Three Ways to Improve

It’s nearly impossible to find anything useful on the SEC’s website . It needs to be demolished and rebuilt from scratch. The way filings are published is fundamentally flawed. It may have been wonderful at some point, when people marveled at being able to crudely access filings online. But it sucks now. Three suggestions:

  1. Filings should be broken up into smaller chunks of content. Sections should be divided up in ways that help search engines (including the sec’s internal one) find info. I randomly picked an 8k to look at, and it had 15,000+ words in it. Most of them were gibberish and legalese, barely decipherable. There’s no way a search engine can look at that document and point a user to what they’re looking for.
  2. Improve the file structure and internal search engine. If you do a search on for JPM filings, you get this pile of crap. And if you drill down to something that looks interesting, you get an even more useless page like this.
  3. The SEC desperately needs basic search-engine-optimization. They lack Web-Development 101 stuff like meta-descriptions and keywords. These have been web-standards since the mid 90’s, maybe earlier.

It’s crazy. $200 billion for AIG? No problem. But our internal financial reporting system is still in the dark ages. If you do it right, these changes shouldn’t be expensive. And it would have a huge impact on transparency and accountability. $15 million could buy 120,000 hours of web development at $125 an hour (check my math?). If you hire experienced programmers and managers, that’s more than enough time to fix this abomination.

I’ve managed large content-migration and overhaul projects before. It’s not fun, but it’s doable (even with something the size of Model the revamp on those done by web companies like google, amazon, and ebay.  But for the love of god, please don’t use the traditional government method: give the deal to a politcally-connected, but technologicaly-inept firm. I’m hopeful that Obama will follow through with his pledge of transparency. This would help, a lot.

China, Google, & Apple

These are the only long positions I feel are good values right now. There will come a time when the overall U.S. market is a great place to invest in. But we’re not there yet.

There’s a lot of bad business models and practices we need to kill first. The financial system needs to be demolished and rebuilt. There’s tons of necessary reform to be done. But will it get done right? I’m optimistic, but will mostly be on the sidelines until the picture is clearer.

I’ll keep holding decent-sized short/put positions in CRE (mostly SPG) and banks (JPM). But government intervention is the big nasty unknown. And I need to figure out how this flation issue is gonna play out, ASAP. Cause right now I’m torn about precious metals, like a lot of others.

Why the hell are analysts surprised by horrible consumer spending?

How baffling is it that Analysts didn’t see the huge drop in consumer-spending coming? Are these guys idiots? Possible. There’s another theory floating around: Ratings are directly influenced by the analysts’ mutual-fund-managing colleagues.

Hypothetical situation: Bob manages a $30 billion mutual fund at Example Corp. Example also has hundreds of equity analysts that issue/sell their research/advice to clients. As everyone knows, a big firms’ recommendations can really move the markets.

Let’s say Bob’s funds are not performing well. But Bob has brought in billions in revenue for the company, so he’s got major power and influence. It’s easy to imagine a situation where Bob has enough power to influence analysts.

Jim Cramer was the first to educate me on this old fraud. He ain’t perfect, but I love the guy. I realize this is probably old news to market veterans.

An important question is: Is the interaction/influence between managers and analysts regulated or monitored? I have no idea. I despise excess regulation and bureucracy, but this seems like an area that could really harm market effieciency.

Editor’s note – I originally had a bunch of F-bombs in this post, but decided to remove them. I got excited when Clusterstock published a post with the F-bomb in it, and ran with it. But I think it might cause your site to get filtered by Google. And I’m vain, and want this site to be read. So I removed the F-bombs.

Update, full text: State Street Announces More Losses and Liquidity Issues

Update on an earlier post. I don’t think this has hit major media outlets yet. I can’t find it anywhere other than Etrade’s news feed (have to be logged in, and it’s not on the ticker page yet). State Street should be applauded for their timing on this one, the story has so far avoided major news wires. So I’m posting the whole thing here (source: Dow Jones):

State Street Corp. (STT) on Friday reported that it faces liquidity risks and potential financial losses as a result of issues related to its long-term securities portfolio, its commercial paper dealings, and the unregistered cash collateral pools it operates.

The Boston-based financial services company said that at the end of 2008, it had $5.5 billion in unrealized after-tax losses in its long-term portfolio of investment securities classified as available for sale and held to maturity.

The company said it must periodically determine if those losses are “other-than-temporary,” and said for the fourth quarter it will report $78 million in other-than-temporary losses.

A significant future charge could damage the company’s capital ratios, lead to credit ratings downgrades and “might adversely impact our ability to access the capital markets,” the company said in a filing made with the Securities and Exchange Commission. In the filing, State Street also detailed how the asset-backed commercial paper conduits it administers could expose the company to liquidity and interest-rate risks. State Street said that as of Dec. 31, it held $230 million in commercial paper issued by the conduits on its consolidated balance sheet – but said that figure doesn’t include $5.7 billion issued by the conduits under the Federal Reserve’s Commercial Paper Funding Facility.

At the end of 2008, State Street said, “there were $3.6 billion of after-tax net unrealized losses associated with portfolio holdings of the conduits.”

State Street said that because it may have to buy assets from the conduits under some circumstances, the company is exposed to the credit risks in the conduits’ portfolios.

State Street also identified a source of risk in the unregistered cash collateral pools underlying its securities lending program.

State Street said that it has transacted purchases and redemptions in those pools at a net asset value of $1 a unit, even though the portfolios underlying the pools often had lower values.

State Street said that as a result of those transactions it could be “exposed to customer claims, financial loss, reputational damage and regulatory scrutiny.”

Based on a net asset value of $1 a unit, State Street said, the value of its unregistered cash collateral pools was about $113 billion at the end of 2008.

State Street, however, said that the market values in those pools ranged from about 90.8 cents a unit to $1 a unit – with a weighted average net asset value of 95.5 cents a unit.

State Street said that its practice of continuing to conduct transactions at $1 a unit is consistent with industry practices and in compliance with the terms of the pools.

But the company also warned that if unregistered cash collateral pools are ultimately insufficient to support redemptions at $1 a unit, investors “may seek to hold us responsible for any shortfall” caused by prior redemptions above the market value.

I’ll post a real source when I find one.

Disclosure: No position in STT. I own JPM puts, and am short various indexes. I own two short mutual funds. But I am an amateur, so don’t take anything I say too seriously.

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