Media coverage of recent events on Wall Street is really starting to get on my nerves. The media continues to promulgate the Washington fairy tale that taxpayers may actually make a profit on the money used to bail out Wall Street. What a joke! 

If money could be made on the toxic assets held by U.S. financial institutions, why aren't the private equity funds or the sovereign wealth funds falling all over themselves to purchase these assets? If these assets were any good, why is there basically no market for them? The answer to these questions is that these assets are nearly worthless trash. And your government is going to buy them. 

Where is the outrage? If a financial institution is “too big to fail,” is not that same financial institution too big to be leveraged at 35 to 1 or higher? 

Leggless Mason? 

Even my local newspaper is getting in on the act. My local newspaper ran a good-sized article on how investors should “stay the course.” That's right, investors – just stay on the same road that has catapulted you over a cliff. 

The newspaper paper article even went on to include quotes from Bill Miller of the now infamous Legg Mason Value Trust Fund. I didn't know whether to laugh or cry. The article writer was passing on “advice” from the Wall Street genius who has owned a veritable who's who of major companies headed for the graveyard – Countrywide, Freddie Mac (NYSE: FRE, Stock Forum), etc. 

Bill Miller is your typical Wall Street “genius” who believes that only American financial stocks and American tech stocks go up and that they go up forever. Look at his fund – Mr. Miller does not believe in owning international stocks or energy stocks or pretty much anything but tech and financial stocks. 

I went to the dictionary to look up the meaning of the word arse – and sure enough there was a picture of Bill Miller right there. Because of his incompetence, his firm, Legg Mason (NYSE: LM, Stock Forum), is in deep trouble and will probably have to sell itself to whatever bidder it may find. 

I don't want to just single out Mr. Miller for his incompetence. My experience has been that most Wall Street “professionals” are incompetent. The situation reminds me of a couple lines from a Three Stooges short. A guy asks, “Are you sure the work will be in competent hands?” Curly answers, “Certainly, we're all incompetent here!” Investors – Caveat Emptor! 

Self-centered Wall Street 

Most of the people in the financial services industry, as usual, are currently centered on themselves. They believe that since times are tough for them, that it must be terrible everywhere. If credit is being curtailed on Wall Street, it must be worse elsewhere. What arrogance! 

It is this arrogance that has most of the talking heads on CNBC telling investors to get out of all international markets and all commodity-related investments. They tell investors to bring all of their money home to U.S. stocks, where it's “safe”. Think of it this way – a nuclear bomb has gone off on Wall Street. Wall Street is telling investors to run full speed toward the blast! Logic dictates that investors run full speed away from ground zero. 

My best advice for investors is to do just the opposite of what the talking heads on CNBC tell you to do. Begin to either gradually accumulate or add to positions in international markets, particularly emerging markets, and commodity-related investments. 

Brilliant! 

You may think, this guy is nuts – international stock markets and commodity markets are dropping like a rock! Investors need to step back and ask themselves why these markets are dropping. The answer is simple. As I stated earlier, Wall Street is rife with incompetent people. Wall Street firms are liquidating the only profitable positions they have (in commodities and internationally) and bringing the money home to the “safety” of the U.S. 

Wall Street firms, having liquidated their winning positions, are adding to their losing positions in financial stocks, etc. What a brilliant strategy to make money – sell your winners and add to your losers. I wish I had thought of that strategy! 

In addition, Wall Street firms have also been buying the U.S. dollar heavily. Yes, I definitely want to own a country's currency that is adding trillions of dollars in additional debt with little hope of repayment. Those Wall Street guys are geniuses! 

The beat goes on 

“The Beat Goes On” is title of a song by Sonny & Cher and also Madonna. The title can also apply to what is going on with emerging market economies globally. The fundamentals of these economies have barely changed. 

While Wall Street continues to believe that the global economy revolves around them, facts to continue to show that they are becoming less and less important to the global economy as time goes on. Here is one fact – 78% of world economic activity now takes place outside of the U.S. Exports headed to the U.S. from these countries represent a smaller and smaller portion of global economic activity. 

A large amount of the global demand is actually being created in the BRIC countries, especially China.

The latest statistics for the month of August show that Chinese oil imports rose by 11.5% and retail sales rose 15.9%. Yet anyone who watches CNBC would think that the Chinese economy is collapsing. 

I continue to be amused by the emphasis CNBC puts on the weekly oil inventory numbers and how weakening U.S. demand will drive oil back to $50 or some other outrageous number. There's that Wall Street arrogance again! What CNBC should be reporting on is the energy demand from China and elsewhere. That is what is important and what will help determine the future course of oil prices. 

Current figures show that the Chinese shopper alone is contributing more to global GDP than the infamous U.S. shopper! Remember, there are a lot more Chinese shoppers than U.S. shoppers. According to estimates, so far in this decade there has been nearly as much global demand from just the BRIC countries alone as from the U.S. 

I'd like to leave investors with one final thought. People once thought that the Earth was the center of the universe until Copernicus proved them wrong. Right now, Wall Street thinks that they are the center of the financial universe. They are not. Don't get caught on the wrong side of history.  

Tony D’Altorio
Analyst, Oxbury Research