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February 2009

Recs

9

Calling BS on the Balance Sheet...

February 12, 2009 – Comments (1) | RELATED TICKERS: FNMA , WFC , M

Everyone has seen how cute accounting tricks can make balance sheets look much better than they are - the prime example would be Fannie and Freddie - remember the CEO's and the regulators kept claiming how their "core" capital rations had never been stronger?  Well, it became quickly apparent that if you removed the deferred tax assets, "temporary" impairments, and inflated fair-market values of securities, they actually had negative book values.  Not only that, but we find that the $200 Billion that Treasury/FDIC have promised them will probably not be enough.  Now, you may be wondering, as I am, how the CEO's, auditors, and regulators haven't been paraded in front of Congress as the bank CEO's have been over the last few days, or for that matter why none of these geniuses are being investigated/jailed...well, that's a question for another day.  For now, let's see how some other companies are prettying up their Tier 1, capital ratios, and book values:  [more]

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12

Watch as CNBC Ruins Yet Another Great Interview Opportunity...

February 11, 2009 – Comments (1)

I Found myself tuned into CNBC today - now every time this happens I end up yelling at the screen, turning off the volume, or changing the channel after about 30 seconds - but I was pleasantly surprised when I heard they were going to have "Dr Doom" Nouriel Roubini and "Black Swan" Nassim Taleb on at the same time.  Wow, great - two guys who have offered truthful and unbiased analysis of the financial crisis and been consistently right.  But of course, the blowhards at CNBC had to ruin it with simplistic/stupid questions, yelling/interrupting, and the never-ending "has the market bottomed" routine.  I was amazed these guys were able to keep a straight face...  [more]

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9

Surely, You Can't Be SIRIous...

February 10, 2009 – Comments (5) | RELATED TICKERS: SIRI

Well, it looks like Sirius/XM has finally succumbed to the weight of its hefty debt load and is preparing a bankruptcy filing - it shouldn't come as too much as a surprise as the common was hanging around the dime level for the last several months.  I guess that's what happens to a company that loads itself with gobs of debt, overpays for talent, pays executives huge amounts of money for under-performance, and prints shares at a rate that would make the Fed blush.  It's really a shame, because the product really shook up the industry and presented consumers with a whole new level of choice, but hopefully someone will figure out how to make the business model work.  Shareholders won't be none to happy to learn that there was a bid on the table late last year that would have enabled them to avoid bankruptcy, but now it looks like the common will be wiped out and EchoStar or Dish Network will swallow it up as they hold a large amount of the debt coming due in a few weeks...  [more]

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7

Geithner Gets Some Laughs...

February 10, 2009 – Comments (5)

I would have loved to be a fly on the wall in the meeting when Geithner and the administration laid out it's plan and it was met with a chorus of laughs - I'm guessing everyone gets the joke now:  [more]

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7

Conservative Insurance Companies a Thing of the Past?

February 09, 2009 – Comments (2) | RELATED TICKERS: PFG , LNC , PRU

Life insurance companies are supposed to be the least risky of all insurers, as they don't have to worry about catastrophic or "black swan" events.  Historically, they were very conservatively managed and the stocks were considered safe, if boring dividend plays.  Barring a nuclear explosion or plague that were to wipe out millions of people at once, there was no one event that could hit the bottom line of these companies unlike a property insurer.  On the other hand, property/casualty insurers were supposed to be risky in that a catastrophic event could have a devastating effect on their capital resources.  However, the asset side of the equation was never supposed to become the problem that everyone would focus on.  Somewhere along the line, they started drinking the Kool Aid and executives started getting more of their compensation based on the performance of their stock price.  Companies en masse started converting from cooperatives owned by the policy holders to public companies, and they essentialy became large investment funds delving into more esoteric asset classes.  [more]

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7

And You Thought You're Fund Was Underperforming...

February 09, 2009 – Comments (1) | RELATED TICKERS: TGT

There have been some really bad investments by really smart people over the past year, but Bill Ackman's large bet on Target might just take the cake.  Ackman, who became famous by taking a big short bet on MBIA as far back as 2002 and making his case public that they were essentially insolvent by writing to anyone who would listen, started a $2 Billion fund to invest entirely in Target Corp last year.  And not just the common, but rather using options to leverage up his bet.  Well, life to date this investment is now down around 90%, or 4 times worse than the performance of Target's stock...with a loss of over 40% in January alone.  Just the other day, he was still exuding confidence as he said he was going to pump another $25m of his own money into the fund:  [more]

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7

A Bank Rescue Alternative...

February 07, 2009 – Comments (0)

I always make sure to check out the Op-Ed section of the Wall Street Journal - it's usually good for a laugh, sometimes it makes you cringe, but mostly to see what the ultra-conservative point of view is - to balance out say that of the NY Times - and sometimes you get rewarded with a gem.  There is no shortage of "look at me" alternatives on how to begin clearing the backlog of toxic assets, but this is probably the best outline of a plan I have seen (excerpt below):  [more]

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18

We're Turning Japanese I Really Think So...

February 03, 2009 – Comments (1)

For all of the talk about how the US has recognized the problem with the financial system and moved swiftly to avoid the fate of Japan and their "lost decade", is there any doubt that we are moving dangerously down the same road?  No matter how you characterize the response of government up until this point, and examine all of the possible plans currently being considered to repair the financial system, everyone agrees there are going to be at least several hundred billion, possibly trillions more in future losses to come.  Someone will have to take all of that pain, whether it's the financial institutions, taxpayers, or a combination of both - moving those losses into the future, either by suspending mark-to-market or refusing to face reality, will not change that fact.  The real problem is the majority of the asset holders, talking heads, and government officials still believe a lot of these assets are worth close to par, and eventually there will be huge write-ups:  [more]

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14

3 Strikes and You're Out...

February 03, 2009 – Comments (6)

Do any of these guys pay their taxes?  The party of ethical reform has just announced that another Democratic nominee failed to pay taxes.  Nancy Killefer, who was slated to become the nation's first "performance czar", will withdraw her nomination for failing to pay taxes on household help.  Apparently just like Geithner and Daschle she was thoroughly vetted and the issue was known to the administration but they didn't think it was a big issue...  [more]

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