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Breaking the Buck...

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November 15, 2007 – Comments (7)

There is no question that I am a strong market bear.  The evidence that crosses my Google Reader (reader excellent product, I strongly recommend checking it out, the stock way overvalued) spits out daily evidence that hard times are coming.

Particularly shocking is governments that are losing tax payer's money in supposedly "safe" investments.  The Yukon government has $36..5 million, $1200 for every man, woman and child, tied up in a hedge fund that might give some of the money back over the next 5 to 10 years.  Pension funds have been hit.  

Incredibly shocking, money markets are now hit.  The "guarantee" that you will never lose your capital no longer applies.  General Electric's is now paying out 96c on the dollar from its cash management fund.  The buck is broken.

JC Penney's quarterly profit falls and 4th quarter forecast has been slashed. 

The high cost of oil is now "denting demand" and slowing the economy.

Carlyle, with $75.6 billion in assets has David Rubenstein saying that private equity is likely to see lower returns in the coming years. 

This one is good, a judge has thrown out foreclosure practices on these lending ba$ta rd$ who package the subprime mess into other investment vehicles and sold them to unsuspecting investors.  The bank is still managing the mortgage, however, it no longer owns the mortgage and the judge has thrown out the foreclosure claim due to not being able to show ownership.  Investors just got screwed even worse...

As I stated in an earlier blog, I predict smart money has been selling into strength...

7 Comments – Post Your Own

#1) On November 15, 2007 at 9:45 AM, dwot (61.86) wrote:

Here's even another good one, there is an accounting standard requiring fair asset valuation on corporate balance sheets, rather than inflated or deflated values, but that requirement has a one year deferral for the implementation.

Goldcorp comes to mind with that one.  When they bought out Glamis, Glamis had $2.2 billion of book value.  Goldcorp put $8.2 billion into book value on its balance sheet. 

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#2) On November 15, 2007 at 9:48 AM, dwot (61.86) wrote:

Another one, commercial real estate has reverse amortization debt at 118%.

Unbelievable, debt on commercial real estate is not be served and each day that goes by the debt load increases.   You think the subprime in housing is causing problems, just wait until this thing bursts...

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#3) On November 15, 2007 at 9:52 AM, dwot (61.86) wrote:

I think Mish's blog on the accounting standards is worth a read, http://globaleconomicanalysis.blogspot.com/2007/11/fasb-157-partial-deferral-implications.html.

Basically,  commercial paper, mortgages, derivatives, REO and physical assets have been given another year to lie about the true value of what's on their balance sheets.

Bottom fishers beware.  Bottom fishing is a stupid game in this market. 

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#4) On November 15, 2007 at 10:23 AM, Imperial1964 (97.78) wrote:

Technically, the GE fund is not a money market.  Reuters misreported it as such.

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#5) On November 15, 2007 at 10:23 AM, devoish (98.37) wrote:

I'll read Mish if you read Tanta.  from yesterday. Actually I am going to read Mish anyway. I think you will enjoy the Calculatedrisk.blogspot.com

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#6) On November 15, 2007 at 11:11 AM, iamamartin (97.85) wrote:

I'll second both Tanta and Mish. Excellent writing and analysis from both.

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#7) On November 15, 2007 at 2:36 PM, dwot (61.86) wrote:

Devoish, thanks for the Tanta link, I will read it when I get a chance.

I just saw an article on GE that all "outsiders" have taken their money out at 96c on the dollar.  That is scary... 

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