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gramps2
106 Comments
America Needs a Turnaround Plan
If this "author" doesn't like George Bush -- good for him. Let him go babble his political propoganda on a website dedicated to politics.
I am absolutely fed up with the STUPIDITY that passes for political debate in this country. I see very little difference between McCain and Obama -- neither of them is really qualified to be president. George Bush is President, whether anyone wants to admit it or not, because he was perceived as the lesser of two evils (both times). I don't think anyone ever thought he was a mental giant, or even qualified, when he was elected.
Once again, the citizens of the United States are being asked to choose between two unqualified candidates. And if that wasn't insulting enough, we have to deal with these partisan hacks who are themselves so confused that they cannot differentiate between their partisan political views and actual economics.
There are no, zero, zilch, economists who think raising taxes is good for the economy. Not one. Shifting economic resources from the private sector to the public sector is ALWAYS a bad thing economically speaking. Big government always results in a lower standard of living -- ask Cuba, France or the former Soviet Union. The part of of China that is growing like wildfire is the part that has been relatively freed from government meddling.
This isn't an economics question. The economic community figured all this out years ago.
If Mr Wilson thinks taxes are unfair from a political viewpoint -- he is entitled to his opinion ON SOME OTHER SITE.
How Risk Aversion Is Evolving
If you are really chicken, you can buy US Treasuries directly via TreasuryDirect. Your Treasury holdings are put on deposit with your local Federal Reserve Bank. There are limits on the amount you can buy via non-competitive bids (these are designed to give small investors the highest rate of an auction) -- but you can do competitive bids for just about any amount that a typical consumer might have
Now is definitely a time to be extra careful about your investments -- but the panic implicit in most news coverage is really unwarranted
Wells Fargo: A Growth Stock During the Great Depression?
If WFC goes up and/or KO goes down -- that still doesnt provide any evidence about whether WFC was a conservative lender.
Buffett saw the disaster in derivatives coming precisely because they caused him so much pain in his General Re purchase -- he got burned, it wasn't foresight at all.
General Re was his largest single purchase -- WFC and KO are only his largest holdings in publicly listed companies, they are much smaller in size than GenRe
Avoiding option ARMs (assuming they really did avoid them) is important -- but it doesn't tell us anything about their underwriting of other mortgage types. If they lent money on overpriced California real estate, they can still have massive losses. Its hard to imagine how they could have avoided that mess entirely.
And to RobM: constantly repeating that WFC is very conservative does not make it so... it just makes you sound like a parrot. I readily admit my only experience with WFC is very anecdotal and not a good basis from which to draw an opinion... I would love to see some actual numbers about WFC's loan underwriting, rather than mindless religious chanting.
I have had several dozen Wall Street "analysts" try to sell me credit products related to WFC and they CONSTANTLY repeat over and over that WFC is super conservative -- but not one of them has been able to show me any numbers.
That doesn't prove anything about WFC -- but it does tell me the crowds are dangerously mindless. Following the mindless crowds is a great way to lose a lot of money
Wells Fargo: A Growth Stock During the Great Depression?
Buffett himself would beg to differ with you. He sunk a lot of money into USAir Group -- which was a huge losing trade until some "bright" state pension managers from Georgia decided to buy USAir and bail Buffett out.
Buffett was a big investor in Fannie Mae -- but after holding the position for several years he bailed out and called Fannie a disaster waiting to happen.
Lets not forget one of his biggest purchases was General Re, which came with billions in undocumented derivatives trades that eventually led Buffett to call derivatives weapons of financial destruction.
Too many of Buffetts disciples only remember his winning trades-- like everyone else, Buffett has had some failures too.
As for Wells Fargo -- the company is extraordinarily concentrated in California, which is having one of the most severe real estate collapses in the country.
Some people like to claim WFC is more conservative in lending, but there isn't much evidence behind this folklore. It might be true, but the only "evidence" anyone ever gives is that "everyone knows Wells Fargo is more conservative"... If they were really more conservative, we should have seen a terrible plummet in the amount of loans they were writing near the peak of the real estate bubble -- but instead we saw a continuation of the trend. Doesn't sound like they were turning away people.
I happen to have several colleagues who received **unsolicited** home equity loans from Wells Fargo through the US Mail. They never requested the loans, so obviously they didnt fill out any liar loan type documentation -- or any documentation. All they had to do was endorse the back of the check and deposit it in their checking account and the loan was activated!!!!
I know this is very anecdotal evidence, but it really made me reconsider the "accepted wisdom" that Wells Fargo is more conservative in their lending.
Buffett's Big Bet: The Real Value of the Berkshire Investment in Goldman Sachs
He says the taxpayer overpaying for crappy mortgages is a great idea for all us little people -- but not good enough for him. He gets a much better deal for himself.
Bailout Should Be A Windfall For Taxpayers - Barron's
Is This a Money Making Bailout?
Buffet is telling us WE should invest in crappy mortgage bonds -- while Buffet himself invests in preferred stock, whose cashflow comes from taxpayers bailing out the financial markets.
Buffett should take his own medicine or else shut up
The Deal's Getting Done, But Will It Work?
Some of you may have the front pages of when a man stepped on the moon, or when JFK was shot, or the coverage of 9/11... but today is the day the dream called the United States of America died.
The history section of the library is filled with empires that dominated the world in their day -- and they are all gone. We all knew America's reign wasn't going to last forever -- but few of us realized just how quickly it would end or that we would die by our own sword.
The generation that talked about flower power and peace and put Woodstock on the map has proven to be the most greedy and selfish generation ever to have lived -- and they haven't even started hitting us with the bill for their "entitlement"... programs yet.
The sissies running the country now are unable to take even the slightest little bit of pain. Everything requires a pain killer, a trip to the nail salon, and of course massive government "relief". Great Depression? Who do you debt addicts think you are kidding?
In your selfish rotten effort to avoid even slight discomfort, the flower children (who are now CEOs, Congressman, etc) are saddling their children with more debt than the world has ever known -- and the only way to pay for it is to be a mortgage banker or lawyer, since we no longer teach math or science or engineering and no American wants to be a "nerd" anyway. Heck, Americans refuse to even get their hands dirty.
George Washington and friends launched a full scale revolution over tax rates that are a fraction of what we already pay.
Lewis and Clark managed to explore the west without a government subsidy, and they didn't file a lawsuit every time they twisted an ankle.
Heck, even John D Rockefeller hauled barrels of oil by hand when he was a young man. How many CEOs today have ever done an honest day's labor? They went from private prep school to university to grad school to the executive suite -- a life of privilege the whole way.
I am ashamed at what America has become. This is no longer the America that was able to tame the west, defeat the Nazis and put a man on the moon. Today's America would go deep into debt to pay an illegal alien do it for them.
Time Not for a Bailout, But for Nationalization
Come on SA editors -- keep this partisan trash off your website or change the name to Seeking Politics
Bailout Talks Lose Sight of the Cost Question
THEN... then you suggest the Treasury is now placing a floor on the price of the assets. Hedge funds can buy them from the Treasury knowing the price "cannot" go below what the Treasury paid.
So in essence, you are proposing that the Treasury sell call options for free/cheap to hedge funds? heads, the assets go up and the hedge funds make even more money, tails the asset prices go down and the hedge funds stick the taxpayer with the problem again?
They say a fool and his money are soon parted... Its becoming clear the US taxpayer is about to part with a LOT of money
Bailout Talks Lose Sight of the Cost Question
Long term investors focus on cash flow, the internal rate of return (compounded) that said cashflow generates, and how that IRR compares to both their cost of funds and to other investment opportunities.
Since homeowners aren't making payments, there are no cashflows. Valuing these things at 30-35 cents on the dollar is saying that the other 65-70% default. That means they don't pay principal AND they don't pay interest. The 30 or so percent that do pay are going to be paying their mortgage rate (around 6% plus or minus). From that 6%, you still have to subtract future defaults, which will not be zero... and all this "analysis" assumes that one is able to correctly identify which loans will pay and which loans will default -- Wall Street has proven that they are unable to do this. Buffett has said he doesnt think he is able to either. Distress investors have not expressed any confidence in their ability either.
It is absurd to suggest a bunch of government bureaucrats, led by Hank Paulson, are going to be able to properly value these assets.
The only way to help the banks is to overpay for the assets (in which case taxpayers incur a huge loss).
If the tax payer makes a profit, it will mean the banks have to take even more write downs -- and they are already capital impaired as it is.
Paulson's plan is a terrible idea and should be thrown in the recycle bin. Rather than rushing through a terrible, poorly thought out plan, we need to wait until January when a new set of faces can come at the problem with new ideas. Paulson has no credibility left, and he knows he is leaving so his heart isn't in the game at any rate.
Bailout Talks Lose Sight of the Cost Question
Buffett is collecting 11% on Goldman prefferred stock-- he didn't even touch the mortgage bonds
The treasury will not receive 18% or anything even close. If a home owner defaults on their loan (something that those of us without an MBA seem to have figured out is happening) -- they don't make payments... This next mental step is probably too big for a Wall Street analyst to grasp, but work with me here: if the home owner isn't making payments-- the bond owner isn't getting ANY interest payment.
The article cited (click through the link) says that the Treasury will **NET** one billion. 50/35 * 700 billion comes out to one trillion GROSS. Kessler neglects to subtract out the 700 billion cost, which (even if you agreed with his numbers) would leave you with only 300 billion profit.
Earlier posters were suggesting that the difference (the other 700 billion) was the NPV of the interest payments... Treasury OAS on high quality mortgage bonds is a couple hundred basis points, not 10000+ basis points that you would need to net one billion in profit.
Bailout Talks Lose Sight of the Cost Question
43% return on $700 billion does not net $1 trillion unless you are mathematically illiterate
The present value of the interest payments is next to irrelevent -- unless you are a Wall Street "analyst" and forget to take the present value of the interest costs... This ranks right up there with EBITDA -- or the most recent Wall Street stupidity: earnings before all costs.
Wall Street needs to learn some basic math skills.
An Absence of Leadership
Why were the last two elections a choice between bad and even worse? Given those choices, we have bad in the White House.
In a little over a month, the country will go to the polls and choose between dumb and dumber. I can already tell you that dumb will win, and he will be a terrible leader.
I have absolutely no idea if Colin Powell would have made a good leader or not. He seemed to do a fine job in the military, but the instant someone suggested he might run for president, the press started digging through his *wife's* medical records.
Was Clinton a good president? I am not sure -- but I do know he had sex with all sorts of women besides his wife.
Will McCain / Palin be good leaders? Thanks to the news folks, we know one guy was in a POW camp decades ago, and the other one likes to shoot moose. We still don't know if either of them know how to lead.
Obama / Biden? Well, his mom may or may not be a rebel / anarchist and hate whities. His preacher says some pretty stupid and inflamatory things. Obama is really good at making soaring speeches without any specifics. We still don't know about the candidate's leadership abilities.
People run for President and all we want to know is who they had sex with and what extra curricular activities they participate in that might alienate a special interest group.
Mr Mason dribbles on for many paragraphs saying that Bush has been completely devoid of any leadership ability -- but in the exact same article he blames Bush for every single wrong that ever happened in the last 7-8 years.
Some of the problems were already in place before Bush even decided to run, while others are a reflection of his **BAD** leadership. Mr Mason is too lazy to differentiate.
The GSEs (Fannie and Freddie) were destroyed by Franklin Raines (a Democrat) and his counterpart at Freddie. They took sleepy little mortgage insurance companies and turned them into over levered hedge funds invested in subprime garbage.
The ^*(& may have hit the fan on Bush's watch, but the problem was very clearly caused by someone else acting *during* Clinton's watch. I don't even know if its proper to blame Clinton for Raines crimes.
But lazy foolish "commentators&quo... like Mr Mason judge every politician using his powers of ADD. Absolultely no effort to find the real problem, just blame the opposing political party for everything.
Why would someone with actual leadership skills want to jump into this mess? Freedom of the press guarantees Mr Mason's right to make unsubstantiated partisan accusations without any consequence to himself.
It should not surprise anyone that the smartest people don't want any part of the media circus. Leaders have to have thick skin -- but they should not be subjected to never ending libel.
We have the leaders we deserve
Caterpillar's Troubling Bond Issue
It took the market quite a while to realize that GE was a bank -- and even after a lot of re-morphing, Imelt today acknowledged that GE is still mostly a bank (he said finance is back up to 53% of the total earnings).
People still think GM is a car company -- but a more thorough analysis of their books show that over 100% of GM's earnings in the last decade came from Dietech and GMAC. The auto manufacturing divisions lost money every single year.
Now before you get all upset: yes, I know GM reported positive SUV earnings on an **accounting** basis a few of those years... however, that was the result of very dubious pension fund assumptions that allowed GM to claim a pension related gain and to avoid making the normal contribution. If you back out the pension shananigans, GM's auto manufacture divisions lost money every single year.
As for CAT... the overwhelming majority of their "sales" are actually leases done through their captive finance subsidiary -- exactly the same as GMAC. CAT also provides financing for dealer inventories.
CAT is a bank