just.a.guy's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/157635/comments http://seekingalpha.com/article/175060-another-crisis-looms-right-around-the-corner?source=feed#comment-777358 777358 Wed, 25 Nov 2009 13:01:52 -0500 http://seekingalpha.com/news/market_currents/post/34870?source=feed#comment-726501 726501
This all sounds familiar...]]> Fri, 23 Oct 2009 01:01:38 -0400
This all sounds familiar...]]> http://seekingalpha.com/news/market_currents/post/31872?source=feed#comment-660448 660448
There are Toyotas that by most reasonable definitions (% of parts content, % of labor content) are more American than some "American" cars.

The political / country flags over the HQ's these days really are more representative of the system of management / corporate culture than anything else as a result.

Instead of taking a more nuanced view, when most people say "buy American cars" what they REALLY mean is "buy a car assembled by a UAW worker in a legacy midwest plant with an American corporation's logo on the side" -- simplistic and wrong.]]> Thu, 03 Sep 2009 12:21:12 -0400
There are Toyotas that by most reasonable definitions (% of parts content, % of labor content) are more American than some "American" cars.

The political / country flags over the HQ's these days really are more representative of the system of management / corporate culture than anything else as a result.

Instead of taking a more nuanced view, when most people say "buy American cars" what they REALLY mean is "buy a car assembled by a UAW worker in a legacy midwest plant with an American corporation's logo on the side" -- simplistic and wrong.]]> http://seekingalpha.com/article/158844-four-reasons-we-re-headed-even-higher?source=feed#comment-651166 651166
What good is a few billion on the top of the captial structure in equity warrants and dividends when tens and tens of billions just might be leaking out the bottom?

Until the government has FULLY exited these financial positions, and it is made very clear that they won't intervene this way again, then none of the bailed-out financials' valuations (equity or debt) can really be trusted, because they have printing press value built into them.

It astonishes me how many commentators (including the author) miss this fundamental point.]]> Fri, 28 Aug 2009 13:15:21 -0400
What good is a few billion on the top of the captial structure in equity warrants and dividends when tens and tens of billions just might be leaking out the bottom?

Until the government has FULLY exited these financial positions, and it is made very clear that they won't intervene this way again, then none of the bailed-out financials' valuations (equity or debt) can really be trusted, because they have printing press value built into them.

It astonishes me how many commentators (including the author) miss this fundamental point.]]> http://seekingalpha.com/news/market_currents/post/31270?source=feed#comment-646477 646477
"...ummmm..."

"...the US government."]]> Tue, 25 Aug 2009 21:25:03 -0400
"...ummmm..."

"...the US government."]]> http://seekingalpha.com/news/market_currents/post/31271?source=feed#comment-646462 646462 Tue, 25 Aug 2009 21:19:42 -0400 http://seekingalpha.com/article/156952-credit-card-delinquency-wave-reaching-tidal-force?source=feed#comment-636043 636043
The FBI last year received 65,000 cases of mortgage fraud, and was staffed with only 150 agents to deal with them. This is per an interview with William K. Black (here: www.ritholtz.com/blog/.../). And those cases are only against the 20% of mortgage originators above the waterline who were regulated. That was on the borrower side. On the lender side we had Countrywide et al.

We have seen the same thing in hedge funds with the collapse of Madoff, Stanford, and a few others.

Every credit bubble reveals massive fraud when it deflates, in a very predictable pattern (see: Kindleberger's classic book on the subject).

I doubt credit cards will be any different. Place your bets!]]> Wed, 19 Aug 2009 05:59:16 -0400
The FBI last year received 65,000 cases of mortgage fraud, and was staffed with only 150 agents to deal with them. This is per an interview with William K. Black (here: www.ritholtz.com/blog/.../). And those cases are only against the 20% of mortgage originators above the waterline who were regulated. That was on the borrower side. On the lender side we had Countrywide et al.

We have seen the same thing in hedge funds with the collapse of Madoff, Stanford, and a few others.

Every credit bubble reveals massive fraud when it deflates, in a very predictable pattern (see: Kindleberger's classic book on the subject).

I doubt credit cards will be any different. Place your bets!]]> http://seekingalpha.com/news/market_currents/post/30617?source=feed#comment-631559 631559 Sun, 16 Aug 2009 09:25:55 -0400 http://seekingalpha.com/article/155151-monetizing-the-debt-open-market-operations-and-statistics?source=feed#comment-624728 624728 > Correct me if I'm wrong, but the bottom line is that the
> Treasury is selling bonds at auction week after week at an
> unprecedented rate, and the demand for this debt is weak,
> forcing the Fed or its proxies to buy it, in effect, allowing the
> Treasury to take in money being electronically created by the Fed.

This is correct. In case the other comments haven't made it clear, the transaction is akin to a proxy purchase like you mentioned. The implication of the article are that the mechanics go like this: The Fed, knowing that an auction of treasury securities is about to go badly, approaches a direct dealer and gives the wink and the nod of "hey, you buy this and hold onto it for a week or two, and I'll promise to repurchase it from you afterwards for the same price [or a fraction of a point higher]." The reason they'd do this is that a failed auction, or one in which the Fed directly purchased a lot of treasuries would set off many alarm bells.

It would be exactly like a single bidder bidding on a disturbingly high number of pieces of art at a Sotheby's auction. Perception would rightly be that the auction was failing, and that there wasn't really broad and deep demand, so maybe the asset prices weren't exactly accurate. Instead, Sotheby's and the bidder would be in cahoots, with the single bidder approach several other art dealers in the room and saying "hey bid $10 million on Painting X and I will buy it from you in the back alley for $10.1 million next week."

What you would see if you looked at the auction data is lots of broad demand among the "primary dealers" (here, art dealers). But if you looked at everyone's warehouse you'd see a disproportionate of the paintings all winding up in one warehouse -- that of the single bidder. Or in this case, the balance sheet of the Fed.

The practice isn't illegal per se, but it looks bad when the single big bidder (Fed) tells everyone "we aren't buying all the treasuries and monetizing the debt, the auctions are going fine" when in fact the auctions are clearly turning into a sham like the above example.

Except in this case the Fed is basically printing money along the way (like a single art auction bidder using counterfeit money that he launders into the art market via the after-auction back alley purchases outlined above).

The net effect in the above example is that $10.1 million of money is created by the Fed, of which $10 million winds up at the Treasury (and for which the American taxpayer is ultimately liable, plus interest), and the middleman art dealer winds up with $100K ($10.1 - 10.0 million) as a thank you for his participation in the scam.

The net result of this should be that credible third party buyers (i.e. the Chinese) start to drop out of the market, or another possibility is that it's a response to the fact that they've dropped out already.]]> Tue, 11 Aug 2009 10:15:25 -0400 > Correct me if I'm wrong, but the bottom line is that the
> Treasury is selling bonds at auction week after week at an
> unprecedented rate, and the demand for this debt is weak,
> forcing the Fed or its proxies to buy it, in effect, allowing the
> Treasury to take in money being electronically created by the Fed.

This is correct. In case the other comments haven't made it clear, the transaction is akin to a proxy purchase like you mentioned. The implication of the article are that the mechanics go like this: The Fed, knowing that an auction of treasury securities is about to go badly, approaches a direct dealer and gives the wink and the nod of "hey, you buy this and hold onto it for a week or two, and I'll promise to repurchase it from you afterwards for the same price [or a fraction of a point higher]." The reason they'd do this is that a failed auction, or one in which the Fed directly purchased a lot of treasuries would set off many alarm bells.

It would be exactly like a single bidder bidding on a disturbingly high number of pieces of art at a Sotheby's auction. Perception would rightly be that the auction was failing, and that there wasn't really broad and deep demand, so maybe the asset prices weren't exactly accurate. Instead, Sotheby's and the bidder would be in cahoots, with the single bidder approach several other art dealers in the room and saying "hey bid $10 million on Painting X and I will buy it from you in the back alley for $10.1 million next week."

What you would see if you looked at the auction data is lots of broad demand among the "primary dealers" (here, art dealers). But if you looked at everyone's warehouse you'd see a disproportionate of the paintings all winding up in one warehouse -- that of the single bidder. Or in this case, the balance sheet of the Fed.

The practice isn't illegal per se, but it looks bad when the single big bidder (Fed) tells everyone "we aren't buying all the treasuries and monetizing the debt, the auctions are going fine" when in fact the auctions are clearly turning into a sham like the above example.

Except in this case the Fed is basically printing money along the way (like a single art auction bidder using counterfeit money that he launders into the art market via the after-auction back alley purchases outlined above).

The net effect in the above example is that $10.1 million of money is created by the Fed, of which $10 million winds up at the Treasury (and for which the American taxpayer is ultimately liable, plus interest), and the middleman art dealer winds up with $100K ($10.1 - 10.0 million) as a thank you for his participation in the scam.

The net result of this should be that credible third party buyers (i.e. the Chinese) start to drop out of the market, or another possibility is that it's a response to the fact that they've dropped out already.]]> http://seekingalpha.com/news/market_currents/post/30110?source=feed#comment-619853 619853 Fri, 07 Aug 2009 11:54:34 -0400 http://seekingalpha.com/news/market_currents/post/30062?source=feed#comment-619110 619110
If one of the nation's largest companies, its supposed shining light upon the hill, is let off with a tiny slap on the wrist for violating a law specifically designed to punish fraudulent financial reporting -- then who the hell will be stupid enough to comply with it now? Smaller companies? Those who don't make large enough campaign contributions?]]> Fri, 07 Aug 2009 00:16:45 -0400
If one of the nation's largest companies, its supposed shining light upon the hill, is let off with a tiny slap on the wrist for violating a law specifically designed to punish fraudulent financial reporting -- then who the hell will be stupid enough to comply with it now? Smaller companies? Those who don't make large enough campaign contributions?]]> http://seekingalpha.com/article/153692-personal-income-and-savings-the-double-whammy?source=feed#comment-617446 617446 Thu, 06 Aug 2009 02:01:13 -0400 http://seekingalpha.com/news/market_currents/post/29507?source=feed#comment-609956 609956 Fri, 31 Jul 2009 13:32:37 -0400 http://seekingalpha.com/article/152557-cnbc-viewership-down-28?source=feed#comment-609259 609259
As for the broader ratings, they could just be cyclically negative (or have lost their one-time doomsday pop), since the equity markets have been up so sharply lately. Sort of like how the Weather Channel loves a good hurricane?]]> Fri, 31 Jul 2009 00:03:50 -0400
As for the broader ratings, they could just be cyclically negative (or have lost their one-time doomsday pop), since the equity markets have been up so sharply lately. Sort of like how the Weather Channel loves a good hurricane?]]> http://seekingalpha.com/article/151842-leveraged-etf-ban-spreading-like-the-flu?source=feed#comment-609250 609250
Leveraged ETFs re-lever every day, and so will have a natural drift away from the underlying based on its volatility

Volatility isn't the only concern, it's also the sequence in which it's achieved -- leveraged ETFs have a high degree of path-dependence.

Those two things make leveraged ETFs like nitroglycerine for the types of buy-and-hold fee-generating cattle that the big brokerages like to corral.

Therefore, they are unsurprisingly banning them.

Here's a good read on the details of levered ETFs and their path dependent option value: www.scribd.com/doc/144...]]> Thu, 30 Jul 2009 23:53:12 -0400
Leveraged ETFs re-lever every day, and so will have a natural drift away from the underlying based on its volatility

Volatility isn't the only concern, it's also the sequence in which it's achieved -- leveraged ETFs have a high degree of path-dependence.

Those two things make leveraged ETFs like nitroglycerine for the types of buy-and-hold fee-generating cattle that the big brokerages like to corral.

Therefore, they are unsurprisingly banning them.

Here's a good read on the details of levered ETFs and their path dependent option value: www.scribd.com/doc/144...]]> http://seekingalpha.com/news/market_currents/post/29281?source=feed#comment-607467 607467
This is akin to saying it is now up to cheated marks in a rigged poker game to be as inventive as the crooked host who marked the playing cards and figure out a way not to get gamed (while continuing to play with the same marked deck).]]> Wed, 29 Jul 2009 23:13:10 -0400
This is akin to saying it is now up to cheated marks in a rigged poker game to be as inventive as the crooked host who marked the playing cards and figure out a way not to get gamed (while continuing to play with the same marked deck).]]> http://seekingalpha.com/article/152117-is-the-fed-losing-the-mortgage-rate-battle?source=feed#comment-606390 606390 Wed, 29 Jul 2009 09:22:00 -0400 http://seekingalpha.com/news/market_currents/post/28560?source=feed#comment-598194 598194 Wed, 22 Jul 2009 12:43:07 -0400 http://seekingalpha.com/article/148397-the-time-has-come-to-regulate-search-engine-marketing-and-seo?source=feed#comment-586442 586442
If, however, such a business cannot cost effectively and profitably generate awareness and sales through other means, then its owner/operator will learn a valuable and possibly expensive lesson about building a business that depends upon the kindness of strangers.]]> Mon, 13 Jul 2009 17:12:10 -0400
If, however, such a business cannot cost effectively and profitably generate awareness and sales through other means, then its owner/operator will learn a valuable and possibly expensive lesson about building a business that depends upon the kindness of strangers.]]> http://seekingalpha.com/article/146503-balancing-california-s-budget-the-home-game?source=feed#comment-571081 571081 Thu, 02 Jul 2009 04:22:55 -0400 http://seekingalpha.com/article/145984-how-to-sell-tarp-warrants?source=feed#comment-567963 567963
> My thoughts exactly. If we are to maintain investor confidence by
> backing them up with taxpayer money, then it would be ridiculous
> not to act like normal investors when it comes to unwinding the rescue
> funds.

You seem to be operating under the misguided perception that the actual intent of the government is to act like an investor. Actions certainly speak louder than words in this case. Sweetheart deals for the warrants are just [yet another] way to inject more capital from the public purse into private banks, turning private debts public.

Just add the mis-priced warrants to the growing laundry list, which includes TARP, TALF, the PPIP (does that exist any more?), the AIG bailout... all are designed to appropriate massive amounts of money to swap private debt for public debt with minimal involvement by the citizenry, even by their corrupt elected representatives.

Argentina did a big private / public debt swap not so long ago... it didn't work out too well for them.]]> Tue, 30 Jun 2009 03:13:28 -0400
> My thoughts exactly. If we are to maintain investor confidence by
> backing them up with taxpayer money, then it would be ridiculous
> not to act like normal investors when it comes to unwinding the rescue
> funds.

You seem to be operating under the misguided perception that the actual intent of the government is to act like an investor. Actions certainly speak louder than words in this case. Sweetheart deals for the warrants are just [yet another] way to inject more capital from the public purse into private banks, turning private debts public.

Just add the mis-priced warrants to the growing laundry list, which includes TARP, TALF, the PPIP (does that exist any more?), the AIG bailout... all are designed to appropriate massive amounts of money to swap private debt for public debt with minimal involvement by the citizenry, even by their corrupt elected representatives.

Argentina did a big private / public debt swap not so long ago... it didn't work out too well for them.]]> http://seekingalpha.com/article/143462-strange-inconsistencies-in-the-134-5-billion-bearer-bond-mystery?source=feed#comment-548953 548953
Though it is disturbing that the US currency and government programs could become the subject of common scams that used to always be associated with Nigeria.]]> Tue, 16 Jun 2009 13:52:19 -0400
Though it is disturbing that the US currency and government programs could become the subject of common scams that used to always be associated with Nigeria.]]> http://seekingalpha.com/news/market_currents/post/25366?source=feed#comment-530059 530059
Yet they can't avoid the same temptation to ignore reality that all successful companies fall prey to when they face situations straight out of Christensen's _The Innovator's Dilemma_.

I believe Gates understood this conundrum and got out while the getting was good. It is clear that Ballmer remains delusional.]]> Wed, 03 Jun 2009 11:52:40 -0400
Yet they can't avoid the same temptation to ignore reality that all successful companies fall prey to when they face situations straight out of Christensen's _The Innovator's Dilemma_.

I believe Gates understood this conundrum and got out while the getting was good. It is clear that Ballmer remains delusional.]]> http://seekingalpha.com/news/market_currents/post/25368?source=feed#comment-529966 529966
Date Total Fed Fed %
5/6/2009 37,983 6,948 18%
5/11/2009 10,426 3,510 34%
5/12/2009 22,857 6,007 26%
5/14/2009 27,086 2,975 11%
5/18/2009 15,217 3,180 21%
5/20/2009 37,181 7,699 21%
5/21/2009 45,694 7,398 16%
5/26/2009 8,523 1,550 18%
5/27/2009 18,819 6,000 32%
6/3/2009 21,114 7,500 36%

It's a fairly short series, but the short-term trend is there and not encouraging.]]> Wed, 03 Jun 2009 11:36:09 -0400
Date Total Fed Fed %
5/6/2009 37,983 6,948 18%
5/11/2009 10,426 3,510 34%
5/12/2009 22,857 6,007 26%
5/14/2009 27,086 2,975 11%
5/18/2009 15,217 3,180 21%
5/20/2009 37,181 7,699 21%
5/21/2009 45,694 7,398 16%
5/26/2009 8,523 1,550 18%
5/27/2009 18,819 6,000 32%
6/3/2009 21,114 7,500 36%

It's a fairly short series, but the short-term trend is there and not encouraging.]]> http://seekingalpha.com/article/133178-the-stress-test-cliff-notes?source=feed#comment-479126 479126
I'm not sure where they'll find the next set of suckers though, as they've already burned pension funds, hedge funds, sovereign wealth funds from Dubai to Singapore... when will these guys realize their game is over and there aren't any suckers left?]]> Mon, 27 Apr 2009 11:01:01 -0400
I'm not sure where they'll find the next set of suckers though, as they've already burned pension funds, hedge funds, sovereign wealth funds from Dubai to Singapore... when will these guys realize their game is over and there aren't any suckers left?]]> http://seekingalpha.com/article/128974-what-hancock-tower-sale-means-for-commercial-real-estate-morgan-stanley?source=feed#comment-448796 448796
What loan amount at today's interest rates would have the same cash flows as the existing loan that was assumed with its terms?

Meaning, if existing loan is $640.5 @ 5.6%, then to make the same payment if you had to borrow new money in today's market, Morgan Stanley's assumptions lead to the conclusion that for the same monthly mortgage payment/cash flow, you'd actually borrow about $190 million less!

Imagine buying a car and taking over payments from someone on an existing 0% financing deal. that existing financing has some value (and will be reflected in what a seller can get for Car A, versus Car B which you have to borrow money at say 6% to finance). The difference between the two is the value baked into the financing structure. In the case of this building, MS calculates it at $190 Million.

What's interesting is that I think the buyers originally started purchasing deeply discounted mezzanine debt on the original deal, which may have given them some rights and preferences not available to others in the auction process? Does anyone out there know if this is true? If so, then they will have paid less than the "market" price because the market would have been artificially restricted in size by their control/position in the existing mezzanine debt, which if true means the building's purchasers may have just pulled off a great distressed debt deal.]]> Thu, 02 Apr 2009 01:41:26 -0400
What loan amount at today's interest rates would have the same cash flows as the existing loan that was assumed with its terms?

Meaning, if existing loan is $640.5 @ 5.6%, then to make the same payment if you had to borrow new money in today's market, Morgan Stanley's assumptions lead to the conclusion that for the same monthly mortgage payment/cash flow, you'd actually borrow about $190 million less!

Imagine buying a car and taking over payments from someone on an existing 0% financing deal. that existing financing has some value (and will be reflected in what a seller can get for Car A, versus Car B which you have to borrow money at say 6% to finance). The difference between the two is the value baked into the financing structure. In the case of this building, MS calculates it at $190 Million.

What's interesting is that I think the buyers originally started purchasing deeply discounted mezzanine debt on the original deal, which may have given them some rights and preferences not available to others in the auction process? Does anyone out there know if this is true? If so, then they will have paid less than the "market" price because the market would have been artificially restricted in size by their control/position in the existing mezzanine debt, which if true means the building's purchasers may have just pulled off a great distressed debt deal.]]> http://seekingalpha.com/article/128682-interesting-times-for-cisco-shares-cheap-below-20?source=feed#comment-447523 447523 Wed, 01 Apr 2009 03:18:31 -0400 http://seekingalpha.com/article/127145-how-will-the-geithner-plan-for-banks-ever-get-approved?source=feed#comment-436212 436212
We'll trade $3 million, the taxpayers will front us each $97 million, and voila! we each get $97 million of new capital from the taxpayers for nothing!

Yes, yes I know that all sounds too obvious and would provoke public outrage. This is why we'll establish subsidiaries with obscure names to do the trading! That is if our inscrutable internal hedge funds or off-balance sheet entities aren't already holding them.

What do you say?"

People, you KNOW this is coming...

On Mar 22 07:48 AM User 143167 wrote:

> If I am an CEO of a bank riddled with toxic assets, I will participate
> this problem so that I can use 3% of the money to buy off 100% of
> these assets at its face value. I don't even care if I lose all the
> 3% in the investment. At least, I will get 97% value back and dump
> all these assets to taxpayers. Great scheme!]]> Mon, 23 Mar 2009 06:25:28 -0400
We'll trade $3 million, the taxpayers will front us each $97 million, and voila! we each get $97 million of new capital from the taxpayers for nothing!

Yes, yes I know that all sounds too obvious and would provoke public outrage. This is why we'll establish subsidiaries with obscure names to do the trading! That is if our inscrutable internal hedge funds or off-balance sheet entities aren't already holding them.

What do you say?"

People, you KNOW this is coming...

On Mar 22 07:48 AM User 143167 wrote:

> If I am an CEO of a bank riddled with toxic assets, I will participate
> this problem so that I can use 3% of the money to buy off 100% of
> these assets at its face value. I don't even care if I lose all the
> 3% in the investment. At least, I will get 97% value back and dump
> all these assets to taxpayers. Great scheme!]]> http://seekingalpha.com/article/68819-next-up-lehman-brothers?source=feed#comment-127705 127705
In fact, using public equity share price as a risk indicator is pretty much an admission that investment bank stocks move due to asymmetries of material non-public information -- that is to say, insider trading.]]> Mon, 17 Mar 2008 12:40:13 -0400
In fact, using public equity share price as a risk indicator is pretty much an admission that investment bank stocks move due to asymmetries of material non-public information -- that is to say, insider trading.]]> http://seekingalpha.com/article/67428-will-bofa-really-buy-countrywide?source=feed#comment-123070 123070
I see the current deal on the table as just a call option for BAC, since it will have/has had a serious chilling effect on any other potential bidders.

Why would the deal just be a call option and not binding? Here, I assume that Countrywide's financial position will only continue to deteriorate, that the quality of its portfolio held-for-sale will only decline, and thus a Material Adverse Change to CFC is pretty much inevitable.

BAC will have front row seats, have done their diligence, and be in the driver's seat when this turns into a pre-packaged bankruptcy with BAC walking away with the servicing business.

Just a theory. Not one I believe in strong enough to hold onto my CFC puts, though. I sold those last month.]]> Thu, 06 Mar 2008 12:52:21 -0500
I see the current deal on the table as just a call option for BAC, since it will have/has had a serious chilling effect on any other potential bidders.

Why would the deal just be a call option and not binding? Here, I assume that Countrywide's financial position will only continue to deteriorate, that the quality of its portfolio held-for-sale will only decline, and thus a Material Adverse Change to CFC is pretty much inevitable.

BAC will have front row seats, have done their diligence, and be in the driver's seat when this turns into a pre-packaged bankruptcy with BAC walking away with the servicing business.

Just a theory. Not one I believe in strong enough to hold onto my CFC puts, though. I sold those last month.]]>