My popularity on television and the internet has led a very small money manager to use his popular financial blog to promote his fledgling business by attacking the recent poor performance of my long-term investment strategy. The post is causing quite a stir and compels me to provide some badly needed context. [more]
US government officials seeking to revamp the financial bailout have discussed spending another $1 trillion to $2 trillion to help restore banks to health, the Wall Street Journal said, citing people familiar with the matter. [more]
Taxpayers will pay much more for the fiscal stimulus than previously revealed – over $1.17 trillion according to the Congressional Budget Office (CBO). [more]
Jan. 28 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner said the department is considering a “range of options” for its financial rescue plan, with the goal of preserving the private banking system. [more]
House Speaker Nancy Pelosi (D-Calif.) says that the idea of nationalization, or perhaps partial nationalization, of America's leading banks is gaining currency among U.S. policymakers. [more]
Despite a full year of being in detox, the U.S. banking system is still lurching around in a hospital gown. [more]
Jan. 23 (Bloomberg) -- Stocks will retreat around the world because of shrinking demand from China as growth in the third- biggest economy slows, said Nouriel Roubini, the New York University professor who predicted last year’s financial crisis. [more]
The economic situation continues to deteriorate this week as past and future bailouts were discussed on Capitol Hill. The debate was over the accountability of already disbursed TARP money, and on whether or not to release remaining funds. Banks that had already been bailed out before are looking for more money to fill the black holes that are their balance sheets, warning that they are simply too big to fail. However, whatever ‘devastating’ consequences these banks are dreaming up and pushing on Capitol Hill regarding their own collapse will be nothing compared to the collapse of our currency if we keep debasing it through these foolish bailouts. It should be that they are too big to bailout. The world will not come to an end without this or that bank. The most troubling thing to me is this rhetoric that only government can save the economy, and must act. This is so counter-productive. [more]
Some experts have argued that U.S. banks should be nationalized. [more]
Jan. 20 (Bloomberg) -- The Dow Jones Industrial Average fell 14 percent between Barack Obama’s election and Inauguration Day, the biggest decline ever. The second-biggest drop gave way to a 75 percent rally in 1933. [more]
Fully 25% of the companies that comprise the Dow Jones Industrial Average and 10% of those in the Standard & Poor’s 500 Index will announce their quarterly results next week. [more]
The Congressional Budget Office announced last week that the federal deficit for 2009 would be $1.2 trillion-as a share of the economy, the largest since World War II. Responding to that staggering sum, President-elect Barack Obama warned that without decisive action, "trillion-dollar deficits will be a reality for years to come."
How much is $1.2 trillion?
To put the deficit in perspective, we thought of a few unrealities that carry a similar price tag:
* For the sake of our children: 4.8 billion Nintendo Wiis.
* What really does the body good: 300 billion gallons of milk.
* Love thy neighbor: everything produced in Canada in one year.
* Monopolize: purchase Exxon Mobil, General Electric, Microsoft and Wal-Mart.
* IS our children learning?: fund the entire education system, Kindergarten through college, for one year.
* Second time's a charm: pay for the entire War in Iraq twice over.
* At the pump: free gasoline for all Americans for the next five years.
* At the box office: one free movie ticket for every American, every single day.
* I.O.U.'s: pay back all the money we owe to China and Japan.
* Reverse the Ponzi: compensate all of Bernard Madoff's defrauded investors with a 2000% rate of return.
A recent article in The Christian Science Monitor provides some additional spending scenarios. For example, according to CSM:
"If the sum were calculated as a traditional 30-year fixed-rate mortgage, Uncle Sam would have to write a monthly check for $6.7 billion. That would be enough to pay the mortgage on about 10 percent of the nation's homes each month."
PGPF's Manager of Research & Analysis Matthew Helm told CSM that "another way to view the $1.2 trillion deficit is in terms of citizens and households. It works out to $4,000 per citizen, or $10,000 per household." [more]
Jan. 14 (Bloomberg) -- Wells Fargo & Co., the biggest U.S. bank by stock-market value, may need to raise $10 billion and cut its dividend after the acquisition of Wachovia Corp., wrote Atlantic Equities LLP analyst Richard Staite. [more]
A few weeks ago when the Fed announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff’s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of “buy the rumor and sell the fact”. [more]
Thursday, January 08, 2009
WASHINGTON -- The U.S. recession will last two full years, with gross domestic product falling a cumulative 5%, said Nouriel Roubini, chairman of RGE Monitor. Roubini was one of the first economists to predict the recession and the credit crunch stemming from the housing bubble. For 2009, Roubini predicts GDP will fall 3.4%, with declines in every quarter of the year. The unemployment rate should peak at about 9% in early 2010, he said. Consumer prices will fall about 2% in 2009. Housing prices will probably overshoot, dropping 44% from the peak through mid-2010. "The U.S. economy cannot avoid a severe contraction that has already started and the policy response will have only a limited and delayed effect that will be felt more in 2010 than 2009," he said. [more]
I haven't seen the acclaimed documentary I.O.U.S.A., but I've heard very good things about it. A number of CAPS players have mentioned how good it was, so I wanted to share this: [more]
By Elizabeth MacDonald
Banks will have to raise new capital in 2009, as a sharp increase in credit-rating downgrades on mortgage-related securities will lead to further stresses on bank capital, according to top banking analyst Meredith Whitney at Oppenheimer Equity Research. [more]
By Elizabeth MacDonald [more]
I really don't have an opinion of this at the moment, but found it interesting: [more]