Chezfrederick

Poisoning the Green Shoots

Excellent article... I agree with your perspective 100%. Manipulating market sentiment may keep the momentum going a little longer, but at some point reality dawns and the major correction shall come to pass.

Why ETFs Are a Scam

Excellent article, well written and 100% true... I especially liked the title... ETFs are good for TRADING period.

High Expectations for Canadian Banks Is Unrealistic

I could have agreed with your assessment, had you been alluding to banks other than Canadian Banks. First, you fail to mention that Canadian Banks are down an average 35% from their peaks. Second, they were not engages into any of the sub prime and other exotic orgies which undermined their asset values. Third, they did not require any bailouts or taxpayer funding. Fourth, they continue to be very profitable and are rewarding shareholders for their loyalty. Fifth, the regulatory and oversight environment in Canada, combined with the banks' conservatism, kept their fundamentals solid and their capital whole. In other words, This is a model for any banking system.

The substantial drop in their prices from their peaks, was driven mostly by a herd mentality, punishing Canadian Banks along with the others. Mediocre analysts who paint the world with the same brush are often wrong as they showcase their weak analysis and poor judgement.

Another point, is that the Canadian economy has not suffered to the extent of the global downturn in most of the advanced world. It is true that real estate values have dropped in Canada, but to a fraction of the drop in the US and Europe. The Governemnt Balance sheet is very sound with accummulated budget surpluses for more than a decade. All this bodes well for the banks and their future performance. Here is a comment I wrote on a recent post on RY's write down of goodwill:

" Canadian Banks have always had a very conservative and at times boring posture, and this is just another confirmation that they prefer to keep clean books.

Further, investors understand that the economic downturn along with the presently reduced stock prices, provides Canadian Banks the opportunity to mop up their balance sheets as much as possible, such that when the economy turns around, they can shine with outsized and stellar performance, as only then will their stocks rise significantly.

Another comforting point, is that the write down of goodwill would not have been effected in this quarter, if RBC had other higher priority write downs of any substance or other skeletons in the closet either on balance sheet or off balance sheet."

My final comment; it is amazing that you find the 4.7 yield insufficent and unsustainable, while at 7-9% analysts we predicting, if not calling for the slashing of the dividend... in lockstep with the insolvant US Banks. Please find another excuse to write more reasoned and well researched articles.

Royal Bank of Canada's Impairment Charge a Sign of the Times

Canadian Banks have always had a very conservative and at times boring posture, and this is just another confirmation that they prefer to keep clean books.

Further, investors understand that the economic downturn along with the presently reduced stock prices, provides Canadian Banks the opportunity to mop up their balance sheets as much as possible, such that when the economy turns around, they can shine with outsized and stellar performance, as only then will their stocks rise significantly.

Another comforting point, is that the write down of goodwill would not have been effected in this quarter, if the RBC had other higher priority write downs of any substance or other skeletons in the closet either on balance sheet or off balance sheet.

The Next Leg up in Financials

Refinancing in the current economic environment implies giving concessions to avoid foreclosures and reposessions... It is doubtful that banks wrote down such mortgages below the value reflecting the refinance terms. By all accounts, banks have written down such mortgages to 96-98% level which means they still have to swallow a big sour pill closer to the 50-60% level in order to refinance. Lower interest rates are not very helpful either if fixed funding costs on their balance sheet is at higher rates.... Negative spreads will be a big drag.

I suggest you consult with proper bank analysts who are more familiar with the dynamics on bank balance sheets. Your article is very misleading. After 27 years of working for a leading bank, I know your statements are false.

Does Quant Fund Unwinding Explain Bullish Market Behavior?

Excellent Article, thanks for the insight...

Hope and hype are not enough to sustain the ongoing rally... and like all bubbles, strong moves which are not suppoerted by macro economic and fundamental factors tend to burst with severe consequences... I think it is time to sit and watch for the next week or two.

Let's Keep Big Banks from Ruining America Forever

Excellent article. Thanks for exploring your point of view and your conviction.

I conceptually agree with your views, and believe that big banks who are wowfully undercapitalized and effectively insolvant need to go through and orderly bankrupcy and be broken down into several smaller units, none of which are "too big to fail", nor have enough influence to dictate government behaviour now or in the future.

One of the worst elements you raised is inertia... unfortunately, this is the reality today. When uninformed masses cannot fully comprehend the significance of the state of the banks and the actions of the US Treasury, and the substantial subsidies to Wall Street, there is a very strong likelyhood that inertia will be perpetuated.

Finally I think that the bank issues will solve themselves over time as they implode over the next 2-3 years attempting to solve their insolvant balance sheet issues. Government support and subsidies will not be of sufficient to have these banks avoid their fate. Unfortunately government actions will delay the unavoidable outcome for as long as taxpayer money is available to prop up Banks. At some point, congress, and or taxpayer revolt will cap such efforts as we continue to mortgage our kids future.

Good luck with your educational crusade, and call to action.

Faber and Schiff: Inflation Inevitable (So Here's What to Do)

I am entirely in agreement that inflation will be unavoidable in the near future and will be with us for some time to come.... I have held TBT for a period of time, and came to the realization that timing is everything... The experts have couched their comments using words such as "eventually", "not too long from now".. etc.

The question is how long? especially when you are betting against the Fed whose objective is to keep interest rates low. Also liquidity injected into the economy is beeing locked up by banks in the form of reserves, and by consumers in the form of savings... rather than stimulating economic activities... Government intervention makes this a risky proposition for the next 2 years, regardless of where inflation stands, unless we see a convincing pick up in economic activity.

Oil ETFs: Cramer Discovers Contango, But Forgets History

Everyone takes Cramer with a grain of salt... He is an entertainer and seeks levity. The fact that he pointed out the issues with USO however, is positive, and for the wide audience of uninformed, it raises a red flag. If one wants to track the spot price of oil, USO is not the means to do so yet many pundits seem to peddle it as the way to go... Most investors are not very well informed and I think any forun through which we can raise their awareness is positive...

I like Seeking Alpha because of this very reason, and I am encouraged that Cramer at least tried to be informative rather than funny. But I agree that he is usually very extreme in his description of the facts and conclusions and hence listeners miss the point.

Wall Street Already Back to Its Criminal Ways?

Excellent investigative reporting... Excellent write up, and very well laid out... Well done.

I wish there was more of this calibre of questioning and reporting in the financial press... but they seem to prefer to hire analysts(????) and reporters who are lazy or prefer to be fed the content.

Employment Situation Report: No Good News

Thanks for digging further behind the headlines. I find the media slant and analysis wanting in their reporting... And rather than reporting facts, they seem to have hidden agendas or are being dictated the content.

While I don't like your findings and conclusion and wished for a different reality, I have to agree with you that there is nothing positive in these numbers if anything they are staggering.

I think now is the time to take profits and hit the sidelines.

Global Economic Crisis: Recovering from a Tailspin

Financial returns are a means of measuring success. They are easy to understand and provide immediate understanding of the magnitude of the results. However, these are insufficient by themselves and have a tendency to obscure the real success when financial returns become an objective onto themselves. When combined with inappropriate focus and behaviour, these lead to greed for its own sake.

In respect to your comments on innovation and creativity, I agree wholeheartedly that this is the way of the future. I have written the following comments in another post:

"I would like to add a couple of other factors I thought you should include in support of the future growth and leadership of the US...

1. I have always believed that the success of the US is because of a deeply imbedded system of "Meritocracy". Where else in the world is there such a system in place? Attracting and retaining human capital and brains, enabling success, enticing creativity and innovation is fundamental to the US success story. America opens it's doors to anyone who wants to work hard and achieve success. You can work in the US, become a citizen and if you so desire, and are elected, within 5 years join the governing elite. Try becoming a German or Japanese citizen... It's almost impossible. And that brings me to my secong point.

2. The US economic leadership is built on innovation and creativity. The administration needs to encourage and support these endeavors. It is the products/technologies of the future that will bolster and grow the economy and maintain the US' leading edge. Others can only dream of such prospect, which is inate in America. In other words, brains vs. brawn. You can wrestle for equilibrium in trade balances, or own the only source of export for new technology... Better yet, a balance between both options helps in the short term as well as the longer term.

I am not an economist, but I believe these 2 points warrant some consideration in your thinking on the US economy.

Thank you for a very good article.

Unemployment Reaches 8.5%; Businesses Gird for Depression

Very good and hard hitting article... You have clearly stated your point without mincing any words. I would like to add a couple of other factors I thought you should include in support of the future growth and leadership of the US...

1. I have always believed that the success of the US is because of a deeply imbedded system of "Meritocracy". Where else in the world is there such a system in place? Attracting and retaining human capital and brains, enabling success, enticing creativity and innovation is fundamental to the US success story. America opens it's doors to anyone who wants to work hard and achieve success. You can work in the US, become a citizen and if you so desire, and are elected, within 5 years join the governing elite. Try becoming a German or Japanese citizen... It's almost impossible. And that brings me to my secong point.

2. The US economic leadership is built on innovation and creativity. The administration needs to encourage and support these endeavors. It is the products/technologies of the future that will bolster and grow the economy and maintain the US' leading edge. Others can only dream of such prospect, which is inate in America. In other words, brains vs. brawn. You can wrestle for equilibrium in trade balances, or own the only source of export for new technology... Better yet, a balance between both options helps in the short term as well as the longer term.

I am not an economist, but I believe these 2 points warrant some consideration in your thinking on the US economy.

Thanks again for your thoughts and well written document.

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

Cobra, look at the facts... The Bush administration blew up the economy and undermined the markets and the US. You have to agree with me, whether you like the budget or not, that you would like Obama to succeed in turning things around... unless you want the US to sink into oblivion. Keep an open mind, and let's all hope for success. At the end, cool heads prevail and hotheads fade.

Cheers and have a wonderful weekend.

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

Would a weak dollar push China and others over the edge, prompting them to dump their US denominated reserves? Would this be in the interest of future US economic growth? Where would the US get their credit? What interest rate will it have to pay? and what happens to the deficit? Default... credit ratings... reserve currency status?....

This is not an issue of strong vs. weaker currency. Like everything else it is a balancing act and a difficult one at that. This is the high wire act that needs to be cautiously maneuvred which I think the boys in the US administration are faced with and I give them high mark to this point. The energy, determination, leadership and willigness to compromise on the world economic stage have set the tone, and given the market some hope... I wish them all the best of luck and success... We will be all better off. Can you imagine what it would have been like if Bush was still around?????

Cheers, and let's count our blessings...