Jolly_Rancher

Five Reasons the Market Could Crash This Fall

Judging by the dramatic number of article thumbs up responses and naysayer-comment thumbs down responses, investors are still too bearish for a crash. Cash levels way too high. Inventory too low. Everyone panicked on the side of caution. Thanks for the article!

Are the Big Banks Gaming the Taxpayer?

I would add one more stipulation: when banks start making money again, they shouldn't be allowed to use past losses as tax credits.


On Mar 28 07:05 AM Chezfrederick wrote:

> Geitner should revise his plan in 2 ways:
>
> 1. Reduce the non recourse offered to private investors to 50% of
> the leverage loan amount. This would then allocate the risk 50:50
> between investors and taxpayers, giving taxpayers a shot at some
> upside and will ensure that private investors price these toxic assets
> more realistically, rather than offer inflated prices.
>
> 2. Disallow banks from participating in the PPIF in any way other
> than as a seller of toxic debt to eliminate any double dipping, or
> appearance of such.
>
> If Geitner chooses not to make such changes, an alternative would
> be to fess up to the fact that the plan is purely a government subsidy,
> and that private investors are nothing more than a screen he is using
> to determine the inflated prices for the toxic assets as an attempt
> to imply these are market prices. He could use instead, these private
> investors as professional advisers to help determine the prices to
> be paid, determine the premium(donation) he is willing to add to
> the price to support the banks, and buy the toxic assets entirely
> with taxpayer money. This is a more transparent and honest aproach,
> giving taxpayers a shot at the upside if the premiums pais are not
> unreasonable.
>
> As it stands, let's all be clear, this is an almost 50% subsidy to
> the banks with optimistically little chance of taxpayers recovering
> more than 50% on the loans.
>
> I am not so much against the plan, rather it is the opacity and misleading
> packaging that I dislike most. I wonder, whatever happened to openness,
> trasparency, accountability... did Geitner consult with Obama?????????
> This is demeaning to taxpayers' intelligence.
>
> Let's all hope that common sense prevails in these tough times.

While Financials Drag Markets Down, Five Ways to Stay in Play

That's it! I'm calling this the bottom. Why? Who knows. Why not? It seems like many people have called one bottom per month. Really, I'm not kidding. This is THE bottom. It's not gonna test or go sideways either or go straight up -- no "L" and no "V" and no "W", maybe a "Z" or a "B" and a "MACD."

Eight Reasons Bank of America Is Going to $20

Additionally, take a look at insider buying in some of these shares.

BAC - Huge significant buys over the last month Feb and Jan.
RF - Large significant buys over the last month of FEb.
USB - Large significant buys over the last month Feb
STI - Large significant buys over the last month Feb.
WFC - Large significant buys over the last month Jan
C - Large significant buys last Dec 2008
JPM - Two buys this Feb
GS - Significant buys Dec and Jan.

On the other hand there were very few sells in any of these. Pessimists love to say the banks need to come clean because we don't know what's on the books. The point is that WE DON'T KNOW. Is it possible the bankers are telling us that this latest sell-off is over done? I realize that insider buys can be a false signal, in this case I don't thinkso and wouldn't be a seller of banks at these prices. If I had any extra money, I'd be a buyer.

Rating the Top 12 U.S. Banks - From Hidden Gems to Zombies

Take a look at insider buying in some of these shares.

BAC - Huge significant buys over the last month Feb and Jan.
RF - Large significant buys over the last month of FEb.
USB - Large significant buys over the last month Feb
STI - Large significant buys over the last month Feb.
WFC - Large significant buys over the last month Jan
C - Large significant buys last Dec 2008
JPM - Two buys this Feb
GS - Significant buys Dec and Jan.

On the other hand there were very few sells in any of these. Pessimists love to say the banks need to come clean because we don't know what's on the books. The point is that WE DON'T KNOW. Is it possible the bankers are telling us that this latest sell-off is over done? I realize that insider buys can be a bad signal, in this case I don't thinks and wouldn't be a seller of banks at these prices.

Bank Nationalization: It's Just Plain Wrong

The government should nationalize the mortgages, NOT the banks: 1) Take possession of every mortgage; 2) Refi each mortgage at a low fixed interest rate and pay $20,000 down on principal; 3) Return the mortgage to the original holder.

Financial Stocks: Playing the Mark-to-Market Suspension

So you're a shareholder right? You must be. That's the only reason you'd want to "keep score." So what has it got you? You're losing your entire investment. Maybe you're really short.


On Feb 15 01:29 AM Fitz919 wrote:

> Financial institutions don't tell us squat about what they're up
> to, especially when things are going very badly. Mark to Market
> gives us a few clues. Without Mark to Market we never would have
> known that these institutions are insolvent.
>
> Would it have been better for everyone if Enron had been allowed
> to continue to lie to everyone about their true financial condition?
> I think not. Remember Enron execs went to prison, and the contrived
> rolling blackouts stopped.
>
> The FBI is currently investigating more than 500 corporate fraud
> cases, some of which involve prominent financial institutions. They
> are also investigating more than 1800 mortgage fraud cases. The
> linkage between the 500 and the 1800 is obvious.
>
> One of the problems with valuing toxic assets is the fact that their
> value changes daily with each mortgage payment not received, or each
> mortgage officially in default, or each mortgage that drops out of
> the asset because it gets adjusted or refinanced. Nightly Business
> Report did a 3.5 minute story on valuing these assets on Friday Feb.
> 13th, you might still be able to see it on their web-site.
>
> Insolvent banks should not be allowed to masquerade like they are
> solvent banks, and receive TARP or TALF, they should be put down
> like a horse with an injury which it can't possibly recover from.

>
>
> Keep Mark to Market, it helps us keep score on these guys.
>

Financial Stocks: Playing the Mark-to-Market Suspension

An alternative? It's not an accounting issue. It's a compensation issue. The cause of it all is greed. Shareholders are greedy, so they compensate management based on earnings and stock performance. The higher the better. Therefore managers are greedy too. It's survival of the greediest. Managers of large banks tend to hoard assets so that they can more easily play with the earnings numbers. They tend to hold risky assets to jack up earnings over the short term to bump up earnings and bonuses. But we really don't want a greedy banking system because that leads to cataclysmic situations like the one we're experiencing. Directors should determine the long term growth potential of the company and compensate management on growth up to that potential but nothing more.

What would be solved if directors compensated according to growth potential rather than actual growth? First, large banks do not efficiently allocate resources. They are too large and diverse. The long term growth potential is very low. If directors compensated based on long term growth potential, these large banks would break up and assets would be allocated efficiently. Second, bank managers wouldn't hold very risky assets. There would be no need.

I think this is FASB 157 solved another way.

On Feb 15 07:47 AM Jim Hawthorne wrote:

> Yes, I fully agree with your excellent assessment of the major problems
> with Mark-to-Market, and the difficulties in realistically applying
> some balance between short-term/long-term worth (as opposed to 'value',
> which is a different breed of duck)! The marketplace can only determine
> worth; and it can and often does ignore 'value', as hordes of us
> 'value investors' are unfortunately currently discovering to our
> chagrin!
> But the question remains as to how best structure some form of worth/valuation
> vehicle that can be applied prior to default.
> Is the devil simply in the details, or is such a vehicle a pipe dream?
>

Financial Stocks: Playing the Mark-to-Market Suspension

Mark-to-market forces the banker to take a short term view of what is a long term asset. That is a mismatch. For example, Aflac's perpetual debentures are marked to market and causing the stock to plummet, but the debentures themselves mostly mature after 2015, many much farther out. The asset should be written off at the time of default. Default clauses trigger default. It is at that time that the debt is impaired. Anything short of this forces the banker to assay a prospective borrower with a the question "How is this entity's debt going to trade after I make the loan?" rather than what the banker should be asking "Can this entity pay principal and interest?"



On Feb 14 09:24 PM Jim Hawthorne wrote:

> Jolly_Rancher, I agree with you that M-to-M is far from perfect,
> and even with it in place we still end up with fraud, corruption
> and scandal. And while we've seen many 'falling shoes', we really
> haven't seen much in the way of 'rolling heads'!
>
> Yes, something better than Mark-to-Market would be welcome... But
> what???
>
> On Feb 14 09:08 PM Jolly_Rancher wrote:

Financial Stocks: Playing the Mark-to-Market Suspension

Mark to market is ineffective. It does not change most bankers' behavior. They do the things they do to maximize income for themselves and they'll trash the world to squeeze a few million out of the system. So investors got market to market, now they're losing their shirts too, while the bankers got big bonuses. It would be best to suspend FASB 157 immediately and put in place something that actually changes banker behavior.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

So as this relates to the price of stocks, are you saying there is a trading opportunity, i.e. a trading range? Buy S&P 750, sell S&P 1300? That's sort of what Japanese indexes did as you point out in your article. Or do you think it will be much worse here. How low does it go? That's what we want to know.

Turning Japanese: The Audacity of Reality (Part 3 of 3)

Great article! But it was not long enough! You need to talk more about job creation and private investment. I ahve said this many times here:

1) Open California, Florida, and New England to drilling - WIDE OPEN!!! This creates US jobs and reduces trade deficit.

2) Streamline and encourage construction of many new nuclear power plants. This also creates US jobs and reduces the trade deficit. Specifically change the spent fuel recycling regulation that leaves us with tons of unspent radioactive fuel. THIS IS THE PROBLEM!

3) Create more tax breaks for business investment in this country and remove tax credit for investment in foreign countries.

4) Eliminate the corporate income tax.

All of these have one thing in common: NOT less government, but less government burden.

John Thain, R.I.P.

Thain bought a million or so shares of M.L. at about $22 then sold at $29 (presumably) to BAC. WHAT A CON ARTIST!! I realize 14 million is small change for a guy like this but how Thanin pulled all of this out of the hat is amazing to me.

Number of U.S. Homes With Negative Equity Is Stunning

Lin, Your post brings tears to my eyes. Very true and I have posted the very same on other message boards. I wish it weren't true. But we are in for a very tough road. The only thing that can save America is a sudden burst of efficiency (i.e. productivity) that boggles the mind. Where this would come from, I cannot see now. Maybe a sudden, easily implemented free form of power such as fusion. Remember, petroleum is about 3/8 of our trade deficit. Maybe, if consumers completely forsook the automobile for motocycles and small three wheelers. Automobile is about 3/8 of the trade deficit. The two together would begin to put this country on a better path. I know this sounds like pie-in-the-sky, but can someone tell me where the productivity improvements are going to come from to overcome our quickly sinking economy?

On Nov 14 02:00 AM Lin wrote:

> Jolly-Rancher
>
> The baby boom generation lost 40-50 % of their " retirement funds
> " in the market cash of 2000-2001 .Now , they have lost 40-70 %
> of their portfolios for a 2nd time . Add to this , losing 30-40 %
> of their home equity , depending on location .Lots of them are now
> being dismissed from their jobs . This will truely be worse than
> the great depression . All of the boomers I know , myself included
> , grew up modestly , worked their way thru college + worked very
> hard thru out life . When you have 78-80 million folks hit multiple
> times during their lives , I personally can't think of a way most
> of them will be able to survive . I feel for the younger folks coming
> up now as their futures are not bright . Their employment options
> aren't going to be great given the effect " globalization + outsourcesing
> ' of US jobs has had on the US job market. I have told my own sister
> that " she ought to consider moving to the middle east or Hong Kong
> ".What are they supposed to do ? A very good question /concern.

Number of U.S. Homes With Negative Equity Is Stunning

It is true that 30% of homes are unencumbered by mortgage; however, the average age of the unencumbered homeowner is probably near retirement. With stock prices at multi-decade lows and interest paying nearly 0%, what are these people supposed to retire on? Most were probably depending on the sale of the home for retirement to a assisted living quarter. To sum up, a 30% home markdown hurts everyone, in real life, not just on paper.


On Nov 12 02:55 PM Flash Gordon wrote:

> I have two issues with this article:
>
> 1) one third of the people in the u.s. own their houses free and
> clear. I'm not sure what the geographic distribution of these free
> and clear owners are but I have read this in many places.
>
> 2) most prices are still above where there were in 2003-2004. Could
> 30% of the homes turned over or been refinanced to close to assessed
> value in the time since 2003/2004?