Pent up demand's Comments

Chrysler's Future

Thu, 30 Apr 2009 15:02:29 -0400

"they just want to get the maximum return on selling the bonds they picked up for pennies on the dollar."

Very sloppy thinking. What does the discount at which a bond was purchased matter? The administration would love to sacrifice the rule of law on the altar of expediency, but that doesn't mean we should do it. I'd rather have rule of law and every single Chrysler employee thrown out on the street than the reverse.

Contrary to some of the comments: some of the bondholders in question were secured and were right to refuse to forfeit their claim so Obama could send a Valentine to the UAW.

TARP Funds to Common Stock: More Accounting Games

Mon, 20 Apr 2009 11:45:20 -0400

"Converting this capital to common equity actually takes the capital OFF the liability side and yet leaves the assets intact."

And not only that, it helps cash flow. The TARP preferred paid 8% I believe.

Let's Hurt the American Financial Services Industry

Tue, 14 Apr 2009 09:41:10 -0400

Shrinking the financial sector is good. The problem is that the only growth sector that seems to be stepping into that gap is the public sector. That is not a recipe for prosperity either.

Definition of CMO Trading: Look for People Dumber than You and Take Advantage of Them

Wed, 01 Apr 2009 09:27:02 -0400

Oh please. So it was the responsibility of a techie at some investment house to foresee all the trouble that could be caused in the future by securitization and say "Not in my Name"? Gimme a break.

What's a Dollar Worth? More than Citi

Thu, 05 Mar 2009 15:08:58 -0500

They will not be delisted. The rules don't apply anymore. Maybe a market historian could tell us if there has ever been a company with the vaunted single letter ticker symbol trading in the pinks?

Geithner's Vagueness Explained

Tue, 17 Feb 2009 11:18:34 -0500

Ah, yes, you see the original super secret plan that had been prepared just wouldn't work out. Right.

Why didn't he just say that the dog ate his homework?

Geithner's Vague Plan

Tue, 10 Feb 2009 13:11:12 -0500

Why is everyone surprised? We were awash in vague platitudes during Obama's campaign; did people expect something different after he took office?

Executive Pay Restrictions Will Deplete Wall Street's 'Elevator Assets'

Thu, 05 Feb 2009 11:48:09 -0500

>Tickerphilia says:
> ...

The government needs to work on the spending side of the ledger. There is a private and public component to our country's current account deficit. Consumers are swiftly adjusting their behavior to reign in their consumption and government should do the same. It makes little sense to me to raise taxes on the financial industry when government is already forced to provide life support.

A better reform would be to drastically curtail OTC derivatives and bring them onto an exchange. This would increase transparency of counterparty risks and allow enforcement of limits on the size of positions. It has the additional benefit for Wall St. haters that it would bring spreads on these products down, meaning less earning for brokers.

And I agree with your point that we should not allow "too big to fail" institutions to exist. They are a systemic risk that clearly is too dangerous.

Executive Pay Restrictions Will Deplete Wall Street's 'Elevator Assets'

Thu, 05 Feb 2009 11:09:13 -0500

Bite me, I made a typo on a blog comment. All I'm trying to point out is that people are throwing the baby out with the bath water.

Those of us in the trenches in Wall Street deal with a lot of pressure and responsibility and live with some of the highest living costs in the country. Take away the incentive compensation for most of us and we will struggle to have even a middle class standard of living in the New York metro area. I am in this industry in the first place because US companies offer neither money nor respect for those in my chosen field (engineering). I saw the writing on the wall as a young engineer. Experienced engineers above me getting paid little more than new hires, if they weren't let go by the time they were reaching 20 years.

But don't let me interrupt those lapping up the populist rhetoric put out by Washington.

Down vote away.

On Feb 05 10:43 AM bricki wrote:

> It isn't a floor, it's a ceiling. I would NOT want anyone managing
> my money who couldn't figure that out.
>
> On Feb 05 09:13 AM Pent up demand wrote:

Executive Pay Restrictions Will Deplete Wall Street's 'Elevator Assets'

Thu, 05 Feb 2009 09:13:03 -0500

I realize that bashing Wall Street is all the rage, but why can't anyone see that $500,000 is too low a floor. Imagine you are a portfolio manager overseeing several billion in investments. Catching or failing to catch a single mistake in rebalancing the funds can easily mean hundreds of thousands in loss/gain for the fund. Do you think doing a competent job for fundholders might be worth more than $500k in total compensation?

Is GM's Worker Buyout Offer Insulting?

Wed, 04 Feb 2009 10:52:21 -0500

I was not "gloating" about the treatment of auto workers. Only pointing out yet more evidence of their detachment from reality of other industries. The vast majority of workers who will be let go in this recession will get a few weeks or months of severance pay depending on their length of service. There will be no buyout payments offered. In light of the fact that GM continues to hemorrhage cash, I am actually surprised that they feel they can do another round of buyouts.

On Feb 04 09:23 AM Tomas04 wrote:

> It's pretty sad times when people get excited over others mistreatment.
> We are all in for a very rocky ride and yes the union workers for
> the auto plants will get hurt in the end here but is that something
> to gloat about?

Is GM's Worker Buyout Offer Insulting?

Wed, 04 Feb 2009 08:39:27 -0500

The insulted worker should have taken the earlier buyout I guess. They made a mistake by betting that jobs bank, etc. would be around. If the insulted worker waits around another year or so, maybe he'll be let go with nothing.

The Broken Hedge Fund Model

Tue, 03 Feb 2009 13:36:42 -0500

I don't see that hurdle rate or participation by the manager do much to deal with the incentive problems when a fund is deep underwater. When funds go underwater they are heavily incented to go for the Hail Mary because they typically cannot retain their talent on management fees alone.

That said, hedge funds will exist as long a people believe that there are certain golden boys who "know how to make money." Some investors will always be willing to take that bet regardless of the high fee structure, lockups, etc. ad nauseum.

Where's the Nationalization Debate?

Thu, 29 Jan 2009 09:36:44 -0500

Just wait for the next leg down for financials and the nationalization talk will be back on the table. There is another wave of mortgage defaults ready to break and consumer credit is deteriorating rapidly. The government types will lose patience with maintaining a veneer of private enterprise. I bet the only thing holding them back now is their fear of screwing up.

Thinking the Impossible: Could Bank of America Go to Zero?

Thu, 29 Jan 2009 09:30:49 -0500

"The simple fact is the government currently won't let any big bank go belly up no matter how bad it is. If the policy was different Citibank would not be around any more. "

Irrelevant to shareholders. The author clearly states that there is a massive risk of dilution for shareholders. No, Bank of America will not go out of business. But for common shareholders I think there is a good chance they will be wiped out. I agree with him, which is why I have already unloaded my remaining BAC after the most recent disclosures about TARP funds.

If you are a US citizen, you already have much more exposure to financials than you want through the government. Why buy more in your personal portfolio?

The Political Strategy for Bank Recapitalization Emerges

Mon, 26 Jan 2009 11:36:59 -0500

"but we’re just saying."

Let's hear it for the Speaker of the House everyone. Truly we are living in an idiocracy.

The big problem with nationalization isn't deciding who does or does not "participate in the upside." As an example, government can have more or less participation by changing tax rates. The big problem is all of the politically motivated lending that will happen once the private management is thrown out. Pressure for this has started already; it go going about 30 milliseconds after the TARP money was approved. The Bi-Factional Ruling Party (Reps and Dems) are turning the US into just another banana republic.

Why Banks Need to Lend Out Their TARP Funds

Tue, 13 Jan 2009 13:27:03 -0500

The idea of immediately lending out these TARP funds presupposes the existence of borrowers ready to put the money to work in some way that is a net economic positive. We are in the process of tearing down a massive edifice built on misallocated capital, but the government and the financial press are ready to get right back on that horse and misallocate some more dollars. Yee haw. Ride'em cowboy!

Smith Barney Math

Mon, 12 Jan 2009 14:47:32 -0500

So basically this is the big bank equivalent of pawning your clothes then?

Cramming Down - On Whom?

Fri, 09 Jan 2009 13:29:10 -0500

I don't think this is a solution. You can bet they will drop the principal just enough to put the borrower up to his eyeballs in debt vs. six feet underwater. So any future hiccup in cashflow puts them right back into foreclosure.

Not to mention the issue of refinancing these people into 30 year fixed mortgages at historically low interest rates. How do you think those assets will look (assuming they don't default first) 5-10 years down the line? Especially if, as I expect, our little ZIRP-TARP adventure results in high inflation/high rates.

Detroit: Please Bring Back the Stripped Car

Thu, 08 Jan 2009 16:53:34 -0500

Fleet sales are a good thing? Yeah, nothing better for resale than hundreds of thousands of rode-hard-put-away-wet fleet vehicles hitting the used market every year.

Is Cheap Oil Compatible with Growth?

Thu, 18 Dec 2008 11:02:08 -0500

Looking at barrels of oil per capita is a nonsense measure. Look at barrels per unit of GDP. The picture is probably a lot more sensible. Even then, if country A derives most of its GDP from energy intensive industries and country B does not, there can still be an imbalance.

It's similar to pollution. Most pollution has gone down over the last few decades in western countries while exploding in China and India. We pat ourselves on the back for being so responsible, when in fact all we really did was shut down our dirty industries and send them overseas.

10 Simple Investment Rules for the Very Wealthy

Mon, 15 Dec 2008 15:30:59 -0500

#9 is a good one. Don't invest in funds of funds. A couple FOF that are failing were collecting fees to run the "place money with Madoff strategy." So they were collecting 2/20 for placing money with another manager with zero insight into how he made his returns. They don't have much room to criticize Madoff as a crook.

Citi: A Sell at $3.00?

Thu, 04 Dec 2008 09:29:01 -0500

Research shows again and again that the analysts are a case of "even a stopped clock is right twice a day". They are a good telltale for where the herd is going if you are a contrarian. That's about it.

I agree with roger maxims. People have this wild notion that
1. stock is beat down
2. no way gov't. will not let them go out of business
3. profit

As roger says, look at when earnings per share go positive. Maybe in 3 to 5 years. In between time, you will get diluted, and/or high-yielding preferred will be issued to make sure that the profits go anywhere but to the rubes in steerage (common stock). If you want to buy a lottery ticket, go pick up some long dated calls on C.

First Take on GM: Packaged Bankruptcy Inevitable

Wed, 03 Dec 2008 10:10:59 -0500

This is simply not an option. These are real companies with payrolls and interest payments to make out of cash, which is evaporating rapidly. You cannot expect the taxpayer to just take over the liabilities of an ostensibly private company for a while without some stake of ownership. Much has been said about the "unfairness" of the auto situation relative to banking. Those people should go look at the specific terms under which that assistance is being rendered to banks. The government basically owns those banks at a date in the not too distant future. If you are proposing that we nationalize the automakers and run them for a loss at over capacity, then we would be no better/different than the infamous Soviet tractor farms turning out product that nobody wanted to rust in a yard somewhere.

This is a bit like the "third rail" issue of Social Security reform. Any politician who proposes a painful reform is taken out and shot because there are always stupid or unscrupulous opponents willing to say that maintaining the status quo benefitis is an option and ignorant voters willing to elect them on a promise they cannot keep.

On Dec 03 09:17 AM aarc wrote:

> Re-structure GM once the global economy becomes less fragile or at
> least already on the way to recovery.

First Take on GM: Packaged Bankruptcy Inevitable

Wed, 03 Dec 2008 08:22:50 -0500

I agree with this 100%. Some sort of government assistance is inevitable. The automakers can enter bankruptcy now, or later (after burning through a round or two of government cash).

Take the tough medicine now. A healthy auto industry means shedding capacity in manufacturing and in dealerships. That will be painful, but that is the sad reality.

D-Day: Does Deflation Draw Near?

Thu, 20 Nov 2008 09:38:19 -0500

"Deflation is simply caused by a lack of demand for product and services. Get money into the hands of the public thru Fiscal Policy and Job Growth and the problem will correct."

Lack of demand == overinvestment

We have deflation in sectors where easy money created massive over investment. I realize it's fashionable right now to toss out empty phrases like "Job Growth" and "Invest in the Future", but that is meaningless. Government spending is not an investment when it allows someone to keep building houses no one wants to buy, or what have you. These sectors, housing, mortgage origination, car building, etc. have to be brought in line with what consumers are able to buy. Public money will only delay the inevitable for a while, not prevent it.

I wish savers would create an association in their minds that when they hear the words "government stimulus" they visualize a big siphon hose draining money out of their savings.

Deflation Watch, Day 2: Consumer Prices

Wed, 19 Nov 2008 13:46:01 -0500

Completely expected. The Fed never had control of the pricing environment. Their tools are extremely crude.

Expect to see continued deflation in financial assets with ever-increasing spillover effects in necessities.

On Nov 19 12:31 PM cpi watcher wrote:

> Almost the whole of the All Items monthly drop is accounted for by
> motor fuel and household energy. Everything else continued to go
> up, including food, housing ex-energy, medical costs, recreation
> ...
>
> cpiwatch.com/component...
>
>
> Transportation costs have dropped precipitously for the past three
> months but food prices continue to climb:
>
> cpiwatch.com/trends?sa...

Let GM Fail

Mon, 17 Nov 2008 17:20:16 -0500

"GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota."

And how much profit was turned on those sales? Oops.

The Autos and Mentality That Ruined Detroit

Mon, 17 Nov 2008 13:19:44 -0500

On Nov 17 10:51 AM Chris B wrote:

> ...yet we are investing in the crappy SUV and subprime mortgage businesses
> of the past instead, so nobody has to be out of a job. This is exactly
> why China will be the dominant superpower in 15-20 years. They are
> investing in the future, not subsidizing failure.

Where do you get your news? The financial industry is shedding jobs like crazy. The "investment" in mortgage backed paper will be a failure just as the "investment" in the auto industry will be. In both cases the same medicine is called for: liquidate, recognize the losses and create a blank slate for some new leaders to build businesses.

The automakers cannot keep their promises on pensions. We can recognize that now or we can wait until the problem grows even worse.

Could Capital Injections Save the Auto Industry?

Thu, 13 Nov 2008 15:41:36 -0500

Don't use all caps. Just don't.

On Nov 13 03:11 PM jimmy46 wrote:

> A federal BAILOUT WOULD BE STUPID.
>
> The auto companies have so many problems that $50 Billion won't save
> them.
>
> THEY NEED TO GET RID OF WASTEFUL WORK RULES THAT LOWER
> PRODUCTIVITY.
>
> WORKERS & RETIREE'S NEED TO PAY MORE OF THE HEALTH COSTS.

>
> THE UNION NEEDS TO HELP OUT.
>
> THE JAPANESE FACTORIES IN AMERICA DON'T HAVE GM'S PROBLEMS,
> WHY???