Alex_G

U.S. Financial Institutions: Does the Collective Balance Sheet Add Up?

Most useful article today. Thank you

GMAC CEO Alvaro De Molina resigns, to be replaced by Michael Carpenter. (WSJ)

Well, this just might be the death nail for ResCap. GMAC needs significantly less new capital (if any at all) with ResCap off the books.

Finding the New Normal in Investment Returns

I really think that the US is heading for a European style economy, which includes higher taxes, higher base unemployment and most of the gains in employment coming from the Govt sector.

Very little of the stimulus is "investment", just keeping people afloat.

It's not a good sign when the money banks spend on government debt matches the amount they're loaning to businesses (chart).

I wonder how that chart looks when you add in consumer loans, in particular credit card lines and HELoC's

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.☺
>