Jimmy Lathrop

Ecuador's Idiotic Default

Felix, this is, by far, the most incisive and on point article you have written to date. Thank you very much for sharing this with us.

Why AIG Gets Billions While GM Gets Scorn

Yes, I did miss something - the UAW has an 80 billion dollar pension that they could lend to the employers.

I have also seen a lot of posts about the defense industry. So far, in the two conflicts we've had in Iraq, we never lost ONE tank, and those tanks were manufactured by General Dynamics. And in case you haven't noticed, the Big 3, outside of trucks and Cadillacs, have not survived through the dealerships but the bond markets. Its the same business model as Amway, but Amway isn't asking for a bailout.

Why AIG Gets Billions While GM Gets Scorn

I think the Asians post is dead on. All the bailouts were a waste of money. Paulson sold Congress on a plan to buy distressed assets and then went back on his word. To think that the team at Treasury didn't see that coming after handing a 3 page proposal to Congress is the height of stupidity. So lets review - we bailed out the New York financiers without any conditions to make sure they don't repeat their mistake, we are rewarding failure in Michigan, Ohio and the rust belt states even though Congress tied their hands with the CAFE standards, and meanwhile, the autoworkers in the south get a gob of spit right in the face. Am I missing something?

More Fun with Levered ETFs

Let me get this straight, Alan, because I am just a dumb dirt attorney from Brooklyn. Instead of just holding a security, and paying a fee or transaction cost to purchase it, I also need to short the security, either by buying an option with another transaction fee, or purchase a levered fund, which has a transaction fee and a management fee. All I see are lots of transaction fees which come out of my initial investment, high volatility and unnecessary complication when all you need to do is either be long or be out. Your solution sounds good if you are collecting the management fee or if you are being paid to tout these redundant products. Southwest Airlines came out ahead with their hedging strategy in jet fuel in the earlier part of the year, now they are getting punished because they are holding contracts when they could buy it on the spot market for cheaper. Abraxas Petroleum has an enormous hole in their balance sheet with their hedging contracts which has completely destroyed shareholder value. And finally, if you can't trust Madoff, how can you be completely sure that the counterparties in these levered ETFs are going to pay out when you try to sell them?

And Alan, don't denigrate Paul's numbers. The fact that the market continues to move around a lot makes your entire counterpoint meaningless. And why is it moving around a lot? Because institutions, funds, and traders are using TOO MUCH LEVERAGE. You are either in the market or out. If you want to do side bets, Vegas has plenty of football prop bets that you can hedge or lever yourself into a hole without disrupting the market through levered volatility.


On Dec 13 08:24 AM Alan Brochstein wrote:

> The reason both lose money is that they were "whipsawed". The market
> moved around a lot, but ended up roughly unchanged. Allow me to
> tell you how you will have your ass handed to you if you simply short
> them both (without rebalancing):
>
> Day 1 +5%: 1x -105, 2x -110, -2X 90
> Day 2 +7%: 1x - 112.35, 2X - 125.4, -2X - 83.70
> Day 3 +3%: 1X - 115.72, 2X - 132.94, -2X - 78.68
>
> It's just math. If you shorted both, you would be out 11.6% of the
> nominal amount of your investment. The same thing would work in
> a downward trending market. As Paul, who seems to be a little slow
> on the uptake regarding how volatility and leverage work, properly
> notes, these things are dogs when the market moves around a lot and
> ends up right where it started.
>
>
>
>
>
> On Dec 12 08:17 PM Hmmmm... wrote:

Fund Management Fraud: Canadians Get In on the Action

I think someone was trying to corner the market for a cold day in Hell. I mean, just because it can't happen in a risk model doesn't mean it can't happen, right?

Bernie Madoff Comes Out of the Closet

He's always paid. Yeah, so did GM bonds. Surprise! Let's review class. First there were the institutional investors who were shocked, SHOCKED, that the MBS that were insured triple AAA lost value. Then there were the market geniuses who watched auction rate security market freeze up in front of their faces. I mean, seriously, I would love to see some of the flabbergasted expressions on some of these investors faces because the underlying premise of the Madoff funds is that market losses are for the little people. Remember Leona Helmsley when she said taxes are paid by the little people? I'm sure someone will swoop in and make all the flustered high net worth campaign contributing investors whole again through a cash infusion. Welcome to the land of the rising sun - where investors have faith in nothing, banks hide loans and a huge infrastructure stimulus plan fuels an explosion of graft, waste and inefficiency that would make Boss Tweed blush. But the important story is how the ultra wealthy took a haircut. Lets slaughter everyone! This is America! We only take money from lower income Americans with retail brokers, not chummy golf course menschs!

More Fun with Levered ETFs

Wait, I'm not done. Paul, I'm sorry for using your article as a soapbox but with all the exotic instruments, options, swaps, levered products, covered calls and imaginative ways to lose money, here's a novel trading strategy - either buy it or don't. I know, it's a hard sell, but just visualize your light switch in the bathroom. On. Off. Now, just think about that before you sit at your level III trading platform and do something dumb.

More Fun with Levered ETFs

The only fun you can have with a levered fun is watching people vomit into their laps when the leverage whipsaws their holdings into Maddowvile.

It's a Mad, Mad, Mad Madoff World

I smell BAILOUT!!! SANTA SANTA, I HEAR YOU ON THE ROOF! DID YOU GET ME MY 10 PERCENT ANNUALIZED RETURN I PUT ON MY LIST! YAAAAYYY!

Own Gold? Time to Fold

You find the bus that will accept your gold dust for a ride crosstown and I will cede your point. Until then, keep wandering around the store aisles with your nuggets, asking to change them for beaver pelts.

Dollar vs. Gold - Can We Trust This Change?

Thanks for pointing out my wrongheaded thinking Robert. I will invest in shells that will not misfire after being in my closet for 20 years. I will also buy land to put huge containers of water, hoping it wont get contaminated or stolen. And nothing washes the taste of paranoia out of my mouth like a healthy serving of spam. Because historically speaking, 20 years ago, a telex machine was a great investment. 30 years ago, the uncle in The Graduate was whispering about plastics. And 500 years they believed if you rubbed a lamp, a genie would come out. Keep rubbing. Harder. Come on, put some shoulder into it.


On Dec 11 10:54 PM Robert Nabloid wrote:

> Lathrop, you wrongly treat curbs in like he's a nutcase. What if
> he was merely saying that buying canned food, ammunitions, firearms
> and water is a good store of money - a hedge against further price
> increases.
>
> Historically, go look at the price of ammo 20 years ago... and you
> would see it was a brilliant investment had someone bought a bunch
> to store and sell today - or if you think the price will go up higher
> - sell later on. Same goes for food prices, guns, water, etc, etc...
> The dollar is going down in value each decade and almost any real
> asset you can buy is worth more today than it was in the past - at
> least in dollar terms. The same can be said for gold.
>
> On Dec 11 07:42 PM Jimmy Lathrop wrote:

Why AIG Gets Billions While GM Gets Scorn

Based on the reasoning offered by E Nuff Said, lets give a bailout to Standard Oil, the Pennsylvania Railroad Company and the entire steamboat industry. We will call it the LTAWDMLP - Lets Take A Walk Down Memory Lane Program.

Analyzing Bill Miller's Fall

This is another great article, Roger. Your well-reasoned and thoughtful articles are much appreciated.

Three Inconvenient Energy Policy Truths

I thought the new energy policy was burning T-Bills for warmth?

Dollar vs. Gold - Can We Trust This Change?

Curbs in - you forgot to mention digging a hole and pulling the earth in over you so that you can bury yourself alive. Make sure you have a breathing tube to the outside world, just give us a date in the future like, oh, 2028, and we'll shake the tube to let you know we're still out here and we'll fill you in on all of the great medical advances, technological innovations and great TV you missed hiding out in your bunker.

Okay, okay, sorry for being so harsh. TV will still be bad in 2028.


On Dec 11 07:32 PM curbs-in wrote:

> Buy canned food, ammunition, firearms and bottled water. They'll
> hold their value -- really.