest rate you get paid on cash deposits, in money market funds, short term Treasuries, and the like, is very low. It usually approximates the inflation rate, meaning that with a little luck the real value of your cash treads water.
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worth. But it worries me. I came close to selling yesterday and might just let it go today.
Government, Investing, Media | Frank Curmudgeon | 
April 30, 2010 12:29 pm | 
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