Rosenthal Rant: Answer to the Financial Crisis: Taking Responsibility

I have recently noticed a disturbing trend that has infected the minds of the investing public and I feel it demands our immediate attention. There seems to be an overwhelming need to lay blame or point fingers to cope with this financial crisis. The honest vocation of introspection and assuming responsibility for one's own actions has given way to the meek and sorry spectacle of crying and complaining. Allow me to give you a glaring example:

I was listening to the O'Reilly Factor on the radio the other night. A man calls in to moan about his financial troubles. He explains that he bought 30,000 shares of Washington Mutual (WM) @ $2 because the new CEO, a man who has been on the job for only a few weeks, said the company had solid liquidity. Of course, WM then goes bankrupt and the man cries to O'Reilly that he wants the CEO brought up on felony charges for misleading him. O'Reilly agrees with this man and launches into a tirade against the corporate executives!?!?

Has everyone gone mad? What kind of a world do we live in where O'Reilly, the original slap you in the face, hard core, suffer no fools journalist, cries like a little baby that the Big Bad CEO caused all the trouble for the caller. HELLO! Can someone please tell the caller to take responsibility for his own actions? If he really did buy WM just because of the CEO comments then he deserves not only to be wiped out, but also to sit in the corner wearing the dunce cap. In fact, he should feel lucky nothing else has happened to him, like an anvil falling on his head or a stick of dynamite that reads ACME on the side blowing up the ground where he's standing. How clueless do you have to be to invest a penny in WM - or any financial stock - in the midst of a credit crisis? What was he trying to do, catch the bottom in the financial sector? Well then, instead of whining about the CEO allow me to give him a little advice that may help in the future: Never try to catch the bottom. As we say in this business, if you try to catch a falling knife you will only succeed in cutting off your fingers.

And one more thing: If everyone insists on pointing fingers instead of taking responsibility, then let's at least point in the right direction. I could build a list a mile long (beginning summer 2007) with quotes from Hank Paulson and Ben Bernanke that laud the financial system, cheer the liquidity situation and assure the investing public that all is well. If there is someone to criminally charge for misleading the public let's start at the source. It's not like this current crisis just popped up out of the blue. While Hank and Ben were snowing the public with misleading statements of financial health, we here at RCM were writing letters to our clients outlining the unfolding crisis (viewable at http://www.rosenthalcapital.com/). And we were not the only ones writing. Other select professionals were fighting the good fight trying to inform anyone who would listen of the impending collapse.

I will admit it is unfair to simply chide the investing public for this abhorrent finger pointing behavior. After all, the public has suckled at the teat of Hank, Ben and the rest of the PPT for so long that its perspective has been distorted. Over the last few years, the public has been taught to expect constant steady gains with little volatility and that in the event problems do occur the government will come to the rescue. This bastardization of a free market has spawned such beliefs as someone else is to blame if you take out a mortgage you can't afford and subsequently lose your house; the short seller is to blame if the market goes down; the CEO is to blame if your investment loses value. I am here offering a reality check. Stop whining and complaining, stop looking for the culprit and start looking in the mirror. I know it is hard to do and I expect some will be angry with me for writing this missive, but I guarantee that if you stop blaming and start taking responsibility your investment results and financial situation will improve exponentially.