Greg Weston

Will a 'Silver Bullet' Finally Kill the Metal Manipulators?

"criminal conspiracy"
"fraudulent investment vehicles"
"real inventories only 1/3rd of what is claimed by the Manipulators"

Seek medication.

Trading the GM Bankruptcy

Soliman: If you have shares in GM you should sell them immediately. They will likely soon be worth nothing.

As I mention in this article, if you want to invest in autos, I think your best bet is to buy GM retail bonds, which will likely be converted in bankruptcy into shares of the new company.

Trading the GM Bankruptcy

Some responses:

The UAW's retirement plans will not control the new GM. Trust law does not allow them to keep their assets in a single concentrated position. They will sell nearly all the shares they get as soon as they can. Press reports have confirmed this.

TX Publisher's calculations are wrong because they deal with current pre-bankruptcy stock. The reverse stock split would be in the event a deal is worked out that avoids bankruptcy, which I assume will not happen.

A new class of shares will be issued after bankruptcy to GM's current creditors. I don't know how many shares will be issued, so you can't even begin to talk about price of those shares, only the market cap of the whole company and what % note holders get.

The Reflation Trade Portfolio

I disagree with general buying of emerging market currencies. In times of geo-economic crisis, they have generally performed much worse than developed economy currencies.

In developed economies, there is a more of an economic cushion during downturns and a higher degree of political stability, so monetary policymakers can avoid the temptation of engaging in competitive devaluations with other economies.

Another issue with emerging market currencies is who are your counter-parties? Will they still be solvent and ready to pay you and other people who shorted the dollar if there is a sharp drop in the dollar? Perhaps not.

Another Big Bank Failure: More Likely Than Not to Occur

Credit Suisse and UBS may be the next big financial institutions to fail. In CS's case it might have been a little more conservative than other major banks, but it the case still remains that either one of these banks is far too big to bail out by the Swiss government as they hold assets many times the GDP of Switzerland.

Even the GDP to assets ratio does not tell the whole story, because Swiss central government is very weak compared to other national governments. Small infusions are likely, but the money simply doesn't exist for a large scale bailout as we saw with all the major U.S. and UK banks.

Felix Salmon has some good articles on this topic if you are interested.

Trading Obama: Solar Stocks, GM Debt, Ambac Calls, Lorillard and Goldman Puts

TG-Sune and Fuge:

Thank you for the corrections. I meant electronic manufacturing demand is _elastic_, which is clear from the context, and I did indeed confuse the names of those companies. I will email SA corrections later.

Wez, XGM are senior unsecured notes. It know it is odd for notes to trade on stock exchanges, but these were aimed at retail investors. GM needed to leave no source of borrowing unturned.

Trading the GM Bankruptcy

xoxoxo:

You make a good point about the Gov debt, which is supposedly senior to the notes. However the US Gov is planning to forgive half of it in bankruptcy. It may end up being more than half.

It also looks like the Gov is also gifting GM a few billion by taking up some of its warranty liability and subsidizing its suppliers. GM will also be getting below-market federal loans.

As for the dealers, is a GM franchise really worth that much? Shutting down Oldsmobile cost GM a little more than $1 billion. Saab and Saturn are getting sold, and only Pontiac is being shut down.

In the grand scheme of things I don't think the potential liability of the dealers will be material. Even if each closed franchise gets $1 million, that's still only 1100 * 1 million or 1.1 billion, and does not much affect my calculations. I think the actual number will turn out to be much lower than $1 million each, and of course whatever amount they get will be reduced by the bankruptcy court along with all the other creditors.

Some of these 1100 dealers are truly small. One dealer that was getting shut down that was profiled in rural Arkansas had a vehicle inventory of only 36 vehicles. A lot of these dealers will just go bankrupt, and their major creditor will often be the now majority government owned GMAC, which it is hard to imagine aggressively pursuing GM based on speculative legal claims that it inherited from bankrupt dealers.

The Benefits of Forced Debt for Equity Recapitalizations

Lisa, thank you for your informed comments.

We will have to agree to disagree about the solvency of JPM right now, and whether market prices of disfavored (some might say "toxic") assets is irrationally low.

But if you will assume that JPM is under legal capital ratios if it had to report assets at market prices and would under my plan be forced to raise capital by forced debt for equity swaps, and it later turned out the market prices were indeed excessively low, then the new equity holder would not be harmed, because they would have shares of a now extremely well capitalized bank.

Nor would current shareholders be harmed because they could use their warrants to buy new common JPM shares. JPM could also simply return all its new excess capital to its new shareholders (and old debt-holders) via dividends, so they too would get their cash back. And given the huge amount of debt these large banks have, the stronger of them would not have to swap that much debt for new shares, maybe 5%. And the market value of that debt would be higher than before given the bank's greater ability to pay it.

The Manipulation of Gold Prices

Rob: as a store of wealth, stuffing $100 bills under your mattress would have been better 28 years ago. You would have lost 0% nominally rather than 12%.

Also better stores of wealth would have been the vast majority of stocks and bonds; plus most any bit of U.S. real estate; plus most fine art and antiques.

Gold needs to do better than inflation in order to be a true store of wealth. But that won't happen unless real demand for gold rises faster than supply. That very well may happen, but it is hardly a sure thing. You're better of with TIPS.

For one thing, technology will probably reduce the amount of gold needed for industrial applications. And gold jewelry seems to be much less in fashion than it was in the age of Mr. T.

All that said, I have a small long position in GLD, not because of any fundamentals, but because I think there will be a greater fool out there who will overpay even more in the near future, in part because of the credulous reaction of so many to articles like this one.

The Manipulation of Gold Prices

Why gold is a poor long term investment, from Wharton Business School:

knowledge.wharton.upen...

The Manipulation of Gold Prices

These "short selling conspiracies" sound a lot like the BS coming from the "evil naked short selling" folks a few years ago.

Their two big stocks they whined where being manipulated were NFI and OSTK. NFI is now bankrupt and the stock worthless, and OSTK is down about 75%.

Gold won't go down 75%, but it is not a good long-term investment. It is STILL far below its 1980 price. Even with the recent huge bear market we are in now, the S&P 500 is 8 times higher than its 1980 price. Gold, on the other hand, is down 12% over the past 28 years.

Or you could have put your money in "fiat money" US long bonds and made more than 10% a year whole the goldbugs lost on average 0.5% a year, actually much more since they incurred storage costs.

The Manipulation of Gold Prices

Mr. Conrad wrote on 9/22/08 that:

"I believe the best course of action is to sell out of index funds and stocks, and buy GLD, SLV, physical gold, silver, precious metals mining stocks, companies that own agricultural land, Swiss francs, and other solid foreign currencies."

If you followed his advice, you would have bought GLD for $90. It is now about $74.5. SLV was around $13. It is now 9.4.

The gold miner index he told you to buy was then 38. It is now 23.

The Swiss Franc he told you to buy was then 94. It is now 82.

There is no better sign of a bad investor than crying "manipulation" and sprouting conspiracy theories when his bad calls go down 20-40% in a matter of a few months.

Trading Obama: Solar Stocks, GM Debt, Ambac Calls, Lorillard and Goldman Puts

31October:

There are two issues with coal, CO2 which is not toxic but causes global warming, and second a large number of other toxic pollutants. There is slow but study progress on the toxic pollutants issue, but coal plants are still by far the biggest source of mercury pollution.

And while natural gas is less dirty than coal for power generation, there is still the CO2 issue. Further, the major source for natural gas in Europe is Russia, which has repeatedly shown its willingness to leverage its CO2 supplies against countries that oppose its foreign policies. This is why Germany, which is in particular vulnerable to this type of economic blackmail, is such a big subsidizer of solar despite its relative lack of sunlight.

Trading Obama: Solar Stocks, GM Debt, Ambac Calls, Lorillard and Goldman Puts

Big Z: Given that Lehman unsecured creditors I think will get about 10 cents on the dollar (based on the CDS auction), and that lawsuits take a long time, I think the prospects of getting much back from Lehman are poor.

That said, I don't mean to say that JASO is a bad play right now, just inferior to the other companies I mentioned.

Non-I:

I disagree that GM will be allowed to file for bankruptcy. While the job losses could be minimized with a quick bankruptcy and subsequent bailout, the huge credit losses to banks, retail investors, mutual funds, and GM's gigantic supplier base would still occur. Its creditors, quite rationally, have been willing to extend payment dates knowing that they will recover little in bankruptcy.

The best case scenario here is really amazing. If GM gets enough money for AAA rating, XGM will go ABOVE par because of the 7.75% coupon, to something in the 28-31 range. And why not? If the feds are the major shareholder, it makes sense that this debt will become among the safest of all corporate debt.

Trading Obama: Solar Stocks, GM Debt, Ambac Calls, Lorillard and Goldman Puts

Tom: Also, Volker is respected now because he implemented a tight monetary policy when it was called for. Right now, we are facing rapid deflation. I hope he recognizes this.