Mack warns of tough 2009

Morgan Stanley Chief Executive Officer John J. Mack, who will run the largest broker-dealer when the acquisition of Smith Barney from Citigroup Inc. is completed later this year, told employees in a nationwide conference call yesterday that 2009 will be “a difficult year,” mostly because of so many toxic assets that have yet to be cleansed from the bank’s holdings. Among the 529 financial institutions that received loans from American taxpayers, according to data compiled by Bloomberg, Morgan Stanley isn’t yet prepared to pay back the $10 billion it received from the U.S. Treasury in October.

the full story is on the bloombeg website.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQf5gYtkdEBk

It looks like the toxic asset issue may linger on in 2009.

http://financialfactstoday.blogspot.com/2009/03/toxic-to-taxpayers.html

Banks throw in towel on run down property

This article in the New York times reveals just how crazy the foreclosure situation has become this year. The value of real estate in some areas has declined so much that the banks doesn't even want to claim the property in order try and recoupe losses. We have had a major meldtown in the economy and with housing. It should be clear that there are few winners when fluctations in pricing are so severe.

http://www.nytimes.com/2009/03/30/us/30walkaway.html?em

Obama and administration getting abused by bankers.

The economy is not healing as well as the administration has spin doctors the bank story repeatedly. Obama, after calling for more responsibility from everyone, has let the bankers throw around foolish and unsubstantiated claims about earnings with no objections from the White House. No one would say anything as long as the stock market was in a mini rally mode. It is interesting to see the banks come out this weekend and already start saying that March was slower than January and February. My opinion is that most of what the banks were saying about profits was not true. Geithner comes on television today saying several banks will need substantial capital even after the billions stuffed into their vaults already. There is no outcry from the public or congress as of yet either. Where is Jon Stewart? The banks are just abusing the government by refusing to write down their assets and the administration is just getting bitch slapped by the ‘too big to fail’ top brass. The government is essentially allowing the banks to just keep digging a deeper hole by handing over billions and not requiring write down of the toxic assets.

Free Market has left the building.

We haven't had a free market for decades if ever. If we had a truly free market the shifty banks would have been sorted out long ago and never gotten too big to fail. Also we would have had the market cleared of toxic assets a long time ago if the free market would have been in place. There would be no games going on between the bankers and the fed like now. My opinion is that we are being played for the biggest fools ever by the banks. They are still in business, still sitting on toxic assets and still holding out for a better price. We have spent billions in tax dollars as the asset prices have only gotten worse. I don't think a free market could be so stupid.

Wagoner ousted as President snuggles with bankers

YES YES YES>....I am asking and screaming and screaming over and over again what about the Bank CEOs?. I can't believe what a two faced hypocrite obama has become already. He is got his hands in the pockets of bankers and taking them to bed with him while they rape the American public and they force out the Wagoner for asking for .0001 the amount of help....that is total crap, complete lies and manipulation of the taxpayer by the administration. This is the worst think I have seen to date.....Oh yeh and they put someone from AIG on the president's advisory committee

New Era of Investing.

I think we have had a major shift in philosophy regarding long term investing. It may be rare but what has always been considered the American way and the way of capitalism, long term buy and hold of any asset is now considered a questionable strategy. There can certainly be an argument made that continuing to pay on your mortgage that may have 30% negative equity may not be the smartest decision financially. Each person has to make this judgment for themselves and their current situation. There are people who bought homes before the massive appreciation that are underwater even if they have not refinanced or taken a second mortgage. Deciding on walking away could be the difference between sending kids to college or having money to care for elderly parents. Everyone should realize that blanket statements about the irresponsibility of homeowners are way off base. The true irresponsibility happens when the chairman of the FDIC comes on the news saying that people should all keep paying their underwater mortgages while the banks are leaching the taxpayer to death. The massive depreciation of all assets has changed the game. It has not leveled the playing field. It has made it even more difficult for the little guy to build wealth. Real estate was really one of the few investments that allowed the average American to get ahead. For years the rhetoric was that nothing had a better return than stocks. This was never true based on cash on cash returns or overall return. There was never any method of investing in stocks or otherwise where the non wealthy could take advantage of leverage. A 10% investment on a cash flowing rental could easily be turned into an infinite level of return in a few years. The recouping of the down payment could normally be done in 3-5 years or sooner if the property was improved. Even a 20% down payment could be recovered in short time frame. It worked for anyone who tried it. People were also not dependent on brokers or investment bankers for advice or access to the markets. There are still people who own cash flowing real estate and have not been wiped out by this meltdown. If purchases were made based on cash flow, most landlords could weather a down turn if they could keep vacancy rates down. Contrast this with a 401 k plan that will now need 150-200% returns to see a substantial recovery and you can see that long term hold of stocks is really more for the brokers and Wall Street players. They make more money by sitting on your funds then you do. They are paid not on gains but on how much money they hold that allows for fees to be charged and collected.

toxic asset arbitrage? or rumor

and a nice arbitrage it is when you can use tarp money to buy the assets while having the government match you dollar for dollar. Am I understanding this correctly? The banks are buying more toxic assets, the very assets that have crushed our economy, and adding them to their balance sheet? They are getting matching funds so at a minimum banks are using 50% government money and paying more than market price for these assets? Please someone tell me this is not true. If it is true I think we need to be screaming a little bit louder and a little bit longer at our administration. It makes perfect sense for the banks because they have been given a free pass by the treasury by saying he won't allow banks to fail. The banks have unlimited capital now to over pay for assets and try and re-price all of the toxic assets they already own. I hope someone can tell me this is not true and that it is absurd and that the government would never let it happen but this is not the first story I have read on the matter. This will be the biggest fleecing of the American tax payer ever. Unless of course everyone thinks we should let the banks use federal dollars to by more of what everyone has been saying is clogging the system so they can raise prices and take fewer write downs. We could stuck in this mess forever if the to big to fail banks are loading up on garbage. I need some feed back on this one people

Obama showing true colors in interviews.

While Obama was dreaming of being president and cozying up to the Taliban and he was stock coal on the change train, he failed to shift from campaign mode to ok I am the president mode because he has no clue regarding economics or politics. The media created this guy to be their anti bush and now we are getting some of the questions answered that were never even on the table before the election or before the swearing in this year. He has no clue and every time he does an interview it is becoming more clear. He is a novice politician who used speaking skill and media free pass to get elected. He did not run for president to lead the people, he ran for president because it fulfills some narcissistic need he is carrying. I am sorry but this guy is not there for the people. He is there for himself and himself only and it is very disappointing to see such a gifted speaker come up so short on in substance and leadership. Ok team maybe if we are real nice to Iran they will turn out to be wonderful trusted friends. (tell me that is not approaching insanity)

Fewer options for home owners added to downturn.

yeh and how about the appraisers that appraised property without any comparable sales to support the massive upticks and how about the builders who were in bed with the appraisers and the bankers who were all sleeping together. The prices could not have gone so high so quickly with out these 3 players in bed together. The banks could have put a stop to it all by using a legit appraisal or refusing to use bogus estimates of values. I think this mess has far less to do with greedy buyers of homes than it does with the 3 principals. I think most people were hoping for appreciating and wanted to take advantage of it and get wealthy and they had an entry point without needing 100 k capital. if the market would have slowed or stagnated without massive drop off many of the foreclosures would not have happened because people under pressure could have sold a year or two later for what they paid. or at least not be 30 % underwater. Circumstances change and people have always needed to sell real estate and that option was nearly completely taken away regardless of price. Pick an recession and I am sure you will find people selling to just break even or take small loss because of job change or job loss etc, then imagine the effect if 90% of any sales or purchases never happened and people did not have an the option to sell in reasonable amount of time. It would have created major problems even without the excessive run up...maybe less but who knows...this was extremely rare...the fact that people couldn't even sell property at a discount for an emergency. Lot of issues here I know but I really think the banks screwed us by how poorly they assessed value and by how poorly the assessed the future of the economy.... They missed the boat entirely ....unless of course it was on purpose knowing the tax buyer would foot the bill........then it would be criminal in my mind and I think some of the valuations they took on property was criminal and we are paying for them to keep going and to "pay back the tax payer"...they all should be paying back the tax payer 1 license plate at a time............

Uptick in Housing or just normal trends?

I am guessing that we could look at the traditional home buying patterns in good and bad times and see that regardless of the economy; certain months always show more sales. I can't believe these genius economists just spew out bottom talk when sales could just be tracking normal averages but just at much lower levels. This is insane. Granted it may be an overall improvement as well but to just take one month and not compare to normal sales trends is silly.

Finance or Cash Only?

You need to have some assets to avoid being taxed to death if you are making an income. I think paying all cash sounds like a noble plan but I don't see where there would be any jobs. Auto sales would be even worse than today, housing sales would be worse also. Our economy will continue to slow or even grind to a halt if we all paid cash. There would be no need for manufacturers of anything. Everything would be sold on a per order basis and the prices would sky rocket because there would be no need for an assembly line production. An example would be putting half down on a car while you waited for it to be made to your liking at the factory. Capitalism can not work this way because the reason we have had improvements in the standard of living is largely because of economies of scale. If you want to increase the prices of everything this is the way to go. The economy needs the money flow that happens because of financing. I am not saying that there wasn't a lot of criminality in what happened. I am saying that cash only in the future is not the answer and will cause massive, massive restrictions in the economy.

Commerical Credit Unions taken out

From the Wall Street Journal

Federal regulators explained why they took over two commerical credit unions this weekend.

"U.S. Central and Western Corporate have been grappling for more than a year with large paper losses on a slew of assets, mostly mortgage related. In January, regulators moved to prop up U.S. Central with a $1 billion infusion after it took big write-downs on some of the securities.

Mr. Fryzel said regulators acted Friday after becoming convinced that the two institutions were underestimating the true scope of their losses. "With us in control we'd get honest numbers," he said. Mr. Fryzel said regulators plan to replace top management at both institutions"

Does anyone think that the large banking institutions that we have been propping up with billions of dollars are giving accurate estimates of their potential losses and write downs? Why are these institutions taken over and not bailed out? They were along given a 1 billion dollars before being seized by federal regulators. Evidently we would rather have the likes of Citi Group and AIG in business for the long haul.

banks blackmailing congress

The banks have been blackmailing the congress since September 2008. I can't believe how little courage congress has shown in dealing with the bankers. The have just rolled over and caved before the election out of fear and lack of fortitude. Congress is the biggest bunch of reactionary fearful criminals ever assembled. Now they are are going to over pay the banks for their toxic assets because the banks will pout and whine and cry if we make them sell to the market. I agree 100 percent that the banks will continue to blackmail congress at the expense of the taxpayer. I can't believe what I am seeing as our representatives who know next to nothing about economics are now under a president who knows less than next to nothing about economics and we are being driven into deeper into a system that is pseudo capitalism that is removing any sense of free market from the economy. It is a sad state of affairs.

We have waited months for this Plan?

What took so long to put this ridiculous plan together? I Giethner was working on some brilliant plan that would save the world. We are not restructuring or cleaning up the banking system. We are funding a horribly faulted system without getting to the bottom of the mess. As we make up these crazy plans for foreclosure that will help very few people and refuse to hold the banks accountable for their own assets, the American people are losing more and more faith daily. How can you expect anyone to believe in our government when it is doing so many stupid things under the smoke screen of a world economic meltdown? Wonder how things would have gone if someone would have just asked the President what he would do to fix the economy? His standard answer was change because he had no idea what was going on or what to do to clean out the system and get money flowing.

toxic asset plan?

From the WSJ article on the new plan from the government.

"All told, the three efforts are designed to unglue markets that have seized up as investors have stood on the sidelines. One big problem is that many of these assets no longer trade, which means it's very hard to put a price on them. Banks are unwilling to sell at too low a price, and investors are unwilling to take the risk" I wrote an article before entitled THERE IS ALWAYS A MARKET. So now after waiting months as the banks held the country hostage we are going to give the banks exactly what they have demanded. I can not believe private investors are going to willingly pay more than the current market price for these toxic assets. Wow! We are going to leave the management in place at these horrible institutions and give them more money under the pretense that it really isn't all government money. I am sure that private investors will not be willing to equally share in the losses so the taxpayer again will now be on the hook for all of the toxic assets. This is not change, this is not a new way of doing things, this is complete wasting of funds and the banks are skating. After this week who is going to want to invest with the government when they could get taxed at 95% if they get on the bad side of congress.

Leno is not the place for the president

The president needs to hunker down in his office and study economics and our banking system and forget about acting like a movie star. I don't want to see him on Leno and I think it is grossly inappropriate during this major crisis and it gives the impression that Obama does not understand the job of president. The more I see him and his wife the more I am convinced that they live in a self absorbed bubble. They are much more interested in being in the White House than truly effecting change and repairing our failing financial system. Talk about in appropriate use of tax payer funds! Air force one to the west coast is completely unnecessary. Until the people regain confidence in our system the President needs to spend a little more time getting to work. Last night he was on ESPN filling out final four picks and tonight he is on Leno. Even if he can work on Air force one it shows the arrogance and narcissism of the president as outrage at wasted funds and mismanaged bailouts creep through the country. Any administration has a free pass to national television on all major networks to address the nation. If he wants to reach out to the public it should not be on Leno. I am starting to think although Obama is a liberal, he has become accustomed to the accoutrement's of the criminal ceo's flying on private jets with tax payers footing the bill.

Geithner attack is unfounded

I don't understand the attack on Tim Geithner. Geithner seems to be no more than a puppet for Obama and appears to have very little say regarding policy. Confidence in this administration is fading in my opinion and if they don't get some policy that is more cohesive our economy will stall. Geithner is not making decisions as treasury secretary and although Obama has said he wants input from everyone, he is following his own policy. Geithner doesn't have a plan, and if he did the administration would do what they want anyway. We have a president who know very little about economics or politics. He is versed in one thing and that one thing is campaigning.

Eventually time will heal the economy but if we congress and administration weigh the system down with idiotic policy it will be a struggle to move ahead.

The Constitution is being dismantled by congress

Today is sad day in American history. Congress is trying to back track make Monday morning demands on companies that were given assistance. I don't think AIG should have been bailed out or given any money but after giving it to them with no strings attached we have taken a major step toward socialism. The people running a failing company don't deserve bonuses but the Constitution of the United States of America says you we have the right to privacy and no one has to reveal what they have been paid and the issue is between the employer, the IRS and the individual. End of Story. The constitution also says that we can not be taxed punitively. In other words the tax code can not be changed because someone in Washington doesn't like you. End of Story number 2. Congress failed in its duty to legislate properly and rushed to bail out many companies. Now they are trying to regain their reputation by defying the Constitution. It is anti American and goes completely against the very principals of our country.

AIG, Congress, Bonus bonanza

This is getting ridiculous. The congress now after giving billions to AIG is now upset that their no strings attached gift money is being spent like no strings attached gift money. I also found it a bit humorous to hear Barney Frank say that the congress should start acting like the owners of the company since the government does own 80% of the company. So the idea that government could own nearly an entire company and not nationalize it may prove to be easier said than done. The Stupidity and lack of foresight from the congress and the administration is hard to believe at times. After basically publicizing that they will keep giving any bank or large insurer such as AIG, all the money they need to stay in business, they start to grand stand about 169 million dollars. I was wrong in thinking that they just gave AIG their own government checkbook.

Did Michelle Obama "diss" Laura Bush?

I read an article in the Wall Street Journal that told of how the first lady had taken up a cause to help military families. The article is entitled The Dissing of Laura Bush by William McGurn and it talked about how Obama seemed to slight Laura Bush by saying that she thought that no one ever thought about or tried to support or help the families of our military personnel. The article pointed out that Laura Bush had done numerous things to aid the families of soldiers even having picnics on the White House lawn. The author thought the ABC press coverage could have been a little stronger. It gave me confirmation of an impression I have been getting regarding our new first family also.

This Seems more like typical biased love affair with the Obama’s that pays little, if any attention to the actual facts. Where have the Obama’s been the past 8 years that they thought no one recognized military families? My impression is that hubris doesn't properly describe the level of arrogance the first family is revealing. It seems as though they have been in the "change train vacuum" for too long and were too focused on "getting elected" to notice so many genuine committed, caring people that have been working to recognize, help and support military families. Evidently the administration was just too busy to get prepared to take office during the months of November, December and January as well. I thought as bright as the President appears to be, that he would have realized we were in economic crisis and that he should spend the 2 months after the election learning a little bit more about economics and the law of supply and demand. It is clear that after 3 months the new administration is still quibbling about how to get credit flowing again. Leadership is not built on arrogance and narcissism and if both the President and the first lady want to lead the country they need to stop with the platitudes and actually see what is really going on across the country. If you are a good speaker you can be a preacher, a teacher, a lawyer and even get elected president. However, as president, substance will is the most important ingredient. Whether or not this president can turn his great speeches into more substantive results in order to lead a thriving country is to be determined.

Cramer vs. Stewart still a hot topic

I think Jon Stewart is a day late and a dollar short. I think Cramer is a typical television show guru and typical stock picker. The majority of the media gurus are wrong at least more than they are right. The market is more about law of percentages than it is about stock picking anyway. The market operates in such a way that most people don't know the direction of stocks. They buy stocks with stop loss orders or put protection. The oil they sell on TV is to try and fool people into believing that these “guru’s” have some secret that is written in their book. It is the same reason people are willing to hand their entire fortunes over to a mutual fund manager and hope they get 8% return without having to figure out how the market really works. Picking a well known figure to tear down is more of a publicity stunt than some type of constructive "comedy"

Bernanke calls for political will.

I noticed a distinct difference in what the administration is selling and what Bernanke is advocating. The administration is willing to bail out banks to save the economy but they also want to spend to the hilt to "help" people across the country. I got the impression that Ben was talking about political will to cut back the excessive spending already started by the administration and focus on repairing the banking system. He sounded like he was saying we spend now on the banking system to uplift the entire country but if we can't get the Dems to cut spending and trying to rescue the country with entitlement programs we will never get the banks on their feet. I know the give aways to the public tend to be counter productive but sound like Bernanke believes saving the banks will save the economy or at least get us more stability. Anybody have the same impression?

G20 doesn't buy the bank rally

From the bloomberg.com news page

A quote from the G20 meetings.

"Our key priority now is to address the value of assets held on banks’ balance sheets, which are constraining banks’ lending” and damaging economies, the G-20 statement said. Banks are still hoarding cash after being stung by more than $1.2 trillion of write downs and losses. Interbank lending rates this week rebounded to the highest level since Jan. 8."

I had mentioned the idea of pricing assets held on banks balance sheets in a blog called "there is always a market". The new bank rhetoric on profitability and solvency evidently didn't get to the G20 yet. Funny how we are told by the bankers that they are profitable yet the biggest issue at the G20 meetings is how the banks are hoarding cash and holding toxic assets while constricting their lending. It couldn't be that banks are selling the rosy picture to the government and the public because they are going come back for more money could it? Well hopefully not but things are not lining up properly. Two opposing views on what the major issues are with the banks. I guess we are supposed to trust the bankers again because they have seen the light.

The Banks pull the rabit out of the hat

It amazes me that this bailout of the banking system continues and the administration allows for CEO such from Citi and BOA to give irresponsible statement to the public regarding how profitable they have been during the first quarter. This is complete manipulation and it is how we got into the mess in the first place. People wrongly assumed that banks were being honest about their number and they bought the story. It appears that we are all buying it again as they pass out kool aid for wiling drinkers. The banks have soaked the tax payer for trillions of dollars and would have been bankrupt a few weeks ago if they had not gotten massive injections of capital from the government. In a miraculous turnaround a few weeks later they have become profitable companies? Wow these CEO’s must be the best and the brightest and it is a shame that they weren’t there running the companies during the meltdowns and massive liquidity problems. Oh wait! I forgot most of them were there during the meltdown and were the ones at the helm during most of the credit crunch. But now they come out with a memo or a luncheon speech and say whatever they want about profitability and now ones questions them, the stock market bounces, and Obama looks like a “guru” stock picker. I have heard the stock market is always looking forward by several months but I don’t see how the banking system can be fixed in several months as housing is still falling, credit is tightening, unemployment rising, and taxes increasing. There was no lag time between the Citi memo on profitability and the market turning upward. Where was the forward looking lag time? I tend to believe that this was more of a short covering rally than the all in signal but I don’t know either way. It just seems to me like we are adding to the lack of trust in the system by allowing bankers to have public forum to preach profits without examination of the data. If we see a downturn of the banks again after this bounce we will have done even more harm to the fragile confidence of investors and the American public. If the banks are saved it is great for everyone and now they can just write the check back –with interest- to the government and send out that memo tomorrow. If this is more smoke and mirrors from the CEO’s we will have taken two more steps back.

Restoring confidence

Finally president Obama has realized that it is not in his best interest to bash the economy while preaching gloom and doom. It has been one of the most egregious uses of the presidential pulpit in decades. The president was willing to destroy billions of dollars in the capital markets in order to push a massive spending bill through congress. The president’s rhetoric was not the only thing that caused the market to drop so quickly this year but his tone likely aided in the 1800 pt drop. We have man in office who has had the goal to be the President. His entire career has been based on jockeying for position to get the inside track to become president. The groundbreaking and monumental event of having a black man as president was the agenda. The only thing that he forgot to do was to focus on what it would take to actual BE the president. It is clear by the first few months in office that our president had very little experience in economics and business. It is clear he also had little idea how the stock market worked and how quickly things would deteriorate when the banking system failed. He was more interested in reward those who voted for him and working on his speeches to give at the inaugural balls then he was about really getting to work on the economy. It is also clear that he either thought that bending the rules a little was ok or he misjudged how many people in politics were used to getting away with bending and breaking the rules with no accountability. His nominees for critical positions seemed to be trapped by their own closets full of skeletons and even the Teflon image of Obama couldn’t help them out. The back peddling done on ear mark reform and fiscal responsibility has been typical of most politicians. It is amazing how an election can change the minds of so many “strong willed” people who preach change. To be continued

It isn't about investing in companies

The stock market is not about investing. It is about picking stocks that are going up or going down. The word investing is just a cover for what the stock market really sells to everyone. They sell speculation and any of you who you’re your money in your 401 K or your mutual fund are speculating on stocks going up. Everything about the market as sold to the general public is about investing and growth of companies. The reality is that the stock market is more about stocks and the economy that it is about companies and profits. A number of “bad” companies can have high flying stocks in good markets. A number of good companies can have dropping stocks during a bear market and even at times during a bull market. The system has been sold to the public on the basis that if your savings account is giving you 2 or 3 % and that CD 4.5 % and Wall Street can give you 6-8 % or even 10% you will be glad to park your money in a mutual fund. The fallacy that the market always returned bigger gains over time was sold by Wall Street in ways only rivaled by snake oil salesman. The more money we give to their funds, the more the tried to figure out how to exploit those dollars to get massive returns for themselves and keep giving you your 6-10%. The system is set up for those in the know and who can get their hands on insider information. Of course it is against the law to trade on insider information but it is clear that it happens nearly every day. As I mentioned and the previous article that short sellers are not the problem, and they are often the only ones who get analysis correct. The past two years has shown us that rating agencies are no better than you or me when it comes to evaluating companies

Short Selling is not the problem

Bear shorters would not be in business if the banks and the like were in business of transparency and honest reporting. The shorts serve a purpose. The often identify the companies that are not being fully truthful with the numbers. The Bull Longs are no different than the shorts, they speculate to drive stock prices. The only reason people are against the shorts is because 401k and mutual funds don't hold short stocks. The system is set up to work for the majority only during expansion. The way mutual funds and 401 k accounts are set up is to encourage buy and hold and it only works in bull markets. The fact that we set up these funds and pay on percentage and not on return we will always have a good deal of destruction of capital during corrections. The system is set up to facilitate growth by using investor capital of average investors based on the "theory" that long term investing is the way to create wealth. It is complete fantasy. The past 10 years are perfect examples of riding the wave up and then riding the wave down with 401 k and mutual funds. If everyone took their money out and had it in savings accounts they would have been much better off over the past 10 years. The exception is for traders and more active investors who take gains continually while the mutual funds push for accumulation of account funds without taking profits.

Jon Stewart beats up Cramer but misses the mark

I have to admit it was nice to see someone call Cramer to the carpet after his two years of delusional stock picking. The funniest part of the Stewart rant is that it is after Cramer and CNBC, along with other pundits and networks, have contributed greatly to the destruction of trillions of dollars of capital. I find it hard to believe people are not calling Stewart on his late arrival to the party. CNBC has promoted Cramer like he was the messiah for years. They believe that making disclosures for viewers to not take his advice gives them the right to put such a character on national television. If Stewart and a few other reporters would have been on the offensive before the majority of people lost 50% or more of their 401 K accounts, it might have actually helped the situation. Now the vitriol anger just makes for great you tube clips.

Cramer vs. Stewart

Jon Stewart took Cramer to task on the Daily show. For some reason he felt it was time to give say his piece about the credit cruncn but it seems like it should have been last year's news.

Cramer is full of it but where was the "investigative Reporting" of the daily show a year ago? Why wasn't he calling out Cramer back then? I Stewart is right on but he just happens to be about year late to the party. Typical ratings seeking stunts in my opinion. A year late and a few trillion short.

G20 pushes for Bad Bank plans

There has been new talk of plans to set up a system to buy “toxic assets” at above market prices from the world banks. This weekend G20 talks have begun talk of setting up more “bad banks” in order to clear the books of the financial institutions.

From Market Watch.com

“The request came in a letter to U.K. Prime Minister Gordon Brown from the Institute of International Finance, a trade group of the world's largest global banks. The IIF wants Brown and his G20 colleagues to push the Obama administration in the direction of setting up a bad bank.

Under this approach, governments would buy toxic assets from banks at a price higher than the prevailing market rates. For the time being, private investors simply won't buy the assets at the prices that the banks want. As a result, banks have huge holes in their balance sheets. “

Of course!!!! The bankers have gotten into a mess and they hold everyone hostage because they have the keys to the vault and now they stand pat as the heads of state quiver in fear and now are pushing to pay top dollar for the ineptitude of the Bank....It is absurd, ridiculous and just plain stupid. On the other hand if we are afraid to make the banks sell at market price and are wiling to support them forever they will stand still and pump more and more spin to the media that they are now profitable. In the end we will allow banks to stick us the citizens carrying the weight of a contracting economy on our backs. The banks get away with murder because they now in the end the system will save them from punishment.

Tdameritrade does the wrong thing.

TDameritrade had a meltdown of their trading platform last Friday and it started doubling people's trades and they would then show up as a short stock. It happened to over 5000 people and I was one of them. The problem was that the computer cliche left me with 200 shares short of one of the fastest moving etf's on the market. The skf which is the double inverse for the financial stocks. The stock moved 65 pts in one session this week. I saw the stock on my screen and didn't know if I had made a mistake because I had no intention of shorting this stock in the last hour of the day on a Friday. I was down about 1700 when I figure out how to get it off my screen but Ameritrade says that I should have called first while I was watching the losses pile up. They toed the company line and had a variety of excuses that all seemed to say we are responsible for our mistakes even though they cost you a lot of money. The could have easily done the right thing and reimbursed me for the cost and for subsequent trades that all resulted from the their mistake but they choose to defend, deflect and bargain much like an insurance company. It is disgusting what these places get away and how much money they steal from clients. This was outright stealing because the trades cost me money and costs me time and concentration from trading. The should not be able to get away with this and a mistake of this magnitude should result in sanctions for this company. This companies are being allowed to toy with people lives with no accountability.

Greenspan defends the fed

This is a quote by Alan Greenspan taken from today's Wall Street Journal.

There are at least two broad and competing explanations of the origins of this crisis. The first is that the "easy money" policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today's financial mess.

The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term, fixed-rate mortgages. Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate.

This should not come as a surprise. After all, the prices of long-lived assets have always been determined by discounting the flow of income (or imputed services) by interest rates of the same maturities as the life of the asset. No one, to my knowledge, employs overnight interest rates -- such as the fed-funds rate -- to determine the capitalization rate of real estate, whether it be an office building or a single-family residence.--end quote

Iinteresting article and should be read by anyone interested in real estate and stocks, and who isn't right ?

There is always a market

The complaints about being unable to price the assets of banks because there is no market is untrue. The market is pricing bank assets well below what the banks are willing to accept. It is just like the home owner who is not willing to sell unless they get their price. It is perfectly acceptable for either party to hold assets until they can obtain a price that is more in line with their estimate. I don't think anyone would disagree with such a statement. However, the home owner as well as the bank, must have adequate capital to follow through on such a decision. The home owner has to pay the mortgage and the bank has to meet reserve requirements that are law. The banks did not adequately prepare for this downturn and in turn went to the government for a bailout. When the government funded these bailouts it meant that mark to market was already being suspended. http://www.working-capital.com/faq.php

Mark to market could prevent crisis if allowed to work

What happens when there is no market where banks can sell their securites or mortgage paper? If the market stalls, the pricing of assets becomes extremely difficult, but there usually is a market. The issue today is that the banks don't want to sell at market price.

It means these assets have the potential to be toxic because the underlying collateral is valued far less than the paper asset. the banks over extended themselves and made no plans for market downturn. Everything changes for the banks and actually individuals as well when there is no one willing to bid on what you are selling. mbs or individual home.....losing that flexibility of selling in reasonable time to at least cover the cost of the asset or home spells disaster. Our economy is suffering because the fluidity of these markets has disappeared. If some individuals default it is the job of the regulators and banks to make sure they can survive and prevent meltdown. The assets may not be worth zero by most people's opinion but in reality if no one will pay you for your asset, at least enough to cover the debt of that asset, then it is virtually worth $0. Even using a home as an example makes it clear. If you have a home most likely everyone will agree that it is not "worth" zero. However, it becomes toxic as soon as you need to move or sell if there is no market. It might be worth less than zero because it becomes an albatross around someones neck. It can start the snowball effect. This is where banks got stuck also. They never accounted for the lowering of asset values. They are supposed to be the back stop and maintain enough strength to withstand defaults. Mark to market is in place to protect the economy but when the government comes in and basically says to the banks that we are going to let you slide for a while even though your forecasting and reserves are inadequate, it prolongs the cycle and prevents mark to market rules from cleaning out the system quickly and efficiently, then it is virtually worth $0.

CNBC trader talk on mark to market

Here is the trader talk article where Bernanke's views on mark to market were mentioned. Click on the title and it will open the Bob Pasani's comments.

Bernanke and mark to market accounting

Fed Chair Ben Bernanke said he was against the suspension of mark to market accounting. I have stated several times that doing away with mark to market accounting would be a disaster for the country. Bernanke did make reference to the difficulty of marking long term assets or those assets banks like to label as long term. Since the average mortgage was refinanced every seven years before this credit meltdown, it would be easy to question the value of marking to a 3o year model for any mortgage paper. The banks, in my opinion, have had too much freedom marking their assets and too little transparency.

Buffet bullish?

Warren Buffet was seen making a statement about the financial stocks. He said they likely had the most upside potential because their assets were down so badly. He added only if they were mark to market currently. The media seemed to be spinning this as Buffet's way of saying the bank assets were marked down excessively. I didn't see it quite the same way however. It sounded more like he was just saying that their was a much great potential for gain because these assets were worth so little on the market. I didn't take his comments to be a statement for or against mark to market accounting. It sounded more as though he was stating the obvious : the financial stocks have been taken down hard and have fallen the most and just by law of averages they have the most potential for upside. The spin doctors who are for ending mark to market account started immediately to twist the Buffet comments to suite their hypothesis.

TDAmeritrade tries smoke screen after platform meltdown

I have yet to hear from TDameritrade but the assured me they were looking into it. The only way I made it that far was to spend 10 minutes on the phone with a rep trying to get through his placating. Finally when I was able to communicate that I was satisfied with his answer he gladly put me through to the next level. However, before the next level, answered I was on hold for about 40 minutes. The offered more free trades and commission rebates but not where near the amount I had lost due to their equipment malfunction. TDA has a choice to do what is right and to do what is good for their short term bottom line. Evidently they are still trying to decide which path to follow.

TDameritrade has a chance to do the right thing

continued from previous post

I refreshed the screen again and saw 2oo shares short of one of the triple short etf's. I had not intention of making a short trade at the time and for the past few weeks this stock had become increasingly difficult to borrow. Immediately, I began to recount all of my trades and knew I had not placed a short order. These etf's can move $10.00 or more in the matter of minutes and at times seconds and they do not afford anyone the luxury of calling customer service to check on the issue. -especially with about an hour left in the trading day- I had no choice but to cover the stock as it shot up over $9.0 costing me what appeared to be close to $2,000. However, when I covered the dollar amounts of gain and loss did not compute properly and I had no idea where I stood. The chaos that ensued on the screen was ridiculous and ended up costing me about $3500. This number could have been even higher because of what I missed while trying to figure out this mess. There is no way to know in situations like this but the numbers don't lie. They have record of where I stood before their screw up and also where I ended the day. They have a chance to do the right thing.

TDameritrade posts phatom trades near end of trading session

Friday afternoon was to be a relaxing end to a great week of trading for me. It has been a long couple of months and and even longer 2 years since we started seeing the effects of the current credit meltdown. I had one stock to sell and then finish the day early to avoid the end of day crazies that have tended to be the norm on Fridays. I had noticed the stock I was trading had swung back up into the green and sat down to sell. I looked at my balance and had seen that my it was not showing a gain of 500 but rather a loss of 1700 plus. I thought I was seeing things and frantically refreshed my screen. It was a nightmare because my balance kept shrinking for apparently no reason. (continued on next post)

TDAmeritrade has a Friday Meltdown that burns customers

TDAmeritrade is not known for its trading platform prowess. They seem to not be able to get there real time streaming down to a science. Usually about once a week the system has some minor cliche that would typically not be noticed if you were not trading actively. These are happening often enough that they have started the don't ask, don't tell policy for customer service. They aren't telling and they aren't asking if you were effected by their technical issues. Often trades will not cancel or they will freeze while they are pending. If you missed a trade and want to cancel often times you are unable to do so and instead have to wait for the stock to come back down have it be executed and then sell it again. This has happened many times the past month but they customer service department refused to acknowledge there was a problem. I would consider this a basic form stealing. Friday's was the far more egregious. More to follow in the next post.

follow up to the opinion poll

First the divide is because you can ride the change train for free, and most of the "folks" are still expecting BO to come to their front stoop and hand them a check directly from the tarp bank account. Wait a minute. I forgot that the tarp money has already been vaporized by wall streets "best and brightest".

2. the market isn't saying much to Obama. The market is finally saying OK now we realize the change train is more of the same train and that the trillions spent on stimulus will not turn the tanker ship of the economy around until it reaches the delta. The message of "superpower, super hero administration" was sold to the American people and they are still buying it. If the administration can keep selling this message long enough the economy will turn on its own and Obama might get re-elected. Most people are too caught up in surviving their daily lives to really give a crap what the stock market is saying. The truth is that the media covers the market more than it covers the "folks". The people going on TV are always selling something or they wouldn't likely be there spouting off some ridiculous opinion on how to save the world economy.

4. Straight from Merriam Webster --hemorrhaging-a rapid and uncontrollable loss or outflow. Example - A financial hemorrhage.

When we are hemorrhaging 650000 jobs a month, most people are more concerned about their next paycheck than they are about their 401 k. I also would imagine that most people have been pummeled so much that their 401 k might be cut in half and they have just decided to not even open their statements now. The probably figure that it is too late to do anything about it now and I am sure the mutual fund brokers are selling the same old book but now with the extra pitch that you don't want to miss the upside bounce that is sure to happen any day now. I think that might have been true in July as well.

Why is there such a large divide between The Markets and the Folks?

this was taken from The O'Reilly Factor website and it discusses the divide between the "folks" (evidently that means you and me-us uneducated heathens that can barely chew gum and tie our shoes at the same time) and the sentiment of the stock market. "There is a huge divide between Wall Street and the folks. Since the president has been in office, stocks are down 17% and every day it seems that financial markets are sending a message to Barack Obama: 'We don't trust you.' But a brand new Fox News poll says the folks do not share that view - President Obama's approval rating is holding firm at 63%. So while the financial markets oppose President Obama, most of the folks are still with him. I chalk that up to the president's personal popularity and the desire of many Americans to give him more time to turn the economy around. But today there was more grim news - General Motors indicates it can not save itself despite a $13 billion taxpayer loan. Talking Points says no more money! Meanwhile, far left Senator Harry Reid is trying hard to push through the $410 billion spending bill filled with 9,000 earmarks, and the Obama administration has just announced a $75 billion mortgage program. In less than two months, the Obama administration has pledged to spend $20 trillion, a staggering amount of money. Finally, here's the kicker - when Fox News asked the folks whether it is possible for the USA to go bankrupt, 61% believe it's possible. And it is."

O'Reilly takes Obama's Advice and buys

Can it be good for the economy if two of the most popular figures (or figureheads maybe) are either recommending that stocks are a buy or just announcing that they are buying. I don't know either but I know that it is a sign that we have taken a whipping the past year and everyone is cheering for a turn around, myself included. I think O'Reilly is doing it to try and put people at ease and instill a little hope in an otherwise dismal looking 2009. Obama seems to be trying to dig out of his 2 month long bunker created by his insistence that the American people didn't realize the economy was in the tank before he took office. It sure seemed as though he had directed his administration to act like 4 year olds who were trying to point the finger at their little brother when asked about the milk spill. I have never heard someone shift so quickly from the change train coming to the rescue to the oh crap train saying "maybe we created expectations that were to high" train.

Look, we all want things to get better. NO one wants anyone to fail because everyone losses. The republican party, no matter how delusional it is, can't be that stupid anyway. Wait. Did I just say that ? Well I hope they are not that stupid.

If Obama just gets off of his set for his hero coming to the rescue model and accepts responsibility for being president while getting on with focusing on the future, we might start to see the light at the end of the change train tunnel.

the factor predictions

O'Reilly mad a few more predictions the other day about who could and could not be elected president. I thought he would learn after he pronounced about a year or so ago that Barack Obama could not be elected president. I recall something about "the folks aren't going to elect". I haven't seen it ever referenced again but I am sure he wouldn't mind. He is a bright man and would have no problem owning up to his mistaken predictions. Right? I don't know about that but he has taken plenty of time to publish his "right" predictions. I am specifically referring to the demise of GE and O'Reilly's beat down of CEO Immelt. ( you could almost say it was a short sale pounding by O'Reilly) I am not on the side of crooked CEO's but to be fair GE is not the only stock taking a beating during this down turn. I would guess that the beat down of Immelt is more a because they parent NBC , MsNBC. As long as The Factor has the ratings lead NBC and Immelt will be hit hard by O'Reilly.

The definition of Change-same as the old change

We then get "change" in the white house and they keep on spending. The ridiculous PR stunt of helping home owners with out reducing principal will waste another 75 million, which most will be used to administrate the program, because it is likely that any of the people who could have used the help are now will over the 105% LTV. You can yell about free markets and I am with you all the way but when the lenders go on the public dollar then things have to be changed for those on the other side of the trade. IE consumers holding notes from insolvent banks. I will not agree with you that when these notes have gone down to pennies on the dollar, that they can be sold with the buying party able to sting the borrower for full value. The banks have to base their paper on collateral value and when they "guess" wrong you can't let them walk away with billions in tarp funds and the rights to full future value of the note. It might not be fair to everyone but fairness is out the window when banks come crying for handout. (yes don't forget the perfect timing by the banks either.....right before the election when they knew they could manipulate and stare down the cowardly congress......because they were all pandering for votes....{there were more flip flops in Washington than in middle of July on south beach}...congress blinked and they have been caving every time the banks cry economic disaster. I don't want a penny from the bank or reduction in my mortgage. But there are people who should be getting mortgage reductions and the banks should be paying for their poor business models and poor business decisions. If this happened we would be a lot closer to a free market than we are today.

for Cody Willard regarding contract law

I don't see how you can say that contract law is paramount in our society when the corporations that are writing those contracts are belly up if not for the tax payer. You can argue all you want about personal responsibility and dead beat this and dead beat that but the only dead beats are the banks and bankers. These loans are all collateralized and that means house for money. The option of house in lieu of paying the money is one that the bank willing uses. The fact that they allowed themselves (and caused the collapse of the world economy) to be put underwater by a small percentage of defaulted loans is an issue with their business model not an issue about people buying what they couldn’t afford. It is the banks job and that of regulators to see that defaults do not kill the bank. The cycle started because banks created a system that could not tolerate any defaults or even the slightest up tick in default rates. Now people who have done nothing wrong and only wished for their home to hold its value are losing years of equity payments. (cash used to pay down principal as prices fall below the 2003 or older property values). These people are suffering because of the banks and regulators. They both failed miserable and now we bail them out while with taxpayer money to prolong the crisis and to push values even lower in stocks and real estate.

Vegas hit hard

Look at the issues going on in Vegas with the previously cash cow casinos. When credit tightened, casinos were squeezed, burned through available cash, economy weakened leading to revenue shortages, and defaults began to rise. I know everyone thinks cash is the only way but normal credit is essential for growth of any kind. If we want to live in a pre order society where we have to specify what we want months ahead of time so it can be made at the factory, using our down payment, then shipped to the dealer for us to pay the balance in cash (car dealers for example) that is fine with me. However, our entire economy system and principals with in this systems is based on expansion and money flow. If corporation’s growth is greatly reduced, investment, as we are seeing now will be exponentially reduced and we will be hard pressed to find investors. I don't care how we proceed. All cash is fine but it means all cash for the banks too. If we take the hits on our investments and if we are to hold the losses of our real estate then so must the banks.

More Banking with Tarp

Additionally, there are few if any businesses that can expand without financing during a slow or moderate business cycle and even less that can expand during a deep recession. I imagine we are still seeing the effects of low revenue and in turn, note default. This is still leading to wealth destruction everywhere. Decreased revenues are the killer of all business. I don't care how much cash you have on hand. If you are paying out more than you owe, you are going to be in trouble eventually and when credit contracts it will hit hard and quickly.

Banking with TARP

We have a banking disaster that is evidently over according to ken lewis and other banking execs..(crying for a reversion back to mark to model of course--load of crap by the way)The hubris of these bankers who seem to think that now that they can survive after having use of tax payer billions means they didn't really need it and that they shouldn't pay it back with a normal interest rate they charge to consumers. What a joke

Schumer actually believes himself!

Schumer just said that there already has been earmark reform in congress. With so many delusional people in Washington and the spend o ramma congress we might see dow 1000 for crying out loud.

Steve Forbes on Mark to Market accounting

Steve Forbes is just plain wrong when it comes to the issue of mark to market accounting. The reason the banks and insurers are in death spirals is because they took assets that have depreciated well beyond the original amount of a mortgage or policy. The reason mark to market account is hurting these companies has nothing to do with paper losses but more to do with what ensuring the companies have adequate reserves in case strong economic downturn. The reality is now being seen by everyone. The banks were horrible at forecasting real estate values have been overly involved in MBS and CDS markets. It doesn't matter if someone is paying or not on a loan that is 300,000 underwater because that particular loan is a powder keg waiting to blow. It is a toxic asset regardless of the payment history. If the collateral doesn't matter and we should do away with mark to market accounting my full article can be found at

http://morefinancialreality.blogspot.com/