(Ritholtz.com/The Big Picture) President-elect Barack Obama will appoint former Federal Reserve Chairman Paul Volcker on Wednesday to be the chairman of a new White House advisory board tasked with helping to lift the nation from recession and stabilize financial markets, Democratic officials say.
The panel will be called the President’s Economic Recovery Advisory Board.
Volcker is one of the true heroes of Central Banking and American economics. He is the rare political player who is willing to make the difficult and unpopular decision, regardless of the polls and politics. Some people believe you just have to do what’s right, and not what’s expedient. If a President wanted to get the real story — stright up no chaser — than you cannot do any better than Volcker.
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Wednesday, November 26, 2008
Tuesday, November 25, 2008
Treasury considered plan to bust Citi shorts
The government has gotten way too involved in our markets. The Plunge Protection Team (PPT) also known has the President's Working Group appears to have been working overtime.
(FT.com) US regulators considered a proposal to buy Citigroup shares in the secondary market before deciding on a plan to buttress the bank with $20 billion in fresh capital and $306 billion in guarantees for distressed assets, people involved in the talks said.
Under the plan revealed on Sunday, the Treasury will invest $20 billion in preferred shares in Citi -- in addition to the $25 billion it has already put into the group.
However, regulators briefly considered investing as much as $30 billion in Citi -- including $15 billion in preferred shares and $15 billion in common stock to be bought in the secondary market, participants in the talks said.
By buying Citi common stock in the open market, regulators could have increased pressure on investors who sold Citi shares short -- selling borrowed shares in the hopes of buying them back to profit from a fall in the price. The Hong Kong Monetary Authority employed a similar strategy during the Asian financial crisis.
Read the entire story
(FT.com) US regulators considered a proposal to buy Citigroup shares in the secondary market before deciding on a plan to buttress the bank with $20 billion in fresh capital and $306 billion in guarantees for distressed assets, people involved in the talks said.
Under the plan revealed on Sunday, the Treasury will invest $20 billion in preferred shares in Citi -- in addition to the $25 billion it has already put into the group.
However, regulators briefly considered investing as much as $30 billion in Citi -- including $15 billion in preferred shares and $15 billion in common stock to be bought in the secondary market, participants in the talks said.
By buying Citi common stock in the open market, regulators could have increased pressure on investors who sold Citi shares short -- selling borrowed shares in the hopes of buying them back to profit from a fall in the price. The Hong Kong Monetary Authority employed a similar strategy during the Asian financial crisis.
Read the entire story
Citi, AIG Won't Drop Big Sports Sponsorships
If you pay the government a big sum for taxes, perhaps you should call your representative in Congress and tell them you would like the box for a game next year.
(ABC News) AIG, Citibank and a number of other federally bailed-out financial institutions have no plans to cancel hundreds of millions of dollars in sports team sponsorships, even as they take billions in taxpayer support, ABC News has found.
Read the story here
(ABC News) AIG, Citibank and a number of other federally bailed-out financial institutions have no plans to cancel hundreds of millions of dollars in sports team sponsorships, even as they take billions in taxpayer support, ABC News has found.
Read the story here
Paulson Says New Fed, Treasury Steps Will Help Lending, Housing
Paulson wants to encourage us to borrow on our credit cards...maybe I'm wrong but I thought that was part of the problem. Enough from the government.
(Bloomberg) U.S. Treasury Secretary Henry Paulson said a Federal Reserve lending program announced today will enable banks to extend more credit to consumers and businesses.
“I and my regulatory colleagues are committed to using all the tools at our disposal to preserve the strength of our financial institutions and stabilize our financial markets, to minimize the spillover into the rest of the economy,” Paulson said in a statement at a press conference in Washington.
Read the entire article
(Bloomberg) U.S. Treasury Secretary Henry Paulson said a Federal Reserve lending program announced today will enable banks to extend more credit to consumers and businesses.
“I and my regulatory colleagues are committed to using all the tools at our disposal to preserve the strength of our financial institutions and stabilize our financial markets, to minimize the spillover into the rest of the economy,” Paulson said in a statement at a press conference in Washington.
Read the entire article
Rogers Says Dollar to Be `Devalued,' Buys Commodities
(Bloomberg) The U.S. dollar will be ``devalued'' as policy makers seek to weaken it, undermining the greenback's role as an international reserve currency, said Jim Rogers, chairman of Rogers Holdings in Singapore.
``They think that if you drive down the value of your money, it makes you more competitive, now that has never worked in history in the long term,'' said Rogers. The ICE's Dollar Index has gained 19 percent since Rogers said in an interview on April 27 he expected a dollar rally ``about now.''
Read the entire story from Bloomberg
``They think that if you drive down the value of your money, it makes you more competitive, now that has never worked in history in the long term,'' said Rogers. The ICE's Dollar Index has gained 19 percent since Rogers said in an interview on April 27 he expected a dollar rally ``about now.''
Read the entire story from Bloomberg
Wachovia execs could get $98.1 mln severance
Anybody else repulsed by this?
(Reuters) Wachovia Corp, which lost $33 billion in the last two quarters, said 10 of its top executives may be entitled to as much as $98.1 million in severance pay after the bank is acquired by Wells Fargo & Co.
In a U.S. Securities and Exchange Commission filing, Wachovia said the executives would receive severance under their employment agreements if the merger closes by Dec. 31, as expected. Wachovia said shareholders will vote on the merger on Dec. 23.
Read the entire article
(Reuters) Wachovia Corp, which lost $33 billion in the last two quarters, said 10 of its top executives may be entitled to as much as $98.1 million in severance pay after the bank is acquired by Wells Fargo & Co.
In a U.S. Securities and Exchange Commission filing, Wachovia said the executives would receive severance under their employment agreements if the merger closes by Dec. 31, as expected. Wachovia said shareholders will vote on the merger on Dec. 23.
Read the entire article
Monday, November 24, 2008
Buffett’s Berkshire Will Give More Information on Derivatives
(Bloomberg) Billionaire investor Warren Buffett will provide more information to investors on how he calculates losses on his Berkshire Hathaway Inc.’s derivative bets in the firm’s annual report early next year.
The report will disclose “all aspects of valuation” and cover “deficiencies in the formula” for pricing the derivatives, “which we nevertheless use,” Buffett said in an e- mail sent by his assistant, Debbie Bosanek.
Read the entire article
The report will disclose “all aspects of valuation” and cover “deficiencies in the formula” for pricing the derivatives, “which we nevertheless use,” Buffett said in an e- mail sent by his assistant, Debbie Bosanek.
Read the entire article
Saturday, November 22, 2008
Japan's `Least Ugly' Economy May Beat U.S., Europe in Crisis
(Bloomberg) Japan's newly declared recession may be a chance to show that the world's second-largest economy can finally outperform the U.S. and Europe.
As the West faces the worst financial crisis since the Great Depression, Japan will contract at a fraction of the pace of its major counterparts next year, according to the Organization for Economic Cooperation and Development.
Read the entire article
As the West faces the worst financial crisis since the Great Depression, Japan will contract at a fraction of the pace of its major counterparts next year, according to the Organization for Economic Cooperation and Development.
Read the entire article
Friday, November 21, 2008
Thursday, November 20, 2008
Citigroup Reported to Seek New Ban on Short Sales
Here we go again, why not just put the uptick rule back in?
(NY Times DealBook Blog) Citigroup is taking the short sellers to task after its stock fell more than 25 percent on Thursday. The sell-off occurred even though Prince al-Walid bin Talal of Saudi Arabia said he planned to increase his stake in the banking giant to 5 percent and expressed support for Citi’s leadership and strategy.
Citigroup urged the Securities and Exchange Commission to reinstate the agency’s expired ban on short selling of financial stocks, The Wall Street Journal and Bloomberg News report, citing people familiar with the matter.
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(NY Times DealBook Blog) Citigroup is taking the short sellers to task after its stock fell more than 25 percent on Thursday. The sell-off occurred even though Prince al-Walid bin Talal of Saudi Arabia said he planned to increase his stake in the banking giant to 5 percent and expressed support for Citi’s leadership and strategy.
Citigroup urged the Securities and Exchange Commission to reinstate the agency’s expired ban on short selling of financial stocks, The Wall Street Journal and Bloomberg News report, citing people familiar with the matter.
Read the entire story
Wednesday, November 19, 2008
Let Detroit Go Bankrupt
(NY Times-OP/ED contributed by Mitt Romney)
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
Read the entire editorial
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
Read the entire editorial
Tuesday, November 18, 2008
Fundamental Analysts Belated Downgrades
(Ritholtz.com) One of the strange aspects of running a quant shop is watching some of the fundie guys downgrade previously beloved names long after they have been spanked. Let’s cherry pick a few charts and work our way through them.
We’ve noticed this with GM, AIG, and many others recently. Today’s silly downgrade is US Steel.
Read the entire article
We’ve noticed this with GM, AIG, and many others recently. Today’s silly downgrade is US Steel.
Read the entire article
Berkshire's Credit Risk Soars on Buffett's $37 Billion Bet
(Bloomberg) The cost of protecting against default by Warren Buffett's AAA-rated Berkshire Hathaway Inc. has almost tripled in two months, a sign of just how skittish investors have become amid the global financial crisis.
The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, is more than four times that of rival insurer Travelers Cos. At those levels, the swaps are typical of companies rated Baa3 by Moody's Investors Service, one level above junk. The price may have risen on concern that the billionaire's firm could lose a $37 billion bet on world stock market values more than a decade from now
Read the entire story
The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, is more than four times that of rival insurer Travelers Cos. At those levels, the swaps are typical of companies rated Baa3 by Moody's Investors Service, one level above junk. The price may have risen on concern that the billionaire's firm could lose a $37 billion bet on world stock market values more than a decade from now
Read the entire story
Tepper, Barakett Abandon Stocks as Funds Cut Holdings
(Bloomberg) Hedge-fund manager David Tepper entered the third quarter with $3.1 billion of U.S. stocks and exited with $648 million, selling most holdings to reduce risk and raise cash as carnage spread across the financial markets.
``We moved a lot out early because we didn't want to lose money,'' said Tepper, 51, president of Appaloosa Management LP in Chatham, New Jersey. The firm, which switched some money to bonds, has between 30 percent and 40 percent of assets in cash.
Read the entire article
``We moved a lot out early because we didn't want to lose money,'' said Tepper, 51, president of Appaloosa Management LP in Chatham, New Jersey. The firm, which switched some money to bonds, has between 30 percent and 40 percent of assets in cash.
Read the entire article
Monday, November 17, 2008
Trillions down and still bailing
(Bill Fleckenstein--moneycentral.msn.com) Unfortunately, despite some 12 financing facilities created by the Treasury and the Fed, massive interest rate cuts and various bailouts, the government has little to show for its attempts to dictate where markets should trade.
The Fed's own balance sheet has exploded from roughly $900 billion worth of debt in August to around $2 trillion as of last week. Knowledgeable sources expect that to reach $3 trillion by the end of the year.
Read the entire article
The Fed's own balance sheet has exploded from roughly $900 billion worth of debt in August to around $2 trillion as of last week. Knowledgeable sources expect that to reach $3 trillion by the end of the year.
Read the entire article
Sunday, November 16, 2008
Goldman Chief Blankfein, Top Executives to Forgo 2008 Bonuses
Isn't that special. The compensation these guys have gotten over the years has been obscene.
(Bloomberg) Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein and six senior executive officers will go without year-end bonuses, a spokesman for the firm said.
Read the entire article
(Bloomberg) Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein and six senior executive officers will go without year-end bonuses, a spokesman for the firm said.
Read the entire article
Saturday, November 15, 2008
Hartford, Lincoln, Genworth Buy S&Ls, May Gain Treasury Funds
We find it interesting that AIG gets money thrown at it, yet insurers such as Hartford and Lincoln National have no access to government funds. While we don't like the bailout at all, the way funds are distributed (you are eligible--you are not) are completely at the whim of the Treasury Department (or should I say Hank Paulson). Well the way around it for the insurers are through buying thrifts. Bloomberg discusses this below.
Read the article
Read the article
Buffett’s Berkshire Boosts Stake in ConocoPhillips on Oil Bet
(Bloomberg) Warren Buffett’s Berkshire Hathaway Inc. became the largest shareholder in oil producer ConocoPhillips and took a stake in manufacturer Eaton Corp. in the third quarter as stock markets tumbled.
Read the entire article
Read the entire article
Bill Miller's 3rd Quarter Letter
In case anybody still listens to or likes to read Bill Miller's views, the 3rd quarter letter is now available.
Read it here
Read it here
Longleaf Partners Qtly Report Available
Mason Hawkins dicusses the bear market and what actions Longleaf is currently taking.
Read the report here
Read the report here
Friday, November 14, 2008
Can you count on GE's dividend?
(Fortune.com) Is GE's dividend safe? That question is likely on the minds of many shareholders who have watched the value of their GE shares sink more than 50% over past year, mainly over worries about the potential for more losses at the company's financial arm, GE Capital.
Read the entire story
Read the entire story
Wednesday, November 12, 2008
Bail-Outrage: Misuse of Funds, Lack of Transparency a National Disgrace
(yahoo.com/Tech-Ticker) Many Americans are understandably outraged by the bailout fever that has gripped Washington this year. But even those who believe the bailouts are a "necessary evil" would have a hard time defending some of the bailout-related items that have come to light in recent days, including:
Read the entire story/watch the video
Read the entire story/watch the video
Revised AIG Terms Begin Treasury Transfusions to 'Zombie' Firms
Anybody that frequents this blog knows we are no fans of Paulson or the Bailout. Apparently some other agree.
(Bloomberg) The revised bailout of American International Group Inc. marks a new phase in the government's effort to shore up financial markets: It's the first time cash from the rescue fund Congress created last month has been committed to a failing company.
The Federal Reserve, which saved the insurer from collapse two months ago with an $85 billion loan, yesterday reduced that loan and offered lower rates, while the Treasury chipped in $40 billion from its bank-rescue fund to buy preferred shares. The new terms represent a departure for Secretary Henry Paulson, who until now has said he only wants to invest Treasury funds in ``healthy'' firms.
Read the entire story
(Bloomberg) The revised bailout of American International Group Inc. marks a new phase in the government's effort to shore up financial markets: It's the first time cash from the rescue fund Congress created last month has been committed to a failing company.
The Federal Reserve, which saved the insurer from collapse two months ago with an $85 billion loan, yesterday reduced that loan and offered lower rates, while the Treasury chipped in $40 billion from its bank-rescue fund to buy preferred shares. The new terms represent a departure for Secretary Henry Paulson, who until now has said he only wants to invest Treasury funds in ``healthy'' firms.
Read the entire story
Tuesday, November 11, 2008
Bonuses for Wall Street Should Go to Zero, U.S. Taxpayers Say
(Bloomberg) U.S. taxpayers, who feel they own a stake in Wall Street after funding a $700 billion bailout for the industry, don't want executives' bonuses reduced. They want them eliminated.
``I may not understand everything, but I do understand common sense, and when you lend money to someone, you don't want to see them at a new-car dealer the next day,'' said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Illinois. ``The bailout money shouldn't have been given to them in the first place.''
Read the entire article
``I may not understand everything, but I do understand common sense, and when you lend money to someone, you don't want to see them at a new-car dealer the next day,'' said Ken Karlson, a 61-year-old Vietnam veteran and freelance marketer in Wheaton, Illinois. ``The bailout money shouldn't have been given to them in the first place.''
Read the entire article
Afternoon Reading: Online Outrage Over Larger AIG Bailout
(Wall St Journal--Deal Journal Blog) The rescue of American International Group just keeps growing and growing and growing.
Already the insurer has hit up the U.S. government for aid and this morning it was back again. This time the U.S. government unveiled a revised bailout package for AIG valued at around $150 billion, easing terms on the insurer as it reported a $24.47 billion third-quarter loss.
Read the entire article
Already the insurer has hit up the U.S. government for aid and this morning it was back again. This time the U.S. government unveiled a revised bailout package for AIG valued at around $150 billion, easing terms on the insurer as it reported a $24.47 billion third-quarter loss.
Read the entire article
Monday, November 10, 2008
Emanuel Was Director Of Freddie Mac During Scandal
(ABC News.com) President-elect Barack Obama's newly appointed chief of staff, Rahm Emanuel, served on the board of directors of the federal mortgage firm Freddie Mac at a time when scandal was brewing at the troubled agency and the board failed to spot "red flags," according to government reports reviewed by ABCNews.com.
Read the entire article
Read the entire article
Deutsche Bank: GM Is Worth Nothing
(Wall St Journal-MarketBeat Blog) Deutsche Bank said publicly today what many detractors of General Motors Inc. have been thinking for some time — the company is worthless.
Read the entire article
Read the entire article
Fuld Solicited Buffett Offer CEO Could Refuse as Lehman Fizzled
(Bloomberg) It was the afternoon of Sept. 9, and tensions were rising in the 31st-floor office of Lehman Brothers Holdings Inc. Chief Executive Officer Richard S. Fuld Jr.
That morning news broke that the Korea Development Bank had pulled out of talks to buy a stake in the New York-based securities firm. By 1 p.m., Lehman's already battered stock had plunged another 43 percent.
Read the entire article
That morning news broke that the Korea Development Bank had pulled out of talks to buy a stake in the New York-based securities firm. By 1 p.m., Lehman's already battered stock had plunged another 43 percent.
Read the entire article
Sunday, November 9, 2008
Great expectations
(Economist.com) NO ONE should doubt the magnitude of what Barack Obama achieved this week. When the president-elect was born, in 1961, many states, and not just in the South, had laws on their books that enforced segregation, banned mixed-race unions like that of his parents and restricted voting rights. This week America can claim more credibly than any other western country to have at last become politically colour-blind. Other milestones along the road to civil rights have been passed amid bitterness and bloodshed.
Read the entire article
Read the entire article
NBER's Hall Sees `Conclusive' Evidence of Recession
(Bloomberg) The head of the panel that officially dates U.S. economic cycles said there's no doubt now that a recession is under way following a surge in the unemployment rate to a 14-year high.
``The evidence is more than compelling,'' Robert Hall, the Stanford University economist who leads the National Bureau of Economic Research's business cycle dating committee, said in an interview. ``It's conclusive, in my personal opinion.''
Read the entire article
``The evidence is more than compelling,'' Robert Hall, the Stanford University economist who leads the National Bureau of Economic Research's business cycle dating committee, said in an interview. ``It's conclusive, in my personal opinion.''
Read the entire article
AIG: We Need More Money
(The Big Picture-Barry Ritholtz) AIG is asking the US government for a new bail-out less than two months after the Federal Reserve came to the rescue of the stricken insurer with an $85bn loan, according to people close to the situation.
Read the entire story here
Read the entire story here
Tuesday, November 4, 2008
Sunday, November 2, 2008
Q&A with Investing Legend Jim Rogers
(Time.com/Time Magazine) Jim Rogers became an investing legend in the 1970s while running a spectacularly successful hedge fund with George Soros. Since then, the Alabama native has traveled around the world more than once — on motorcycle and in a car — writing about his experiences, and his thoughts on investing, along the way. Last year, he moved to Singapore, to be close to the economic growth engine that is Asia, and also saw the launch of tradeable securities tied to a commodities index he created. TIME's Barbara Kiviat caught up with him by phone while he was on the road from Brussels to Amsterdam to ask him about what he makes of the state of the financial world today.
Read the entire article
Read the entire article
Just How Bad Was October 2008 ?
(The Big Picture-Barry Ritholtz) Not too shabby a week -- plus 11% across the major indices, with some areas even stronger. Of course, that comes from deeply oversold levels, with stocks peak trough down 27% within October. The key question going forward is whether or not this past week's snapback rally has legs. But rather than guess about that, let's look at some of the more intriguing data points from October 2008.
Read the entire article
Read the entire article
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