I Can't Remember If the Car Left First, or If the Girl Left First

Carl Icahn is an American billionaire financier. He appears in headline news as a "corporate raider." This means that his company will do what it has to do to unseat existing management of poorly run companies. The purpose for doing so is to change the way it does business. Most recently, Icahn wants to break-up Motorola. He believes its wireless division is worth more than the 0 value that the market is assigning it.

I am reviewing Motorola. Its wireless division is undervalued. Indications for strong sales are favorable:  Motorola's Droid and Cliq are very well-designed and well-received.

In the video below, Yale University's Professor of Economics Robert Shiller introduces Icahn as guest lecturer. Icahn speaks extensively about the lack of accountability in many (but not all) corporations. He explains that these CEO's are morons. They are selected to run the company, because they move up the corporate ladder by being:

1) likeable
2) politically astute.

A CEO's assistant is "dumber" than the CEO for the reason that the job security of the CEO will not be threatened by the assistant. When the CEO retires, the assistant gets promoted.

h/t marketfolly.com for originally posting this video.

"I Can't Remember If the Car Left First or the Girl Left First" - Icahn, on winning ~$10,000 in poker, losing it all in 1962, and then deciding to earn money through his own skill and intellect.

Watch it on Academic Earth

During Q&A, Icahn talks about how to handle when things are going well or going poorly:

If you are do great, don't think you are a genius. If you are doing poorly, don't think the world is coming to an end.

- @27:42 min

So what? Work hard. Believe in your abilities. Stay on course (Embrace luck, which comes and goes). Below is Kipling's poem, If, Icahn mentioned to illustrate this frame of mind. My markings are in bold.

If

By Rudyard Kipling 

If you can keep your head when all about you

Are losing theirs and blaming it on you,

If you can trust yourself when all men doubt you,

But make allowance for their doubting too;

If you can wait and not be tired by waiting,

Or being lied about, don't deal in lies,

Or being hated, don't give way to hating,

And yet don't look too good, nor talk too wise:

If you can dream - and not make dreams your master;

If you can think - and not make thoughts your aim;

If you can meet with Triumph and Disaster

And treat those two impostors just the same;

If you can bear to hear the truth you've spoken

Twisted by knaves to make a trap for fools,

Or watch the things you gave your life to, broken,

And stoop and build 'em up with worn-out tools:

If you can make one heap of all your winnings

And risk it on one turn of pitch-and-toss,

And lose, and start again at your beginnings

And never breathe a word about your loss;

If you can force your heart and nerve and sinew

To serve your turn long after they are gone,

And so hold on when there is nothing in you

Except the Will which says to them: 'Hold on!'

If you can talk with crowds and keep your virtue,

Or walk with Kings - nor lose the common touch,

If neither foes nor loving friends can hurt you,

If all men count with you, but none too much;

If you can fill the unforgiving minute

With sixty seconds' worth of distance run,

Yours is the Earth and everything that's in it,

And - which is more - you'll be a Man, my son!

Yale economist Robert Shiller on Evaluating Risk

It can be difficult to develop an opinion contrary to that of the behaviour of the market and the mass media. During those times, one might not be focused on listening and watching the opinions of those who express contrary opinions.

Shiller, a Yale Economist does this in his discussion on evaluating risk:



Note: Video was found from Ritholtz' blog site.
http://www.ritholtz.com/blog/2009/08/yale-economist-robert-shiller-on-evaluating-risk/

...The Good ("Better") News

• There were 8.8 months of supply in June - significantly below the all time record of 12.4 months of supply set in January (Source, here)
  

Robert Shiller: How Animal Spirits Drive the Economy

In this video, Robert Shiller (Yale Professor) discusses the global home price bubble. This is in context to his new book, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Video originally blogged by CalculatedRisk.com.

Here are my high-lights (if you don't want to watch the entire 2-hour video):

• View the 44-45 minute mark, Brad DeLong discusses the P/E Ratio (10-year average). Note that this measure is used by Buffett and Dodd extensively in assessing the valuation of securities. When the earnings target keeps changing, this proves to be a challenge for individual Securities Analysts.
  

• View Chapter #19. This is Jeff Madrick's commentary on "Efficient Market Hypothesis."

• View Chapter #28. Comments on the automobile and bank bailouts make a lot a sense.
  

To paraphrase on Chapter #28, Jeff Madrick thinks the government should spend more time obtaining more information on the problem, be more critical on the assumptions (that the auto/banks have "hit bottom") and be looking more closely at the financial books of these companies.

Disclosure: Long Ford.

Dow Jones Industrial Average (DJIA) 6000?

I include technical analysis in my analysis of market indexes and stocks. One big name in this area of analysis was Ralph Nelson Elliot, a person who had great skills in mathematics. Admittedly, my understanding of his description of wave direction for stock charts still elude me. This type of analysis is not used in my analysis. That said, below are selected Sections from Matt Blackman's Trade Systems Guru. The conclusions are startling.

< ... >

Few in the technical analysis world would argue with the contention that Ralph Nelson Elliott was a genius who lived long before his time, even if they don’t adhere to his teachings. The wave analysis principles he developed would have been amazing had they been developed with the help of computers but they did not exist his Elliott’s day.

Born in 1871, he became an accountant with a rather illustrious career cut short by an amoebic illness picked up while working in Central America. This developed into a debilitating case of pernicious anemia leaving him bedridden at the age of 58. With nothing else to do and an actively mathematically-wired brain, he turned his attention to the markets just as stocks hit their peak in 1929.

< ... >

Targets:

When the current corrective phase is over (and we could see a 2000 or more point bear rally in the meantime), the next five wave impulse pattern should register a similar price decline that unless something goes seriously wrong, puts the target on the Dow well below 7000.

This target gets even more interesting if you plot long-term trendline on the Dow (or S&P500) from the late 1970s and 1980s to present day. It also puts trendline support for the Dow back well below 7000. Finally, Dr. Robert Shiller’s long-term Price/Earnings research shows that in every serious bear market bottom back 120 years, annual trailing-ten year PEs dropped below 10 before a sustainable recovery could occur. That implies a price drop on the S&P500 below 600 or 28% below Friday’s close. And that translates to a Dow below 6000.

Source: http://www.tradesystemguru.com