- why the stock market will crash (but it won't be the Fed's fault);
- Google's stumble; and
- the reasons for Vikram Pandit's departure from Citigroup.
The SEC Will Be the Market's Undoing Posted at 7:08 a.m. EDT on Friday, Oct. 19 Are higher stock prices bad if they partly occur because the Federal Reserve is wrecking the competition in the financial supermarket? On the 25th anniversary of the 1987 crash, we are going to hear a lot of bubble talk. It's natural. We are reading not only about how it can happen again, but that it has to happen again. We are reading, moreover, that this may come about because the Fed is facilitating a stock market bubble with easy money. First, I agree that another crash is inevitable. But I don't think it will be because of the Fed. I think will be because the stock trading system is too fragile, lacking in any serious regulation, and because the sacrifice of integrity for speed seems to have been blessed by the Securities and Exchange Commission. It is almost as if the SEC has decided that we have a need for speed, like the big video game I have at home in the basement, even as there is no definable benefit from speed to capitalism or capital formation and preservation. This speed altar, on which we sacrifice regular investors, is a vestige of a previous administration, which thought volumes would be endlessly growing and that speed could only make things more fair. > > Bull or Bear? Vote in Our Poll Instead it has dramatically unleveled the playing field, and helped destroy the image and respect of an asset class. What makes a crash is inevitable is the unwillingness of the SEC to even question the notion that financial innovation could be malevolent, especially as it applies to something that speeds up trading. Everything happens too fast for humans to stop it, yet the benefits of the speed simply aren't there. Go ask anyone involved in Thursday's Google ( GOOG) release. Speed overwhelmed the system and the company, and neither was ready for it.
Searching for Answers on Google Posted at 1:30 p.m. EDT on Thursday, Oct. 18 What the heck happened here? What's going on with Google ( GOOG) that was not obvious to anyone -- I mean anyone -- including, perhaps, Google given the slipshod way the company reveals earnings? Here's my take: Google should have made a lot more money than it did off those revenues. It seemed so perfectly positioned, and it had the best call on mobile, uniquely mobile, because it didn't need display ads, which advertisers and users seem not to care for, and could rely on queries. Given that it's been taking share from everyone, I can't believe it didn't do better. Traffic acquisition costs seem nasty, too. Execution? Clearly subpar. Communication about how business is really doing? Horrendous. Let's be really clear: Advertising has been terrific. The companies I talk to are advertising like mad. The recipients of ad dollars -- TV, radio, and even print -- are doing great. I think the premature release is having a secondary negative story that caused another leg down, but we are going to see a bunch of downgrades. And, yes, it is too early to buy Google -- a stock that had been the "best chart in the book" going into this quarter. Oh, and as my colleague Matt Horween points out, this early release is just one more item on the endless checklist of what drives individual investors out of our stock market. Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.
The Politics Behind Pandit's Resignation Posted at 7:42 a.m. EDT on Thursday, Oct. 18 How can the stock of Citigroup ( C) be so strong still, stronger than all of the other bank stocks that have reported, including JPMorgan Chase ( JPM)? Let me give you a couple of theories, theories that make both Pandit and the board look good. First, there is no doubt that the last quarter that Pandit delivered put the place on firm footing. To be the only bank that had honest-to-Betsy net interest margin growth is pretty spectacular. To be the bank that owns the emerging markets at a time when suddenly everyone is budging about those emerging markets again is extraordinary. The infrastructure is there and the growth path is obvious.