Alex Filonov

Debunking the 'Too Big to Fail' Myth Once and for All

Sure, if they are too big to fail, make them smaller. Let FDIC to set max size of US operations of any bank, as measured by provided credit. It won't solve all problems (nothing will), but it will kill monsters.

Citigroup's Doomed IT Strategy

As an IT professional I can say that such integration task is difficult, usually costs several times more than initial budget, takes several times more time to develop, test and move to production than initial plans suggest. But gain from such changes is so big, they pay for themselves even then.

Credit Card Rules: No Consumers Need Worry

I am paying my balance in full. And I want to continue doing so. Essentially, credit card companies give me about of month of free credit, which means extra money in my pocket. This credit is not exactly free, because merchants pay a fee. But they do accept credit cards, so it looks like it's profitable for them.

Couple of points here:

it's convenient to carry more than one credit card, because not all merchants accept all of them. At Costco, you need Amex.

In current environment, further contraction of debt is very dangerous for economy. We are not out of deflation danger yet, and debt (and monetary mass) contraction is deflationary.

Understanding What Buy and Hold Really Means

Buy and hold is just useless talk. Maybe there were some companies 30 years ago good for 10-15 year long investment. Of all companies I invested in, only one was good for 10 years: Apple. I invested since 1998 and have positive return overall, but I would be much better off if I sold most of my investments in 2-3 years after buying them. If you are too lazy, you can invest into index fund (better yet, ETF) and hold it forever. If you go for individual stocks, you need to research every stock you want to buy and research even more every position you hold.

Of course, last 10 years were hard. We might be close to the long term bottom, and buy and hold will serve better afterwards. Doing your homework and selling in time will serve even better.

Oh, and one more thing: rebalancing without thinking will kill your portfolio. Count on it.

One Easy CDS Fix

You are right that there are few net sellers of CDS. Unfortunately, AIG is one of them.

Bank Stocks Will Return to Prior Norms

Jason, I have to congratulate you on BAC position. I was wrong and you were right. It's no small deal to get a double in less than a month.

Mark-to-Market Triggered This Recession; It Will Also Trigger the Recovery

CDO market crashed in August 2007 (time of the famous Jim Cramer rant). Mark to market affects reserver requirements only, and with or without it banks are in danger of a run if they have huge illiquid positions. Bear Stearns failed because of a run, same for Lehman Brothers, Goldman Sachs and Morgan Stanley had to become banks (i.e. get access to Fed window) to survive. I don't know what would happen without mark to market, but run on bank kills it in any circumstances. And just a rumor that bank is illiquid can trigger a run.

Cramer's Mad Money - Cramer, SEC Chairman? (12/2/08)

Cramer doesn't get my vote. He is way too emotional for this job. Maybe some of the proposed changes are needed. Others are obvious bunk: bear raids might break a bank or a brokerage which needs to do a secondary offering, but they didn't have anything to do with Lehman collapse. Lehman, Goldman and Morgan Stanley were a subject of a classic run on bank in September. You can't save yourself from a run by secondary offering, takes too much time. It was Paulson and Bernanke fault, they should've given Lehman a lifeline. Later they allowed Morgan Stanley and Goldman to register as banks to get access to Fed's window, which obviously saved them. Lehman shoud've been given the same possibility in September.

Main thing, Jim is often forgetting that markets are bigger than any government. When some regulations are needed, you can't make market to do something which it doesn't want to.

Last but not least: if bear raids should be investigated, how about bull raids?

Does Buy-and-Hold Work on Major Blue Chips?

Buy and Hold works great during long term bull markets. The last one started in 1981 and ended in 2000. If you bought and held during 1966-1980 period, you had about the same return as in 2000-2007. Dividends are OK, but if company pays 1.5% and stock doesn't grow, you're much better with CD (and much safer to boot). That's why index fund investing right now is plain stupid.

The Outlook for Financials Failure

Goldman Sachs is not a bank, but it's priced like one. I'm seriously thinking of buying it.