Skip to main content

Posts

Showing posts from February, 2009

Berkshire, Buffett bear brunt of bear market

Berkshire Hathaway and its chairman, Warren Buffett, are certainly bearing the brunt of this bear market in shares.

Last week, Bloomberg reported that Berkshire Hathaway shares had fallen to a five-year low on concern about possible losses and writedowns from "bets the billionaire chairman has taken on world stock markets."

Berkshire won't have to pay out on the contracts until "at least" 2019, but falling stock market prices and increased volatility in the interim require the company to take quarterly writedowns on those positions.

Today, Bloomberg reports that writedowns from those derivative bets, along with losses in the company's stock portfolio, may cause Berkshire to report its worst results ever, according to the gauge most touted by Buffett: the company's book value per share.

"Berkshire Hathaway Inc. may report its worst results since Warren Buffett took over in 1965, based on a measure the billionaire chairman cites on the first page of h…

Rock n' Roll for traders and investors

New music has been added to the Trader Rock blog. Rock n' roll fans, rejoice!

This week's offerings in the rock n' roll jukebox include the Small Faces, Rolling Stones, The Kinks, T. Rex, and much more.

So head on over and check out some cool tunes, find new music blogs and listening resources in our recent music news linkfest, or subscribe to the Trader Rock feed to keep up with all the latest hits.

We'll see you back here tomorrow for more news from the markets!

Marc Andreessen on Charlie Rose

There are a lot of different things I could be posting about today (bank nationalization, the stock market, the wondrous things Obama said, etc.).

What I am posting today is this recent interview with Marc Andreessen on the Charlie Rose show. I'd seen the interview posted at a couple of different blogs this week, but finally got a chance to watch it yesterday while checking in with Howard Lindzon's blog. I'm glad that I did.

As you'll see right from the beginning of this interview, Charlie Rose engages the fast-speaking Andreessen on a number of subjects, from advances in technology (Twitter, Facebook, Ning, social networking and more) to entrepreneurship and venture capital and the current state of the economy.

Their rapid-fire exchange hardly lets up througout the interview, so that by the end of the program, you might find yourself trying to remember and sort out all the information and opinions that were just thrown your way within a 53 minute timespan.

But it's…

Home prices continue to slide

US home prices continue to slide, dropping at a record pace in December. Here are the latest details from Bloomberg's story:

"Home prices in 20 U.S. cities declined 18.5 percent in December from a year earlier, the fastest drop on record, as foreclosures climbed and sales sank.

The decrease in the S&P/Case-Shiller index was more than forecast and followed an 18.2 percent drop in November. The gauge has fallen every month since January 2007, and year-over-year records began in 2001. Separately, the Federal Housing Finance Board said prices in 2008 fell a record 8.2 percent.

Record foreclosures are contributing to declining property values and household wealth, crippling the consumer spending that makes up about 70 percent of the economy. The Obama administration has pledged to spend $275 billion to help stabilize the housing market, including $75 billion to bring down mortgage rates and encourage loan modifications.

“The massive inventory overhang in the market and the surge i…

The Dow, S&P, Marc Faber, and Gold

As mentioned in last Friday's "Features" post, now that the Dow Jones Industrial Average has sunk below its November lows, all eyes are on the S&P 500 charts.

Will the S&P hold its support at the November lows, or will we see a breakthrough to the downside, confirming the new lows in the Dow?

Well, it seems that the S&P 500 has not only broken through those November lows, it has gone below its lowest close since April 1997. Bloomberg has the details:

"The S&P 500 lost 2.4 percent to 751.44 at 12:56 p.m. in New York, below its lowest close since April 1997. The Dow Jones Industrial Average decreased 157.14 points, or 2.1 percent, to 7,208.53, below its lowest close since October 1997. The Russell 2000 Index lost 2.8 percent. "

Bloomberg also notes that the S&P 500 is down 17 percent on the year, the worst start to a year on record. And given that dividends are falling at the fastest rate since 1955, the S&P 500 is still expensive even afte…

Features of the week

Get set for our, "Features of the week".

1. European stocks fall to nearly six-year lows.

2. Roubini says Europe's banking system faces growing risks.

3. Fear of US bank nationalization drives debt insurance higher.

4. Dow breaks through its November lows; all eyes on S&P 500.

5. Comment: The end of Swiss banking secrecy?

6. Buffet's Berkshire hits five-year low on derivatives worries.

7. Gold hits record against Euro on fears of Zimbabwe-nomics.

8. Frank Barbera charts discretionary spending and the art market.

9. Banks' latest writedown woe - their art.

10. Ron Paul on reinstating the draft and forced "volunteerism".

11. Home loans in the US: the biggest racket since Capone?

12. Rick Santelli calls for a "Chicago Tea Party" in July.

13. Baseball and the financial markets have a lot in common.

14. Roma bear brunt of Hungary's downturn.

15. Judge orders new probe into Russian journalist's death.

16. Niall Ferguson on "The Axis of Upheaval&q…

Commodity currencies: follow that ship!

Commodity currencies, those reflecting the commodity exporting character of their host economies, may prove a worthwhile bet over the coming year, according to some traders who gauge the action of the currencies against a leading index of shipping costs.

Bloomberg reports that the recent jump in the Baltic Dry Index (BDI) is signalling a possible follow-through in the strength of major commodity currencies:

"Shipping costs have more than doubled this year, so it may be time to buy kroner, Aussies and loonies.
The 147 percent jump in ocean-transport prices is evidence that China’s $580 billion stimulus plan will lift raw materials, said Ihab Salib, who oversees $3 billion at Federated Investments Inc. in Pittsburgh. That would benefit countries exporting them, so Salib is “actively trading” Norway’s krone and Australian and Canadian dollars, nicknamed Aussies and loonies.
Salib and other currency traders have started using the Baltic Dry Index’s global gauge of raw-material shipping…

Marc Faber is everywhere today

Our main man, Marc Faber is everywhere today.

He phoned in to chat with Bloomberg this morning about the financial health of the European nations and their currencies, as well as the importance of US stock market indices (S&P 500) approaching their November lows.

Marc also penned an interesting opinion piece for the Journal today entitled, "Synchronized Boom, Synchronized Bust". Here's an excerpt:

"The world has gone from the greatest synchronized global economic boom in history to the first synchronized global bust since the Great Depression. How we got here is not a cautionary tale of free markets gone wild. Rather, it's the story of what can happen when governments ignore market signals and central bankers believe in endless booms..."

"...Sadly, government policy responses -- not only in the U.S. -- are plainly wrong. It is not that the free market failed. The mistake was constant interventions in the free market by the Fed and the U.S. Treasury …

A short history of the national debt

John Steele Gordon offers up, "A Short History of the National Debt", in today's Wall St. Journal. Here's a look at what's inside:

"At 8.3% of GDP, this year's deficit is by far the largest since World War II. But the total debt is, as of now, still under 75% of GDP. It was almost 130% following World War II. (Japan's national debt right now is not far from 180% of that nation's GDP.)

Still, it's the trend that is worrisome, to put it mildly. There have always been two reasons for adding to the national debt. One is to fight wars. The second is to counteract recessions. But while the national debt in 1982 was 35% of GDP, after a quarter century of nearly uninterrupted economic growth and the end of the Cold War the debt-to-GDP ratio has more than doubled."

However, persistent deficits and a growing national debt did not always loom so large over the country. At one time in our nation's history, steadily growing debts and deficits were …

Notes: Everybody wants to rule the world

Monday's notes: what's happening in the markets and the world.

1. Bill Fleckenstein - "Treasury's strategy: 'what elephant?'".

Fleck is muy skeptical of the government's plan to take over the banking sector's bad assets. As he sees it, "the real sticking point continues to be discovering the prices at which these various assets can be sold", a point the Treasury seems unwilling to acknowledge.

He also calls attention to the Fed's role in pumping up the credit/real-estate bubble that led us to this inevitable bust and its aftermath.

Fleckenstein feels that public attention should be centered on this fact, and that a serious discussion about the Federal Reserve's role in our monetary system should take place, so that our country might put itself and its future on a sounder footing. (H/T: Bear Mountain Bull).

2. Obama nominates Geithner, Summers to head auto team.

So when I looked at Google News this morning and saw Timothy Geithner…

Marc Faber interview - Financial Sense Newshour

Marc Faber joins the Financial Sense Newshour broadcast as this weekend's guest expert interview. "The Grand Illusion", is theme for this weekend's interview segment.

Marc speaks with FSN host Jim Puplava about a range of subjects including; the "second half recovery" theory, corporate earnings, Keynesian economic theories and policies, inflation and deflation, the illusion of wealth, and some important future investment themes.

Enjoy the interview, and if you'd like to hear more at this forum, check out some of Marc's previous FSN interviews at the guest expert link above.

Related articles and posts:

1. Marc Faber - 2009 to be "catastrophic" - Finance Trends Matter.

2. Marc Faber speaks with Bloomberg TV about bailouts - YouTube.

Features of the week

We're debating the stimulus package, corporate earnings and fair value on the S&P 500, as well as America's economic and political future.

Plus, you'll hear from Nouriel Roubini on the economy, Donald Coxe on commodities, and Martin Fridson on investing in corporate debt. All in this Friday's star-studded edition of "Features of the week".

1. House passes Obama's $787 billion stimulus plan.

See also: Stimulating consumers? What you get vs. what you owe.

2. John Authers on the bounce in Chinese shares and Baltic Dry Index.

3. Half of all CDOs built from ABS have now defaulted.

4. Financial crisis called top security threat to US.

5. Fair value for the S&P 500 = 440.

See also: Why fair value for the S&P 500 is not 440.

6. Stop listening to Suze Orman (caution: photo included).

7. Stimulus: because all economies have performance issues.

8. Gary Tanashian on Geithner's "comprehensive" attack.

9. FT Markets Q&A: Nouriel Roubini on prospect…

Jim Rogers: Geithner clueless (Bloomberg TV)

Jim Rogers joined Bloomberg TV to discuss the Treasury's bank rescue plan, confirming the Wall Street consensus that Tim Geithner's proposal is a bomb. Rogers heaps scorn on Treasury Secretary Geithner, citing Geithner's role in fostering the financial crisis in the first place, and his efforts in crafting TARP and other "absurd bailouts" last year. He says Geithner "has never known what he's doing", and this is something that everyone (including President Obama) will soon find out. Once again, Jim points out that America is making the same mistakes Japan made in the 1990s, and that efforts to prop up the banks with "government money" will prove disastrous. Press play and we'll let JR tell the rest. Related articles and posts:1. Marc Faber speaks with Bloomberg TV about bailouts - YouTube.

Bank rescue: a plan with no details

On Tuesday, US Treasury Secretary Tim Geithner introduced a $1.5 trillion bank rescue plan that aims to recapitalize the banking sector and spur increased lending to individuals and businesses.

The market's reaction to the plan (S&P 500 down 5% Tuesday) is the subject of some debate today. Did traders and investors show their disapproval of the rescue plan by selling shares, or was yesterday's decline simply a "sell the news" event?

Whatever the verdict on yesterday's action turns out to be, one thing seems clear. In the long run, some market participants are doubtful that the plan will achieve any good at all.

Another sticking point: when looking over some of the criticism of the Treasury's "Financial Stability Plan", complaints over a lack of detail seem to be a recurring theme.

From Breakingviews.com, "A plan with no details":

"After months of ad hoc bank rescue efforts, the markets hoped the new U.S. administration would delive…

Trading hits: Trader Rock linkfest

The latest "Trading hits" linkfest has been posted at Trader Rock. It's a sampling of recent news and featured posts from the trading & investing blogosphere.

We've got news on the US stimulus bill vote (and the market's early reaction to it), the Treasury Secretary's $1 trillion "bad bank" plan, notes on the bond bubble, some thoughts on the resource ETFs, new interviews with Marc Faber and Jim Rogers, and more.

Check it out, and enjoy some rock n' roll hits while you're there. You can even leave your requests (I'm trying to figure out what to play today).

Ray Dalio in Barron's: it's a "D-process"

Hedge fund manager and Bridgewater Associates founder, Ray Dalio talks to Barron's this week about the global economic downturn and ongoing deleveraging process (H/T: Paul Kedrosky).

Here's an excerpt from the Barron's interview:

"Barron's: I can't think of anyone who was earlier in describing the deleveraging and deflationary process that has been happening around the world.

Dalio: Let's call it a "D-process," which is different than a recession, and the only reason that people really don't understand this process is because it happens rarely. Everybody should, at this point, try to understand the depression process by reading about the Great Depression or the Latin American debt crisis or the Japanese experience so that it becomes part of their frame of reference.

Most people didn't live through any of those experiences, and what they have gotten used to is the recession dynamic, and so they are quick to presume the recession dynamic. It…

Ron Paul: End the Fed (at Mises Circle)

Ron Paul gives a talk entitled, "End the Fed" at the 2009 Mises Circle in Houston, TX. To use a phrase from back in the day, Ron Paul is punk rock. Yes, in certain tribes, this is just about the highest form of compliment one can give. Related articles and posts:1. End the Fed (Ron Paul before the US House) - Lew Rockwell. 2. Ron Paul on stimulus and the economy - Finance Trends.3. Ron Paul visits Google - YouTube via Finance Trends.

Features of the week

Plenty to read and hear in our latest, "Features of the week".

1. US economy: jobless rate soars and payrolls plunge by 598,000.

2. TARP robs $78 billion in taxpayer cash (at least).

3. Faber Friday: Bloomberg interview clips with investor Marc Faber.

(a) Faber says US stimulus may lead to dire consequences (video).

(b) Faber favors US tech stocks: Cisco, Intel (audio).

(c) Marc Faber says stocks will fall after mid-year bounce (video).

4. The "bad bank" proposal: even worse than you imagined.

5. Dividends are forecast to decline in Europe and in the S&P 500.

6. Should you follow Buffett and be greedy now?

7. In Daschle's tax woes, a peek into how Washington works.

8. Corn ethanol takes another hit.

9. Downturn ends boom in wind and solar power.

10. Clean Money is a useful guide for clean-tech investors.

11. Uncle Sam takes salary, leaves allowance.

12. The History of Money: Peru.

13. Chart spotlight: January forecasts a down year - Carl Swenlin.

14. Drivers for natural re…

Clean Money - John Rubino: Book review

Clean Money
by John Rubino
274 pages.
Hoboken, New Jersey
John Wiley & Sons.

2009. 1st Edition.

The bouyant stock market environment of the past several years is gone, and the financial wreckage of 2008 is still sharp in our minds as a new year starts to unfold.

Given the recent across-the-board-declines in global stock markets (and most asset classes) that have left many investors shell-shocked, you might wonder if there is any good reason to consider the merits of a hot new investment theme, such as clean energy.

However, we shouldn't be too hasty to write off all future stock investments. After all, the market declines of 2008 may continue into 2009, but they may also leave interesting investment opportunities in their wake. Which brings us to the subject of this review.

John Rubino, author and editor of GreenStockInvesting.com, recently released a new book on renewable energy and clean-tech investing entitled, Clean Money: Picking Winners in the Green Tech Boom.

In Clean Money, R…

Clean-tech investing and Friday Features

Quick update on what I'm working on for tomorrow and Friday's posts.

I'm currently making my way to the end of John Rubino's new book on clean-tech investing. It's called, Clean Money: Picking Winners in the Green Tech Boom, and we'll try to have a review of the book posted here tomorrow. Be sure to catch this one, especially if you have any interest in alternative energy and "green" investing.

In the meantime check out John's new site, GreenStockInvesting.com, for the latest news and original articles on this investing theme.

In addition to that, I'll also be compiling material for our next "Features of the week" post. We missed out on our "Features" post last Friday due to our wrap-up coverage of the Barron's Roundtable, so get set for an awesome Friday linkfest post this week.

As always, your suggestions for linkfest articles and posts are most welcome and appreciated. Thanks for checking in, and we'll see you then…

Can countries really go bankrupt?

"Can countries really go bankrupt?".

That's the question Der Speigel is asking in an article that examines the lengths national governments are going to in order to try and "prevent the financial system from collapse".

Here's more from the Speigel Online article:

"The bailout packages aimed at shoring up financial markets in Europe are getting increasingly expensive. A creeping depreciation of currency is inevitable and state bankruptcies can no longer be ruled out. Could the euro zone also fall victim to the global financial crisis?

"There's a rumor going around that states cannot go bankrupt," German Chancellor Angela Merkel said recently at a private bank event in Frankfurt. "This rumor is not true."

Of course she's right. Countries can go bankrupt if they allow their deficit spending to spin out of control and are no longer able to service their interest payments. Merkel's comments can be read as a warning that countr…

Pay your taxes! Or not...

Tom Daschle, former Senate majority leader and current nominee for secretary of Health and Human Services, is the latest Obama pick to suffer public disclosure of tax problems. Will this hurt his chances for confirmation?

From ABC News - "Daschle Apologizes for Failing to Pay Taxes":

"...Tom Daschle, President Barack Obama's choice to head the Health and Human Services Department, apologized Monday to the Senate panel that will decide his fate, saying he was "deeply embarrassed and disappointed" about failing to pay more than $120,000 in taxes.

Determined to salvage his nomination, Daschle wrote a letter to the top leaders of the Senate Finance Committee in which he sought to explain how he overlooked taxes on additional income for consulting work, the use of a car service and paperwork to support claims for charitable contributions.

Daschle recently filed amended tax returns for 2005-07 to report $128,203 in back taxes and $11,964 in interest.

"I am deep…

Jukebox

Welcome to the "Super/Lazy Sunday" edition of the jukebox.

1. Pretty Things - Rosalyn.
2. Fleur De Lys - Circles.
3. Small Faces - Lazy Sunday.
4. The Kinks - Lincoln County.
5. Led Zeppelin - Ramble On.
6. Jimi Hendrix - Wind Cries Mary.
Cross posted at Trader Rock, the full time rock n' roll jukebox.