M dub

Thain Calls Lewis a Liar: BofA Saga Continues

good blog edward. lewis wanted out with the mac though so he lost his credibility either way. when you're swinging for home runs there's going to be strikeouts.

S&P P/E Ratio Is Low, But Has Been Lower

Babak, it is nice to see someone at least writing stuff that has data or a pretty chart. I'd like to see some more details about R Schiller's chart - i assume its TTM or last year's earnings? Not sure that's comparable to 1900, but 1982 perhaps.

However, the problem with *everything* right now is precisely what the point is with this chart - that is, look at historical data and performance and predict future results. Problem is, this only works when it does then it doesn't.

The 1929 stock market crash was induced by a speculative stock lending bubble, some speculative lending, perhaps Smoot Hawley etc. The 1982 recession was energy and inflation. While it has to be something, I would say the massive credit fueled bubble now I is much broader - housing, consumer, commercial RE, and bank / finance companies. My point is that this time around, Trailing Earnings and future earnings will barely resemble one another. The "cheapness" of equities can be a complete mind *&ck as earnings get decimated and also as the government bails out creditors at the expense of equity holders.

For common stocks, in 2009, past data and future results are not a smart man's game.

Eight Reasons Bank of America Is Going to $20

Good try son, is this your grand pump and dump moment, or are you just hoping to crap-shoot something into $10 booklet sales? Why on earth would someone buy the top of BAC option volatility if it is so certain to go to $20? Sorry to say i've heard the type of song you are pitching for decades.

Your mindset is of sentiment play, and given that BAC's assets at BV vs. what they are probably worth, basically makes it obama's call. MBS purchases are coinciding with this silly stress test nonsense for obvious reasons, mainly to determine what price will clear the market without killing all the equity in any given bank. Its going to be one or the other unless they just decide to pay par for everything. The will have to take someone with them, and maybe citi is the only one.

But you're eluding to something that no one knows, though i'm just speculating you're looking for dumb money bait.

When Warren Buffett Speaks, It's Still Worth Listening

you'd have to go "all the way back" to 2003 to see these bargains? somehow that doesn't sound like such a deal....in a heavily declining earnings environment.

Winners and Losers from Oil Contango

Getting picked off on the roll, nice - you can't make this stuff up. Even putting aside the flawed concept in this etf, i'll bet most of these retail idiots think WTI futures actually move the world crude market as if they were UST or S&P futures. If there is so much of this dumb american speculative money floating around, how on earth can we even be close to a bottom in US asset prices? Jesse Livermore would be having a nice laugh about now.

btw, isn't Cushing at capacity for all intensive purposes? I don't think there's enough there to crash the spot market but it does make the carry trade more difficult.

Obama's Speech Struck the Right Tone

Felix, not your best piece today, but i know you've got to get something out. "Tone" isn't going to get us anywhere in this situation. Its not american idol gossip. People have debt, many underwater with their home values and decimated retirement accounts. Were you looking for a "please be inspired to spend your whole paycheck" speech? Cause that well is tapped, the country needs good ideas and he obviously has none. On top of it, the republicans come back with the moron Jindal. Boy are we in for a bad trip. Hold onto your hats.

Thoughts on Last Night's Speech by the President

I agree with most of the points Fred made here.

When reading the stimulus specifics all I could see was the work of some really dense socialists. Watching the speech, all i could hear was an obviously intelligent man pretending to spin it into the left middle america that elected him.

Unfortunately for O'bama, he isn't in an economic period where he can remain in a delusion that what got him here has anything to do with the serious problems at hand. What i realized: He's got nothing. And playing with Reid and Peloisi are like giving matches to pyros. He appears to only be positioning for 2012.

Stock market, look out below.

Fiscal Responsibility: Obama Takes the Reins

Seems to me the only way o'bama can slash the deficit is by

1) including the cost of the war where it was not before, thereby using a somewhat inflated starting deficit number and 2) taking credit for the reduction of expenses as we withdraw from iraq.

that spending was going to go down despite who the president was. he is only being coy by calling this responsible to include it in the deficit, as he only wants personal credit for it.

Now, it is technically correct that war spending is part of the deficit, however, after all this pork money down the hole stimulus all he will be able to show is that he reduced the war spending.

it is his only hope for showing how he will not be the president that brought back socialistic welfare and big government. good thing people are stupid.

the stock market isn't so dumb, though, so don't be surprised as we take a dive.

Here's What's Wrong with the Banking Sector

Good, except they killed the stream of customers by feeding them with radioactive hot dogs.

Or, if you will, i'd compare it to the Chinese milk that was pumped with melamine, which was good for the company and its profits but killed (literally) its customers. The powdered milk market was no bubble industry, but when you murder your customers it sure looks like one afterwards.

Now we all know what was happening to regulatory capital and accounting equity and all the of balance sheet CDO's and the funny money games and "models" where past performance apparently guarantees future results......... since banks want fees and haven't desired the low returning bore called lending for while, they leveraged themselves to the hilt with "fee" (wink wink) income, and that indeed was a bubble.

Overconfidence at its worst, especially after how we shrugged of 9-11 without a bruise.

But if they weren't feeding poison to their customers for four years like a tube-fed goose being fattened for foie-gras i'm not sure we would have ended up exactly all the way down here in economic hell, so far so fast.

Why 'GooBay' Makes Sense

Auction revenues were own 16%, not immune to the concept that in order to "sell your old led zeppelin records" someone has to have the money to buy them. You appear to be living in the past with relative valuation.

Auction has cut off its hand to spite its face (amazon). Absolute valuations are better once you know where the bottom will be.

Dare to say where the bottom in auction earnings will be and when the inflection point will be? Cause i'd like to know.

The Fallacy of Floating Exchange Rates

"The strength of the Yen is mainly based on speculative demand" How do you know this? Do you have proof or evidence? Or could it just be that the disaster of USD/GBP/EUR puts the yen to shame and capital is flowing back home?

If anything, we seem to be in a period of de-leveraging today, so this part of the argument seems weak, or bit late if we are talking about position unwinding.

Of course, you are quoting Robert Mundell so you have said enough.

GE: Lose AAA Rating or Cut Dividend

jegan,
i see what you are saying but i was trying to address the op's question of dividend and credit quality, not earnings downside. hopefully no one really sees GE as anything other than a bank in terms of the risk on investment, for if not then they own the common equity of an industrial with 13.5x debt/ebitda (yikes!) but as i said with a government backstop on the bank all is well and investors can put their head in the sand for a while.

i agree that the spin coming out of there is of epic proportions given the severity of conditions, not just economically but also at GE. They point to 70% of earnings coming from service revenue, and that's all nice, but what of all that (seemingly) ginormous operating leverage (ie high fixed overhead) as orders / backlog go down with cancelled orders? No, the gov't is not (yet) backstopping GE industrial, but who's to say they don't sell a few extra bonds at GMAC and upstream some cash dividends to parent?

Even that's not a stretch to consider, as even management decided to keep at the parent level buffet's $3b of preferred equity, rather than funnel it down to gmac when it needed it the most.

they want a stable rich dividend and AAA rating, and with government gty'ing the bank, why not? Its all possible, unless of course the sovereign credit rating goes down.......




On Jan 11 05:00 PM jegan ;-) wrote:

> mdub..Aside from the excessive use of CAPS, I agree with Diegojames...
> (Also agree with the leek pie and salmon)... GE has too many divisions
> that are subject to teh whims of our present economic collapse. And
> the financial guarantee only really applies to GMAC, just part of
> GE. What's the near-term upside for GE? The poor quality appliance
> division? Aerospace? Not the reconstituted finance division! That
> really only leaves the industrials. And maybe in a year that might
> start to work if our new President can actually get the infrastructure
> play moving, or if China gets back in gear.... Remember that these
> **big** projects have a lot of hurdles, EPA, lawsuits, contracts,
> engineering etc... and they don;t turn on a dime. Having said that,
> GE does seem to have activity in China now that might ramp up. The
> question there is, why buy GE and drag around everything else, when
> you can buy ABB or SI which are already working well and don't have
> the rest of the business to drag along.
>
> jegan ;-)

GE: Lose AAA Rating or Cut Dividend

question: why need to reduce the dividend when you have a backstop guarantee on refinancing / issuing debt? taxpayers have guaranteed GE's divivend ; at one time there could have very well been a run on the bank, but now hundreds of billions in its cap structure is backed by fdic (bonds) or fed (CP). Financial flexibility by taxpayers means GE dividend needs to go nowhere.

As a taxpayer, this is ludicrous, but as an investor what could be better than to have your guarantor be big daddy?

Why a Psychological Bottom Will Lag Any Real Recovery

Ross, good article. You're right, everyone under 40, maybe 50 is underwater in their 401k. Those people who are laid off with credit card debt may throw up their arms and cash out.

More importantly the boomers have pretty much only ever known a bull market for their whole investing lifetime. I haven't seen a bum rush for the door where everyone is yelling "i'm gettin out while there is still something left". Is it still to come?

Indeed there is a lot of hope on all that is being thrown into the kitchen sink in of monetary and fiscal policy.

Market Watch: Beware the Ides of February

Cam,
Nice article, nice call. I also think there will be a much bigger test of the low we printed recently. And people don't even know how desperate times will become, sadly. The american mind is very soft, and until they can get "toughened up" a bit they won't have the intentional fortitude to swallow some bitter tasting medicine. First the market psyche builds in a 1990 style recession, then 1982, then 70's style, and so on. But this is the perfect storm, and we're pressing further out to sea based on all past storms. We'll see how it works out.

At the minimum its going to be a deep world recession, but to some it will be worse. We, O keepers of giant debt balances, may be that someone.

See you in Feb.