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Moon Kil Woong  

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Latest  |  Highest rated
  • How the Citi Stock Offering Flopped [View article]
    Schlumpf: Thanks for your post. I am still cautious at least until January. The new year effect is highly dubious in my book this year. So far I haven't missed much being out and I don't expect to. I'll keep you posted if my view changes (lots of silly givaway government money always helps short term).
    Dec 17, 2009. 04:10 PM | 4 Likes Like |Link to Comment
  • Reconfirm Ben Bernanke [View article]
    Oh how we like to praise the current Fed until he staps down. Perhaps it's because he can make more money than anyone else in the US. Perhaps it's because he has no problem trying to play god. Perhaps it's because it's hard to imagine a world without the Federal Reserve. Or perhaps we all acknowledge that it doesn't matter who's head of the Federal Reserve, they all will do essentially the same thing save maybe Volker.

    Regardless, I would not vote for anyone approving prolonged zirp or QE. If you recognize Greenspan's bubble blowing errors surely you must realize it's only a matter of time before Bernake's boiling pot becomes explosive. It is quite a bit hotter than Greenspan's.
    Dec 17, 2009. 02:43 PM | 2 Likes Like |Link to Comment
  • Strategic Default and Duty to Shareholders [View article]
    This issue has more to do with the lenders than the borrowers. It's up to the lenders to make sure that it makes no economic sense in most cases to defaultr. That means requiring collateral and ability to pay is needed. The FHA 3.5% down, zero down, and subprime lending has made holes in these contracts.

    Some is government's doing, some ios the banks doings; but to blame only the people taking these loans and figuring out they lose less walking away is to overlook the true architects of bad lending and underwriting.
    Dec 17, 2009. 02:35 PM | 15 Likes Like |Link to Comment
  • Hidden Truths from Citibank [View article]
    Thanks Macro Man. The big get bigger no matter how bad they do in banking. Citbank is the prime example. It gets bailed out. The government has to give it $. Then the Federal reserve has to buy some of their loans and backstop some. Then the government has to turn their preferred stock into stock. Then they get pout of TARP restrictions. Then they have to change the rest and can't sell it because the market price is lower all while Citibank gets even bigger. All the while the government decides to give them a tax break to help finance the deal.

    Apparently we have learned nothing from this crisis. Zero reform. Zero regulation. Zero change in bank givaways. Zero improvement in too big to fail banks. Zero transparency. Zero morals or ethics or oversight. Zero chance this won't happen again. We can't get much worse than this can we?
    Dec 17, 2009. 02:29 PM | 2 Likes Like |Link to Comment
  • Japanese Yen: Still a Safe Haven Currency? [View article]
    Good assesment Thomas George. Japan unlike the US has a trade surplus and can finance it's atrocious government debt internally.

    Unfortunately, they also have QE but that has been curbed so it shouldn't undermine the currency. They have learned QE is the patrh towards economic hell (either burning to dath with hyperinflation or freezing to death without a viable path to recovery or both). The US has yet to find that out.
    Dec 17, 2009. 02:15 PM | Likes Like |Link to Comment
  • No Surprise from the Fed [View article]
    The Fed will remain as accomodative as possible, especially as Bernanke makes his way through confirmation hearings. In the end the Federal Reserve is already a political beast akin to Santa Claus to bankers and special interest groups. A much bigger richer Santa than the President and his stimulus package.

    Bernankwe is person of the year because he minted more money than anyone else in 2008 and 2009. In Ameeica that means raw power and virtual godhood. At least that's what Bernanke expects. Strangely, here are nagging dislievers like Ron Paul.
    Dec 17, 2009. 02:11 PM | Likes Like |Link to Comment
  • FOMC: What the Fed Said Today [View article]
    What do you expect with Bernanke confirmation still due. Also, on a point of procedure, since the Fed's newfound QE role of coining money exists I think Congress should get a vote on confirmation since those consitutional powers are derived from Congress.
    Dec 17, 2009. 02:06 PM | Likes Like |Link to Comment
  • Is the Treasury’s Monetary Policy Effective? [View article]
    2 good points: People seem no longer to discuss how government debt crowds out private investment. If banks couldn't buy endless supplies of US Treasuries and get free interest depositing money with the Federal Reserve then they would have to actually look in the private sector for investment. Why take risk investing in the private sector when you get guaranteed risk free profit depositing it with the government? Banks aren't that stupid.

    "...second Rajiv Sethi (hat tip: Mark Thoma), who finds it 'a bit surprising that while the size of the deficit is a topic of endless controversy, there is such little debate about the manner in which the deficit is financed.” This is a great point too. Only now is there a real debate about the Federal Reserve and it's effectiveness at doing anything. Before you were considered to be a Ron Paul crackpot to suggest the Federal Reserve was anything but mad geniuses who were the next best thing to God.

    I'm glad we are mature enought to realize that nothing is beyond scientific and economic analysis. It's about time because the Federal Reserve is beginning to fail at even it's simplest responsibilities, holding proper US Treasury auctions. QE is one of the most troubling ways to "finance the debt" in that it doesn't really. Rather it is a mechanism for price fixing more than anything else. In a normal market such behavior amounts to criminal price fixing. The Federal Reserve has undermined the transparency and legitimacy of government funding.

    Why you might ask? Well, if the Federal Reserve can pay interest on deposits and borrow itself, eventually if they ruin the US Treasury bond market they can make a case for them to print money themselves. After all, they are essentially doing it already with QE and Congressional authorization to buy assets and pay interest on deposits. Their main problem is that it is "technically" not allowed in the Constitution but neither is a Central Bank or any other non-Congrsssional coining of money.
    Dec 17, 2009. 12:05 PM | 5 Likes Like |Link to Comment
  • Can Citigroup Flail Its Way to Solvency? [View article]
    It's good that you caught the political backstroking on tax breaks to try to get this deal shoved through. Yes, it's just another way the government can open its coffers to a private company. The government needs to get out of private business all together. There are just too many ways to steal from the public.

    I noted, in return, Citibank announced it will delay foreclosures for a month. How nice. Afew billion in tax breaks for 4,000 x 1,000 = $4 million or less in delayed payments that probably weren't going to be made anyway. Indeed, the goose is getting fat!
    Dec 17, 2009. 11:44 AM | 2 Likes Like |Link to Comment
  • How the Citi Stock Offering Flopped [View article]
    It is strange that right at that time the government allows Citibank tons of tax breaks and Citibank announces more refinancing in December and a suspension on foreclosure in December. It sounds like a lot of stroking each other's back.

    Even with all the goodies and good will the deal was terrible and demand is poor. In the end, political stroking and tax and accounting games don't change the fact that their fundamentals are still rotten to the core. What it does show, is that government needs to be completely rid of public involvement or the constant political ploys and taxpayer givaways will continue indefinately. There are 100 different ways to siphon money out of the government coffers and onto a private company's balance sheet. And there are 100 different ways to dole money to execs.
    Dec 17, 2009. 11:38 AM | 7 Likes Like |Link to Comment
  • Do We Need More Fiscal Stimulus, Or Just the Correct Type? [View article]
    Actually we already tried semi-permanent tax cuts in the Bush Jr. Administration with no avail. This was actually the first government stimulus plan, not Obama's even more obscene plan. Obama also extended the Bush Jr. tax cuts.

    Considering the federal government is having trouble floating its own bonds and is increasingly relying on US citizens and the Federal Reserve to soak up the excess supply I am against further stimulus. Government debt has a terrible tendancy to take money that would otherwise go into funding the real market. Rather than chasing good loan deals in the private sector, the banks have seen fit to just keep rolling over more and more assets into an endless supply of government bonds. That's bad for the everyone.
    Dec 16, 2009. 02:15 PM | 1 Like Like |Link to Comment
  • Three Types of Bankers [View instapost]
    It is both funny and sad that in fact he is quite right. They are especially bad at figuring out zeroes. For instance: how can their derivative risk be a few more zeroes than their total assets, let alone their capital.

    That's ok. We all have our mathematical deficiencies. Perhaps the government is terrible at positive numbers. Maybe that's a good reason why they prefer negative ones.

    And perhaps the Federal Reserve has a hard time with exponents. That's why they can't figure out why their monetary policies are that bad or why people who save money end up getting screwed at 1-2% interest when the dollar drops 13 some odd percent in 1 year. Surely if they understood the concept of compounding they would see the errors of their ways and the fact that their claimed inflation rate does not match up with the actual rise in the cost of goods and services over time. We should mail a letter to Ben Bernanke that non-core inflation that never goes negative compounds the same as core inflation. Commodity inflation actually matters in the short and long run.

    Really, people in the financial world need to stop cutting corners starting with doing due diligence and proper risk analysis.
    Dec 16, 2009. 02:04 PM | 5 Likes Like |Link to Comment
  • Ben Bernanke, Person of the Year [View article]
    Bernanke is not defending the Fed's independence. His actions have threatened the Fed's independence. Undoubtedly without QE, backstops, buying AIG and Fannie and Freddie loans, etc. few people would question the Federal Reserve even though they historically perform the job of controlling interest rates and money supply quite poorly.

    As far as I'm concerned Bernanke is just repeating Greenspan's mistake but on a grander scale. Being that it makes his the biggest architect of American finance in which the government takes over free market pricing, I can understand why he's the man of the year. Never in America has an unelected man had so much power over all aspects of the economy. He is by far more powerful than the president simply because he can print more money than Congress and the President combined and needs no checks, balances, or public vote to do it.

    All hail Ceasar!
    Dec 16, 2009. 01:27 PM | 9 Likes Like |Link to Comment
  • Housing: The High Cost of Leverage [View article]
    Thanks to the zero, no down, or second mortgage until prices fall system you are exactly right. And thanks to Fannie Mae, Freddie Mac, and FHA in the future the taxpayer not the banks take the fall.
    Dec 16, 2009. 12:27 PM | Likes Like |Link to Comment
  • Debt Wars, Part II: Attack of the Traders [View article]
    "This problem is most glaring when the market is in panic mode. Last fall, real money almost universally wanted to sell at the same time that fast money had no access to capital. Efficient markets completely broke down."

    A credit contraction does not mean that the markets cease to be efficient. It means that the market has determined that cash is king. Although deleveraging is painful for all those who are overextended, it does not mean the fall of capitalism.

    Deleveraging from a badly overextended position is the only sane and logical thing to do. The markets know it. People know it. The only ones who don't seem to know it is our government.
    Dec 16, 2009. 11:17 AM | 3 Likes Like |Link to Comment
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