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Rakesh Saxena  

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  • The Pfizer-Wyeth Deal: Experimenting with Taxpayer Dollars? [View article]
    Dear rd4sndk: You are missing the point completely; please re-read the post. What is in question is the underwriting-type risks the banks when it is not clear if their balance sheets support those risks. Particularly in the face of an impending Bad Bank package. Nobody is questioning Pfizer's ability to close or re-finance. Many thanks - Rakesh


    On Feb 02 11:25 AM rd4sndk wrote:

    > Its this type of blog that's driving me crazy. Do you expect Pfizer
    > to welch on its loans or that the expected $20B in CF to not materialize?
    > How obsurb is to restrict the banks from loaning to a bluechip company
    > with $20B+ in cash reserves and a FCF greater than $10B. Find something
    > else to do with your time and leave us alone with absurb fears of
    > Pfizer failures. I for one welcome such transactions and plan to
    > take part in the arbitrage shortfall to reap my 12% in 90 days.
    >
    >
    > There are transactions that unhealthy banks have made and I didn't
    > hear you questioning those like Citi's planned purchase of Wachovia
    > etc. Now there's a merger that was rightfully terminated.
    Feb 2, 2009. 12:17 PM | Likes Like |Link to Comment
  • Emerging Markets: Beware of the 'Head-in-the-Sand' Strategy [View article]
    Thanks for your comments David. I am getting to the possible prescriptions this week--Rakesh


    On Feb 02 10:25 AM David Braunstein wrote:

    > Wonderfully written! I enjoy your posts. After you make your fortune
    > shorting stocks, please give us your prescription for the current
    > crisis. The world needs the likes of you to help us all.
    Feb 2, 2009. 12:12 PM | Likes Like |Link to Comment
  • Derivatives Alert: Explosive Risk Is Still Unrecognized [View article]
    Yes User169185, these banks are "bobbing" around, like the good old penny stocks. A trading approach is required in the lower-priced ones, with a strong bearish bias, entering and re-entering positions ever so often. Many thanks- R


    On Feb 02 08:28 AM User 169185 wrote:

    > Totally agree with you. I am very short JPM and WFC. Aren't you worried
    > though about this "bad bank" and "ring fencing" that will be announced
    > next week? Time is our worst enemy as the new administration is the
    > same as the old - delay the bad news for as long as possible.
    Feb 2, 2009. 09:59 AM | Likes Like |Link to Comment
  • Berkshire Hathaway: Failing Business Model Points to a 35% Decline [View article]
    Thanks raytoei. Your approach is appreciated. - Rakesh


    On Jan 31 07:46 PM raytoei wrote:

    > Rakesh Saxena,
    >
    > I am going to file this paragraph away and revisit at the end of
    > the year:
    >
    > "In the interim, it is not difficult to see Berkshire Hathaway shares
    > dip well below their November 20, 2008 lows. Look for a decline of
    > 35% from Friday’s levels at some point during the second half of
    > this year.
    >
    > Unrealized losses on Berkshire’s put option insurance contracts may
    > well breach $10.5 billion by the time the annual results are announced.
    > Though all four major indices, particularly the Standard & Poor’s
    > 500, would have to hit zero for Berkshire to lose the entire $37
    > billion at risk, the prospects of the company’s performance being
    > impacted by another $2-3 billion in unrealized losses in 2009 are
    > very real indeed."
    >
    > I am very interest by highly intelligent writers who make statements
    > on near term stock movements.
    >
    > raytoei
    Feb 1, 2009. 12:11 AM | Likes Like |Link to Comment
  • Thinking the Impossible: Could Bank of America Go to Zero? [View article]
    Dear Adam: The statement that JPM's derivatives are worthless is incorrect. It is true that their filings don't reveal the true nature of the derivative contracts, but they do provide Level 1, 2 & 3 measurements of value. The concerns really is counterparty risk in the current conditions. In brief, how many loss-making counterparties will default? That question has not been answered yet. Many thanks - Rakesh


    On Jan 29 11:30 PM Adam Sharp wrote:

    > "JPM has 75 Trillion in hidden off=book near worthless derivatives.
    > They are broke."
    >
    > Can someone point me to a source for this, if there is one? I've
    > been searching for details about off-book stuff, and more details
    > about their Tier 1 Capital situation (details, not PR fluff). I haven't
    > dived into the SEC filings yet, was hoping someone had already done
    > the homework...
    Jan 30, 2009. 03:27 AM | 2 Likes Like |Link to Comment
  • Bad Bank and Draft Bill Spook CDS Traders and Wall Street [View article]
    Dear Pangaea: In my view, you should wait for a thorough restatement of assets, i.e. S&P 500 at 700 or below before buying shares. You are correct, though I am bearish, I am not predicting the end of the world. Buying opportunities will follow deleveraging and realism on valuations. As far as gold is concerned, my concern is the declining real demand in key markets like India and China; besides, there are too many mines which can produce gold if the investment is available. That said, limited purchases of gold may be advisable, given that the general perception is that gold represents the best alternative if asset values deteriorate. Good luck. - Rakesh

    On Jan 30 01:32 AM Pangaea wrote:

    > Rakesh, thank you for your contributions... I have been reading you
    > for some months now, and it helps keep a balance vs. the pumpers
    > on the other side. For the past year I've been mostly in cash, with
    > select short-term trading. Now, as you observed in another piece,
    > we appear to be at a market "crossroads" - yet your bearishness seems
    > as resolute as ever, and although your endgame may not be armegeddon,
    > it's not a pretty scenario either...
    >
    > I wanted to ask, what do you think of gold? I am not a "gold bug"
    > or alarmist by nature, but events in recent months have got me wondering
    > what's the best way to protect my family's wealth in the most likely
    > of scenarios in the coming year(s)... Any thoughts there, or view
    > onto the answer to that question generally? Many thanks.
    >
    Jan 30, 2009. 03:14 AM | Likes Like |Link to Comment
  • Bad Bank and Draft Bill Spook CDS Traders and Wall Street [View article]
    Dear Recourse Bob: You make a very good legal point indeed. Are these contracts void ab initio due to misrepresentations at the very outset? Interesting. Many thanks - Rakesh


    On Jan 29 10:31 PM Recourse Bob wrote:

    > Counterparty investors who engage in CDS without having equity to
    > back them up should have their contracts voided. Even in Las Vegas,
    > you don't play if you don't have chips on the table.
    Jan 30, 2009. 03:06 AM | Likes Like |Link to Comment
  • There Are Many More Satyams Out There [View article]
    Dear gig49: You obviously have a very limited understanding of the terms "leverage" and "cash in hand and banks"---in any event, the last thing one needs is an accounting course at this point. In my view, it is the accountants who failed the public, in India and in the West, by sticking to concepts which are totally irrelevant and unduly restrictive (the "snapshot" trap). But I will address your concerns in more detail when another similar issue comes up. Many thanks - Rakesh


    On Jan 29 10:08 PM gjg49 wrote:

    > two things:
    > first, leverage has absolutely NOTHING to do with the Satyam fraud.
    > Balance sheet leverage derives only from debt (or perhaps off balance
    > sheet debt) or contingent liabilities (contract leverage). Satyam
    > had neither. (BTW AIG's leverage was contract leverage--large batches
    > of CDSs that represented very low $ liabilities until suddenly one
    > day they all kicked in and represented very high $ liabilities--kind
    > of like an insurer who has no claims to pay until the day after a
    > hurricane when they suddenly incur massive claims.) Again, from everything
    > I have heard, Satyam had neither debt nor any contingent liabilities
    > that suddenly exploded on them.
    > Second, Indian authorities arrested two of PWC's auditors on the
    > Satyam account a couple of days ago.
    > Rakesh, with all due respect, you should consider taking an accounting
    > course to insure that you better understand financial statements.
    > The cash issue that I raised has nothing to do with leverage and
    > it has nothing to do with some of the cash flow and operating margin
    > items you suggest. Cash itself and the entire balance sheet represent
    > snapshots of the financial condition at a given moment in time--say
    > 11:59 PM on December 31. At that moment, Satyam either had $x of
    > cash in such-and-such a bank or it did not. Similarly, either they
    > owed someone or they did not. Valuing inventories and receivables
    > and most other items can be open to negotiations (how much is last
    > year's undeployed personal computer actually worth in inventory.)
    > But cash should not be open to any interpretation. The value of a
    > contingent liability may be--such as the AIG CDSs. Someone either
    > never checked to see whether cash assets were real or someone actually
    > helped management perpetrate this--the arrests seem to suggest the
    > latter. "Cash flows" and operating margins both represent "flows"
    > or movement of funds over periods of time--quarters or years, not
    > balance sheet snapshots.
    Jan 30, 2009. 03:03 AM | Likes Like |Link to Comment
  • Stimulus Packages: Conceptually Flawed and Historically Unproven [View article]
    Dear carey_jim: I must stress that there are ample facts which tell us what actually got America finally and conclusively out of depression-mode: America's dominant post-war position, a development which opened up huge markets for American capital. I can grant you that the interpretations of what happened between 1929 and 1939 are subject to debate. But there is no disputing the facts as they evolved after 1945. In essence, what I am saying is that a "stimulus" must have an end-game, e.g. there must be visible value creation after a road or bridge has been built. Many thanks for your comments - Rakesh


    On Jan 29 04:01 PM carey_jim wrote:

    > As the commenters have remarked, it isn't really known (there is
    > little agreement on) what caused the Great Depression or what got
    > us out of it.
    >
    > Bernanke is simply working from his own hypothesis which is shared
    > by some and not by others.
    >
    > There are strong arguments, for example, against the 'World War II
    > got us out of it' theory.
    >
    > You said there was a collapse in 1937 after the Roosevelt stimulus
    > plan but that isn't true. There was a strong recovery (but not in
    > unemployment)
    >
    > If you compare the real unemployment (using the same measures as
    > were used in 1937-42) unemployment today and during the past 10 years
    > is not much different from then or at about 14%.
    >
    > America didn't enter the war until virtually 1942 but we were into
    > recovery long before that.
    >
    > So we are in virtually 'uncharted waters' now but human beings feel
    > very uncomfortable with the unknown and so they invent explanations
    > as far fetched as religious and mystical to economic and social.
    >
    >
    >
    >
    Jan 30, 2009. 02:52 AM | Likes Like |Link to Comment
  • Stimulus Packages: Conceptually Flawed and Historically Unproven [View article]
    Dear Yamu: You are correct. The distinction is very important. And I agree with you that, without the post-war US dominance, the war-related employment and production figures could well have turned about to be just another stimulus. Thanks for pointing this out. - Rakesh


    On Jan 29 12:20 PM Yamu wrote:

    > "the extent to which the thoroughly changed post-war political and
    > military environment (i.e. US dominance on the international stage)
    > opened up new and huge markets for American goods and services."
    >
    >
    > Yeah, but that would be the indirect result of the war. Normally
    > when people speak about the war getting America out of the recession
    > they refer to the production-spike that was related to the actual
    > war-time and had almost everyone employed. The part about the setting
    > after the war is true, of course, but it's important to remind people
    > that is was not the war itself as argument is, wrongly, used by many
    > Keynesians today.
    >
    > By the way, actually nice to see an author taking care of his article
    > and commenting on the views.
    Jan 29, 2009. 02:54 PM | Likes Like |Link to Comment
  • Thinking the Impossible: Could Bank of America Go to Zero? [View article]
    Bruce: The risk is not on derivatives is not substantially from the price; in fact, many such contracts (interest rate and currency swaps) may well be profitable on a mark-to-market basis, directly or implied via some alternate mechanism. The problem is counterparty risk. More precisely, how many of the counterparties are in a position today to honour loss-making positions? Many such counterparties are in the developing world.That is a key question which needs to be answered immediately so that we all get a clear picture. Are we hoping in vain? - Rakesh


    On Jan 29 02:15 PM Bruce Vanderveen wrote:

    > Thanks to everyone who commented. I was hoping to stimulate a discussion
    > of the bank balance sheets and wanted to get all view points.
    >
    > I think a lot of us would like to understand the derivative factor
    > better. Do the huge derivative contract positions on the balance
    > sheets just zero out. Or, do they hold the potential to bring these
    > banks down? I'm afraid the later is the answer, but would be happy
    > to see evidence otherwise.
    Jan 29, 2009. 02:49 PM | 2 Likes Like |Link to Comment
  • Thinking the Impossible: Could Bank of America Go to Zero? [View article]
    What readers need to take away from Bruce's analysis is the need to focus on the balance sheets of the banks, not on whether he is recommending a buy or a sell. The fact that many investors still appear to resist a thorough examination of key items in bank financial statements (particularly valuation methodologies and loan-delinquency provisions) is not a good sign. Many thanks - Rakesh
    Jan 29, 2009. 11:58 AM | 5 Likes Like |Link to Comment
  • Bad Bank and Draft Bill Spook CDS Traders and Wall Street [View article]
    Good luck Ranchr. I only hope you are not selling house-and-home to buy up bank shares. Many thanks - Rakesh


    On Jan 29 07:53 AM Ranchr wrote:

    > With every Seeking Alpha short screaming bloody murder at the Bad
    > Bank approach, it must be a very good idea.
    Jan 29, 2009. 11:48 AM | Likes Like |Link to Comment
  • Stimulus Packages: Conceptually Flawed and Historically Unproven [View article]
    Good insight Glen. Thanks - Rakesh


    On Jan 29 10:42 AM Glen L. wrote:

    > For the correct and definitive analysis of what caused the Great
    > Depression, see Murray Rothbard's "America's Great Depression", published
    > in 1963. Of course, Rothbard was of the Austrian economic school,
    > the same school that is routinely ignored by the Keynesians and monetarists
    > who created the crisis we're in now, and who made the 30's Depression
    > much longer and deeper than it needed to be.
    >
    > Stimulus packages not only don't work, they cause deeper economic
    > problems. For the reason why read Henry Hazlitt's classic "Economics
    > in One Lesson". In short, these policies obfuscate their "unseen"
    > consequences, as no one can say what the money extracted from taxpayers,
    > i.e. the productive members of society, for stimulus packages, infrastructure,
    > etc., would have been used for instead. Perhaps they would have used
    > it to pay down personal debt and put money in the bank, itself an
    > economic stimulus; perhaps they needed that capital to bring the
    > next great American invention to fruition, e.g. a new cheap energy
    > source, or nanotech breakthrough.
    >
    > Stimulus packages are a classic example of what Hayek called "the
    > fatal conceit" of socialism, that central planners can judge for
    > all of us what America most needs now to break out of the slump.
    > History proves they don't work, and that socialism doesn't work,
    > but all around us the socialists are taking charge again. First they'll
    > nationalize the banks, and then things will really start to spiral
    > down.
    >
    > And then their court historians will write about how Obama saved
    > America, and teach it in the government schools. And the churches.
    > And preach it on the nightly news. So much for "change".
    Jan 29, 2009. 11:45 AM | Likes Like |Link to Comment
  • Short Into the 'Bad Bank' Syndrome [View article]
    Good issue raised nyorker. It is a question of what risk-reward ratio one determines prior to a trade. I don't think your "unlimited risk" scenario is real--I'm not convinced that the government is capable of converting semi-socialist policies into value for private capital. Many thanks - Rakesh


    On Jan 29 08:26 AM nyorker wrote:

    > With the banks stock prices at historic lows, I can't figure out
    > how you would gauge the risk/reward ratio of shorting further. <br/>
    >
    > Maybe I'm too conservative, but the possiblity of a 30% return verses
    > UNLIMITED losses (if this GB/BB comes to fruition) seems like financial
    > suicide.
    >
    > Surely there must be some sector out there that offers a "safer"
    > risk/reward ratio ?
    Jan 29, 2009. 11:43 AM | Likes Like |Link to Comment
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