Timothy Swift

Goldman Sachs Backlash Is Picking Up Steam

Of course GS was "fully hedged." They have an enormous number of alum at all levels of government. Hank Paulson, et al, was the hedge...

Steve Waldman at Interfluidity thinks private investors in Treasury's PPIF ("let's call them PIMROCK") could be "convinced" by Geithner et al to buy toxic assets at way above market price - thereby bailing out the banks and saving their bondholders (um... PIMROCK). Scary theory.

at 6:1 with favorable financing why wouldn't they raise their bid, if one existed, to something closer to what the banks are offering? This is a massive distortion of the market...

What I haven't figured out is if there is $2 trillion in bad assets. Wouldn't there be $2 trillion in bad assets after this trade? The risk profile only improves at the right price...

Political meddling is never the answer and AIG et al should be let to fail.

Time to Wager on Youbet.com

Rotate Black (ROBK) may be a better trade. Seneca's look like they'll be the first to put a full scale las vegas styled casino in the catskills of NY an hour and a half outside of Manhattan, and this is the only way to play as its the managment company.

Geithner's Doomed Bailout Plan

Leveraging already leveraged assets using the Governments balance sheet to set price above where the market is willing to pay...? This seems crazy to me. The gov's involvement is skewing prices. If the bid is 20 and the financing terms allow for a 40 bid, or whatever, that just cut the volume of assets for sale in half or more. Throw on the potential changes to mtm and what's the price? Seems this is being used to set an artificial market for these assets so the banks can mark their books.

When will the marketplace be left alone to set the prices for these assets that accurately reflects the risk:reward vs other assets? According to may of the articles on this site there is an avalanche of public debt coming due and a reset of more mortgage related loans in 2010.

This plan seems to be financially favoring a certain set of assets, using the gov's balance sheet, over others.

This doesn't sound wise to me.

Mark-to-Market: A Rule That Begs to Be Broken

Vaughn's argument is specious at best... The question isn't how one prices fixed brick and mortar assets of one going concern vs a similar assets. Rather the question is how one prices financial assets of similar companies that depend and demand liquidity for their respective business models, i.e. banks, and whether that model is adequately capitalized to meet funding requirements in the event of mass withdrawals or some other such liquidity stress.

The comparison is intellectually dishonest. Nuclear reactors seldom face mass depositor withdrawals or pledge their reactors 30:1 to trade other financial assets while banks have as going concerns.

I'm not a big fan of mtm but there must be some recognition of liquidity risks for illiquid financial assets. Maybe a footnote with the high, low and marked case? Some sort of liquidity risk recognition so in the event of undue stress investors have some sort of guide posts.

Executive Compensation: What Obama Could Still Do

This is actually a brilliant insertion by Dodd. Not for the country mind you but for his state. Where will all the smart money men from manhattan go where they won't be manhandled by government policies? Why into the hands of the unregulated and less taxed hedgies up and down southern CT. Brilliant move!

If Obama screwed up in nominating and backing Tom Daschle, the former Senate majority leader who ponied up $140,000 in back-taxes and interest, what does that say about his support for Geithner?

What's odd to me... If there is a crisis of cofidence in government and the financial systems in general why anyone in their right mind would appoint tax cheats. It's not what we know about them that's the problem. They are tax cheats. Got it. It's what we don't know about them that is a concern.

Afterall Madoff was a regulator...

Plan Orange: Killing the Mortgage Crisis Quickly

Why can't we let those that took on the risk in the first place assume the risk and file? Our bankruptcy laws need to be re-written so the debt never leaves someones balancesheet until paid. That'll make folks rethink taking on unsustainable levels of debt in the first place and force banks in the process to lend to credit worth borrowers.

Price needs to adjust so let it without government interference.

How Wall Street Keeps Dooming Itself

Nope. Having the President of the United States, the leader of the free world, throw rhetorical bombs into the process isn't helpful and doesn't efficiently allocate capital. I get the politics of it, but this is what I object to!

Which industry is he going to train his attention and megaphone on next? Healthcare and energy are in the headlights...

The street is sorting itself out and will eliminate, by some estimates, 200,000+ jobs in Q1 of this year. Who knows it may grow it may not, but the system of allocating capital is ever so slowly doing its job. The market adjusts up and adjusts down. You can be certain the bonus pool next year won't be nearly the same size.

The other thing you can count on is a meaningful drain of intellectual capital (term used losely) from the major money center banks to other less regulated and out of the spot light entities where earnings aren't nearly as encumbered by political meddling. With it will go the experience of having gone through the risks of a major liquidity crisis (not to be underestimated), ultimately leaving the keys to the kingdom to less experienced operators.

How Wall Street Keeps Dooming Itself

A rather inconvenient truth is Albany and NYC also benefit from the mothers milk of Wallstreet bonuses. At a mere $18 bln the city and state are witnessing a $1.3 bln short fall in tax collections. Followed by an announced potential 20,000 job cuts in the service personel pool of NYC.

Blasting the bonuses has far reaching consequences. Lambasting is easy by those not losing their respective jobs due to the fallout... and I'm not talking about wallstreet jobs! I'm talking about the better than 8 million people that live in and around Manhattan that depend on that injection of cash into the system for their livelyhood.

The repercussions of government dictating private business practices is far more dangerous than the bonuses. Justified or not.

For the sake of conversation... What do you suppose Wallstreet's adjusted hourly rate is? Just curious. Most I know don't work a 40 hour week.

Obama 'Shines' Natural Gas

On the NGV thing... A big impediment is the 35% decline rate of domestically produced natural gas, which is up in the last 5-years from 28% or so. Bottomline is its harder and harder to harvest natural gas. Especially when one considers the economic threshold for new projects is roughly $6/mmbtu. I suppose increased demand via the transportation pool would keep prices above $6 but it'll also continue the decline curve creep. What happens when it hits 40 or 50%?

Why is it that no one discusses super conductivity? the technology has come a long way and its now possible at temperatures just below zero, up from -200+. Get it to operate at ambient temps and now you're talking major energy efficiency. Gov dollars are better spent on such research rather than meddling in markets.

Oil: What Goes Down Must Go Up?

This is awesome... "all signs still say [the oil market is] 'very tight.'" EXCEPT price!

The historical inflation adjusted price of oil going back to the mid 1800's is roughly $30/bbl. Prior to '08 the price approached or exceeded $100/bbl on an annual basis only twice. Why is today's market any different?

The price will gyrate around the incremental barrel as it has in the past. When the incremental barrel is scarce the price will go up when its in abundance the price will go down. Econ 101.

The rationing mechanism of price is truly a powerful force. There is nothing new here.

Obama and Higher Fuel Efficiency Standards

Why is 35 mpg a good thing? Seems like the autos need to design, engineer and build cars the public will buy and not by some arbitrary standard established by the all knowing and feeling coming from Washington. What do those clowns know about making a car?

Something seems terribly wrong about pumping billions into the auto companies to keep them alive then jam design mandates down their throats. But we knew this was coming.

The carbon tax silliness... Can someone please explain to me why CO2, an inert gas and essential for the cycle of life, is such a bad thing?

According to James Lovelock the world produces 550 gigatonnes of the stuff of which we're responsible for 30, or 5.5%. Even if its reduced to 0%, an impossibility, what was accomplished? Will the earth cool off? Seems like silly willy math to me.

Geithner's Tax Troubles Give Obama a Chance to Get It Right

Geithner is a tax cheat. We now know this. Its what we don't know that troubles me. Madoff was a former regulator. Its what wasn't known about him that cost investors $50 bln. Just imagine if he ran the Treasury.

That aside...

I'll put American workers against any foreign competitor. Just reduce the corporate tax burden equal to the average of the industrilized world and we'll see how trade works.

As for the 4 republican economic policies cited... it's about freedom and liberty, not necessarily economic policy. Reducing the burden of Government on individuals ensures their respective freedoms and as a consequence economic growth through individual efforts is a by product everyone benefits from. Although Republicans are impotent to the point where no one understands what they stand for who knows now.

Income taxes, cap gains taxes etc haven't always been taxed. Maybe we need to go back to a simpler time... There is so much in the genius of the Keep-It-Simple-Stupid principle.

Oil Price Economics the 60 Minutes Way

60 Minutes put together a clever little piece of nonsense. Speculators are a two sided trade. By definition there is a buy side and a sell side to the trade. Nations on the other hand are a one sided trader. They purchase and consume.

Consider China's imports of diesel during the spike... China's imports of diesel through the end of Nov. were up 800% y/y. At the peak in July the Chinese imported 970,000 tonnes of diesel, 4,850% more than the same month in '07. The barrel conversion is a little more than 7 bbls/metric ton. Using diesel is material in that it has a multiplier effect close to 3x due to its processing conversion rate. Roughly 30% of a bbl of crude is processed into some form of diesel.

The real one way buying/demand by China in the diesel market alone was enough to skew the price of a bbl of oil in a tight market. Not surprising Chinese diesel imports have fallen from the high of 970,000 tonnes in July to just 40,000 tonnes in Nov. Put another way, that's a decline of nearly 700,000 bbl/day of oil equivalent in July to just 9,300 bbl/day of oil equivalent in Nov.

The world runs on oil, its the cheapest and most efficient store of energy, making crude a global commodity used to fuel economic growth.