Ronald Pires's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/174829/comments http://seekingalpha.com/article/133345-john-hussman-it-s-not-over-yet?source=feed#comment-483395 483395 Wed, 29 Apr 2009 21:29:39 -0400 http://seekingalpha.com/article/132888-bank-of-america-bombshell-illustrates-why-government-shouldn-t-be-in-free-markets?source=feed#comment-475817 475817
Sorry, but the "government doesn't belong" argument is a bit rediculous at this point. These companies all killed themselves quite nicely well before USam waddled its clumsy hands into the picture.]]> Fri, 24 Apr 2009 11:33:15 -0400
Sorry, but the "government doesn't belong" argument is a bit rediculous at this point. These companies all killed themselves quite nicely well before USam waddled its clumsy hands into the picture.]]> http://seekingalpha.com/article/130079-will-the-ppip-bankrupt-the-fdic?source=feed#comment-457130 457130
Bair is telling the truth, except that we are not doing the same "net" calculation that she is. If the net calculation is actually the difference between this program and putting these banks into receivership, then yes, of course there is "no net loss".

See? It's all in how you define your terms.]]> Thu, 09 Apr 2009 00:30:21 -0400
Bair is telling the truth, except that we are not doing the same "net" calculation that she is. If the net calculation is actually the difference between this program and putting these banks into receivership, then yes, of course there is "no net loss".

See? It's all in how you define your terms.]]> http://seekingalpha.com/article/128950-open-letter-to-fdic-please-no-legacy-loans?source=feed#comment-449851 449851
But let's extend all of this out into one possible future, which I find horrifying. The FDIC becomes insolvent, and asks Congress for additional funding. Congress's hand are tied. They know if they refuse, the largest global bank run in history begins, and the global economy collapses. So they vote the funds.

At this point, China balks. It is one thing, they say, for the US to sell its own future down the river, but now they are selling China's future also, and that can no longer be accepted. The dollar crashes, and with no immediate reserve currency to replace it, international settlements grind to a screaching halt along with trade.

Welcome to the new Dark Ages.

No wonder Mr. Geithner's answer to Rep Gresham Barrett's question, "What's the backup plan?" He didn't have one ... because there isn't any.]]> Thu, 02 Apr 2009 15:32:11 -0400
But let's extend all of this out into one possible future, which I find horrifying. The FDIC becomes insolvent, and asks Congress for additional funding. Congress's hand are tied. They know if they refuse, the largest global bank run in history begins, and the global economy collapses. So they vote the funds.

At this point, China balks. It is one thing, they say, for the US to sell its own future down the river, but now they are selling China's future also, and that can no longer be accepted. The dollar crashes, and with no immediate reserve currency to replace it, international settlements grind to a screaching halt along with trade.

Welcome to the new Dark Ages.

No wonder Mr. Geithner's answer to Rep Gresham Barrett's question, "What's the backup plan?" He didn't have one ... because there isn't any.]]> http://seekingalpha.com/article/129101-what-consequence-will-fasb-s-expected-approval-have-on-mark-to-market-accounting?source=feed#comment-449691 449691
Of course, honest bankers would never do this.]]> Thu, 02 Apr 2009 14:18:40 -0400
Of course, honest bankers would never do this.]]> http://seekingalpha.com/article/128802-fair-value-accounting-instills-exactly-the-wrong-mindset-in-bankers?source=feed#comment-448548 448548 Wed, 01 Apr 2009 18:53:09 -0400 http://seekingalpha.com/article/128512-john-hussman-the-danger-of-inaction?source=feed#comment-447261 447261
You make one point in particular that I've long believed but have not really seen written up elsewhere. That is, that the effort to save banks is misguided, and instead should be to identify and save critical investments (such as pension funds) within those banks. Certainly far less money, and much better directed towards general economic stability.]]> Tue, 31 Mar 2009 20:38:27 -0400
You make one point in particular that I've long believed but have not really seen written up elsewhere. That is, that the effort to save banks is misguided, and instead should be to identify and save critical investments (such as pension funds) within those banks. Certainly far less money, and much better directed towards general economic stability.]]> http://seekingalpha.com/article/128390-exclusive-big-banks-recent-profitability-due-to-aig-scam?source=feed#comment-445794 445794 Mon, 30 Mar 2009 20:25:52 -0400 http://seekingalpha.com/article/127567-a-look-at-a-world-with-90-tax-rates?source=feed#comment-440134 440134 Wed, 25 Mar 2009 16:13:48 -0400 http://seekingalpha.com/article/117312-derivatives-and-bank-collapse-the-scam-that-went-largely-unreported?source=feed#comment-372838 372838
www.rgemonitor.com/glo...]]> Sun, 01 Feb 2009 21:35:01 -0500
www.rgemonitor.com/glo...]]> http://seekingalpha.com/article/117350-would-the-new-legislation-kill-the-cds-market?source=feed#comment-372832 372832 Sun, 01 Feb 2009 20:58:35 -0500 http://seekingalpha.com/article/116814-everything-you-ever-wanted-to-know-about-credit-default-swaps-via-rge-monitor?source=feed#comment-368928 368928 Wed, 28 Jan 2009 14:00:45 -0500 http://seekingalpha.com/article/110675-florida-s-health-insurance-deception?source=feed#comment-330261 330261
My worry now is that state agencies currently providing health access for Florida's poor will not start redirecting "qualified buyers" to these new plans. People will die if they do.]]> Mon, 15 Dec 2008 15:52:19 -0500
My worry now is that state agencies currently providing health access for Florida's poor will not start redirecting "qualified buyers" to these new plans. People will die if they do.]]> http://seekingalpha.com/article/109456-origins-of-the-economic-crisis-in-one-chart?source=feed#comment-323330 323330
First, predatory lending is not complex. It is simply loansharking dressed up with a storefront. As we have learned from (the now shunned) Eliot Spitzer, the states were quite well aware of these abuses, but were barred federally from acting. Embarassing, but hardly complex.

Second, CDOs are not complex. They are merely insurance policies written (like all others) on assets. The only difference is that they were (again federally) barred from the oversight routine to other insurance products. Because of this, several mistakes were made and went unaddressed:

1) Inadequate reserves were kept to pay for future claims. This was not due to complexity however, but rather to the fact that there was insufficient experience data available from which to properly develop this component of their rates. As we have learned from Eliot Smith (Bloomberg News), this was a known fact when these rates were developed, and conscious decisions were made at the highest levels to ignore this problem. Again, not complex. Merely embarassing.

2) Thrid party policies were not only allowed but were written with abandon. (A third party policy, an insurance no-no, occurs when the purchaser of insurance does not own the underlying insured asset. These are shunned by insurance companies because they involve anti-selection, an anathema to all serious underwriters.) There is nothing complex about this either; it was a lack of insurance knowledge coupled with simple greed.

Otherwise, a good chart which I will keep handy.]]> Sun, 07 Dec 2008 18:45:19 -0500
First, predatory lending is not complex. It is simply loansharking dressed up with a storefront. As we have learned from (the now shunned) Eliot Spitzer, the states were quite well aware of these abuses, but were barred federally from acting. Embarassing, but hardly complex.

Second, CDOs are not complex. They are merely insurance policies written (like all others) on assets. The only difference is that they were (again federally) barred from the oversight routine to other insurance products. Because of this, several mistakes were made and went unaddressed:

1) Inadequate reserves were kept to pay for future claims. This was not due to complexity however, but rather to the fact that there was insufficient experience data available from which to properly develop this component of their rates. As we have learned from Eliot Smith (Bloomberg News), this was a known fact when these rates were developed, and conscious decisions were made at the highest levels to ignore this problem. Again, not complex. Merely embarassing.

2) Thrid party policies were not only allowed but were written with abandon. (A third party policy, an insurance no-no, occurs when the purchaser of insurance does not own the underlying insured asset. These are shunned by insurance companies because they involve anti-selection, an anathema to all serious underwriters.) There is nothing complex about this either; it was a lack of insurance knowledge coupled with simple greed.

Otherwise, a good chart which I will keep handy.]]> http://seekingalpha.com/article/107836-ten-reasons-to-hate-mortgage-modifications?source=feed#comment-314972 314972
Of course, a simlar list can easily be made for why they should be done, but I guess that's why "the powers" have not yet set a clear direction on this.]]> Tue, 25 Nov 2008 16:23:21 -0500
Of course, a simlar list can easily be made for why they should be done, but I guess that's why "the powers" have not yet set a clear direction on this.]]> http://seekingalpha.com/article/107421-reflation-is-the-only-option?source=feed#comment-314341 314341
"Of course retirees ... get screwed but we have no other viable alternatives ..."

Retirees happen to vote in far greater percentages than all other groups. Screw them out of their money, and they will still do so, only they will get VERY ugly. No one in DC is unaware of this.

I'll bet you thought they were going to privatize Social Security too.]]> Tue, 25 Nov 2008 02:26:27 -0500
"Of course retirees ... get screwed but we have no other viable alternatives ..."

Retirees happen to vote in far greater percentages than all other groups. Screw them out of their money, and they will still do so, only they will get VERY ugly. No one in DC is unaware of this.

I'll bet you thought they were going to privatize Social Security too.]]> http://seekingalpha.com/article/106825-u-s-economy-no-easy-answers-but-plenty-of-questions?source=feed#comment-310958 310958
Social Security does not even dip into the trust fund until 2017, and the trust fund can continue to make full payments until 2042, dropping slowly after that, but not to less than 70% of full benefits.

That's not insolvency. Unless of course your claim is that the trust fund is not there. Even then, it's not insolvency. Call it what it is: DEFAULT.]]> Thu, 20 Nov 2008 12:53:56 -0500
Social Security does not even dip into the trust fund until 2017, and the trust fund can continue to make full payments until 2042, dropping slowly after that, but not to less than 70% of full benefits.

That's not insolvency. Unless of course your claim is that the trust fund is not there. Even then, it's not insolvency. Call it what it is: DEFAULT.]]> http://seekingalpha.com/article/106904-congress-should-address-capital-gains-and-corporate-taxes-differently?source=feed#comment-310941 310941
Decreasing YOUR taxes may increase YOUR consumption, but it does not change total comsumption. Apart from the creation of new money, only an increase in the velocity of money can do that, and I think most would agree that almost no one spends money faster than the government.]]> Thu, 20 Nov 2008 12:32:49 -0500
Decreasing YOUR taxes may increase YOUR consumption, but it does not change total comsumption. Apart from the creation of new money, only an increase in the velocity of money can do that, and I think most would agree that almost no one spends money faster than the government.]]> http://seekingalpha.com/article/106824-being-wrong-for-five-years-makes-peter-schiff-right-now?source=feed#comment-310790 310790
> Here's a tip. Food Stamps can get 80 cents on the dollar on the black market

What planet are you on? Food stamps only get you 50 cents on the dollar. If you are getting 80, 30 cents of it is charity.]]> Thu, 20 Nov 2008 10:32:56 -0500
> Here's a tip. Food Stamps can get 80 cents on the dollar on the black market

What planet are you on? Food stamps only get you 50 cents on the dollar. If you are getting 80, 30 cents of it is charity.]]> http://seekingalpha.com/article/105469-banks-worried-about-fdic-debt-guarantees?source=feed#comment-304613 304613
How nice. If I didn't know better, I'd be tempted to think thay are rigging the game.]]> Wed, 12 Nov 2008 19:34:19 -0500
How nice. If I didn't know better, I'd be tempted to think thay are rigging the game.]]> http://seekingalpha.com/article/103570-bye-bye-dividends?source=feed#comment-297634 297634
1) If dividends are stopped, then they become retained earnings. How does that then negatively affect the stock price? The government has not taken the money away; it simply is rearranging access to it.

2) If dividends are taxed as ordinary income, companies will be less likely to pay dividends. Again, these will become retained earnings boosting the stock price. That boost in stock price will then be taxed as capital gains. Again, the same amount of money. You just get at it differently.

So how again does the stock price suffer? ]]> Mon, 03 Nov 2008 18:12:23 -0500
1) If dividends are stopped, then they become retained earnings. How does that then negatively affect the stock price? The government has not taken the money away; it simply is rearranging access to it.

2) If dividends are taxed as ordinary income, companies will be less likely to pay dividends. Again, these will become retained earnings boosting the stock price. That boost in stock price will then be taxed as capital gains. Again, the same amount of money. You just get at it differently.

So how again does the stock price suffer? ]]> http://seekingalpha.com/article/103283-healthcare-insurers-going-kaput?source=feed#comment-295996 295996
These wounded animals should be kindly put down ... before they kill anymore of us.]]> Sat, 01 Nov 2008 23:15:39 -0400
These wounded animals should be kindly put down ... before they kill anymore of us.]]> http://seekingalpha.com/article/98330-fdic-insurance-limits-eating-my-humble-pie?source=feed#comment-273556 273556
Your OPINION as to where the fiat aspects of the monetary system begin and end is noted, but it is just that. No more. As are all opinions of same, including mine.]]> Sat, 04 Oct 2008 16:25:12 -0400
Your OPINION as to where the fiat aspects of the monetary system begin and end is noted, but it is just that. No more. As are all opinions of same, including mine.]]> http://seekingalpha.com/article/98318-a-satirical-breakdown-of-the-bailout-plan-s-expenditures?source=feed#comment-273460 273460
Comments? Priceless.]]> Sat, 04 Oct 2008 12:44:49 -0400
Comments? Priceless.]]> http://seekingalpha.com/article/97805-the-great-bank-rush-of-2008-what-s-the-money-for?source=feed#comment-271358 271358
The FDIC is committed to paying all claims for insured dollars, so you will always get paid, even if the FDIC reserve fund is exhausted. In that case, the FDIC would by law borrow money from the Treasury, even if that money had to be newly minted. Sorry if I gave you the wrong impression. Here is the problem I was getting at however.

Say a banks folds and the FDIC reserve is empty. Say the Treasury gets newly minted money to pay the depositors off. (It will likely come to this eventually.) That's inflation.

Now let's say that bank couldn't pay a single depositor back. It was flat broke. FDIC has a new dollar printed for each insured dollar. But it doesn't stop there. Under this new rule change, it has to print a second new dollar to cover the fact that each dollar was not only insured but also used as collateral. The FDIC is responsible for paying DOUBLE the amount of deposits lost, the original lost dollar AND the collateralized dollar.

Now say the failed bank was able to pay back half of the depositors. The FDIC gets a newly-printed dollar for each dollar for each insured dollar the bank couldn't pay, but then needs an additional TWO dollars for the collateralized debt.

Now obviously, the more that can be paid back out of the failed bank's own funds, the better it is for the FDIC. I don't mean to imply otherwise. Rather that when the FDIC reports lost deposits for that bank, its actual liability is at least twice that and possibly more.

One additional item. This rule change insituted under these conditions literally DEMANDS the creation of these new mega-banks we are now seeing form. If even one of them fails, the FDIC could in the conceivable future be on the hook for a trillion dollars. That's not inflation anymore; it's hyperinflation. And THAT'S the gamble Paulson has taken with the mere stroke of his pen.]]> Thu, 02 Oct 2008 08:42:40 -0400
The FDIC is committed to paying all claims for insured dollars, so you will always get paid, even if the FDIC reserve fund is exhausted. In that case, the FDIC would by law borrow money from the Treasury, even if that money had to be newly minted. Sorry if I gave you the wrong impression. Here is the problem I was getting at however.

Say a banks folds and the FDIC reserve is empty. Say the Treasury gets newly minted money to pay the depositors off. (It will likely come to this eventually.) That's inflation.

Now let's say that bank couldn't pay a single depositor back. It was flat broke. FDIC has a new dollar printed for each insured dollar. But it doesn't stop there. Under this new rule change, it has to print a second new dollar to cover the fact that each dollar was not only insured but also used as collateral. The FDIC is responsible for paying DOUBLE the amount of deposits lost, the original lost dollar AND the collateralized dollar.

Now say the failed bank was able to pay back half of the depositors. The FDIC gets a newly-printed dollar for each dollar for each insured dollar the bank couldn't pay, but then needs an additional TWO dollars for the collateralized debt.

Now obviously, the more that can be paid back out of the failed bank's own funds, the better it is for the FDIC. I don't mean to imply otherwise. Rather that when the FDIC reports lost deposits for that bank, its actual liability is at least twice that and possibly more.

One additional item. This rule change insituted under these conditions literally DEMANDS the creation of these new mega-banks we are now seeing form. If even one of them fails, the FDIC could in the conceivable future be on the hook for a trillion dollars. That's not inflation anymore; it's hyperinflation. And THAT'S the gamble Paulson has taken with the mere stroke of his pen.]]> http://seekingalpha.com/article/97805-the-great-bank-rush-of-2008-what-s-the-money-for?source=feed#comment-269190 269190
You are correct. Shreholders and bondholders indeed did not do well. I didn't mean to imply they had.

I tend to write in a very literary style, and my words here were quite flip (and intentionally so). It made for a better storyline. Obviously no one is making out well in this. My intent was merely to highlight that among all of the losers, a few of them at least have a few crumbs left to be happy about.

And yes, it was quite convenient as scaremongering also. The banks however are just following the numbers. Insured deposits are now an irresistable acquisition. Whomever gets the most lasts longest.]]> Mon, 29 Sep 2008 22:37:45 -0400
You are correct. Shreholders and bondholders indeed did not do well. I didn't mean to imply they had.

I tend to write in a very literary style, and my words here were quite flip (and intentionally so). It made for a better storyline. Obviously no one is making out well in this. My intent was merely to highlight that among all of the losers, a few of them at least have a few crumbs left to be happy about.

And yes, it was quite convenient as scaremongering also. The banks however are just following the numbers. Insured deposits are now an irresistable acquisition. Whomever gets the most lasts longest.]]> http://seekingalpha.com/article/97805-the-great-bank-rush-of-2008-what-s-the-money-for?source=feed#comment-269155 269155
Well said. Since I first learned of the deposit rule change (change,my butt ... they just tossed it out), I've been trying to scream it out to others. (Thanks to Seeking Alpha for the help.)

And I agree with your extension of my gambling allegory. If Paulson is risking insured deposits, he indeed sees himselfas down to his last few chips. With a game that is far from over.]]> Mon, 29 Sep 2008 21:58:15 -0400
Well said. Since I first learned of the deposit rule change (change,my butt ... they just tossed it out), I've been trying to scream it out to others. (Thanks to Seeking Alpha for the help.)

And I agree with your extension of my gambling allegory. If Paulson is risking insured deposits, he indeed sees himselfas down to his last few chips. With a game that is far from over.]]> http://seekingalpha.com/article/97805-the-great-bank-rush-of-2008-what-s-the-money-for?source=feed#comment-269141 269141
Credit unions are depositor owned. At this point, they are probably safer than Treasuries (and they are certainly paying more than short term Treasuries.)]]> Mon, 29 Sep 2008 21:39:15 -0400
Credit unions are depositor owned. At this point, they are probably safer than Treasuries (and they are certainly paying more than short term Treasuries.)]]> http://seekingalpha.com/article/97805-the-great-bank-rush-of-2008-what-s-the-money-for?source=feed#comment-269136 269136
You didn't specify which conclusions you disagreed with, but just on a guess, I'd say it was tying the bailout to acquisition funding. And no, I can't prove that. My case of course was made on the close timing of all of these events.

To that end (and since I wrote this article), Goldman has announced its intentions to purchase $50B of insured assets, Wells Fargo has attempted to buy Wachovia, and Citigroup has succeeded in doing so. And all of this in the entire timespan of two weeks since the deposit rule change. There's clearly a buying frenzy out there for these assets.

Also, from the Financial Times, "Lending Woes Threaten M&A Deals" ( link.ft.com/r/M2ZOXX/C... ), which speaks of funding for mergers and acquisitions drying up. Certainly if the bailout is not specifically endorsed by these parties as for acquisitions of insured deposit assets, the money from it will end up there because it's not likely coming from anywhere else soon..

Now of course, none of this activity so far is based on funding from the bailout because it simply hasn't happened yet. So far, we're just looking at distressed institutions seeking shelter among themselves from otherwise certain demise. Still, there is a definite pattern of seeking insured assets coming from this group, and the rule change undoubtablely is playing a major role in the specific decisions we are seeing.

Remember though, there are still the regionals (and locals) that have suddenly become very attractive to these majors. We'll have to watch to see how much of this happens, but if I was betting (I'm not; I don't), I'd probably be looking for long options on the regionals.]]> Mon, 29 Sep 2008 21:36:45 -0400
You didn't specify which conclusions you disagreed with, but just on a guess, I'd say it was tying the bailout to acquisition funding. And no, I can't prove that. My case of course was made on the close timing of all of these events.

To that end (and since I wrote this article), Goldman has announced its intentions to purchase $50B of insured assets, Wells Fargo has attempted to buy Wachovia, and Citigroup has succeeded in doing so. And all of this in the entire timespan of two weeks since the deposit rule change. There's clearly a buying frenzy out there for these assets.

Also, from the Financial Times, "Lending Woes Threaten M&A Deals" ( link.ft.com/r/M2ZOXX/C... ), which speaks of funding for mergers and acquisitions drying up. Certainly if the bailout is not specifically endorsed by these parties as for acquisitions of insured deposit assets, the money from it will end up there because it's not likely coming from anywhere else soon..

Now of course, none of this activity so far is based on funding from the bailout because it simply hasn't happened yet. So far, we're just looking at distressed institutions seeking shelter among themselves from otherwise certain demise. Still, there is a definite pattern of seeking insured assets coming from this group, and the rule change undoubtablely is playing a major role in the specific decisions we are seeing.

Remember though, there are still the regionals (and locals) that have suddenly become very attractive to these majors. We'll have to watch to see how much of this happens, but if I was betting (I'm not; I don't), I'd probably be looking for long options on the regionals.]]> http://seekingalpha.com/article/90233-federal-reserve-asks-for-wall-street-bank-stress-tests?source=feed#comment-233164 233164 FSAP) of the entire US financial system (major investment banks and hedge funds included). No doubt the Fed is merely coordinating/overseein... the banks' participation in this audit. And yes, the Fed itself (for the first time) will also be required to open its own books to IMF review as a part of this.

My question is this: Is this just the IMF finally getting around to a routine audit of the US system, or is its timing a sign of low confidence in that system?]]> Mon, 18 Aug 2008 11:53:53 -0400 FSAP) of the entire US financial system (major investment banks and hedge funds included). No doubt the Fed is merely coordinating/overseein... the banks' participation in this audit. And yes, the Fed itself (for the first time) will also be required to open its own books to IMF review as a part of this.

My question is this: Is this just the IMF finally getting around to a routine audit of the US system, or is its timing a sign of low confidence in that system?]]>