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  • Wachovia for Free? Citi Still Paid Too Much
    I think the author's point wasn't that Wachovia is worth less than nothing but rather that it has no value to Citi specifically. Whether WFC will profit from its offer is a different question altogether.
    Oct 03 23:23 pm |Rating: 0 0 |Link to Comment |View article
  • Where's the Bottom? Still Anybody's Guess
    The bottom for equities and paper, in dollar terms, will come when people are no longer writing articles asking when the bottom will come, because they are too busy selling.

    The bottom for the dollar, however, does not exist. It will continue asymptotically approaching zero until it becomes inconvenient to quote prices in it, at which time it will have zeros lopped off or otherwise be replaced by something else with indistinguishable characteristics, which will itself promptly begin its own asymptotic march toward zero.
    Sep 24 10:58 am |Rating: 0 0 |Link to Comment |View article
  • An Optimist Looks at the Market
    1. Expensive oil spurs innovation, providing a competitive advantage to the US and other technological leaders. Cheaper oil spurs pollution and climate change and encourages further investment in inefficient living patterns. The best thing that could possibly happen to America is $500 oil.

    2. That number was inflated in several ways and should not be relied upon. Even ignoring the wrong signs on several of the components and the "stimulus checks", one cannot ignore the silly "chained dollars" method of calculating the deflator. GDP growth in real terms has been negative for 5 years and remains so. If you don't believe a chart of nominal GDP priced in gold, ask anyone who works for a living. They'll tell you the same thing. If you happen to ask anyone in California, make that 8 years.

    3. Dead cat bounce inspired by weakness elsewhere.

    4. There are always once in a lifetime opportunities. Today's involve being short, especially Treasuries, which are at historically overvalued levels. And there are always opportunities for good stock pickers. But how is this optimistic? It's no better than at any other time, and probably worse: even "cheap" stocks have earnings yields no higher than 7-8%, and few pay anywhere near that much in dividends. With the dollar losing 10%+ of its value every year, you won't get much out of them. And those dividends won't look like much once the benchmark interest rates hit 10%.

    5. Housing is horribly unaffordable in historical terms. Only with the most myopic view focused solely on the 21st century could anyone conclude otherwise. 20% down? Here in San Francisco, one of America's wealthiest cities, the median household income is $68k. The median house in the City proper costs $790k as of July. Once a frugal household is done paying its crushing tax bill and the rent on a modest rent-controlled apartment, it might save $15k a year. In a mere 11 years (no help from the Fed's 2% interest rates here, eh?), it would have the down payment saved up. Too bad it'll need to put 60% down to qualify for a mortgage it can actually afford. When the median house costs 3x the median income, housing is cheap. When it costs 10x and people call that cheap because 2 years ago it was 14x, those people are silly but housing is still expensive.

    Keeping an emergency fund, unless it's in gold, and living within your means are foolish in the extreme. Borrow more, spend lavishly, and declare bankruptcy when when the game is up. The entire system is set up to encourage that, and you would do well to get your piece of the pie while the Chinese are still willing to lend it to us. There are no prizes for prudence; you'll be stuck with a fat tax bill no matter what. Might as well enjoy getting there.
    Sep 15 01:46 am |Rating: 0 0 |Link to Comment |View article
  • Is the U.S. Banking System Safe?
    prescient11,

    I'm very much of two minds about WFC. They are indeed making money, at least so far. But they also have a lot of dodgy exposure, and the HELOCs are coming, too. I agree that it's a much better bank than C or WM or WB. But it's hard to make a case for buying it instead of USB, a similarly-priced bank with a more conservative balance sheet. Both did very well after they announced similar earnings at the short-term bottom. But I have more faith in USB's management and loan book than in WFC's, even though USB's payout ratio is somewhat higher and it's slightly more expensive to book. USB just seems the safer pick here. Unfortunately at $30 both are now fairly valued and I see little upside beyond the dividends. At $21, well, that was a nice day to buy.

    Long USB. No position in WFC.
    Aug 03 19:42 pm |Rating: 0 0 |Link to Comment |View article
  • Is the U.S. Banking System Safe?
    The FDIC no longer has $53b. Based on published figures from this year's bank failures, I place their current reserves between $44b and $48b. There are 21 weeks left in 2008. If there is another failure each week of the same size as First National of Nevada, almost half those reserves will be gone. Sprinkle on a few more First Priority sized failures and maybe one or two more IndyMacs and the FDIC will be insolvent. What will the next "FDIC Friday" bring? Ready for RTC II?
    Aug 03 13:01 pm |Rating: 0 0 |Link to Comment |View article
  • Financial-Dip Buyers Forget To Ask What's Next
    Sentiment, sector rotation, and squeezes. Those are all that matter. Earnings? If the market is determined to go up, it will. If it is determined to go down, it will. There's always something in an earnings call that can be spun whichever way the wind is blowing. Just remember, we've seen this movie before.
    Jul 23 00:35 am |Rating: 0 0 |Link to Comment |View article
  • The Great GSE Meltdown: Market Adding Fuel to Fire?
    researcher, investors aren't going to buy. No investor would ever buy debt that yields less than the rate at which the currency in which it is denominated is losing purchasing power. Speculators might buy them, possibly. More likely they'll be bought by sophisticated traders betting on spreads, but that trade will evaporate quickly once the money is made. Most of this paper, though, will end up at big foreign banks and central banks. You know, the ones Paulson's been calling all weekend. I don't know what he's told them, but I'm guessing it went something like this:

    "You know, you have $300b in Treasuries. I know it's been a tough year for those dollars, and I'm really sorry about that, but darn it, America is still the greatest country on earth and I'm sure you're thrilled to be holding them. But gee, it sure would be a shame if we had to bail out Freddie and something bad happened to those Treasuries. Well, that's all; I just wanted to get a better understanding of how tomorrow's auction is likely to go. Nice chatting with you."

    While a few central banks and SWFs have stopped throwing good money after bad, we have yet to see anyone start dumping this garbage, even slowly. One wonders if it's really Paulson making these calls and not Gates. Either way, though, there's no reason to think anyone will stop now, not over a paltry $3b rollover.
    Jul 13 20:59 pm |Rating: 0 0 |Link to Comment |View article
  • Investors Look to the Fed for Signals on Inflation and Interest Rates
    There is no way the Fed will raise rates in June, probably not in August either. There have been several good opportunities to "disappoint" markets when sentiment was positive, and the Fed has taken none of them. Now sentiment is awful. I suppose that if your thesis is that the Fed is acting to reinforce rather than counter the business cycle, presumably through gross incompetence, then you might bet on a small hike. My thesis is that the Fed is simply a galactic inflation engine that cares nothing for savers and will happily sacrifice us all for the benefit of the almighty bankers who founded it. Long gold. Short Treasuries. I'll keep saying it until everyone starts doing it.
    Jun 25 00:26 am |Rating: 0 0 |Link to Comment |View article
  • The Outlook for Financials Failure
    It's hard for banks to raise capital when most of what they offer is yield but the yields, fat as they are relative to other stocks, are below the rate of price inflation while real interest rates remain negative, suggesting strong inflation for years to come. The market is asking itself why it should invest in bank stocks when it could have oil instead. Yesterday, at least, the answer was pretty clear.

    Paradoxically, if the Fed raised rates to 7%, I'd like the banks a lot better: the weakest would fail quickly and the strong would be available cheaply, becoming attractive homes for capital as their much-reduced dividends would nevertheless exceed the rate of price inflation for years to come, with capital appreciation on the cards when short-term rates later ease. Right now it's just an unattractive and overpriced muddle in which, as you seem to be saying, no one fails but no one succeeds either. Oil it is, then.
    Jun 07 14:07 pm |Rating: 0 0 |Link to Comment |View article
  • Broker Default Risk
    No one on this list will ever be allowed to fail. The proper hedge against a long position in one of these IBs is short the dollar. The Fed will print to get these guys out of trouble.
    Jun 06 03:36 am |Rating: 0 0 |Link to Comment |View article
  • Saving the Economy with IRA Funds
    ABF, how is owner-occupied residential real estate an investment at all? It generates no cash flow. It produces nothing. It has maintenance and operations costs, and if you borrow to buy it, it has financing costs (if you don't, it has opportunity cost). In return for those costs, you're taking the risk that the property you buy will be valued more by the market at the time you want or need to sell it. Sounds a lot more like speculation than investment, doesn't it? If you do the math, most people are much better off renting. Leave speculation to those who can afford to lose what they put in.
    May 17 20:42 pm |Rating: 0 0 |Link to Comment |View article
  • Citi's Pandit Spams His Customers
    I don't much care if my bank admits it's fallible. I just want a rate of interest on my extra cash that exceeds the rate of inflation. So, Mr. Pandit, how about talking your Fed buddies into raising rates? I'll happily lend you $100k for a year at 8%. Get that pitiful capital reserve figure north of 10% and we can talk about bigger numbers. Right now you're a lot closer to insolvency than to a "global financial institution [of] enduring strength". And horribly managed, to boot. Tsk, tsk.
    May 16 23:58 pm |Rating: 0 0 |Link to Comment |View article
  • Big Ben's Credit Card Moves: The Good, the Bad and the Ugly
    There is nothing I can use to predict the future price of V, so there's no way to formulate an exit strategy. Its price is decoupled from its value and there are no technical indicators; it's a new issue and the chart is parabolic. That's not trading, it's gambling. If you need the returns and are comfortable with that, so be it. Good luck to you.
    May 07 12:32 pm |Rating: 0 0 |Link to Comment |View article
  • Vikram Pandit, 'COO' of Citigroup
    Gabe, good luck chump! You're going to need it. C is garbage; I wouldn't give you $15 for it. A "multiplier of 7"? Got news for you, buddy: America is out of real money. That's what soaring dollar prices for commodities means, at its most basic level: dollars no longer represent much of a claim to real production. Print and borrow all you want, the rest of the world is getting tired of it. Nothing Pandit can do will make any difference to C and nothing the fed is willing to do will make any difference for America. If they raise rates to 15% and let C and its brethren fail, maybe. But that's as likely as meeting Frosty the snowman on a midsummer holiday in Death Valley.
    May 07 00:45 am |Rating: 0 0 |Link to Comment |View article
  • Big Ben's Credit Card Moves: The Good, the Bad and the Ugly
    No, Visa is not a credit card issuer. But V trades at 40x earnings and it pays no dividend. That's an automatic fail here at the bearfund. If you want to bet on number 23, go ahead. The casino is over there. V is neither a sound investment nor a reasonable trade; you are doing nothing but betting on the greater fool. I'll give you $15 a share for it; that's a bit above its liquidation value but I'm willing to take a bit of risk that it'll someday pay a dividend.

    No position on V. I don't trade the untradeable.
    May 07 00:33 am |Rating: 0 0 |Link to Comment |View article

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