Henry Buttal

After posting a heavy Q2 loss, Fannie Mae (FNM) asks the government for a $10.7B capital injection. Fannie's cumulative losses over the last two years now stand at $101.6B, and it has drawn $44.9B from the Treasury since April. Shares -12.7% premarket.

How ironic. You lose your house, and then get hit with an additional tax burden as the American people are forced to cover for the losses of Fannie Mae.

While I know there were many factors in the making of the Great Mortgage Security and Property bubble, I really would like to see a reporter ask Barney Frank what he thinks of the "experiment" now.

Energy-Climate Bill Could Boost Electricity Costs 20% by 2030

JCC,

Here are the specific examples again. No PUC impacts them. Feel free to ignore them at your leisure:
- The Alcoa example happened in Texas in an area not covered by PUC regulation
- The Texas summer has not been as hot as usual, at least in North Texas. However, baseload is struggling to keep up with the demand. Why? Because there has been a reduction in growth of generating capacity, with the former TXU agreeing not to build more coal fired plants and use more green electrons. Except both wind and solar power are less effective in high heat conditions.
- In spring of 2008, plants were taken off line, with the expectation that wind power would provide enough to avoid shortfall. An unusually hot period coupled with a wind cessation occurred. The Texas grid would have browned out if not for a DC tie to MEXICO of all places. These kind of urgent peak purchases cost more - just ask California.
- Given the success of Glen Rose and other facilities in Texas, nuclear would seem to be a no-brainer under the current administration's interest in cap and trade and carbon reduction. However, the Federal government has declined to approve the guarantees for the new Glen Rose facilities.
- While renewables are unsuitable for baseload, they can used to supplement traditional power sources, albeit at a higher cost at the present time. However, a grid build out costing billions of dollars will be required. This is not just making the grid smarter with the "right" meters, this includes easements, towers, substations, etc. You see, the problem with renewables like wind and geothermal is that you can only locate them where environmental conditions are right - and that usually isn't anywhere near current infrastructure or, ultimately, where the electrons can be consumed. And electrons are a wasting resource.

Posting is easy, JCC. But pragmatism is harder, and requires you to think. The PUC is a problem, but not compared to Cap and tax.

Where to Next: S&P 900 or 1100?

Babbs,

Its easy in this market - Revenues are the numbers that are declining, while Earnings have (thanks to job and cost cutting) been better than expected, or if you own GS, experiencing Record Growth, thereby distracting everyone from the fact that you can't whittle your way back to an improved economic environment......

DOLLAR vs. STERLING: QE OR NOT QE, THAT IS THE QUESTION

Thanks Cliff! Funny and informative.

The Recession Is Over: Bloomberg U.S. Financial Conditions Index Reaches 21-Month High

Currently trying that. One thing I find about bond ETFs is that the increased volatility can be painful, unless you are playing instrument momentum rather than for yield, and thus short term.

Over longer terms I want either a fund or the instrument itself...they seem to be performing better.


On Aug 05 12:20 PM RiskReturnOptimizer wrote:

> JNK and HYG are still not trading at 2007 levels ... perhaps good
> risk-reward if hedged property with SDS.

Housing, Dating, Marriage and the Tax Code

johnnywalker,

It is an interesting stat, but you have to realize it is a different population. It implies not a disappearance of wealth (though that has probably happened too), but a younger population that has had, depending on how you want to look at it, either fewer opportunities or greater set-backs.

I would like to see the medians of the same populations compared today, and see what the (very painful) decline has been.


On Aug 05 12:54 PM johnnywalker wrote:

> "According to the Fed (PDF file: February 2009 report, page A11),
> in 2007, the median net worth of an under-35 years old person in
> America was only $11,800--down from an astounding $80,700 in 2004"
>
>
> So what happened in the last 5 years? Where did all that wealth
> go? Note that those are median values, so they are less influenced
> by changes in extremes.

Housing, Dating, Marriage and the Tax Code

After reading Clarence the dog, I think the following sociological statement might also be true:

"In good times, single women want to get married because they can afford a big wedding, while single men are hesitant to get married because their current high socio-economic status makes them attractive to a large pool of women."

I personally think the economic argument around marriage is null and void in either case...

Small Caps Suggest the MSCI World Still Has Bullish Legs

Great information. I am concerned that emerging small companies will be even more vulnerable in a retracement than those in EEM.

But not so concerned that I am stocking up on hard goods and moving to Costa Rica.

Energy-Climate Bill Could Boost Electricity Costs 20% by 2030

Irrespective of the free carbon credits to politically favored industries, and any benefit accrued by the smart grid crowd, the bill clearly will burden anyone who buys electricity, and includes additional bureaucracy overhead requiring funding that approaches a billion $$ per year within a few years. The ACEEE does not consider such tax burden overhead, nor the full capital cost of smart grid deployment, decommissioning of existing power-plants before the end of their life cycle, or potential dislocation of power intensive businesses. That money has to come from somewhere.

Case in point: Alcoa, who after succumbing to "green" and governmental pressure to shut down the coal fired power plants that juiced the last U.S. Aluminum smelter, found they couldn't source power at a competitive rate from a nearby co-op that already begun mixing in significant renewable power. Alcoa shut the Aluminum smelter down, at the cost of 100s of high paying jobs.

The equivalent of cap and tax is also happening in the railroad industry, where in 2008 Congress passed a bill mandating the installation of new train control systems - which the railroads will have to pay for, at the cost of billions of dollars. The industry, which is critical to our economy, is anticipating a capital and cashflow crunch that can only be solved by, you guessed, raising prices and reducing expenditures in other areas.

So when the bills on electricity and transported goods start going up, remember those more terrible words:

"Hi, I'm from the government and I'm here to help!"

In an SEC filing, Goldman Sachs (GS) discloses its $100M-plus trading days for Q2 - an incredible 46 out of a total possible 65. Equally amazing was its consistency - just two losing days all quarter. Obviously these guys have not figured out how to game the system.

Talk about using leverage! GS saves itself from the AIG hit, get $12 billion from the taxpayers for free, uses it the money as capital to yet again make money from said taxpayers in the stock market....no wonder their VaR is down! Its all been offloaded to the citizens of the U.S.!!!

I'm Bearish Here, But Not a Perma Bear

Agreed. I vote for a least a stall here, if not an outright retracement.

However, barring some major tightening in the credit markets, I think the move to the upside picks back up within 90 days.

The Bull Side of the Story

Hmmm. Not sure how to translate this article. It seems we share a lot of concerns, but not empirically.

I do know that nobody likes a cry-baby; so Timmy Tantrum needs to shape up, or all the squabbling appointees will be forced to have a beer in the White House backyard with BHO.

Momentum Thrust Leaves Some Traders in the Dust

Also, don't forget the dreaded Newsweek contra-indicator curse.

"The Recession is Over..."

Retracement to 880, here we come!!

Bond Expert: Tuesday Wrap

Great comments, whidbey.

I am the up trend in hedge fund interest in U.S. instruments will work against the corporates, and outstanding instruments.

While I want us to service our debt, I want the politicians to understand that it is not at the price of my larder, so to speak.

China Choices

Thanks for the update, Roger. I will add my two cents.

Penny 1: As of this week, I am out of EWH. It seems the story has run its course, and was part of moving out of Asian stock ETFs in general I did this week, taking profits. I still own some individual stocks that are ADRS, and Asian currency ETFs as a dollar hedge.

Penny 2: Re Schwab, I find it Hilarious that they are claiming better execution, when even here on the U.S. exchanges they have (published, documented, and admitted) data feed problems for basic trading.

I am more of a swing/macro trader, but my day trading buddies are livid about the lack of data and execution quality seen on Schwab.

So if anyone has a similar international alternative, let us know.