Bill Herbert

Synovus: A Beat-Up Bank to Bet On

Tom,

fm..no stat makes some key points -

1) In 1990 the CRE crisis was concentrated regionally and in the S&L industry. Commercial banks were affected but had a more viable exit strategy. - --- - I agree - we are looking at the possibility of a severe crash in CRE over the next few years, and it's obvious that despite some recent stabilizing, the residential side is far from healthy. It's more like a multiple gunshot victim, and the ER docs have stopped most of the bleeding, but it's still on life support equipment in the ICU and it's hard to say about the prognosis for recovery.

2) Barnett reduced NPA's from $1.1 Billion in 1991 to $238 Million by 1995. Most evidence suggests that with +/- $1.5 trillion in commercial mortgage debt coming due in the next three years, unemployment still rising, and CRE values subject to further decline, loan portfolios may still contain significant risk. ------ Barnett was lucky, if you ask me. They had huge problems, that were essentially wiped away by extremely strong growth in Florida real estate, business in general, very strong growth in tourism (the Baby Boomers and their kids blowing $3K on four days at Disney World - not happening now) the tech boom, the very low commodity prices of the 90s which resulted from the collapse of the FSU and disarray in OPEC, etc.

We have a MUCH different set of circumstances now, including the aftermath of a ridiculous building boom and a huge bubble in both commercial and residential RE - this typically takes 7-10 years to unwind, not just 2.5 years, which is where we are right now. IMO, retail real estate is so overbuilt that a lot of old stuff will have to be razed to get tenants to occupy the newer space. Some malls are 30% vacant right now, which was never contemplated when they were built a few years back.

3) Don't forget that in 1990 Florida was still a growth state. Recent demographics indicate that Florida is experiencing out migration due to lack of viable employment in construction and tourism. ----- ditto the above reasons - Florida is now back to sub-normal growth/recession. Barnett would not fare well if it still existed with the problems it had then, translated to now. I don't think the outlook for the Atlanta area is going to improve radically for at least a few years. SNV, as others have noted, is a poorly-run bank, loaded with incompetent old-guard management that really blew it over the past five years.

Why do you want to bet on them now?

There has to be a better reason than "the stock just hit a new all-time low" or other such folly.

Barron's' 'Miller Time' Completely Misses the Math - and the Mark

Great article. Miller is a real joke, IMO, and has been for years, but the shill machine on WS is a high-dollar operation, and he is still considered by many to be a credible "money manager" who just had a little bad luck recently, that's all.

I truly wish the SEC would require fund companies to prominently disclose the horrendous damage to wealth and stock portfolios that people like Miller have caused, and also make them disclose the real numbers on their performance over the years. Neither is the case right now, so there is a lot of outright fraud in the way these "investment results" are presented.

And Barron's??

Please don't make me laugh. Barron's hasn't been worth reading for years, and is getting progressively worse now that Rupert has taken over. Unless you have a need for catbox liner, save your money.

Same goes for Morningstar - basically a shill machine disguised as a service to investors. Their stock picks are entirely random, and as far as I know, haven't even matched the S&P for performance - so it's less than useless.

Jamie Dimon: The Man Who Could Save Wall Street

Dimon is indeed a real talent. He came from a non-rich family, and as Buffett said, sticks to banking, which he does successfully. He inherited an operation that is way too heavily exposed to derivatives, and although most of it is "hedged" in terms of offsetting trades, we all know what happened at AIG. There is no truly hedged book that can avoid counterparty risk, although it can be spread around to fifty different banks around the world. so that helps.

As smart as Dimon is, and I say that sincerely, I would guess that he will try to build more solid commercial banking, and gradually move away from derivatives, as the economic situation is just too fragile at this point to have a huge exposure, as JPM still does.

Maybe he's the "best house in a bad neighborhood" but I think Dimon is head and shoulders above his peers, most of whom are really corrupt and would peddle their offspring if it helped their bottom line or added to the bonus pool.

The Arithmetic of Gold: Why Its Price Has No Ceiling

Check your facts David - There is no way that Central Banks "own" 4.8 million tons of gold. Unless it is phony "gold" - paper promises and concocted 'lease' documents and smoke and mirrors and derivatives and...and........God knows what. Anything, of course, but the actual pure yellow metal.

Why do you think they refuse real audits, and have for centuries??? Why does Nymex have to change the settlement rules in a mad panic, with gold still at a low, low $1,000 per ounce?? There are so many wankers betting the other way, and trying to talk it down, but yet, strangely, it is now OK to deliver phony paper money against a contract that absolutely GUARANTEED the delivery of the actual physical metal, come Hell or high water.

If you can't read between those lines, go back to your dreams and totally phony govt. stats from corrupt and clueless bureaucrats. It will be quite a day in the "financial" markets, that revolve around fraud and illusion, and paper money of rapidly declining value, when people try to finally get back to the hard, physical reality of owning something that others desire, and demand payment in - the real, physical metal (that doesn't exist, never did, and yet had been "sold" to any number of suckers through the larcenous and totally fraudulent ETFs and so on.)

I believe we will turn on our TVs and see politicians, WS bankers, and ETF managers staring down the barrels of guns, held by an outraged citizenry that realizes, too late but unmistakably, that it has been had, and is simply not going to accept anything but delivery of the gold it has been (fraudulently) promised.

This is the world's, and history's, greatest deception, by far. I would guess that the CBs could produce no more than 300,000 tons of actual gold, no matter how they twisted and turned. Not "press release gold" or "Ben Bernanke's testimony" gold, or "JP Morgan's certified statement of ownership" gold, audited by some thoroughly corrupt 'Big 4' accounting firm, but real GOLD. The real deal, that they no longer have.

The rest has been leased out, stolen by corrupt governments, or quite likely, never existed in the first place. The lies surrounding CB gold are gargantuan and beyond the average person's imagination. You will see gold over $10,000 USD in less than fifteen years, and possibly in less than five. Mark my word, the fraud will be blown away very soon, and the physical metal will be as scarce as hen's teeth, and politicians will be hiding out in mountain cabins rather than face the music.

How to Reform the Credit Rating Agencies

Great article - but I would suggest going even further in pursuit of reform.

I would create a Federal Oversight Board that collects money from the users - the investing community - and assigns the task of analysis and issuance of ratings on a random basis to a handful of rating agencies. I would keep the present three, but immediately fire any top execs who were responsible for the past egregious blunders, and bring in new, outside management that is very closely tied to investors' interests.

I would also encourage the formation of several new rating entities (hey, there are a LOT of good, unemployed analysts floating around the job pool right now - although some may be too rigidly honest to hold a job on WS under the present system that rewards the cheaters) to promote competition. And I would institute a "rate the raters" independent review system wherein the ones that did a good job were rewarded with extra business and better fees, thereby starving the slackers and the "business as usual" crowd that is presently so corrupt. Maybe people like you and a few other high-minded individuals could do voluntary two-year rotations on such a review board.

And I would go so far as to outlaw any type of influence exerted by the companies-being-rated on the analysts who are doing the DD and deciding on the creditworthiness of the issuers' paper. I wouldn't even let them buy a guy lunch, or invite her/him to a Christmas party or golf outing. Nada, zero, no bribing or arm-twisting allowed - and swift jail sentences for anybody who steps over the line.

By the way, I would strongly advocate a similar system for corporate audits, so that we can clean up that profession as well. The average audit is more of a whitewash than a thorough review of the real situation, at many companies. It doesn't help that the FASB is a joke, and that corrupt Congressmen have battled reforms for years, and have shielded the SEC from tough scrutiny until things imploded in a morass of corruption, worthless securities, Alan Stanford and Bernie Madoff, and hundreds of truly-busted hedge funds - many of which, incredibly, are still operating today as they try to "unwind" millions of dollars worth of bogus trading profits they have booked on CDS's and other flaky trades.

We haven't come near the final tally of all the bad numbers on the books of the banks, hedge funds, and WS firms. It's going to be an interesting year-end audit season, that's for sure.

China's Silver and Gold Download

>>Once Hong Kong's gold is safely back in the new vault there in Hong Kong, watch China use the Hong Kong Dollar as a stalking horse for the Yuan by pegging the HKD to their gold and watching what happens. Never, ever forget that when dealing with China, NOTHING happens by "accident".<<

M.A.D. - You are so right. I would surmise that over the next few years, we will see China rapidly accumulating gold and other PMs, as well as building huge stockpiles of industrial metals. While some argue that this would be counterintuitive (driving down the dollar, thereby shooting themselves in the foot) I suspect that the Chinese have already calculated the inevitability of the US Dollar sinking much further, and don't want to be the lone soldier trying to hold the fort against economic reality.

In fact, this trend of dumping dollars quietly for REAL goods has already begun - I think China will also become very aggressive in terms of buying up mines, processing plants (mills), and so on over the next year or two.

For one thing, it is now pretty obvious that we will not have the 'global Armageddon' some were touting six months ago, and that prices will be headed in one direction for a long time - UP. That is due to the huge pile of paper money swirling around the globe - it will find a target in real assets. I believe the Chinese will be aggressive buyers of prime commercial property as well - it's sort of like a giant Monopoly game at this point - many very prime properties in major cities can be had for a big cash outlay, and can be refinanced later if needed at very low rates.

I'm buying miners, silver, gold and looking seriously at plucking some deep value from the distressed commercial REITs.

Today in Commodities: A Fitting End

Matthew, or anyone -

I've been holding off valiantly on the long nat gas / short crude oil trade for the past two months. With the ratio now around 26.3 to 1 as of the close on Friday 8/21, I can't stay away from it any longer.

I know we have an enormous NG glut and I also know that demand is likely to remain stagnant for at least the next few months, as we get into milder weather and slack industrial usage. It could get ugly, but I will be surprised if the Crude-to-NG ratio can go beyond 30-to-1.

I'm wondering if anybody has some insights as to how to most effectively position the account in terms of moderate risk, a hedged position, and reasonable use of leverage. I want to be there when the spread comes in, and I would love to triple my invested money in a few months from riding the position, and the move may occur quite suddenly and violently depending on world events and/or a big hurricane.

Any constructive thoughts would be appreciated,

thx

How Can We Regain Confidence in Financial Professionals?

Bogle is correct - we need to emphasize the "looking out for the shareholder" and policing of the natural tendency toward self-dealing and corruption in the corporate suites of American business.

We also need to clean up the 'auditing' profession and put severe restrictions on brokers and other advisers in terms of their ability to deceive clients and present phony financial information about their own performance or the potential profitability of investments being sold by the brokers.

I am in favor of completely eliminating stock options for executives or any other employees of publicly-traded companies (PTCs). They work great to incentivize key people at entreprenurial start-ups owned by VCs, but have proven to be an avenue for corruption and despicably poor management decisions at a variety of public companies, and a ripoff of the shareholder base to boot.

For my money, I wouldn't mind leverage restrictions in the capital structure as well for PTCs - part of the recent problem was a bunch of self-dealing execs who levered up companies and tried to cash in on massive stock option positions. These manipulators typically pressure accountants and auditors to generate phony financials, and have no long-term interest in the health of the company they are running - it is merely a financial play geared toward filling their own pockets.

Many formerly strong companies have been hampered, or in some cases bankrupted, by the reckless and corrupt execs who have hijacked the Board and the company at the expense of the shareholder base. This should be criminal, but unfortunately it is not, and as a matter of fact, the Fox News crowd pats these jokers on the back more often than not!

As to "certifications like the CFA and MBA"" - don't make me laugh. Most MBAs are worthless in terms of the theory and methods learned - they may have sheepskin value as a way of promoting one's career or connecting with other grads in the networking game. The CFA is a very rigorous exam, but much of it is focused on the wrong things - and it does not automatically make somebody a great analyst or money manager, not by a long shot. It is more about memorization of terms and ability to do number crunching - valuable basics, but only part of the game. Bill Miller anyone?

After Peak Finance: Larry Summers' Bubble

Clive C:

You asked a very important question -

>>The question however is are there enough educators at the top business schools who see the bigger picture and structural reasons behind asset price bubbles and can amend the curricula accordingly?<<

From what I have seen over the past twenty years of being involved in "Finance" I would say that the answer is a resounding "NO."

The bigshot theorists, noted professors and business economists are, almost to the last man (and woman), much more the disease than the cure.

Summers and the rest of the cognoscenti are now advising the President and Wall Street about the true nature of what happened during the past decade in the U.S. economy, which resulted in an enormous dislocation, wasted investment, and a severe credit crisis. If these people are so thick-headed and blind to the obvious problems of financial corruption, far too much power in a few hands, and a ludicrously flawed compensation structure on both Wall Street and in Fortune 500 executive suites, they should resign in disgrace.

We can't afford to have a bunch of corrupt and misguided jokers running our country further into the ground, IMO.

Leucadia Sees Huge Increase in Book Value

I currently own a small position in LUK.

I view it as a good field bet on several industries at this price. Both JEF and ACF have done nicely, despite the tough economy. And their mining interests are undervalued, IMO.

They also have been punished due to the writedown of the tax loss CFs at the end of last year. This may reverse by early next year, at least in part. These things are almost always misread by investors, who see a big negative earnings number and conclude that there is some horrible problem with the company, when in fact it's just a forced accounting adjustment per FASB.

That said, they just came off a pretty bad year (and they have lots of company) in terms of actual performance, disregarding accounting adjustments. One thing though - the LUK management team is very seasoned and straightforward, a rarity in corporate America. They always publish a really detailed annual letter that "tells it like it is" and doesn't sugar-coat blunders or disappointing investments.

Check the website, and read the past letters - they are very good, and will show you that this is not a lightweight team, or just a bunch of gamblers with OPM. They eat their own cooking in a very big way, just like Buffett.

I am holding this for another 10% or so, and then will write some covered calls once the stock reaches about 25, which it should get to easily in the next month or so. If it gets called away, I have about a 40% gain in short order - if not, I just write calls on it until it does get called away.

Shiller Tries to Defend Subprime Mortgages

>>If this is financial innovation, I want much less of it, thanks for asking. And while I agree that the CFPA “should be staffed by people who know finance and its intricacies”.<<

That would obviously not include muttonheads like Shiller and one J. Siegel, both of whom have spent way too long in academia, dreaming up ways to sink the real economy via "financial engineering" and "innovation."

These insidious mad scientists of academic finance suck money out of the government through huge "research" grants, then turn around and give cover to a bunch of parasitic thieves on WS through their academic studies and cockamamie theories of the economy, 'risk' and derivatives games.

The whole nonsensical train wreck that is the last thirty years of output from the likes of these Finance jokers should be banished from the markets, as all it has done is led to massive dislocations and enormous income disparities between those who actually contribute something real to the economy, and the predators who game the system and the laws to allow their illicit gains.

It is a shameful result of a profession run amok with greed and flighty thinking.

Are GLD and SLV Legitimate Investment Vehicles?

Obviously, this will result in a colossal fraud being revealed at some point.

I can't imagine how scams like this are allowed to be generated, and clean out investors' accounts time and again, but we keep letting the crooks run the accounts and write the securities laws, don't we, so it keeps on going and going, just like the Eveready bunny.

This running con game has all the earmarks of a gigantic smoke-and-mirrors operation, and yet there is NO action being taken by CFTC or SEC, even after Madoff and Stanford and Bayou and all the others?

Positively outrageous, if you ask me.

Forget Goldman, Start Worrying About the Government

>>As my good friend Marshall Auerback says, the advantages firms like Goldman have are “symptomatic of the problem, but they are not the problem.” The problem is Government and its cozy relationship with the industry it is suppose to regulate and control. The government is captured by the financial services industry, plain and simple. This is why the global financial system is a shambles. The question is: what are you going to do about it?<<

Edward, do you have a link to the Auerback article?

tia

New U.S. Natural Gas Pipeline Displacing Canadian Gas

I believe you may be right - Nat Gas could dip under $3 by September, given that storage will be full by then at around 3,700 bcf.

I will buy aggressively at $2.75 if it gets there - if not, I will pass and miss the upside, as well as gut-wrenching volatility in which I have little interest.

I think we will be under $4 in NG for at least a year, if not longer. There is just way too much gas right now, and unless we get the pickup in both power consumption and industrial, it won't get bid up much. REX just brings more gas into the high-consumption zone, and the winter spikes we used to see will never happen again unless a pipeline is out, or it is extremely cold for an extended period in the Midwest and Northeast. Not likely, IMO.

Supply and demand - very simple.

I also agree with numerous other posters and pundits - we should be building CNG buses and delivery vans like crazy, and mandate that fleets in metro areas be at least 50% CNG powered within five years.

Hell, the govt can take over abandoned auto plants in the Midwest and create 5,000 jobs building these suckers - that makes a lot more sense than pumping money into the financial rackets, er, I mean, institutions,

Game Over for U.S. Oil, Natural Gas ETFs?

I agree 100%.

These vehicles are a joke, and are duping investors.

We need to rein in a lot of the racketeering on WS, and this is a good place to begin.