MonkeyBusinessBlog

The White House Oval Office: October 2009.

The scene: The White House Oval Office

The Players: President Obama, David Axelrod, Rahm Emanuel, Tim Geithner, Larry Summers, Sheila Bair, Peter Orzag.

All to the President: "Congratulations sir!  The "2009 Health Insurance Reform Act" is a smashing success! 

Emanuel:  "Sir, thanks for finally letting me take the gloves off and crack some skulls.  I know you don't like or approve of the bare knuckle stuff, but it had to be done."

Axelrod: "Simply incredible sir.  The Clintons must be fuming with jealousy.  I bet you anything that Bubba's face is a dark shade of purple right now!  

Orzag: " Sir, you strong armed the big pharma guys into promising to not be greedy anymore AND to sponsor a nationwide run of "The Best of Rogers and Hammerstein" for the seniors in exchange for our promise that Medicare won't use its size as leverage to negotiate lower prices!"

Emanuel:  "Let's not forget the deal we rammed up the insurers asses!  In exchange for us dropping the public option the insurers promised to make their process more transparent and hold weekly lotteries for the poor.  The lucky winner gets a yearly $5,000 deductible, $10,000 max out of pocket health plan!  

Summers:  "I hope you realize the lottery was MY idea.  My research shows the poor LOVE lotteries."

President Obama: "Now now, take it easy fellas.  I had a lot of help from all you.  No way I get this landmark piece of legislation without you guys.  Ok, lets not revel in our successes.  There's still a lot of work to do.  Tim, you had something on General Motors you wanted to discuss?"

Geithner: "Yes Mr. President.  It seems General Motors Acceptance Corporation, GMAC needs about a $2 billion capital infusion."

Emanuel: "Jesus Tim, $2 billion?  Why don't you just come up here and ask the President of the United States to validate your parking?  

Orzag: "Seriously Tim.  Welcome to 2009.  If isn't at least $50 billion, handle that weak sh*t at your shop! Don't bring it up in here."

Summers:  "Listen you two neanderthals, the only one around here who gets to bitch-slap Tim is me!"

President Obama: "Alright fellas, take it easy.  Go ahead Tim. What is the story with GMAC?"

Geithner: "Well sir, remember Cash for Clunkers"?

Summers: "You mean the best stimulus idea since the Chinese built the Great Wall?  Duh, I think so!"

Geithner:  "Anyway sir, it seems that the 100,000 or so customers that participated in the program with GM essentially traded in a paid off vehicle for a new car."

Emanuel: "And.....?

Geithner:  "Well, essentially almost all these folks used the $4,500 Clunker Credit as a down-payment for the new vehicle and then borrowed the balance from GMAC at 0% for 72 months.  It appears that nearly 50% of those loans are already delinquent!"

President Obama: "Well that's bit odd isn't it?  It almost sounds like the subprime problem doesn't it David?"

Axelrod:  "It certainly does.  

Geithner: "You both are correct there.  It turns out that many of the borrowers are the same people.  Now the loans GMAC made to the Clunker borrowers are coming up delinquent.  And once these these folks go delinquent, they usually don't get things straightened out.

President Obama:  "Wow, who knew right?  Now, many of other car companies have been selling lots of vehicles.  Are they experiencing the same thing?"

Geithner:  "Yes Mr. President.  In fact, this is where it gets tricky.  See, remember all those neat lending facilities we set up with the Fed.......the Term Asset Backed Lending Facility or TALF?"  That is where we tried to help jump-start consumer financing by lending money at very generous terms to investors to buy the securities collateralized by things such as auto loans."

President Obama: "Okay..?

Geithner:  "Well the defaults on these Clunker loans are really starting to clobber those new securities that the Fed lent money on and the FDIC backstopped losses.  It looks like the FDIC may be taking some sizable losses as a result."  Additionally, a lot of this paper is ending up in money market mutual funds.  Last year we threw a government wrap on this market too.  So the FDIC may be on the hook for that as well.

President Obama: "Hmm, major bummer.  Sheila, what do you think?

Bair: "Umm, I suppose this isn't a good time to bring up that our FDIC reserve fund is out of money?"

President Obama: "I wonder if President Bush would let me clear some brush out at Crawford?"

 

No More Clunkers and That Ain't So Bad

Well, well, well the cutting edge bloggers who told you from minute 1 that this "Cash for Clunkers" was a big mistake, are now basking in their glory. Despite the President saying the program was "wildly successful", we see some nifty stuff like the Tri-State Area New York Car Dealers Association saying they werent going to honor the program anymore......2 days ago. Then we get the statement from the government today saying the program is over on Monday. Because it was so successful! I hope they run healthcare better. Oh wait.

The other neat after-product of this "great" program is that the guys who were getting stiffed (technical term) by the government are saying, "Um yeah the cyanide you want us to pour into the engines of these clunkers when they get turned in? Lets just say we "lost" our cyanide until we get paid." How special. Great program. Hate to see what is called a horrible program by this administration. Can't wait for the defaults to happen on these car payments and we the taxpayer get stuck again. Well at least we also have a bunches of foreclosed houses to go with our brand new cars!

I am off to some pretty economically battered areas for vacation with the family to do my part in propping up the local economies. First stop, Southern California where my kid will become a surfing afficionado. Then to Las Vegas where daddy will lose what is left of the family fortune. But I do know one thing, we'll have a blast doing it! So have a good week everyone and I'll see you all on August 31st. With my Shamu the Killer Whale hat, and my new pair of shoes that I win at the dice table. Enjoy.

Here's A Great Idea From Japan!

Bloomberg News started my day off in fine fashion with this Japan Turns To Taxi Cabs For Help In Selling Bonds.

Japan is expanding efforts to attract buyers to the nation’s growing debt load, flooding the backs of taxi cabs for the first time with pamphlets in the hopes of getting retirees to invest more money in bonds.

“Government bonds are worth another look,” the Ministry of Finance says in its latest advertisement, which features a picture of 37-year-old Junko Kubo, a former anchor on Japan’s public broadcaster NHK. Individuals can buy government debt at local banks for as little as 10,000 yen, or about $106, according to the ads. The ministry is hawking the bonds on its Web site with the slogan, translated from Japanese, “Peace of mind. Piece of happiness.”

“We are targeting those people with money for retirement,” said Masaaki Kaizuka, director of debt management policy for the government in Tokyo.

What a great idea!  We should try the same thing!  After all, if it's good enough for Japan, who's national debt is ONLY $7.26 trillion compared to our $12 trillion (and this is before they drop the little bomb that the FDIC will probably need a few hundred billion in the coming months) it's certainly is good enough for us.  Especially now that we actually have a positive savings rate! 

I don't know about you, but in New York City, we have video in the back of our cabs.  I can just see the piece now;

Cue Announcer: "And now direct from our studios in Washington DC it's the Larry and Timmy Show!!

Larry: "Hi everybody, I'm Larry Summers..

Tim: "And I'm Tim Geithner.  First of all make sure you're wearing your seat belts, especially those of you who have no health insurance!"

Larry: "Tim and I want to talk to you for a few moments about a fantastic investment opportunity.  Don't mind the meter right now.  We've instructed your driver to drive you around the block for the next ten minutes so we can have this time to chat.

Tim: "And don't be alarmed by the automatic door locks that just clicked in!"

Larry: "We'd like to talk to you today about investing in the safest instrument in the world, United States Treasury Bonds!  Let's be frank, you putting your money in the stock market these days?  Are you really believing all inscrutable drivel from the government that we are coming out of the recession...

Tim: "Um Larry, maybe you shouldn't..

Larry: Pipe down Tim.  Right now you can buy a brand new 10-year Treasury Note for 101-16 that will yield you 3.4%.  Again I say to you, where are you going to put your money?  Do you know that in the second quarter of this year over 13% of ALL HOME MORTGAGES are either delinquent or in default?  You going to buy real estate......hell no right?

Tim: "Larry?"

Larry: "Can you imagine what is going to happen to global equities once this short term stimulus wears off?  We've been relying on you, the American consumer to drive the global economy for at least twenty years!  You feel like driving anything right now?

Tim: "I think what Larry is trying to say is...."

Larry: "So help me Tim, just sit down and STFU!  Anyway, the FDIC is broke, banks are failing left right and center which is causing more and more corporate defaults, and don't even get me started on commercial real estate.....have you ever heard of a thing called 'flight to quality'?  That's the kind of thing that happens when the stock market realizes it's gone up 40% on complete BS and proceeds to drop that 40% in one month!  Here's the good news.  Tim over here is making these bonds like they are going out of style!"

Tim: "LARRY!!"

Larry: "I told you twice Tim {WHACK!!}.  Anyway, when this proverbial sh*t hits the fan that 10-year Treasury note you bought at this amazing, one time offer at 101-16?  It's gonna go to 108-16.  That's quality baby!!!  You can make SEVEN POINTS in as little as 48 hours!! Show me a better opportunity if you can, which you can't! Ok Tim, now you can tell the nice folks where to call. Tim?....Tim?  Alright, Tim's a little shaken up.  Just go to www.treasury.gov/saveourass and place your orders.  Have a nice rest of the day!"

Loaded up the Car and Moved to Beverly........Sparks that is. Nevada

One of the all time great characters in TV but only for a short time, was Jethro Bodine in 1962-66. (Perhaps topped by Rueben Kincaid from "The Partridge Family" but that's for another time) In real life he was Max Baer, Jr.,son of the former heavyweight boxing champ of the world. He also palled around with Elvis Presley and his entourage. See the problem was Max was typecast as a goofball actor and couldnt really get another gig in Hollywood once the show was finished. The show of course was the Beverly Hillbillies. You can still catch it on some obscure channels. Brilliant stuff.

So one day Max was really at a loss with what to do with his career so he made a movie on his own and controlled the whole thing. It was called "Macon County Line". He spent most of the money he had ($100k) to make it. No big studio would take it so he released it as an independent film. Made $35mm big ones. Kapow! Take that Hollywood assclowns.

So he invested that dough in real estate and become a tycoon! Go Jethro! Today the Reno Gazette-Journal (www.rgj.com ) reports that old Max is at it again. He wants to buy a closed down hotel-casino in Sparks, Nevada formerly known as the Silver Club. Unlike the dopey Jethro he played on TV, Max bought the Jethro Bodine name from CBS a few years back. You know what he wants to call this place? Jethro's Beverly Hillbillies Hotel and Casino!! I will be there for the opening.

But here's a guy who people wrote off a few times and thought he was just some B-list actor. But he seems to have a knack for making money. You think he's getting this place in Sparks, Nevada cheap today? You gonna bet against him? Not I said the brown cow. Good luck Jethro. Wonder if Ellie Mae will be at the opening. Or even Elvis?!

Hey! Hey! We're the Monkeeeeees! We Defraud Everybody Around!

Something just hit the Associated Press Wire just now that caught my eye. Eric and I feel obligated to report about MonkeyBusiness and if this story isn't MonkeyBusiness I don't know what is. The headline is "Wife of Monkee Micky Dolenz Arrested in NYC". I thought hmmmmm. Booze or Drugs? Assault and Battery? No that would be too simple. "The wife of Monkees vocalist Micky Dolenz was arrested Friday on charges that she defrauded an affordable housing program in New York City." Kapow!

"Donna Quinter,54, illegally received $136,866 in government rental subsidies for an apartment on Manhattan's Upper East Side." This is great. She also lived in an exclusive gated community in LA with Micky. So she wasn't even living here! She also was sharing it with a friend who was paying rent!! Think about that. Defrauding the government AND her pal! Seems like a peach of a lady. Grand larceny is a nice charge in the court of law too. Maybe we will send one of our ace reporters to cover the trial. I think it would be neat to have the monkey plastered on a big fat microphone while sticking it in the face of Monkee Micky or Donna for an explanation. MonkeyBusiness indeed! Classic TV moment for sure. 

Enjoy the weekend if we dont get to chat.   

Now THIS is Funny!

Check out this headline in the Financial Times today;

Credit crunch causes analysts to rethink rational market theory.

A new realisation has dawned among the most fervent advocates of financial analysis and collective investor wisdom: markets are not always rational.

For the past five decades, the Chartered Financial Analyst Institute has been teaching the tenets of analysis based on efficient markets to tens of thousands of adherents from banks, fund managers and investment houses that make up the global financial system.

Now, however, the credit crisis has forced high priests of rational market theory to question their own creed.

I can't stop laughing!  Here's more;

Extremities of recent market swings have sparked interest among politicians and investors in the field of behavioural finance, which asserts that markets do not behave rationally but can be driven by human emotions such as fear.

However, the CFA survey suggests the finance industry is not yet ready to rip up its creed.

Please boys, whatever you do, please don't rip up that creed.  We all need someone to trade with to make all our money back!

You Really Really Can't Make This Sh*t Up!

They really must want to see how much they can push the envelope before we have riots in the streets!  From Bloomberg News Fed Intends to Hire Lobbyist In Campaign to Buttress Its Image.

The Federal Reserve intends to hire a veteran lobbyist as it seeks to counter skepticism in Congress about the central bank’s growing power over the U.S. financial system, people familiar with the matter said.

Linda Robertson currently handles government, community and public affairs at Johns Hopkins University in Baltimore, and headed the Washington lobbying office of Enron Corp., the energy trading company that collapsed in 2002 after an accounting scandal. She was also an adviser to all three of the Clinton administration’s Treasury secretaries.

Robertson would help the Fed manage relations with lawmakers seeking greater oversight of a central bank that has used emergency powers to prevent Wall Street’s demise. While she wasn’t tied to Enron’s fraud, her association with the firm may raise questions, analysts said.

“Some members of Congress think there are votes in attacking the Fed” after it “unnecessarily and unwisely entangled monetary policy with fiscal policy,” said former St. Louis Fed President William Poole. “The Fed is going to have a tricky time of unwinding what has been done” and will need to “keep in touch with members of Congress more thoroughly,” said Poole, now senior fellow with the Cato Institute in Washington.

Robertson served under Treasury Secretaries Lawrence Summers, Robert Rubin and Lloyd Bentsen. She didn’t return calls seeking comment.

Enron!!  Well at least she didn't work for Goldman Sachs.  However she worked for Summers and Rubin so...yeah, she kind of worked there too!  Oh, and if you aren't mad enough....they were considering her for a senior Treasury post but the Adminstration stopped it because she's a lobbyist.

I feel like I'm living in a banana republic.....with no bananas!!

"Do The Zombie Bank!"

How did I miss this?  From www.markfiore.com  By the way, when I was a kid, I was lucky enough to have a neighbor and friend Sy Warner who was an executive at London Records.  All my friends and I got autographed copies of the original "The Monster Mash", recorded by Bobby "Boris" Pickett and The Cryptkickers!

Fed To Announce "Term Yankee Ticket Lending Facility"!

Today the Federal Reserve, in coordination with The United States Treasury Department and Major League Baseball, are announcing a new facility to put fannies in the seats at the new Yankee Stadium.  The New York Yankees are suffering incredible embarrassment as many of their best seats go unfilled as fans balked at paying prices ranging from $2,500 to $375 for premium seating.  Fed Chairman Ben Bernanke stated

"What's bad for the New York Yankees is bad for baseball, and what's bad for baseball is bad for America.  Clearly disruptions in private consumption and liquidity, brought on by the credit crisis, have led to these seats being sold at "fire sale" prices in the secondary market at less than fifty cents on the dollar. These purchase prices are not true market based prices but rather distressed sales.  Since, just like our "Legacy Loan" and "Legacy Security" programs, the ticket prices the New York Yankees have set are the correct prices and are not being met due to a severe and extraordinary lack of liquidity.  Therefore, we are announcing the following initiatives;

1. A modest $50 million term lending facility will be set up.  This facility will lend on a non-recourse basis, 90% of the listed ticket prices.  Therefore, on a $2,500 ticket, the Fed will lend to credit-worthy investors $2,250 AND invest along side with this private capital dollar for dollar.  This way, Lord willing, if the Yankees make the playoffs, the taxpayer will share in the upside should anyone be insane enough to pay more than $2,500 for a ticket to a baseball game! It should be noted that the games the government gets will consist of a special package of weeknight only games against the Kansas City Royals, Baltimore Orioles, Cleveland Indians, Texas Rangers and Minnesota Twins.

2. The Fed will provide special George Bush and Bill Clinton masks for any bankers who wish to participate in the program and are currently utilizing TARP funds, in order to avoid public scrutiny.  After all, to be fair to the Yankees, it is for those banks that these four digit ticket prices were aimed at in the first place! 

3. The U.S. Treasury Department, through the FDIC, will contribute $10 million of capital to the new facility.  This capital will absorb losses in the highly unlikely event the Yankees continue to muddle along and play .550 ball and tickets can't be given away, let alone sold for face value.

We believe that these bold steps will help to restart the market for $2,500 tickets to a ballgame and get the New York Yankees, Major League Baseball and America back on the winning track.  God bless America!

Perfect Stupidity Storm Forming Over Financial System Today!

What a day this is going to be!  We have;

1. Day two of the greatest "he said-he said" since Larry Birkhead and Howard K. Stern staged their epic battle for fatherhood of Anna Nicole Smith's baby daughter!  Our dear friend Rita Cosby chronicled this duel in her best selling book, "Blonde Ambition".  We may ask her to take on the epic Ken Lewis- Hank Paulson- Ben Bernanke saga next!  BofA CEO Kenny Lewis claimed to New York Attorney General Andrew Cuomo that Hank Paulson (then Secretary of the Treasury) threatened his job if he didn't take Merrill Lynch back in December 2008, after Lewis got a early Christmas present from "The John Thain Gang " in the form of a surprise $15 billion loss.  Lewis claims that it was Paulson who "encouraged" him not to disclose these losses to BofA shareholders until after the deal was done.  Meanwhile, Paulson at first told A.G. Cuomo, according to Cuomo, that HE was pressured to do this by Federal Reserve Chairman Ben Bernanke.  Ben Bernanke denied this and Hank immediately recanted.  Chairman Bernanke did not give deposition to the A.G. citing "bank examiner privilege"!  This is amazing.  Firstly, any process that makes Andrew Cuomo look like the "White Knight" is pretty damn heinous!  Secondly, as a perfect lead in to item number two, why would ANYONE trust ANYTHING the government tells us while watching this sh*tastrophe??
2. Today the government will get its first indication of who wants to play ball in Timmy's legacy asset flea market!  Check this out:  Investors are actually afraid to play ball with the government because, paranoid as it sounds, they are worried the government might change the rules on them midstream!  I can't imagine where they got that idea...do you?  Get this, after allowing our financial institutions to mark to model, many institutions may not participate in the cleansing.  Who knew?  Let a guy mark a bond worth 40-00 to 90-00 and then he won't sell it at 75-00?  Crazy.  Additionally, Citigroup says they won't participate, which considering the FDIC has already wrapped $300 billion of their garbage, makes sense.  They've already been cleansed and all it cost them was some preferred stock that they got to convert to common.  Meanwhile, Morgan Stanley says they WILL participate.  They want to buy stuff!  Awesome.  A company that was given a bank charter, had all their new debt guaranteed by the FDIC and got $10 billion in TARP capital wants to sell their assets at the governments pumped up price, THEN buy another bank's assets with the government's generous financing and put option on the asset!  I just wish Timmy would take one of us aside and say, "Look dude, I know it's nuts, I'm not stupid, just corrupt."  That would make me feel a little better.
3. The "Stress Tests" start getting released to the "Gang of 19" today!  This is easy for me because Mark Gilbert at Bloomberg wrote a great piece  Stress Test Scores 'C' If Name Ends in 'itigroup'  Very funny, check it out.
4. Finally there is this also from Bloomberg Bear Stearns, AIG Dumped $74 Billion in Subprime CDOs on Fed.  Ahh yes, Maiden Lane I II & III.  This is the financial markets equivalent to "Area 51" (where we keep all the UFOs and the identitity of the guys who bought the March 30-00 puts on Bear Stearns in March 2008 when the stock was trading at 70-00).  The Fed says they are only down $9.6 billion.  Hah!  Dream on.  The Fed said they are using mathematical models to value the assets.  The guys who don't want to participate in Timmy's plan should call the Fed's model for a better bid!  The article also points out that the Fed has lent about $2 trillion to banks, taking many of the financial creatures as collateral.  I'm sure they took the proper haircut.  Whatever the case, since the Fed isn't allowed to take a loss, we do.

Strap in and don't forget to put on your "I'm With Stupid" shirts on!  

China Be-otch Slaps Europe! Classic Stuff.

Ahh, sometimes you can just report the news and the comedy is right there in the story.  This is one of those times.  Remember around this time last year when our banks were bamboozling (I think that's how you spell it) China and all the Asian sovereign wealth funds, having them get in "on the ground floor" to such fine places as Merrill?  Senators like Chuck Schumer were standing up and making speeches about how China needed to be more transparent with regard to their intentions and perhaps we should put a halt to the Middle Kingdom buying the "crown jewels" (my quote) of our financial system in the interest of national security.  At the time I remember many, including us saying out of the corner of our mouths,

"Dude, STFU! The only national security that is being jeopardized is China's by buying Stanley at $45!  Don't piss them off!"

Well, the Europeans succeeded in "stopping" China from buying into their fabulous financial jewels back then.  And now?   China's Sovereign Fund Reconsiders Policy After Europe's Humbling.

Check out this line;

"I have to thank these European officials," Mr Lou said. "They saved me a lot of money. Now they come to me without conditions and I am beginning to consider making investments in Europe again."

Beautiful!

"AIG Bonus Payments? Bailout Funds Used to Bailout U.S. and Foreign Banks???...Lets Go to WWW.FinancialStability.Gov !!

Wow!  So counterparties that received our money in the form of collateral postings, credit default swap tear ups (through the buying of the underlying securities), and return of cash from securities lending is finally out!  Also, we are dealing with the public schtupping that AIG is giving us in the form of $165 million in bonus payments, made yesterday, to employees in AIG's Financial Products Group because AIG was contractually obligated.  Anyway, upon hearing of this new transparency I rushed to www.financialstability.gov , Tim Geithner's cool, new website,  and here is what I found;

This site is coming soon.

On Tuesday, February 10th, Treasury Secretary Timothy Geithner outlined a comprehensive plan to restore stability to our financial system. In the address, Secretary Geithner discussed the Obama Administration’s strategy to strengthen our economy by getting credit flowing again to families and businesses, while imposing new measures and conditions to strengthen accountability, oversight and transparency in how taxpayer dollars are spent. And Secretary Geithner explained how the financial stability plan will be critical in supporting an effective and lasting economic recovery

Damn, still nothing there!  Where did all this transparency come from then?  It came from AIG!! Here it is AIG Counterparty Release.  How heinous is this??!!  To cover the stink of these outrageous bonus payments AIG releases the document that drops the dime on all the counterparties, the biggest being Goldman Sachs, to take our minds off the bonus payments! 

I'm not going to get into the whole counterparty thing.  We have an "AIG" category on the blog that has us explaining the types of trades Goldman was doing with AIG (negative basis trades....great writeup from Richie here from back in September 2008 Investigation Coming For Goldman and AIG? It Should. ) as well as our repeated calls for the government to reveal to the public just who was getting bailed out when we bailed out AIG.  If anything, when you check out the numbers, they still look light.  Additionally, what also needs to be addressed is who helped firms like Goldman "hedge" their AIG exposure through credit default swaps on AIG?  If I AIG was allowed to fail, would those counterparties be able to pay?  If not, who would be wearing the loss?

Other thoughts that strike me on the bonus payments.  AIG and Treasury say that they are contractually obligated to pay these bonuses, as contracts were signed prior to the September, November, December and March bailouts of AIG.  Larry Summers, resident White House economic Over-Lord, says,

"Every legal step possible to limit those bonus payments is being taken by Secretary Geithner and by the Federal Reserve System.  However, the government cannot just abrogate contracts."

Really?  The government just can't abrogate contracts?  I thought it had an entire branch of government that specializes in abrogating contracts.....Congress!!  Don't believe me?  Ask anyone who owns a bond collateralized by a residential mortgage loan!

Lastly in my morning rant. On the last page of the AIG release, you can see that $43.7 billion of our money went to pay off counterparties involved in AIG's securities lending business.  All the big names are there, Barclays, DB, Goldman, BofA, BNP Paribas, etc.  If you remember, securities lending is the business where a company like AIG, who holds lots of stocks and bonds, lends those stocks and bonds out to short-sellers, gets cash as collateral and then invests that cash in a risk free security that earns the lender (AIG) a spread.  Unfortunately, the window lickers at AIG took that cash and invested in AAA rated CDOs.  Ooooops!  I'm just curious about something.  What securities were all those big names borrowing?  Granted, the short selling of stocks is used for a variety of reasons and strategies.  However, much of those strategies are total or partial bets against a companies equity (they could be long bonds, short equities, etc) .  I wonder who all those entities were shorting, since there was such a furor last summer and fall about bear raids on our banks.  How interesting it would be to see how many of the above mentioned banks proprietary trading desks were involved in direct bets against our banks.  Just curious.

Morgan Stanley Gives S&P 500 Forecast for 2009

Morgan Stanley equity research has given their forecast for the S&P 500 for the remainder of the year:

• First, over the next few months, the S&P 500 will plunge another 25% to approximately 560
• Then the S&P 500 will rocket back up approximately by 47% and end the year at 825.

That's it.  No joke necessary.  However, this forecast does remind me of the great Al Sleet, also known as "The Hippy Dippy Weatherman".....also known as Mr. George Carlin.

AIG's "Top Secret Memo" Is Here!

The "Strictly Confidential Memo" that AIG produced at the end of February is available on-line.  Bail-Out or End of the World....You Choose! (Thank you to the Williambanzai7.blogspot for "unearthing this").

Wow!  Just a year ago AIG told us to sleep better at night because THEY were on the job.  Now?  "Save us or you will sleep.....forever!"  All that's left is for AIG to tell us that Nostradamus predicted their destruction and prophesied the only solution.  Something like this;

Century 8 – Quatrain 28

"The promises of default risk abated,
which after the fees were collected were thrown to those on the take
at the discovery that all is exhausted & dissipated by debt.
Pay the insurer or all will be wiped out"

 

www.foxnews.com  "The Strategy Room" today at 9AM (Me, not Nostradamus)

 

"Make That a Popov and Tonic!"

Yeah baby!  Any article that starts like this;

"I CAN’T say for sure whether I’ve ever tried Popov vodka, but I seem to recall pouring it into a punch bowl in college. Or maybe it was Gordon’s."

Immediately gets my attention!  Great piece in the NY Times this weekend Reaching For the Bottom Shelf.  Liquor store owners are saying that once frowned upon Vodka brands like Popov, Majorska and Georgie are FLYING off the shelves.  Bravo to that!  Personally, I thought paying $40 for a bottle of Grey Goose, or Kettle One was rediculous (that's how the kids say ridiculous).  While I drink all alcohol with the stated purpose of at least getting a little buzzed, when it comes to scotch, bourbon and gin, I drink it because good brands taste good.  Vodka?  Sorry, but I'm only drinking vodka because;

1. My sole purpose is to get hammered
2. I'm out of everything else.

The sale of "premium" vodkas was about as full of sh*t as a mezzanine CDO!  Talk about a group-think circle-jerk.  "This vodka was derived from the finest spring-water, potatoes and then distilled 14 times while Franciscan monks prayed over it."  Bullsh*t!!  The consumption of premium vodka was a social embarrassment perhaps only topped by Gatorade changing their name to "G".

Now that we are in tough times, we need more booze and we need it cheaply and a 1.75 liter bottle of Popov for $12.09 sounds good to me.  $40 for a liter of Grey Goose?  Not so much.  Speaking of getting drunk, check out what Ben Stein wrote in the article below the fold;

REIN IN A RULEImmediately end the near-universal applicability of the accounting rule formally known as FAS 157. This is the “mark to market” rule that requires banks and other finance houses to value securities at current market prices, even when they may plan to hold those securities for some time.

The rule was intended to provide greater transparency. But its deficiencies are glaring. It allows short-sellers to basically price mortgage-backed bonds and to make them trade for pennies, even if the bonds are still meeting their payments. This “mark to market” price often does not come even close to the value of future cash flows that can reasonably be expected. The “mark to market” price is just the price at which the last short-seller made his sale.

This accounting rule kills banks and insurers, kills credit generally and makes taxpayers pay off the profits of short-sellers. It’s time to stop this giant gift to those sellers.

Have another Popov and tonic Ben....it's on me you nut job!

GM Keeps the Laughs Coming!

From Bloomberg News;

March 2 (Bloomberg) -- General Motors Corp., surviving with U.S. federal loans, needs government help worldwide to get through the worst automotive market since the end of World War II, Vice Chairman Robert Lutzsaid.  The slump is forcing GM to undergo changes it has needed to make for years, such as reviewing the future of its Hummer, Saab and Saturn brands, Lutz said today in a Bloomberg television interview from Geneva. Lutz, who rejoined GM in 2001 to help revitalize its auto designs, will retire at the end of this year.

“We will go through a rough spot as will every other automobile company,” said Lutz, 77. “We will get through and come out the other end stronger and more competitive than ever before.”

I really love Bob Lutz and he will be missed.  The unintentional comedy that he has provided over the last three to four months has kept me smiling.  GM is going through a "rough spot"!  No Bob, Toyota is going through a rough spot.  GM is frantically clicking its heels together waiting for "Glinda the Good Witch of the North" to transport them back to 1956 while the evil flying monkeys are swooping in to carry GM off to bankruptcy land!

To be fair to Mr. Lutz, when I watch or read his interviews he certainly sounds like he knows what he's doing with regard to car design and forward thinking.  What I don't get is how it seems that none of his expertise flowed through to actionable results at GM.  What I mean by that is, when you listen to him talking about new age cars like "The Volt" he sounds like a visionary.  Unfortunately most of these interviews took place in 2008 when GM's goose was already cooked.  Was he stamping up on the board room table in 2002, warning that GM was putting all its eggs in one, gas guzzling basket?  Maybe.  In any event the jig is up now. 

Banzai News Reports AIG Can Build Financial Atomic Bomb!

Just in from http://williambanzai7.blogspot.com !  (This guy is scaring me.  He may be funnier than me.  I have to up my game!)

BANZAI7 NEWS WATCH--AIG CAN BUILD A FINANCIAL ATOMIC BOMB

MARCH 1, 2009

WASHINGTON — The United States now believes that American International Group has amassed enough weapons grade credit default derivatives material that with further putrification could be used to build a financial atomic bomb (FAB), a spokesman for the Pentagon/Treasury Department FWMD joint task force declared Sunday.

The statement went further than previous, official judgments of the AIG FAB threat, and it essentially confirmed a new report by the United Nations FWMD watchdog agency, which found that AIG had enough derivative materials to build a global financial doomsday device. “We think they do, quite frankly,” the representative said on “State of the Union” on CNBC. “And AIG having a financial nuclear weapon, I’ve believed for a long time, is a very, very bad outcome for the US economy and for the world.”

 

 

So You Have Two Cows.......

I leave you with this bit of comedy from one of my friends who NEVER calls or writes me anymore...but I still love him.  I will be gone tomorrow watching the mighty Rye Mariner Mites play in the New England March Madness (in February!) Hockey Shootout.  Have a great weekend.

Two Cows

SOCIALISM

You have 2 cows.

You give one to your neighbour.



COMMUNISM

You have 2 cows.

The State takes both and gives you some milk.



FASCISM

You have 2 cows.

The State takes both and sells you some milk.


BUREAUCRATISM

You have 2 cows.

The State takes both, shoots one, milks the other, and then throws the

milk away...



TRADITIONAL CAPITALISM

You have two cows.

You sell one and buy a bull.

Your herd multiplies, and the economy grows.

You sell them and retire on the income.



AN AMERICAN CORPORATION

You have two cows.

You sell one, and force the other to produce the milk of four cows.

Later, you hire a consultant to analyze why the cow has dropped dead.



GOLDMAN SACHS VENTURE CAPITALISM

You have two cows. You sell one and buy a bull.

You sell three of them to your publicly listed company, using letters of

credit opened by your brother-in-law at JPM Chase, then execute a

debt/equity swap with an associated general offer so that you get all

four cows back, with a tax exemption for five cows. The milk rights of

the six cows are transferred via an intermediary to a Cayman Island

Company secretly owned by the majority shareholder who sells the rights

to all seven cows back to your listed company.

The annual report says the company owns eight cows, with an option on

one more.

You sell one cow to buy a new president of the United States, leaving

you with nine cows. The public then buys your bull.

Do Banks Have The Ability to Remove a President if He Loses His Mind?

Section 4 of the twenty-fifth Amendment to The Constitution of The United States states;

Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.

Essentially, what this means is if the President suddenly loses his mind and starts saying things like,

"Gentlemen, in my poker game last night, President Truman told me to nuke Pakistan and his advice was seconded by President Grant.....so get me "the football" and lets get this done."

The Vice President and the rest of the cabinet can declare the President nuts and remove him from office.

Today, in Charlotte,  North Carolina CEO of Bank of America Ken Lewis made these statements;

• Countrywide and Merrill Lynch have been "stars" this year.
• Merrill "Will be a thing of beauty over the long term."
• “Everything we thought is playing out” with regard to the Merrill purchase.

If BofA has ANYTHING remotely resembling our constitution's twenty-fifth amendment they should use it immediately because CEO Lewis has lost his mind!  And here is the proof!

Hugh McColl Having a Senior Moment

I'm going to file this one under comedy.  Former Bank of America CEOs(actually former CEO's by way of NCNB, Nations Bank and finally, in McColl's case BofA)  have published a letter today, backing Ken Lewis's decision to buy Countrywide.  From Bloomberg News;

Acquiring Countrywide puts the bank “in a unique position to take advantage of one of the few bright spots in the entire industry right now: the surging market for mortgage financing that is being fed by extremely low interest rates,” Hugh McColl Jr. and Thomas Storrs said in a letter published today in the Charlotte Observer.

Good Lord!  It's not like BofA didn't already have a monster mortgage origination machine.  Buying Countrywide saddles BofA with a $ trillion mortgage servicing portfolio that, while once considered an big asset, is now a big pain in the ass because it costs more (in money and in human resources) to service the $billions of loans in various stages of delinquency or default than the fee the servicing arm gets to perform these functions.  Maybe some of this will be offset once Obama's mortgage rescue plan starts handing out $1,000 per loan modified (and $1,000 a year for three years if the new loan stays current).  Still, between the servicing and the Countrywide law suits,I think if BofA had to do it all over again they just might have passed on the trade.  Just a hunch.

Waiting on The Mighty Quinn!

Rather than bullsh*t us with fantasy budget pronouncements, or un-implementable housing solutions, half in/half out bank nationalizations and assorted other nonsense, I think a government hotline should be set up that feeds directly to this recording of Bob Dylan's "The Mighty Quinn"!  Trust me, it will make you feel a whole lot better than the current bloviating (thank you O'Reilly).   "Just tell me where it hurts and I'll tell you who to call!"

Ev'rybody's building the big ships and the boats,
Some are building monuments,
Others, jotting down notes,
Ev'rybody's in despair,
Ev'ry girl and boy
But when Quinn the Eskimo gets here,
Ev'rybody's gonna jump for joy.
Come all without, come all within,
You'll not see nothing like the mighty Quinn.

I like to do just like the rest, I like my sugar sweet,
But guarding fumes and making haste,
It ain't my cup of meat.
Ev'rybody's 'neath the trees,
Feeding pigeons on a limb
But when Quinn the Eskimo gets here,
All the pigeons gonna run to him.
Come all without, come all within,
You'll not see nothing like the mighty Quinn.

Now lamp gates ain't gonna do, I can't recite 'em all,
Just tell me where it hurts,
And I'll tell you who to call.
Nobody can get no sleep,
There's someone on ev'ryone's toes
But when Quinn the Eskimo gets here,
Ev'rybody's gonna wanna doze.
Come all without, come all within,
You'll not see nothing like the mighty Quinn

"All We Need is One More Pin Timmy!"

So the story swirling around this afternoon is that Treasury Secretary Tim Geithner will take his mulligan from his February 10th "mishap" and give us some details on the Financial Stability Plan.  After a morning of envisioning Citi and BofA getting nationalized as early as this weekend (personally I've been envisioning Citi since December) we needed some glimmer of hope to take us into the weekend.

Why do I have the feeling somebody at the White House told somebody at CNBC, "Hey...tell them Geithner will be out with something next week...that ought to calm them down and let us get back to appointing all the wrong people to all the wrong posts (read previous post for color on that wisecrack)."

So we are back to waiting on Tim.  The first thing my sick mind thinks of is one of the classic television moments of ALL TIME.  For you twenty-somethings the relatively thin man with the brown hair who sounds like John Madden.....IS John Madden!  Timmy of course is Rodney.  Enjoy.

TARP.....This is Funny!

Finally something has captured The TARP in all it's glory!  Just hit the link.

Download Bailout_in_a

McGraw-Hill Still Clueless. Won't Publish "Big-Picture" Barry's Book

This is funny.  From Bloomberg News;

Feb. 12 (Bloomberg) -- McGraw-Hill Cos. won’t be publishing a book on the financial crisis that the author says addresses the role of one of its units in the recent market turmoil.

Barry Ritholtz, chief executive officer of equity-research firm FusionIQ, said he withdrew the manuscript from the New York publisher and returned his advance after the company tried to edit passages critical of its Standard & Poor’scredit-rating division. McGraw-Hill says it wasn’t initially able to verify some of the book’s claims.

“The book made a number of assertions covering a range of public figures and public entities that needed corroboration,” McGraw-Hill spokeswoman Mary Skafidas said today in a telephone interview. “We could not come up with a unified approach with the author.”

In one section of the roughly 300-page book, “Bailout Nation: How Easy Money Corrupted Wall Street and Shook the World Economy,” Ritholtz wrote that Standard & Poor’s, Moody’s Investors Service and Fitch Ratings inflated their opinions in exchange for fees.

“It’s kind of hard to write a book about the financial crisis without mentioning the ratings agencies,” Ritholtz, 47, said in an interview.

Exactly Barry!  How the hell did McGraw Hill, owner of S&P, think they were going to publish a book about the credit crisis and get around the whole "ratings thing"??  Why did they even waste a minute of their time, as well as Ritholtz's!  Too bad they didn't go ahead with it.  Despite a few slaps on the wrist, the ratings companies, hiding behind the disclaimer they put on every bond or structure that they rate, have gotten off pretty easy.  It would have been great if McGraw Hill published the book, as is, and then triggered a law suit against S&P!  After all, if their parent McGraw Hill published a book by a respected market expert, implicating S&P in a "buy your way to a AAA" scam, perhaps a savvy lawyer could have turned it around on S&P!

These are some of the things I fantasize about. 

It's All About Packaging and Re-Packaging.

Sorry for the light posting activity today.  Richie and I met with our lovely lawyer Nicole to discuss a few things.  The main take away was that we have no idea how the body ended up in the trunk of our car and the magical mushrooms in the glove compartment must have been planted there......Just kidding!

Anyway, I got to Nicole's a little early so I sat in a conference room reading the Financial Times.  There was a great article titled "Half of All CDOs of ABS Failed".  What FT was referring to was the CDOs that we made from the refuse we couldn't sell from original CDOs.  You might know them as "CDO Squared".  Simply put, CDO squared were like a ponzi scheme except you had to pay rating agency and legal fees.  I wouldn't be surprised if the first residential CDO squared was structured and marketed from a cave in Tora Bora!  It turns out that not only have half of all the deals issued since 2002 failed, but the majority of the deals, made in the second half of 2006 and first half of 2007 have defaulted by a rate of 68% and 76% respectively!  Like we always say when we talk about the Wall Street Sausage Factory, it's all about packaging chicken sh*t and repackaging it to look like chicken salad. 

Any-whoo, I'm reading this article laughing as Richie and Nicole walk in and Nicole is drinking a bright orange drink called "G".  Richie and I both say at the same time,

"Oh, so THAT is G?.....the stuff that they have those commercials with the rap star (Big Wayne or Little Kevin...whatever) saying "What's G? It's dah game!" and EVERY sport superstar appears?  The commercials that have to cost multi millions??"

Nicole says, "Oh, I think it's just Gatorade. It came from the same machine I get my Gatorade every day."  I looked at that bottle of Gatorade, that Pepsi spent $MILLIONS changing to "G" and then I looked down at the CDO squared article and realized that this is what we are really good at....this is what we as a people do.  We just package and re-package stuff, just like a structured security desk!  We take the same old stuff, put a bright, shiny new name and bow on it and sell it as something better!

That's what I learned today.  Here's the commercial if you some how missed it.

BofA Up 19% on Bove's Strong Support For Ken Lewis. Hmmm....

From Bloomberg News;

Feb. 6 (Bloomberg) -- Bank of America Corp., the largest U.S. bank, climbed as much as 19 percent in New York trading after analyst Richard Bove called the bank a “strong buy” because of its positive cash flow and government support. Bank of America shares jumped 80 cents, or 17 percent, to $5.64 at 10:43 a.m. in New York Stock Exchange trading after yesterday touching its lowest level since 1984. Chief Executive Officer Kenneth Lewis bought 200,000 shares on Feb. 4, and four directors bought a combined 150,000 shares this week.

Bank of America on Jan. 16 accepted a $138 billion package of U.S. loan guarantees and additional capital. The U.S. last year committed $25 billion to the bank and Merrill Lynch & Co., which was acquired this year. “I have always believed Ken Lewis may be the best operating manager of any bank in the United States,” Bove said in his report. “I continue to think that this company has $5 per share in earnings power.”

Bank of America had ratings on its preferred shares lowered to non-investment grade by Fitch Ratings, which cited rising losses from credit card, home equity and commercial loans. Fitch lowered its rating to “BB” from “BBB” and the ratings could be cut further with the outlook deemed negative, analysts David Spring and Sharon Haas said today in a report. Fitch didn’t change its overall “A+” rating on Bank of America, citing its “systemic importance and the magnitude of support provided by the U.S. government.”

Pay no attention to the crazy man kids, just keep walking and stick your fingers in your ears.  Monkey Business responds;

Presented Without Comment

What Might Have Happened in The Oval Office This Morning

I think this clip could have captured President Obama's reaction to Nancy Killefer's "tax problem" this morning.  The President is Tom Cruise.....Demi Moore is........Rahm Emanuel?

"You Don't Get to Tell Me What to Do EVER Again!"

Tell me this little movie clip from "American Beauty" isn't perfect to describe the delicious irony that is going on between the farce of President Obama's nominees and his lecturing of Wall Street!  Not that we (Wall Street) don't deserve a good whipping, but who the hell is the Obama Administration to give a morality speech to ANYONE?? 

Think of Kevin Spacey as "Wall Street" and Annette Bening as "The White House".

A Little Hank Sr. For Tom and Tim.

Yes....I am obsessed with Geithner and Daschle's taxes.  I wonder if I get mad enough and break my TV the next time the story comes out can I deduct the cost of theTV from my taxes?  Why the hell not right?

Also, for you music fans out their, listen to this Hank song and then listen to Queens's "Fat Bottomed Girls" and tell me that Queen didn't write this with Hank's "I Saw the Light." playing in the backround. For some of you who know me, this is another obsession of mine.