Raft of Deals for Failed Banks Puts U.S. on Hook for Billions

(wsj.com) The biggest spur to deal-making among banks isn't private-equity cash or foreign investors. It is the federal government.

To encourage banks to pick through the wreckage of their collapsed competitors, the Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. The initiative amounts to a subsidy for dozens of hand-picked banks.

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Bond Market To Stock Investors: You People Are A Bunch Of Morons

(www.businessinsider.com) Stock investors are giddy about the impending v-shaped recovery (which, at this point, seems required to drive the stock market higher).

Bond investors, meanwhile, are looking forward and seeing nothing but crap. Despite trillions of proto-inflationary reserves being pumped into the global economic system, bonds are rallying and rates are dropping.

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Too Bigger to Fail

(paul.kedrosky.com) The banks that were mostly too big to fail are now bigger. Maybe if they get bigger yet we can redefine “big” and call them “small” again, thus starting over.

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The Trashiest Stocks Are On Fire (FNM, FRE, AIG)

(businessinsider.com) Since the market hit its lows in early March, the trashiest, most beaten-down stocks have been the big winners. Some are arguing that the trash stocks have to slow down soon. But in the meantime, it looks like investors are reaching for the trashiest of the trash. Check out the crazy runs in Fannie Mae (FNM), Freddie Mac (FRE).

See the charts here

Grant's Summer Break Issue

To the readers of Grant’s: This compilation of recent articles, the first annual Grant’s Beachhead issue, is for you. And it’s for your friends, co-workers, clients, classmates, shipmates, brothers-in-law and maids-of-honor, too. Please pass it along, with our thanks, to any and all prospective members of the greater Grant’s family.


(www.grantspub.com)

Go here to read the Beachead Issue

Gartman Starts First Hedge Fund Betting on Stocks, Commodities

Will Gartman be more successful than other's with CNBC ties?
(bloomberg.com) Dennis Gartman, an economist and the editor of the Gartman Letter, said he is creating his first hedge fund to speculate on assets including global equities and commodities.

The River Crescent Fund, created Aug. 17, seeks to raise $200 million over the first year, Gartman said today in an interview from Suffolk, Virginia. The fund already includes some “well-known hedge-fund managers,” he said, without identifying them. Gartman has managed guaranteed notes since 2007 and an exchange-traded fund since April in Canada.


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Pimco Says Dollar to Weaken as Reserve Status Erodes

(www.bloomberg.com) Pacific Investment Management Co., which runs the world’s biggest bond fund, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy.

The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.

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NY Times/Warren Buffett OP/ED

(www.nytimes.com) IN nature, every action has consequences, a phenomenon called the butterfly effect. These consequences, moreover, are not necessarily proportional. For example, doubling the carbon dioxide we belch into the atmosphere may far more than double the subsequent problems for society. Realizing this, the world properly worries about greenhouse emissions.

The butterfly effect reaches into the financial world as well. Here, the United States is spewing a potentially damaging substance into our economy — greenback emissions.

Read the entire OP/ED here

PIMCO's El-Erian: Stocks Have Hit A Wall

(www.businessinsider.com) Mohamed El-Erian has called the recent Wall Street rally a "sugar high." Now, he says U.S. stocks have hit a wall.

The chief executive of bond-king PIMCO said on Reuters TV that U.S. stocks had topped out because valuations have shot up too quickly.

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“The White House, a Subsidiary of . . .”

(www.ritholtz.com)

Go here for the answer!

Tudor Investment Calls Stock Gain a Bear-Market Rally

(bloomberg.com) Tudor Investment Corp., the $10.8 billion hedge-fund firm run by Paul Tudor Jones, said equity markets could decline later this year, creating buying opportunities.

Slowing growth in China and the return of front-page stories on swine flu may be “further catalysts for global equity markets to pause in September,” the Greenwich, Connecticut-based firm said in an Aug. 3 client letter, a copy of which was obtained by Bloomberg News.

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You're An INVESTOR? How Quaint

(businessinsider.com) James Montier (via John Mauldin) observes that the average holding period for New York Stock Exchange stocks is now down to six months.

We imagine this has something to do with the boom in high-frequency trading, in which stocks are sometimes held for all of six seconds. But week-to-week performance benchmarking of professional fund managers probably has a lot to do with it, too.

In any event, can we please stop pretending that what most fund managers are doing every day is "investing"? Holding stocks for six months isn't investing. It's trading. And because trading is a negative-sum game--one largely focused on trying to figure out what everyone else is doing--it is really speculating.

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Paulson’s Calls to Goldman Tested Ethics

Just as we suspected......

(nytimes.com) Before he became President George W. Bush’s Treasury secretary in 2006, Henry M. Paulson Jr. agreed to hold himself to a higher ethical standard than his predecessors. He not only sold all his holdings in Goldman Sachs, the investment bank he had run, but also specifically said that he would avoid any substantive interaction with Goldman executives for his entire term unless he first obtained an ethics waiver from the government.

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