Wednesday, December 31, 2008
It's almost over officially as well. I probably won't stay up until 12:00 (again this year). The baby is in bed, the boys are lounging in the play room and my feet are up.
The wifey and I are going to have a glass of champagne around 10:00 and that'll be it.
Thanks to those of you who checked in here in 2008. Who knows what 2009 will bring, in this blog or elsewhere. Be happy.
Madoff Will File List of Assets Today, Lawyer Says
And by the way, nobody is going to trust that list as presented today. Madoff pulled off a long-running scam in the billions of dollars. Apparently he told his sons that he had $200 - 300 million left. It could just as easily be $2 billion.
It's going to take the authorities forever to find out where the money isn't.
Seriously, I imagine that there are lots of viewers who watch CNBC less often or for less time in the morning because the commercials are so sickening and repeated so frequently. How about shaking it up, CNBC?
U.S. stocks are down by more than a third. Earnings have been very weak and 2009 estimates have come down a lot. The dollar is finishing up its worst year vs. the yen since 1987. Global investors have priced in U.S. economic weakness in spades. A Russian professor is predicting the end of the USA and nobody is particularly shocked.
It's impossible to know whether 09 can be less bad than real expectations unless you know what expectations are, which is kind of circular but necessary analysis. There's no need to rush into anything.
Tuesday, December 30, 2008
GMAC got some Fed money which will help prolong the agony, especially GM's agony.
A Democratic Senator is poking around the cell phone companies looking for dirt on sky high text messaging bills. Not surprisingly, the cell phone network operators don't want to disclose their costs.
The futures are perky. Thin to win?
Monday, December 29, 2008
- U.S. border patrol efforts caught 705k would-be immigrants in the year ended Sept. 30, down from 1.7 million/year in the mid-80s
- In addition to building a wall, which was very uncool when Germany did it, border efforts have included increasing staff from 4,000 agents in 1993 to 18,000 currently
What is left out:
- How many are still getting in? How is their batting average?
- How much of the decline is attributable to the economy? Are they staying home because there are fewer jobs?
Yes, I wrote "speculators".
OPEC has already said that they will cut output - more than once and more than a little. Still, crude futures have gone straight down. In my opinion crude getting a bid on this weekend's news is speculators trying to get in front of a supply shock that probably won't happen. The trade is probably a good one, though, since they got oil up to $147 in July when it never should have been there based on supply and demand.
Again, just my opinion.
There was a spooky chart in this weekend's New York Times, and I'm sure elsewhere, listing the Madoff clients, or victims. Charities and foundations, Funds of Funds, European banks all litter the list. It's strange to see one name on the list - Madoff Family Foundation - Charity - $19 million. I'm not sure what to make of that. Part of me understands that if you have a scam that good, you might as well put your money in it. I'd still like to know where the rest of the money went, if it went anywhere at all.
Bring on 2009.
Sunday, December 28, 2008
Saturday, December 27, 2008
"Speaking to the Berliner Zeitung newspaper, Bishop Huber argued that bankers had a duty to look beyond the short term and to ensure stability: “Never again should a Deutsche Bank chief executive set a profit goal of 25 per cent.” Such goals drove up profit expectations to unsustainable levels and amounted to “a form of idolatry”, he said. “In the current circumstances, money has become a god.”"
FT's take seems to be that this is a populist tangent to the idea that the financial crisis was caused by excessive greed and leverage at U.S. financial institutions. That may be true but these big financials are all truly global.
The whole thing is crazy. Who wou;d question the idea of a bank having a profitability goal? Even in Europe? That a religious leader took it upon himself to wave the flag makes it even stranger.
Friday, December 26, 2008
November/December sales were down 1 - 5% and more for high end items. Consumers have for the right reasons pulled in their horns and I don't see them splurging between now and New Year's.
I can't find it now but I read something this morning about the sale of men's bras taking off in Japan. A killer new product like that would really help things out over here.
Wednesday, December 24, 2008
The obvious conclusion is that despite how inept the Fed and Treasury seem at times, they have gotten better over time at getting the economy back on track when it falters.
Whether this recession is an outlier of big and bad proportions is open for debate.
The "which multiple?" argument is an old one. I think the more interesting question is "what earnings?" The S&P earned $87 last year, might do $52 or so this year. Who knows for next year. 2010 should be good.
Quoting P/E ratios sounds good a lot of the time. In my opinion, current price divided by last year's earnings tells you nothing. This is not an awards show. Current price divided by current earnings is an observation that a 6th grader could make, not analysis.
Current price divided by what the underlying will earn over your investment horizon is the only bone with any meat on it. Since that calculation is different for every investor, the P/E ratio used by financial media is useless.
Just my opinion.
"Valuation is a lazy way to make an investment decision."
Tuesday, December 23, 2008
Monday, December 22, 2008
What is surprising is the intractable situation with money market funds and the fact that it's happening under the radar for now. Money market funds are supposed to be like cash. The NAV is always $1.00 (only 3 or 4 have ever lost any value) and they pay a low interest rate, usually 1.5 - 3%.
Short-term treasury interest rates have moved so low that the real interest rate of some funds is about to turn negative - that is the interest earned on portfolio investments will be less that the expenses incurred in running the fund. That is downright unfixable.
The futures are down a little, I'm fighting a cold and this week looks like a quiet one.
Sunday, December 21, 2008
If your company is shifting even more of the responsibility for you retirement income to you, what should you do? The market is down by more than 1/3. Your 401(k) balance is bound to be smaller than it was. You can't fix it overnight but don't compound the situation by making mistakes.
- Do not stop making contributions. By contributing now, you are paying much less for the same investments than you were months ago. Deal.
- Question your allocations but don't get too conservative, unless you are very near retirement.
- Have a pro take a look. At some point, hopefully now, your 401(k) could be your biggest asset. Don't just wing it.
- Unemployment is above 21% vs. 6.7% nationally
- One in five residents are delinquent of their local taxes
- Almost half of children live below the poverty level
Pretty soon East Coast companies are going to start outsourcing work to the Midwest. It should have already happened. The economic disparity is unsustainable.
Saturday, December 20, 2008
DIGG is a cool web site - Web 2.0 and all that. Businessweek had comments on the cash burn and prospects of the company and summed up its prospects for a liquidity event with the following:
Friday, December 19, 2008
The National Association of Insurance Commissioners advanced a proposal to reduce the amount of money carriers must hold against guarantees made to variable annuity clients. The potential reform, criticized by a consumer advocate, may be adopted in time for 2008 financial results, the NAIC said yesterday.
“Typically insurers would turn to the capital markets for reserve relief,” Roger Sevigny, president of Kansas City, Missouri-based NAIC, told reporters yesterday on a conference call. By relaxing standards, “it becomes easier for the companies to meet the requirements of banks and other credit facilities.”
According to Bloomberg, the whole thing had been masterfully simplified, because there is no way he was actually doing those options trades. He might have been doing little more than typing up fake statements. I want to know who was in the meeting when he was drawing up that strategy. "OK guys, I have worked for years to devise the perfect, risk-free investment strategy and it is impossible, so what do you say we pretend to have one? Sound good?"
Dec. 19 (Bloomberg) -- The options trading strategy Bernard Madoff said he used to help produce profits for 17 straight years would have required at least 10 times the contracts that trade on U.S. exchanges.
“It was never done,” Michael Schwartz, chief options strategist at Oppenheimer & Co. in New York and a trader since 1965, said of the strategy. “If he did it on an exchange, we would have heard about it, and if he did it over the counter, the person he bought it from would have hedged it on an exchange.”
There are a number of things going on in the financial markets that are unprecedented or were unfathomable six months ago.
- Oil has gone from $147 to $36
- The 10-year treasury is yielding 2.08% and might go below 2
- The Fed funds rate is about zero
- Equities have done nothing but go down for the last year
- The U.S. Government is intervening everywhere
- Housing prices cannot find a bottom
- AIG, Fannie, Freddie, Bear Stearns, Lehman, WaMu, Wachovia, Merrill Lynch are all gone
- Two of the big three auto makers may be bankrupt within the week
- The 90 year old Ponzi scheme is alive and well. Just like in the film classic "The Sting", the oldies are the goodies.
It's Friday and a storm is coming in the Northeast. Enjoy the weekend.
Thursday, December 18, 2008
I would love to see the math but haven't. If this is good analysis it should make for good, confidence-inspiring media if presented correctly. Further, it would underline the fact that parts of this program may not actually be a "bailout."
Motorola yesterday announced that they are getting out of the pension fund business (no surprise) but preserving benefits for those who already have earned them. No problem there.
They also announced that they will be suspending 401(k) matching payments. Who does that? I didn't realize they were that desperate and maybe they aren't. If they aren't then this was a very bad message to send to the market, not to mention current (loyal?) employees.
Fairfield was apparently Madoff's biggest investor, and the Financial Times is reporting that they are looking to sue PWC to recoup some of the money they lost. That in itself is a joke. Fairfield failed miserably at its core missions - asset allocation (as much as 50% of assets may have been with Madoff) and due diligence.
The genius of the move at this point is a little more subtle. The government's reticence to give them bailout money to date may mean that each company individually has not reached too-big-to-fail status. The merger would likely shove them over that goal line.
Wednesday, December 17, 2008
"Because of a legal concept known as "fraudulent conveyance," they could be forced to return their profits and even some of their initial investments to help offset losses incurred by others entangled in the long-running Ponzi scheme."
I never heard of "fraudulent conveyance" until last night. If this transpires as some legal pundits are speculating, it amounts of even further disincentive for anyone to invest in private partnership. There already exists no guarantee that you won't suffer big losses, as many funds have this year, no regulation to speak of in practical terms, no SIPC or FDIC protection, huge fees and the prospect that you may be gated, or delayed/denied getting your money. Add to that this retrospective profit-plus-principal-give-back risk and the whole proposition gets even worse.
It's clear that Bernanke and Co. will do all they can to keep the U.S. out of depression, in addition to the steps taken yesterday. The credit markets almost have to improve after yesterday's action. As investors get more comfortable with those two things being true, the rally is likely to continue. Maybe today.
Tuesday, December 16, 2008
Borrowing money in the U.S., thanks to Fed actions today, is as cheap as it ever has been or ever will be. Banks and borrowers need to get back to business, with the possible exception of over-leveraged consumers.
The Fed also redoubled its pledge to throw every kitchen sink available at the problem of credit availability and lack of growth. Like any other good-sounding idea, we won't know whether it is one until after it has been proven one way or another.
A pub crawl that adds a new person to buy a round at each location. Each new person is promised that they will get free drinks at all the future bars if they buy this round. Obviously, whoever joins the ponzi crawl last gets screwed!
"The biggest shareholder in PartyGaming, the UK-listed online gambling company, has agreed to pay US authorities $300m and plead guilty to a charge relating to illegal web betting in the most prominent prosecution so far in the US clampdown on internet gambling."
The Financial Times dispassionately cover's one of PartyGaming's founder's apparent willingness to shell out $300 million. A betting man might wager that U.S. Internet gambling is going to be legalized or decriminalized or exonerated based on this.
Monday, December 15, 2008
The equity mutual fund managers are all down 40% this year.
The Fund of Fund guys, to the extent that they steered money to outfits such as Madoff & Co., have lost a lot of credibility.
The hedge funds? Many of them, including some of the best, are down 30%+ and refusing to allow investors to withdraw their money, even under the client-unfriendly terms stipulated in the partnership agreement.
My guess is that a new form of fiduciary is going to emerge that is more investor-friendly and more diligent. The business of managing money is in many parts of the system about raising money, not managing it. That is going to change.
"When Barron's asked Madoff Friday how he accomplishes this, he said, "It's
a proprietary strategy. I can't go into it in great detail.""
Seriously, though, Barron's did make an effort to question the Madoff returns years ago, but the guy was walking on water at the time. The fact that this could go unchecked for such a long time and on such a large scale is going to further undrmine folks' confidence in the players in the market, not just the markets.
The SEC needs to start hiring some real talent, pronto.
Saturday, December 13, 2008
Just over a year ago, Royal Bank of Scotland paid
$100bn for ABN Amro (80% cash).
For that amount today, RBS could buy:
Morgan Stanley $10.5bn,
Goldman Sachs $21.0bn,
Merrill Lynch $12.3bn,
Deutsche Bank $13.0bn and
And still have $8bn change
Negative: Madoff fraud and the fact that one or more auto makers might fail.
Positive: Bush and Paulson make noises that they are not willing to let the auto makers go busto yet.
I was out for happy hour yesterday and more than one farther-right-than-me person opined that the reason the market rallied was relief over the Senate rejecting the auto bailout. While that may have been a good decision, that reasoning is a stretch.
The oversold bear market rally continues.
Friday, December 12, 2008
Thursday, December 11, 2008
Here's a question. What stocks work when the economy is losing 500,000 jobs per month?
My research on the topic consisted of getting another cup of coffee. The most likely answer is none, unless the employment situation is likely to turn within the marginal equity buyer's investment horizon. Alas, it's too early to tell.
The blog entry is about interview questions that tell you that you are not getting the job, or that the interview is heading in a bad direction, or that the interviewer is wasting your time.
One such question is, "What are your biggest flaws?"
I haven't been on an interview in a long time but I clearly remember hating that question and never felt like I had a good answer.
"Ideally, your answer to this question reveals valued traits of self-awareness, maturity, honesty and humility, right? In my estimation, there’s no real reason for anyone to ask you this question. The more time you spend answering it is basically giving the interviewer more reasons not to hire you. Also, consider that some of the biggest jackasses in history spend their lives gainfully employed despite their glaring flaws, the same shortcomings you are being asked to lay out for your prospective employer before you have spent one day working for them."
Maybe there is no good answer.
The NY Times is reporting that it is finally possible for an amateur YouTube video producer to earn a decent living from advertising-generated revenue. That would be a good thing since most video ads are intrusive or slow down the process enough to make clicking on something else a real option.
If there is enough money in it then we should be close to the point where Google spends enough money to make it tolerable. Better monetization opportunities should lead to better content as well.
Wednesday, December 10, 2008
Looks like Google vet Deep Nichar thinks it's a good idea as well, as he leaves one of the best start ups ever to join another one.
As VP Products at LinkedIn he will face a classic truth - there is a different between a good product and a good company. LinkedIn in my opinion is a good site and a good product. It will have to broaden its offering greatly to become a good company.
They have a shot a greatness.
The 3rd most popular story in there at the moment is a gritty expose on why the police are getting called to break up fights so often at Chucky Cheese's.
If you've ever been to a Chucky Cheese, you're probably happy to be done with it. It's noisy, the food is terrible and at peak times it is way too crowded. That alone could lead to fights. Heck, the WSJ article could lead to fights. They go into a lot of analysis of the why of the parents fighting.
Parents are silly, over-protective folk. The atmosphere at these restaurants is designed to whip kids into a frenzy. Some times, hilarity does not ensue.
Tuesday, December 9, 2008
Some guy just up the road from me in East Brunswick, NJ is among folks who are rattling Obama's cage by claiming that he is not actually American or not American enough or something.
"The Supreme Court declined Monday to hear an emergency appeal from a man who said that President-elect Barack Obama is not qualified for the presidency because he is not a "natural-born" citizen... Leo Donofrio of East Brunswick, N.J., had said that Obama had dual nationality at birth, because of his Kansas-born mother and his Kenyan-born father, who was a British subject at the time."
We can all go back to work now.
"SAN FRANCISCO — Some same-sex marriage supporters are urging people to "call in gay" Wednesday to show how much the country relies on gays and lesbians, but others question whether it's wise to encourage skipping work given the nation's economic distress.
Organizers of "Day Without a Gay" — scheduled to coincide with International Human Rights Day and modeled after similar work stoppages by Latino immigrants — also are encouraging people to perform volunteer work and refrain from spending money."
Layoff announcements are everywhere. Because of that, it's probably a good time to keep your head down and do your job. I think same sex rights are a fine cause and what went down in California this election was unjust but if I had a 9-to-5 job right now and the boss parked a steamroller on top of me, I probably wouldn't stage a protest.
The "worse-than-expected" tag is can be a bit of a misnomer at junctures like this. Companies that miss analyst estimates for November/December quarters are not necessarily seeing their stocks fall, as investor expectations have gotten lower than estimates for the current period in many cases. Nor is anyone shocked if companies lower their outlook for 2009.
The challenge if the market is going to avoid making new lows is to get investor expectations, company expectations and 2009 estimates to a level where we don't need another round of big negative shocks. It may be impossible to get there without more information and time.
“There’s no more Wall Street,” Greenberg, 81, said last night in an interview on Bloomberg’s “Money & Politics” television program. “That model just doesn’t work because it’s at the mercy of rumors.”
Blaming the rumor mill is a unique and interesting take. Investment banking deals require a great deal of secrecy from a large number of people, so there's not much room for rumor. Rumors were the friend, however, of short sellers in Lehman and Bear Stearns stocks, who were happy for the spreading "news" that those balance sheets might be in worse shape than people generally thought.
My take is that while rumors might have hastened the demise of Bear, they are an inconvenience to bankers, not a death sentence. It depends on your perspective.
Monday, December 8, 2008
The market gave back a little last week amid more bad news, but the S&P 500 is still 16% above the November low. If we are going to get some sort of year end rally, we are probably still in it. Obama's plans for economic stimulus may justify some level of optimism.
Merrill CEO John Thain goes before the Merrill board today to suggest that he get a $10 million bonus, probably the least popular thing that he could do. He might have saved shareholders a few billion as the WSJ estimates, but who cares at this point?
Equity futures are up nicely. Oil is at $42 and nobody outside of CNBC is talking about it any more. CNBC is going to need a new bubble as much as anybody.
Sunday, December 7, 2008
MAP is "minimum advertised price". "Manufacturers have been racing to enforce minimum-pricing policies since last year, when the Supreme Court ruled them to be legal, and not a violation of antitrust law. EBay and a group of other retailers and antitrust advocates are meeting Thursday in Washington to craft a strategy to overturn that ruling."
Manufacturers can set price minimums and retailers, especially online, need to respect them or risk sanctions, including loss of marketing dollars and referrals. My gut tells me that is wrong in an un-American, anti capitalist way.
The uniquely capitalist angle? A new industry has popped up to profit from the situation.
"MAP's proliferation has boosted business for NetEnforcers, a unit of Intersections Inc., of Chantilly, Va., and similar companies. Stuart Bennett, NetEnforcers' head of sales, says the Supreme Court ruling helped him land 40 new clients the past year, bringing the total to about 140. Rival firms include MAPtrackers Inc., Cyveillance Inc. and Brand Protection Agency."
In a totally messed up article yesterday, the Wall Street Journal reports that Heebner, manager of among other things the CGM Focus Fund, has called the bottom in financials.
Even though it was Saturday, I'm not sure where the editor was on this one. Heebner's Fund, "which for years has posted a string of market-beating returns, this year is lagging behind the Standard & Poor's 500-stock index by 11 percentage points. For only the second time in his 11-year tenure, he is in the red, off 52%." He is getting pounded this year. The Fund was up 80% in 2007 and has one of the best 10-year records in the business so some form of leniency may be warranted, but not to this extent.
"This fall, Mr. Heebner built a more than $1 billion combined position in Citigroup Inc. and Bank of America Corp. He has put $780 million in two Brazilian banks, Banco Bradesco SA and Banco Itau Holding Financiera SA, counting on U.S. actions to help lending abroad. CGM Focus's biggest holding through September was $552 million in Wells Fargo & Co.
About 40% of his $4.3 billion CGM Focus was in financial stocks as of Sept. 30, according to its portfolio report."
Huh? Sometime between July 1 and September 30 Heebner loaded up on financials.
- That is ancient history for a PM with high turnover.
- That could be the reason he is underperforming this year but it isn't mentioned. The financials are down huge since the summer.
Instead of calling him early and wrong, the WSJ lauds his moves as potentially super terrific.
Saturday, December 6, 2008
- believe that it is rigged
- wonder why anyone would play for real money
I don't believe that it is rigged, although I know that it is possible to cheat. The two most prevalent forms of cheating are (a) groups of people in the same room entering the same game and colluding, and (b) mediocre players "allowing" top players to take over their account late in a tournament in order to increase chances of winning.
The fact that an insider at one of these firms orchestrated the incident that 60 Minutes covered is very troubling, but it's over. The fate of these entire companies rests on that not happening again, so I'll take my chances.
I was reading a poker site today and came across a tongue in cheek email that one poster had sent to Pokerstars, one of the sites that I play on, complaining about the bad beats that he had been taking of late. I'm not sure he was even expecting a response but the over-the-top explanation from Pokerstars proving the randomness of their virtual card dealing program is wacky.
"Our shuffle is completely random - far more random than you could ever hope to get in a "brick and mortar" casino. We use a thermal entropy chip designed specifically by Intel for generating truly random (as opposed to "crackable" pseudorandom) numbers. It is based on movement of atomic particles in constant motion (defined in physics as heat) and is theoretically impossible to predict (see Schroedinger's principles for more information). As if this wasn't random enough, we have added all of our users input into the equation. So when you move your mouse, you are providing truly random input to the random number generator used to shuffle the deck prior to each game."
I'm sure there's a name for this phenomenon. Most people have probably come across a situation when, despite the fact that they are well-versed in something, someone else is so much more an expert that they feel stupid by comparison.
Consider this article on how to figure out whether you're a lousy writer.
"Don’t take a perfectly good word and give it a new backside so it functions as something else. The New York Times does this all the time. Instead of saying, “as a director, she is meticulous,” the reviewer will write, “as a director, she is known for her meticulousness.” Until she is known for her obtuseness.
The “ness” words cause the eye to stumble, come back, reread: Mindlessness, characterlessness, courageousness, statuesqueness, preciousness - you get the idea. You might as well pour marbles into your readers’ mouths. Not all “ness” words are bad - goodness, no - but they are all suspect."
I am interested in the English language. I studied it in school, did well. The writer of that article knows so much more about writing than I do that I might as well have just learned it in night school.
Continued thanks to the Grammar Police for staying away from this blog.
My wife likes to remind me that when I moved to the U.S. from Canada in 1991, I was very much in favor of universal health care, was perfectly content with what was available in Canada and thought it draconian that Americans didn't have access to it.
Health care reform was one of the lynch pins of Obama's winning campaign. He issued a statement yesterday demanding that American voters get involved in the reform process from day one.
"Obama is encouraging average Americans to host informal gatherings to brainstorm about how to improve the U.S. system.
"In order for us to reform our health care system, we must first begin reforming how government communicates with the American people," Obama said in a statement yesterday. "These Health Care Community Discussions are a great way for the American people to have a direct say in our health reform efforts."
Former senator Thomas A. Daschle, Obama's point person on health, will attend at least one and prepare a detailed report"
What a brilliant play. I don't think America has the appetite to pay for universal health care right now. What is more, the economy, an orderly retreat from Iraq and what is going on in the rest of the Middle East will be more than enough to fill up Obama's first term. By shifting the part of the responsibility for planning health care reform to voters before he even takes office, Obama hugely increases his chances of getting a free pass if he gets nothing done on health care.
The line about Daschle attending at least one meeting is priceless.
"WASHINGTON, December 5 – Congressional Democrats and the White House have reached agreement on emergency aid for US carmakers of between $15bn and $17bn, two senior congressional aides said on Friday.
The amount is far less than the $34bn requested this week by General Motors, Ford Motor, and Chrysler, but it would keep them going into next year."
The half-assed compromise isn't being confirmed by any other news outlet as far as I can see (EDIT: looks like WSJ is on board) , so might not be correct.
In the end, I would have been shocked if these guys had walked away with nothing, but even as the auto execs showed up better-prepared in D.C. this week, the questions in asked were much tougher.
Friday, December 5, 2008
The first week of December 2008 brings us a perfect example of "raise money when you can, not when you have to."
Harvard University filed a prospectus this week to sell $600 billion in bonds. The proceeds will be used to pay down other (likely more expensive) debt and unwind some swaps. Bravo, well-played etc. Rates are low, Harvard's credit ratings are still high. Use that balance sheet.
Contrast that to Corning, who filed a mixed securities offering this week with the stock in the single digits for the first time since 2004. For Corning, equity is expensive down here. I'm not sure about this but I don't recall them raising money when the stock was above $25.
There is nothing really new today with respect to earnings, credit or the macro. With the market down big yesterday, it feels like we're setting up for a rally off a really bad jobs number. The estimate for the November unemployment rate is 6.8%, up from 6.5% last month. It could be that the sooner we get to 8% or some horrific level, the sooner that we can recover or at least bottom.
Edit: Wow, was I wrong
"Mr. Obama's victory marks the death of the campaign finance system. When it was created after Watergate in 1974, the campaign finance system had two goals: reduce the influence of money in politics and level the playing field for candidates.
This year it failed at both. OpenSecrets.org tells us a record $2.4 billion was spent on this presidential election. And with Mr. Obama's wide financial advantage, it's clear that money is playing a bigger role than ever and candidates are not competing on equal footing."
Aprroximately 130 million Americans voted in the Presidential election last month. Next time around why don't we have voters give each other $18 each and call it a stimulus package as well? It is ridiculous that anywhere near $2.4 billion could be spent on an election. This country really needs to get that number as close to zero as possible. Anything that leads to reform of the system would be a great thing.
On another note, the idea that McCain had a shot had he raised more money seems a stretch, though. While I wasn't an Obama fan, his message hit home.
Thursday, December 4, 2008
Has anybody noticed that the daily U.S. equity market this year is a lot like a regular season NBA game? Nothing really matters until the last 10 minutes. Then a big-time player steps up and closes the deal one way or another.
I'm recommending brunch and a movie. See you back here at 3:00.
If the analyst is correct, he'll be a hero. If he's wrong, we'll have or be pricing in a better economy so nobody will care. It's sad but true that those conditions make it a good call.
Homeowners aside, what is going on with the financial engineering at the Federal government level highlights the fact that the countries of the Euro zone could be screwed.
The Euro can cut rates, and have been, but they have no central bank and so can't get involved in shoring up the credit markets with any mechanism other than money supply and short term rates.
Economics and Finance textbooks everywhere are being rewritten as I write this. It's probably too soon, though.
Wednesday, December 3, 2008
The NHL yesterday suspended Dallas Stars player Sean Avery indefinitely for making the following comments to reporters:
"I'm just going to say one thing. I'm really happy to be back in Calgary; I love Canada," the Ontario native said. "I just want to comment on how it's become like a common thing in the NHL for guys to fall in love with my sloppy seconds. I don't know what that's about, but enjoy the game tonight."
Crude, sure, but an indefinite suspension?
Howard Lindzon has a witty and insightful blog, and he's Canadian. In questioning the wisdom of betting on Microsoft if you are in fact betting on CEO Ballmer, he writes:
$500 fully subsidized with a plan! I said that is the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good email machine…. Right now we’re selling millions and millions and millions of phones a year, Apple is selling zero phones a year. In six months, they’ll have the most expensive phone by far ever in the marketplace and let’s see…what’s the expression? Let’s see how the competition goes.”
–Microsoft CEO Steve Ballmer on the iPhone, January 2007
Live and learn.
Two weeks ago, the Chiefs of the big three auto makers went to D.C. and asked the Congressional Committee on Grandstanding and Giving Out Money for $25 billion. While the car companies employ lots of voters and retiree voters, they went to Washington with no plan. They got no money.
They went back yesterday with plans for cuts, and asked for $28 - 38 billion.
If the government doesn't hurry up and give them some dough, the price tag could get up to $100 billion by Obama's inauguration.
U.S. housing prices are down over 20% from the 2007 peak. All of the 20 markets tracked by the Case Shiller index are down, so while there are regional differences, this is not a regional problem. It is everywhere. You probably already knew that.
Superanalyst Meredith Whitney of Oppenheimer and Merrill Strategist David Rosenberg have both come out in the last week and said that there is anther 15 - 20% downside in prices.
These calls caught my attention because, it feels to me, that an awful lot of people were hoping we are at the bottom, while not explicitly calling one. I read both Whitney's and Rosenberg's notes. Both have one of the qualities that I like least about financial research:
In the short term it is more important that something sound like a good idea than whether it is one.
Add to that the fact that a negative argument almost always sounds more intelligent than a bullish one, and you have a big call. I don't believe that housing prices have bottomed, but making a call as precise as calling for 15 - 20% more downside from here is quite a high wire act.
"In the latest evidence of how Wall Street is seeking to broaden its sources of funds, Goldman Sachs Group Inc. is weighing whether to launch an Internet banking operation, according to people familiar with the situation."
Goldman, like every other highly leveraged financial institution, needs stable deposits to help shore up the balance sheet. Its competitors have been more focused on strategies to buy existing bricks and mortar banks. The $5k in your savings account earning 2% is now very important business.
If you bank online now, switching costs are already pretty high. Since there is rarely a reason to go to the bank itself, your laptop has become the bank. All your payees are already loaded. As long as the software and platform your bank uses is good enough, it is quite a hassle to switch.
Can Goldman attract Main Street deposits without making an acquisition? I wouldn't mind a Goldman Sachs check book but I can't imagine getting one.
Tuesday, December 2, 2008
Palm is in the middle of the perfect storm. Apple is killing it and RIMM is resurgent, even as every non-smart phone is catching up in terms of functionality. They're in a huge air pocket in their new product line up and the consumer is obviously suffering. It's tough to have much hope.
Futures are up big and oil is down again. Auto makers report monthly sales today which shouldn't be pretty but shouldn't be a catalyst either.
Clearly yesterday was a miserable day for stocks. Particularly scary was the action in the large financials. Down is bad.
Monday, December 1, 2008
I didn't comment on the following when I first noticed it, but I will now. Some time last month Google began running low-rent Google text ads on Google finance. You've seen the ads on lots of low-traffic sites and they aren't pretty. They are, to me at least, a sign that the site running them is unable to attract high-quality advertisers. Nor do the ads appear to be for content or services that anyone would be likely to click through to.
I could be wrong but to me it's a pretty clear sign that Google is stretching for revenue. The stock has certainly been telling you that all is not rosy.
This time, they will have a plan. Each of the three will almost certainly have a different plan, which will make a decision very difficult for Congress, but at least they will have a plan. Two weeks ago, the spoiled kids went to Washington and said, "The economy is bad. You need to increase our allowance."
It might be true. Microsoft can do whatever they want at this point, and Yahoo needs to hurry up and get off the stage before the board and top management get sued into oblivion.
Oil is trying to get down into the $40s with no fundamental end in sight. OPEC is powerless given the sharp decrease in demand and no light at the end of that tunnel. The U.S. 10 year is down to 2.88%. The Fed should use this window to sell some 30-year (or 50-year) bonds. Why not? They're going to need the money.
Futures are down sharply. No surprise after the move we've had.
"The holiday shopping season got off to a better-than-expected start, as retailers reeled in cautious shoppers with massive discounts like "buy one get one free" sweaters at Gap Inc. stores, $200 iPod Touch music players from Amazon.com Inc., and 26-inch LCD TVs at Target Corp. sites for $299.
In a survey of 3,370 shoppers, the National Retail Federation estimated shoppers spent an average of $372.57 over the weekend, up 7.2% over last year's $347.55."
3,3370 is not a large sample size, and the article goes on to say that many shoppers had plans to finish more of their shopping earlier, potentially front-loading the season. In any case, chalk one up for the world not ending in November.