MonkeyBusinessBlog

Ok I'm Not Waiting Anymore

Did I tell you that "Healthcare Summit" yesterday was gonna be garbage? So what got settled? Other than Obama smushing McCain again, there wasn't even much fun or hijinx in it. The President was boring and kind of lame. The congressfolk were reading statements for future clips for re-election commercials in the coming months. Meanwhile stocks got a little "tingly" while this was all going on, but at least they came back at the end of the day to only be down some instead of a lot.

As I sat cooped up yesterday and today, like many of you in the Northeast, watching the snow blow sideways, I thought about something we have all been talking about for awhile:  the housing market. Consumer confidence is down (and after yesterday's performance I bet confidence in our elected officials is at an all-time low). Jobs are going away. Foreclosures keep mounting with more to come. But then I heard another one of those mortgage company radio ads saying, "with prices where they are, and interest rates where THEY are, it's never been more affordable to buy a home. And you know what? They are right.

So I'm honing in on one of the epicenters of this housing implosion......Fort Myers/Naples/Marco Island, Florida. You cant even believe some of the prices on these either foreclosed, or about to be foreclosed properties. I have made the appropriate calls to "my people" down there. I have told them the "Monkey
Business McMansion" is going to be purchased soon. Yeah I know, I know. Prices are gonna drop further. People are not going to want to or be able to buy housing for a long time. But this is where you make the green people. When NO ONE is buying. And you know what? Based on the recent stats, almost NO ONE is buying. I'll keep you abreast of the entertaining news I hear and I know many of you were interested in partnering up. So, just respond to bensalzproductions@yahoo.com again if you think you might like to go along on a venture such as this.

I've had enough of the gloom and doom and if you think about it, other than a downpayment, I plan on structuring this where we don't need much, if any, money out of our pockets. Then one day, and it could take a while, we have a small mortgage and a somewhat recovered housing market, and voila we take our cash out. A wise man once told me in the real estate market that he never makes money when he sells the property, but when he BUYS it. If you catch my drift. Sure there's some downside but if we are willing to wait it out, with very little coming out of our pockets, that won't keep me awake at night. Now in the immortal words of Jerry Maguire in "Jerry Maguire", "Who's comin with me?!?!"  

Baby You CAN'T Drive My Car

Lotta stuff going on in the car business (or lackthereof business) these days. Yeah I know the circle jerk (technical term) known as the "Healthcare Summit" is going on now but this car stuff is more telling for the economy.

Loved a few things about the Japanese guy who came to get grilled yesterday by Congress. Loved that his name is Toyoda so all these years we've been spelling the name "Toyota" and its been wrong! Loved that he read a statement in pretty good English and then for all the questions that came after he had to use an interpreter! And to any question he would respond with something like, "I am very sorry for what has happened." Who is this guy's advisors? Tiger Woods' people or Mark Mcguire's? As I watched, all I could think about is, basically, the biggest car company in the world (that actually sells cars) is selling ZERO cars right now! So it must be doing great over at GM right?

Well the news has broken that China has no more interest in the Hummer franchise. You might remember that last spring Government Motors (GM) decided that they should probably sell a division that made a gas guzzling truck built really for military use, that was big with rap stars for a year or two? Yeah well they reported they were looking to sell it for $500mm. So about 3 months later a Chinese company said they would buy it for $150mm. GM leapt at the chance. Now? The Chinese company has no interest. Congrats to us taxpayers. Hummer will be out of business with more jobs lost in about a month. But that aint all.

The Government (the "G" in GM these days) has decided that GMAC, the financing arm of GM, should sell its ResCap division to Warren Buffett. You know who is working at ResCap? Old Wall Street Guys. You know what they are saying? Don't sell to Warren Buffett! He'll rob us and you blind!! Well, I don't think there's a lot of power left for the Wall Street guys at ResCap. Look for a nice firesale price to Mr. Buffett soon. Which again will force us taxpayers to take yet another hit in our wallets and MORE layoffs by the cost cutting "Oracle".

So these assclowns are yapping about healthcare now in some room in DC which is a big political show. Anybody in that room got any ideas how to sell new cars or even new houses? Oh I dont know, maybe do everything you POSSIBLY can to create jobs? I mean no one is arguing that if this healthcare bill passes, a lot of someones are gonna PAY for it. Probably with money they don't have. Good luck.

Media Alert Update!

I know its hard to believe but, it looks like some famous or infamous muckety-muck (yes more famous or infamous than us) has bumped us from our 5pm Eastern Time spot on the Pete Dominick show on Sirius/XM today. But never fear, we are going on at 4pm Eastern! So same bat channel DIFFERENT bat time. Sirius 110 or XM 130 at FOUR p.m. Eastern Time today. That's 10 a.m. in Oahu. Aloha.

Same funny hijinx will transpire, however, as Eric and I dissect the monkey business for the week. And as you know there's been PLENTY! Enjoy.  

Media Alert! And Other Nifty Things

An administrative note: you can catch Eric and I on the always entertaining Pete Dominick show, on the POTUS network on Sirius 110 or XM 130 on your satellite radio dial, TODAY at 5pm eastern time. We will, as always, conquer all things monkey about business. Tell all your friends, particularly your WEALTHY friends.

Well, the new housing sales numbers just came out for January and they were at an all-time LOW. We have a President who is holding another summit today called the "healthcare summit". This is the one where he tells the Republicans in Congress that he's gonna run over them even if they don't vote for his newest healthcare plan. Which is kind of fun since the Republicans will still say "Ok" or "no problem" as foreclosures mount, jobs go poof, and almost everyone feels WORSE than they did when the new administration came into power. Am I simplifying things too much, or are the Reoublican Congressmen and women playing a much better game of poker than almost ANY of their Democrat counterparts?

Meaning, it won't matter whether healthcare passes or doesn't, whether terrorists are tried in downtown Manhattan, whether there is "don't ask, don't tell" in the military, if no one is working and everyone is getting foreclosed on?! I would venture to say they might want to shake up the priorities in the ol' Administration, don't you think? Pretty soon the midterm election season will start. Can't wait to see the TV ads by both parties. Message to Democrats: Its ok to sprinkle just a little bit of concern for business and job creation, it could help save your jobs in the fall. But if you don't want to follow that advice that's quite alright. I got a funny feeling "the people" are going to vote for the guys who show them how to earn a paycheck and keep one of the basic necessities of life, shelter and I think its going to be the guy or gal who CUTS spending without having to raise taxes. Just a thought.

Ummm, Does Anyone See Something Wrong With This?

Check this out from Bloomberg News Banks May Use Pay-Day Style Loans to Replace Overdraft Fees.

 U.S. banks may expand their short- term lending at interest rates of 120 percent or more as they seek to replace more than $15 billion in lost revenue because of regulations limiting overdraft fees.

“The smarter banks are trying to resell overdraft protection to consumers as a different product,” said Elizabeth Rowe, group director of banking advisory services at Mercator Advisory Group in Maynard, Massachusetts.

OK, so these moe-moes have essentially coupled the "over draft fees" they were charging, most prominently in 2009 I believe, with pay-day loans that charge about as much as Tony Soprano on the corner would charge!  Personally, I do not like pay-day loans at all, but at least they involve a usually conscious borrower.  What our banks were doing to create much of this $15 billion they made in "fees" last year were often underhanded tricks to nail unsuspecting customers with overdraft fees.  Here are some examples.

• Customer goes to the ATM machine and orders a withdrawal from his account for $100.  The customer only has $90 in the account (lets assume he honestly didn't know there wasn't enough in the account to cover the withdrawal).  His bank KNOWS that he is short $10 but lets him withdraw the $100 anyway and charges him $35!  The customer is not notified at the point of the transaction that he is short, nor is he given the choice to overdraft his account for a $35 fee.  It just gets done for him.  He gets the extra $10 for a $35 charge....Hiya!  In the old days the bank would just deny the withdrawal for insufficient funds fyi.
• Customer has $1,000 in his account.  He writes 3 checks on March 1 for $25 each ($75).  Then on March 3, he writes a check for $1,000.  What the bank SHOULD do is charge him one overdraft charge ($35) for the $1,000 check that had $75 insufficient funds.  The bank however, goes out of sequential order, wipes out the account with the $1,000 check and then hits the customer for THREE bounced checks at $35 a pop.  That is called "serving the customer".

So now the banks can't pull these "matchstick-men" scams, so they are breaking into the exciting world of pay-day loans....oh sorry, the banks won't be calling them pay-day loans.  According to Bloomberg;

They’re known as “checking advance products.”

Nice.

Issa Secret List?!

There's that name again! Bloomberg.com is reporting in its top news article, "Secret AIG List Shows Goldman Minted Most Toxic CDOs", that Rep. Darrell Issa (R-CA) has submitted a 5 page addendun via his committee, showing ALL the CDOs that AIG helped blow themselves up with. They call it a "secret" list. I'm not sure why. Maybe because it was buried in 250,000 pages of other documents related to the AIG "sitchy"? Issa not gonna be a lucky day for somebody!

A lot of people are quoted in the article bad mouthing Goldman Sachs (there's THAT name again) for creating/structuring/selling most of these bonds that blew up in AIG's, and therefore we taxpayers', faces. Except there's one problem with that, where people should bark up another tree than the money tree known as Goldman Sachs (for once!). No, I haven't gotten a job offer from Goldman, and don't think I'm pandering to them. Just listen up for a minute.

You see to create these profitable trades for themselves, Goldman actually HELD the toxic bonds that everyone is dissing, in their own accounts! (Or in some tax haven place with a funny name but that's for another day, just so you know GOLDMAN had the risk on these bonds.) So when any of these experts or politicians come knockin on Goldman's door again, thats the first thing they will say. Something like, "why would ever HOLD these bonds in our account if we KNEW they were toxic?"  And you know what? They are correct.

For a little refresher to those of you who are new to the site, and to make our example simple, what Goldman did was take these bonds and got paid let's say 50. They went to AIG (and others!) and said "hey you want this risk and we'll pay you......um......10?" AIG said "Sure, and give us plenty please". So using my toes and fingers, 50-10 = 40. Voila. Goldman could give 2 hoots where these bonds went.... up, down, or sideways, they were gonna get their 40. AS LONG AS, and that's the most understated As long as, in any of our lifetimes, AIG was still alive. So you can now imagine the backroom dealing between Goldman and the US Government when it looked like AIG was gonna take a dirtnap (technical term) back in September 2008. Which is also why I nearly kick my computer in when I see one of these asshats from Goldman stand up every once in a while and say they DID NOT need the TARP money to survive. Oh maybe they didnt need the TARP money, but they CERTAINLY needed the AIG money.

But in this case, you are gonna be barking up the wrong tree if you are going to try and blame Goldman for selling something they knew was toxic. For chrissakes, they probably STILL own the bonds somewhere in one of their accounts in the Isle of Man or Cayman Islands! However, this Bloomberg article did touch upon a new interesting villain, the asset manager. For most of this whole mess, the asset managers have escaped the wrath of Main Street. Which may change now. Ask how Trust Company of the West (TCW) is doing this a.m. when the article says they manage the worst CDO bond in the entire 5 page portfolio that we taxpayers now own via our nifty relationship with AIG. Issa not a good day for them, I assure you.

Ohhhh.....SHE Did It

I should've known it when it first came out and put it together with Goldman and Greece but I didn't know this chickie was still working there. I'm not going to mention her name because she's probably googled her name about 100x already because the Journal made her infamous today. So I'll save her and her friends and family a trip to this site. "SHE" is the woman at Goldman that the WSJ said masterminded these derivative trades with Greece that everyone is talking about.

I used to work with her back in the day at JPM. Not with her, but she was on the derivative desk, hawking ideas to corporate and government types. Her daddy had some dough, she liked to drink booze, and surprise, she is Greek. The only interesting thing was when she didn't get paid one year what she thought she should at JPM (a common theme throughout JPM's history which helps explain why they are Chemical-Chase-BankOne-JPM today), she bolted for the "enemy", Goldman Sachs. I say "enemy" because JPM back then used to view Goldman as their archrival, which was a real joke because some clerks at Goldman were getting paid more than JPM Managing Directors, but that's what they thought. So this lady bolted for the dough. Hey, I can't blame her. And dough, I think she made plenty of by the by.

The thing is up until about a few days ago, I GUARANTEE she was telling everybody and anybody how brilliant SHE was, and how SHE came up with this great trade idea. Now? Not so much. Especially if one of those wacky German Government officials gets their hands on her. I think President Angela Merkel might want to give her a nice crack across the chops herself.

So she'll go down as the scapegoat here, which isn't right. But the PR group that Goldman has hired, can't let Mr. Blankfein take the hit for this one even though I GUARANTEE he knew about these trades when they were getting done. As did, quite a few people at Goldman. You see this lady was the salesperson on these trades. Of course, she would/will try to crack me across the chops for calling her such an "inferior" name. But you make the call. She wasn't an awful looking chick, who liked to drink booze, spoke fluent Greek, went to some Ivy League school here, and her daddy had money. You telling me some of those Georges or Alexs or Tonys, in the Greek Finance Department didn't enjoy drinking nice wine and food with her and buying whatever she was sellin? I'm not saying she's dumb but I can promise you that there was a GROUP of people at Goldman who worked on these transactions. Now she's gonna take the fall for them. This will be an interesting thing to follow. Good luck, honey.

Greece Goes All In.

So Greece is going to "test" the waters, possibly this week, with a sizable bond issuance.  According to the Financial Times Greece Set For Critical Test With Bond Issue

Greece will call on other European countries for help if it is unable to borrow money at similar rates to other eurozone members, the prime minister said on Sunday.

“What we are saying simply is we need the help so that we can borrow at the same rate as other countries, not at high rates which in fact undermine our possibility for making the changes and cutting down our deficit,” George Papandreou told the BBC’s Andrew Marr show. 

Bankers in Athens expect a multibillion-euro syndicated bond issue to be launched within days after the government appointed a senior commercial banker on Friday as new head of its debt agency.

Mr Papandreou said Greece’s borrowing needs were covered till mid-March. “What we are saying simply is we need the help so that we can borrow at the same rate as other countries, not at high rates which in fact undermine our possibility for making the changes and cutting down our deficit,” he said.

However, the appointment of Petros Christodoulou, general manager for treasury global markets at National Bank of Greece, the country’s biggest lender, fuelled expectations that the government would try to raise €3bn-€5bn ($4bn-$6.7bn) as early as next week.

This is a great tactical move by Greece.  Very well played.  Essentially what they have done is dared the Germans and the French to stand by and do nothing, knowing that if these Euro leaders don't come up with some sort of real support to make the auction work, the auction will be a disaster.  Greek sovereign bonds will get destroyed, the Euro will crash, European banks will be wearing HUGE losses, and the wolves will start seriously circling Portugal and Spain.  There must be furious negotiations going on right now in the Old World.  Also, to make things just a little more "time sensitive", there are massive strikes and protests scheduled in Greece.....on Wednesday! 

There's really no good option for the EU.  However, as has been the case globally since this crisis began in 2007, the predictable option will be to kick the can down the road a little ways. I think this issuance will go reasonably well.  Those who are long protection on Greece will get squeezed and the Euro should scream higher. This past week lots of strange happenings went on in the credit derivative markets.  If you were long protection on just about any risk asset (long protection means short the asset) it was very painful.  While absolutely nothing was going on in the real cash markets, the derivative markets were sharply tighter.  No one had a real good reason for why.  It felt like manipulation was afoot, at least that's the excuse I am using for losing money! 

Perhaps" The Lord's Investment Bank" Goldman Sachs, will be furiously working behind the scenes, hitting any and all protection bids, calling in favors, etc...to make this auction go well and hurt shorts.  Afterall, it was GS who allowed Greece to cook their books and get into the EU in the first place.  Berlin and Paris may be calling on Lloyd to "do the right thing" or face a whole lot of scrutiny about their dealings with Greece and other weaker EU nations at the beginning of the decade or even earlier.  Of course a foreign government talking to Goldman like that could be grounds for a nuclear strike from the USA because afterall, nobody talks to OUR investment bank like that!

Anyway, this should be interesting

Please Turn The Machines Off. Close Prices and END THIS WEEK!

Going short the High Yield Index  against Investment Grade (with a little short Muni CDX thrown in) seemed like such a good idea last week!  My P&l is a puddle (although today was a little better).  Have a nice weekend.  A little rare Who for you.

Funny...I Don't Think They Play These Commercials Down in the Gulf States.

Insurance companies piss me off.  Or maybe I should say that the basic business model gets me all riled up.  A "good" insurance company is like a bad slot machine.  It takes your money and never pays off.  Conversely, that is why they are great businesses to own.  As Mr. Buffett says, (paraphrasing a bit) "They give good float."  What that means is the insurance company gets a boat-load of your money to invest while they figure out how to not pay you when you need them....and they have a whole army of lawyers and other assorted bullsh*t artists to help them with that. 

Anyway, I'm getting REAL sick of seeing this Allstate Commercial

In fact, my real good buddy was visiting us up here in the Northeast last week.  He's from Alabama.  His in-laws (the nicest people I have ever met btw) had their Mississippi home completely destroyed by Hurricane Katrina.  You know how much they initially collected from their insurance company, State Farm? Nada...Zilch.....ZERO.  It was an "act of God", or entirely caused by flooding (not covered by insurance) that destroyed their house.  100 MPH sustained winds?  Nah.  Storm surges? Nah.  Eventually they sued and got something, but in their hour of need they got a whole lot of grief from their insurance company.  The "good hands people" over at Allstate were equally heinous.  So my friend and I are watching the TV and I said to him, "Friend, do they show these ads down in 'Bama?"  And he said, "If they showed these commercials down in "Bama there would be a lot of TV sets kicked in!"

I think of that when these damn commercials run every ten minutes.  Here's a nice story about Katrina Katrina Victims Challenge Insurance Denials to remind you. 

Rates Ticking Up Eh?

First of all, I love how Eric is covering this Goldman/Greece massive "hide the salami" situation. I wonder 1) who else has been doing these kinds of trades, and 2) what is going to happen to the perpetrators of the massive fraud? Kinda makes you feel like the whole financial system is a sham doesn't it?

So Ben Bernanke pulled the trigger and rose the discount rate today. Makes you wonder what kind of numbers he's seeing with respect to inflation right? Hint: He's quaking in his boots. If rates really begin to go higher, wonder what that does for the housing market? Careful Big Benny.

Finally, as I smoke a Cuban cigar writing this by the pool with a gentle evening breeze, I have listened to all of you who have commented/e-mailed me about the "Monkey Business Blog Timeshare" idea from yesterday. I have decided to do a little more research before buying. Someone actually told me there seems to be a thriving secondary market for timeshares on Ebay that I should look at before I take the plunge. Will do don't worry.

I'll be back in NYC tomorrow night, nice and tan and full of contraband. See you soon.

Pow! Right in the Kisser!!

Ladies...I'm sorry but I would have taken the dress back to the store, while it was still on her....and returned BOTH OF THEM!

Repent All Ye Sinners!

So it's Ash Wednesday. For all you non-Catholics out there today is the day Catholics begin a solemn repenting for all of their sins. This supposedly follows a time of debauchery known as "Carnival" that ended last night with Mardi Gras or Fat Tuesday. The time to repent is supposed to be all the way to Easter Sunday, a mere 47 days away. (For you "good" Catholics out there it is 47 days not 40 like they taught you in religion class, trust me). You are also supposed to give something you enjoy "up" for this 47 day period also known as Lent. Little kids give up candy or sweets. Grown ups give up stuff like cursing. Me? I give up booze. This will be year 16 for me on this program and the good lord knows, I am making a true sacrifice when I do this. So you still might see me with a cigar in hand, but no booze. Plans are starting though for the day after Easter as we speak. Keep in touch if you'd like to join the festivities about 658 hours from now.  Enough of this religion talk. Let's talk about another religion......the religion of money.

I went to this timeshare presentation yesterday and got my $200 gift. Of course I took the cash in the form of casino chips where I will be headed tonight. The presentation was nice, the presenters were informative and the deal was solid. Basically, I can buy a 1 week vacation to anywhere these guys own a resort (and they are one of the biggest timeshare companies in the world) in a 1BR suite for $9800. That's a one time fee. I can vacation every year for a week for 40 years. Its also willable. Now if you look at these condos/rooms, you will notice they are BIG. With all kinds of amenities. Looks like a nicely furnished NYC apartment. If you do some quick math and figure that these places MUST go for at LEAST $300 a night if you were renting them, that's 2100 a week. So if I take 5 of these vacations, I get my money back right? Well, there's a little hitch called "dues" or "annual fee", which works out to be around $700 a year right now for the 1BR units. That might go up with the rate of the inflation which in 20 years could double at least. The math still kind of works out as long as you plan and you want to visit these places the timeshare company owns.

As I said yesterday, some people think "neutron bomb exploding in my face" is a better thing than the word timeshare, but I'm going to run it by the Head of Homeland Security (the Mrs.) and see what she thinks about this type of investment. Its kind of a personal thing, and it might be hard to make it the "Monkey Business Blog Timeshare", but it might have some merit. Would love to hear your thoughts, and if you want to join in, I'm sure we could work something out. If you are going to have adult beverages tonight, have one for me. Now its back to the pool. Bingo starts in half an hour.
 

Groaning the Blues

No real reason, just an awesome clip.  Although seeing former Fannie Mae and now Fortress CEO Dan Mudd on CNBC opining on the housing market was a little much.  They really couldn't find ANYBODY else for that gig?

And Now The Judges Results For Goldman Sachs "My Big Fat Greek Derivative"

In the spirit of the Olympics it's time to judge Goldman Sachs latest performance!  Our number one seeded organized crime syndicate chose for their "long program" (remember...the Olympics!!). 

• Through the magic of derivatives, cooking the books of a sovereign nation, Greece.
• Using those cooked books to underwrite almost $15 billion of long term debt for said nation without disclosing the derivative transaction that materially misrepresented that nation's financial condition.
• Subsequently aiding Greece in their entry into the European Common Union, by cooking the books and thus, contributing greatly to the economic and potentially social demise of an entire continent.
• Giving Greece an upfront $1billion payment on a off-market cross currency swap that I would bet Richie's entire net worth was worth more like $1.5 billion (hence, another $500 or so million for the best firm on Wall Street.)

And here are the judges scores;

• Execution - 10.0  What can you say?  It worked like a charm.  And like I say above, they probably took a whole lot more than just a $1 billion out of Greece. 
• Difficulty - 8.5  They get high grades for the balls behind the performance.  Afterall, we're talking about defrauding not just bond holders but the economic underpinnings of the second largest economy in the world!  As far as outright difficulty though, any clever kid on the swap desk could have come up with the off market swap idea.  I'm a little disappointed that this transaction wasn't washed through 11 different legal entities and parts of the world I never heard of...but so be it.
• Artistry -7.0 Like I said above, it wasn't pretty.  Rather pedestrian when you think of it, and not very original since Freddie Mac was doing similar style transactions at the same time (early 2000's) to cook their books.  For all we know, they may have stolen this idea from Freddie since I know for a fact Freddie brought Goldman the trade and to my knowledge Goldman didn't do it.  Freddie knew how to discount a cashflow....which was probably a non-starter for Goldman.

So if we weight this 50% execution, 25% Difficulty and 25% Artistry I come up with a final score of 8.875, which ain't too shabby!  Anyway, here's a nice write up by Bloomberg.  Goldman Sachs Didn't Disclose Swap, Investors Fooled.

Goldman has yet to respond.  I'm sure when they give their non-denial, denial it will be insulting....and it will work like a charm.

 

 

CNBC's Mark Haines Calls it Like He Sees It.

Thank goodness for the rewind function on my cable!  I was working away with CNBC in the backround and I heard Erin Burnett and Mark Haines talking about Greece.  The subject of Goldman's little "assist" in Greece's manipulation of their balance sheet earlier in the decade to gain inclusion to the EU came up.  Here is what Mr. Haines said about "The Lord's Investment Bank" as an incredulous Erin looked on.

"They're up to the same B.S. that was used to drive our economy off the cliff.  I find it very discouraging.  It shows that they're....I'm not going to get into it......They will do ANYTHING for money.  There's a word for people like that.  I mean ANYTHING.  Screw ethics, screw what's good for anyone.  I mean in a community.  ANYTHING.  There's a word for that type of person.  Actually, there's several words."

I always liked that guy!

 

Bon Bini From Aruba

Hello all from 78 degree Aruba at 8:30 a.m. local time (1 hour ahead of Eastern US Time and 7 hours ahead of Hawaii. Mahalo). Some of you may wonder if I just travel to exotic locales carrying a laptop, a stubby #2 pencil, a few cigars, and write a blog.You would be correct. Well, not entirely. You see this holiday was planned. My kid is off from school this week and I had picked this destination awhile ago. Also, I think in my second lifetime, I'll be a travel agent, with all these deals I seem to be able to find.

You can still see the economic affects down here. Granted, not all kids in the US are off this week from school but I think a lot in New York are. I remember dreading having to take vacations someday "with everyone else" and having to pay top dollar. So far that's not really the case. Obviously, the economy being in the terlet (technical term) has helped my cause. Speaking of, as I sit here looking at an offer for "a gift of $200" to visit a timeshare presentation down the block from my very nice hotel, I'm thinking of going. For some of you, timeshare might be a word that gives you the "willies" (technical term). You know what? I think the prices are probably worth paying attention to and as your "man on the street in places that generally don't fall below 60 degrees even at night", I believe it is my duty to go and fact find and report back.

So if I don't get to you today enjoy this FAT Tuesday or as our friends in New Orleans like to say Mardi Gras. Then repent for your sins tomorrow. Oh and stay in the holding pattern with the stocks we are short (notably SPY and QQQQ), got a funny feeling things will really be breaking in our favor quickly. Now let me go eat my fruit and smoke my cigar. Enjoy

This is Really Cool!

And it has absolutely nothing to do with business. Check out around 4:00 when the conductor starts dancing!

Goldman Sachs Starring in "My Big Fat Greek Derivative"!

Oh my!  How are the Goldman Superheroes going to get out of this one?  The New York Times has really been getting after Goldman Sachs lately.  It seems like every Sunday the paper drops a new bomb on "The Lord's Investment Bank."!  Here's this weeks episode Wall Street Helped Greece Mask Debt Fueling Europe's Crisis.

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.  As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Read the article for the particulars.  I will just summarize.  Goldman, along with other bankstahs ran rather unoriginal (if you have been in the game) derivative scams to make the Greek balance sheet look much stronger than it actually was, which was kind of important considering that fake balance sheet got Greece into the EU and enabled the country to issue hundreds of billions in long term debt, much of which was used to collateralize loans from the European Central Bank in the dark days of 2008.

You ever see those JG Wentworth ads where JG promises to "pay" folks money TODAY in exchange for some stream of cashflows the victim...I mean people....are getting in future?  Of course it is a complete ripoff that gets around usury laws.  The poor sap who has the stream of dough coming to him (it could be a legal settlement as an example) for say the next 10 years, sells the future stream for say, $10,000.  Unfortunately, doing some quick discounted cashflow analysis usually reveals that the stream is worth more like....$20,000.  The discount rate to arrive at the $10,000 is usually something north of 20%!  The transaction is effectively a loan but is recorded as a sale. Now here is the Times reporting on what Goldman and others did with Greece;

In Greece, the financial wizardry went even further. In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country’s airports and highways to raise much-needed money.

Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics.

I wonder what happens to those deals if Greece goes bust?  I'm going to bet that Greece won't default AND the bankstahs get every dime coming to them on these future revenue streams.  Just a hunch. I wonder if Goldman's presentation to the Greeks back in 2001 went something like this;

* It also appears that Goldman did the old, "I pay you now, you pay me later" off-market swap...in this case cross currency swaps.  The idea here is a bit of a twist from the "ingenious" plan Freddie Mac used in the beginning of the decade to hide massive amounts of current income, deferring it to years later when they might need it. In the case of Freddie's fraud they used fixed-floating interest rate swaps.  I say "ingenious" (dripping with sarcasm) because anybody with a brain in their head could see that these swaps were nothing more than a clumsy accounting "hide the salami" move to manipulate earnings.

Looks like Goldman and some of our other fine banking institutions engaged Greece in similar transactions.  Instead of back-loading income, as in the Freddie case, income was front-loaded.  More brilliant value added business from our dear friends at Goldman.

The Fall of An Equal Opportunity A-Hole Billy Tauzin

Most of the time when you try to sit down and think about how this country could be made better, or how we can tackle our toughest problems in a fair way for everybody, it's a pretty damn hard thing to do.  Sometimes however, something crops up that makes it real easy.  This is one of those things.

One Grand Deal Too Many Costs Tauzin His Job.

Check this out;

 After about two dozen years in Congress, Representative Billy Tauzin of Louisiana was after bigger game — the giant, 200-pound whitetail deer that run through the area of south Texas that hunters call the Golden Triangle. 

So in 2003 Mr. Tauzin, then chairman of the powerful energy and commerce committee, made a deal. Though still on a modest Congressional salary, he paid more than $1 million for a 1,500-acre ranch there. And he invited a dozen friends — mostly executives and lobbyists with interests before his committee — to cover its mortgage by paying him dues as members of a new hunting club. It did business as Cajun Creek L.L.C., based in the Baton Rouge office of a lobbyist who was a member.

Now, seven years later, Mr. Tauzin’s friends say, it is to his Texas ranch that Mr. Tauzin, 66, will retreat, to contemplate the apparent collapse of the grandest in a career of fearless deals — a pact to trade the drug industry’s political support for favorable terms under President Obama’s proposed health care overhaul.

Mr. Tauzin is leaving his $2 million-a-year job as the top lobbyist for the drug industry amid complaints from drug makers that he bargained away their profits too cheaply, spent too much in his $150 million advertising campaign to sell the overhaul and miscalculated in his assessment that the passage of the legislation was all but inevitable.

So when President Obama bargained away health care with the big pharmas, this is the assh*le who brokered the deal...Billy Tauzin, a guy who has been on the take for nearly a decade, both inside Congress and out.  The kind of revolving door turd, much like the President's chief of staff Rahm Emanuel (remember Rahm became an "investment banker" earlier in the decade and a director of Freddie Mac after he left the Clinton Administration) or the Secretary of Health that the President just had to have, but didn't get because he, much like our Treasury Secretary, "forgot" to pay his taxes.....former Senator Tom Daschle.  Remember Daschle was the guy we just "had to have" because he knew his way around all the complexities of health care.  Yep.  What that meant was, Daschle was on real good speaking terms with Billy Tauzin and could get us a "good deal."

President Obama comes into the White House with all this talk about how he is going to change things and how lobbyists won't be part of his White House....and then every person he either hires or does business with is or was a registered or "unregistered" lobbyist.  Tauzin is a guy, according to the Times, who set up a little hunting reserve along with a little toll booth that demanded money from people who had business in front of his committee.  Then, after he couldn't shake any more money out of being a congressman, he leaves and becomes the king of pharma lobbying.  This is the guy that President Obama sat down with to bargain on health care.

Now Tauzin is essentially getting sh*t-canned because he bargained away TOO MUCH for the pharma boys!  You really want a perfect example of just how completely screwed up our way of doing "the people's business" is?  Check this out;

The agreement that Mr. Tauzin struck on health care — capping the drug industry’s costs at $80 billion over 10 years and turning a perennial foe into a Democratic ally — was in some ways a fitting climax to a career of such capers.

“I don’t know anybody else who could have made a deal like that and could have made it stick,” said Wallace Henderson, Mr. Tauzin’s former chief of staff and one of the lobbyists in his hunting club. “He was one of the best political and legislative strategists I have ever seen, and I guess this sums it up: He is the only member of Congress who has ever served in the leadership of both parties.”

Mr. Tauzin’s supporters in the drug industry trade group, the Pharmaceutical Research and Manufacturers of America, known as PhRMA, say that he was essentially undefeated in his five years representing the industry on Capitol Hill — beating back a phalanx of proposals to cut drug costs, including allowing foreign imports or government price negotiations.

"One of the best political and legislative strategists"!  This guy Henderson (check him out by the way. Chief of Staff for Tauzin when Tauzin was a congressman and then left to be a lobbyist...imagine that.  I think things like that happen in DC at least one time a day.) talks about the things Tauzin did without the slightest hint that what he was doing may not have been in the best interests of the people he was supposed to serve.  Thinking like that has me thinking that makes former Gambino crime boss John Gotti, a fantastic construction and labor relations strategist.   

You want to change things?  This one is easy.  Guys like Tauzin are thieves.  You don't do "the people's business" (as our President likes to call it) with them, you prosecute them.

Oh My God....Make This Winter Olympics Opening Ceremony Stop!

Ok.  I thought I was done for the weekend until I made the brutal mistake of watching the Winter Olympics opening ceremonies with the family.  This may be the most boring thing I have EVER SEEN!  My 12-year old has passed out....stone cold!  The four year old is actually asking to go to bed!  That just doesn't happen on a Friday night in this household.

They've had four years to prepare for this and this is what they came up with??  Nanook of the North walking across the frozen tundra (indoors by the way) with Donald Sutherland speaking in the backround like he just downed 4 ludes with a bottle of Jagermeister?  Native Canadians dancing around aimlessly for two hours?  A drunken fiddler dancing to the image of the moon? 

The saying that immediately comes to mind is, "as exciting as watching paint dry."  Then I found this..which is pretty damn funny.  So give a watch a few times while you wait for Gretzky and perhaps Gordie Howe to come and light the flame.

Remember "The Kinks: Low Budget"??!! Have a Great Weekend.

News Flash On Wall Street Compensation.

How many times have you seen some "compensation expert" get on the TV and give this line;

Comp Moron (or Dennis Kneale): "Listen, if you put caps on compensation on Wall Street the best players are going to leave.  They're either are going to go to other firms like Goldman and JPM and get paid.  Or, they might go hedge funds and private equity groups that can pay whatever they want...etc, etc...

What these clowns don't get is, BANK MANAGEMENT DOESN'T WANT TO PAY "THE TALENT".  THEY NEVER DID!  THEY PAID BECAUSE THEY HAD TO AND NOW....THEY DON'T!!  AND THE SAME GOES FOR HEDGE FUNDS AND PRIVATE EQUITY GROUPS.

The whole insane compensation issue is a relatively new thing.  The truth is, It wasn't always this way.  Sometime in the mid to late 1990's, things changed.  As Glass Steagall eroded and the Street started coming up with wave after wave of new structured products (residential mortgages, commercial mortgages, high yield loans and bonds, etc.) lots of seats opened up on trading floors, as all these new products starting making lots of money (which of course turned out be largely illusionary) for firms.  Additionally, every German, Japanese, Canadian, British, Dutch and French bank started getting into the game as well.  Think of it as if Major League Baseball suddenly went from 26 teams to 60!  Every Tom, Dick, Alexi, Pierre and Wang became a highly coveted free agent.  Firms gave huge guarantees because they had to replace the "talent" that had just walked out the door for their own guarantee elsewhere.  It was nuts.  By 2004, if you could spell mortgage or define what "bespoke" meant and knew a few nifty Bloomberg pages to pull up on your particular product, you were a $1 million a year guy.....EASY!

The best part is when the firms decided that they would try to hold folks to the firm by making deferred stock a larger percentage of your bonus.  That worked real well.  The firm hiring you would just convert your old stock into their stock.  Problem solved

Then, the firms would make you sign a contract that said if you wanted to leave the firm, you had to go sit at home anywhere from 1 to 3 months before you could start at your new firm.  Of course you got paid by your old firm to sit at home.  It was supposed to make you less attractive to the hiring firm because they were paying you a full year guaranteed bonus and you couldn't start working for them for 3 months.  That worked great for about a minute.  Then EVERY firm made you sign a similar agreement.  The result was, it became a normal way of doing things.  Every firm just accepted the fact that they had to pay you a full one year bonus for 9 months or less of work.  The result?  PAID 2-3 MONTH VACATION FOR EVERYONE!!  I personally had two such wonderful times.

This was insane, but bank management felt they just HAD to do this, because back then they kind of had to!  Trust me, I know these people.  If they could have replaced us with truckloads of illegals that they could chain to their desks....they would have.  They hated paying "the talent".  They always did and still do!  These are the greediest M'Fr's on the planet.  The more they can keep for themselves the better. Back in the last decade however, there was just too much pressure on these guys to produce all these great returns on all these great new products.  Afterall, what would you say to the stockholders if you were "missing out" on the latest greatest product like a Synthetic Student Loan CDO desk?  You needed to have one and have one YESTERDAY! Hence, management paid a fortune to buy a desk (traders and salesmen) and check the box off.

Now?  The league has contracted from 60 teams (using the MLB example) to 12!  It may take a year or two, but this little compensation issue is going to work its way out and 25 year old kids who spend their day saying "twenty bid at twenty-two...whadya want to do" won't be getting paid $1 million.  In fact, there's a good chance they will be saying at their new jobs, "Would you like sparkling water or flat for the table?"  Or maybe they will be writing blogs!

"E.U. To Demand Strict Fiscal Discipline From Greece". Now THAT'S Funny!

Sorry for the late posting.  I was traveling yesterday, which was a blast.  Planes, trains and automobiles!  Two good things happened;

1. I actually made it home.  It took nearly 12 hours, but I made it.
2. Due to the fact that I had a flight canceled, I had to rent a car in Mobile Alabama and drive to Pensacola.  What was good is I got to go to the rental car counter and deliver the famous Steve Martin line from "Planes, Trains and Automobiles"  "I need a car..4 wheels and a freaking seat!"  I didn't drop the F bombs like Steve did because the rental car lady was cool and she looked like she could definitely kick my ass!

Anyway, before we get to Greece, lets post that famous scene.

Now on to Greece!  I couldn't stop laughing yesterday when I saw the headlines on how the Germans and the French are going to make the Greeks get fiscally responsible.  RIIIIIIIIIIIIIIIIIIIIIIIIIIGHT!!  I think this Family Guy scene works.  Think of Tom Tucker as the Germans/French and of course Peter is Greece.

Sorry About Not Reporting on the ASF Conference

As some of you who are long time followers of the blog know we've had a lot of fun reporting from Vegas on the annual ASF (American Securitization Forum) conference the last few years. This is the one where all of the "industry insiders" (and outsiders) got together for a massive goat rope (technical term) and told each other how wonderful they are/were. We know because Eric and I used to attend these things all the time and tell people how great we are/were. Oh they were held in the past at places like Bermuda, the Bahamas, Arizona, and of course Vegas. When times were good they had 2 a year. One in October and the other in February. This year though they just had one. And it just finished. You know where it was? In Washington, D.C.

If you click on the right of this page to our videos, you will see that Vegas was probably a better choice than D.C. Even with Obama saying it was not a good idea to go to Vegas for conferences. So in any event, we did not send a representative(s) this year. But we hear it was real nifty with politicians and adminstration folk blasting the Wall Street ASF attendees like they were red headed step children. Now I'm sad we missed it. Well maybe the 20 degree weather and snow blowing sideways would've kept a damper on things. So maybe I'm not so sad.

I do want to know what they said in the panel discussions about how the CDO product, that all these guys and gals helped create, was going to do in 2010. These are the bonds that the FASB (Financial Accounting Board) last April allowed banks to mark on their balance sheets "at a reasonable level". You might remember that was the day I told anyone that bought a bank stock after that an assclown because there was NO WAY you could ever know what you were buying since they were playing hide the salami (technical term) with their balance sheets......again! Well guess what? Some of those CDOs are going to DEFAULT in the coming weeks. I wonder how many guys have this stuff still marked near 100 cents on the dollar. My guess is when something defaults even the politically controlled FASB might check on what the banks are then calling "a reasonable level." Good times all around. Enjoy the snow and that thud you are hearing again in the financial world. Can't wait to see what everyone's reaction is to that. In the meantime, if the ASF conference is held in a warm weather climate next year we'll be there. I don't like the snow anymore.

It's Official: President Obama Is the Biggest Pussy To Enter White House Since James Buchanan.

This morning, or last night President Obama had this to say about Wall Street bonuses. 

In an interviewwith Bloomberg News, President Obama likened bonuses for Wall Street CEOs to outrageous salaries for athletes, but he said he does not begrudge the bank chiefs for pulling in such hefty sums.

"I, like most of the American people, don't begrudge people success or wealth," Mr. Obama said. "That is part of the free-market system."

JP Morgan Chase CEO Jamie Dimon was awarded a bonus of around $16 millionfor 2009 after leading the company to profit through the financial crisis. Goldman Sachs Group CEO Lloyd Blankfein, meanwhile, is getting a $9 million bonus for 2009 after his company's profits soared last year.

Mr. Obama called both Dimon and Blankfein "savvy businessmen" but said they are making "an extraordinary amount of money." Still, he said, "there are some baseball players who are making more than that and don't get to the World Series either, so I'm shocked by that as well."

What happened?  Did Lloyd and Jamie give him a little be-otch slapping last week?  Who knows.  Did they tell Timmy to tell the Prez that if he doesn't calm down on the pay issue, Goldman's little algo-machine is going to take the S&P down 1% a day until he cries uncle?  I wouldn't be surprised!

I'm not giving an opinion on bonuses here, but for the love of God, Obama got all populist a couple of weeks ago (and f*cked up my trading P&L....so there is some bias here!) and now he is back to comparing bank bosses to star athletes!  Does he understand that except for MSNBC (I'm on the road so I watched that channel last night, and...it was a mistake) he is becoming a freaking joke to just about EVERYONE?  

Anyway, I'm not sure we have seen this complete "lack of sack" in the White House since our 15th President James Buchanan stood by and let the country dissolve into Civil War while trying to appease EVERYONE!  Oh, and by the way, when Buchanan entered office he was viewed as one of the most qualified men to have ever entered it..and one of the smartest.  

Snow? Not Where I Sit

Had to make a quick trip down to Florida. Armed with the knowledge of looking on the internet for weather reports, I surmised on Monday that it would probably be best if I high tailed it out of NYC by Tuesday A.M. Got a reasonably priced flight too. I'm scheduled to come back Thursday evening but I don't know if that's gonna happen. Which is fine by me. You see I'm in Naples, FL and people are freaked out because even though its sunny, its like 50 degrees at 9 a.m. I have shorts, flip flops, and a short sleeved shirt on. I'm poolside typing this blog. Every once in a while I go in to my room, turn on the TV, and watch the weather channel with those imbeciles who stand outside "reporting" that its snowing outside with a blizzard in their faces. I wonder how the cameraman feels about standing in the middle of Central Park right now when he doesn't even get to go on the air to show how "brave" he is. Funny.

So I did manage to read a few things. I saw on bloomberg.com that Obama doesn't begrudge Jamie Dimon and Lloyd Blankfein for making their money because 1) they are savvy businessmen, and 2) some ballplayers who don't make it to the World Series make more than those 2. Is it me or has it become REAL important for the President to surround himself with one or two people that have held private sector jobs before? Just one or two would be fine.

The other thing I noticed was USA Today reporting that despite the snow, Treasury Secretary Tim Geithner has shown up to work in D.C. in a suit everyday. Now does USA Today have a guy standing at his office waiting and watching or did one of Tim's "people" find it important to leak this kind of message to USA Today? This is supposed to make him look good? I dont know where the guy lives in relation to his office, but if its taking him a few minutes longer to get to the office, wouldn't he better served staying home and "telecommuting" (one of my favorite words that really means sitting in your pajamas all day eating Funyuns and surfing the web)? Well I'm going to take a walk on the beach now. Be back to you later.

"What Do I Know About Pork Bellies?"

In my "new" line of work I tend to have CNBC on a lot more than I used to.  Every time I hear or see this commercial I can't stop laughing.  What could go wrong with trading commodities on your own?

John Thain? CIT? Why the Hell Not Right?

Here's what comes to mind when I think of these two jackasses coming together.

The Politics and the Football

Sorry for the late post. I was a little "UNDER" the weather. Get it? I played the UNDER like Big Dick said and at about 11pm last night, I knew I was going to be UNDER the weather today! The old cocktail flu. Chicken wings too. Washed down with a nice victory cigar. Good times.

Watched the pre-game to the Super Bowl yesterday. All the stories and drama. Then CBS (some say that stands for the Communist Broadcasting System) flips from the field in Miami to the White House Library with Katie Couric and the President. Live. With that, people start BOOING in the bar! Now, I know you might find it hard to believe but this was not some right wing bar I was hanging in. As a matter of fact, I was sipping on some nice $2 drafts all day (and all night), and I only knew the gang I was with (and the lady bartender, of course). Shocked me. And I dont even know what the 2 "newsleaders" said because they made the bartender turn on the jukebox and people started dropping money in it like it was a loose slot machine.

It kind of reminded me of another story about the "news" and football. Did you know that in the last 40 years, 60 Minutes (that hard hitting leftist documentary show on Sunday nights) has been in like the top 20 of all shows weekly for 35 of those years. Wanna know why they didnt make it the other 5 years? Um because CBS didnt have the NFL. I try not to make these things up people. Check it out. So 60 Minutes gets viewers basically because J.S. Ragman watches his football and is either happy or angry at the end of the game and goes in the other room for a belt of scotch and keeps the TV on! Think about that. Maybe 60 MInutes should do a story about that.

I also bet CBS might think twice before they have that "exclusive" interview next time during the Super Bowl. I don't think the voting public cared for it. Oh stocks are down again. So is job creation. Good luck with the healthcare.