Robert Radano

Who Is the Mystery Buyer?

Through multiple federal intermediaries billions in US Dollars are sloshing through global financial markets. We are living in a world where the Fed has decreed zero interest rates for another six months; probably longer. The old Fed Playbook forced money into riskier fixed income securities and then, as asset allocations models dictated, some of that money rotated into equities. Therefore, those above who have referenced "dumb" money trades are probably accurate. In this day and age even smaller traders have the sophistication afforded by Bloomberg and other data services, to see these waves on the horizon and front-run them. In addition, ETF's, (and leveraged ETF's,) are faced with the problem of matching their synthetic positions to a very real index and they must accomplish this task for relatively small fees. All of these, and other prop desk issues are forcing anomalies that lead to some bizarre prints on the tape.

SEC gives a lesson in how to bury filings.

We're deep into the weeds now. The lack of any documentation for 536 exhibits is unfortunate and indicative of an agency that does not welcome real oversight. It would be nice if someone from Capitol Hill drafted a letter to the Commission requesting a more complete index of these very important documents.

The Wall Street Journal (NWS) closes its bureau in Boston and says it will shift mutual fund coverage to another team. "We remain in the midst of a profound downturn in advertising revenue and thus must think the unthinkable," wrote Managing Editor Robert Thomson in a memo. The paper will also stop selling its U.S. edition in London.

Remarkably, this comes on the heels of the WSJ becoming the number one newspaper in the country. If the largest daily newspaper in America is closing bureaus due to economic factors what does that say for the viability of the industry as we know it? Perhaps the Journal can work with some Seeking Alpa contributors...

ISI Group's Washington analysts send a note that an agreement could come today not to extend the first-time homebuyer tax credit, but to phase it out - an outcome "worse than a straight extension and probably worse for housing than the consensus."

ISI Washington Group is an excellent service. It seems their post regarding the decision to end the home buyer tax credit is a reason Bloomberg is now giving for the sell-off in equities. ISI should take this as a compliment. If true, it speaks to the fragility of the numerous federal facilities and programs designed to spur economic growth and protect the financial system from further loss. There have been other signals that the recent rally in equities may have reached a near term top. Most notably would be that almost all major asset classes have been in rally mode. Normally something is out of favor...

The other factor that may be weighing on financial markets is the recent announcement that Sen. Reid is now going to press the Senate for a vote on the public option for health insurance. There have been rumors and releases that maintain the White House favors the trigger approach. Reid's announcement may indicate another Senator has been turned. I wonder what the public option would mean for Treasury yields and the value of the Dollar. Are global investors really willing to finance a federal insurance program for health care?

Barron's' 'Miller Time' Completely Misses the Math - and the Mark

What is not mentioned is that Miller bought into many of these positions as the market was dropping. What would be fascinating is to see how he deployed cash into troubled financials; (FNM, BSC, etc.) even when many on the Street were happy to give Bill their shares!

As a former Legg Mason broker, I can report Miller always had a "relative" value approach to investing. Readers should know that he was the under-study to the eclectic manager who built the LMVTX, Ernie Kiehne. Ernie was director of research and responsible for the success of the Value Trust going back to the early 1980's when it was Legg Mason's only mutual fund.

Back then Ernie used to get on the Legg Mason institutional research call and talk about how his cats had told him about the value in PEG, or some other boring true value idea. In order to keep Bill happy he was given the more aggressive/relative value fund, The Legg Mason Special Investment Trust, and he did quite well with it.

When he took over for Ernie, Miller brought his relative value ideas to the flagship fund, but many value investors always chafed at Miller's analysis. Style drift in value asset management has always been an issue as often times value investing is out of favor, which can make retaining investors/assets very difficult. Unfortunately for Bill he gave in to the dark side of value investing and no one stopped him. In the process he hurt investors, the firm and his own reputation. It will take more than a puff piece in Barrons to change that.

Jim Rogers on the Next 10 Years

Not enough has been said about a few macro points.

First, China is not a free society. No matter what anyone says this issue is China's most fundamental problem. Free enterprise exists up to the point where central planners within China's government have a different view.

Second, do not underestimate the creative destruction of the American economy. More than most economies, the US can move in different directions faster than other large economic systems.

Third, consider predictions from a few years ago today. Most don't hold value. There are many world views and going against the common view...which is China is the emerging super-power in the world...may well look different in a few short years.

Fourth, Rogers predictions regarding commodities may well be accurate, and his investment views in a macro sense have proved out more times than not, but his political views are not as accurate.

Vonage (VG) unveils a mobile app that will allow iPhone (AAPL) and BlackBerry (RIMM) users to make discounted calls. Unlike Skype (EBAY) calls, which are limited to Wi-Fi, iPhone Vonage calls will be carried by AT&T (T). VG +19% premarket.

The VZ and T news is important in that it signals, (pun intended,) mobile calls and data are evolving away from proprietary cell networks into wifi and other/future incarnations of wireless data networks.

Someone Is Finally Listening to Sirius XM Shareholders

XM/siri were born as technology plays, but the technology itself is suspect. Just as sat phones have not taken hold, sat radio has had its problems. The merger should have helped, but has not because the model has not changed. What has consistently puzzled me is that we now live in a world of "high-def." We love our high-def tv's and have bought them in huge numbers. We have done so because anyone who can look at the picture sees a tremendous difference. Consumers do not feel the same way about sat. radio. The reason is sat radio is based on sound, and the sound on sat radio is not any better than what's available. If XM/siri was smart...and so far there is no indication they are...they would get rid of some channels and expand the bandwith for the remaining offerings so the sound is superior to FM, pandora and even the Ipod. In the audio/visual world, superior technology matters. Delivering a parallel product is just not a compelling business model. The talk radio stations don't require more bandwith, but the music quality does matter.

What's Normal for the Economy?

Good observations Felix...sorry to say your publication is closing. Portfolio was a good read. Hope you've got a ticket home.

As for the article, don't know how we "de-globalize." America was created in the 1700's in a bold move towards globalization. Unless China decides to build another wall, globalization will continue. It will be different but let's give creative destruction a chance to work before we conclude that the "morphing" of the problem is completely negative. Governments can't buy every element of this dynamic economy. We're nearing the point where Congress and institutional bond buyers are going to realize something else must be done. Not all morphing is bad.

After injecting over $800B of cash into the financial system over the last eight months, the real test for the Fed will be figuring out when to turn off the money pump.

This post sounds like dialogue from an Austin Powers movie...millions become billions, become trillions. And yes, before we're through this credit crisis, additional trillions of capital will be required. This is not merely the view of a beltway hack, no less a figure than Bill Gross has repeatedly used the "t word" when referring to what must still be done.

Geithner's Plan for Bad Assets: Part of a Master Program

Mad Hedge...I like your idea...I have a contact who provided me with a plan...contact me via email: [e-mail] and I'll send you a copy...regards,
rr


On Mar 30 12:29 PM Mad Hedge Fund Trader wrote:

> Geithner should consider this. There is an easier, cheaper, and faster
> way to solve the banking crisis which no one is talking about on
> Capitol Hill. If collateralized debt obligations (CDO’s) are the
> problem, just get rid of them! Desecuritize them! Just convert them
> back into the underlying loans. There are $1.4 trillion in CDO’s
> outstanding backed by Alt-A and subprime loans in the form of 3,700
> individual securitizations of perhaps 3.7 million loans. Over 68%
> of the loans backing these bonds are current. Mark to market rules
> are forcing the banks to carry this paper on their balance sheets
> at 50%-80% discounts. The problem is that mark to market is a meaningless
> accounting fiction when there is no market. If you break up these
> securities and place the underlying loans back on the banks’ balance
> sheets, the good mortgages can be valued at 100% of face, and those
> behind in their payments or in default can be discounted to maybe
> 70% because they are still secured by the value of the homes. This
> would boost the value of the entire asset class from the current
> 20-50 cents up to 90 cents on the dollar. Restored balance sheets
> would enable banks to resume lending. Of course it would be a massive
> admin job unwinding the rats’ nests behind some of these securities,
> but Heaven knows there is abundant subprime and Alt-A expertise available
> for hire these days. Just sift through the ashes of Lehman Brothers
> and Bear Stearns. It is a workable plan, and therefore is unlikely
> to ever see the light of day.

In an op-ed published in 31 newspapers this morning, Pres. Obama says the U.S. is ready to lead the way out of the financial crisis. "We need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy," he writes. "That is a false choice that will not serve our people or any people."

Words do not matter. Policy, legislation and regulation matter. We understand that the President is using his popularity in the polls to "jawbone" the daily news flow on the economic crisis. However, the reality is disquieting to the investment industry and capital markets. I agree with those who say that after a slow start the Administration is doing a better job articulating issues, but that is no replacement for addressing key underlying issues. More work is required and attacking a loosely defined Wall Street is still far too convenient for the Administration and Congress. If we don't fix the banks first, Obama's aggressive domestic policy agenda will never gain traction. In a bizarre way, by nationalizing AIG, Fannie, Freddie, key banks and GM we may be avoiding a federal takeover of healthcare and other more liberal Democrat programs.

Blackrock (BLK) CEO Larry Fink says his firm will participate in the government's toxic asset purchase plan, and that he would like to give retail investors the chance to play along at home by creaating mutual funds around the assets. BLK +9.3%.

Maybe this is how this deal should have been pitched from the beginning...Set up a system where the Federal government provides liquidity. Then a defined group of managers are selected. These managers must provide two offerings. A pure institutional product, for pension funds, etc., and a retail product. If the federal government/taxpayer is going to provide the underlying capital, and back the loss, why shouldn't the taxpayer also be allowed to participate in the upside? So far, Blackstone and PIMCO have announced they will participate. Why not Vanguard and others?

Tomorrowland: Has Web Innovation Peaked?

To My Fellow Seekers:

This is just the beginning. The current internet doesn't match what many technologists have already created. Even established technology companies are concerned. Look no further than Microsoft in terms of multi-billion dollar companies who may be defining a soon to be outdated business model. Older mature technology franchises will fight to defend their turf. These include telecomm companies, cable companies, some media companies. Others are already thinking "cloud computing" and other trends that will make the current technology baseline seem like "dial-up." The only question is whether our clumsy federal government will actually stimulate this sector of American entrepreneurism in time so that creative risk-takers can help this nation emerge from aging and ineffective business and government models. Moore’s (Gordon,) still exists. And other similar axioms regarding the pace of technological growth behind the scenes are still holding.

Never bet against American innovation.

Rick Santelli: The Best Five Minutes in CNBC History

I like Santelli. Understanding what's going on in Chicago is important to all traders and investors. However, his rant is still a distant second to Cramer's "they know nothing" gold standard. The way I see it, Santelli's point is a follow-on to Cramer.

Since the markets and the country have been dealing with the credit crisis, (and now its impact on the real economy,) federal responses have shared one common theme. Regardless of the amount of money involved, the federal response has been treating symptoms, not causes. Therefore, anyone on the opposite side of the trade/argument has a compelling point. My view is that markets are reacting to a lack of leadership from either Wall Street or Washington. And rallies in the US currency, bonds and occasionally equities are a function not of a return of optimism or a positive policy response, but rather that the rest of the world's markets are worse off than America's. Hardly a vote of confidence.

Rather than complaining about the problem, (which is easy,) I'd like to see this site and the investment industry in general offer more solutions. Otherwise markets will get a strong dose of Democrat consensus policy rife with political compromise. The Stimulus bill is just the beginning and should be as scary to investors as a six handle on the SPX.