Hi Cockerel!

The market is what it is. I am simply stating that the concept of an efficient market is a myth. Over the longer term the value of any one particular stock may accurately reflect the underlying fundamentals for the company, but on the short term the intense distortion of overt manipulation and background noise can leave most investors wrong-footed. Just for example, look at the swings in value of the big banking institutions from one month to the next. Some entire sectors are completely out of line with historic value multiples. Sure, the price on any given day reflects the collective independant action of many participants. But that is surely 'wrong' nonetheless when so much of the trading is driven by HFT, algos, option stunts, etc.

You may say that the market is reacting to all information available at any given time. Fine. What about the fact that even forensic accountants cannot accurately state what the real loan exposure may be for many large corporations today? That reporting is a sham when the FOMC has allowed companies to lie about the real value of their assets under management.

Case in point: Goldman Sachs stated last week that the net value of their exposure to Europe is just $2.4 billion. This is pure crap, because that "NET" amount includes derivative exposure and phony swaps that are backed by nothing but promises. So if indeed Goldman has counterparties that must pay off in order for the loss side of a bet to be covered, and those counterparties are also insolvent, then what in fact exists is a house of cards. Goldman stock traded higher on the news however. Efficient market or mass delusion?

What was the value of MF Global in our efficient market immediately before that company blew up? Was the market wrong? There are many other financial corporations trading today with huge market values that are quite probably also zombie grade. Is the market right or wrong in how investors collectively value this crap?

I will not even bother ranting about the total lack of ethical oversight from regulatory agencies at this point. That adds just one more layer of distortion to further displace the market from any rational valuation parameters. Since when can you have the senior management of a corporation state publicly that the financials are sound, and then four days later have the company completely insolvent, as was the case with Lehman Bros? You cannot suggest that the market is 'right' when the disclosure used to measure risk is a crock of $hit.

How about when short operations distribute false information and carpet bomb a market with sell orders, as we saw with SVM? High profile reporting of fraud and intense short selling should be fair game? Even after the story has been proven a scam, and SVM has worked to debunk the reports, the stock is still trending near multi-year lows. But the marekt is right? I think not...

I could make many such examples. I rest my case. My point is simply that AUM has been driven far below fair value and I do expect we can look forward to a sustained recovery as more rational sentiment is expressed over the long term.

cheers!

mike