Prudent Man CFA

JP Morgan Offer for Wachovia Makes Sense

Buying Wachovia would just be an ego move against Sandy Weil. JPM would be just a payback. Economically, the industry is dead money. We are seeing more of these corporate executives using stockholder's money to further a personal agenda, regardless of whether it is value additive.

Unfortunately for the taxpayers the politicians, to protect their sources of political contributions, are trying to sell the "too big to fail" nonsense. If it is too big to fail, it is too big. We lost many big companies such as Packard Motor, Studebaker, Continental Illinois, etc. and seem to do quite well. If the consumer doesn't buy from one they will buy from another and if an employ gets laid off by one they will work for another. The upside is that the fat is partially removed from the executive suite, where all these problems evolve from.

Bear Stearns' Collapse, Part III - The Finale

Why is anyone spending any energy with concern about Bear Stearns. Like most brokerage firms it was mismanaged and the over-leverage got them. Is the world any worse off without them and the multitude of firms that failed in the seventies. No. End of story. CNBC, WSJ, FT, etc. please give us some current news and shut up about the dead Bear! There will be others as greed never stops and is bound to fail, like the addicted gamblers who borrow money to feed their habit.

Under The Radar News - Friday

Are we seeing where large companies, like the Federal Government, a getting too big to manage? Of course, if they are too big to fail they are, by definition, too big.

Evidently, management appears to be clueless as to what the operations of their companies are doing. This is not good for the country as their size hinders competition and efficiency and hinders a free market.

Killer Derivatives, Zombie CDOs and Basel Too?!

I find it interesting as to how little attention is being paid to the large sub-prime loans held by big insurance companies, viz., Prudential and Met. Also, H & R Blocks' problems seem to elude the pundits.

This is not like LTCM as it is more pervasive. People bought with leverage over-priced assets and if market psychology prevails they will become under-priced assets as those who want to puchase them no longer have the resources for which to do so.

Was the liquidity availability a scam and just debt? Is China next? Remember the Hong Kong markets before and after the communists took over. This what happens when you invest in markets that lack transparency.

Deleveraging means reducing buying power and affects everything for sale and the least marketable worse.