MonkeyBusinessBlog

CNBC in Davos

A very short post here.  It's short because I'm laughing too hard.  The kyron that CNBC puts up when Maria Bartiromo reports from the world economic circle-jerk in Switzerland is, "Dispatches From Davos"!!  I can't stop laughing.  It's like Maria is Edward R. Murrow reporting from the 1940 London Blitz!

My wife doesn't think this is funny.  I can't stop laughing!  Play this clip the next time we get another "Dispatch" and you be the judge!

Confidence Down? Disillusioned With Our Folks In D.C.? Disgusted With Corporate CEOs? Here's a Message From Uncle George.

John Thain: "You Got To Roll, Roll, Roll Me and Call Me The Tumbling Dice!"

I've been thinking an awful lot the last few days about John Thain.  With his ramrod straight posture, his conservative haircut and his Clark Kent demeanor I always thought of him as a conservative, no fun guy.  Clearly, looking back on things I was wrong.....very wrong. 

Thain is a wild man!  Between playing it fast and loose with the financial statements all through 2008, telling investors one thing and doing another, tattooing BofA's Kenny Lewis with the sale of Merrill, creating a kick-ass office for himself and getting the whole firm paid before BofA could say no..........Call Johnny Thain "The Breeze", "The Super-Freak"........Hell man, I'm going with my all time favorite....Call Johnny Thain "The Tumbling Dice"!  Here's to you Johnny..."The Rank Outsider Playing the Field Every Night."   My favorite version of my favorite song.

The Frog and The Scorpion

The John Thain-Ken Lewis war of words and accusations is getting uglier by the day. 

• First, Thain gets canned by Lewis as Lewis implies that Thain was less than truthful about remaining troubled asset time bombs when the deal closed in December.  BofA also implied that Thain accelerated the  payment of $4 billion of bonuses in December, before the BAC MER deal was completed, without their knowledge.  Additionally, "someone" put out the story that Thain spent $1.2 million to renovate his office.
• Now, Thain is trying to prove that BofA was fully aware of the bonus situation.  With regard to the $15 billion of losses posted from Merrill in the fourth quarter....well in the words of Don Rumsfeld, "Stuff happens."

Anyway, it's getting uglier by the minute and you have to imagine there's a good chance Kenny Lewis may not be around as BofA chief much longer.  As you may know, I like to imagine conversations that might of or should have happened.  Here's one imagined conversation between Lewis and Thain, sometime in early January.

Thain:  "Kenny, I didn't know you were up in New York today, come on in and sit down!  Oh wait, don't sit on that chair...it's an antique.  Got a great deal on it.  Only $35,000!"

Lewis:  "Thanks John.  Listen....ah...I ah..."

Thain:  "Kenny, are you ok?  You look terrible, was it a rough flight?  If your going to throw up try not to get it on the rug, it cost $87,000....Oh Kenny, not in that waste paper basket...it costs $1,400!"

Lewis: "Sorry John.  Listen...about these $15 billion additional charge offs...I've checked my notes and you pretty much assured me all your troubled assets were marked down the nuclear winter levels."

Thain:  "And they were Kenny.  Problem here is, we had about $40 billion of assets that we didn't think were "troubled".  Who knew commercial real estate was going to get so bad.  European high yield loans...like I said..who knew?"

Lewis: "Come on John, that's just bull-sh*t!  How could you have lost so much money?

Thain:  "Well Kenny, think about it this way.  You see that toilet in my bathroom?  The seat on that toilet costs thousands.  I'm a thrifty guy.  Therefore, to get maximum utility out of that toilet I make sure I use it at least six time a day.  Now think about my head of trading, Tom Montag.  I paid $89 million for him.  I'll be damned if I was going to let him just sit there in the fourth quarter and do nothing but caretake the book.  I made sure he was trading the CMBX around like it was nobody's business...and well....sh*t happens." Kenny...if your gonna puke again...you get it on this rug...you bought it!  Oh wait, actually you already did....hah hah hah....."

Lewis:  "John!  How could you do this to me?"

Thain: "Well Kenny, have you ever heard to story about the frog and the scorpion?  One day a scorpion came to the edge of a pond and wanted to get to the other side.  Next to the scorpion was a frog.  The scorpion asked the frog if the frog would ferry him across the pond.  The frog said to the scorpion, "If I let you get on my back you will sting me."  The scorpion said, "Look, you are doing me a great service.  There is no way I will kill you after you provided me such a great service."  The frog said, "Ok, hop on and lets get across the pond."  The frog ferried the scorpion across the pond.  As soon as they got to the other side the scorpion stung the frog.  As the frog lay dying he said, "Why did you sting me? I did you a great favor and you said you wouldn't sting me.  Why did you do it?"  The scorpion replied, "I don't know, I guess it's in my nature."

Lewis:  "Jesus John, what the hell are you talking about?"

Thain:  "Kenny, you came all the way up to New York to ask me why I screwed you right?  I guess it's just because it's in my nature!  I'll have my $250,000 a year driver take you back to the airport."

If John Thain Was a Roman on Bonus Day!

President Obama Escapes Injury!

Let it be Known: Monkey Business Gave John Thain the 2008 "Dope of the Year" Award Last September.

Here is a reprint from our September 2, 2008 post:

It's Official. Thain Clinches the 2008 Dope of the Year Award!

I truly believe that John Thain has some kind of deal where if he can destroy Merrill Lynch by the end of 2008 he gets a special bonus!  Today, it has been announced that Merrill has hired Mike Nierenberg to run it's "Global Mortgage and Securitized Product Business".  Mr. Nierenberg was key to building Bear Stearns securitized product business.  If this were 2005 you would probably say, "Hey, that's a nice grab by Merrill."  Unfortunately it's 2008.  In 2008 we say, "You're paying a kings ransom to hire a guy to run a business that no longer exists!  Are you out of your freaking minds??"

This really has to be a moral builder over at Merrill.  First Thain comes in and hires his buddy Tom Montag, who was currently being paid BY NO ONE, for $89 million to run global trading and sales.  Montag couldn't start his new job for three months, thus paralyzing all decision making for that little business until Tom could start working, which was last month.  Now he's hiring Nierenberg to head up a business that destroyed the firm and a good part of The Street.  What's he going to do?  How is he going to possibly justify whatever they are paying him?  Unless, like we said about Montag last month, he can cast a magic spell and make the rest of Merrill's tier III assets disappear at par, he's nothing more than a high paid thumb in the eye for everyone else working at the firm.  Someone should check on Danny Tully and David Komansky to see if they need to be revived!  Stan O'Neal must be rolling around on the floor laughing!

Anyway, I've been saving this clip for this occasion.  Think of John Thain as The Honorable William J. Le Petomane.  Think of Slim Pickens as any employee of Merrill.

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I truly believe that John Thain has some kind of deal where if he can destroy Merrill Lynch by the end of 2008 he gets a special bonus!  Today, it has been announced that Merrill has hired Mike Nierenberg to run it's "Global Mortgage and Securitized Product Business".  Mr. Nierenberg was key to building Bear Stearns securitized product business.  If this were 2005 you would probably say, "Hey, that's a nice grab by Merrill."  Unfortunately it's 2008.  In 2008 we say, "You're paying a kings ransom to hire a guy to run a business that no longer exists!  Are you out of your freaking minds??"

This really has to be a moral builder over at Merrill.  First Thain comes in and hires his buddy Tom Montag, who was currently being paid BY NO ONE, for $89 million to run global trading and sales.  Montag couldn't start his new job for three months, thus paralyzing all decision making for that little business until Tom could start working, which was last month.  Now he's hiring Nierenberg to head up a business that destroyed the firm and a good part of The Street.  What's he going to do?  How is he going to possibly justify whatever they are paying him?  Unless, like we said about Montag last month, he can cast a magic spell and make the rest of Merrill's tier III assets disappear at par, he's nothing more than a high paid thumb in the eye for everyone else working at the firm.  Someone should check on Danny Tully and David Komansky to see if they need to be revived!  Stan O'Neal must be rolling around on the floor laughing!

Anyway, I've been saving this clip for this occasion.  Think of John Thain as The Honorable William J. Le Petomane.  Think of Slim Pickens as any employee of Merrill.

Dick Parsons Provides Easiest Layup of the Day.

Financial Times headline this morning; "Parsons Calls For 'Bad Bank'.

"Hey new Mister Citigroup Chairman....you already got one!"

Sorry but that was too easy.  Seriously though, here's Mr. Parsons from FT

"I lived through the first crisis," said Mr. Parsons, who ran Dime Bank, a small lender, between 1991 and 1995.  I remember one of the keys to bottoming out of the crisis was the presence of the RTC...We need something along those lines.

I remember Mr Parsons being at Dime Savings in 1988.  Dime was a disaster and maybe by today's standards Dime was small, but back then it was pretty sizable.  To Mr. Parson's credit, the damage had been done to Dime before he arrived and he did turn it around, or at least stop the bleeding.  One thing that definitely helped was the RTC cleaning up all the real-estate-owned from failed banks in his New York area of operation.  Getting that REO moved helped Dime move or resolve their own REO. 

This time around though?  It's a problem of different assets in a different time.  The aggregator bank is going to pay too much for the assets (meaning way above where real money would pay for them) and eventually stick us with the losses and tie up too many valuable resources.  Part of the RTC's success is what I said above, it moved REO from failed institutions to strong hands, established market clearing levels, reduced the overhang of properties, and allowed banks that hadn't failed to resolve their issues.  This plan does not move assets to strong hands and inflates their "value".  All that will do is miss-price assets and allow some institutions to kick the can of loss recognition down the road. 

A Special Announcement From BofA's Ken Lewis

More Fun With New Hollywood Comedy "The International"! (This was too easy)

We've been having fun with the new Clive Owen film, "The International".  It is supposed to be the story of a geniusly evil bank who controls the world.  Considering the state of the world's "real life" global banks, it's pretty damn funny.

Anyway, I was watching the commercial for the movie just now and there's a piece where Clive Owen says, "I wish we had just one way to bring this bank down!"  Hey Clive....here's ten!!

         

       

Bob Rubin, Chuck Prince, John Mack, Fred Goodwin, Jimmy Cayne, John Mack, John Thain, Ken Lewis,

Marcel Ospel, Stan O'Neal

President Bush to President Obama: "Sit Down and Write Two Letters."

Time to have some fun with this historic day.  What do you think President Bush said to President Obama in their last private moments?  I am reminded of a story I heard about another historic transfer of power.  This one however, was the result of a coup instead of an election.  And remember, just having a bit of fun here.

On October 14, 1964, after being deposed by his rivals at a Central Committee meeting, primarily for being an "international embarassment," Nikita Khrushchev, who until only moments earlier was the First Secretary of the Communist Party of the Soviet Union, sat down in his office and wrote two letters.

Later, his successor, Leonid Brezhnev, upon taking office found the two letters and a note Khrushchev had attached:

"To my successor: When you find yourself in a hopeless situation which you cannot escape, open the first letter, and it will save you. Later, when you again find yourself in a hopeless situation from which you cannot escape, open the second letter."

And soon enough, Brezhnev found himself in a situation which he couldn't get himself out of, and in desperation he tore open the first letter. It said simply, "Blame it all on me." This Brezhnev did, blaming Khrushchev for the latest problems, and it worked like a miracle, saving him and extending his career. However, in due time Brezhnev found himself in another disaster from which he could not extricate himself. Without despairing he eagerly searched his office and found the second letter, which he tore open desperate for its words of salvation. It read thus:

"Sit down, and write two letters."

 

 

 

Royal Bank of Scotland May Write Down $41 Billion! Who Advised Sir Fred to Buy ABN Amro? Could it be...Satan??

From Bloomberg News;

Jan. 19 (Bloomberg) -- Royal Bank of Scotland Group Plc said it may post a loss of as much as 28 billion pounds ($41 billion), the biggest ever reported by a U.K. company, as the credit crisis worsens. The stock slumped as much as 46 percent. Britain’s biggest government-controlled bank may post a full-year lossbefore exceptional goodwill impairments of as much as 8 billion pounds, Edinburgh-based RBS said in a statement today. In addition, the bank may write down the value of past acquisitions by as much as 20 billion pounds.

Yes, you read that right, these writedowns do not reflect impairments to "goodwill" and other past acquisition valuations.  This comes on a day where the U.K. Government has essentially nationalized their banking industry.  I guess it makes sense.  The U.K. essentially invented modern banking, so they should blaze the way forward in the ways of losing money!  Here's a great RBS commercial from last year.  The one where two golfers, one a young man, the other a grizzled veteran, are making their approach to the green and a large tree appears to be blocking the young man's way.  The older golfer "advises" the younger one, "When I was your age I used to hit it right over that tree."  Watch the clip and imagine that the younger golfer is former RBS Chairman Sir Fred Goodwin ( I wonder if they will take the "Sir" title away after this?)  The older golfer?...well that has to be Satan!  Imagine the tree is ABN Amro, a bank that may have actually out-did Wamu in balance sheet time bombs.  RBS fought Barclays to the death, right as the credit crisis was unfolding, to buy that disaster for $19 billion!  And the green....?  Well, that's the promised land that Sir Fred never quite got to. 

Hollywood Coming Out With Blockbuster Fantasy- Comedy "The International". A Smart Global Bank!!

How deliciously funny is this?  A big blockbuster movie is coming out called "The International".  A major global bank uses its evil brilliance and brutal efficiency to do all sorts of bad things throughout the world.  HAH HAH HAH!!!  Talk about Hollywood being out of touch.  The last two years have proved, beyond the shadow of a doubt that our global banks can't walk and chew gum at the same time let alone control the world.....at least deliberately!  In fact, our global "powerhouse" banks have shown us that by sheer incompetence and stupidity they can do FAR more damage to the world, flushing $ trillions down the toilet, than they could as evil geniuses!  Thank you Hollywood, we need good laughs in these troubled times.  Here's the preview and the trailer

In The International, Interpol Agent Louis Salinger and Manhattan Assistant District Attorney Eleanor Whitman are determined to bring to justice one of the world's most powerful banks. Uncovering illegal activities including money laundering, arms trading, and the destabilization of governments, Salinger and Whitman's investigation takes them from Berlin to Milan to New York and to Istanbul. Finding themselves in a high-stakes chase across the globe, their relentless tenacity puts their own lives at risk as the bank will stop at nothing - even murder - to continue financing terror and war.

"The Heart Attack Hedge Fund"

When we start OUR hedge fund we are going to change a few things.  If you are a investor, you're going to have a good time because after all, you paid for it!  In the last year or so investors have lost lots of their hard earned money, been told they can't take out what money they have left and in the worst case (like Bernie Madoff) their money was gone the second they wrote the check!  If you are going to take a lot of risk and pay big fees, shouldn't you at least get some top-flight entertainment??Here's what we are going to do;

1. We're smart guys and we'll try our damnest to generate nice returns.  No promises of "Alpha" though.  At the end of the day, the market can kick anyone's ass.  You can be in the "Right" trade but be "Wrong" if 95% of the investing world disagrees with you and does the opposite.
2. We're going to charge you the classic 2/20 management fees. 
3. We are going to put lock up provisions in to stop mass redemptions.  Runs on the fund are bad for investment performance and worse for our fee structure.
4. Here is our main pitch.  You are going to have fun! 

• Credit Suisse is sending over Shake Shack for lunch?  They better send over a lot because as a investor you are always welcome.  We'll send out a blast at least two hours ahead of time to let you get involved. 
• The office is going to have TEN TVs NOT tuned into CNBC!  Nope, you can come into the office at anytime, pour yourself your favorite beverage and watch the horse-racing, ESPN, Cinemax, whatever.  Get a shoe shine, smoke a nice cigar and/or have a seat in the massage chair.
• Goldman wants to take us to their box at the new Yankee Stadium, make sure there's lots of room in the luxury box because you're invited too!  Anything we get, you have a chance to get too.  Same goes for golf, spa treatments, rock concerts, fly fishing...whatever.  If you have the potential to lose millions while paying us at least 2% for the privilege of doing it, at least you are going to have fun.

We are going to call this "Heart-Attack Hedge Fund".  Here is our inspiration;

Dalai Lama Blames Economic Disaster on "Lack of Spirituality" I Respectfully Disagree.

Yesterday, Tibet's spiritual leader, The Dalai Lama, blamed our our economic trainwreck on a, "Decline in culture and spirituality."  The Dalai Lama also said,, "People have become selfish and materialistic, which has led to the economic slowdown."  Dealing with the latter statement first, I'm not sure what time frame the Lama is talking about when he says we've "become" selfish and materialistic.  As far as I remember we've always been pretty selfish and materialistic.  Still, I'll cede that point to the Lama (I keep hearing Bill Murray in Caddyshack everytime I write "Lama", I hope you do too!).  Most probably he's talking about it in a relative sense.  Where I don't agree with the Lama is the lack of spirituality.  It is obvious he never sat on a structured security or exotic derivative desk.

Spirituality is the belief and faith in a transcendent reality.  Any religion that believes in a higher deity or god, accepts the fact that there are things that are beyond our grasp of knowledge.  We must have faith in things that to us, defy our earthly beliefs in what is possible.  We accept these things as truth despite the fact that we cannot see them or understand them.  This mode of thinking fits perfectly into the world of high finance no?  Talk about transcendent reality!

"How can we structure a subprime deal that produces 80% risk free, AAA bonds from a pool of mortgages made to people that can never pay them back."

"Because our model says we can."

"But what if they all default?"

"They won't.  We are diversified and even if they do, home values always increase."

"They do?  Why?"

"Because they do."

"Oh.  Well, what about all the loans in our Alt-A deal?  The borrowers have no documentation and credit scores, like FICO can easily be gamed.  How do we know that the weighted average FICO score is > 680."

"Because we have faith.  Blessed are those who have not checked documentation and yet still believe."

"Ok, what about the exotic derivative desk?  I see here you just did a big deal that pays the buyer 15% if the S&P 500 is greater than 1,400, the Ten-year Treasury note is less than 5% and USD/Yen is greater than 80......TEN YEARS FROM NOW!  You say it's worth $100, you sold it for $110 and booked a $10 gain.  How do you know that what you sold is worth only $100?"

"Because our model tells us it is.  Actually the model says its only worth $95 but we are being conservative.

"How can you possibly figure out the value on all those parameters and their correlations to one another, TEN YEARS FROM NOW?"

"Because the model tells us it is so and therefore it is.

Don't tell me we don't have spirituality!

Perfect

Just watching this clip puts me in a good mood.....and makes me think, "It's 5pm somewhere!"

What Do You Call it When One Bailed Out Company Cherry Picks Another Bailed Out Company?

Ah, the delicious irony!  I wonder how we, as taxpayers are supposed to feel about Morgan Stanley buying Citi's highly valuable Smith Barney brokerage unit?  On one hand we have Morgan Stanley, a bank that without Uncle Hank, would be gone by now.  Anyone who tells you that we didn't bailout Morgan Stanley doesn't know what they are talking about.  Between the crappy assets on the balance sheet, the zero chance they would be able to refinance over $20 billion of debt in 2009 without Treasury's stamp of approval, and their liquidity problems they were mort, dead.  So we gave them $10 billion in cheap capital, gave them a bank charter and there bye guaranteed their future debt issuance, and took care of their liquidity problem.  

On the other hand we have Citi.  So far we have given them $45 billion in cheap capital, guaranteed all their newly issued debt, taken the loss position on about $277 billion ($306 billion of assets where Citi takes the first loss on $29 billion) of "troubled assets" and given them access to all the great new liquidity facilities launched from by the Fed.  Word is that Citi has another whopping loss coming for the fourth-quarter of 2008 (hearing $10 billion operating loss), so we have that going for us.

Now Morgan Stanley, one of our companies, is spending money we have given them to buy the crown jewel of another one of our companies, Citigroup.  Do you think Treasury was even consulted?  Is the plan to let Citigroup degrade down to $306 billion of garbage assets, a few hundred billion off-balance sheet nightmares and no other engines to make money, while letting Morgan Stanley become a brokerage powerhouse and lay off a few thousand more finance sector employees... all on our dime?  From our perspective, isn't this like robbing Peter to pay Paul except Peter (Citi) owes us something like $100 billion while Paul (Morgan Stanley) owes us $10 billion?  I'm confused.

Hold on! Disregard My Previous Post. Here's How We Solve "The Output Gap!"

Here's the man we need in charge to solve our economy's "Output Gap".  By the way, what the hell happened to Sunday morning "Abbott & Costello"?  What happened to this country!

I Was Out Visiting My Old Wall Street Firm Today. Here's a Video of My Visit!

Presented Without Comment (Just a Video!) UBS David Bianco Sees S&P 500 1,300 For 2009.

From Bloomberg News;

The combination of government stimulus and oil’s 69 percent drop from its July record of $147.27 a barrel may pop the “bubble of pessimism” toward stocks, according to David Bianco of UBS, Wall Street’s biggest bull. “The consensus outlook for 2009 is a full year of gloom,” Bianco, 33, wrote in his annual market outlook last month. “We believe 2009 will bring signs of a dawn in confidence with the first faint light appearing earlier than most investors expect.”

The S&P 500 began recovering an average five months before recessions ended in 1975, 1982, and 1991, data compiled by Bloomberg show.

‘Greatest Roars’

Bianco predicted 12 months ago that the S&P 500 would climb 16 percent in 2008, and stayed bullish after the subprime mortgage meltdown spurred the collapse of Bear Stearns Cos., then the fifth-largest U.S. securities firm, in March. He said in a July interview with Bloomberg News that the rebound in stocks during the second half of 2008 would be the “one of the greatest roars we’ve seen.”

UBS’s New York-based equity strategist now expects the S&P 500 to reach 1,300 this year as share prices cheap relative to earnings become irresistible. Last year’s slump left S&P 500 companies valued at an average 12.9 times operating profit, near the lowest since at least 1998, monthly data compiled by Bloomberg show.

From "Market Timing" to Monkeys, There's a Sucker Born Every Minute!

Lets start 2009 with a light, comical risk management lesson.  From our friend "Fletch". 

 

Once a upon a time a man appeared in a village and announced that he would buy monkeys from the villagers for $10 each.  The villagers, seeing that there were plenty of monkeys around, went out into the forest and began to catch them.  The man bought thousands of monkeys for $10 each until the supply of monkeys began to diminish and the villagers stopped looking.

 

The man then announced that he would buy monkeys for $20 each, and the villagers began to hunt monkeys again.  Soon they had captured more monkeys to sell to the man for $20 a piece.  Before long the supply of monkeys became so scarce that is was nearly impossible to find a monkey, let alone catch one.

 

The man then announced that he would pay $50 for each monkey captured.  The man however, told the villagers that he needed to go out of town on business.  The villagers were told to deal with the man's assistant while he was gone.

 

The villagers complained to the man's assistant that the man already owned all the monkeys in the forest and finding new ones was impossible.  The assistant said to the people,

 

"Listen, while the man is away, I will sell you all the monkeys you can take for $35 a piece.  Then, when the man returns you can sell the monkeys back to him for $50."

 

The villagers rejoiced as they took all the money they had already received from the man plus all their savings and bought every monkey the assistant had for $35 a piece.  The next day the assistant snuck out of town and the man and his assistant were never seen or heard from again!

Getting Ready For "The Football"! First A Message From Plaxico Burress.

This just came into us from one of our friends.  John McCain had "Joe the Plumber", we have "Bruce the Roofer".  Straight out of Pittsburgh, just like Plaxico, Bruce the Roofer is having a little fun with us Giant fans.  We can take it.  I haven't spoken to Big D, but I'm feeling REAL good about the Giants right now, even without Plaxico.  What does any of this have to do with business?  Nothing, which sometimes is a good thing.  Enjoy.

Bailing Out GM. It's as Easy as 1-2-3 ... Umm, 4-5-6-7-8-..........

JPM Chase analysts are predicting that main GM supplier Delphi will also get some sort of federal bailout package to keep it viable and hence GM viable.  Funny, but I thought we were bailing out GM so they wouldn't take down the entire supplier chain and cost the U.S. millions of jobs?  Now it appears that the suppliers need a direct bailout too.  Here is the Bloomberg story GM May Get Delphi Rescue in Bailout

This is one ingenious and evil scam and you had to know it was coming.  Once we got into GM for the initial $13.4 billion it was like inviting Count Dracula in through the front door.  GM has our money now, and a lot like AIG, they are now calling the shots and Uncle Sam is getting led around by the nose.  First GM gets a multi-billion loan.  Then they say, "For us to succeed and pay you back you really have to keep our financing arm GMAC afloat."  So last week we grant GMAC, who is essentially insolvent, a federal bank charter.  This of course will give GMAC access to unlimited short-term liquidity from the Fed.  Then yesterday we cough up $5 billion to GMAC in return for preferred stock, essentially to get them over the little capital hurdle necessary to qualify for a federal banking charter.  Additionally, because GMAC needs more capital through a rights issue (giving existing shareholders, who right now are bondholders who are swapping bonds for equity.  There's a whole story there for another time) GM has asked for and received an additional $1 billion loan from Treasury so they can participate in GMAC's rights issue.  After all, it would be embarrassing if GM couldn't buy stock in its own subsidiary!

Now we come to Delphi.  Here's a piece of the Bloomberg article (whole article is up top in blue);

Domino Effect

“There’s a pretty good chance that some sort of resolution for Delphi is included,” said Kirk Ludtke, an analyst at CRT Capital Group Inc. in Stamford, Connecticut. “To stabilize GM and give it an improved chance to attract private capital, you need to resolve Delphi.” Delphi initially had a $3.4 billion commitment from Cerberus Capital Management LP in December 2006 to help it out of bankruptcy. Cerberus backed out in April 2007, and Delphi received a new offer in July 2007, valued at $2.55 billion, from Appaloosa Management LP. That offer was withdrawn in April 2008.  Delphi is working on alterations to its current bankruptcy reorganization plan that will cut the amount recovered by creditors. The new plan also will account for GM’s assumption of its unfunded pension liability, which reduced Delphi’s exit- financing requirements.  On Dec. 1, Delphi won an agreement that allows it to continue using its $4.35 billion bankruptcy operating loan, which expires tomorrow. Delphi potentially can continue to use the proceeds from the loan until June.

Welcome to freakshow central!  I'm going to go out now, drive down the block into town and tell Vigna Brothers Auto Shop to start the paper work for their Treasury money!

In These Dark Times There is Hope: "The Slap-Chop"!

Last night, as I was watching the movie classic "Rocky" this infomercial came on.  This proves to me that American "know-how" is alive and well.  We will overcome with "The Slap-Chop"!  And by the way, the "pitch-guy" could probably bring peace to the Middle East if he got all the players in a room.

Treasury to Buy Stake in GMAC

From Bloomberg News;

Dec. 29 (Bloomberg) -- The U.S. Treasury said it will purchase a $5 billion stake in GMAC LLC, the financing arm of General Motors Corp. Treasury will also lend an additional $1 billion to GM so the automaker can participate in a rights offering at GMAC to support the lender’s reorganization as a bank holding company, the Treasury announced today. The loan is in addition to $13.4 billion the Treasury agreed earlier this month to lend to GM and Chrysler LLC.  The credit is under the Treasury’s Troubled Asset Relief Program and comes after the Federal Reserve last week approved GMAC’s application to become a bank holding company.

Becoming a bank makes GMAC eligible for federal aid and eases the threat of a collapse, which threatened to dry up credit for purchases of GM cars. Dealers depend on GMAC to finance about three-quarters of their inventory. Analysts have said the lender’s survival is a crucial step toward saving GM, which has said it may run out of cash.

This is really becoming comical in a sad, pathetic sort of way.  GMAC is allowed to become a bank despite having "a little trouble" coming up with enough capital to qualify for a bank charter.  No worries, Uncle Sam will help that along by putting $5 billion of capital into GMAC.  Presto!  GMAC is also going to embark on a rights offering to raise capital.  To help that along we are going to lend General Motors $1 billion so GM can participate in GMAC's rights offering!

Lets summarize what we, the taxpayer, are doing for GM;

1. To get GM through the next couple of months we lend them $13.4 billion.  GM has to come up with a plan to become a "viable company", the unions have to make wage concessions and Rick Wagoner can't fly the corporate jet anymore.  Otherwise, we're going to make them file Chapter 11??  Riiiiiight!  Good luck with that.
2. Since GMAC finances seventy-five percent of GM dealers inventory, we allowed them to become a bank so they can attach themselves to the many fine free-money lending facilities set up by the Fed.  We will take a $5 billion stake in GMAC to give them enough capital to avoid making the granting of a federal bank charter too much of a farce. 
3. Additionally, we are lending GM $1 billion so GM can buy a stake in GMAC.  Let me repeat, we are lending GM $1 billion so they can "buy" a stake in GMAC. 
4. As a quick aside, do you know why GMAC would have been dead a long time ago if not for all this aid as well as about eighteen months of debt swapping, renegotiating, pleading  and other assorted financial drama?  They blew themselves a second, third and fourth A-hole in the subprime and Alt-A residential mortgage market.  Additionally, they blew themselves a fifth one in the commercial real estate mortgage market.  Getting mad yet?
5. Therefore, we lend GM $14.4 billion and inject their financing arm, GMAC, with $5 billion of capital and an open ended short-term Fed credit line, so GM can build cars to sell to their dealers on credit, so dealers can sell the cars to consumers to get the money to pay back GMAC, so GM can pay us back.

I hope someone at Treasury is keeping all this on a spreadsheet!

It's A Credit Crunch Christmas!

This is good.  Sad, but good!

How My Fund of Funds Manager Destroyed My Investing Pleasure.

Here's a great little tale.  The actual title is "How She Destroyed My Fishing Pleasure".  However, I think we can apply it to a lot of "Fund of Funds" managers after the "Madoff Fiasco".

Saturday morning I got up early, dressed quietly, made
my lunch, grabbed the dog, slipped quietly into the garage to hook the
boat up to the truck, and proceeded to back out into a torrential down
pour.  The wind was blowing 50 mph. I pulled back into the
garage, turned on the radio, and discovered that the weather would be
bad throughout the day. I went back into the house, quietly undressed, and
slipped back into bed. There I cuddled up to my wife's back, now with a
different anticipation, and whispered, 'The weather out there is
terrible. My loving wife of 20 yrs replied, 'Can you believe my
stupid husband is out fishing in that sh*t.

I still don't know to this day if she was joking, but I
have stopped fishing.

Some More Fun

Industrial production is falling off a cliff, the dollar is getting smacked (who are the Europeans kidding, they are going to have to cut rates too...buy USD sell Euro pronto), every fifteen minutes another poor soul is coming forward to announce that Bernie Madoff stole their money, and for Christsake, we've got people throwing shoes at the President of the United States!  For that last one Monkey Business has to say, "Hey Khalil, if you don't respect the man at least respect the office!"

Anyway, this has nothing to do with business and it's funny.

http://gizmodo.com/5101296/santa-claus-gmail-account-exposed

Hard Times 2008: Paris Nude Art Models Strike For Better Pay

Well, we certainly need some light-hearted stories to keep us from the abyss and here is one.  In Paris France, nude models, ages ranging from twenty-seven to sixty-one have staged a strike......outdoors in the nude!  Here is the full story from Bloomberg News Paris Art Models Strike In The Nude.  Here's what one of the exposed strikers had to say;

“We are a symbol of France,” said Jerome Cuveliere, a 35- year-old model, and one of the four males protesting today. “With the economy the way it is, everyone is increasingly exposed as we face 2009.” He shivered as he alternated between his birthday suit and a sheepskin coat.

I can see something like this happening in a lot of places, but I really think France is the one place on earth where the strikers will probably get what they want! 

Who Else Needs a Shoe Thrown At Them?

Have you seen the clip yet of the Iraqi reporter throwing his shoes at President Bush?

A number of things struck me here.  Firstly, did you see how Bush stood tall in the pocket there?  I think he made Tony Romo look like a school girl.  In fact, the President popped his head up after expertly dodging the first shoe and practically dared him to throw another one.....which he did!  Additionally, I don't know if they play baseball or cricket over in Iraq, but the shoe thrower had some real zip on those throws no?

With all that has gone on, I'd like to hear some suggestions for who else needs to have a few shoes thrown at them (and it can't be me).  Suggestions are wanted and welcome.