Alex Sebastian

Citigroup: The End Draws Near

Not sure where this bout of insecurity came from. IMO Citi is too big to fail. I can't see them being bought by anyone else...

I really can't see why the uptick rule can't be reinstated. That would really help the situation. Also, CDS swaps aren't trading nearly as high as other large financial institutions' were before they folded. As of yesterday, they were trading at 360 basis points, compared to over 3000 for the other doomed banks. I think Citi may be a buy here, but only with true MAD Money.

The Shallowest Generation

Excellent article. Sums up very nicely what I (a member of the generation following the Baby Boomers) have been telling people for ages. My generation is worse than the Baby Boomers are though. We are growing up with easy credit, and a lot of people are being given credit before they are responsible enough to handle it.

A few points I would like to add:
1) The war in Iraq is going to cost in excess of $2 trillion, not the $700B quoted in the article
2) As far as banks making bad loans and granting mortgages they should not have, it was not as simple as poor decision making. What occurred was the original lender was able to securitize the loans and sell them to a third party, earning a commission on the loans, so the incentive structure of the industry changed dramatically.

Before the era of securitization, a mortgage lender would have to do due diligence to ensure that people would be able to repay their loan. Once securitization began, they simply earned a commission on each mortgage, which they subsequently unloaded to Investment Bankers, who subsequently did a million optimization equations and got AAA ratings and sold them off. The bad banks were the banks which were caught with billions of these loans. Look at Goldman Sachs, they securitized billions of these loans and were a market maker fro CDOs MBSs etc, but foresaw the problems and got net short, evading the problems, while still making a killing during the securitization binge. A similar process occurred with consumer loans.

A great video that is in the same vein as this article is "In Debt We Trust". Google it.

Goldman Starts Getting Smaller

For the record, the expense was a negative number because Goldman had put away money for bonuses in preceding quarters which will no longer be paid out. The regular salary payments to these employees are less than the bonuses which are no longer being paid out (and were accrued in earlier quarters), hence the negative figure. Go do some homework of your own sir, before you make an ass of yourself again.

On Dec 16 11:48 AM bodysurf wrote:

> We can put aside the idea that "compensation and benefits fell to
> a negative $490 million". Unless Goldman managed to force people
> to work, not only for free, but to pay GS for the privilege of showing
> up there every day, it's not possible for an expense to be a negative
> number. Perhaps they meant to say the expense GROWTH was negative,
> but I suppose that's what passes for research at Moody's these days.
> Quelle surprise.
>
> And there is absolutely zero chance that Goldman made a profit this
> year. We can fully expect that future quarters will wipe away whatever
> phantom profits GS claimed to have earned in 2008. One of the great
> short sell candidates of 2009, considering it's one of the few with
> some meat still on the bone.

Three Financial Stocks Worth Holding

I would be interested to know over what period you calculated the historical average returns for these banks. In the case of JPMorgan, a five year period was used. To earn such returns in a period characterized by such speculative excess, is not, as we have seen, necessarily an indication of good management.

Overall I think that the financial stocks are still too risky. When Lehman collapsed, the valuation of its senior debt implied a $110B hole in its balance sheet. Also note that when Wachovia was forced to actually value its assets by Wells, it took a $28B hit. The situations at Freddie and Fannie were similar. What is hiding on the books of these institutions? I for one don't want to be a shareholder when we find out.

11 Stocks Selling Below Cash

I was going to say I wouldn't touch any of these except the Brazilian meat manufacturer, but after reading the comments, I don't think I would touch any of them. Mitsubishi UFJ is planning an enormous stock offering, one which will dilute the h*** out of the current shareholders. All these financials are still facing enormous challenges, I wouldn't touch them for a few quarters at least.

Cramer: Dow Could Drop Another 14%, Oil's Going to $50

Hmm, well that's only 279 points off now... Cramer called bottom when July 15, when the Dow touched 10,500. Then he tried to limit his call to the financial stocks. Well XLF has recently dropped below its July 15th low. So he's wrong again. I would like it more if he said, "Look I called bottom here, I was wrong, here's where I see the next bottom". There's nothing wrong with being wrong, just admit to it...

This time I believe him a little more though, we HAVE to be getting close. How long can the VIX stay above 50? I actually see the Dow above 9,000 this time next year. I mean the stockmarket is down 40% on a fears of a recession. Isn't the cost of a recession already priced in? 40% is A LOT. Are companies earnings going to be beat worse than that? I doubt it. That's global depression-like numbers. I am going long this tomorrow at close if we see another big dive..

If MS makes it to the 14th, there is going to be one hell of a short squeeze (that's when the deal closes for their Japanese financing)...

If You Think the Dow Did Well Today, You're Wrong

Hmmm I wonder why that is. It couldn't be the case that the U.S. markets, the most developed and heavily traded on the planet, do not suffer the volatility of other markets...?

Options Trader: 9/11 Redux

Anyone have any opinions on why Merrill is getting shitk*cked so badly? I mean I have puts so I'm happy, but I'm still a little confused why it has lost around $10 in 3 days...?

Lehman Brothers on Sale?

If Lehman makes a deal like Merrill's (including financing considerations) on it's $40B of real estate assets - admittedly much higher quality than what Merrill sold - there will be no equity left. And I think to many the Lehman name has lost almost all of its value. You said yourself that they no longer have any goodwill, isn't that what the value of a "name" is?

Also, there haven't been any rumours since July, when the SEC targeted rumour-mongering short sellers. Goldman, Morgan Stanley, Citi and others were all very well behaved yesterday after hours when their spokesmen said that they all continue to trade with Lehman.

Expect the Real Rally by Mid-2009

Just curious where your three year prediction of economic growth was derived from? Other than your conclusion on housing based on very simplistic analysis of housing data, I see nothing here that justifies economic predictions. I am open to being convinced on which way the economy is going to go, but I am not going to buy some numbers you clearly just picked out of thin air. Rationalize your conclusions and you might see more people listening to them. Complete an analysis like that and you will get laughed at when you draw a conclusion.

Oh and I don't think forward earnings expectations are in any way reliable...

Equities: In the Eye of the Storm

I do think that the economic weakness which has emerged in the rest of the world may be beneficial for US equities simply because there are no "safe havens" left, so the US doesn't seem "as bad" in comparison

Time to Pull the Trigger on Four Oil Service Stocks

Thanks. That was much more pleasant than sifting through their annual/quarterly reports

Time to Pull the Trigger on Four Oil Service Stocks

My only concern with RIG is its low income tax expense. With as much as 80% of revenues locked in through 2010-2, I feel that leaves limited room for profit growth when the tax expense jumps as much as 20% over that span. Any thoughts?

Wal-Mart Continues to Impress

No surprise here. American consumers are flocking to Wal-Mart. Drive by any store, the parking lot is always full.

Forget $100 a Barrel - Oil Will Plummet to $30

I didn't take the time to read through all the comments on this page so forgive me if I am repeating some of the points already made by other readers.

After reading this piece I honestly think Mr. Schwartz should be removed from the Seeking Alpha list of authors. This piece was so poorly researched and thought out that it is an insult to the entire site, and it's readers. I am only going to point out the most glaring flaw in Mr. Schwartz' argument.

New oil is NOT plentiful. If you had any knowledge of the off-shore rig market, you would know that many of the rigs are being commissioned by big oil companies for EXPLORATION purposes, not production. This is a direct result of high oil prices (big oil is looking in places where it is very expensive to extract oil). Beyond this, while there have been some large new fields discovered, but they lie in harsh environments which result in very technically challenging drilling conditions. As a result oil is prohibitively expensive to extract from these areas. Many of these fields come online only with oil over $100 per barrel. With oil at $30 a barrel, there is almost no new oil coming into the market. With the megafields in significant decline, there will be a net loss in oil production, resulting in a higher oil price.

No matter how you cut it, $30 oil is an impossibility which will never be realized. I feel sorry for the investors in your fund if that piece is what you guys consider "due diligence".

My advice: stick to options trading. You seem to be excellent at that.