Saturday, February 28, 2009
This is one stupid piece of legislation. The intent is to levy a 0.25% transfer tax on all purchases and sales of securities, greatly increasing the cost of trading.
Who is going to bear that cost? For investor in mutual funds and pension plans, the investors themselves. The result will be lower returns, in lots of cases significantly lower for most investors, and many business models will not work. 0.25% per year can be the difference between success and failure in professional investing. In a high-turnover niche of the market, forget it.
The Security Traders Association is lobbying for support against, over here.
"A lot of commentators are wondering whether GE results will be strong enough to protect the dividend. I'm beginning to question the wisdom of that.
GE's return on equity over the last two years has been around 19%. To oversimplify, if you, Mr. Investor, give GE a dollar of equity, they will earn almost 20% on that dollar year in and year out. If you want the dividend protected, you would rather get 9% back on your money than have GE reinvest it in the business at a higher return...
I wonder what would happen if Immelt says on the call, "There are so many fantastic investment opportunities across all of our core markets that we are cutting the dividend to ensure utter global industrial/financial domination." "
They should hire me. I'm running five weeks ahead of the game.
The policy initiatives that Obama would and will pursue if elected – health care reform, greener everything, more money for education, negative tax rates for the less-than-middle-class – were clear throughout the campaign. His pursuit of the mandate he has been given shouldn’t surprise anyone. Nor should anyone bitch about how it’s going, or the price tag within reason. If you don't like it, vote for somebody else next time.
The economy is another matter.
Every economy is cyclical and downturns are necessary. Bubbles get deflated, dead wood get cleaned out, expectations get reset. This one looks and feels especially bad so some government intervention is warranted. The policies of Obama and Geithner have been all over the place and mostly off the mark so far.
It’s especially easy to bitch about the government and economic and fiscal policy if one is not forced to offer solutions. I would like to see three things fixed in the short term and have some ideas about how to get it done. The rest of the economy could very follow along a better trajectory.
- Get the good banks lending again. This is a tough one. The biggest impediment to better access to credit system-wide would be to move the hard-to-value assets off the good banks’ balance sheets. There has been chatter about Citi selling its Mexican bank or its Brazilian credit card processor - good assets. The Fed created TALF in November to help deal with the bad asset situation but hasn’t done anything with it yet.
Starting with Citigroup yesterday, the Fed’s policy should have been that if any institution needs incremental TARP help, the first step that the Fed took was to liquidate the hardest-to-sell assets at Citi. The banks are valuing loan portfolios at 20, 30, 60 cents on the dollar and are afraid to sell them lower. The market needs price discovery. Forced sales can get us there. The buyer might even make some money.
- Put in a natural bottom in housing.
Again, let’s not subsidize people who bought houses that they can’t afford. Ugh.
- Create jobs
Some very important changes in tax policy in the budget outline do the opposite. Raising the capital gains tax creates a disincentive to invest. Less investment equals fewer jobs. Increasing the tax rate on carried interest on funds, particularly venture capital funds, is just crazy. Small businesses create essentially all the net new jobs in this country.
We are going to have a huge deficit. Let’s not offset a tiny part of it with the two above changes. Give the market a hand then get out of the way.
"...declining home values have a devastating effect on the economy. The only long term solution is for home prices to get to a level where people can afford them. The government propping up prices at an unsustainable level using tax credits or forced mortgage modifications will prolong the problem, not fix it.
If you bought a house you can't afford, you have to sell it. Period. If Obama offers you a juicy tax credit to perpetuate the myth that everyone should own a home, he is borrowing money from future generations to do it.
Those that argue that the government is helping the banks so should help the people too are wrong. The government intervened with the financials to avert a global meltdown. If you have to sell your house and rent an apartment, your husband or wife may have a meltdown but the problem pretty much ends there."
Friday, February 27, 2009
If the folks who own the Citi preferred own it because they need yield, they are in a world of hurt.
Stocks are at news lows. I'm going to try to ignore this. If you're sitting on some cash, you should too. If you're fully invested, I don't know what to tell you.
As GM losses deepen, bankruptcy fears grow
Wagoner pleads case in Washington
Bankruptcy fears. The company needs to borrow $2 billion per month so that it can lose $3 billion per month at the current run rate. Bad.
Reportedly some private money is either coming in to the deal or converting preferred to common along with Uncle Sam. That is wonderful but there's a limit to how many deals the Feds can orchestrate with private investor participation, so let's hope that this is the last one.
Contrast that to the grand plans contained in Obama's budget outline yesterday. U.S. voters did sign up for that, even though the scope of the plan and the exact depth of the deficit required could not have been know at election time. Holy crap. It's going to cost $2 trillion to reduce health care costs.
"In an era where taxpayers and markets are confronting bad numbers in the trillions, the price tags on some of his initiatives do not seem quite so breathtaking, and, in any case, good economic policy demands that the fiscal floodgates remain open for a while."
His timing here is either perfect or perfectly crazy.
Thursday, February 26, 2009
I covered Dell for over 10 years when I was on the buyside and it was always a cash flow machine, particularly its consumer division. My home office setup is fine, and that computer drives my wireless network, but since I use my laptop most of the time its actual computing power is used primarily by my wife and kids. That being said, it's a couple of years old, and I wanted to replace it due to the buildup of spyware and the like.
I ordered an inexpensive tower from Dell on Tuesday - no monitor, just the box. I ordered the standard config that they were pushing which I am sure they had readily assemblable. I just checked my order status and it hasn't shipped yet. I chose 3 - 5 business day shipping and the projected delivery date is March 18.
They hit my credit card the minute I ordered it and they still own the components, which if they don't actually assemble it until 2 weeks from now will have come down in price, since the inventory that they have on site belongs to their suppliers until they pull it out of the cage. They have my money, they have their componenets. Brilliant.
I'm not complaining but I'd be happier if they ship it tonight. Business is bad, yes, but that is a bona fide cash flow machine.
While I'm not recommending the stock, it is trading up a couple of percent in the aftermarket.
"But now the party is over—and painfully so for a world
in recession and for markets in chaos. The task ahead is to
pick up the pieces, learn the lessons of this crisis, and take
actions to insure these types of problems never occur again.
The post-crisis fix can succeed only if it is grounded in the
premise of shared responsibility. A targeted politicized fix
is not a solution to a systemic problem. Fix the system that
gave rise to the crisis—not just the banks that have defined
ground zero of a wrenching credit crunch. The piecemeal
prescription of the blame game virtually guarantees there
will be a next time—an even bigger crisis that deals an even
tougher blow to market-based capitalism."
Stephen Roach, Chairman of Morgan Stanley Asia, great financial thinker and earner of about $500k per year did not proclaim the end of capitalism, but is worried about it.
With any crisis, a government has an obligation to fix the problem to the best of its ability and on opportunity to fix the system so that the same problem, or worse, does not happen again. Thinking about the last decade, poor business practices, poor consumer behavior, poor legislation and poor regulation got us where we are today. Let's fix that. Thinking about the last century, lightly
-regulated capitalism in an environment of the most efficient capital markets in the world made the U.S. the dominant economic force that it is. Let's keep that.
If we can't fix the current problem while at the same time preserving free markets, we're really screwed.
The country's 19 largest banks are about to be stress tested in order to determine what will happen to their balance sheets in the event of another leg down in the economy.
"According to the new Treasury Department guidelines, the banks would have to assume that the economy contracts by 3.3 percent this year and remains almost flat in 2010. They would also have to assume that housing prices fall another 22 percent this year and that unemployment would shoot to 8.9 percent this year and hit 10.3 percent in 2010."
If, under the simulation, a bank's capital levels are not adequate, that bank would be given 6 months to raise additional capital. If they can't raise the money, the Fed will invest in additional preferred and undoubtedly increase restrictions on bathroom breaks and pencil purchases.
Some are arguing that the above doom and gloom scenario is not harsh enough, but if the future is worse, we have a lot of ground to cover in between now and then. It is encouraging that there is some semi-transparent analysis behind whether more taxpayer money will go to the banks. Ironically, though, it is the opposite of investment research. The worse a bank's balance sheet is, the more likely the U.S. is going to own a bigger stake.
More scammers doing the perp walk:
Four People Arrested in Three Separate Fraud Cases, FBI Says
By Patricia Hurtado
Feb. 25 (Bloomberg) -- The FBI arrested four people in three separate securities fraud cases. James Nicholson of Westgate Capital Management was taken into custody this morning by FBI agents, said Jim Margolin, a spokesman for the FBI’s New York office.
Paul Greenwood and Stephen Walsh of W.G. Trading were arrested on what authorities believe is a $550 million fraud scheme.
Mark Bloom, who used to work for Greenwood and Walsh and now heads his own firm, was arrested on a separate fraud scheme.
Last Updated: February 25, 2009 10:40 EST
Wednesday, February 25, 2009
"The best confidence comes from knowing the rules."
That quote is not exactly correct in all likelihood but you get the idea. I couldn't agree more. Who in their right mind would buy a bank stock, common or preferred, if you didn't know until yesterday whether some banks would be nationalized? Who would bid on a portfolio of distressed debt if there was even a possibility that the Fed would be the next bidder? If you're upside down on your mortgage, why make this month's payment if Uncle Obama might come over the top with a cramdown next month?
We need to know the rules.
The futures are little changed as maybe no news is good news. Oil is up a buck and a half - perhaps the Pres. did inspire confidence in a better economy ahead.
Tuesday, February 24, 2009
As follows is a snapshot of BofA's balance sheet, as pointed out by Jim Cramer today:
- $1.3 trillion in binding unfunded loan commitments
- $80 billion in letters of credit
- $1 trillion "matched" book of credit default swaps
- $1.4 trillion notional swap book
- $60 billion in liquidity commitments to conduits
- $26 billion in residential loan guarantees related to loans sold but still serviced
We can't handle the truth. If the resultant truth is that the Pres wants to nationalize the banks, we don't want or need the truth.
Obama is clearly on the hot seat tonight. It's unfortunate but his speech better be good, and/especially a departure from the doom an gloom or else stuff that he's been dealing of late. The TALF needs to get kicked in ASAP. Confidence needs to be restored. If we're paying attention, we know it's bad out there.
If the treasury and the President are really still considering nationalizing a bank or banks, they should take a closer look at how they're doing unwinding AIG.
AIG needs, reportedly, another $60 billion and the Feds might give it to them, with strings attached of course. Attached to what I'm not sure..
Google has some kind of technical problem. For the last 24 hours I've been only sporadically been able to reach this blog and/or my gmail account. Maybe the antitrust gods are addressing the issue of Google rapid ascent in market share and power. In any case, I probably won't be posting as much this week.
The Japanese market made a 26-year low last night. Just sayin'.
"Fidelity Investments, Charles Schwab Corp. and other 401(k) account managers say most clients rode out the worst months of the stock market slump without changing weekly contributions or moving to more conservative money-market or bond funds."
Bloomberg is pointing out that the average 401(k) investor is not running for the hills. This is obviously good and bad.
- investors have a shot at making some of it back should the market recover
- the defined contribution system kind of works
- that money is not sitting out on the sidelines waiting to come back in
- those folks lost half of their retirement money
I talk to people every day about their financial situation. Most people these days would rather be talking about something else.
Monday, February 23, 2009
This market stinks. The common equity of hundreds of firms that have a complicated balance sheet is a crap shoot, and few in the mainstream media focus on it. If you read this with any regularity you might have noticed that I don't mind highlighting the positive, what could go right scenario if I can see it as possible. Doesn't even have to be probable.
Nothing I can see leads me to believe that this market is not going lower. I couldn't log into my blog today from the office or I would have written this as soon as the premarket strength showed signs of rolling over.
Things are bad right now. No one is smarter than the market. Certainly not the government.This is going badly, and could get a whole lot worse.
The plan involves swapping preferred for common equity among other things, and is being viewed by the market as a much better outcome that what Citi had coming to it otherwise.
Back at the auto ranch, GM is trading up nearly 20% in the premarket as Treasury reportedly is getting financing together for a $40 billion bankruptcy loan. The early leader for quote of the day:
Sunday, February 22, 2009
Recency bias - the cognitive bias that causes people to more vividly remember the most recent example of something - needs to get to work on the psyche of the American consumer.
Yale Professor Robert Shiller writes in the weekend Times:
"According to the Reuters-University of Michigan Survey of Consumers earlier this month, nearly two-thirds of consumers expected that the present downturn would last for five more years."
Given that fact that most U.S. citizens have not lived through a downturn lasting five or more years, the above is surprising. We should be remembering a recent, brief recession. I wonder how different consumer, employer and banker behaviour would be if people really believed in a quick light at the end of the tunnel this time around.
"My suspicion is that Google's power will begin fraying at the edges as customers and advertisers realize that Google has too much power and too much information - but substantive change to its competitive position will not occur until a great alternative comes along."
In today's NY Times, [I think that] Randy Stross is arguing for, or saying that there will be regulatory pressure on Google as it approaches 70% market share. I can't imagine the government or anyone else telling you which search engine to use. They can't separate the ad portion out or else there will be no business there. For the time being the downward pressure applied on Google's market share will come from the fact that the market hates a monopoly. Then something new will come along.
"If you don't believe in God, you better be right."
A survey of 1,000 members of the National Academy of Sciences (NAS) revealed that only 7% of members believe in God, down from 15% in 1933 and 27% in 1914. I'm not sure why they waited so long between surveys. I'm also not sure what to make of this all.
Saturday, February 21, 2009
<--- That's a 3-year chart on the S&P 500. We are within spitting distance of the November closing low of 752. Most technical analysts will tell you that if we breach that, look out below.
The key in my opinion is the balance sheet of the banks. The financials are acting like they have one big combined balance sheet and it's busto. The only good news is that it may not be, and if Geithner has a plan to really begin to move the toxic assets, there may be hope. Be careful though. Down is still bad and hope is still not a strategy.
WOMAN: "Honey, it's me. Are you at the club?"
WOMAN: "I am at the mall now and found this beautiful leather coat. It's only $1,000. Is it OK if I buy it?"
MAN: "Sure, go ahead if you like it that much."
WOMAN: "I also stopped by the Mercedes dealership and saw a new 2009 models. I saw one I really liked."
MAN: "How much?"
MAN: "OK, but for that price, I want it with all the options."
WOMAN: "Great! Oh, and one more thing .....the house I wanted last year is back on the market. They're asking $1.5 million"
MAN: "Well, then go ahead and give them an offer of $1.5. They will probably take it. If not, we can go higher. It is really a pretty good price."
WOMAN: "OK. I'll see you later! I love you so much!!"
MAN: "Bye. I love you, too."
The man hangs up. Another man looks at him and asks, “What was that all about?”
The first man smiles and sys, "Nothing. Anyone know who this phone belongs to?"
Kudos to him of he can get it done. Hats off to antitrust officials if they block this one, as it truly will be bad for consumers. Good luck to upcoming artists. At least they know whose back they need to scratch.
Friday, February 20, 2009
Futures are ugly, overseas markets are ugly.
Some Brit is on the tube talking about the wisdom in tough times of cutting your dividend, which is absolutely contrary to conventional wisdom. Sustainable and growing dividends have long been a sign of a company's stability, especially to superficial investors. I can certainly see that in tough times when earnings are troughy and the real cost of capital is high, many companies could find a better use for cash than giving it back to shareholders a little at a time.
Thursday, February 19, 2009
Oh, and Happy Birthday to me.
Since I am of the view that America has lost at least a part of its ability to see and deal with the obvious, I'm going to point some really bad ideas as I come across them.
I'll start at #197 since I'm sure I've seen almost 200 of them over the last year.
<----- Having a pet killer monkey.
Under current CEO Mark Hurd, who took over for underwhelming Carly Fiorina and created the new HP, the company has exceeded expectations, improved margins, made a good acquisition of EDS - done everything it could to be more like cash flow machine IBM.
The big miss doesn't bode well for coming quarters. Methinks if they had some remaining tricks up their sleeve they would have used a couple this quarter.
The horrendous economic news continues.
- The U.S. Fed lowers it outlook for U.S. 2009 GDP and year end unemployment
- Japan sees no near-term bottom to the economic outlook
- The World Bank is calling on the EU, which has no central bank and therefore no money, to bail out Eastern and Central Europe, or something like that
- The housing/mortgage component of Obama's economic Rube Goldberg is a complete and utter joke
Seriously, we are going to subsidize people who couldn't afford the house they bought in the first place at the same time that we are not going to get a supply/demand based bottom in house prices.
More populist, porkulist garbage.
Wednesday, February 18, 2009
Either Allen Stanford isn't very good at fraud or it's a low-margin business. Think about it. Fortune puts his personal net worth at 2.2 billion, which is probably overstated. If I stole $8 billion I would like to think that I would have something pretty close to $8 billion. These crooks need to get more to the bottom line.
The U.S. auto industry is on its last legs. They asked for billions again yesterday and might not make it til the end of the year even if they do get this round. Despite the jobs that will be last, the government needs to force their hand soon. They are cutting jobs as fast as they can anyway. I'm not sure why the arrival of an auto czar or an auto panel will make a difference.
The court of public opinion isn't going to like this one. Goldman Sachs Co-President Jon Winkelried headed for the exits yesterday and the WSJ is focusing on the fact that he made $67 million in 2007. I don't blame him for getting out of their while the getting is good.
Tuesday, February 17, 2009
This is good. Read it.
The market had a big down day today, which will most likely be viewed as an appropriate response to the lack of [ ] in Washington D.C. with respect to dealing with the immediate issues in front of us.
What word(s) should appear in the [ ] in the above paragraph? Talent? Transparency? Sincerity? Cohones? We need better regulation, more jobs, better regulators, better banks. Lots of things.
That the stimulus bill subsidizes the digital cable transition is off the wall wacky. Let's hope someone get some things right.
In a shocking development, the 17 top mobile phone manufacturers (not including Apple) have agreed to have a universal charger for all phones produced after January 1, 2012. The group is citing environmental reasons for the shift but sheer convenience also makes it a big winner for consumers.
Apple better get involved in a hurry, although I'm sure they have their reasons for resisting, one of which is probably the profitability of proprietary accessories.
I was at Sam's Club yesterday and it was packed with people celebrating Presidents' Day. Either that or they really had to have 10 lbs of navel oranges.
"The world is suddenly awash in almost everything: flat-panel televisions, bulldozers, Barbie dolls, strip malls, Burberry stores."
Layoffs, closures and production cuts will help with the capacity side of the equation, but with respect to finished goods, we still need to sell all the extra stuff. With a car, a house or an office building, that's a big deal. Good news for consumers, bad news for everyone else.
There's a poker term "close to the felt" which means that a player is almost out of chips, or money. Donald Trump's casino operation, Trump Entertainment Resorts, will probably file for bankruptcy today for the 3rd time. It is a great promoter who can go out and raise money over and over again for an enterprise that runs so close to the felt that it goes busto every time the economy goes into recession.
Anybody else think it's strange that people are fighting over Sirius?
Monday, February 16, 2009
"If in real terms we assume write-downs of 50%
in U.S. equities, 35% in U.S. housing, and 35% to 40%
in commercial real estate, we will have had a total loss
of about $20 trillion of perceived wealth from a peak
total of about $50 trillion. This relates to a GDP of about
$13 trillion, the annual value of all U.S. produced goods
and services. These write-downs not only mean that
we perceive ourselves as shockingly poorer, they also
dramatically increase our real debt ratios. Prudent debt
issuance is based on two factors: income and collateral.
Like a good old-fashioned mortgage issuer, we want the
debt we issue to be no more than 80% of the conservative
asset value, and lower would be better. We also want
the income of the borrower to be sufficient to pay the
interest with a safety margin and, ideally, to be enough to
amortize the principal slowly. On this basis, the National
Private Asset Base (to coin a phrase) of $50 trillion
supported about $25 trillion of private debt, corporate
and individual. Given that almost half of us have small
or no mortgages, this 50% ratio seems dangerously high.
But now the asset values have fallen back to $30 trillion,
whereas the debt remains at $25 trillion, give or take the
miserly $1 trillion we have written down so far. If we
would like the same asset coverage of 50% that we had a
year ago, we could support only $15 trillion or so of total
Without a doubt, there are some very worthy borrowers who are struggling to find a loan. As banks' assets have declined in value, they have been hustling to keep leverage and capital ratios in line. Without a doubt, it is more difficult overall than it was 2 years ago to get a loan. It should be. I don't want to see another bank fail in dramatic fashion, or even quietly, but it may result in the worst case scenario if we incent them to go back to their old lending levels.
If he's right, the market is not as cheap as I thought it was based on current earnings. It may still be very cheap relative to normal earnings.
Happy President's Day.
Sunday, February 15, 2009
I got a really bad haircut today.
The Japanese economy is worse than ours maybe.
This populist, protectionist crap dominating the media and U.S. politics is sooooo weak. If the Congress and Senate had spent half the time debating whether we need a stimulus package as they did debating what pork to put in, the world would be a better place.
Friday, February 13, 2009
The cause of the rally, of course, was the news of some details of the bailout plan, specifically a government-orchestrated mortgage modification program. Clearly this market is starved for specifics, as the Dow moved up 200 points in less than an hour.
Thursday, February 12, 2009
"Despite the sorry state of markets far and wide, and even sorrier state of the real economy that is lagging the former, a week of traveling, planes, trains, and hotels with attendant over-indulgence in popular newspapers, television and radio has revealed the latest rip-roaring and snorting bull-market: simple-minded interviewers wheeling out pedestrian interviewees from any remotely-related tangential financial discipline - most with paltry knowledge and understanding of the current economic crisis, economic history, and financial markets but all who are recriminating, pontificating, moralizing, wagging fingers, denying and defending in a blind-leading-the-blind retributional media-equivalent of road-rage."
Yowsa. My wife, who has great common sense, wants me to stop watching CNBC.
He is offering to review business plans and invest his own money based on very strict criteria. That blog entry has 684 replies since Monday, many of them back-of-the-envelope proposals so don't expect him to get to yours any time soon.
Latin America is the world’s largest exporter of cocaine and cannabis and a major supplier of opium and heroin. It’s also been the main focus of U.S.-led drug eradication and interdiction efforts ever since U.S. President Richard Nixon declared “war on drugs” in 1971."
Nice try, not happening.
Down is still bad.
Bloomberg reported this morning that JP Morgan, Goldman Sachs and Morgan Stanley may be working to repay the TARP funds as soon as possible, in order to avoid groundhogging days like yesterday. No kidding. The quality of the questions they were forced to answer was laughable. It's a sad state of affairs that members of Congress can summon important guys (even guys who screwed up big time) to a meeting, force them to be prepared to answer questions in detail and do no more prep themselves than printing a few emails from constituents
What exactly did Goldman Sachs do again? The U.S. government 5-year bond yield is 1.71%. The goverment borrows money at 1.7% forces Goldman to take a loan in for form of preferred shares at 5%. There is virtual certainty that Goldman will pay the money back. Doesn't sound like a lynching is warranted.
It would be interesting to bet that it won't given the evidence stacking up that the economy is still getting worse. Oil is back down to $35, the economy is losing half a million jobs per month, the government stimulus and stability plans are being roundly jeered. Since lots of stocks are cheap and I'm not a fan of putting trough multiples on trough earnings, I'm not making that bet but you certainly can.
It's crazy windy outside like my house is going to blow down. What are the odds of that?
Wednesday, February 11, 2009
"I think the Treasury should set up the "U.S. Treasury Bank," or USTB, to deal directly with homeowners.
This new USTB will pay off, in full, the homeowner's current mortgage held by any private bank. This will be a huge positive to the banking system. The new USTB will retire the homeowner's old loan, and the principle balance on USTB loan will be reduced to a point that creates a 25% equity cushion on any home refinanced. (Anyone can qualify if you have less than 25% equity and only for existing homes loans.)
This would be a huge positive to the homeowner. In addition, this new loan would have a 4.5% fixed rate for 100 years. This would dramatically reduce payments for the homeowner. These new loans will be guaranteed, securitized and sold by the U.S. Treasury back to the public. This program will be financed by the corresponding sale of 100-year Treasury bonds, hopefully below 4.5%, helping the taxpayer directly, rather than giving money to banks and hoping they lend. The banks would receive huge amounts of capital and bad mortgages would be paid in full.
This would establish a bottom for home prices. The underwriting criteria can be set up quickly, probably in one week, and require every bank in the US to have at least one USTB employee at each branch (i.e. force banks to retrain one of their employees to be a USTB employee). This would expedite the set up."
Sure people who bought over their heads and have negative equity would get a free pass, but all in all it's worth it.
Intel Corporation to Invest $7 Billion in U.S. Manufacturing Facilities
Tuesday, 10 Feb 2009 09:00am EST
Intel Corporation announced that it would spend $7 billion over the next two years to build advanced manufacturing facilities in the United States.
Cisco Systems, Inc. Prices $4 Billion Of Senior Unsecured Notes
Cisco Systems, Inc. announced the pricing of two series of senior unsecured notes for an aggregate principal amount of $4 billion.
While much of the economy is sputtering to maintain the credit that they have, tech giants Intel and Cisco are charging ahead. The rich get richer.
"Now, of course, everyone is discovering that it was Geithner all along. Public/private. Are you kidding me? Do you think there is enough money, even with financing, to make a dent on Citigroup's structured investment vehicles, let alone the banking system? Does it matter that he will make "a trillion" dollars available? ..... More facilities. More trusts. More piecemeal. More, well, Geithner, complete with the daily leaks right up into this and the heavy press-courting that has been his style from day one.
I am embarrassed by the "press" that made us believe in this Geithner."
Then, less than 6 hours later, he wrote the following:
"However, as I listened to [Geithner's] testimony later in the day, I thought he made a lot of sense. I didn't like his speech any more than the market did, but if you parse it and expand it, there are elements that I have been calling for in these pages for a year now so I can't dump on the guy when he is in my camp."
I wouldn't be surprised if he got a call from someone very high up asking him nicely to tone it down.
Tuesday, February 10, 2009
We need a continued downsizing of investor expectations and corporations' fixed-cost structure. " Doug Kass, Seabreeze Partners
Geithner is done speaking, the Senate passed the stimulus package and the market is not impresseed, down 3+%. Looks as though there is lots more work to do.
An analyst at R.W. Baird just upgraded Seagate and its competitor Western Digital. These are two of the most hated stocks in techland, which makes the call interesting.
PC units shipments are terrible. High end notebooks now have solid state flash drives as a real option. Cyclical and secular headwinds aside, I'd rather own this stock at $5 than $30. Probably too early though.
Las Vegas sounds more boondoggleish but it's cheaper than San Francisco, so I guess they are doing it for the symbolic Brownie points that they may get. The sooner we get out of this phase the better. Banking conferences such as this one bring together institutional investors and companies with Goldman acting as the intermediary, which it is
Let's not totally destroy the capital formation process.
Oil is still hanging out at $40, signalling no real changes, despite the fact that the Baltic Dry Index has doubled since Christmas and a handful of other commodities have been acting noticeably better.
Geither and Bernanke both take the stage today, but different stages. I'm not sure what to expect from Geithner, and I'm not sure it matters what Bernanke says.
Monday, February 9, 2009
IPOs create supply of stock, which at the margin is a negative, but also breed confidence and give investors something new and glossy to get excited about. The market could use a fresh look at some new. good ideas.
My suspicion is that Google's power will begin fraying at the edges as customers and advertisers realize that Google has too much power and too much information - but substantive change to its competitive position will not occur until a great alternative comes along.
Sunday, February 8, 2009
Expectations are very high for this week on the federal government policy front.
It's a shame really. The market probably sells off early this week no matter what happens. The market wants good news now. Especially good would be news that promises good future results which are not immediately disprovable.
I posted this 6 months ago. It just happened.
Saturday, August 30, 2008
Early Grammy Nomination
By Braaak, of course, who is not a member of any Academy that nominates anyone for anything. Nor am I the most talented singer/songwriter of my generation. I'm also not a music producer.
Song of the Year: Viva La Vida by Coldplay.
If you listen to the radio at all you know this is not a controversial choice. Other than it being a good song, my reasons for picking it may not be so obvious. As follows:
1. This is the 1st Coldplay song that I can remember where they don't sound like they're trying to imitate U2.
2. The violin(s) arrangement is awesome, especially for a pop song.
It may be chick music, as I've heard some say, but I think it's a winner.
Saturday, February 7, 2009
One of my boys said, "Steroids make your muscles bigger, right?"
I said, "Yes and they make your penis smaller."
braaak at yahoo dot com for more handy parenting wisdom.
"Ms. Schapiro said she wants to restore investor confidence in the markets, and she announced the formation of an advisory group of investors. She signaled interest in giving shareholders more say on how much executives are paid and who serves on corporate boards, long a divisive issue among commissioners."
A call to arms for smart watchdoggery as expected. I am a little perplexed about the comment on executive compensation. Disclosure to investors is not a problem. The proxy materials and annual filings provide all the info they need.
Board composition isn't the problem either. The problem is that boards are rarely held accountable for the actions of companies or their top execs. If the boards consistently put the shareholders' interest first, all will be fine.
Friday, February 6, 2009
The futures and the dollar are in positive territory and not reacting much.
If we don't get a package on Monday which includes $335 million for treatment and prevention of sexually transmitted diseases, we could be in real trouble.
Despite CNBC's fervent prayers, Reuters is reporting that she isn't in with Geithner discussing the suspension of mark to market.
I don't think the jobs number at 8:30 this morning matters that much. We're going to 8%+ unempoyment. Whether we stopped at 7.5% or 7.6% last week doesn't really make much difference.
If the U.S. economy were a semiconductor company, it would be bottoming now. Semi companies know how to put in a bottom and get moving to the upside. Obama and company are not so sure.
Flash memory spot prices have risen more than 50% since December 20. Flash memory is used in iPods, digital cameras, cell phones and the like. Its claim to fame is that it retains what is stored in its memory even when to power to its device is off, which makes it idea for portable consumer electronics.
Prices for flash got really weak last quarter so the suppliers acted swiftly and decisively, cutting supply. Commodity prices are up over 50% since just before Christmas. Demand should put in a seasonal bottom this month.
Adults acting sensibly.
- Singapore'se sovereign wealth fund has $130 billion in it (that's a lot of money)
- Temasek's CEO, who is also the wife of the Singapore Prime Minister, has resigned
- Singapore's Prime Minister's wife was running $130 billion (a lot of money) of the coutry's money
- The reigns of the $130 billion fund (big dollars) will be handed to the former CEO of commodities giant BHP Billiton
It's an interesting strategy to run a really big fund with people who don't have experience, but I'm sure there's more to it than that.
Thursday, February 5, 2009
I know it's a show of confidence to buy your own common stock into turmoil, but I wonder if there is a rule against buying the preferred. I wouldn't touch BofA common with oven mitts.