Tom Brown At It Again

Just last week I wrote this post discussing Tom Brown's gung ho, self-serving talking of his bank sector equity portfolio book on Bloomberg.

Unbelievably, he was back at it again this morning on the same network. This time it was to bemoan Goldman Sachs' disappointing earnings announcement, specifically its trading revenues.

Facing obviously uneven results in the banking sector, Brown had to act fast on air to try to convey why investors should remain interested in banks with such earnings problems.

What came next was something for which I was unprepared- old fashioned Wall Street sell-side hucksterism.

Brown harked back over 20 years to when, he so modestly disclosed, he had coined a now-famous meaning for BofA's ticker, BAC- "Buy All you Can."

Wow. I mean, how much more distilled can Brown's brilliance get? And it's so long-lived, too! Over twenty years!

I first heard this sort of nonsense years ago when I briefly dated a stock broker. She repeated the apocryphal phone patter for me by rote, in her thick Brooklyn accent,

"If you liked it at 60, you'll love it at 50 and you marry it at 40."

In short, declines are always and only opportunities to buy before the equity swings ever-upward again. Colossal management mistakes which led to current losses are surely one-time gaffes. These same managers, or their successors, will never- never- make another mistake of similar size. Really. Trust him. It's safe now. This time, it'll be different.

This morning, Brown went on to forecast, somewhat murkily, that in six quarters, BofA would be doing just fine, so load up on it now.

Funny thing about those pesky investors- they actually don't like to be told to wait six quarters for a return. They prefer constant, positive returns, when possible. And when you're counseling investors to buy and wait for a stock in a sector that cratered so badly in 2008 that it had to receive a federal bailout of unprecedented proportions, it is not a comforting recommendation. A lot can happen in six quarters.

But consider Tom Brown's dilemma.

If he tells the truth- that the large-bank sector is moribund, populated by slow-moving, heavily-regulated financial leviathans which are only good as very risky timing plays, retail investors will leave his fund.

If he tells the truth that right now just isn't the best time to buy large-bank stocks, retail investors will leave his fund.

Brown's objective is to say things, preferably on air, appearing as an objective analyst, rather than an interested portfolio manager, which keep his investors in his bank stock portfolio fund.

Once investors sell out of his fund, they may never return, captured by some other manager's line about some other sector. Perhaps technology, or cloud investing, or even gold and other commodities.

So Brown must act quickly to prevent such redemptions and departures.

In this light, BofA's recent large losses become an opportunity to buy low. Goldman's lower trading revenues? You should love it even more at its new low price!

Witch hunts on Wall Street come and go. New regulations, like Dodd-Frank, come and go.

But basic, unvarnished sell-side Wall Street hucksterism of Tom Brown's variety never, it seems, goes out of style.