James Cullen

Economic Policy: The Perils of Playing for Time

Ok Teresa - you make a valid point. But my emphasis there was that many companies that would have had to take loss-generating actions (be it debt restructuring, asset sales, etc.) don't have to do so, because their liquidity needs are being guaranteed by our government.

Also, I'm not sure why SA's eds removed the background links I had for my sub-points. But they're there, if you check the instablog or the article on my site.


On Aug 18 11:58 AM TeresaE wrote:

> "...Across sectors, there are many companies awaiting a turn in the
> cycle – and the only reason they’re still around is due to the good
> graces of the government. But cycles don’t truly turn until fewer
> people are around to looking at them, and it’s doubtful policymakers
> are willing to adopt this position and let liquidations occur...."
>
>
> Reality: Around cities and office buildings, are many companies
> closing their doors forever. Then liquidating assets for pennies
> to the purchasing agents that buy our stuff and ship it back to China.
> Meanwhile, Washington pretends that small businesses don't matter
> to our economy and not only are they encouraging the banks to shut
> more of them down, they are busy writing new legislation to finish
> the job.
>
> What the elite, from the multi-nationals to Wall St to Washington
> have missed, is that those companies too little to save, were their
> best customers.
>
> Now what? Just a big check kiting scheme where the treasury writes
> a check to the fed, that writes a check to the bankers, that then
> write checks to the treasury?
>
> How long you think that can last before it implodes? Especially
> considering that once this health care debacle passes, our foreign
> debtors are going to realize the gig is up.
>
> For how can one of the heaviest taxed nations on earth, add massive
> costs and taxes to their businesses and citizenry and still get prime
> rates for its borrowing? Or, how can there be enough money in the
> world to back us then?

Rail Transport CDS Levels and the Dow Theory

Edward,
CDS are credit default swaps - the cost to insure the debt of a company against default. Not being snide, they've made headlines the last nine months or so, thus the straight-to-abbreviation usage.


On Aug 14 09:19 AM Edward, Lord Clarendon wrote:

> JIM:
>
> It would be helpful if bloggers defined their abbreviations on first
> usage, as in the AP stylebook (if there still is such a thing).
> This is a common problem in jargon. It is the same as saying, "
> I'm a knowledgeable inside person and you're NOT." I know I'm not,
> that's why I read anything and everything. And have been for 400
> years.
>
> What is CDS? Not being snide: I want to learn things and this doesn't
> help.
>
> Left to guessing I suppose CDS is a measure of non-utilization of
> rolling stock. It might relate to fuel consumption, though, or track
> utilzation..

4 Reasons Why Banks Will Keep Getting Stronger

There's a lot of arm-waving here. Maybe these guys have some facts, they're just don't feel like sharing them. Um hm...

On Primus Credit Mitigations

There's the possibility for a collateralized CDS seller, which could possibly be economic if spreads remain elevated, since it would operate with lower leverage than the CDPC. But if that's in the works, it's going to involve outside investors, since the stated operating plan is to run off PFP and return that capital. So there, you're relying not only on the ratings agencies to bless the endeavor, but whatever capital allocated to the structured credit markets that still exists to want to fund the venture.

Devoting time and resources to building out a collateralized entity would also detract from the mission of building out Primus' asset management capabilities. There's plenty of institutional skepticism about how successful those efforts will be, so I don't know if management wants to tackle a second growth avenue at this point.

You're right about the reduced competition finally making new business attractive (a theme applicable to a number of areas). I'd like to see them raise new capital and seed a collateralized DPC to extend the credit platform. But it'll take nine figures worth of fresh capital, so I don't know how realistic it is.


On Aug 03 02:30 PM Gtarras wrote:

> So, what is the future for Primus? do you believe they return to
> writing new business/generating revenue?
>
> if they do, how profitable do you think it will be? they will have
> to post CSAs, how much of capital will this be tying up? will they
> need a high rating?
>
> TIA. i'm actually interested in this stock and this platform. given
> the upcoming demand for risk management products, and wiped out competition
> (such as monolines, AIG etc), i 'm curious if there is bright future
> for Primus.

Why This Is No Time for Buy and Hold

Exactly -- it's a cheap ad. Just look at the end of the article. It's conspiracy talk, conspiracy talk, "use my system."
How did everyone else miss this?


On Jul 20 04:17 PM speeddaimon wrote:

> Bah,
>
> This whole article is just an overblown advertisement for some half
> assed BS trading system. Hell, check the links below his picture
> on the article, the asshat can't even spell his own website description
> right. singals?
>
> Credibility = gone for you.

Does Liquidating Bad Debt Start with CIT Group?

We shouldn't judge a company's societal value by its ability to make payments to bondholders... millions of widows? Is this Seeking Alpha or Miss America?

Favoritism and poor judgment from Washington? Sounds like par for the course. Yes, it is unfair to let CIT fail after savings others. Most of us were told life is unfair in kindergarten. Every company on the brink will come up with important functions it fulfills, so where, if ever, do you draw the dividing line between companies that get saved and those that don't?

As for providing financing... there are plenty of companies that worked to achieve the noble goal of helping people afford homes that are no longer in business - we call them subprime lenders, and actually look down on them quite a bit. Again, the entire idea is to reward those who took smart risks, and not save those who were overleveraged or overplayed borrowing short. Just because we can't go back in time and undo prior bailouts doesn't mean we're obligated to save everyone.

On Jul 15 08:05 AM nyc female lawyer- bondholder wrote:

> The author of this article obviously does not own any stock or bonds
> in CIT and therfore is not well infomed.Therefore,he has not been
> folowing some of the positive moves in CIT. CIT has paid the bonholders
> a steady 7% and has provided retirement income to millions of widows.
> CIT has done an excellent job at providing financing to milions of
> small business owners.
> Also, several small business owners are depedent on their financing
> to run their daily operations as an alternative to bank loans.<br/>CIT's
> collapse would have the same negative effect that the Lehman collapse
> had in the bond and stock market.
> Also, a credit crisis with the collapse of CIT would adversely effect
> small business owners and this would be a disaster.
> To bailout Goldman, Citibank, AIG and leave CIT out would be unethical
> and show favoritism and poor judgment from Washington.

Moody’s a Short on Rating Agency Regime Change?

If you wanted to be really cynical, you'd say that bankers and regulators don't even bother with valuation -- just with the letter grade assigned by Moody's/S&P. Yup, not much need to think beyond that.


On Jul 13 05:58 PM Moon Kil Woong wrote:

> I'd love to buy the stock based on profitability. I realy would,
> but doing so really bothers my conscience. It would help if they
> weren't so obviously peddling garbage. Oh well, I guess all that
> matters is what bankers and regulators use for valuation huh? No
> wonder we are in such a mess.

Accenture (ACN): FQ3 EPS of $0.68 beats by $0.04. Revenue of $5.5B (-16%) vs. $5.2B. Sees Q4 revenue $5B-5.2B vs. $5.3B. Raises FY09 guidance to $2.67-2.70 vs. $2.64. Shares +3.5% AH. (PR)

Where are you getting EPS of $0.62?

Industry Observers: Shouldn't Something Finally Change at Citigroup?

Long Islander,
This is an observation from a number of people I've talked with; Tom Brown and Vernon Hill were the most recent and were willing to go on the record.
I saw Vikram Pandit was talking about the need to overhaul and simplify the world economy; what about his own company? Put differently, who thinks Citi has credibility -- many will say no, who says yes?

Why Isn't Microsoft's Strategy Working Anymore?

Having a poor strategy and poor stock returns can be two different things, especially when you're starting at a time of inflated valuation multiples.

AIG CDS Unwind: From a Waterfall to a Trickle

Another possible answer: spreads have been tightening across a variety of asset classes (CDX, ABX), and since the trades are not going against AIG as much as they previously were, their ability to hold them and see what happens has been improved.

Entertainment Property: Long-Term Outlook Remains Favorable

Avi - I'd question those non-movie investments more critically. I own one of EPR's convertibles, and that's because I don't have faith in the idea that all is well with the non-movie properties. One takeaway from the last few years is that CNBC appearances where "everything is fine" shouldn't be taken at face value.

WARREN BUFFETT ERRS TRASHING Tangible Common Equity (TCE)

It's not that Coca-Cola has "zero" TCE, but that if you look at the market cap. to TCE, you'd think shares are absurdly expensive - you're paying about 13x net tangible book. But does that matter? That's the question you should be asking. Not every metric is equally applicable to every company.

Stress Test Results Are Out - Leaks Were Right

>>>Tyler said: And, of course, all leaks were right on the money.

False, unless you have a very loose interpretation of "right on the money" - just days ago, your own headline (via the WSJ) said that Citigroup needed "up to" $10 billion in new capital. But in these times, what's overshooting by a couple billion, right?

Doug Kass's Killer Shorts - Barron's

Isn't it possible that his #2 point - avoid stocks already heavily shorted - precluded him from shorting many of the most troubled companies?

I'm not saying it worked this time, but in general he seems to be looking for a "variant" view (he often uses that term)... in this case, where there's minimal chance of a squeeze. Part of it is risk management....