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Showing posts from March, 2009

The Detroit quagmire & Treasury's absolute power

Latest news on the Detroit automakers and the proposed "resolution authority" for the Treasury. Let's get right to it...

Starting with the whole automaker bailout/bankruptcy quagmire theme - Deal Journal says, "Mr. Obama, don't let Detroit be your Vietnam":

"Congratulations. It took a couple of months in office, but you finally got something right. GM and Chrysler are bankrupt, after all.

Not that it took any particular genius to see it. But it did take some gumption for you to come out and say it. Now prepare yourself for your next feat, the reinvention of Detroit.

And here are some words of advice: Do not let Detroit destroy your Presidency. It will, if you let it."

Meanwhile, Bloomberg reports President Obama has concluded that bankruptcy is the best option for GM and Chrysler. Here's an intro from that piece:

"President Barack Obama has determined that a prepackaged bankruptcy is the best way for General Motors Corp. to restructure and b…

Bill Fleckenstein on PPIP, inflation

MSN Money's resident contrarian, Bill Fleckenstein, has some thoughts on inflation and the Treasury's trillion-dollar toxic assets plan (aka, "PPIP") in his most recent MSN columns.

In his latest piece, "Bank plan a cure-all? Don't bet on it", Fleckenstein notes that the Treasury plan to rid banks of their most troubled assets may prove feasible if the government can convince them to start shedding a certain percentage of their "impaired" assets.

However, the very well-known problems of the financial sector may soon be overshadowed by problems in the larger economy:

"But I believe that as bad as the financial problem is, the economic problem is worse. I don't see how the Treasury's program and other facilities would alleviate the economic problem.

None of these maneuvers to plug the holes in the dike of the United States' and the world's financial systems will necessarily do all that much for the overall economy. Thus, as t…

Market news: Monday's reading list

Here are some of the news items and blog posts that I'm checking out today.

We've got: political drama and executive defections at GM, AIG gifts profitable trades to the major banks, a look at the recent stock market rally, and more. Have a look.

1. Obama says GM, Chrysler have last chance to survive - Bloomberg.

See also: Obama gives GM, Chrysler ultimatums; GM's Wagoner to resign - Greentech Media.

2. Bear Market Rally - Carl Swenlin.

3. Market bottom? "Follow the Money" - Janice Dorn, Trading Doctor.

4. AIG was responsible for banks' profitable months - Zero Hedge.

See also: AIG funnels taxpayer funds to counterparties - Finance Trends.

5. Bankruptcy is economic stimulus - Ron Paul.

6. Revisiting the global savings glut thesis - Doug Noland.

7. The Dangers of Printing Money (photo essay) - Time.

8. Giving in on mark-to-market accounting rules - Bear Mountain Bull.

9. Taken for the ride of our life - Best Minds Inc.

In addition to the above articles and posts, y…

Dambisa Moyo on Charlie Rose

Dambisa Moyo sat down with Charlie Rose last week to discuss her views on African aid programs and her new book, Dead Aid.

Thanks to John at Controlled Greed for recently highlighting this Charlie Rose appearance, as well as the recent Wall Street Journal piece by Moyo entitled, "Why Foreign Aid is Hurting Africa".

We first mentioned Moyo here last month in a "Features of the week" item highlighting a recent New York Times interview about the "Anti-Bono".

As you can probably tell from the article titles mentioned above (and you will know from the video interview), Dambisa Moyo takes a very skeptical view of the conventional foreign aid money drops which dominate the Western world's playbook of "assistance" to the African continent and its people, or rather, its corrupt politicians who tend to benefit most from these monies.

I have not read her book, so it is difficult for me to say much about the proposed solutions she offers in place of con…

J.R. Nyquist: "Speaking Truth to Power"

Excellent commentary from J.R. Nyquist on the true crisis of our time, "the crisis of intellectual integrity", in this Financial Sense article entitled, "Speaking Truth to Power".

"Diogenes the cynic was a Greek philosopher of the fourth century B.C. who walked the streets of Athens carrying a lamp in broad daylight. People asked what he was doing. He said, “I am just looking for a human being.” After Plato offered Socrates’ definition of humanity as “featherless bipeds,” Diogenes brought a plucked chicken to Plato’s Academy, saying, “Behold! I have brought you a human being.”

When captured by pirates and sold into slavery his new master asked what his trade was. “Governing men,” he replied, adding that he wished to belong to someone who needed a master. One morning, when Diogenes was basking in the sun, Alexander the Great came to see him. Wishing to do the philosopher a kindness, Alexander asked if there was any favor he could bestow. “Yes,” replied Diogenes…

On PPIP and Geithner's amazing power grab

Well, where do we start?

On the subjects of the toxic-assets plan/public-private investment partnership ("PPIP") and Treasury Secretary Tim Geithner's latest power grab, it's difficult to organize my thoughts and decide where to begin. There is almost too much information to absorb here.

Trying to catch up with all the latest news on not only the government's toxic-assets plan, but Geithner's proposal for sweeping regulatory changes over the financial industry, may seem like an overwhelming task.

Thankfully, there are a few people out there (bloggers, journalists) who seem up to the task of covering these events. I've organized a collection of some of the best articles and blog posts that I have found on these interrelated subjects. Select and read as you like.

Before we begin, I will say one thing about the ongoing financial crisis and government's response to it: the officials (many of whom are unelected) at the helm have, rather predictably, decided…

Ray Dalio - Fortune interview

Ray Dalio was recently interviewed for a Fortune magazine profile of Bridgewater Associates, the "world's biggest hedge fund".

You may know Dalio as founder and chief of said hedge fund; his views on the markets and the economy (see our related articles and posts below) are already a popular draw with traders and investors across the globe, as well as Finance Trends readers. So, let's get to the new stuff...

Here's the lead in from Fortune's piece:

"Is the current downturn merely a severe slump, or are we facing a second coming of the Great Depression? That's the question everyone is asking these days. But Ray Dalio, founder of Bridgewater Associates and manager of what is now the world's biggest hedge fund, has been preparing to answer it for eight years.

In 2001 he had his investment team build a "depression gauge" into the firm's computer system, line by line in the code, to adjust the portfolio's strategy and risk profile if t…

Q&A with Charles Kirk (The Kirk Report)

Trading Edge magazine recently interviewed stock trader and blogger, Charles Kirk, of The Kirk Report for an upcoming print feature.

Of course, The Kirk Report is one of our regular reads here at Finance Trends (see our sidebar blogroll for more), and a popular destination for many traders and blog readers.

For those who'd like to know more about Charles and his thoughts on trading and blogging, check out this excerpt from the Trading Edge Q&A:

"Q: What would you say are the most important considerations for those thinking of going full-time?

A: First of all, don't do it for the money or because you don't like to work hard. Because of my website, I come into contact with many people who see trading as a way to get rich without doing a lot of work. That's simply not possible no matter how smart or skilled you may be or what trading strategy you discover and/or develop. Trading successfully requires diligence, dedication and determination and it is not a career fo…

Dr. Copper is in the news again

Copper prices are making news again today.

The recent runup in copper prices have made the industrial metal, nicknamed Dr. Copper for its blunt utility in guaging and forecasting economic activiy, front page news (well, at least in the Companies & Markets section of Financial Times) today.

Here are excerpts from FT's above the fold report:

"Copper stockpiling by a secretive Chinese state organisation has helped trigger an impressive rally of almost 35 per cent in the price of the metal this year.

Copper’s fortunes are closely tied to the industrial cycle so the price jump, bigger than that of gold, has grabbed attention outside the commodities market, with some questioning whether it could signal a turning point for economic growth..

...Industry reports point to buying by the Beijing’s State Reserves Bureau, which manages the country’s strategic stockpiles...

...David Wilson, metals analyst at Société Générale, said buying by the SRB has been the main driver behind rising co…

Beijing's rock n' roll underground

File this one under "World Culture"...

Tim Swanson, my blogging pal and man-on-the-scene in China, hips us to the burgeoning underground rock n' roll scene in Beijing. You can find part one of CNN's video report on this underground music scene in the above link at Tim's blog.

Being a follower of both rock n' roll and cultural trends, I decided to head on over to the CNN website and dig up the rest of the clips from this televised report. Have a look:






Sidenote: I'll admit that I was interested to know more about lyrics in Chinese rock music, but the interviewer seemed to press this issue a little too much; it made her seem like a total outsider and a bit of a narc. Interesting to see the musicians' responses to these questions and others, they seemed very charming and thoughtful.

Cross posted (March 22nd) at Trader Rock.

Marc Faber chats with Bloomberg

Marc Faber sits down with Bloomberg TV for an extended chat about the global economy and investment markets.

Faber tells Bloomberg's Bernard Lo that the global economy is "stuffed" for some time, with economic activity (ex-government spending) is down about 15 percent from the peak (2006-2007).

This past prosperity was built on borrowed money, and although Marc expects the economy to stabilize at some point, he does not expect us to surpass these peaks in prosperity and speculation for some time.

However, Marc does see intriguing value in depressed commodities and equities in sound companies. Whenever the recovery comes, it should lift these asset prices.

Marc is also still long-term bullish on gold and all the precious metals, given the unprecedented state of global money printing and the inflation that is sure to follow.

Plenty more to hear in this engaging and entertaining interview clip; be sure to catch Marc's comments on some of the "special" crops th…

What does a trillion dollars look like?

Given all the recent talk of government stimulus packages, bailouts, quantitative easing, and spending programs that amount to trillions of dollars in expenditures, it's gotten easier to lose sight of what a trillion dollars represents.

What does one trillion dollars look like? Let's use images to visualize.

For the sake of visual comparison, here's what a million dollars in stacked $100 dollar bills (or, Federal Reserve Notes) looks like:

Here's one billion dollars in stacked C-notes:
One trillion dollars (in double stacked pallets of $100 bills) looks something like this:If you look directly above the arrow I've placed in that graphic, you'll see the same little guy standing right next to the double stacked pallets of money.So the next time you hear some politician or a "too big to fail" executive talking about how much they really need that trillion dollars for their can't miss plan to help save the world, just remember this: Dr. Evil only wante…

In memory: Bennet Sedacca and Thomas Dorman

"Don't fight the darkness; bring the light, and darkness will disappear" - Maharishi Mahesh Yogi.

It may seem difficult to pay tribute to someone who you've never even met, but I think it is important to honor the people who have been a force for good in this life. This post is dedicated to the lives of Bennet Sedacca (who died suddenly this week at age 50) and Thomas Dorman (who also died unexpectedly last week at age 72).

Bennet Sedacca was a professional investor and writer. His articles appeared regularly at Minyanville.com, and were often circulated throughout the web by other investors, traders, and bloggers.

In recent months, Sedacca wrote frankly about corruption in the new bailout economy and an encroaching socialism put in place through a mixture of poor judgement and undemocratic policies from above.

It was his great hope that the USA would not go too far down this terrible road, that we would somehow right ourselves as a society, and that his profession (W…

Jim Rogers: US bailouts add to depression risk

Jim Rogers speaks with Bloomberg TV about the economy, saying he expects the US to have a very long recession with great risks for civil unrest within the nation and across the globe.

Jim feels strongly about the ongoing bailouts in the US economy, calling them "totally outrageous" and indicative of "absurd economics and absurd morality". Unfortunately, the US government have taken it upon themselves to prop up failing companies with taxpayers' money, throwing good money after bad in the process.

Rogers also shares thoughts on the investment ideas he's optimistic about, his long and short postions, the needed foundations for a sound economic recovery, and a great deal more, so have a look!

Related articles and posts:

1. Jim Rogers talks to Bloomberg TV - Finance Trends.

2. AIG bailout provides derivatives blueprint - Finance Trends.

AIG bailout provides derivatives blueprint

Okay, at this point I think everyone is probably sick to death of hearing about AIG, and I wasn't actually planning to add anything to our recent AIG-related posts.

Nevertheless, the Financial Times has a very worthwhile article today about the effects that the US government's bailout of AIG will have on the derivatives market.

And since we're all about trends here at Finance Trends Matter, it'd be careless of us to omit such important news. So let's get into it.

Excerpt from, "Backing for AIG provides derivatives blueprint":

"The US government's decision to pay out all the money owed by AIG to its financial derivatives counterparties is widely regarded as a "blueprint" for the level of government support that can be expected in the derivatives industry.

Indeed, the list of counterparties shows that many banks benefited from the government's decision to ensure AIG's obligations were met, including some of the biggest dealers in the…

AIG funnels taxpayer funds to counterparties

The morning's headline at MarketWatch reads, "AIG details $105 billion in payouts", but it might as well read, "AIG funnels taxpayer funds to counterparties".

Well, at least that's the case as far as I can tell (and I'm far from an expert on the ever-growing AIG bailout story). Apparently, AIG's payouts of bailout funds to its counterparties is great news; the "blue chip penny stock" is up over 60 percent (about 30 cents) in today's trading.

Here's more from MarketWatch:

"American International Group revealed on Sunday details of $105 billion of government funds that it paid to U.S. and international banks including Goldman Sachs, Deutsche Bank and Societe Generale.

The cash paid to AIG's so-called counterparties was used to cover collateral payments, cancel derivatives contracts and meet obligations at its securities lending business.

Now majority-owned by the government, AIG (AIG) has received more than $170 billion in bai…

Start your week with some rock n' roll

New music and music news at Trader Rock: a "rock n' roll jukebox for traders, investors, and other free spirits".

Sex Pistols, The Stooges, Bob Dylan, New Order...just a few of the names you'll find in the recent jukebox playlist. Plus, music news and info on some cool new groups, with new music being added throughout the week.

If you're into it, head on over and set your dial.

AIG bonuses: surprised?

Bear Mountain Bull points out that the bonus babies at AIG are receiving tens of millions in new bonuses with the money coming from the firm's (to date) $170 billion taxpayer bailout.

And he's not really buying the line from AIG chairman Edward Liddy that the bonuses were agreed to in early 2008, before the firm got into "severe financial straights". Take it away, BMB:

"Right. AIG was ‘just fine’ at that time. I’m sure this trouble was all very sudden, and that none of the people receiving bonuses had anything to do with any of the decisions that got them into this mess."

Meanwhile, Larry Summers and Barney Frank are shocked and surprised (?!) at the new AIG bonus plan, calling it "outrageous". But what else would one expect in the wake of the great bailout spree of 2008-2009?

The government and the Federal Reserve have shown they will prop up all manner of failing businesses (banks, auto-makers, insurance companies, etc.) in an attempt to prevent h…

Features of the week

Some of the more notable stories and items of interest that we've clipped and saved this week:

1. Household net worth plunges 18% in 2008.

2. China expresses worry over its US assets.

3. Fitch cuts GE, Berkshire Hathaway AAA ratings status

4. Berkshire Hathaway CDS trading on par with Turkey, Peru.

5. South Sea bubble descendant has advice for fellow bankers.

6. Pimco predicts inflation joining Buffett, Faber, and Rogers.

7. Jim Rogers talks to Bloomberg about the dollar, inflation.

8. John Authers on the importance of a Swiss Franc devaluation.

9. Switzerland, Luxembourg relent on bank secrecy.

10. Financial Times examines, "The Future of Capitalism".

11. Making the numbers: "Bernie, Jack, and the rest of us".

12. Grand Illusion - life in a Fed-driven economy.

Thanks for reading Finance Trends Matter. If you'd like to keep up with our latest content, you can subscribe to our blog feed in your RSS feed reader. Enjoy your weekend!

Retirement on Main Street

The Rolling Stones had an Exile on Main Street while dodging out on the high-tax environment of their home country (the UK) in the early 1970s.

Their time in the South of France was (sometimes) well spent; the group's musical work at Keith Richards' villa in Nice resulted in a good deal of material for the aforementioned Exile, one of the best records the Stones ever made.

Unfortunately, for many middle-class Americans, that type of creative holiday in the sun may never come. High taxes, inflation eroding away the value of retirement benefit payments, and a negative "wealth effect" from falling house and stock prices may combine to level this facet of the American Dream.

If we can shift gears from the Côte d'Azur and back to middle America, we'll let Gary North explain why Elkhart, Indiana, the RV capital of the world, is a metaphor for the "lost lifestyle" of American retirees:

"Over the last 18 months, Americans over age 55 have suffered a reve…

Marc Faber thinks markets could rally

Marc Faber joined Bloomberg this week to discuss the economy, risks of inflation, gold and gold mining shares, and the possibility for a rally in the US stock market.

Lots of interesting thoughts here from Marc on the world stock markets and the global economy.

He notes that the world has certainly slumped into a depression, with a decline in global GDP of "at least 10 percent" ex-government spending.

At the same time, Marc points out that stock markets worldwide have dropped more than 50 percent, and that sentiment has turned extremely negative. These recent developments have given Faber a more favorable view of buying shares for the long-term.

He also thinks we could see a near-term rally in shares and asset markets as a result of government/central bank money-printing, along with a deceleration of bad news in the coming months.

Related articles and posts:

1. Marc Faber interview: Financial Sense Newshour - Finance Trends.

2. Marc Faber: more boom, less gloom and doom - Busin…

Jim Rogers talks to Bloomberg TV

Well, Warren Buffett is not the only one getting up early in the morning for tv interviews.

Jim Rogers sat down to chat with Bloomberg TV (parts one & two) from Singapore the other day, and he's got plenty to share on the state of the world economy and the financial markets.

As always, Jim has some colorful ways of expressing his long-term bullish outlook on commodities. He says that farmers will be the ones to drive Lamborghinis in the coming years (in place of stock brokers and other finance types), and that ex-Wall Streeters should learn to drive tractors if they want to make it in the future, as wealth shifts to producers of real things and tangible commodities.

Rogers also made a great point about the ongoing interventions into the economy, saying that America is making the very same mistakes Japan made in propping up their zombie banks and ushering in a "lost decade" of economic decline.

Here's how Jim put it: "Sometimes you can spend more money trying t…

Warren Buffett Monday on CNBC

Well, there are a lot of things going on in the markets and the economy that we could talk about today, but let's not fight the whale.

Warren Buffett is front and center in the business news today, as he joined CNBC this morning for an extended "Ask Warren 2009" interview special.

Transcripts and video clips are all there in the link, and there's plenty for WB and Becky Quick to talk about, including the news of a merger between Schering Plough and Merck, which broke in the opening moments of this morning's interview.

Interesting to note that Buffett is seeing a lot of change in consumer behavior recently. He said that the American public has changed its buying habits, and that the level of fear that's taken hold among Americans is something he's never seen before. The widespread confusion and fear over the economy has led the buying public to really pull back in recent months.

And as you may have noticed in last week's coverage of Berkshire Hathaway…

Features of the week

A taste of what's to come in this Friday's, "Features of the week".

From BusinessWeek, Maria Bartiromo's recent interview with Jim Rogers:

"MARIA BARTIROMO

What do you think of the government's response to the economic crisis?

JIM ROGERS

Terrible. They're making it worse. It's pretty embarrassing for President Obama, who doesn't seem to have a clue what's going on—which would make sense from his background. And he has hired people who are part of the problem. [Treasury Secretary Tim] Geithner was head of the New York Fed, which was supposedly in charge of Wall Street and the banks more than anybody else. And as you remember, [Obama's chief economic adviser, Larry] Summers helped bail out Long-Term Capital Management years ago. These are people who think the only solution is to save their friends on Wall Street rather than to save 300 million Americans.

So what should they be doing?

What would I like to see happen? I'd like to see them …

When hope is all you have - Harry Eyres

Weekend FT columnist Harry Eyres has written a wonderful piece on the importance of "radical hope" and positive thinking entitled, "When hope is all you have".

I read the article this weekend and thought it was especially appropriate in these times, when we seem to be surrounded with all sorts of gloomy news and the formation/acceleration of a number of ominous trends, economic and political/cultural.

Here's an excerpt from Eyres' piece:

"As their last great chief Plenty Coups came to manhood, the outlook for the native American Crow people was beyond bleak. It was not just that the Crow were facing hard times, with straitened economic circumstances, disease and military defeat.

The Crow, as philosopher and psychoanalyst Jonathan Lear points out in his book Radical Hope: Ethics in the Face of Cultural Devastation, were confronting the loss of their entire way of life – not just the means of living (the buffalo being exterminated from the plains) but th…

The next leg down for world markets

John Authers, of FT.com's "Short View" column, charts the new lows in world stock markets and emerging market currencies in this March 2 video clip.

Here's a lead in from the print version of, "The next leg down":

"World markets are taking the long-dreaded “next leg down”. A new low for this crisis by the S&P 500 last week has been followed swiftly by new lows for the FTSE-100, the FTSE- Eurofirst 300 and, in dollar terms, Japan’s Nikkei 225.

The equity markets’ loss of confidence has translated into currencies. The Korean won and the Mexican peso, representing economies exposed to US imports, are at fresh lows for the crisis. With currencies in eastern Europe, the current focus of concern, also falling, the risk of a true emerging markets crisis is back. "

Authers notes that some reasons for hope may be found in improved economic data from China (due to a recent uptick in activity coinciding with stimulus efforts there), but he remind us that we…

Wiley to publish "Bailout Nation"

Hey! Good news for Big Picture blogger Barry Ritholtz and those who were looking forward to reading his upcoming book, Bailout Nation. It should be out this spring.

For those who don't know, Barry had been set to publish Bailout Nation with McGraw-Hill until a fracas erupted over passages in the book that were critical of the rating agencies, including Standard & Poor's, a unit of McGraw-Hill.

Bloomberg reports that John Wiley and Sons is now set to publish the book, and that it will be released this May.

"John Wiley & Sons Inc. will publish the book on the financial crisis that the author said was spurned by McGraw-Hill Cos. because of a dispute over passages critical of its Standard & Poor’s credit-rating service.

John Wiley said on its Web site the 320-page book, “Bailout Nation: How Easy Money Corrupted Wall Street and Shook the World Economy,” will be available in May. The author, Barry Ritholtz, said today he couldn’t discuss some specifics until he’s rec…

Hugh Hendry: AIG is "no longer with us"

BusinessWeek points us to Hugh Hendry's recent comments on AIG and the process by which supposedly "too big to fail" financial companies have become wards of the state:

"To the average U.S. taxpayer, the math may not sound right: After pumping in about $150 billion of federal money (with another $30 billion to come), American International Group posts a quarterly loss of almost $62 billion—the largest in history. And it will have access to $30 billion in new cash from Washington.

American International Group is being broken up in exchange for getting yet get another lifeline from the government. The former insurance giant posted a staggering $61.7 billion loss for the fourth quarter (about $22.95 per diluted share). Now, AIG is putting what are considered to be its most valuable insurance assets—American International Assurance (AIA) and its Asian operations—under direct government control. Once the businesses are sold, taxpayers will reap the benefits.

I was struck by…