rmenton

Oil: Crashing to 30 or to 20?

As always, time horizon is paramount. Entry into USO at these levels for a longer term hold can't be a bad bet. With the production capacity issues around the producing world, any signal that we are making a turn to normalcy can produce very tradable spikes.

Playing the Financial Crisis Blame Game Again

I completely agree with Tom A. Systemic risk was at the heart of the matter. What is the point of having monetary policy and regulators, and not monitoring/responding. If the words "irrational exuberance" could have elicited such a response, why not a concerted effort on the part of the Fed and Treasury, SEC and FDIC, to carry out basic functions of oversight?

Geithner's Vague Plan

The posts here are surprising. Heaps of criticism for Geithner, yet an underlying tone of "what is the government going to do about this." Frankly, I was relieved that they hadn't come up with "shock and awe." Rather, it seems to me like what has probably happened since the new administration has had to tackle this is to consult with experts around the business world, for their ideas. The vagueness of this plan no doubt reflects the care that is being taken to not jump into something that 1) may not be necessary, 2) if it involves taking on impaired assets, does not prejudice the position of holders that will likely not need assistance. I'm beginning to get the impression that many people "just want this thing to end," but are not either knowledgeable or patient enough to allow market forces to have their effect. Remember, asset values have declined substantially. Let's see if economics as we know it to be in the conventional sense will begin to emerge.

The Nationalization Debate

Applaud many thoughtful posts here; some not so well thought out as well. I realize that the horse is out of the barn, but, could we usher in an era of transparency and ethics, please. For government to take responsibility for this seems far less efficient than companies doing it of their own volition. But, either way we desperately need it. If BofA was between a rock and a hard place in mid-Dec, with the Merrill deal, it needed to be said. As a common shareholder I'm feeling betrayed. I also agree that mark to market accounting is just not in keeping with going concern principles, where the market for assets is clearly not functioning due to obvious structural problems that can be tied to short term phenomenon.

How the Government Forced BofA to Marry Merrill Lynch

It now looks like BAC significantly overpaid, which would have been a direct result of inadequate due diligence. Thain said the positions which led to the deterioration in earnings were legacy. Therefore they should have been examined at the time of due diligence. I don't know about invoking a "material change" clause. As for the shareholders, let's hope the new administration is willing to inherit the mistakes of Paulson/Bernanke/Lewis in respect of more losses. Clearly lawsuits will start springing up, and heads will roll. Will the shareholder get an escape route, is the question.

BofA Following Citigroup to $5 or Lower

Banking system insolvent?? Heck, the whole country is insolvent. Soon, we are going to be sporting a 10 trillion dollar debt, granted, recent borrowings at depression rates. Nevertheless, we keep focusing on the banks not lending. Well, there is a good reason for it. There isn't anybody out there that needs money with the balance sheet to borrow it in a sane credit market, and even if you have the balance sheet, you wouldn't need the money. Are companies expanding? Duh. The only thing that is going to sort this out is time. Time to service the unholy loan balance, without taking on any more credit, at every level in the economy. It doesn't help matters when the government is tossing around billions like nickels, giving the impression that what a household should do is stop making payments so we can speed up their chances at a class bailout. Ken Lewis put his shareholders all in with the acquisition of Merrill. They won't see their money for 5 years, and a divdend that will unlikely see 10 cents for as long.

Nationalize Citigroup and Bank of America

The problem I see with the more aid maneuver is the dilution, and the fact that most likely the dividend will go, meaning that any BAC shareholders are now in the stock for 5 years, like it or not. Was this Ken Lewis' intention? John Thain is looking like the consumate salesman here. The whole thing stinks a bit, because of the lack of transparency. I can only imagine what is going on behind the scenes. Perhaps something like, "well we really can't do that...it would hand the shareholders out to dry." "Yes, but you have to understand that we have to show that the taxpayer is getting something." Very awkward, to say the least, and by no means near resolution.

Credit Default Swaps Contracts 'Only' $34.8T

Based on the principle that CDS's should only be written when there is an underlying risk to hedge/manage, the figure should be a small fraction of the 35T. The same goes for many other derivatives. I want to see standardized, exchange-traded derivatives, to stop the Las Vegas casino usage.

The Crash of 2008

After being asleep at the switch, the regulators are going to throw everything they have at the credit crunch. Yes, it's now a technical problem, but it is being fed by lack of confidence on a scale not seen for decades. Structurally, something needs to be done about the casino nature of OTC derivatives. Someway, somehow, we must disallow using CDS, CMO, IRS, etc to be gambled with, and by those who don't possess sufficient capital to assume their risk. The sea change is this, and overall cessation of leverage without capital. How any semi-intelligent regulator could think that something that trades over the counter and doesn't have to appear on a balance sheet, carrying the risk of these instruments, levered at staggering ratios is not a casino, is dumbfounding.

Why Bubbles Can't Be Stopped

I disagree in the case of the housing bubble, because this can only occur in an environment of cheap, easy and, as we have come to see, reckless supply of money to unqualified buyers. If the regulators had done their job, they would not have allowed such lending practices to take place, such as 100% loan to value, on arguably inflated appraisals. In Hong Kong, the home of numerous successive housing bubbles, the likes of which we have never seen, loan to value is regulated at 70%, with any additional borrowing required to be insured. There are ways to prevent such bubbles, or their after effects.