EdG

Street Fighters: The Last 72 Hours of Bear Stearns, by Kate Kelly

My view is that investments banks were so over-leveraged that a drop in the real economy meant that they had to disappear this depression. The pure investment banking model has been put away until the next boom.

Has Gold Been Manipulated?

I feel Gold prices should be a lot higher if this is another great recession. One reason is that China has never had that great desire to hold gold. Traditionally they have coveted silver and if seeking alpha is to be believed they are now also coveting copper.

The most likely reason is that most investors have invested in cash not gold. As this is a debt crisis we are likely to see more trouble when cash is devalued. ie: a move to gold.

I think the interesting question is how the team think cash is to be devalued? Inflation, pegged exchange rates or even central bank deflation. Surely this will cause panic?

Berkshire Hathaway Q1 Portfolio Changes: Does It Pay to Follow Buffett's Moves?

The only real way to follow Buffet is to buy shares in Berkshire. WB is worth a high PE based on his investment results, unfortunately it is unlikely he will be around long enough to generate the earnings. I dont think the board: family, Gates, and the girl from Yahoo are capable of running Berkshire. The only hope is Charlie gets the reigns but he isnt any younger.

Warren Buffett's Stock Holdings Outperform

The interesting to me (and I am a big WB fan) about the recent Berkshire business results is the value of the investments invested by the insurance companies. Wells Fargo, Coke, Amex, Moody's etc all crashed last year but there was no major hit reported on the companies profit and loss. I guess this is just another american company not marking their assets to market and reflecting their gain or loss in the P&L.

In Warren's defence he must expect all investors to see the decrease in the share prices, the accounting treatment and the fact he is not planning on realising these losses.

Friday Outlook: Commodities, Global Markets

The Gold chart would be useful along with a chart showing the USD versus a basket of currencies. At some stage we must expect the USD to depreciate causing USD stocks to rise and joy in the US but leaving international investors like myself unimpressed.

Where We Stand Compared to 3 Other Bad Bears

Mr "RiskReturnOptimizer" (whoever this is) makes an interesting point. This is the first truly global recession with floating exchange rates. I think analysis was a lot easier in 1929 when most currencies were backed by Gold. For example if the american dollar decreases in value then global stocks on the NYSE should increase in value to compensate. As a UK based investor prices would stay the same unless the pound also decreases. Further complications occur with global trade, it may be correct to think that exporting countries will be hit hardest by the recession. This may not be true as these countries through competing on the global market may be more flexible and at the very least have significantly less debt. In conclusion I would like to value stock prices on a stable indicator of value. Traditionally the world has used gold. I suggest we need a better measure of value, the big mac was tried, as also was silver, copper and even platunium. Suggestions please.

Where We Stand Compared to 3 Other Bad Bears

Paul: Please keep these updates coming. In the 1920s the florida property cashed before the major speculative bubble crash in 1929. Could this be comparable to the dot com crash before the 2007/2008 subprime crash?

Preview from Europe: Bear Market Rally Rolls On

I agree this looks like a bear rally and the situation close to how it was in 1929/1930. Unfortunately it is impossible to tell the real situation and for anyone out of the market at the moment now has missed out on at least a 25% gain on most stocks. Encouraging news out of NZ of a 0.2% rise in retail sales indicates that the cut in interest rates has filtered through to the consumer and we are likely to see this effect in other western economies. Also copper has risen 50% in the last two months and oil prices are beginning to rise.

It is also interesting to note that in 1929 there was low inflation, low interest rates and no substantial stimulus programs. It may mean that shares will increase in nominal terms as the current stimulus will create inflation in contrast to 1929. China may even keep inflation low trying to utilise their current capacity surplus.

In reality no one has any disposable income so I believe we will see every company reporting less revenue and exponentially lower profits. It is these profits that drive company value so I believe this rally will end. It is probable that companies will report good first quarter numbers utilising provisions made in the last financial year. Therefore expect bad numbers reported in quarter two - i.e: after June 2009.

Preview from Europe: Beware Wild Swings

New Zealand retail sales should be looked on as an accurate predictor on UK/US retail sales. This country has the same language and culture and also the same housing market problem. It also has a lot of immigrants from the UK/US supporting the local economy.

Is the Government Deliberately Trying to Lose Money on Its General Motors Investment?

Sorry I meant "use" the investment to subsidise the other creditors. Especially now I reread the article the retiree benefits.

Is the Government Deliberately Trying to Lose Money on Its General Motors Investment?

An investment? I though the money was paid so that GM would survive until Obama is president?
Good article, politically it now makes sense for the government to back administration and us the "investment" to subsidise the other creditors.

Stanford's Last Days of Freedom

The question is who is next? In 1929 one of the biggest scandals was engineered by Goldman Sachs. If you have funds with them I would remove them now as they only care about number one.

From John Galbraith's book "The great crash of 1929" -
Mr Sachs: The firm invested in 10% of (Goldman Sachs Trading Company) the entire issue for the sum of £10m.
Senator Couzens: And the other 90% was sold to the public?
Mr Sachs: Yes, sir.
Senator Couzens: At what price?
Mr Sachs: At 104
Senator Couzens: What is the price of the stock now?
Mr Sachs: Approximately 1.75

Stock Market Performance: BRICs Leading Current 'Recovery'

China's stock market is over 90% dominated by the domestic investor and is divorced from earnings and dividends, the fundamental value in stocks.

I ask: does it makes sense that the biggest banks in the world are in China? does it make sense the total market cap of China's stock markets? Did it make sense in the 90s that Japan had the biggest banks in the world? and the stock market had highest market cap?

Could the Dow Sink Another 50% by 2012?

I think most people, especially the professionals have their portfolios biased to the positive or increasing stock market. It is instructive that the stock market is still only fair value and this is at last reported (high) earnings. Most companies (and people) still have too much leverage. It makes sense to me that the de-levering cycle will result in stocks being cheap at last reported earnings so I conclude that there is still a large decrease on the way.

10 Dangerous Stocks to Avoid

This is a blatant piece of advertising and the article is badly written. The main problem with increasing leverage is that it increases the possibility of bankruptcy. If the graph is true it could mean that assets have been written down or even that cashflow has collapsed and the three companies IBM, CAT and Marriott are in trouble. At the very least you would expect the market value of the equity to be greatly reduced.

If I were to guess the reasons it would be: IBM - write-downs or reduced revenues as companies halt capital projects to save cash-flow, CAT - decreased demand for vehicles as per the rest of the industry, Marriott - write-downs on property.