k9s-4-k8

Should Bernanke Be Reappointed?

On Jul 27 11:44 AM Carlos Lam wrote:
>As a rational actor, Pres. Obama's goal is to get re-elected in
>2012. There is no question that a Fed Chmn. Larry Summers
>would be friendly to Pres. Obama's hopes of re-election and, as
>a result, employ a loose-money policy. Given this fact, Pres. >Obama has a HUGE incentive to appoint Larry Summers to the >top Fed job.

That's precisely the problem with Larry Summers. He would be too friendly with the administration. It makes him a partisan player which never works in an office that is supposed to be independent. If the Fed is viewed as partisan, his views carry no weight but with his own party. It will also make it difficult to put decisions for the sake of long term economics ahead of the President's own agenda. The bond market won't cooperate with such a choice and that's the whole ball game.

Green Mountain: Good Coffee, Peaking Chart

It appears I got stopped out on my trailing stop on GMCR. Hope you're right about GMCR.

A Strong U.S. Dollar Isn't in Anyone's Best Interest

Dave, Where are you buying that kool-aid? While Europe does have a somewhat different set of problems, it has more to do with policies that stifle innovation and instead look to reward those who suck from the teats of government aid, but that's another issue.
While the U.S. mortgage backed debacle is at the root of this recession, European bankers were reticent about doing their own homework regarding the viability of the mortgage backed securities they were investing as well as the amount of leverage they used in order to benefit a few extra basis points. This is the same irresponsible risk management that American banks pursued. No difference. But Europe is actually worse off. Most of these countries have the majority of their money in just a handful of banks. A number of these same banks used 40-1 leverage. On top of that, they don't have sustainable consumer based economies. Their economies are supported by exports, and tourism. They're dead in the water till the U.S. economy recovers.


On Apr 03 10:19 AM Dave Wrixon wrote:

> Europe has a different set of problems to the US. Europe's problems have been largely caused by the US, but are generally less severe, although there is precious little recognition of this. Consequently,
> Europe is still being protective of its inflationary postion, which
> is probably largely justified, even though there have been significant
> efforts to stimulate.
>
> The pig-headness, largely stems from the American assumption, that
> the Europeans must unquestionably do as they are told to help solve
> the US's problems, even though their is little consensus that American
> leaders actually have a clue what has happened or what to do about
> it.
>
> If America is to get cooperation in resolving its crisis, then these
> Neo-Imperialist attitudes will not help, either vis-a-vis Europe
> or anywhere else.
>
> Having said that I am sure that will join me in lauding Obama for
> addressing one of the most obvious issues, which is the over-investment
> in military hardware, which frankly the US economy can no longer
> support.

Four of Chile's Most Attractive Companies

No lithium is only the metal of the moment. Battery development has already begun moving in all different directions. One development is nanobatteries which can recharge devices about 100 times faster than conventional lithium ion batteries. The design could lead to electric car batteries that charge in 5 minutes (compared with 8 hours in today's electric cars) and cell phone batteries that charge in just 10 seconds.
Competing against better battery technologies are even newer developments in hydrogen cars. They are now closer than ever to developing a storage system that will not only fill up in 5 minutes but will have a 300 mile capacity which has been the goal.

FASB's New Mark-to-Market Standards: April Fools' Came a Day Late This Year

On Apr 02 07:46 PM User 387814 wrote:

> you are missing that most of these packages are still performing
> well above 90%. What you are missing is M to M has constricted capital
> in such an enormous magnitude that there just isn't much around to
> BUY "these so-called toxic assets". Karen, I'd love to see how you'd
> respond to your mortgage company telling you that because a couple
> foreclosed houses in the area sold at .30/$ that you would have to
> put up addl collateral or paydown your mortgage to that balance even
> though you've paid perfectly the whole time...is your house worth
> .30/$? NO...Would you sell your house at that price? NO...So why
> should the financials be forced to do the same? Over the 80 years
> after M to M was thrown outta the house, banks have had tough business
> cycles but have always came back strong by utilizing BOON CYCLES
> (which is upward expanding yield curves like we've had the past 6
> months along w/ lower priced assets/ better collateral). So what's
> the difference during this boon period as compared w/ the past 80
> years? M to M has artificially tied the banks hands and capital so
> that the banks cant DO BUSINESS in this BOON period... this is their
> hayday!!! It's like cutting toysrus's credit before X-mas, this is
> their most profitable environment, spreads nearing 5% on new loans
> yet M to M has completely destroyed the ebb's and flows/ the economic
> cycle of the financial system and it's doing the same to the economic
> cycle. Before making up wise cracks, research what M to M is and
> what the consequences of the rule are.

Exactly! I'd only add to that the colossally stupid fact that because many had made mark to market into a religion of sorts, taxpayers are coughing up hundreds of billions to prop up those reserves. Ultimately, we will see a bigger spread between treasuries and mortgage rates going forward. Banks are going to avoid them like the plague. This will remove one group of buyers. Another group that will stop buying are foreign institutions. That leaves the future in the hands of Fannie Mae and Freddie Mac, or should I say the U.S. taxpayer to hold these securitizations.

4 Possible Market Scenarios

Perhaps, the focus should be more on what happens to the treasury going forward. If the world loses its appetite for treasuries, treasuries go down and interest rates go up. Considering our current situation, higher interest rates might put a cap on growth to say the least. In turn that could be the prescription to squeeze out inflationary pressures. My guess is the government bond market will lead the Fed by the nose. Unfortunately, this will keep our economy in the crapper.

The Mark-to-Market Myth

It seems to me the reason for altering mark to market wasn't so that banks could hoodwink investors. It wasn't even about earnings though they certainly will be positively affected. The problem is more to do with huge sums of taxpayer dollars going into these companies so as to offset their diminished reserves. When banks write down performing assets to values that don't represent discounted cash flow values their reserves are taken down another notch thus affecting their abilities to lend or invest. In comes the Treasury with billions more to prop up their diminished capital base. Take any one mortgage backed security. If 90% of the underlying mortgages are performing why should it be marked down to 25% of par value just because the marketability has disappeared.? And why are we infusing more capital on account of a not well thought out accounting standard? Good thing we aren't forced to use mark to market standards on our personal home equity. Uh oh, I need a taxpayer bailout to bring my home equity back up to 20% or I lose my home.

AIG Bonuses Are Just the Tip of the Iceberg

The Dems call to return the money is a sham. Not that they might not attempt to get it back but that they weren't behind the bonuses going forward in the first place.
When the original stimulus bill was being drafted Senators Snow (R) and Wyden (D) proposed an amendment that would have blocked just this type of bonus payout. Chris Dodd (D) the chairman of the Senate finance committee together with backing of the Obama administration dropped it from the stimulus bill. Now its been revealed that Congress and the administration knew for more than a month that AIG was going to do this bonus plan. Within the last month the treasury sent another 30 billion to AIG. The outrage from Dems is ridiculous! They knew about this all along and in fact dropped legislation that would have made these bonuses impossible to do. Now they're outraged and protesting to Libby?

Goldman and Morgan Stanley: Banks of Choice - Barron's

Can't help but note the sell off on MS and GS the first trading day after Barrons' report. Maybe a little buy on the rumor, sell on the news? Always makes me wonder if some financial writers hold a story till some institution gives them the go ahead to publish so that they can sell into the story. But maybe I'm being too conspiracy minded. Its hard in a bear market.

Stewart vs. Cramer: A Cheap Shot

Cramer is the type of guy who likes to lay claim to a certain clairvoyance regarding anything financial. It is for this reason that I don't like him. He is a loud mouth with a history of continuing ethical lapses who prefers to color himself the defender of the little guy. While he is knowledgeable about certain things, he is way overboard in his own self exaltation.
While Jon Stewart's hammering was entertaining, it was also off base. Jon isn't any financial or political genius by any stretch of the imagination. His strengths are humor and capitalizing on the misled Bubbas that actually tune in less for humor and more for political indoctrination. These are the grassroots of the fascist party of America.

The AIG Bailout: Why Was the Onus Placed on Taxpayers?

It looks pretty unlikely that under the best of circumstances, we will only not owe quite as much as we do now on AIG loans. AIG has businesses to sell, and some with actual tangible assets, but a lot of others hold a great portion of their value in intangibles that are dissolving before our eyes. Consider the CEO's argument for paying out bonuses to those same executives that over-exposed AIG in the CDS market? There isn't much fear that Goldman is going to be calling on those guys. How attractive does AIG derivatives trading department look on their resume anyway. These guys will be following the tried and true career path of so many others that fail in business. They'll teach. Who is really going to want to buy this talent, or this business?

The Bane of Broken Balance Sheets

A simple screening of stocks within Yahoo's limited screening comes up with 297 companies with no debt and are cash flow positive. Those certainly aren't broken balance sheets, but neither of an even larger number of companies who might have debt but are cash flow positive, or have no debt but have some writeoffs in the current fiscal year. This isn't only a small percent of those companies that couldn't be classified as having a 'broken balance sheet'.


On Mar 06 01:20 PM dw57 wrote:

> a question not asked, are there any companies that truly do not have
> a broken balance sheet?

Relax, Obama's Socialist Agenda Is Capital Friendly

I can see Obamans carving out some form of universal coverage. They are likely already facing sticker shock and will likely introduce any number of expense cutting measures in an attempt to make the overall cost palatable. But one only needs to study the life of government programs to better understand why many are opposed. Every government program is forever changed and manipulated to expand features and benefits. This is an eternal given. We are about to embark on some type of universal coverage that will initially appear wildly expensive but 5 years from now we will look back and wonder how it grew so much from those good ole days of 2009. This is a plan that will grow exponentially larger every couple of years costing business more than it was ever marketed to save leading us down the road to global competitiveness issues which will result in a natural unemployment rate of 9 or 10% just as our Euro-models, France and Germany.

America Needs the Stimulus of Innovation

I agree whole-heartedly. But tell that to people affected by changing consumer demands and you'll likely get an earful because of the anxiety and loss of a good paying job with nice benefits. In most cases its about thrift, which doesn't cover the lavish benefits most have come to expect. Its either innovation or bankruptcy. We can still see it in our schools. Look no further than student choices for study and career aspirations. Who still can't see the importance of a greater emphasis in the sciences? Why do so many young kids not understand the importance of education? With globalization it will be those that didn't take education seriously that will live out their lives on the bottom rung of society.

The New Foreclosure Prevention Plan

We all know the arguments about fairness. What about those that payed their mortgage faithfully and yet have to spend their tax dollars on those that bought at the top of the market. But truly, not enough attention has been spent on the unfairness to those that were prudent about not overpaying for a home in an incredibly obvious bubble market. Those that have been renting and saving for that down payment. If we prop up values, they are being cheated out of the opportunity that rightfully belongs to them. What about the next generation? How are they served by the government propping up home values artificially?
If we can rationalize propping up the real estate market for a select group, can't we also rationalize bailout money for renters that see their rent go up? Why should they have to move if homeowners some of whom used 'liar loans' can remain in their homes? And what about my 201K plan? Shouldn't I receive a government cash infusion to recapitalize my stock losses?
The fact is this is an immoral act in a free market economy.