Vobogeck

Forget the 1930s; We're Reliving 1975 (Part 1)

I remember the 1973-75 recession well too and agree with Ferdinand E that there was not as much wailing and gnashing of teeth. Of course then we didn't have CNBC and internet blogs screaming at us 24/7.

Congress: Shortsighted About Financials

Spot on!

10 Reasons Why We Still Haven't Hit Bottom

TEN REASONS WHY WE HAVE HIT BOTTOM:

1. Bearish posts on Seeking Alpha are coming thick and fast.
2. Everyone is saying "buy and hold is dead."
3. The press is full of "sky is falling" stories .
4. The Fed is swamping the market with liquidity yet no one is saying "you can't fight the Fed" anymore.
5. Most investors have given up hope.
6. House building has ground to a near-halt.
7. Oil prices are moving up again.
8. Australian coal contracts settled much higher than analysts expected.
9. The US dollar is finally weakening and will fall further as the fear driven "flight to safety" reverses. Cheaper dollar will improve US exports.
10. Everyone is in cash, and the market quite often moves in a direction to hurt the most people.

Five Impossible Thoughts After Breakfast

What a load of bullshit!

Bank Nationalization: It's Just Plain Wrong

IMHO, the problem with the US banking system is that the REGULATORS allowed:
- leverage up to 30:1,
- securitization of all kinds of risky assets,
- hedge funds operating behind a veil of secrecy,
- and shamefully turned a blind eye to widespread fraud like that of Madoff.

The regulators are empowered by the government, and IMHO it is the government that got us into this mess. The bankers simply responded to the encouragement they were given by the regulatory system, including "encouraging home ownership" among less credit worthy borrowers (as I understand it, this was a goal first set up by the Clinton administration and reinforced by subsequent administrations and the federal home loan organizations)

Why are the Canadian banks in such good shape? Because the regulatory system does not allow such high leverage as we see in the US system, the mortgage lending industry does not allow no money down, teaser initial rate mortgages. Canadians get no tax relief for mortgage interest, so there is incentive to pay off the loan. In the US, the incentive is to have as big a loan as you can. The US government reaped the crop of bad mortgages that it sowed. Don't blame the bankers. The government needs to first fix bank regulations and take responsibility for what has happened.

Temporarily suspending the mark to market rules would be a good start. Nationalizing the banks will just play into the hands of the short sellers, many of whom post on Seeking Alpha. Kudos to Baker for being a voice of reason among the self-serving short sellers.

Comparing This Past Week to the '87 Crash

Instead of focussing on the single week losses, investors should focus on the third column. Only GM is a long-term loser.

Citigroup Should Walk Away from Wachovia

The "common good" is better served by respecting contract law. Citigroup had a contract and the terms of the contract should be honoured. See Pennzoil v. Texaco.

Point of No Return or Perfect Buying Opportunity?

I agree that the charts are useful. I just wish the author had shared his/her interpretation. My interpretatio of the data is that we can expect these banks to bounce back to within 10% of the previous 52 week high within two years. A nice return unless all of them go bankrupt (an unlikely scenario). The pain that investors feel in buying these stocks only to see them drop another 10-20% is nauseating, but that is why "buying low" is so much harder than it seems.

Point of No Return or Perfect Buying Opportunity?

Seeking Alpha produces too many of these bearish scary pieces in which the author does not give an opinion. I don't know who runs this site, but they should consider changing the name to Seeking Answers. You don't find "alpha" by following the herd.

Should Citi Cut Its Dividend?

The other falacy in the "cut dividend" argument is revealed when you extrapolate it to every company that needs to raise capital. For example, TransCanada Pipeline (TRP) just did a multibillion dollar equity issue, but you don't hear anyone arguing that it should cut its dividend so as to reduce the amount of equity it has to raise.

From a classical finance theory point of view the value of a stock should depend only on the NPV of future earnings and not whether or not it pays a dividend. However, from an emotional investing point of view, what a stable and growing dividend represents is a clear signal to shareholders that management is confident of future earnings. Cutting the dividend sends the opposite signal.