Archive for the ‘Politics’ Category

Making money by losing money

Tuesday, March 10th, 2009

Doublespeak here

Citigroup’s CEO Vikram Pandit caused a surge in the Stock market today with a “memo to employees” (Translation:  I’m not saying this to the SEC or directly to the public because if I’m not telling the truth, that becomes a criminal issue).

Once you read through the weasel word language (what is an “externally disclosed mark” that was excluded from the theoretical profit?), the substance comes down to – we made money because we have a $44 billion tax loss carry forward, that we will apply to future income.

This is the same thing that GM tried to do over the past few years – the reason their balance sheet fell apart was their auditors decided it is extremely unlikley GM has any chance of making a profit in the next 3 years – so those tax loss carryforwards were declared worthless and written off.

I believe today’s rally is a suckers rally.   Banks don’t make wealth – they just move it around.   Until Barack Obama and the Democrats drop the mantra that  profit=rich=evil=corrupt, this economy is headed nowhere.

*** Update ***

CitiGroup Execs make $4.4 million profit

Just before this “announcement” of a return to profitability, Citigroup executives bought up a bunch of their own stock.  This was probably completely innocent, but surely is going to invite an SEC investigation.  Tim Geithner says the SEC needs to regulate more.  Let’s see if he really means it – when it involves his personal friends at CitiGroup.

GE, BofA sell $18B in FDIC debt

Monday, March 9th, 2009

Bloomberg Story

Just a day after the FDIC announced it may be insolvent this year – and with responsible smaller banks crying foul (We’re paying for the mistakes of the reckless banks), GE Capital (which was NOT a bank) has issued $8B in bonds guaranteed by the FDIC and BofA (which recently said it was a mistake to accept TARP funds) has issued $8.5B in FDIC backed loans because Credit Default Swaps on their own lending is getting too expensive (because people selling the swaps believe the chance of default is going up).

If CitiGroup is allowed to fail, there is really no doubt the FDIC goes with it.  All the cards are on the table now, and the United States is holding a pair of 3s and bluffing – and the other people at the table know the cards we are holding.

FDIC to borrow its way to solvency

Friday, March 6th, 2009

The “solution” to the FDIC being insolvent is for the US Treasury to loan the FDIC $500 billion (It currently insures around $4 trillion sitting in bank accounts – probably more by now)

The problem with this?  The total revenue the FDIC raises by assessing a fee to banks on their insured deposit accounts is $2 billion a year.  It takes a long time to pay back $500 billion at $2 billion a year.

To dig the hole deeper, part of the mortgage cram-down bill’s language (probably to blackmail the American Banker’s Association into supporting it) is making the “temporary” insurance limit raise from $100k to $250k per account permanent.

The stupidity and unintended consequences continue.

Don’t catch a falling knife

Thursday, March 5th, 2009

One of the “rules” of investing is don’t try to stop a falling market by trying to stand in its way.  It’s the fast path to poverty.

Yesterday, China decided to follow the prosperity through spending model of Obama/Geithner and announced a large spending program to boost its economy causing the world markets to go up around 3%

Apparently, they have realized the folly of their ways and said “no more”.  Today the free fall continues – down 3.5% before noon, and heading straight down.

Unintended or not?

Saturday, February 28th, 2009

First you demonize people who travel in private planes.  Then you suggest that the President doesn’t really need that new fleet of helicopters after all. 

Well, Textron makes Cessna airplanes, and Presidential helicopters (as a subcontractor to Lockheed/Martin Marietta).  Textron has already maxed out its $3 billion bank credit facility.

Friday, in the midst of all the other chaos, Textron announced it is selling off the portion of its company that makes control systems for military planes, tanks, helicopters, etc… in order to “maintain liqudity”.  They also laid off a significant portion of the Cessna work force that makes mostly private planes.

Do laid off airplane workers count as “jobs lost”, “jobs not yet saved” or “George Bush’s fault”?

FDIC to raise insurance rates to banks

Friday, February 27th, 2009

Story here

At a time when banks have no place to earn even meager interest safely, the FDIC has announced it needs an “emergency” increase in the insurance rate charged to insure your deposits.

The one time assessment with be 20 basis points ($.20 for each $100 on deposit), expected to generate $15 billion

The ongoing fee will be raised from $.14 to $.16 per $100 on deposit.

This was a completely predictable outcome of the Congressional mandate to increase the FDIC limit to $250k to cover deposits in banks for which no premiums were being paid in the past.  It’s like allowing people to buy house insurance the day after their house burned down.

Thank you John McCain.

It’s official – CitiGroup caves

Friday, February 27th, 2009

Story here

Citigroup Common stock immediately lost 41% of its value.

*** Update ***
Since the US Government is moving its claim of ownership to the end of the line, Citigroup Preferred stock is zooming up – up 70%….

NBA offered a “bailout”

Friday, February 27th, 2009

AFP (the French news service) reports that the Sports Business Journal  reports that Bank of America and JP Morgan approached the NBA about lending them $175 million to help them get through the tough times.

Does this mean the $500k governemnt salary cap needs to apply to the NBA?

Bloomberg on Geithner

Wednesday, February 25th, 2009

Story here

A -very- long article about Timothy Geithher – who he is, where he came from, the problems that he faces.

It’s important to keep in mind that Bloomberg is not an observer just standing on the sidelines.  Bloomberg’s own investment advisor is the guy just named to run the GM/Chrsyler auto bailout project for Tim Geithner, and Bloomberg’s terminals are used by subscribers to access the Treasury’s “temporary” Commerical Paper funding program (and probably other things).

The article mentions a number of times that the Credit Default Swap market needs a marketplace to increase transparency of the risks.  I wonder if Bloomberg has any interest in running that?

The final nail in the GM coffin

Wednesday, February 25th, 2009

One of the reasons for GM’s prosperity in the “good old days” was GMAC.  The amount of money that GM made selling a car was secondary to the money it could make from the financing of the car through GM’s car financing subsidiary.

President Obama’s idea to get the US government involved in car loans tries to replace the market forces that drove GM to seek profit from lending money for cars rather than building cars with a central government controlled agency which will be motivated by policy objectives and government control.  Create a fund like this, you put everyone else in the financing business out of business.  Car finance companies don’t have a printing press that lets them print money to lend.

If the US Government starts becoming an auto loan lender, how can it avoid repeating the mistakes of Freddie Mac and Fannie Mae?  What if someone wants to borrow money to buy a car made by a non-UAW manufacturer?

The woman who was widely mocked for saying that now that Obama is President, she won’t have to make her house payment and will get a free car was telling you the truth – the problem is people didn’t believe her.