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Housing's Big Picture Isn't Pretty

Re: Deflation

Gresham's Law should become part of everyone's economic vocabulary.

We may see deflation in many assets but inflation in staples like food and water.

It's my feeling that we will continue to see a huge inflation in Cash prices but offsetting deflation in Credit prices. Think of the CPI as averaging the two hence the disinformation of current low inflation be reported.

We all know the distortions of the current CPI but just simplify the basket of goods to see the problem when including both necessities and luxuries in the sam inflation metric.

2006 - Bread - $1 per loaf, 30" Flat Screen TV - $1000
2009 - Bread - $2 per loaf, 30" Flat Screen TV - $500

In 2006, $3000 would buy 1000 loaves of Bread and two 30" Flat Screens

In 2009, $3000 would buy 1000 loaves of Bread and two 30" Flat Screens

Hence no inflation, as long as you can eat a Flat Screen TV

Nightmares on ETN Street: When Issuers Go Bust

Does this mean that ETF's have less counter-party risk or no counter-party risk?

I own a lot of Proshares and was wondering who backs them up?

Insights from an AIG Bear

Take 5 forgets about CEOs of bankrupt companies who walk away with millions or congressman who retire to million dollar lobbying jobs.

At least the short seller isn't pledged to things like creating shareholder value or defending the constitution.

Take 5 cannot be so naive to think that independent hedge fund short sellers are more powerful then the trifecta of Government, Wall Street and Corporations. All three of those entities "know" the shorts are correct and are probably profiting right along with so-called short sellers.

Personally, I think naked short selling is a problem but even if they were eliminated, with ETFs you can still "short" without shares.

Like the author, I worked at one of the firms in current difficulty. Their business practices first led me to leave and then led me to enormous profits via SKF. I shorted because I felt their business model had LT problems and lo and behold it did.

I took a risk and could have been wrong, but I wasn't. I'm still a lot less rich then all the people who were wrong though.

If you want to punish short sellers then institute a five year salary look back provision for CEOs.

Enjoy the bailouts while blaming the observers.

An Involuntary Transaction: Why BAC + CFC May Never Close

You fail to take the BSC/JPM analogy far enough. Both mergers were not about rescuing CFC or SC respectively but the market as a whole. Their was no ten year view in either case, just Fed forced false hope to prop the market up for a few more months.

Apple Stores Outshine Retailers

Anecdotal but...

Sent my neophyte Dad to 5th Ave Apple store for my Bday gift. 400 plus people in the store (it was after work Friday). It took him less then five minutes to get help with finding my gift and also two games for my kids, and check out.

Packed but still great customer service...makes me happy to still be long AAPL

One Reason Apple May Be Hoarding $18 Billion

How dare Steve Job's think about the future and actually prepare for it. Doesn't he know that as a CEO he should only be concerned with share price and not the long term viability of the corporation he runs.

It's attitudes like his that will ruin countless other American companies who sacrifice there companies long term futures at the alter of Wall Street's short term demands.

Should Wall Street Have Saved Itself?

RE: vboring

I remember Buffet and BKR looked at with disdain during the height of the internet bubble. They were as being behind the curve. Those who dissed BRK were wrong of course but they are still getting a billion dollar bailout after booking billions in profit from 2003 - 2006.

The lesson is simple, make money steady and slowly like BRK or be reckless enough to ensnare the sheeple and get out when the s&#t hits the fan.

TBTF is the new version of a early 1900's trusts; inevitable without regulation and destructive to capitalism in the end.

The JP Morgan-Bear Stearns Option Agreement

The shares are being bought by BSC bondholders who want to make sure this deal goes through. Apparently they are competing with stockholders who want to hold out for a better deal.

The bondholders risk losing money if this deal is rejected and BSC winds up declaring bankruptcy.

It Wasn't a 'Bailout'

to expand on drmalaka's right on post:

The flame out of Bear Stearns, while it wasn’t a bailout of shareholders, was a bailout of Bear Stearns creditors and counter-parties.

The current crisis is the direct result of the moral hazard created with the bailout of Long Term Capital Management (LTCM), in 1998 (more details below the fold). As with Bear Stearns, the shareholders of LTCM were NOT bailed out, but the counter-parties and creditors were bailed out. Thus, the Fed sent a message that if you lend recklessly to a hedge fund or investment bank, don’t worry, the FED will guarantee private contracts, as long as the lending is reckless enough to put the entire economy at risk.

The saying, “too big to fail”, directly and inexorably leads to the kind of reckless lending that crushed Bear Stearns and still threatens the US economic and monetary supremacy.

Who would lend billions of dollars to Bear Stearns unless they know, via the actions in 1998, that Bear Stearns debt would be backed by the faith and credit of the Federal Reserve? Rather then squelch the reckless lending that allowed for the current crunch, the Bear Stearns creditor bailout reinforces the LTCM lesson that as long as you lend to large enough institutions you need not worry about default and counter-party risk.
The problem today is that there isn’t enough money to bail out the entire system as LTCM was bailed out in 1998. In 1998, LTCM was the only over leveraged firm threatening the economy, now virtually all investment banks are over leveraged (and banks as well given Glass-Steagall;s 1999 repeal).

Had the FED and Wall Street allowed LTCM to fail, causing counter-parties a lot of financial pain, perhaps Bear Stearns would not have been allowed to borrow 3000% of their equity. Homeowners buying houses with zero equity is understandable as they are laypersons, Wall Street over leveraged precisely because of the backing of the FED as implied by their behavior in 1998. Just as Wall Street misjudged the severity of home mortgage defaults they are still misjudging the severity of their own over-leveraging.

Grab you hats, this roller coaster is still on the way down.

Exchange Email Integration: RIMM's Lifeline in an iPhone World

I don't use a Blackberry, but every user I show my iPhone too loves. They are mostly not IT types and their only criticism is the lack of "push" email.

As soon as Apple figures that part out, iPhone sales will explode. My sister's firm will buy 30 once that happens (assuming her IT peeps give her the go ahead).

I guess will have to wait until tomorrow to see where we stand.