Alex_G

4 Possible Market Scenarios, Updated

Alex,

I would swap the probabilities of GD 2.0 and an amended Japanese disease. I think the govt will do anything (including severely debasing the currency) to avoid GD 2.0, which will result in the substantially higher taxes you talk about. What this will do is make our economy look a lot like the Euro Zone’s, much slower growth, with lower levels of private investment and a higher level of unemployment going forward. Full employment might have a bottom 6-7% unemployed.

Fixing GMAC: Paging JPM

To the author,

The mortgage part of GMAC (ResCap) is already walled off and can be cut loose. This was ironically done when Cerberus bought 51% to protect ResCap from GMAC. If this is done, no capital needs to be raised, as almost all of the balance sheet risk is at ResCap.

My question is this:

Why won't the Govt let them do it? It's the most logical thing to do.

Prepaying Mortgages

The Danish model Tyler Cowen is speaking of allows the mortgage holder to buy a security to PAIR OFF his mortgage, effectively pre-paying it. He does not actually go to the bank and pay it off.

As djackson above states, a direct payoff would not be workable on many different levels.

Alex

The Facts About GDP and a U.S. Recovery

The 2 things the obama admin is not doing are spending stimulus dollars on:
1) infrastructure that will provide economic benefit and

2) energy initiatives that will REDUCE the out-flow of money to foreign energy companies (if you take out oil purchases, our trade deficit is nearly 0) and INCREASE payments to domestic energy companies. Jobs and revenue here instead of overseas.

AIG Is Dead, Long Live AIG

MarkA,

FRE pfd Z on Bloomberg, FRE.Z on others


On Aug 28 08:47 PM Mark Alexander wrote:

> Alex_G, thanks for highlighting the situation with FRE. That's too
> funny. Can you provide a ticker for the preferred shares? There are
> lots of issues (it looks like most trade as if they were junior in
> the capital structure to common), but it would be interesting to
> know which one you are referring to.
>
> buygolly, your thinking is critically flawed in one area. With clients
> no longer trusting AIG and and price slashing by AIG underwriters,
> the value of AIG's operations is depreciating much more quickly than
> a Hummer. Benmosche is doesn't have the foggiest idea what he is
> doing or talking about, or else he is simply lying

AIG Is Dead, Long Live AIG

In other news regarding Govt owned financials, FRE common is trading higher than their $25 par pfd. Any rational explanation would be appreciated.

AIG Is Dead, Long Live AIG

So, at the current price of 54, the stated market cap is over $7bln. We're told the Govt owns 80%. Does that mean the implied mkt cap is over $35bln? Anybody?

Alex

Revenue Growth: The Market's Next Catalyst

With all due respect, you didn't answer my question. Show me the metrics and structure for increased, sustained, demand.

BTW, the high yield market is a better indicator of economic activity, and while it has come back from Armageddon levels, it is still telling us that we are in a recessionary environment and future growth of 0-1%.


On Aug 26 10:51 AM Terence Chan wrote:

> Alex,
>
> thanks for your comment. I do agree with your points. I'm not saying
> it's a v-shaped recovery for the US... there will be a lot of headwinds.
> the consumer won't recover that easily. but you're seeing a lot
> of data starting to bottom like auto sales and housing starts. yes
> it will be choppy recovery, but the stock markets are forward looking
> and by the time you get all the data confirming that consumer spending
> has recovered, etc, bull markets are usually close to a year old.
> who knows where it will come from, more stimulus or simply people
> just getting "tired" of this recession. remember, savings rates
> are up and there are a lot of cash in the sidelines. the exact number
> is 25% are still in money market funds. i still think it will be
> a wall of worry for the us markets, but for the emerging markets
> I believe it's a secular bull. maybe this external demand will fuel
> manufacturing activity in the States. the reason why a lot of money
> managers and investors have been left behind in this rally because
> they wait for the tangible data to come out... but the market never
> waits... :)

Revenue Growth: The Market's Next Catalyst

Terence,

The charts and statistics you use are all over the internet and not new. What you don't tell us is where, specifically you see the rise in demand (don't say pent up) coming from.

Current spending is fueled by Govt stimulus, and can't be maintained in perpetuity. It needs to be replaced by other sectors. Tell us which these are and were the spending power is going to come from.

I await your reply.

We Needed Government Aid Sooner

Richard,

I think you are forgetting what got us here in the first place. The largest housing bubble in our history, the use of inflated values to consume more than we make, and the extra debt taken on fuel the consumption.

Cash for Clunkers would not have saved the over-built auto industry.

$8,000 tax credit would not have made vastly overpriced houses affordable in the long run.

50% of economic growth from '02-'07 was fueled by the vapors of an asset bubble. It was time to pay the piper.

Grab Your Shorts, The Correction Has Begun

Current equity bear, added in march, been taking money off the table the last 2 weeks, went all in w/ leverage in distressed debt starting in April, have taken the leverage off the debt but have kept the profits invested. So, yes, we have made a boatload this year.

The consumer is dead for 3-10 years, depending on if we become Japan or Japan light. The people that think the consumer will spend as they have the last 10 years just don't understand the metrics.

Alex


On Aug 19 07:09 PM Rick Urban wrote:

> All I can do is to ask you bears out here: DID YOU MAKE MONEY THIS
> YEAR? The way you view the world, I doubt it. The growth will come
> where it always comes from. Consumer! It may take some time, but
> it'll come. I don't understand why it is so hard to comprehend.
>
> Yes, perhaps we pilots are all the same, however being a pilot or
> an investor requires among other things discipline, taking calculated
> risk, homework, planning and fear control.☺
>

Buffett's Latest NYT Op-Ed: The Greenback Effect

Zach,

M3, or bank credit, is still falling off a cliff. Wealth losses are well over $10 trillion. Banks are holding the cash for future commercial loan losses, and are only deploying capital for trading.

The "money being printed" so far is 1/5th of money, or wealth, lost. The world is just now realizing that non-stimulus growth hinges on the American consumer coming back to the trough. Good luck with that.

Inflation will not happen until the bank reserves are leveraged to provide consumer loans, and consumers begin to compete for goods with their "excess dollars".

Deflation at Work

M3, or bank credit, is still falling off a cliff. Wealth losses are well over $10 trillion. Banks are holding the cash for future commercial loan losses, and are only deploying capital for trading.

The "money being printed" so far is 1/5th of money, or wealth, lost. The world is just now realizing that non-stimulus growth hinges on the American consumer coming back to the trough. Good luck with that.

Popular Mechanics Gets It Wrong on Buick Hybrid

Dude,

On the Kwh, you multiplied instead of divided...


On Aug 10 01:45 PM lostark98 wrote:

> OK, so I knew that it would be next to impossible to find any definitive
> data on how much electric vs gas fuels cost to produce. And I'm no
> one you want to trust with numbers so I was hoping someone could
> point me to it!
>
> It isn't easy to determine the real costs of energy production. None
> of the companies break out all the numbers the same and allocations
> for investments are handled differently, for example. My rough cut
> is based on data from the Energy Information Administration website
> (www.eia.doe.gov) as best I can without losing my day job
> (using U.S. numbers from 2007 and 2008!)
>
> It costs roughly $.198/gallon to get the crude to the surface and
> another $.64/gallon to get a refined gasoline product. (These are
> very, very gross numbers!) For a car that gets 30 mpg that's about
> $.0279/mi.
>
> To produce 1 kW*h in the U.S.A. is roughly $.0548. For an EV that
> gets 4 mi/kW*h that's $.2192/mi.
>
> It costs a lot in fossil fuels to produce electricity (51% of the
> U.S. electricity is from coal.) That's why I think the ICE will continue
> to be popular until we produce cheap electricity.
>
> On Aug 10 10:43 AM Alex_G wrote:

Are Investors Too Bullish?

According to BAC, homeowners spent 30% of home appreciation between '02 and '06, adding 200 basis points to GDP. Add the increased savings rate, and the consumer can only be counted on providing 62-64% of GDP. Will corporate investment and exports step up? Will the Govt raise taxes and permanently fill the gap, thus retarding real growth?

Temporary spending measures tend to become permanent, so my guess is that we gravitate toward the Govt option. 1-2% growth could be the norm unless we step up immigration.


On Aug 10 02:57 PM Mad Hedge Fund Trader wrote:

> By miles. Welcome to the square root shaped recovery. That is the
> likely shape of the recovery curve we can expect over the coming
> years. If you back out what I call the “2000’s fluff” of excess car
> production, liar loans, using the home ATM for serial, annual refinancings,
> excess consumption, unneeded home construction to account for the
> new frugality, US GDP growth drops by 1%. Chop off another 1% for
> deleveraging in all its forms, including lower leverage ratios, the
> end of the collaterized debt markets and credit default swaps, ultra
> high junk yields, bond ratings for sale, and the new conservatism
> of CFO’s and auditors. That leaves you with a 1% growth rate that
> Japan has seen for the last 20 years. That means falling standard
> of livings, an unemployment rate permanently stuck at German style
> double digits, endemic deflation, a collapsing dollar, a comatose
> real estate market and moribund stock markets. Where are the 37 million
> jobs going to come from that American needs over the next decade?
> If your kid is going to graduate from college soon, or cash out from
> the army, he better start learning Mandarin.
>
> 3% Average US GDP growth rate 2002-2007
> -1% Bank deleveraging
> -1% 2000’s fluff-liar loans, excess home construction, excess car
> production
> -1% real GDP growth 2010-2020