Thursday, September 17, 2009
Tuesday, September 15, 2009
We still have the same disease
Nassim "Black Swan" Taleb: ‘We still have the same disease'
http://www.theglobeandmail.com/report-on-business/crash-and-recovery/we-still-have-the-same-disease/article1286246/
Jim Rogers: "Investors . . . should learn how to sell short [long term] government bonds"
http://www.youtube.com/watch?v=Vqbu6ZS3nJI&feature=youtube_gdata
Meredith Whitney: "Banks are extending and pretending"
http://www.cnbc.com/id/32856449
http://www.theglobeandmail.com/report-on-business/crash-and-recovery/we-still-have-the-same-disease/article1286246/
Jim Rogers: "Investors . . . should learn how to sell short [long term] government bonds"
http://www.youtube.com/watch?v=Vqbu6ZS3nJI&feature=youtube_gdata
Meredith Whitney: "Banks are extending and pretending"
http://www.cnbc.com/id/32856449
Monday, September 14, 2009
Friday, September 11, 2009
Home Prices Could Fall by Another 25%: Whitney
CNBC.com excerpt:
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.
"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.
If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.
"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.
Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.
"Obviously that doesn't bode well for spending," Whitney said.
full article: http://www.cnbc.com/id/32773345
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.
"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.
If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.
"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.
Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.
"Obviously that doesn't bode well for spending," Whitney said.
full article: http://www.cnbc.com/id/32773345
Tuesday, September 8, 2009
Hyperinflation: The winners and losers
Voltron says: Der Spiegel has an article describing the German hyperinflation of the 20s (Hat tip to "Jeep"). I think the major trigger was foreign denominated debt (in that case, war reparations). It's interesting to note who the winners and losers were.
excerpt:
The stupid ones were those who had nest eggs: the thrifty, holders of government bonds, but primarily the country's pensioners. In other words, those who received money without having to work for it, who lived on their pensions or the interest on their savings. Large sections of the middle classes saw themselves stripped of their assets, losing almost everything they had set aside for years. Banks, savings banks, and insurance companies suffered huge losses and were left with nothing but their paper money. As a result, they had to start the majority of their businesses from scratch in 1924.
By perverse contrast, the winners of the hyperinflation were those with massive debts; first and foremost the state, but also private individuals who had borrowed money to buy houses, construction land or farmland, and whose loans were slashed by the switch to the rentenmark.
Some industrialists made huge gains from the period of hyperinflation. Hugo Stinnes, whom Time magazine crowned "Germany's new Kaiser," built up an immense corporate empire comprising heavy industry, newspapers, ships and hotels -- all based on a mountain of debt. As late as the summer of 1922, Stinnes was recommending that people continue capitalizing on "the weapon of inflation." Indeed manufacturers and craftsmen in general profited from the crisis since they possessed plants and buildings -- that is, tangible assets that outlived the currency switch.
Most farmers also did extremely well. "They had money to burn, and spent it willy-nilly," writer Lion Feuchtwanger recalled. Some bought themselves entire stables of racehorses, others expensive cars. "Farmer Greindlberger drove from the grimy village street of Englschalking to Munich in an elegant limousine complete with a liveried chauffeur, while he himself was dressed in a brown velvet jacket and a green chamois-tufted hat," Feuchtwanger wrote of the rural rich.
Never before had Germany witnessed such a fundamental redistribution of wealth, and many of the winners were those who had previously been wealthy.
The rest of the article is here: http://www.spiegel.de/international/germany/0,1518,641758,00.html
excerpt:
The stupid ones were those who had nest eggs: the thrifty, holders of government bonds, but primarily the country's pensioners. In other words, those who received money without having to work for it, who lived on their pensions or the interest on their savings. Large sections of the middle classes saw themselves stripped of their assets, losing almost everything they had set aside for years. Banks, savings banks, and insurance companies suffered huge losses and were left with nothing but their paper money. As a result, they had to start the majority of their businesses from scratch in 1924.
By perverse contrast, the winners of the hyperinflation were those with massive debts; first and foremost the state, but also private individuals who had borrowed money to buy houses, construction land or farmland, and whose loans were slashed by the switch to the rentenmark.
Some industrialists made huge gains from the period of hyperinflation. Hugo Stinnes, whom Time magazine crowned "Germany's new Kaiser," built up an immense corporate empire comprising heavy industry, newspapers, ships and hotels -- all based on a mountain of debt. As late as the summer of 1922, Stinnes was recommending that people continue capitalizing on "the weapon of inflation." Indeed manufacturers and craftsmen in general profited from the crisis since they possessed plants and buildings -- that is, tangible assets that outlived the currency switch.
Most farmers also did extremely well. "They had money to burn, and spent it willy-nilly," writer Lion Feuchtwanger recalled. Some bought themselves entire stables of racehorses, others expensive cars. "Farmer Greindlberger drove from the grimy village street of Englschalking to Munich in an elegant limousine complete with a liveried chauffeur, while he himself was dressed in a brown velvet jacket and a green chamois-tufted hat," Feuchtwanger wrote of the rural rich.
Never before had Germany witnessed such a fundamental redistribution of wealth, and many of the winners were those who had previously been wealthy.
The rest of the article is here: http://www.spiegel.de/international/germany/0,1518,641758,00.html
More sinister gold hanky-panky
Voltron says: Gold mining companies often sell their production in advance or hedge against down moves in the price of gold. Major mining companies are stopping this practice which indicates they think the price of gold is going higher. This article explains how this might be tied to gold market manipulation by central banks.
A year after financial crisis, a new world order emerges
Voltron says: a good summary and outlook:
Monday, September 7, 2009
Saturday, September 5, 2009
Wednesday, September 2, 2009
Wells Fargo CEO Stumpf Says Some Loan-Loss Rates Are Peaking
Voltron says: I'm not sure the CEOs comments are going to make anyone feel better about Wells Fargo.
Sept. 2 (Bloomberg) -- Wells Fargo & Co., the nation’s largest home lender, may be reaching a peak for losses tied to troubled loans, President and Chief Executive Officer John Stumpf said.
“There are some indications that we’re seeing a top in some of our problem loan areas,” Stumpf said in an interview from Wells Fargo’s San Francisco headquarters broadcast today on Bloomberg Television. In some businesses, the bank is seeing “very high levels of loss, but they look like they’re flattening out.”
Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the lender said on July 22. Charge-offs widened to 2.11 percent of loans in the second quarter from 1.54 percent in the first quarter.
Stumpf has told investors that he must increase profit before taxes and provisions at a pace to offset credit losses.
Loss rates on auto loans are stabilizing, Stumpf said, and “some buckets” of home-equity lines of credit “seem to be maybe not getting worse than they were before.”
excerpt:
“There are some indications that we’re seeing a top in some of our problem loan areas,” Stumpf said in an interview from Wells Fargo’s San Francisco headquarters broadcast today on Bloomberg Television. In some businesses, the bank is seeing “very high levels of loss, but they look like they’re flattening out.”
Voltron says: agreed. This is an inflection point before the losses resume.
Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the lender said on July 22. Charge-offs widened to 2.11 percent of loans in the second quarter from 1.54 percent in the first quarter.
Stumpf has told investors that he must increase profit before taxes and provisions at a pace to offset credit losses.
Voltron says: Oh, they'll "earn" their way out. no problem. whatever...
Loss rates on auto loans are stabilizing, Stumpf said, and “some buckets” of home-equity lines of credit “seem to be maybe not getting worse than they were before.”
Voltron says: That does not inspire confidence.
Wells Fargo's Tight Lips Drag on Shares
Excerpt:
NEW YORK -- Wells Fargo & Co. routinely ducks hard questions from investors. That insistence on silence has lately hurt the San Francisco bank's stock.
Wells Fargo is surely one of the strongest survivors of the financial crisis thus far, having gobbled up crumbling rival Wachovia Corp. at a fire-sale price last year. That merger made the one-time West Coast bank a national powerhouse of retail banking, with more than 10,000 branches and $1.3 trillion in assets.
But Wells Fargo's stature didn't prevent its shares from falling abruptly Tuesday amid a swirl of unfounded rumors. The shares fell as much as 6% during the day before recovering after CEO John Stumpf's said the bank doesn't plan to raise more capital to pay back government bailout money, which can hurt existing investors.
The stock's wild ride in part reflects investors' growing unease over Wells Fargo's refusal to mimic the routine disclosure practices of its large-bank rivals. Whereas J.P. Morgan Chase & Co., for example, provides extra detail about the condition of its operations, Wells Fargo says as little as possible.
A spokeswoman for Wells Fargo declined to comment for this report.
Wells Fargo stock is down about 11% year to date; that fall is less than the 32% decline at Citigroup Inc., but well behind the rise of 17% at Bank of America Inc. and the 31% rise in J.P. Morgan shares.
Wells Fargo is the only large bank that refuses to hold a quarterly conference call to discuss its earnings -- a prime opportunity for investors to ask questions of company executives. The bank also won't disclose its tangible book value per share, a statistic that became a focus of investors during the financial crisis, and that other banks routinely provide.
Perhaps most importantly, Wells Fargo has repeatedly refused to say exactly how the troubled loans it purchased with Wachovia are faring.
Full Article: http://online.wsj.com/article/SB125191978384280681.html
NEW YORK -- Wells Fargo & Co. routinely ducks hard questions from investors. That insistence on silence has lately hurt the San Francisco bank's stock.
Wells Fargo is surely one of the strongest survivors of the financial crisis thus far, having gobbled up crumbling rival Wachovia Corp. at a fire-sale price last year. That merger made the one-time West Coast bank a national powerhouse of retail banking, with more than 10,000 branches and $1.3 trillion in assets.
But Wells Fargo's stature didn't prevent its shares from falling abruptly Tuesday amid a swirl of unfounded rumors. The shares fell as much as 6% during the day before recovering after CEO John Stumpf's said the bank doesn't plan to raise more capital to pay back government bailout money, which can hurt existing investors.
The stock's wild ride in part reflects investors' growing unease over Wells Fargo's refusal to mimic the routine disclosure practices of its large-bank rivals. Whereas J.P. Morgan Chase & Co., for example, provides extra detail about the condition of its operations, Wells Fargo says as little as possible.
A spokeswoman for Wells Fargo declined to comment for this report.
Wells Fargo stock is down about 11% year to date; that fall is less than the 32% decline at Citigroup Inc., but well behind the rise of 17% at Bank of America Inc. and the 31% rise in J.P. Morgan shares.
Wells Fargo is the only large bank that refuses to hold a quarterly conference call to discuss its earnings -- a prime opportunity for investors to ask questions of company executives. The bank also won't disclose its tangible book value per share, a statistic that became a focus of investors during the financial crisis, and that other banks routinely provide.
Perhaps most importantly, Wells Fargo has repeatedly refused to say exactly how the troubled loans it purchased with Wachovia are faring.
Full Article: http://online.wsj.com/article/SB125191978384280681.html
Monday, August 31, 2009
The Fed's Interesting Week
by Ron Paul
It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician's best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.
Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation's gross domestic product. It is also projected that by 2019 the national debt will be 68% of GDP. Our path, if unchanged, is completely untenable.
The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn't stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems.
Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends.
Meanwhile HR 1207 and S604, legislation to open up the Fed's books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny.
It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician's best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.
Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation's gross domestic product. It is also projected that by 2019 the national debt will be 68% of GDP. Our path, if unchanged, is completely untenable.
The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn't stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems.
Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends.
Meanwhile HR 1207 and S604, legislation to open up the Fed's books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny.
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