htex

Fair Value for the S&P 500? Tell Me Lies, Sweet Little Lies

Ah, one's old breviarium verum-i...does not apply in the market. More certain doth caveat emptor to I.

Is Economic Fraud Really Burgeoning?

Financial Fraud (er...engineering) let's start with the G's; GE, GM, GS.

A continued White House push for financial reforms, most recently with plans to rein in rating agencies, is facing growing resistance among doubtful lawmakers.

Olly, Olly, Oxen, Free, Free, Free, Free. Since many are declaring the recession over and Obama/Rahm are taking credit for saving the economy, no need to do anything drastic. All are ok. Come on just start the new game so that the sheepel don't think about the lying, cheating and stealing in the last one.

Rich Harvard, Poor Harvard: "Could the same lethal mix of uncurbed expansion, colossal debt, arrogance, and mismanagement that ravaged Wall Street bring down America’s most famous university?"

Here is the conclusion of a very long article by Nina Munk, Vanity Fair contributing editor.

"One day, desperate for someone in authority to talk on the record, I caught up with Michael Smith, dean of the Faculty of Arts and Sciences, as he was leaving the town-hall meeting of undergraduates at Boylston Hall. Unaware that I was persona non grata on the Harvard campus, he talked openly to me.

I walked with him from the meeting to his car. How did the university get into this mess? I asked as we cut across Harvard Yard. Smith stopped. 'First of all,' he remarked, reinforcing what I already knew, 'the endowment growth did not keep up with the expenses. We hired faculty faster than we really should have We put up buildings based on debt financings—not fund-raising. And we decided the right thing to do was this financial-aid package, even though, again, we didn’t have new finances behind it to actually do it.'

A popular professor with an undergraduate degree from Princeton and a Ph.D. from Stanford, an expert in computer architecture, and co-founder of a data-security company called Liquid Machines, Smith, 47, is a driven and dedicated man. Yet even he conceded that his current job has been taxing. He’s held the position for less than two years; still, as he remarked to me, it 'seems like forever.'

We were in the parking lot, Michael Smith and I. The sun had set. Smith looked tired. It can’t be easy to be charged with cost-cutting at a university that refuses to use the term 'cost-cutting' and instead goes on about 'alignments' and 'resizements.' He added: 'The hope was that the endowment would continue to increase, and we could get some support from our alumni base to help pay for those changes in the program.'

He paused. 'And then, of course, the bottom fell out of the market.'"

Spent what they didn't have. Borrowed instead of doing the heavy lifting of pitching the plan and raising the money. Easy credit with plenty of security behind it. Same old story.

They'll survive. They'll just, like California, do it on less revenue.

Jobless Recovery: Fasten Your Seatbelts

Ok, first some dumb questions: (a) So when we have to pay for this "much too small stimulus package," what happens to the economy? (b) Could the true drop in GDP be greater than published and therefore "Okin's Law" applies?

Speaking of the stimulus and not the deficit, one cannot have perpetual growth or even quality growth based upon "viagra and candy" (Buffett's description of the stimulus package). No doubt fun for the moment (and a false stimulant of perceived real performance) but a let down afterwards when one sees the impotence in the "government" economy.

CIT (CIT) says talks with government have ceased, and that it's been told there's no appreciable likelihood of support in the near term. Board and management are "evaluating alternatives." Trading in CIT halted late in the session.

This would be CIT's 2nd bailout. They are not "dissing" small business. The downturn is worst than advertised. CIT took the government's word and used the 1st bailout to lend to small business. GS traded with theirs. Oop's, guess who wins and loses. It was a scam (the bailout) and they (our leaders) should have let them all sink or swim. It is still a credit crisis based upon a huge collapse that our leaders have played games with.

Putting Goldman Earnings into Perspective

So who did Goldman recieve these great earnings from? They pulled liquidity out of the market with a computer program? Not smart enough to figure it out...but it looks like they are going to lock in earnings every quarter on many who are long? If the money doesn't make it back to the floor, can Goldman still get at it? Feed the giant and maybe it will let you live!

Consumer Confidence Fading

based on the "thumbs down" above, I shouldn't comment after a glass of red wine.

but heck, why not dig the hole deeper (and violate the first rule of holes). if the price one charges does not cover "costs" (read all...) then the good or service will go away unless this underpricing allows one to achieve a monopoly position (i.e. kill competition). the only way is cheap capital (read financing or fed gifts).

IMHUO (see above comment for the U) underpricing or monopolies are never good for the consumer and the short term gains are long term losses.

Have a great half weekend (oh no, another glass of red wine showed up) :)

Consumer Confidence Fading

Here's a thought. Wait until retail centers are boarded up and office buildings have see-through floors. Commercial real estate problems will be in consumer's faces for the next 2.5 to 3 years. They have only started to see businesses go dark. Deals and sales are great but they violate the most basic of economic rules. If you charge to little for a good or service, it will go away. Cheap financing and fancy bookkeeping have dampened the power of this rule. I would suggest that it is lurking just-around the corner. If a good or service is "over-priced" it will be there tomorrow for one to trade for or not trade for. In my uneducated opinion, the destruction of manufactures and distributors and retailers because of the desire for a deal will eventually lead to inflation. In other words, I think inflation will come from the destruction of production not the velocity of the turnover of the currency/money that is being pumped into the system. I think the current pumping is just covering previous blood loss. Just a thought on a Friday evening after a large glass of red wine. Have a great weekend.

Unbelievably, the No-Doc Loans Movement Gains Steam

I don't have a problem with someone loaning money to another on a "no doc" basis; just don't use my money, don't use OPM, don't lend it on a fractional reserve basis, and don't allow the government to guarantee it or bail out the entity that chooses this blind and stupid form of lending. Oh, and require full recourse from the borrower. Let me suggest the outcome...no "no doc" loans. Well I'll be....

Two Congressmen Want a Moratorium Imposed on the New Appraisal Rules

What is it tonight with spam? Can't ya'll kill cetin? Again, I feel like I am on the first floor of a two story outhouse and I can clearly see the a$$ above me.

Appraisers need to have their E&O carriers called with claims. That'll clean up the problem.

O, the irony: With just $2.5M to live on for the balance of her life, what Ruth Madoff really needs right now is a money manager she can trust.

Commenting after spam is like sitting in the first story of a two story outhouse...and the top floor is occupied.

Oh, she'll be ok. She has children and friends of Bernie that are walking away with a lot more. This keeps her from being prosecuted.

Time to Go Long Natural Gas and Short Oil?

Not a trader but have interest in NG production. Here what I posted on the other NG article on SA this a.m.

Could Oil/NG pricing ratio be related to the fact that oil is acting as a "safe harbor" commodity (reacting to devaluing of the dollar and possible inflation)? And, NG is behaving so poorly because supply is still being burned off from its peak pricing moment in the summer of 2008 that led to increased E&P. And, demand for NG is down. Further, the folks from the mideast who invested billions in our banks (previously known as investment banks) have oil they would like to sell at a certain price...maybe?

Natural Gas: The Next Big Thing

Could Oil/NG pricing ratio be related to the fact that oil is acting as a "safe harbor" commodity (reacting to devaluing of the dollar and possible inflation)? And, NG is behaving so poorly because supply is still being burned off from its peak pricing moment in the summer of 2008 that led to increased E&P. And demand for NG is down. Further, the folks from the mideast who invested billions in our banks (previously known as investment banks) have oil they would like to sell at a certain price...maybe?

Un-American Government Intervention

Good article. This is the moral hazard some have been continually beating the drum about. I've been to the courthouse several times as of late. Your contract/lease/agreement may not stand you well even when you have done everything right and the party who has failed to perform has no defenses. Risk is heightened in every deal. Guaranties, higher interest rates, higher rents, more security, etc, will all lead to higher costs which will be passed on and provide another drag on commerce. Thanks again Peter for keeping it real.