Remember how a couple of days ago I was explaining how this runup in the market is nearly perfectly correlated to the decline/debasement of the USDollar? Well for those of you who want things explained as simply as possible Glen Beck does an excellent job. Love him or hate him he really got it right this time. Please Make sure to watch all 3 parts.
Wednesday, November 18, 2009
This is what "Made In China" really gets you
Not $20 DVD players, not cheaper toys, not cheaper clothes or steel but the kind of pollution that ruined American waterways for more than a half century and in some cases permanently. This photojournal is what you should think of the next time you pick up an item that is made in China. In some way shape or form someone is paying.
Please click over and see the rest.
Buy American or European and pay for someone increasing their quality of life instead of ruining the land they live in.
Please click over and see the rest.
Buy American or European and pay for someone increasing their quality of life instead of ruining the land they live in.
Tuesday, November 17, 2009
The State Of Commercial Real Estate
Hey citizens of Pontiac you know that $55.7 Million we took from you?
Niiiice.
99% depreciation over 35 years, plus of course all the money poured into property taxes and maintenance.
This sale is emblematic of the general state of Commercial Real Estate. Bluntly, too many people built too much crap on wishes and dreams - dreams they financed with other people's money, either the taxpayer's (in this case) or with some poor fool who believed the prospectus on some CMBS deal that screamed "PRIME Commercial Space!"
Well, perhaps. But there are only so many business interests that can inhabit a given area and turn a profit, especially when you send all the good jobs overseas to CHINA and INDIA, rendering unemployed the middle-class call-center employee who used to make $30,000 a year but now makes zero while the Indian or Chinese employee makes $2/day.
Worse, all real estate (that has buildings on it anyway) has a carrying cost, meaning that if you don't have a revenue-producing use for it the value is actually negative. In the case of the Silverdome basic maintenance on the building and grounds is about $1.5 million a year. If you can't make enough to cover those costs, "ownership" just bleeds you out.
Welcome to the "new normal."
If this doesn't send a shiver up your spine on the "quality" of regional banks that are stuffed to the gills with commercial real estate loans made in the last few years, you're not paying attention.
Don't worry, you soon will be, as nearly all of these deals are interest-only and have to roll over between now and 2013.
They can't and won't.
Pontiac -- Nearly 35 years after taxpayers spent $55.7 million building the Pontiac Silverdome and a year after a $20 million sale fell through, city officials have sold the arena once called the most desirable property in Oakland County.
The price: $583,000.
Niiiice.
99% depreciation over 35 years, plus of course all the money poured into property taxes and maintenance.
"The citizens of Pontiac deserve better," Seay said. "This is pennies on the dollar (of what it cost). It goes to show how bad times are ... Worse, we don't even know who bought it."
This sale is emblematic of the general state of Commercial Real Estate. Bluntly, too many people built too much crap on wishes and dreams - dreams they financed with other people's money, either the taxpayer's (in this case) or with some poor fool who believed the prospectus on some CMBS deal that screamed "PRIME Commercial Space!"
Well, perhaps. But there are only so many business interests that can inhabit a given area and turn a profit, especially when you send all the good jobs overseas to CHINA and INDIA, rendering unemployed the middle-class call-center employee who used to make $30,000 a year but now makes zero while the Indian or Chinese employee makes $2/day.
Worse, all real estate (that has buildings on it anyway) has a carrying cost, meaning that if you don't have a revenue-producing use for it the value is actually negative. In the case of the Silverdome basic maintenance on the building and grounds is about $1.5 million a year. If you can't make enough to cover those costs, "ownership" just bleeds you out.
Welcome to the "new normal."
If this doesn't send a shiver up your spine on the "quality" of regional banks that are stuffed to the gills with commercial real estate loans made in the last few years, you're not paying attention.
Don't worry, you soon will be, as nearly all of these deals are interest-only and have to roll over between now and 2013.
They can't and won't.
Monday, November 16, 2009
Rail Traffic - A very bullish sign?
The most interesting weekly statistic last week was rail traffic, which held steady. Why is that interesting? Because by now rail traffic should be well into its seasonal decline (last year the decline was a "cliff dive"), but traffic has generally held steady at September-early October's levels or even improved, as shown on this graph:
This is a bullish sign for the economy if this keeps up.
This is a bullish sign for the economy if this keeps up.
Market Trivia
Since first closing above 10,000 (March 29, 1999), how many times, on a closing basis, has the Dow Jones Industrial Average traversed that level?
Answer: 29 Times (Highlight over the blank area to get your answer)
Answer: 29 Times (Highlight over the blank area to get your answer)
Barrons: US Government = Worlds Worst trader
From Barrons
THERE ARE SOME LISTS YOU WANT TO SEE your name on, and others you'd rather not. It would be nice to make the Forbes 400, for instance, but not so great to be mentioned in the obituaries.
When listing the worst traders of all time, many of you would include some sports teams that made infamous deals. In football, the Atlanta Falcons traded Brett Favre to the Green Bay Packers. In baseball, you can debate whether the Chicago Cubs trading Lou Brock to the St. Louis Cardinals for Ernie Broglio was worse than the Philadelphia Phillies trading Ryne Sandberg and Larry Bowa to the Cubs for Ivan DeJesus. As bad as those swaps were, there is one that's far worse.
To paraphrase my friend Mark Fisher, founder of MBF Clearing and one of the biggest energy trader/brokers in the world, the federal government let the trade of the century slip through its fingers at the depths of the financial crisis. Worse, Warren Buffett had already drawn up the perfect blueprint, in steps so easy even a Treasury secretary could follow. Doesn't that make the government a candidate for worst trader of all time?
Long before his acquisition of the Burlington Northern Santa Fe (ticker: BNI) railroad, the Oracle of Omaha agreed, on Sept. 23, 2008, to invest $5 billion in Goldman Sachs (GS) through a purchase of perpetual preferred stock. The shrewd chairman and CEO of Berkshire Hathaway also got warrants to buy up to $5 billion of Goldman common shares at $115 each, some 8% below where the stock was trading at the time.
In a single bold stroke, when Goldman and the global markets needed it most, Buffett put his money and reputation on the line. He stood to own roughly 10% of the bank, and his convertible shares also pay a fat 10% dividend.
Yet even with this trade serving as a very public model, what did then-Treasury Secretary Hank Paulson ask for? When the Wall Street giants had their backs to the wall, he gave them billions of our taxpayer dollars for a relative pittance. In mid-October 2008, Goldman and Morgan Stanley (MS) each got $10 billion from the Treasury; Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) each got $25 billion.
Fast-forward to Oct. 21 of this year, and now Paulson's successor at Treasury, Timothy Geithner, is telling us what a great investment the government made in Goldman. His office touts the 23% return on our $5 billion in taxpayer money. Let's compare that with what we might have gotten with terms similar to Buffett's.
Goldman was trading at $115, so a $5 billion stake bought the taxpayers 43 million shares. With the stock subsequently running up to $180, that $5 billion stake would be worth $7.8 billion, a gain of $2.8 billion. But wait, it gets better -- or worse, depending on your view. Given the added kicker of warrants on another $5 billion, 8% under the market, we'd also own warrants for 43 million shares at $105. So we'd have made another $3.2 billion.
Thus, the total gain before dividends would be $6 billion on a $5 billion investment. Last time I checked, that's 120% on our money, versus the 23% that Hank got us. I didn't go to Dartmouth, as Secretaries Paulson and Geithner did, but I think Buffett got the better deal.
THERE ARE SOME LISTS YOU WANT TO SEE your name on, and others you'd rather not. It would be nice to make the Forbes 400, for instance, but not so great to be mentioned in the obituaries.
When listing the worst traders of all time, many of you would include some sports teams that made infamous deals. In football, the Atlanta Falcons traded Brett Favre to the Green Bay Packers. In baseball, you can debate whether the Chicago Cubs trading Lou Brock to the St. Louis Cardinals for Ernie Broglio was worse than the Philadelphia Phillies trading Ryne Sandberg and Larry Bowa to the Cubs for Ivan DeJesus. As bad as those swaps were, there is one that's far worse.
To paraphrase my friend Mark Fisher, founder of MBF Clearing and one of the biggest energy trader/brokers in the world, the federal government let the trade of the century slip through its fingers at the depths of the financial crisis. Worse, Warren Buffett had already drawn up the perfect blueprint, in steps so easy even a Treasury secretary could follow. Doesn't that make the government a candidate for worst trader of all time?
Long before his acquisition of the Burlington Northern Santa Fe (ticker: BNI) railroad, the Oracle of Omaha agreed, on Sept. 23, 2008, to invest $5 billion in Goldman Sachs (GS) through a purchase of perpetual preferred stock. The shrewd chairman and CEO of Berkshire Hathaway also got warrants to buy up to $5 billion of Goldman common shares at $115 each, some 8% below where the stock was trading at the time.
In a single bold stroke, when Goldman and the global markets needed it most, Buffett put his money and reputation on the line. He stood to own roughly 10% of the bank, and his convertible shares also pay a fat 10% dividend.
Yet even with this trade serving as a very public model, what did then-Treasury Secretary Hank Paulson ask for? When the Wall Street giants had their backs to the wall, he gave them billions of our taxpayer dollars for a relative pittance. In mid-October 2008, Goldman and Morgan Stanley (MS) each got $10 billion from the Treasury; Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) each got $25 billion.
Fast-forward to Oct. 21 of this year, and now Paulson's successor at Treasury, Timothy Geithner, is telling us what a great investment the government made in Goldman. His office touts the 23% return on our $5 billion in taxpayer money. Let's compare that with what we might have gotten with terms similar to Buffett's.
Goldman was trading at $115, so a $5 billion stake bought the taxpayers 43 million shares. With the stock subsequently running up to $180, that $5 billion stake would be worth $7.8 billion, a gain of $2.8 billion. But wait, it gets better -- or worse, depending on your view. Given the added kicker of warrants on another $5 billion, 8% under the market, we'd also own warrants for 43 million shares at $105. So we'd have made another $3.2 billion.
Thus, the total gain before dividends would be $6 billion on a $5 billion investment. Last time I checked, that's 120% on our money, versus the 23% that Hank got us. I didn't go to Dartmouth, as Secretaries Paulson and Geithner did, but I think Buffett got the better deal.
Gold at $5000+?
They are all making good points but I'm leaning towards this being a contrary indicator. My friend sold a plain old ordinary oz of gold on Ebay last week and it sold for $1600.
Might be interesting to see where these next 3-6 months trade in the metal.
Might be interesting to see where these next 3-6 months trade in the metal.
Wednesday, November 11, 2009
Why are you wrong?
People often ask me what my opinion about the stock market is and when I tell them my theory they often express their disagreement. My theory has always been that over the next 3-5 years the market will hover in a range between 1100 and 700 and I would be a seller of stocks right now. Most people are near term thinkers with the "what have you done for me lately" mentality. They have long forgotten that the market is still well off its highs and at the same level as it was in 2003-2004 and are focused on the tremendous rally from the March lows. I have been suspect all along of this rally and here's another data point to consider. The following Chart is the performance of the S&P vs the US dollar. It is almost perfectly inversely correlated.
Now you wonder why Bernanke et all aren't pushing a strong dollar policy and are happy enough to see our dollar tank. The question I pose to you readers is how much further can the dollar trade lower before it becomes a hugely crowded trade and we get a violent short squeeze? What do you think will happen to US equities?
Now you wonder why Bernanke et all aren't pushing a strong dollar policy and are happy enough to see our dollar tank. The question I pose to you readers is how much further can the dollar trade lower before it becomes a hugely crowded trade and we get a violent short squeeze? What do you think will happen to US equities?
Tuesday, October 20, 2009
60% Rally and how it compares to prior ones.
Hope Springs Eternal.
* Year over Year Retail Sales: 9.3% average in prior 60% rallies versus -5.3% in the current one
* Consumer Confidence: 95.5 average; 53.1 now
* Capacity Utilization: 79.9% average; 66.6% now
* Year over Year Industrial Production: 4.1% avereage; -10.7% now
* ISM: 53.9 average; 52.6 now
* Payroll employment gains over period: 2.2% average; -2.0% now
* Decline in continued unemployment claims from cycle peak: -26.3 average; -11.6% now
* Year over Year growth in total credit market debt: 9.3% average; 3.0% now
* Year over Year growth in household debt: 8.8% average; -0.1% now
* P/E Multiple: 16.8x average; 20.0x now
With the exception of ISM, this 60% rally is completely nonsensical. On 9 out of the key 10 economic dimensions we are cruising purely on hope and on expectations that Uncle Sam will continue printing trillions of dollars simply to get us out of this mess. Or not even that, but merely the excess hundreds of billions in liquidity courtesy of Ben Bernanke, are following the path of least resistance straight to equities. Whatever the reason, the current rally, at least when juxtaposed with previous ones, is a complete sham. Anyone who believes there is any ounce of economic fundamental credibility to it needs to take a careful look at the data. Unfortunately, all will be happy to be blissfully ignorant until, as always, it is too late.
Monday, October 12, 2009
Single Best Investment in history = 258,449%
The single best investment — in terms of greatest return on invested dollars — has been the lobbying efforts of the major banks and finance firms and the bailouts that they received.
They spent $114.2 million dollars in contributions toward the 2008 election, according to the the nonpartisan Center for Responsive Politics. The companies that have been awarded taxpayers’ money from Congress’s bailout bill spent $77 million on lobbying and $37 million on federal campaign contributions, the Center finds.
These firms political activities have yielded them $295.2 billion from Recapitalization, TARP and other assorted bailouts.
The return on investment: 258,449 percent.
They spent $114.2 million dollars in contributions toward the 2008 election, according to the the nonpartisan Center for Responsive Politics. The companies that have been awarded taxpayers’ money from Congress’s bailout bill spent $77 million on lobbying and $37 million on federal campaign contributions, the Center finds.
These firms political activities have yielded them $295.2 billion from Recapitalization, TARP and other assorted bailouts.
The return on investment: 258,449 percent.
Thursday, October 8, 2009
Why you shouldn't be invested in the market
The fed is blatantly monetizing debt. They issued debt and 30 minutes later bought it back.
click here for zero hedge where i got this information
Below is the 10:00 am announcement of a new $5 billion auction of 2 Year Fannie Agencies:
A mere half hour later, the NY Fed announced that as part of tomorrow's "Outright Agency Coupon Purchase" precisely this CUSIP would be one of the securities repurchased:
These shell games are getting tiresome. A half an hour turnaround time between issuance and buyback? Really Ben?
As Jim Bianco comments, some answers are far overdue, when trying to explain this most blatant example of monetization to date.
1. Who bought these securities at auction? The potential for foul play here is high if the news of such a buyback accidentally leaked to a few individuals in the market
2. Who does the Federal Reserve think it is fooling by monetizing in such a roundabout way?
click here for zero hedge where i got this information
Below is the 10:00 am announcement of a new $5 billion auction of 2 Year Fannie Agencies:
A mere half hour later, the NY Fed announced that as part of tomorrow's "Outright Agency Coupon Purchase" precisely this CUSIP would be one of the securities repurchased:
These shell games are getting tiresome. A half an hour turnaround time between issuance and buyback? Really Ben?
As Jim Bianco comments, some answers are far overdue, when trying to explain this most blatant example of monetization to date.
1. Who bought these securities at auction? The potential for foul play here is high if the news of such a buyback accidentally leaked to a few individuals in the market
2. Who does the Federal Reserve think it is fooling by monetizing in such a roundabout way?
Monday, October 5, 2009
Hey FED why is Goldman so special?
This is exactly why I own a ton of Goldman debt (bought last march).
A Short Question For Senior Officials Of The New York Fed
A Short Question For Senior Officials Of The New York Fed
At the height of the financial panic last fall Goldman Sachs became a bank holding company, which enabled it to borrow directly from the Federal Reserve. It also became subject to supervision by the Federal Reserve Board (with the NY Fed on point) – hence the brouhaha over Steven Friedman’s shareholdings.
Goldman is also currently engaged in private equity investments in nonfinancial firms around the world, as seen for example in its recent deal with Geely Automotive Holdings in China (People’s Daily; CNBC). US banks or bank holding companies would not generally be allowed to undertake such transactions - in fact, it is annoyed bankers who have asked me to take this up.
Would someone from the NY Fed kindly explain the precise nature of the waiver that has been granted to Goldman so that it can operate in this fashion? If this is temporary, is it envisaged that Goldman will cease being a bank holding company, or that it will divest itself shortly of activities not usually allowed (and with good reason) by banks? Or will all bank holding companies be allowed to expand on the same basis. (The relevant rules appear to be here in general and here specifically; do tell me what I am missing.)
Increasingly, the issue of “too big to regulate” in the public interest is being brought up – an issue that has historically attracted the interest of the Department of Justice’s Antitrust Division in sectors other than finance. Should Goldman Sachs now be placed in this category?
Given that the Fed has slipped up so many times and in so many ways with regard to regulation over the past decade, and given the current debate on Capitol Hill, now might be a good time to get ahead of this issue.
In addition, there is the obvious carry trade (borrow cheaply; lend at higher rates) developing from cheap Fed dollar funding to the growing speculative frenzy in emerging markets, particularly China. Are we heading for another speculative bubble that will end up damaging US bank balance sheets and all American taxpayers?
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