Archive for 2009

Dave’s Daily

MARKET COMMENT

Dave Fry at ETF Digest, March 22, 2009

Greg Newton and Dave discuss bailouts, the Fed, equity, bond and commodity markets from the previous week.

 

 





How Citigroup Incompetence Squanders Taxpayer Money

Mish writes on the astounding greed and deception at the top. – Ilene

How Citigroup Incompetence Squanders Taxpayer Money

Courtesy of Mish 

Inquiring minds are reading Banks Selling Properties in Bulk for Cheap

Mar. 19--Lenders have become so overwhelmed by the foreclosure crisis that they are starting to unload properties in bulk to investor groups at steep discounts. Investors then flip the properties for a profit without necessarily improving the home.

For example, a unit of Citigroup, the troubled financial giant, sold a foreclosure in Temecula to an Arizona investment firm for $139,000 when comparable homes in the area were selling for $240,000 to $260,000.

The firm listed the home for $249,000, received multiple offers and the property has entered escrow, said Amber Schlieder, the real estate agent who handled the listing.

The Temecula foreclosure was first listed for sale by Citigroup in May 2007 for $420,000, according to Multi-Regional Multiple Listing Service, a real estate posting site used by real estate agents.

The property was listed on the site for 19 months before selling to the investors in a bulk sale in December 2008. The lowest price it was listed for was $314,000.

"It should have been listed for less," said Craig Finlayson, a real estate agent in the area who listed the property for Citigroup. "But it would have sold for more than 139 (thousand); 139 was a giveaway price."

CR Capital was the firm that flipped the Temecula foreclosure property, an investment group based in Tucson, Ariz. Calls to CR Capital were not immediately returned.

Incompetence In Pricing

The house never sold because Citigroup had it priced way above market. That is incompetence, lack of concern, an overworked unit or a combination of the above. I vote for the latter.

In Banks Leaving Money on the Table "All Day Long" Calculated Risk said "Citi just left $100,000 on the table. I hear stories like this all the time."

Debt Guarantees

Debt guarantees are another piece of the puzzle. Flashback February 4, 2009 Triage For Troubled Assets.

In November, the government agreed to limit Citigroup’s losses on a portfolio of $301 billion of troubled assets. Last month, the government issued a similar guarantee to Bank of America covering $118 billion in troubled assets. In both cases, the companies agreed to absorb an initial increment


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Ridiculous Whining at Citigroup, Bank of America

Money – The Beatles

Ridiculous Whining at Citigroup, Bank of America

Courtesy of Mish

It’s going to be interesting to see how quickly Congress and the administration caves in to banks and Wall Street after expressing so much indignation about bonuses over the last week.

Here is the backdrop.

  • Senator Chuck Grassley said AIG "Sucking The Tit Of The Taxpayer".
  • President Obama said "It’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165m in extra pay"
  • Obama pressed Treasury Secretary Timothy Geithner to "pursue every single legal avenue" to block the bonuses.


House Passes 90% Tax On Bonuses

The indignation was round one. For additional discussion of round one, please see Bonus Bonanza Bingo, a Blessing In Disguise.

In round two Bonus Tax Heads to Senate After House Passes 90% Levy.

The Senate plans to vote next week on steep levies on employee bonuses after the House overwhelmingly approved a 90 percent tax on bonuses at American International Group Inc. and other companies receiving bailout funds.

The Senate’s proposal on companies that got federal money would place a 70 percent tax on the bonuses. Half that amount would be paid by employees, half by the companies.

The 328-93 House vote came amid a national outcry over $165 million AIG paid in bonuses last week after receiving $173 billion in bailout funds as part of the government’s efforts to stabilize credit markets. President Barack Obama said he was “stunned” by the bonuses and vowed to recoup the money. Nineteen state governments have begun probes of the AIG bonuses.

“Paying excessive bonuses to the same group of folks that helped get us into this crisis is simply unacceptable,” Senate Finance Committee Chairman Max Baucus said in a statement. “Millions of Americans continue to struggle to get by, counting their dollars, and Congress needs to do the same.”

The House measure would cover companies receiving 75 percent of federal bailout funds, according to the Ways and Means Committee. The Senate proposal would affect a larger pool of workers and the chamber may vote on it next week, said its primary sponsor, Baucus, a Montana Democrat.

Meanwhile, House Financial Services Committee Chairman Barney Frank proposed legislation late yesterday to ban payments at companies getting U.S. aid until the government is repaid.

More Than $250,000

The House


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The Big Takeover

Here are a few long excerpts from a very disturbing article by MATT TAIBBI, published in Rolling Stone.  Well worth reading. – Ilene

The Big Takeover

The global economic crisis isn’t about money – it’s about power. How Wall Street insiders are using the bailout to stage a revolution Photo - Illustration by Victor Juhasz

It’s over — we’re officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That’s $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG’s 2008 losses).

So it’s time to admit it: We’re fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we’re still in denial — we still think this is some kind of unfortunate accident, not…
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More Ugly Revelations on the Way

Michael Panzner reports on the fraud being uncovered in the wake of the financial meltdown and the likelihood that it’s only the tip of the iceberg. - Ilene

More Ugly Revelations on the Way

Courtesy of Michael Panzner at Financial Armageddon

In Financial Armageddon, I warned that a great deal of ugliness would come to light once the Great Unraveling was underway (from Chapter 10, "Financial"):

Newfound transparency in the wake of the unfolding financial crisis will expose a scale of fraud, corruption, and self dealing that many will find almost impossible to comprehend. Day in and day out, reports will surface about hidden losses, false accounting, inflated appraisals, sizable off-balance-sheet obligations, valuation discrepancies, unregulated offshore entities, phantom profits, insider trading, and businesses bled dry to enrich a few individuals at the expense of employees, investors, bankers, and bondholders. Other revelations will reinforce the idea that companies, governments, and individuals are in far worse shape than people had assumed only a few years earlier. Much like the child watching the royal parade in Hans Christian Anderson’s tale, "The Emperor’s New Clothes,” they will be bewildered by the starkness of businesses lacking any real substance.

Yet despite all the chicanery that has been exposed so far, it looks like there is plenty more to go if the following Financial Times report, "Watchdog Fears Market ‘Ponzimonium,’" is anything to go by.

US federal regulators have warned of a “rampant Ponzimonium” as they disclosed they are investigating “hundreds” of possible scams in the aftermath of the $50bn fraud allegedly perpetrated by Bernard Madoff.

Bart Chilton, a commissioner at the Commodities Futures Trading Commission, the US regulator, said the watchdog was “seeing more of these scams than ever before” in commodities and other futures markets.

Mr Chilton said the CFTC, which patrol commodities and financial futures markets such as derivatives on stocks and foreign exchange, was investigating “hundreds of individuals and entities, many of which were related to Ponzi scams”.

The CFTC has filed charges against 15 alleged Ponzi schemes so far this year, compared with 13 during the whole of 2008. If the rate were sustained, the regulator could end the year filling more than 60 cases, officials said.

US regulators have


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Spinning Straw Trades Into Gold

Here's a fun chart that illustrates why I like gold.  Don't take it too seriously but do take seriously that this is exactly what happened to the US when we got embroiled in the Vietnam war and Nixon took over and the country plunged into debt and we cut taxes to the rich and dropped the gold standard.  The ratio of the Dow to gold dropped from 47:1 to 2:1 but the middle of Reagan's first term.  During the Clinton years, as we moved towards a budget surplus, the ratio of Dow to gold jumped from 7:1 in 1993 to 40:1 in 2002 but, since then, has dropped back to 15:1.  The bottom line is:  If you are worried about the markets – buy some gold.  If you are worried about the dollar – buy some gold.  If you are worried about terrorism – buy some gold

I still think we should get a correction in gold back to $875 (no longer $850 as the trendline has been yanked up) but we're not hedging gold because we are worried it will hit $1,000, we are hedging because we are worried it will hit $2,000.  That means that the difference between buying gold at $850 or $950 is not a big enough deal to stay completely out of it now.  We would LIKE to be in the 2011 $70 calls for $20.  Sadly, they are $32.25 at the moment.  Here is how you can use a rolling plan to enter something high and still be happy when it's low. 

  • We pick a target amount of gold.  Say 10% of our virtual portfolio and say that's $10,000.
  • We scale in so we buy $2,500 at a time (roughly)
  • We FIRST look at what rolls cost.  The roll from the $120s to the $115s is $1.  Well that's silly, we'd pay that now.  The roll from the $75s to the $70s is $3 so let's say we'll be happy to spend $1.50 a roll.  THEREFORE we buy in at the first strike we CAN'T roll down for $1.50, which is the 2011 $100s at $19. 
  • If we plan on spending $1.50 per $5 roll down as gold falls, it will cost us $9 ($1.50 x 6 rolls)


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Weekend Reading

I really can't take all this AIG talk in the media anymore.

I'm not looking to defend the bonuses or argue the point but gee America, can we move on?  We have TONS of problems that need solving yet the "finest minds" the media can assemble spend all day long on TV discussing whether or not to punish AIG workers retroactively.  On top of that, turning this into a referendum on Tim Geithner after 60 days on the job is simply ridiculous.

I mentioned Friday that the real problem is Congress passing retroactive tax laws, which will do far more economic damage to this country than the 90% of $165M they are using the legislation to go after.  What really cracks me up is the LACK of outrage at  the 85 REPUBLICAN Congressmen who voted for the 90% clawback tax.  I'm outraged at the Democrats, this is ridiculous populous pandering and if this bill actually goes through I'll be very, very disturbed about what is happening in this country.  I am still hoping cooler heads do prevail. 

I put in my mandatory Fox viewing time this morning (their "Cost of Freedom" block) and, if you wonder why people are still worried about the economy, all you have to do is spend a half hour listening to these talking heads ramble on for a segment and you too will be heading down to the nearest bomb shelter will all the canned food, guns and gold you can carry before the government comes to take it all away from you!  What I have learned this morning from Rupert Murdoch's Fox News is that Geithner must resign now because he knew about the bonuses on March 3rd, not on March 10th as he indicated when he said "last Tuesday."  I also learned that no one who voted for TARP read the bill and that that is Obama and Geithener's fault – even though they weren't in office at the time.  I learned that our deficit is really $3.6Tn, not $1.7Tn and that Obama hates the handicapped

I know all of this is true because the people who agree with these points are much louder than the people who disagree.  Also, Rupert Murdoch's Wall Street Journal agrees as well and that legitimizes the whole thing, right?  My favorite part is the girl
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“Despair over Financial Policy”

Mark Thoma presents a collection of thoughts on the administration’s soon-to-be announced Geithner plan.

"Despair over Financial Policy"

Courtesy of Mark Thoma, at Economist’s View

Reactions to the leaked details of the administration’s bank bailout plan. If I find any posts in support of the plan, I will add those in an update.

First, Paul Krugman:

Despair over financial policy, by Paul Krugman: The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem. …

This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan


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This Time I’m Not the One Calling It a Subsidy

James Kwak reports on the Toxic Asset plan to be announced as soon as Monday.

This Time I’m Not the One Calling It a SubsidyCourtesy of Jesse's Café Américain

Courtesy of James Kwak, at The Baseline Scenario

According to The New York Times and the The Wall Street Journal, the Treasury Department is set to announce its plan for troubled assets early next week. It will include three components. The details aren’t clear since these are anticipatory news stories, but it will be something like this (combining bits of information from the two stories):

  1. The FDIC will create a new entity to buy troubled loans, with the government contributing up to 80% of the capital and the remainder coming from the private sector. The Fed or the FDIC would then provide non-recourse loans* for up to 85% of the total funding (NYT), or guarantees against falling asset values (WSJ), which more or less amount to the same thing.
  2. Treasury will create multiple new investment funds to buy troubled securities, with Treasury contributing 50% of the capital and the rest coming from the private sector. It’s not clear from the news stories, but I think it’s highly likely that these funds will also benefit from either non-recourse loans or asset guarantees.
  3. The Term Asset-Backed Securities Loan Facility (TALF) is a program under which the Fed was already planning to buy up to $1 trillion of newly-issued, asset-backed securities** (backed by car loans, credit card receivables, mortgages, etc.). The idea was to stimulate new lending in these categories. This program will be expanded to allow the Fed to buy “legacy” assets – those issued prior to the crisis. This enables the Fed to buy toxic assets off of bank balance sheets.

Instead of coming up with one plan to buy troubled assets, it looks like the government has come up with three. (As Calculated Risk said, however, ” More approaches doesn’t make a better plan” (emphasis in original).) For now, I think the concerns I expressed last month still hold. If we take as given that the government will only negotiate at arm’s length with the banks (meaning the banks can decide at what price they are willing to sell the assets), then the most important thing is for the plan to work. But…
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TARP Banks Hammered After 90% Bonus Tax Passes

The 90% Tax on Bonuses, even though far from a done deal, didn’t help the TARP banks in trading last week.  Here are the results.

TARP Banks Hammered After 90% Bonus Tax Passes

Fears that a huge tax increase at the firms subject to the 90% bonus tax might shatter the performance of those banks were reflected in the performance of their stocks at the end of the week.

The folks at Bespoke Investment Group produced the list next door contrasting the performance over the last two days of the 20 largest non-bailout global financial firms against those that took enough bailout bucks to fall under the 90% tax penalty. The unaffected firms are primarily foreign banks, with Bank of New York Mellon being the only exception.

Here’s how Bespoke describes the results:

As shown, the non-bailout firms are down an average of 1.38%, while the 90% bonus tax firms are down an average of 14.02%.  While the companies that would fall under this bonus tax rule are heading lower, their competitors are probably licking their chops for the top talent to come their way.  And the government still hopes to get the taxpayers their money back. 

Good luck with that.

 

 





 
 
 

ValueWalk

#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...



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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...



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Phil's Favorites

Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...



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Digital Currencies

Transparency and privacy: Empowering people through blockchain

 

Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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Insider Scoop

Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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