Invest On Fundamentals

Trident Microsystems: Still Dateless for the Ball

In my opinion, you've made the classic rookie mistake in estimating liquidation value: you've forgotten about cash burn since the Q was filed and you've forgotten about the time it would take to liquidate (and cash burn is just getting worse!). Additionally, you've forgotten about the liquidation costs (severance, disposal, etc). Lastly, cash is not cash: if you do a little work, you'll find that there's a lot of cash in Hong Kong and there are significant potential tax liabilities in getting it to the US, so cash is much lower unless you can use it in HK. We've looked at this ourselves, and even at current prices find it unappetizing unless you assume that there is a magical buyer out there. We don't see any logical buyers. If I were you, I'd do a little more work before you post something like this and reveal your lack of thoughtfulness.

Curing the Credit Crisis: A Better Alternative Plan

Correction: change "Goldman was among the few firms that knew the risks to these instruments" to "Goldman was among the few firms that took the time to understand the risks to these instruments and do something about it." All the firms on Wall St, and frankly almost all the investors, knew the risks. But at the time, few on or off Wall St. cared about the risks and few wanted to do anything about it while the going was good.

Curing the Credit Crisis: A Better Alternative Plan

ABG, aka Avery Goodman: I'm sorry, but you don't understand Bernanke's comments, despite your assertions to the contrary. If rational people have to judge, I think most would agree with me, a partner in a hedge fund, in matters of finance and economics, over your UCLA law degree and your law firm of one that seemingly specializes in silver futures regulation. But that's not the point, and this is not a matter of ego and it's not personal.
I think you are using highly inflammatory political assertions that have no basis. You say that Paulson and Bernanke have been proven wrong time and time again, but you fail to back that up with any facts (and your other facts are often colored by your personal beliefs anyway). You say that Paulson has already paid full price, and yet Paulson has done nothing but guarantee securities at Bear (which to my knowledge has cost the Fed nothing so far, and may not cost a dime, depending on how this economy pulls out of the current situation), and guarantee Freddie/Fannie obligations (which again have not cost the Fed a dime yet, and may not, but no one knows). There is a big difference in a guarantee and a purchase, as you know. I'm not a Fed employee defending the boss here. I have stated publicly and privately that Paulson's plan is imperfect. I agree that public discussion is positive. But standing on your soap box making empty, inaccurate, and inflammatory assertions about big giveaways, crony capitalism, the socialization of America, etc, is completely unfounded. Another great example: you highlight Goldman's "Machiavellian course of conduct, buying hedges against what they knew would be the inevitable demise of those toxic instruments." Why is this Machiavellian?? Goldman was among the few firms that knew the risks to these instruments if the real estate market went south. Understanding finance and buying hedges against any type of investment is simply sound business practice and evaluating risk/reward, nothing else.
Blame should be fixed on guilty parties (after we fix the current problem of market lock), and those guilty parties include everyone up the ladder of homeborrowing--from the borrower that borrowed more than he/she could afford to the bank that made the loan despite knowing the lender couldn't afford it, to the bank regulators, to Congress and the banking oversight committees that sought to maximize home ownership regardless of the consequences, to the Wall St. banks that securitized loads of junk, to the Fed and the SEC, and to the investor that bought the junk. It should be clear many people were asleep at the wheel along the entire chain. More important than fixing blame, we need to correct the system to avoid future repetition. Eviscerating Paulson and Bernanke for trying to fix the problem as best they can (when the situation calls for swift action, not weeks or months or public debate) when NO ONE has a crystal ball and no one is omniscient about the ramifications of any plan seems a very big stretch to me--especially when your background is in law and not finance or economics. It is clear to me and should be clear to others that you have some sort of personal agenda and/or vendetta (on the Obama payroll perhaps?), and that you are not being objective here by any stretch of the imagination. As such, readers should consider your skewed assertions accordingly and move on. As will I.

Curing the Credit Crisis: A Better Alternative Plan

Avery Goodman's article is at best misleading, and at worst a complete debauchery of the Paulson's intent and testimony coupled with a political smear agenda. Give me a break!
Look at the quote that Goodman himself points us to above: "In subsequent questioning, Mr. Bernanke distinguished between, on the one hand, “fire sale prices,” the ones that prevail “when you sell into an illiquid market” and, on the other, the prices that holders think the assets are really worth, sometimes described as “fundamental” values or “hold-to-maturity” value."
Fundamental value is not full price, as the article says--it is what holders think the assets are really worth! Goodman, get a clue, and research before you write. Paulson talked about yield to maturity and fundamental values, which you should understand before you fly off the handle and reveal your total ignorance. Next time, please try fair and accurate reporting??
The Fed and Treasury are not trying to turn the US into a socialist state, so get off your soap box. You don't seem to realize what could happen if this plan doesn't go through--you obviously don't understand that the events of last week were pushing our financial system to a high probability of something looking like a severe recession or another depression. If we don't do something quickly, that is the distinct possibility we face. I'm not willing to take those odds and that kind of worst case scenario, are you?? Get real.

ROI, Paulson's Plan, and the Rise of Neo-Mercantilism

HJ,
I have to chuckle a little at your earnest attempt to sort this situation out, and I agree with you on your ROI concept, but I have to say, you vastly mischaracterize the reality of the situation. You are quick to draw (innacurate) conclusions, but more importantly, you completely miss the whole point.
First, it is astounding that you assert that we are "being asked to subsidize the losses of major financial institutions without receiving any of the benefits..." Then, to further illustrate your ignorance, you ask "So what's the rush?" I have to say, these comments clearly highlight that you are simply a reporter and not a thoughtful businessman or economist.
Let me be very clear: We will all receive the main and primary benefit of Paulson's plan--a financial system that avoids financial Armageddon. To those who understand the events quickly unravelling last week, our financial system, and the world's financial system to some extent, was on the brink of partial collapse (or worse). Paulson's plan has bought us a brief period of time to put in an imperfect but functional way to stop a financial panic that would cause at least a very severe recession or possibly a depression. No plan is perfect, but Paulson's plan has a high probability of success (and where did you get your 50-50 chance? Convenient for you to say, but I doubt you base that on any analysis whatsoever). Remember the S&L RTC process in the early 90's? It worked well, and the net cost after the RTC sold off the assets was low. This is the same kind of plan, based on a previously successful model. Get a clue. If you don't believe me, listen to Buffett's interview on CNBC this morning. He is certainly smarter than you are and he said last week would look like "nirvana" if Congress didn't pass Paulson's plan. He also thought that the government could make a NET PROFIT after it eventually sold the assets that it plans on buying at a very low current price. People like you and certain members of Congress are strutting around talking about how outrageous a $700B price tag is, but they and you don't even understand how it works. The $700B is an upfront cost, just like when you invest in stocks, and then you can sell those stocks at your convenience when the market is in a better condition at a higher price. Remember the old saying to make a profit, buy low, sell high? That is exactly the plan.
People who say that the plan is outrageous and they don't agree should ask themselves this: if the plan is not approved, and hundreds of banks go bankrupt, the entire world pulls its money out of the US, the stock and credit markets are decimated, unemployment skyrockets, and we're back in the Great Depression Part II, are these same people willing to stand up and take full responsibility for their stupidity? I highly doubt it. And yet there is a high probability of at least some of these events taking place if Paulson's plan, or one very similar, isn't put in place very quickly.
Next time, get your facts straight and think about things before you reveal your stunning ignorance and publicly perpetuate false concepts.