Emerald

What's To Be Done About Citigroup?

Although your article has some merit, simply attacking commercial bankers as people who are "boring and counting pennies" is both arrogant and ignorant. Commercial bankers serve a very valuable link in our credit based economy and provide necessary loans to small and middle market companies that cannot access public debt markets. Cit is unfortunately a larger-than-life failed financial supermarket that has its fingers in many businesses and financial markets. Most governments don't want to deal with a complete failure here. Citi needsan experienced commercial banker to help turn it around.
As to your gloss over of JPM, this bank has the largest derivative book in the world and was handed Bear Stearns because of its counterparty risk to Bear. A lovely cover up.

Why This Rally Is Unsustainable

The author is correct. Earnings are deteriorating and fundamentals remain weak. Banking sector is essential to a recovery and banks are crippled; facing more real estate writeoffs and consumer deleveraging. Stock market has "corrected" to the upside and will now give it back over the next three months.
-Investors can find monthly cash flow in MLP's around 7-10%(KMP, EPD, TPP, LINE) and Ginnie Mae bond funds (4.5-5%).

-Also consider intermediate investment grade corporate bond funds due to wide credit spreads that will come in over time(5%).

-Stocks with strong balance sheets will be buys again after the market corrects.

-A strong short is the TBT (20 year T bond).

-Cash can be held in SHY (1-3 year T's; 2%)

Note: Long all of the above.

Seven Uncomfortable Predictions for the Economy

In general, what nonsense and broad generalized "end-of-the-world" mumbling. It is too late to short real estate via the SRS as you state. This index is filled with the more creditworthy REIT's. Yes, there will be corporate failures, but investment grade companies are in much better shape. The insurance companies with large exposures to annuities have already been discounted and the balance are in good shape. Regarding the dollar, we are trying to inflate our way out of all the debt, but deflation is the current rule and hence a strong dollar. "Crime will go up, people will save more and you can now buy big ticket items cheaper than before." Not particularly precise investing advice.

10 Drivers That Will Affect the Market in 2009

Investment grade corporate bonds will be the clear winners as credit risk spreads tighten. Investors holding intermediate and long Treasuries will get crushed because it is an extremely crowded trade at this point. I am slowing buying corporates and am short the 30 year T Bond.

Great Depression Not Imminent, But Inevitable

Taxes are not already paid by Wall Street Partnerships who pay 15% on their "sweat equity". That's the problem.


On Dec 18 10:45 PM Jack K wrote:

> Although I agree with you in many areas of your comment, i don't
> think that the capital gains cut hurt. Any decrease in taxes are
> good. Taxes are already paid on capital gains by the company that
> made the profit.

Great Depression Not Imminent, But Inevitable

Amen. Well said.


On Dec 17 03:37 PM JasonC wrote:

>
> Simply dumb. What covers real risks is spreads, spreads are at epic
> levels, ergo even epic levels of risk can be objectively handled
> now. The silly and dangerous bit was the low spread world we just
> exited --- exiting it has destroyed so much capital taking credit
> risk for a living (which used to be known as "banking", duh) that
> spreads have reacted to the opposite, silly extreme. Someone will
> realize these epic spreads are buys when the narrow ones were sells,
> and be profitable as a banker again. Those who believed that it was
> possible to be a banker at spreads of zero were wrong, those who
> now believe it is impossible to be a banker at spreads of 10% over
> risk free rates are just as wrong.
>
> Both are trend following idiots and not bankers.

JPMorgan Chase: Poisoned by Bear's 5,000 Counterparties

Due to lack of diclosure, you have no way of knowing the so-called value of their hedged ositions. With no transparency, you are simply recommending a purley specuative investment in JPM. Additionally, you haven't noted your own exposure. I have to assume you are talking your book.


On Dec 14 11:00 AM TomArmistead wrote:

> If Bear Stearns operations were competently run and hedged, derivative
> assets and derivative liablilities should net to zero or better given
> sufficient time. The volatility of spreads creates imbalances that
> may be temporary in nature. From where it lies, adding enough capital
> and waiting, as Paulson et al are doing, is a workable strategy.
>
>
> WaMu, when it was handed over to JPM, was adequately capitalized
> from a statutory point of view and had substantial pre-provision
> earnings, sufficient to cover losses as they occurred.
>
> I agree with ishortyou, JPM may suffer a protracted bout of indigestion
> but it is unlikely to be fatal.

What Obama Needs to Know about Tim Geithner, the AIG Fiasco and Citigroup

Will Dimon show us the details of his portfolio? That would clear up this issue. Otherwise, JPM is sitting on the largest derivative portfolio in the world. Transparency anyone?


On Nov 27 08:59 PM roy mckoi wrote:

> STUPIDITY PUBLISHED HEREIN
> THE VAST MAJORITY OF CDS HAVE NOTHING TO DO WITH THE TYPE OF RISKS
> AIG AND THE MONOLINE TOOK: SUPER SENIOR ABS CDO RISK....
>
> THE VAST MAJORITY OF JP MORGANS CDS IS PROBABLY SINGLE NAME AND PORTFOLIOS
> OF IG CORPORATES..STOP THE GLOOM AND DOOM, ESPECIALLY WHEN YOU KNOW
> NOTHING ABOUT WHAT YOU ARE WRITING!!!!!!!!!!!!!!

Putting the Perception and Reality of the Financial Crisis Into Perspective

Generally, home prices go flat for a number of years while the economy slowly catches up. Also, it will depend on where the price of mortgages goes over this time. After another year or two of asset defaltion, we should see inetesrt rates reflect the excess money in the system (inflation). Short term rates may stay low, but the twn through thrity year will move up to compensate for excess liquidity. This will keep housing prices depressed. IAfter the inital shock of all this wears off in another six months, the value of the U.S. dollar will start to decline again.

What is to be Done? An Interview with Bert Ely

Ranting agianst the government is always popular when you have nothing constructive to say. Sandy Weill paid the lobbyists big bucks to repeal Glass Stiegel. He wnated to build the biggest casino in the world and it worked. They gamed the system with complex derivatives and we ended up with wealthy executives and trickle down asset destruction. Unfortunately, McCain has no understanding and little interest in learning. The Democrats are no blessing, but perhaps no as dangerous. Try maintaining the banking system without insurance.When the typical Board of Directors is little more than a good ole boys club where serious questions are rarely asked, financial executives are the "private" market equivalent of the barn yard animals of Orwell.

Attention Locusts: The Party Is Moving to Merrill and AIG

Baby, it depends on what your current allocation is for your investments. If all stocks and stock mutual funds, you are not diversified. My guess, absent worst case, is that stocks can go down another 10% and it will take 3-4 years to rebuild values in generally diversified mutual funds. Make sure you have at least 30-40% in cash and no more than 50% in stocks overall. If you can sleep with this allocation, you will be ok. If you can't, then go to 75% cash (a Treasury only money market fund). If you have bond funds, you may be ok depending on what kind. Stay away from high yield. Things are difficult out there, but the world is not ending.

Dow 30 Price Targets - Too Much Optimism?

I guess it depends on your time line. "C" at a target of $23 over the next 12-15 months is out there, but not unbelievable. The largest gains are made by buying near the bottom. I agree that you should never listen to the sell-side analysts.

Long-Term Ugliness

Other than GM, the others are a good relative buy now for significant upside in 2-3 years. GM has no leadership. Nardelli will sink Chrysler.

Dow: An Undervalued 5-Star Market

If you are playing for a bear market bounce, you missed it. Otherwise, the rebound in these stocks could be at least 12-18 months away. The consumer is either out of money, broke or weakening and this will do little for banks and insurance companies. Big Pharma is a crapshoot at this point and GE is basically a finance company.