Augustus

What CIT's Troubles Really Mean

The reason that all of these borrowers are with CIt is that the local bank won't "bank" them. A good bit of that is because the bankers are lazy and don't want to have to really understand a business. But if the operator has 15 operations in five states then the local bank isn't really a good candidate anyway. Now in a downturn all businesses have cash problems which backs up on their lenders. Sure, CIT is suffering. But I would much prefer saving CIT which WILL finance a small business operation that BAC which is a national leach. What would the CIT P&L have looked like if they had been financed with $45 Billion at 1.5% as GE Credit has been? We really are seeing how the govt. programs are playing out.

AIG's Cassano: The Man Who Crashed the World?

Good write up. generally Lewis does a good job. In this case he makes some reaches that don't pan out in the final analysis. When Lehman, Merrill, and Bear decided that there were excess profits to be made in eating their own cooking it was their decision and misunderstanding of the risks that took them down. Every time I read that they were crooks I know that the author simply does not understand. If they knew it was bad, they would not have owned it leveraged 50:1. But who knew that Americans would decide to quit making mortgage payments and abandon their homes?

Mortgage Defaults and Skin-in-the-Game: Why This Correlation Is Wrong

The S&L crisis was in the late 1970's. It was caused by changes in interest rates on deposits vs. long mortgages. It had nothing to do with defaults on the 90% loans with PMI.
Requiring a large downpayment does reduce the buyer pool. That would have restrained the extreme price runups. It also requires a borrower to demonstrate that they can live on their income and also accumulate a bit of savings by some form or another. Both factors make for a more stable housing market.

Unwinding the Goldman Sachs Myth

That is about as nutty a conspiracy theory as any others presented. If you look closely at the news reports you might find that July '08 was when that oil trading firm in Tulsa went TU. That was not Goldman with all those positions. And I'm not even sure that the Tulsa traders were responsible for the high prices.


On Jul 02 08:58 AM john s. gordon wrote:

> in july 2008 GS pumped oil to 147/bbl on the premise that 'excess
> demand existed'.
> nuff said.

The Real Crisis Is Food: Beginning of the Bull for Agriculture

Dan,
Your comment only illustrates the problems with government help. A farmer friend just reported that a 3,000 cow dairy is now operating at a LOSS of $1,000,000 a quarter. That is $100 a month a cow loss. US farmers have become very specialized and have applied capital to achieve darned high efficiencies for their operations.

There is an interesting article in New Scientist which somewhat summarizes two other articles. Links to those are provided there. Final analysis is that humans are now farming 1.4 billion hectares. there are an additional 1.6 billion hectares that could be farmed. Much of that is in Africa and Latin America. From the article:
www.newscientist.com/a...
DOOM-MONGERS have got it wrong - there is enough space in the world to produce the extra food needed to feed a growing population. And contrary to expectation, most of it can be grown in Africa, say two international reports published this week.




On Jun 24 04:01 AM Dan in mpls wrote:

> I am sure that world wide food production is headed the wrong way
> vs. population but there SURE is a TON of fallow land in Wisconsin
> that the US government keeps out of production with insane pricing
> policies. I also see the big dairy farmers there selling milk at
> a loss right now while in arid California the milk supports are higher.
> The government is squarely in the way of large increases in production
> there. Global warming, if there is anything to it, would bring a
> lot of land there into more profitable use. The problem is that its
> getting colder, not warmer, despite what we read.

Dennis Kneale Takes on Zero Hedge...And Fails

Dennis Kneale is working on being the perfect emulation of a chicken. He squawks nonsense when disturbed. If he gets his hair style just a little more on target, he would be perfect in the brooder house. I wonder if he has mastered that barnyard chicken walk pattern. CNBC once titled him as the "media analyst" or something near that. He should go back to covering Lohan without her panties.

I have never seen a network switch so completely from fairly balanced to so in the tank for Obama. Immelt left only Rick Santelli (with very little air time) as the only one speaking up about what is going on in the economy. The price was high but Obama was able to buy this network also. Kneale simply adds more nonsense to the mix.

Are High Yielding aMREITs Ready to Run?

The MREITs referrenced invest in govt. guaranteed mortgages. They are not Thornburg. They can have the funding problem though. The guaranteed interest rate of 5% on the investments will not look so good if the cost of funds to carry the MBS becomes 6%. That is what happened to the S&L's in the late 70's. It took them out. This is a fairly simple business. It still has dangers.


On Jun 28 09:09 AM David Van Knapp wrote:

> Very good article, thanks. I am not an expert in aMREITS, but while
> I was reading the description of what they invest in, and considering
> myself as a possible investor in them, I couldn't help but think
> that this is the same kind of thing that blew up for so many banks
> and led to the banking/financial crisis we are in right now: Leveraged
> bets on packages of mortgage-backed securities with hard-to-believe
> returns.

Zombie Community Banks Still Lining Up for TARP Funds

These small banks are not able to get fed dunding a 0.25%. the TARP rate of 5% on preferred stock is a good deal for them. Not really a good deal, just better that what is otherwise available. The Fed is screwing all the smaller institutions.

The Real Crisis Is Food: Beginning of the Bull for Agriculture

Food production capability is not the problem. It is govt. interferrence with the production that is the problem. A prime example is Zimbabwe. Once an exporter, the country is now facing starvation. All because of politics.

Strange Inconsistencies in the $134.5 Billion Bearer Bond Mystery

Yes, but the mystery continues to be "Why has the US Treasury not made any official commnet on the bonds?" Of course, some central bank could have requested delivery and then have accepted bogus bonds for the money. That would be a real downer for those folks. However, if we bailed out AIG to save European banks, Whay not just take another $134.5 billion on the balance sheet? Who got the real money?


On Jun 19 02:36 AM Dada wrote:

> Let’s presume country X holds US bonds worth something like $134
> billion. Country Y has a technology of counterfeiting bonds the way
> it is impossible to separate them from original (even imperfect counterfeits
> could work for this scenario). Country Y, knows about countries X
> bonds. Y makes $134 billion and exposes it as smuggling effort. US
> deny them as counterfeit. The effect is that country X now has no
> guaranties that their bonds will be recognized as real or somebody
> will claim that amount from US. So this could force the country X
> try to cash out it and effectively will hit US economy or in case
> if US denies it – will force US and Y into conflict.

Strange Inconsistencies in the $134.5 Billion Bearer Bond Mystery

You may be correct about the capabilities of the Italian police in this matter. We should not necessarily expect the Italians to be the experts in the matter. However, what is missing is the declaration of US officials that THEY have inspected the goods and that they are fake. If the US officials do not make that statement, then they must be good for collateral. And that is what is most curious. For verification of $134.5 billion I would think that Treasury could buy a couple of plane tickets. Or, Maybe they did and are not able to say that the bonds are not good? Why does the mystery continue?


On Jun 16 03:06 PM manya05 wrote:

> Mmmm.... I have my doubts the Italian police can tell the difference
> between a real and a counterfeit piece of paper (bond, cash, whatever).
> Could be as devious as the article suggests, but it sounds like a
> hoax to me...part of a Japanese reality TV show maybe?

Reverse Converts and Vince Fernando's Straw Man

"The problem with reverse converts isn’t that they’re too risky, it’s that they’re a transfer of wealth from the client to the broker. This is true in general whenever a stockbroker puts a client into an options trade: options, being derivatives, are a zero-sum game, and the options game is very profitable for the sell side. It’s simply a truism, then, to say that the buy side, in aggregate, loses money whenever it dips into the options market."

++++++++++++

More idiotic nonsense was never written.
How did it work out for the low level Google employees who received options as part of their pay deal?

Sure, there can be a question of pricing, and risk, and knowledge of what those risks may be. The proposition that option buyers are always suckes is simply stupid.

Reverse Convertibles and 'EIPs' – Here’s The Point

Explaining these as Cash Secured Puts is fine. The question is whether the buyers of these instruments knew that is what they were buying. You and I might believe we understand it, however do you believe the regular $10,000 CD buyer has a good understanding of it? That is the problem. Really the question goes beyond whether they got a fair price for the deal. It is whether they would have possibly have entered into a deal of that type if they had understood it.

CB Richard Ellis Prices $450 Million Sub Notes Due 2017 at 11.625%

What would the value of the real estate be if the cap rate used for the appraisal was 11.5%?

Natural Gas Should Get a Boost from China's New Demand

The target market for the LNG exports has to be western Europe. They are being held hostage by the ruskies now and are paying jacked up prices. The US has a current oversupply that is unlikely to disappear for a couple of years. OBamanomics will increase US industrial costs, driving more industrial users offshore. The economic rebound, if any, will be weak and tepid, at best. Very little LNG will be landed at US receipt points as the market is saturated with supply.