Oregonrain

Jeremy Grantham: Collapse is Over, But Monumental Challenges Remain

This guy has been about as perfect in his calls as anyone though this. He is a bit early sometimes but he freely admits this. He is not a market timer but a value investor. . But when the S&P hit around 650 in March he was yelling BUY. So..whatever he says I would listen very carefully. One of the best ever.

FDIC Insurance Fund - It Doesn't Actually Exist

Hardball...would you believe it....Mr. Hill is a banker who got out when the getting was good. He will be back....to help pick up the mess I am sure. He just wants to make sure that his new bank will not have to pay the real going rate....."Meet the new banker...same as the old banker."

Mark to Market: Time of Death 8:45AM, April 2, 2009

I like Tyler's style as well.

First, the truth is that probably no more than say 20% of the American public know what a balance sheet is let alone know how it works. I think many of you would agree that I am being nice here. I know I was one of them (that had no idea) even though I had run a very successful private company.

Then one day "BIG Corp" came to town and said...hey let us pay you millions. Perfect! Now I am at Big Corp and the first company they give me to run the first day the controller comes in to tell me that "hey our balance sheet is really clean." I think to myself for one second..I wonder what she meant.

Next thing I know...I am running a major portion of BIG Corp...and same controller tells me to watch out .....major portions of the companies balance sheet/s have "problems." Again..at first...I wonder what that means.

OH..WOW. You mean you can cheat your P&L with that balance sheet thing! I felt like Gomer Pile and the Pentagon. My "moment of Zen" came to me when I had dinner with the Regional Controller who was leaving to take a new job (a short time after my promotion) and he told me he was leaving because "its just not fun anymore now that you are here...we can't be as creative." I wanted "creative people" I just wanted them in the design department not in accounting.

I mean when you are work in the real economy running real businesses when you don't have any cash you cannot make the payroll...and things stop real fast. The sad truth is that many many people have no idea what this change means. But, I concur it is a license to lie cheat and steel. And I also concur (and it is very sad) that that is nothing new. But the whole "system" became "infected" with this kind of thinking..and the higher up you went (on average) the worse it was and is.

Now the accountants...the outside ones were a total joke in that time...late 90's early 2000's. I mean a total joke. The operators who were cheating using their balance sheets were more afraid of the internal audit people than PW. Eventually it caught up to all of them. I think that the AA experience produced enough "shock and awe" that even some of the most "creative" accountants decided that people could actually go to jail for what they were doing and decided that being some Con's "bitch" was not really high on their list of things to do.

The answer is simple...hey we will just make the rules more "flexible." This is tragic and eventually there will be hell to pay...but..not today.

Go Tyler...

Want to Reform Wall St.? Bring Back Partnership Investment Banks

I agree with this article. Others have made the same comment.

But it appears that once the individuals balance sheet was no longer on the line this "freed them up" to become a good deal more "innovative" I think the term was.

Funny how people behave very differently when it is their own money on the line and not OPM. This is a concept that as a small buiness person I am very familiar with. No small business person would or was allowed to lever up their balance sheets 30 or 40 to 1. It is insane. Yet...this was the standard operating procedure it seems on Wall Street.

Design A Country Rescue Package Here (Comment Competition)

To be sure what is being done now is monetary insanity. At the same time I do not see another option other than letting everything fail. Perhaps in the long run this will be shown to have been the best course in the long haul. But...as Arete says...it is counter-intuitive.

At the same time, it is essential that there be plans in place to pull back the levers of the throttles on the speed printer going on at the Fed. It will take higher taxes and cutting social security and other retirement plans and of course the medical programs. That is the only place where you can pick up the kind of money you need (hundreds of billions) in short order. Everything else in the Federal Budget (other than the pentagon which we will need and interest on the debt) is not worth the effort. It just simply does not get you the savings you need fast enough.

The people who argue that it can all be done with either tax increases or spending cuts simply do not understand the issues. As people say, "for every complex problem there is an easy and simple solution." It just happens to be wrong.

To the extent money is spent it has to be directed at high pay back areas. Education, R&D and infra-structure. As Jeremy Grantham says..real wealth is measured in the will of a nations people, the knowledge they hold and their resourcefulness. it also helps to have good land and water. We are still a rich nation.

On the Calif situation....I think they will need to make some major cuts to their budget. I think the number I heard is $23.0 billion short fall. Maybe some small "bridge loan" makes sense given how large a part of the national and international system it is. But, the people of that State have spoken. "No New Taxes." Ok...good on them. Time to cut the services...no more messing around. Once the pain becomes unbearable and it will.... it might be time to consider the loan. Until then....No.

The problem in the country has been that the demigods have told the public you can have it all. Huge tax cuts...all the services and wars you want..no problem.

This can be solved. It just takes reality...not slogans and the scapegoats like 'welfare." The idea you can cut taxes to ZERO as one commentator expresses and "solve" the problem shows you how far this kind of lack of thinking has gone.

I will admit that letting it all fail is an option. Let the real crisis begin. It is an intellectually defensible position. I just do not think the nation or the world for that matter would be a nice place for a long time if we go there.

Goldman Sachs: Why Aren't Trading Profits Raising Any Red Flags?

This one goes way over the head of a small business person in Oregon. Could someone try to give a brief ( or otherwise) explanation or point to a link that does. What I have been able to tell...GS is using a special position/ government program or NYSE "program" to in essence screw the little guy. Wow that never happens.

My understanding is that the goal is to push equity prices up in order (at least in part) to allow the financial service companies (especially GS) to do their deleveraging at inflated sale prices. Who would have thunk that??? Thanks.

Chrysler Lenders (Non-TARP) Come Out with Guns Blazing

This is good stuff..Tyler..thanks. Hey good thing the judge has a life time appointment (I think).

If I were the judge I would say to the "non-Tarp lenders"...so what is your plan? Are you going to grab the collateral (as they probably have a right to do) and then what? Are you just going to have a fire sale?

They will end up owning a lot of well...I think crap would be the technical term. Or is this just a stickup play? You know hold out long enough to either destroy any chance of the company moving ahead for a few more cents on the dollar? (shakes head YES)

I know I know...that is their job. But really, who here thinks the secured creditors really want to execute on the collateral and sell it in a fire sale let alone try to run this POS.

So my prediction is that there will be push back by the judge as there should be...these guys will get some more money...as maybe they should...and the whole thing moves ahead. Then it crashes in the next year or so.

Jeremy Grantham: Reinvesting When Terrified

I have been following this guy for about two years now. I have done nothing but make money. He is the real deal.

He called the top and has more or less called the bottom. He is of course too smart to say it is a bottom as we could easily sink back again.

But, I will say this...when he became ever so much more positive in his Jan newsletter I hung in a bit longer with my shorts...I am not after all moving billions around...but...went long about a month ago with SSO.

Thanks you thank you (again) Mr. Grantham. For all the people who have "thoughts" on CNBC and on here...I have found this guy to be dead...nuts...on. I highly highly recommend that Seeking Alphas pay close attention to him

Wells Fargo: John Stumpf's Letter to Shareholders Is a Must-Read

I read parts of the Wells letter. You know to me it sounded like they had had a great year. Until of course you look at those nasty numbers. I have made money darting in and out of this stock. As of now and for a long time I have been out.

They have performed better than their peers for sure...but overall I think this is just more bla bla bla...from a CEO to tell the truth.

Will Someone Remove Geithner from the Poker Table, Please?

I am but a simple small business person way way outside the beltway. But, what this seems to be is an overly complex "Rube Goldberg" type "contraption" meant to obscure the real problem. Many of the nations largest banks are insolvent.

Rather than just deal directly with the problem which is I think called the "Swedish" solution and take the banks over on a temporary basis and clean out the mess on the balance sheets it appears we have to find a way for the Goldman's of the world to make a buck on this....a huge buck.

I suppose the rational is that Congress will not vote for the Trillion dollars that would be needed to do this directly. At least that way we would know we were getting the job done.

This is a disappointment.

Buffett, Grantham and China: What the Savers Are Buying

I liked this article in that it tries to talk about two of the best value investors of our time. But as is typical, Buffett gets all the ink and Grantham is like "who."

Grantham is someone I have started to follow very carefully. He has a quarterly newsletter that goes out for free. All you have to do is put your name on the list. I highly recommend that as well. gmo.com

All in all Grantham has been talking for at least two years about what I believe are the three big issues of our time. First even before things got bad he said we were in the "first worldwide all asset class bubble" and that no one had the guts to call it like it was let alone stand up and "pop" the bubble early on. In this regard he zeros in on Greenspan. He is old school (as am I) and see the traditional role of the central banker to be to "take the punch bowl away just as the party starts to get really fun." In this situation the "rational market" ideology of the Fed chair prevented this.

Next he has talked about what I consider to be the great "group think" or as Grantham describes it.."people were paying more and more to take on more and more risk." This of course is the exact the opposite of how markets should function.

He described how "career risk" among CEO's and others also accelerated the bubble. I call this simply "lack of leadership."

Remember this is a guy who called it to a tee. A bit early yes...but like Buffett he would concede that value investors are not great market timers. Now he says that the market is getting close to fair value. But...he also says that in most bubbles things tend to "over correct" before they "revert to the mean."

If you start to do a top down analysis and believe that expected earnings in the S&P are still to rosy..you can at the low end expect total earnings in the S&P in 2009 to be around $50.00 and a PE of somewhere between 10 - 15 that would put a bottom in at between where we are now...750 and a low of 500. That is where Grantham is as well.

Now all you have to do is pick how much risk you want to take on to make how much gain. Above all you need to be very patient and not blink.

Major Investors Piling into Gold

I have to agree that it looks like gold is going to make a run here. I have been watching for a while now and believe that there are just too many fundamental reasons for it to continue an upward path for a time. This may be an emotional reaction to things but the printing of money eventually will result in some increase if not a large increase in inflation. If you add that factor to the just general factor of "fear and loathing" in the world marts I think it spells a continued upward move for gold.

Disclosure long gold....first time ever.

Selfishness vs. Selflessness

Ok...so many of those who have posted here essentially essentially that only the private sector can efficiently allocate capital have to be joking right?

Yeah, it was really an efficient use of capital to create trillions of dollars in CDO, CDS and the like...right? It was really an efficient use of capital to pay the guys who ruined (no strike that destroyed) their firms ten's of millions and even hundreds of millions of dollars as compensation to do it.

Now before the "mob" takes off on me..I am not saying that government will do all that much better. But, on the other hand..can it really do much worse?

I think what Fred Wilson may be saying here is that a little more long term thinking...call it selflessness or just delayed greed...would go a hell of a long way. We have seen the results of an era when weak kneed poorly led companies and government that promised huge tax cuts and huge spending increases, huge trade deficits would bring prosperity or in the case of companies that they could make "wine our of water" using derivatives. It was all smoke and mirrors and the masses loved it. Why not. But it was just a lot of ...ah crap..would be the technical term.

Its time to put ideology aside...and do what works. If we cannot put our individual short term greed aside here for a bit...the nation is screwed. That much I agree with Fred about. Those that participated in getting us here...would do well to listen up. The alternatives are far worse.

Another Big Bank Failure: More Likely Than Not to Occur

I understand that Buffett has three "buckets" when he looks at making an investment. Yes, No and too complex.

I have done reasonably well in both shorting and then going long with WFC now and again. I think that the government overlay here makes these investments "too complex" at least for me.

There are a lot of people that believe as this writer does that the banks are still hiding lots of I think "garbage" would be the polite term on their balance sheets. So the risk of another large failure cannot be written off. However, I think that letting Lehman fail and the aftermath of that convinced a lot of government and policy types that the alternative of letting a big financial institution fail is just too scary right now. Crap they rescued GMAC..when not many people were looking. I do not see them letting another large one go anytime soon.

Connecticut AG: 'Time to Shatter Old Boys Club of Ratings Agencies'

If there ever will be a "Best of Tyler Durden" this article will surely be featured.

"Fight Club was the beginning, now it's moved out of the basement, it's called Project Mayhem."