paso11

Buffett on Wells and the Banking Business

10% guaranteed return? In this environment that was a shrewd move.

Don't be so quick to dismiss the 'old man'. No one is always right but Buffet is still someone we can all learn from.


On Apr 21 11:33 AM jeandit75 wrote:

> Wasn't it Buffet who bought preferred stocks in GS and GE before
> they both had to be saved by the government? Yeah, I think so. He
> unfortunately is not always right. The old man also has a lot of
> stake in this market and will certainly not talk down financial stocks.
> I think we should stop citing the old man. His best years are behind
> him.

Amity Shlaes: Paulson Plan Bring On Accounting Deja Vu

fair value accounting is the messenger not the cause, it may have contributed to the pain but ultimately it helped to highlight the greed, poor risk management and other issues. As an investor I want financial statements to reflect economic reality and to be prepared on a prudent basis. Besides accountants didnt tell Wall St to buy and manufacture mortgage backed securities in the first place.

Time to Exempt Mortgage Securities from Mark-to-Market Rules

A lemon market will be produced by the following:

1. Asymmetry of information
* no buyers can accurately assess the value of a product through examination before sale is made
* all sellers can more accurately assess the value of a product prior to sale
2. An incentive exists for the seller to pass off a low quality product as a higher quality one
3. Sellers have no credible disclosure technology (sellers with a great car have no way to credibly disclose this to buyers)
4. Either there exist a continuum of seller qualities OR the average seller type is sufficiently low (i.e. buyers are sufficiently pessimistic about the seller's quality)
5. Deficiency of effective public quality assurances (by reputation or regulation)
6. Deficiency of effective guarantees / warranties

Some of this sound familiar?

Time to Exempt Mortgage Securities from Mark-to-Market Rules

Lets just step back a few months, banks typically had over levered, bloated balance sheets with $bns of MBS. Not writing these down would just give shareholders, lenders, and other users of financial statements a false sense of security and would allow bankers to continue as they were. As an investor I would want a balance sheet to represent the accurate financial position and economic reality of a company.

Without writing down these 'assets' we would not have been alerted to the failings of management, inadequate risk controls, poor underwriting standards, etc.

I agree with Kinabalu, if the securities had been priced and rated correctly to start with the write downs would have been much smaller. If banks learn lessons from this then we might not have similar writedowns in future although I would not hold your breath, "these things tend to happen very 10 years or so, gets rid of all the bad blood".

AIG: The Success of Failure

Agreed, but whilst Sullivan should be held accountable for whats happened so should the remuneration committee who approved his package. I presume this included former chairman and now new CEO amongst its members?

Its simply not right for someone to be so handsomely rewarding for destroying $bns in shareholder value.

David Einhorn: The Irony of It All

Bonzo:

"Einhorn talks about the loss of freedom of information, and yet his fund is almost entirely unregulated and doesn't have to diclose anything to anyone. Callers to his company won't be spoken to, much less have any questions answered unless the caller has at least $1 million to invenst. For the counterpoint to Mr. Einhorn's book and this review, read deepcapture.com blog."

Einhorn has to answer to his investors regarding performance not to you, why should he have to disclose positions to anyone else? His fund is not something that exists for the general public to invest in, they target high net worth individuals so why would they waste time talking to anyone with less?

Allied on the other hand is a publicly traded company and is required to follow GAAP and SEC rules regarding disclosure.

I also find the accusations against him prove the point he makes regarding the bias that exists within Wall st and the financial media.

Furthermore he and other short sellers are not idiots, they dont just pick on any Company unless they suspect accounting fraud, mispreprentations by management, or simply that the stock is overvalued.

There is nothing wrong in bringing these reasons to light as they benefit the investment community in general, i see no diffference between this and the talking heads on Bloomberg who big up certain stocks and explain their reasoning for going long.

Can Saudi Arabia Push Down the Price of Oil?

The Suadis simply dont have the spare capacity to influence the price siginificantly.

There is an argument that oil is too cheap at current prices, just work out how much a pint of oil costs...

Speculation and the Price of Oil

Its so simple: rampant demand from China, India etc, a lack of sufficient spare capacity to offset effect of rampant demand and, weak dollar.

Whats worrying is that the Saudi's have the latest oil extraction technology but are investing heavily in existing wells rather than new fields...how much oil is really left?

Salesforce.com: When Shorting, Timing is Everything

chungst stop being such a pedant

The Case for AIG - Patience Required

Jimmy-

What is your alternative to mark to market? Whats the use in a balance sheet which doesnt reflect economic reality?