The Simple Accountant

Wells Fargo, JPMorgan and Bank of America: Stock Prices Can Double

Not too sure about this thesis. While I don't analyse bank financials, I do know from conversations with bankers in the area that Wells is carrying large amounts of very problematic Wachovia RE development loans. Wachovia did a number of major deals these bankers wouldn't dare to touch even in the go-go years. It's not clear to me that they have made adequate provision for all of this stuff, so I have avoided Wells stock. B of A raises suspicion due to its ongoing leadership problems; there may be more snakes in that woodpile than we know. Morgan may be the best of what looks to me like a slightly disreputable group.

Overall I am reluctant to buy the US banking giants, especially when there are (apparently) healthier banks with intact dividends such as BMO and STD. On the other hand, the Fed have made no secret of their intention to nurse these banks back to health, and we all know better than to fight the Fed, so perhaps the thesis has merit.

Disclosure: no current position in any financials

Why Capping Pay Is Likely to Work

The type of individual who would be attracted to a senior management role at a major financial institution, in this era, is not going to be the person who is motivated primarily by salary. Having worked with CEOs and entrepreneurs, albeit at a smaller enterprise level, my observation is that the better ones are more motivated by the challenge, and the sense of accomplishment or adulation, than by pure avarice.

They see themselves in some sense as heroic figures, and that may not be such a bad thing given the present circumstance. Imagine the public acclaim that would go to the CEO who "turned around Citi" or "saved B of A." My sense of the zeitgeist here is that this is what people seek.

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

Very good analysis, for the most part, though some points are debatable, particularly the anti-SEC bits. Yes, they failed to do their job, but that doesn't preclude them from shaping up and getting on with it.

In terms of stimulus, we could look at the country as if it were a business firm. Parts of its capital stock are depleted and could benefit from being refurbished. This means that investment in growth producing capital goods is the order of the day. Spending for its own sake, as you point out, is part of the problem rather than the solution.

The important distinction that one hopes (I have little confidence) the authorities will keep in mind, is the difference between spending and investment. The "projects" detailed in the essay are too much of the former and too little of the latter.

Last Thursday Was the Bottom - It's Time to Get Back in

Apropos of the author's pseudonym and the present state of affairs, but unrelated to the topic at hand, a favourite quote from the fabled Roman historian:

"In seasons of tumult and discord bad men have the most power; mental and moral excellence require peace and quietness."