InnocentsAbroad

Restoring Balance to the Economy

I think that the basic issue of regulation is the prominent and salient one here. Regulation allows markets to work. Currency is not issued by markets. It is issued by sovereigns. Banks function as natural arms of government. If banks are allowed to set their own pace and regulations, they become an unhinged portion of the economy. Ronald Reagan played little role in creating the disaster -- the wealthy and powerful who put him there did.

No point in changing the taxation rates. Just don't transfer them more income. The broken banks are not in receivership because of hidden contracts and transactions that even now cannot be made public. Obama is in a bind. Can he really open up to the public on the secret gutting of the American economy, which occurred just so a few pennies could be wrung out of the megabanks' operations ? This is not so much an economic reckoning as it is a coming political reckoning. Once the American public truly understands what has transpired, Obama will appear to all as he is, a crafty and careful traditional conservative in the guise of a liberal crusader. I suspect the mantle of power may shift beyond his grasp, even before he realizes it is happening.

Why the Market May Hang On by Its Fingernails

I would like to suggest we are not looking at an economic process or a market process but rather a political phenomenon.

As Washington comes around to the idea of conservative and realistic banking (and financial regulation), practitioners of of financial sleight of hand will (I hope) be driven from the marketplace.

This, of course, depends on decisive judicial, regulatory, and executive action. Of real interest, is that the courts and the FBI have been perfectly willing to follow through with executive leads. So, to a large extent, we are just waiting on the leaning curve in the White House and Congress.

I suspect that Obama really does want to provide leadership -- and he has as good a chance as anyone, at doing so.

Richard Deaves on the Bear Market

A nice reminder to diversify.

The professor might also add some suggestions on what used to be called dollar cost averaging.

In general, I don't see much discussion about how to pick multiple points over time to invest. A difficult subject, even for experts.

Is Government Part of the Problem or the Solution?

OK. So -- the banking crisis is due to over - conservative accounting. Yes.

Not to leverage. Not to incompetence. Not to poor management structures. And not to just plain old bad business models.

Just mean old hard nosed conservative accounting. Good. We can solve everything -- just get some new accountants. There are a bunch now freed up from recent employment in the Bernie Maddoff branches of UnoCredit and Banco Santander. We can import them at extra low cost - problem solved.

About Insurance and Other Antitoxins for Toxic Assets

Incredible. The establishment is still talking about these banks as if they are not currently insolvent. Kind of like the U.S. government feels it has to prop up something that has no more economic wherewithal than the Standord International Bank.

OK. The big banks are Ponzi schemes. What do you do with Ponzi schemes ? Put all of the assets into receivership. Creditors eventually get something. And the ecohomy moves on.

Is there a reason that Citibank and Bank of America's contractual parntners should be subsidized by the taxpayer, and those of Bernie Maddoff should not ?

In other words. what is the reason for a special case of transferring wealth from the general public to a self selected group of ultra wealthy families that have little tolerance for becoming just a little poorer ?

The toxic asset problem is a problem only if you own it, and originally thought it was worth something. Why are the problems of Citibank's parnters the same as the problems of the general public. More importantly, why is there not a more to the point discussion of how our government can be subverted and used by a tiny minority of the wealthy to prop up their own power and wealth ?

Why Bank Nationalization Will Never Happen

Please -- Barney Frank may be a corrupt idiot, but that doesn't mean he is the root of the problem.

You might do better to review the history of financial regulation beginning with Ronald Reagan. This is ultimately the return to roost of an ideology that the financial markets needs no regulation.

Ronald Reagan and his heirs paved the way for the whole range of financial re - engineering that made the current collapse possible.

Why Bank Nationalization Will Never Happen

Umm. Sorry Mr. Sage. Happy Days are not right around the corner. The money center banks and their various partners and creditors are doing everything possible to give the taxpayer the tab.

No level of transparency is going to occur prior to that, simply because it doesn't look good politically to transfer money from the ultra poor (the tax paying public) to the ultra rick (the bank owners and debtors).

In factor, I will be very surprised the day some basic accounting transparency regarding the money center banks occurs.

By the way, please don't use terms that have no meaning. "Nationalization" is a term of rhetoric, not economics. Do you mean purchase ? Or condemnation ? Or forced receivership ? Or expropriation ? I really like Seeking Alpha, but gosh, a whole lot of articles here appear to be written by 3rd graders.

(sorry, just my opinion)

Banks: Some Thoughts on Stress Testing, Regulation and Failures

As I think I'll try to point out elsewhere, the question is not whether the banks fail, but how their state of bankruptcy is managed.

Proposing a US government purchase of the banks is a fool's errand -- they have no equity (or negative equity, if you will) - there is no equity there to purchase.

Long term senior debt is an entirely different issue, but if one were to propose the Federal gov. to purchase the senior debt at market, the current holders, and much more important, contractual counter-parties would have a fit.

It simply is not going to happen. Contractual partners to the banks, and their debt holders represent the most political powerful constituencies in our country.

Instead, what is vastly more likely to happen is what has occurred already - debt guarantees, asset guarantees, prefereds, warrants, and equity purchased at a 40 % premium, and assets purchased at a premium.

The end point will be a purchase of majority equity at a premium, at which point the US taxpayer becomes liable for all the contracts and debt of the bankrupt banks. Thereby fully and wholly solving the problem of the contractual counter-parties and the senior debt holders.

I'd certainly be interested in any different prediction as to the outcome. It is probably best, from an investing standpoint, to recognize that very little truly helpful for the real economy is going to occur.

Stanford Financial Is Next Hedge Fund Investigated

How is that they were able to advertise on CNBC ? Doesn't CNBC have any due diligence on who they allow to advertise ?

In my own modest experience, I find the business TV shows to be pretty unnervingly deceptive. Usually I get the feeling I'm watching an informmercial (such as for Bassomatic clones).

What's Going On at Stanford International Bank?

Nice article. And very public minded. I feel sorry for the poor investors in Venezuela and elsewhere. And I do think that Chavez is in no small measure to blame.

However, no one should think he US is not free of similar frauds. Many investors get caught with CDs in failed banks here, above the FDIC limits.

There is a real need to talk more about regulation as if it is a real and vital part of the financial economy. I think in my future comments, I'll be doing that to a larger extent.

JPMorgan Chase: Poisoned by Bear's 5,000 Counterparties

Wow. Very interesting observation on a member of the general public's experience with JPM as a service provider.

My general take (and I greatly appreciate Mr. Saxena's nice article), is that the problem is not only one of disclosure, but also one of the moral capacity to carry out fiduciary duty -- whether at the Fed, the Treasury, the FDIC, or the SEC.

Suspect when all is said and done we are looking at more of a systemic moral failure, rather than just a cyclical political economy problem.

On top of that, malfeasance, either in government or in the government sponsored private banks, seems to not only be endemic, but also as a general rule unpunished.

My continued reading of the core problem facing the economy today makes the US economy not dissimilar to that of the Russian Republic, or of communist China. The cycles of behavior of the wealthy and powerful appear to be more that of a corrupt plutocracy, rather than that of a republic.

Margin Debt May Indicate Buying Opportunity

Just on the basis of this article, I am subscribing to Mr. Karsan's articles. Nice summary of the role of credit in equity purchases, which to me, seems a core force in the larger equity market. Even if margin debt is only a proxy for leveraged purchases of equity, I plan to see where Mr. Karsan takes his analysis over the next 6 - 24 months.

Citigroup on the Brink, Despite Government Rescue

Uhh. I think the drunken monkey is the American moneyed class, which, in a short period of 8 years, has managed to have its nominee decision maker destroy not only our economy, but approaching destruction of the economy of our trading partners.

Just because the US government is attempting to cover up the levels of disaster wrought by Bush's money center friends, doesn't mean the abyss is not there. None of the money center institutions are revealing the actual nature of their off balance sheet assets.

It seems only reasonable to make an estimate. That our estimates are off, is not an indication of a poor estimation problem, but the depth of the hidden corruption our country faces in form of the economic remnants of the Bush years.

Occidental Petroleum: Stock Price Doesn't Reflect Company's Real Value

But the article's point is well taken. Reserves are now undervalued. I do not think that the Obama Administration is going to tax carbon. Global warming is here, it is with us, and the US public is as indifferent to it as it is to any salient global issue. US autos rule the universe. Which means oil rules everything. Occidental is a good buy if they are competently run (I don't know enough about the company to answer that).

Occidental Petroleum: Stock Price Doesn't Reflect Company's Real Value

Yep -- a typo there. But the other issue is what is meant by control. Control could mean ownership, or partnership, or land lease, or a contract with a sovereign government. All constitute differing levels of risk.