Kinabalu

Airlines: Some Costs They Can't - And Shouldn't - Cut

When you say Pan Am had bad management I have to comment. They had some real world regulatory problems and made some terrible mistakes. However, the Pan Am Finance department kept that Company running for years after they should have been dead. I watched Pan Am from a competitor and was amazed how they could continue to raise money for years with such terrible financial results.

I couldn't give the whole Company high management grades but the Treasurers department gets the highest marks.


On Nov 01 12:16 PM User 105447 wrote:

> Sorry, but there is no way a "cyber-enviroment" can duplicate all
> sensory inputs. Most importantly the will to stay alive. When aircraft
> become drones controled from a central location, I will stop flying
> or get my own plane.
> Pan Am was the prime example of bad management, now replaced by GM.
> GM still has one of the most isolated management structures in corporate
> America. Therefore GM is kaput, and still digging its own grave.
>

CIT's Bankruptcy and the Trading Sardine

Over the last 40 years I've probably heard 50 versions of the trading sardines story, from Cannery Row to the Alaskan gold rush. This was one of the worst. Here's another version if any one's interested:

The story goes that sometime in the early years of the Twentieth Century there was a lull on the trading floor of the New York Stock Exchange, a lull that extended from hours to days - and the boys were getting bored and restless. One afternoon, for want of any better entertainment, a trader pulled out an elderly sardine tin and announced his willingness to sell this unique item for no more than a nickel. In a moment two jobbers from the Railroads pitch had bid and counter-bid for the tin, pushing the price up to a dime. Not to be outdone, the cowboys who trade Texas oil stocks jump in, doubling the price of the sardines, then doubling it again. The tin passes from professional hand to professional hand, with the ticket sometimes a cent or two higher, sometimes up a quarter. At last the hubbub attracts the attention of the baby of the floor, a wet behind the ears college kid. He spots the unusual label and can't miss the excitement in the open outcry yelling of the traders. The kid, determined to show he can play with the big boys and genuinely intrigued by the apparent rarity of the item, firmly calls out 'Ten bucks' and is delighted when the bidding comes to an abrupt end. Hefting out his pocket-knife, he punctures the tin, only to be met with the unmistakeable stink of rotting fish. Bewildered and heavily out of pocket, the new boy turns to one of his elders, who had taken a half dollar turn out of the tin an hour previously. 'I don't get it' says the kid, 'these sardines are terrible.' 'Son', says the old jobber, 'those weren't eating sardines, those were trading sardines.'

Ultimately, Who Benefits from Too-Big-To-Fail

A review of FRB staff studies reveals a 1994 review of Merger Performance Studies in Banking, 1980-93, and an Assessment of whether bank mergers actually yielded any effeciency gains.

www.federalreserve.gov...

Conclusions? "findings indicate consistently that bank mergers do not generally result in gains in efficiency or general operating performance."

Galleon's Defense: Insightful vs. Insider Information

The defense will be the Mosaic Theory. You put together an investment theme from a lot of separate pieces of information, none of them material on their own. Rajaratnam has already been quoted as saying he gets thousands of calls from people with investment ideas.

Ultimately, Who Benefits from Too-Big-To-Fail

"Given the technological advances that were occurring in the 1990s, it is very possible that much of the productivity experienced across all industries had more to do with a secular movement in technology as opposed to efficiencies realized by managerial acumen."

We have a winner!! Give the man a Kewpie Doll. The FDIC promoted bank mergers for 2 decades because they thought that larger banks had lower loss ratios. They never tried to claim that larger banks were more efficient because all of American industry was experiencing productivity improvement.

TooBigToFail has refuted the loss ratio concept but now someone is trying to ascribe broad productivity gains to merger activity? Except for monopolistic situations, mergers have traditionally been shown to have ineffective results across industries. Banking is no exception.

Hedge Fund Due Diligence Reports: Akin to the Sports Illustrated Cover Jinx?

"The quartet found that 21% of fund DD reports studied contained “misrepresentations” about past legal or regulatory problems and over a quarter contained 'incorrect or unverifiable representations about other topics.' "

It's important to note that these percentages are not mutually exclusive. The 21% could be a completely different group than the quarter (25%). I personally find it very hard to believe that less than 50% of hedge fund promoters are not misrepresenting current or past performance or other important issues. It's interesting that the study also notes that over 40% had past regulatory infractions, many of which were not reported in the few required filings.

The incentives for hedge fund managers to cheat are so great and the regulatory oversight so small, as a result of the so-called "sophisticated investor" exemption, that anyone who pursues this form of investment is just asking for trouble.

Three Asset Classes that Can Actually Outpace Coming Inflationary Price Increases

"But then you think about the the first time the Dow hit 10,000 -- about a decade ago -- and you look at the relative prices of gold (about $250 per ounce in 1999, as opposed to almost $1100 an ounce today)"

Pick the right periods and you can make some pretty misleading points. What about gold hitting $800 about 3 decades ago?

I can see good arguments for oil and agriculture but gold confounds me.

Global Markets in Review: Risky Assets Disconnect from Fundamentals

A picture is worth a thousand words. What an array of great pictures. Thanks!

How U.S. Financial Sector Could Be Downsized

The information on bank CDS contracts is readily available at the website of the Office of the Comptroller of the Currency, the federal regulator of national banks. The OCC’s quarterly report on bank derivatives activities and trading revenues is based on Call Report information provided by all insured U.S. commercial banks and trust companies. See the link:

www.occ.treas.gov/deri...


On Oct 18 12:59 PM markfl wrote:

> Harrison wrote:
> "The FDIC will be directed to examine the books of the largest 25
> insured banks to uncover all CDS contracts held."
>
> Still $600 trillion in the derivatives market, and we don't know
> which banks may have a potential AIG-breaking $3 trillion in exposure.

How Washington's Policymakers Are Damaging the U.S. Economy

"Krugman has written on his blog that the “bottom of the class” guys in economics go to Wall Street and the top of the class guys get good academic positions."

James Kwak had a great article here on Seeking Alpha, that repeats a Calvin Trillin opinion piece in the New York Times, on Friday, that puts some actual numbers to this concept. In fact he shows that, since 1990, it's just the opposite. The smart guys around then started going to Wall Street and developing products that their bosses, the dumb guys from an earlier generation, didn't really understand. See the link:

seekingalpha.com/artic...

7 Things Goldman Can Do with Its Money Instead of Fat Bonuses

From a taxpayer perspective the only one of your options that makes sense is Number 4 - Pay back the AIG money. Without that money Goldman could easily have gone under. I believe Paulson did the right thing by bailing out AIG. It was the details he got wrong. There definitely should have been a haircut when all that collateral was posted.

Audit Integrity chief James Kaplan responds to news of criticism by CBS (CBS) and a lawsuit by Hertz Global (HTZ) - both of which appeared on Audit Integrity's most-likely-to-bankrupt list - with a dry, pointed letter (.pdf) amplifying the firm's concerns: "I must warn our readers that this will be the first and last time I depart from the 'pseudo-analysis' we call 'statistical.' " (previously: I, II)

There were several companies on Audit Integritys Most-Likely-to-Go-Bank... list that would have a much better lawsuit than either CBS or Hertz Global.

Debunking the 'Too Big to Fail' Myth Once and for All

"Indeed, some very smart people say that the big banks aren't really focusing as much on the lending business as smaller banks."

One of the few real nuggets in the article. Unfortunately there is also some real dreck like:

"The Obama administration could break the "too bigs" up in a heartbeat if it wanted to, and then justify it after the fact using PCA or another legal argument."

The thought that the government could easily, or effectively, fix the TBTF problem is really delusional.

Debt Monetization: He's Heading for That Small Moon

"Why I make a distinction between what the Fed is currently doing (quantitative easing) and debt monetization."

The definitive description of what monetizing the debt really means was answered by the St Louis Fed in 1984. It doesn't significantly differ from what is presented above. Here's the study:

research.stlouisfed.or...

The study concludes that if the Federal Reserve achieves its desired money growth objective, it is not monetizing the debt, even if money growth is achieved solely through open market purchases of government debt. The policy objectives of the monetary authority play an important role in determining whether the Federal Reserve is monetizing debt.

Ackman Explains Why He's Short REIT Realty Income

As noted in the article Ackerman uses derivatives rather than equities to accomplish his shorts. Avoiding dividend payments is probably part of his reasoning.

On Oct 11 09:00 AM Brad Castro wrote:

> I agree with davidbdc.
>
> And then there's the monthly dividend. Why would you short stock
> that pays a monthly dividend? When you short the stock, YOU pay the
> dividend.