AndrewBaker

Wall Street Breakfast: Must-Know News

The PPIP will give banks plenty of opportunity to sell bad assets amongst themselves, and I'm sure the accountants have already lined up ways to show a profit from the off. If one bank can sell a written-down asset at greater than the written down value, it can book a profit. The purchasing bank can show it on its balance sheet at the price it paid for it, so no loss at this stage for them. There can then be a mirror sale in the other direction, giving the other bank a profit to book. (In practice these buys and sales will be spread around and not so obvious to spot.)

Get ready for another big dollop of bank profit announcements in the near future. Gee, why did we ever doubt these guys?

Wall Street Breakfast: Must-Know News

Tucked away at the bottom today is the news another five banks have gone under, with assets stated as $1.04 billion. Given the likelihood that the smaller banks were better run as regards keeping an eye on lending quality and therefore ultimate profitability, what does that say about the assets of the "too big to fail" banks and financials?

The answer is of course, very little that is any good. Waiting for the real and bad news about the banks' bad assets is like watching a car crash in slow motion: you see it happening, but it seems like it's taking forever.

Maybe if each of us told three people that bank stocks must be sold and for them to do so and tell three other people the same, the message may get home just a little sooner: falling stock prices will alert people more than anything else, and the false hype that's keeping them up won't have so much affect then. Worth a try!

Wall Street Breakfast: Must-Know News

Slowly slowly we are starting to hear admissions that things at financial companies, banks et al, are not so bright as they have recently been painted whilst the stock price ramp was in full swing (which enabled many to sell new shares at sky high prices). Do look around too to the UK, where Barclays recent Abu Dhabi IPEC saviour has now decided to offload stock they bought just seven months ago, and at a nice profit. These sovereign wealth and similar funds do not invest at the outset for a short term return, so what has caused them to get out so soon?

Pick any one from three:
1) They feel they have helped out some very nice people.
2) They weren't invited to the "D" day celebrations.
3) They realise bank shares are in a bubble and are getting out at a profit whilst they still can.

No hints given; work it out for yourself. It can't be that difficult, can it?

Wall Street Breakfast: Must-Know News

The financial and stock market manipulation continues, and with lower trading volumes in the summer, it'll be that much easier.

Bernanke says: Without a "strong commitment to fiscal sustainability in the longer run, we will have neither financial stability nor healthy economic growth."

So true: shame the government don't take their own advice.

Wall Street Breakfast: Must-Know News

This re-posted as posted earlier, then disappeared (so if there twice that is the reason):

"The motor industry is a big problem. They've built big thirsty vehicles for many years that the public used to like driving. Pay has been too high because the unions have been so strong. The vehicles still sold as the running costs were not so high. But now, gas is no longer so cheap and won't be again, small cars are wanted more and the unions have to give in on pay if any motor industry is going to be left in the US. Foreign makers offer better smaller cars at lower prices.

Conclusion: we have to bite the bullet, make the US motor industry more competitive which means smaller cars, smaller pay and smaller pollutants whilst driving.

Before that though, there will be horse trading, so it is still gonna take some time to get reality into this market place, including the downsizing in worker numbers that will be needed."

Wall Street Breakfast: Must-Know News

The motor industry is a big problem. They've built big thirsty vehicles for many years that the public used to like driving. Pay has been too high because the unions have been so strong. The vehicles still sold as the running costs were not so high. But now, gas is no longer so cheap and won't be again, small cars are wanted more and the unions have to give in on pay if any motor industry is going to be left in the US. Foreign makers offer better smaller cars at lower prices.

Conclusion: we have to bite the bullet, make the US motor industry more competitive which means smaller cars, smaller pay and smaller pollutants whilst driving.

Before that though, there will be horse trading, so it is still gonna take some time to get reality into this market place, including the downsizing in worker numbers that will be needed.

Wall Street Breakfast: Must-Know News

I wholeheartedly agree with doubleguns.

On May 15 07:44 AM doubleguns wrote:

>"Cetin read the article today before you start your "its a wonderful
> world" script today.
>
> Insurers getting tarp money, EU GDP falling, Govt taking over BoA
> board, BoA stock dumped (for a loss), Jobless claims up, Prices up,
> Mortgages rates up, short bond rates are still going down and the
> economists still have thier heads in the clouds."
.........................
In addition, insurers getting TARP funds is one more sign of problems not yet admitted to. The banks bad assets show more quickly due to the nature of the business, which is precisely why insurers bad assets can be hidden for so long. They could be holding bonds riddled with defaulting debt, mortgage, credit card, car etc ... , but as insurers pay-outs stretch years into the future, it could be a long time before they have to own up to the non-performing assets and the write-offs that go with that.

I also agree with doubleguns later comment: I need a drink!

Wall Street Breakfast: Must-Know News

Yes, sell - or short - in May looks like being good advice. The bad news in the financials will slowly be leaked out over the summer so there will be even less reason to buy stocks then. There is a limit beyond which the markets cannot be falsely inflated, and that limit must have been very nearly reached by now. I'm enjoying pulling back a little of my rally losses with FAZ, SDS and similar right now; and my unleveraged shorts will tick away nicely for some time yet, thank you.

Wall Street Breakfast: Must-Know News

They keep on talking the banks up but we still do not know the extent of the bad assets, even though it is proposed that they are sold off. "A pig in a poke" comes to mind.

Wall Street Breakfast: Must-Know News

AIG has passed the money around to save other financial companies (for now), and the politicians at the G20 weekend meet are singing in chorus; but it's not very tuneful. Yet so many have put money into the financials as a result of the noise being made about it getting better, and yet we still have not had the news about just how bad the bad assets are. We are now at a point where protection should be in place by buying financial shorts and perhaps taking any profits on the longs, if you are fortunate enough to have any. Back to AIG: the insurers have toxic assets too in the bonds they hold which have CDO and the like wrapped up in them. We have the displeasure of their solvency problems still to come. Don't get complacent.

Wall Street Breakfast: Must-Know News

Well, the markets are saying that they do not much like the bailout terms. It all looks very nice that the bankers are saying sorry and accepting new constrains, easing back on foreclosures and similar; but they're still going to do alright thank you, and now will have the policitians to blame when it gets worse, which it will. I just hope that some of the money being spent will really help educate our kids, repair our roads, bridges and other infrastructure, and get people thinking more about how good things can be rather than how much can we get. Investing-wise? I'm still more into shorts than longs. Sadly, it's going to get a lot worse before it gets better.

Wall Street Breakfast: Must-Know News

Well ... no-one likes it, the market's selling off, and billions of dollars are going to be thrown around and wasted. Our dollars! I tried to like things, and even went long financials (foolish, I know): my answer now is to short, short and short again until I get back the good money of my own I tried to use to support the "recovery." With dishonest bankers and incompetant politicians (regardless of creed), we best look out for ourselves 'cos sure as anything, they won't do it for us.

Wall Street Breakfast: Must-Know News

Why the delay? Uncertainty doesn't make for optimism. We've a bankrupt financial system and have little choice but to bail it out with tax dollars, whipping the financiers who put us here as much as possible to make us feel just a little better. At the same time we have to trust our politicians to do the job, which is also not adding to the feel-good factor: and at the end of it, we pretty much know it'll get worse. So, let's get the proposed deal out as quickly as possible, so we can see how much more it's gonna cost us and then we an get on with dealing with the bad. The sooner we do, the sooner we can get through.