Newsletter – March / April 2007 – The Second Shoe

The Second Shoe

In the Sept 06’ issue of CastleMoore Investment News, I wrote about the woes of General Motors, the oncepowerful auto manufacturer whose only remaining talent is making obsolete V-8 engines. They had announced cut-backs, layoffs and huge losses.

And in February, it was Chrysler’s turn. 2000 people to become unemployed… production cut-backs. The second shoe has dropped. I wonder when Ford will announce the obvious.

Isn’t it pitiful? The big three can’t make hybrid cars. They can’t make high quality 4-cylinder small cars. Fuel efficiency? What’s that?

The technology exists: the Japanese auto manufacturers are doing just fine. European auto makers are doing just fine. Why can’t The Big Three survive? What’s wrong?

Maybe it’s us who are wrong. Maybe our expectation that “Big Is Beautiful’ is the problem. Maybe our expectation that the “Way of the Big” is the correct way is the problem. Maybe reality is contained in the slogan “When you’re green you grow; when you’re ripe you rot.”

That’s our philosophy at CastleMoore. The big brokerage firms and the big mutual funds are financial dinosaurs. “Buy and Hold for the Long Term” is obsolete. The long term is over. Today’s financial markets are the sum of a series of short term and intermediate terms. It started in the year 2000 and may run for another 10 years.

In the same way that GM and Chrysler are talking merger, the big mutual funds will soon be merging. In the same way that GM and Chrysler are talking layoffs, the big brokerage firms will be talking layoffs.

The Age of Financial Giants is over: the Age of the Individual Investor is here.