This is an impressive move on the part of Disney. Back when monopolies and oligopolies used to be illegal, this may have thrown up a few red flags.
Their standard oil like vertical integration of entertainment is truly forming a death grip on the industry. The control of television (abc, espn, disney channel, abc family), film (disney, pixar, miramax), music and destination entertainment is truly unparalleled.
Mickey Mouse and Hannah Montana will be joined by Spiderman and Wolverine at Disney World.
Disney To Buy Marvel for $4 Billion
By Paul Thomasch
NEW YORK (Reuters) - Walt Disney Co said on Monday it plans to buy Marvel Entertainment Inc for $4 billion in a deal that would add characters like Iron Man, Spider-Man and the Fantastic Four to its entertainment empire.
Disney is striking the biggest media deal of the year so far -- one that will unite the Incredible Hulk and Mickey Mouse -- at a time when the media business is struggling to cope with spending cutbacks by both consumers and advertisers.
Marvel has a stable of wildly popular characters that it has brought to the big screen in home-run films like "Iron Man."
A sequel, "Iron Man 2" is due to hit the theaters next year, while "Thor," "Spider-Man 4" and the first "Avengers" movie are slated for a 2011 release.
For Disney, movies like those should help address a key area of concern among investors: How it can better reach more young males.
"This helps give Disney more important exposure to the young male demographic that they have sort of lost some ground with in recent years," said David Joyce, an analyst with Miller Tabak & Co.
Disney Chief Financial Officer Tom Staggs told Reuters on Monday, "(Marvel's) audience is surprisingly broad. It transcends gender and age and has real potential worldwide. They skew a little more toward boys than many of our properties."
Indeed, Disney has long been a blockbuster brand with girls thanks to characters like "Hannah Montana," "Cinderella" and "Snow White," but has struggled to achieve the same kind of success with boys.
To do so, Disney agreed to pay $50 per share in cash and stock for Marvel, a premium of 29 percent to Marvel's closing stock price of $38.65 on Friday. The deal has been approved by the boards of both companies.
Marvel shareholders would receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own.
Marvel's shares shot up to $48.75 in early trade.
Disney approached Marvel a few months ago "to get to know them," Staggs said. The overture began with a meeting between Disney Chief Executive Robert Iger and Marvel CEO Ike Perlmutter and evolved into merger discussions over a series of meetings, Staggs said.
"We at Disney had admired them because of their position and asset base," Staggs said. "With conversations over time we came to believe in the value of a combination."
Shares of Disney, which will acquire ownership more than 5,000 Marvel characters, dropped about 2.3 percent in early trade. The deal is expected to close by year-end, and is expected to add to Disney earnings in two years.
Monday, August 31, 2009
Thursday, August 27, 2009
Davidowitz: "We're in a Death Spiral"
The end of the line for many of the American retailers is January of 2010. Many of them are hanging on by a thread or in a free fall hoping that a strong Christmas season can boost sales.
This simply will not happen. Discount retailers will continue to flourish, however, will prove vulnerable in an environment where prices accelerate quickly. Stores like Wal-Mart are heavily dependent on cheap gas to get their merchandise into their distribution centers and then on to the stores. Fringe markets will become less viable and there will be potential for locally owned stores to exist once again.
Let's take a look at a successful, regional shopping center in Chicago - Fox Valley Mall owned by international REIT Westfield out of Australia.
Off the bat the anchors Macy's, Sears and JC Penney are all vulnerable.
You lose ONE of the anchors and you may lose your premier apparel tenants which draw consumers regionally including Abercrombie, Forever 21, Victoria's Secret, Banana Republic, Gap, etc. and keep other stores there.
Even without an anchor loss, you are looking at troubled tenancies including...
Bakers, Build a Bear, Claire's, Deb, dELIA'S, Disney, Eddie Bauer, Express, FYE, Helzberg, Hot Topic, JB Robinson, Journeys, Justice, New York & Company, Pacific Sunwear, Radio Shack, Spencer's, Sunglass Hut, Waldenbooks and Zales.
This is of course an example of one of the most stable markets (Chicagoland) and submarkets (Naperville/Aurora) in the country. What does it look like in Detroit? Baghdad after another Bill Clinton scandal...
"In the Tank Forever": U.S., Retailers in a "Death Spiral," Davidowitz Says
Posted Aug 27, 2009 07:30am EDT by Peter Gorenstein
Related: dltr, fdo, spy, kss, xrt, WMT, CVS
Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.
Rather than summarize, let me just highlight some of his best one-liners:
On retail:
* "The retail business is terrible... It's almost all negative."
* "We're going to close hundreds of thousands of stores."
On the consumer:
* "They’re still over leveraged, they're losing jobs, their credit has been cut back."
On America:
* "We are in the tank forever. As a country we are out of control, we're in a death spiral."
On the stock market:
* "We're in terrible shape. That's what the fundamentals tell me. I can't explain the stock market."
But it's not all gloom and doom, believe it or not. Davidowitz, who runs a retail consulting firm Davidowitz and Associates, thinks certain discount retailers, grocers, drug store chains and a select few department stores can survive and prosper in the future.
Most notably he likes the "extreme discounters" like Family Dollar, Dollar Tree (which was up almost 5% Tuesday after the company raised its outlook) and 99 Cents Only Stores. And, in the department store sector, he says, Kohl's will "be the only winner" because of their cost controls. (Davidowitz has no positions in stocks mentioned.)
Grant Thornton: 10,000 Retail Stores Could Close by Year’s End
Triangle Business Journal - by Kelly Johnson Sacramento Business Journal
As many as 10,000 stores are expected to close by the end of this year, according to a retail report by Grant Thornton LLP.
Retail distress advisers at the company’s Corporate Advisory and Restructuring Services division in New York focused in the report on what retailers can do to improve their chances of survival, specifically through financial management and process improvement.
Retailers faced their biggest declines at the end of last year, Marti Kopacz, Grant Thornton’s CARS national managing principal, said in a Tuesday release. More than halfway through 2009, consumers still aren’t in the mood to open up their wallets.
“Falling sales hit all regions of the country and nearly all retail sectors, challenging stores and pushing many to the brink of failure,” Kopacz said. “Either retailers are contemplating bankruptcy, have already declared it or are announcing significant reductions.”
Scott Davis, a CARS principal, said companies need to capitalize on retail trends and focus on financial management.
“Although there’s high risk in the retail industry, now is the time for companies to fine-tune their business and take advantage of new opportunities,” Davis said. “The winners will be the disciplined companies investing the time, effort and resources to re-examine their strategies and position themselves for growth.”
The CARS group’s tips include:
• Balance and integrate the use of bricks-and-mortar stores with online sales.
• Consider private-label products, which are gaining ground over name brands.
• Invest in environmentally friendly, or “green,” practices, and determine which green products to offer.
• Improve customer loyalty through incentives, such as discounts, guarantees and generous return policies.
• Focus on lean operations and reducing waste.
This simply will not happen. Discount retailers will continue to flourish, however, will prove vulnerable in an environment where prices accelerate quickly. Stores like Wal-Mart are heavily dependent on cheap gas to get their merchandise into their distribution centers and then on to the stores. Fringe markets will become less viable and there will be potential for locally owned stores to exist once again.
Let's take a look at a successful, regional shopping center in Chicago - Fox Valley Mall owned by international REIT Westfield out of Australia.
Off the bat the anchors Macy's, Sears and JC Penney are all vulnerable.
You lose ONE of the anchors and you may lose your premier apparel tenants which draw consumers regionally including Abercrombie, Forever 21, Victoria's Secret, Banana Republic, Gap, etc. and keep other stores there.
Even without an anchor loss, you are looking at troubled tenancies including...
Bakers, Build a Bear, Claire's, Deb, dELIA'S, Disney, Eddie Bauer, Express, FYE, Helzberg, Hot Topic, JB Robinson, Journeys, Justice, New York & Company, Pacific Sunwear, Radio Shack, Spencer's, Sunglass Hut, Waldenbooks and Zales.
This is of course an example of one of the most stable markets (Chicagoland) and submarkets (Naperville/Aurora) in the country. What does it look like in Detroit? Baghdad after another Bill Clinton scandal...
"In the Tank Forever": U.S., Retailers in a "Death Spiral," Davidowitz Says
Posted Aug 27, 2009 07:30am EDT by Peter Gorenstein
Related: dltr, fdo, spy, kss, xrt, WMT, CVS
Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.
Rather than summarize, let me just highlight some of his best one-liners:
On retail:
* "The retail business is terrible... It's almost all negative."
* "We're going to close hundreds of thousands of stores."
On the consumer:
* "They’re still over leveraged, they're losing jobs, their credit has been cut back."
On America:
* "We are in the tank forever. As a country we are out of control, we're in a death spiral."
On the stock market:
* "We're in terrible shape. That's what the fundamentals tell me. I can't explain the stock market."
But it's not all gloom and doom, believe it or not. Davidowitz, who runs a retail consulting firm Davidowitz and Associates, thinks certain discount retailers, grocers, drug store chains and a select few department stores can survive and prosper in the future.
Most notably he likes the "extreme discounters" like Family Dollar, Dollar Tree (which was up almost 5% Tuesday after the company raised its outlook) and 99 Cents Only Stores. And, in the department store sector, he says, Kohl's will "be the only winner" because of their cost controls. (Davidowitz has no positions in stocks mentioned.)
Grant Thornton: 10,000 Retail Stores Could Close by Year’s End
Triangle Business Journal - by Kelly Johnson Sacramento Business Journal
As many as 10,000 stores are expected to close by the end of this year, according to a retail report by Grant Thornton LLP.
Retail distress advisers at the company’s Corporate Advisory and Restructuring Services division in New York focused in the report on what retailers can do to improve their chances of survival, specifically through financial management and process improvement.
Retailers faced their biggest declines at the end of last year, Marti Kopacz, Grant Thornton’s CARS national managing principal, said in a Tuesday release. More than halfway through 2009, consumers still aren’t in the mood to open up their wallets.
“Falling sales hit all regions of the country and nearly all retail sectors, challenging stores and pushing many to the brink of failure,” Kopacz said. “Either retailers are contemplating bankruptcy, have already declared it or are announcing significant reductions.”
Scott Davis, a CARS principal, said companies need to capitalize on retail trends and focus on financial management.
“Although there’s high risk in the retail industry, now is the time for companies to fine-tune their business and take advantage of new opportunities,” Davis said. “The winners will be the disciplined companies investing the time, effort and resources to re-examine their strategies and position themselves for growth.”
The CARS group’s tips include:
• Balance and integrate the use of bricks-and-mortar stores with online sales.
• Consider private-label products, which are gaining ground over name brands.
• Invest in environmentally friendly, or “green,” practices, and determine which green products to offer.
• Improve customer loyalty through incentives, such as discounts, guarantees and generous return policies.
• Focus on lean operations and reducing waste.
Tuesday, August 25, 2009
Transparency Forced on Fed
Beware the potential for "punishment" through manipulation to teach curious minds a lesson.
Federal Reserve Loses Suit Demanding Transparency
Mon Aug 24, 2009 8:39pm EDT
NEW YORK (Reuters) - A federal judge on Monday ruled against an effort by the U.S. Federal Reserve to block disclosure of companies that participated in and securities covered by a series of emergency funding programs as the global credit crisis began to intensify.
In a 47-page opinion, Chief District Judge Loretta Preska of the federal court in Manhattan said the central bank failed to show that disclosure would cause borrowers in the Federal Reserve System to suffer "imminent competitive harm," by stigmatizing them for using Fed lending programs.
"The board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed," she wrote. "Conjecture, without evidence of imminent harm, simply fails to meet the board's burden."
Monday's ruling comes as lawmakers and investors demand greater disclosure in how the government manages a series of programs designed to lift the economy out of its deepest recession in decades.
The case arose when two Bloomberg News reporters submitted requests under the federal Freedom of Information Act (FOIA) about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan Chase & Co (JPM.N).
After the Fed resisted the request, Bloomberg sued to compel disclosure.
Preska concluded the Fed "improperly withheld agency records in response to a FOIA request by conducting an inadequate search," she wrote.
FOIA obliges federal agencies to make government documents available to the public, subject to various exemptions.
Bloomberg News and the Fed did not immediately return requests for comment.
The case is: Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595.
(Reporting by Jonathan Stempel, editing by Leslie Gevirtz)
Federal Reserve Loses Suit Demanding Transparency
Mon Aug 24, 2009 8:39pm EDT
NEW YORK (Reuters) - A federal judge on Monday ruled against an effort by the U.S. Federal Reserve to block disclosure of companies that participated in and securities covered by a series of emergency funding programs as the global credit crisis began to intensify.
In a 47-page opinion, Chief District Judge Loretta Preska of the federal court in Manhattan said the central bank failed to show that disclosure would cause borrowers in the Federal Reserve System to suffer "imminent competitive harm," by stigmatizing them for using Fed lending programs.
"The board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed," she wrote. "Conjecture, without evidence of imminent harm, simply fails to meet the board's burden."
Monday's ruling comes as lawmakers and investors demand greater disclosure in how the government manages a series of programs designed to lift the economy out of its deepest recession in decades.
The case arose when two Bloomberg News reporters submitted requests under the federal Freedom of Information Act (FOIA) about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan Chase & Co (JPM.N).
After the Fed resisted the request, Bloomberg sued to compel disclosure.
Preska concluded the Fed "improperly withheld agency records in response to a FOIA request by conducting an inadequate search," she wrote.
FOIA obliges federal agencies to make government documents available to the public, subject to various exemptions.
Bloomberg News and the Fed did not immediately return requests for comment.
The case is: Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595.
(Reporting by Jonathan Stempel, editing by Leslie Gevirtz)
Monday, August 24, 2009
Marc Faber: Hyperinflation a High Probability
Faber in his latest interview shares his belief that when it comes time for the federal reserve to raise interest rates to combat inflation, they will be unable to do so because the federal government will not be able to pay the additional interest. Hyperinflation would then be inevitable.
Friday, August 21, 2009
Bernanke: Growth Good
Ben Bernanke will be replaced by Larry Summers or another stooge in the very near future. It's a win win for the government and Uncle Ben: the government has their fall guy in the near term and Ben gets to step away before the CIT really hits the fan.
Ben will take a graceful bow as the economy "rights itself" and we start to see moderate, to strong growth in the next several quarters. He will be blamed with Greenspan for the recession but will be credited for saving the US economy from the brink of annihilation.
Ben, no idiot, sees the inflation on the wall like the rest of us and the end of the road for the US Economy. The economy sure will be growing, granted, at a much slower pace than that of the supply of 'money.'
Bernake Calls Growth Prospects 'Good'
In his most optimistic economic forecast since the financial markets plunged nearly a year ago, Federal Reserve Chairman Ben Bernanke declared that “the prospects for a return to growth in the near term appear good.”
Bernanke made the comments Friday in a speech at an annual Fed event in Jackson Hole, Wyo.
It’s the latest in a string of increasingly hopeful pronouncements from Fed officials that the end of a recession many economists feel has been the worst since the Great Depression of the 1930s will soon be over — or might be already.
Earlier this month, the Fed said “economic activity is leveling out,” and in late July said the western states were among four of its 12 regions of the country where the economy was showing “signs of stabilization.”
Other statistical indicators have pointed toward the same conclusion over the past two months — though this week’s dip in consumer spending and unexpectedly sharp growth in new unemployment claims suggest that any recovery is tentative and fragile.
Indeed Bernanke, in a speech that charted key events over the course of the downturn, said that credit markets remain constricted and financial institutions could expect additional losses on underperforming assets.
“The situation is not back to normal,” he said.
Ben will take a graceful bow as the economy "rights itself" and we start to see moderate, to strong growth in the next several quarters. He will be blamed with Greenspan for the recession but will be credited for saving the US economy from the brink of annihilation.
Ben, no idiot, sees the inflation on the wall like the rest of us and the end of the road for the US Economy. The economy sure will be growing, granted, at a much slower pace than that of the supply of 'money.'
Bernake Calls Growth Prospects 'Good'
In his most optimistic economic forecast since the financial markets plunged nearly a year ago, Federal Reserve Chairman Ben Bernanke declared that “the prospects for a return to growth in the near term appear good.”
Bernanke made the comments Friday in a speech at an annual Fed event in Jackson Hole, Wyo.
It’s the latest in a string of increasingly hopeful pronouncements from Fed officials that the end of a recession many economists feel has been the worst since the Great Depression of the 1930s will soon be over — or might be already.
Earlier this month, the Fed said “economic activity is leveling out,” and in late July said the western states were among four of its 12 regions of the country where the economy was showing “signs of stabilization.”
Other statistical indicators have pointed toward the same conclusion over the past two months — though this week’s dip in consumer spending and unexpectedly sharp growth in new unemployment claims suggest that any recovery is tentative and fragile.
Indeed Bernanke, in a speech that charted key events over the course of the downturn, said that credit markets remain constricted and financial institutions could expect additional losses on underperforming assets.
“The situation is not back to normal,” he said.
Let This Be a Lesson To Us All
What happens when an insolvent bank (dead zombie bank) dies? How can you kill something that is already dead? You extract your toll on another victim by passing on the penalty to another party.
The recession is over for some - the depression is on for the rest!
Exhibit ZZZ...
U.S. Helps Spanish Company to Buy Texas Bank
Guaranty Bank, a deeply troubled Texas lender, was sold on Friday to Banco Bilbao Vizcaya Argentaria of Spain in one of the largest government-assisted deals offered to a foreign firm.
Federal regulators seized Guaranty Bank and simultaneously brokered the sale of its branches as well as most of the deposits and assets to BBVA Compass, the Spanish bank’s American subsidiary. The government, however, agreed to absorb most of the losses on $9.7 billion, or more than 80 percent, of the Guaranty assets included in the deal.
The failure is the fourth-largest since the financial crisis began, and the Federal Deposit Insurance Corporation projects that it will cost its deposit insurance fund about $3 billion.
Regulators also arranged for the sales of three smaller banks in Alabama and Georgia on Friday, bringing the total number of bank failures so far this year to 81. That compares with only 25 bank failures in all of 2008.
News that BBVA had submitted the winning bid leaked out earlier this week, but regulators waited until late Friday to orchestrate the takeover. That may be another sign that confidence in the financial system is being restored, since in contrast to past leaks, regulators did not immediately seize the bank over fears of rumors stoking a bank run.
Stockholders in Guaranty Bank will be wiped out, but the deal ensures that its depositors will not suffer losses. Although BBVA did not take control of the failed bank’s $344 million of brokered deposits, the F.D.I.C. said that it would reimburse brokers directly for those funds.
The government also agreed to shoulder the bulk of the losses on all of Guaranty’s loans — a deal sweetener that the government has rarely extended to overseas buyers.
BBVA agreed to buy $12 billion of the $13 billion assets left at Guaranty Bank, which it will ultimately sell to private investors. The F.D.I.C. agreed to take on the remaining $1 billion of assets, as well as cover losses on the $11 billion pool of risky loans that BBVA bought. The agreement calls for the government to take on about 80 percent of the first $2.3 billion of losses, and 95 percent of the losses above that threshold.
Loss-sharing agreements have become a standard part of the F.D.I.C.’s toolkit for resolving troubled banks, but rarely have they covered such a big portion of a failed bank’s assets.
And seldom are they offered to foreign buyers. Indeed, it appears the last time that an overseas bank received federal assistance in a failed bank deal was when the Bank of Ireland scooped up four New Hampshire banks in September 1991.
Analysts say the BBVA deal may signal that the F.D.I.C. will be more open to bids from foreign banks. Many of the strongest American banks are occupied with deals they did last fall, while private equity firms have struggled to meet the high bar set by regulators. Weaker banks, meanwhile, have been hamstrung by their own losses. That has left regulators scrambling to drum up buyers.
José Maria Garcia Meyer, the head of BBVA’s American operations, said in a statement that the deal provided convincing evidence of the bank’s strength and stability during the current crisis. “This transaction further demonstrates BBVA’s clear commitment in building its U.S. franchise,” he added.
Along with its Spanish rival Banco Santander, BBVA has been ramping up its business in fast-growing American markets that have strong ties to Latin America. It made a series of expensive acquisitions in Texas over the last few years.
Guaranty, which is based in Austin, will add another 103 locations in Texas and 59 branches in California, where BBVA has been trying to establish a beachhead. That will give it a total of 767 locations in seven Sun Belt states and make it the nation’s 15th-largest commercial bank with about $49 billion in deposits.
The recession is over for some - the depression is on for the rest!
Exhibit ZZZ...
U.S. Helps Spanish Company to Buy Texas Bank
Guaranty Bank, a deeply troubled Texas lender, was sold on Friday to Banco Bilbao Vizcaya Argentaria of Spain in one of the largest government-assisted deals offered to a foreign firm.
Federal regulators seized Guaranty Bank and simultaneously brokered the sale of its branches as well as most of the deposits and assets to BBVA Compass, the Spanish bank’s American subsidiary. The government, however, agreed to absorb most of the losses on $9.7 billion, or more than 80 percent, of the Guaranty assets included in the deal.
The failure is the fourth-largest since the financial crisis began, and the Federal Deposit Insurance Corporation projects that it will cost its deposit insurance fund about $3 billion.
Regulators also arranged for the sales of three smaller banks in Alabama and Georgia on Friday, bringing the total number of bank failures so far this year to 81. That compares with only 25 bank failures in all of 2008.
News that BBVA had submitted the winning bid leaked out earlier this week, but regulators waited until late Friday to orchestrate the takeover. That may be another sign that confidence in the financial system is being restored, since in contrast to past leaks, regulators did not immediately seize the bank over fears of rumors stoking a bank run.
Stockholders in Guaranty Bank will be wiped out, but the deal ensures that its depositors will not suffer losses. Although BBVA did not take control of the failed bank’s $344 million of brokered deposits, the F.D.I.C. said that it would reimburse brokers directly for those funds.
The government also agreed to shoulder the bulk of the losses on all of Guaranty’s loans — a deal sweetener that the government has rarely extended to overseas buyers.
BBVA agreed to buy $12 billion of the $13 billion assets left at Guaranty Bank, which it will ultimately sell to private investors. The F.D.I.C. agreed to take on the remaining $1 billion of assets, as well as cover losses on the $11 billion pool of risky loans that BBVA bought. The agreement calls for the government to take on about 80 percent of the first $2.3 billion of losses, and 95 percent of the losses above that threshold.
Loss-sharing agreements have become a standard part of the F.D.I.C.’s toolkit for resolving troubled banks, but rarely have they covered such a big portion of a failed bank’s assets.
And seldom are they offered to foreign buyers. Indeed, it appears the last time that an overseas bank received federal assistance in a failed bank deal was when the Bank of Ireland scooped up four New Hampshire banks in September 1991.
Analysts say the BBVA deal may signal that the F.D.I.C. will be more open to bids from foreign banks. Many of the strongest American banks are occupied with deals they did last fall, while private equity firms have struggled to meet the high bar set by regulators. Weaker banks, meanwhile, have been hamstrung by their own losses. That has left regulators scrambling to drum up buyers.
José Maria Garcia Meyer, the head of BBVA’s American operations, said in a statement that the deal provided convincing evidence of the bank’s strength and stability during the current crisis. “This transaction further demonstrates BBVA’s clear commitment in building its U.S. franchise,” he added.
Along with its Spanish rival Banco Santander, BBVA has been ramping up its business in fast-growing American markets that have strong ties to Latin America. It made a series of expensive acquisitions in Texas over the last few years.
Guaranty, which is based in Austin, will add another 103 locations in Texas and 59 branches in California, where BBVA has been trying to establish a beachhead. That will give it a total of 767 locations in seven Sun Belt states and make it the nation’s 15th-largest commercial bank with about $49 billion in deposits.
77 Banks Down - GFG #78?
Guaranty Financial Group is rumored to be the next casualty this weekend. The company's announcement came after the bank, at the behest of regulators, wrote down the values of investment assets by more than $1.4 billion. That move left the bank with negative capital.
The description of the bank is below as per GFG's website:
Guaranty Financial Group Inc. (NYSE: GFG) is the second largest publicly-traded financial services holding company headquartered in Texas and one of the 50 largest publicly-traded financial services companies based in the U.S. ranked by asset size, offering a range of financial services through its primary operating subsidiary, Guaranty Bank.
Guaranty Bank is a federally-chartered savings bank that began operations in 1988. With assets of approximately $16 billion and more than 150 banking centers in Texas and California, Guaranty Bank offers a full range of consumer and business deposit and loan products serving diverse geographic markets throughout the U.S., making it one of the largest financial institutions headquartered in Texas.
Through our full range of products, we are committed to growing sustainable client relationships and delivering our products with extraordinary service.
Quagmire Worsens for Guaranty
Guaranty Financial Group Inc.'s situation doesn't appear as though it's getting any better.
Late Monday the Austin-based parent company of Guaranty Bank filed a regulatory statement saying it won't be able to report its second quarter financials on time. The company also reiterated its position as "critically undercapitalized" and said again that it does not believe it "will be able to continue as a going concern." Guaranty and its parent company, Guaranty Financial Group, are technically based in Austin, while its executive team is located in Dallas.
A takeover of Guaranty (NYSE: GFG) by the FDIC now appears inevitable. Citing sources familiar with the situation, the news agency Reuters reports that a U.S. regulator has set Tuesday as the deadline for other banks to bid on Guaranty. If indeed Guaranty falls, it would be the second largest bank failure so far this year, following last week's federal takeover of Montgomery, Ala.-based Colonial BancGroup Inc., which is now part of BB&T.
Meanwhile, Guaranty shares continue to plummet. The stock fell another 17 percent on Tuesday to 33 cents a share. After falling to an all-time low of 12 cents in late July, shares rebounded a bit to close at 58 cents on Aug. 13. Shares have traded as high as $6.75 in the last year.
The Dallas Business Journal first reported in July that Guaranty Bank confirmed it was likely to fail.
The company's announcement came after the bank, at the behest of regulators, wrote down the values of investment assets by more than $1.4 billion. That move left the bank with negative capital.
The description of the bank is below as per GFG's website:
Guaranty Financial Group Inc. (NYSE: GFG) is the second largest publicly-traded financial services holding company headquartered in Texas and one of the 50 largest publicly-traded financial services companies based in the U.S. ranked by asset size, offering a range of financial services through its primary operating subsidiary, Guaranty Bank.
Guaranty Bank is a federally-chartered savings bank that began operations in 1988. With assets of approximately $16 billion and more than 150 banking centers in Texas and California, Guaranty Bank offers a full range of consumer and business deposit and loan products serving diverse geographic markets throughout the U.S., making it one of the largest financial institutions headquartered in Texas.
Through our full range of products, we are committed to growing sustainable client relationships and delivering our products with extraordinary service.
Quagmire Worsens for Guaranty
Guaranty Financial Group Inc.'s situation doesn't appear as though it's getting any better.
Late Monday the Austin-based parent company of Guaranty Bank filed a regulatory statement saying it won't be able to report its second quarter financials on time. The company also reiterated its position as "critically undercapitalized" and said again that it does not believe it "will be able to continue as a going concern." Guaranty and its parent company, Guaranty Financial Group, are technically based in Austin, while its executive team is located in Dallas.
A takeover of Guaranty (NYSE: GFG) by the FDIC now appears inevitable. Citing sources familiar with the situation, the news agency Reuters reports that a U.S. regulator has set Tuesday as the deadline for other banks to bid on Guaranty. If indeed Guaranty falls, it would be the second largest bank failure so far this year, following last week's federal takeover of Montgomery, Ala.-based Colonial BancGroup Inc., which is now part of BB&T.
Meanwhile, Guaranty shares continue to plummet. The stock fell another 17 percent on Tuesday to 33 cents a share. After falling to an all-time low of 12 cents in late July, shares rebounded a bit to close at 58 cents on Aug. 13. Shares have traded as high as $6.75 in the last year.
The Dallas Business Journal first reported in July that Guaranty Bank confirmed it was likely to fail.
The company's announcement came after the bank, at the behest of regulators, wrote down the values of investment assets by more than $1.4 billion. That move left the bank with negative capital.
Sears & Macy's: The Walking Dead
Surprise slip? Who are these people kidding! For the past 8 years since Eddie Lampert has taken the helm, the focus of the company has been on the REAL ESTATE. Disposition of assets and creative accounting have been 100% of their "resurgence." Sales and margins have had little to NOTHING to do with it. Now with the commercial real estate (particularly suburban retail) being slimmed down Darwin style, it's quite expected for them to begin hemorrhaging money.
Macy's is in there with them. The same "brilliant" minds who closed down Marshall Field's in Chicago will love when Target or Wal-Mart take over their 34th Street store in Manhattan or the store is retained as a one off operation by foreign capital.
The arrogance from these companies is overwhelming with the expectations that consumers will shop there because of some dreamed up loyalty to the brands that have been betrayed decades ago. The Macy's ad below is a perfect example of living in the past! These brands are the walking dead.
Sears Slips on Surprise Loss in 2nd Quarter
Shares of Sears Holdings Corporation fell 12 percent on Thursday in Nasdaq trading after the retailer reported an unexpected second-quarter loss.
Excluding some items, the loss was 17 cents a share. Analysts had projected profit of 35 cents, the average of six estimates compiled by Bloomberg News.
Sales at Sears stores in the United States open at least 12 months declined 13 percent as consumers bought fewer washers, dryers, refrigerators and clothing, the company said in a statement. Same-store sales at Kmart, which is owned by Sears, fell 3.9 percent.
The retailer’s net loss was $94 million, or 79 cents a share, in contrast to a profit of $65 million, or 50 cents a share, a year earlier, the company said. Sales fell to $10.6 billion, from $11.76 billion in the year-ago quarter. The results were below the $10.7 billion average estimate of analysts.
Sears’s stock fell $8.76 on Thursday, or 12 percent, to $65. That was the biggest percentage decline since Dec. 1.
“The decline at Sears Domestic continues to be driven by categories impacted by housing market conditions,” including home appliances, the company said.
Separately, Gap Inc., operator of the Old Navy and Banana Republic chains, reported second-quarter profit that was little changed from a year ago.
Net income was $228 million, or 33 cents a share, compared with $229 million, or 32 cents, a year earlier, the company said Thursday in a statement. The retailer said on Aug. 6 that earnings would be 30 to 32 cents a share. Revenue fell 7.3 percent, to $3.25 billion, from $3.5 billion a year ago.
The company reduced operating expenses and inventory to make up for sales declines as consumers cut spending on clothes. Sales at stores open at least a year decreased 8 percent in the three months that ended Aug. 1.
“Our focus is to find the right balance between maintaining our cost discipline and making appropriate, targeted investments to gain back market share,” Glenn K. Murphy, Gap’s chairman and chief executive, said in the statement.
Comparable-store sales in North America dropped 4 percent at Old Navy, which sells the least expensive clothes of Gap’s three chains, less than the 16 percent decline a year earlier. They fell 10 percent at Gap stores and 15 percent at Banana Republic.
Separately, Aéropostale, the mall-based retailer aimed at the teenage market, said profit rose 83 percent, to $38.6 million, or 57 cents a share. Comparable-store sales advanced 12 percent in the three months ended Aug. 1, the company said in a statement.
Gap and Aéropostale reported earnings after markets had closed.
Gap shares rose 24 cents, to $18.85. Aéropostale gained 21 cents, to $35.88.
Macy's is in there with them. The same "brilliant" minds who closed down Marshall Field's in Chicago will love when Target or Wal-Mart take over their 34th Street store in Manhattan or the store is retained as a one off operation by foreign capital.
The arrogance from these companies is overwhelming with the expectations that consumers will shop there because of some dreamed up loyalty to the brands that have been betrayed decades ago. The Macy's ad below is a perfect example of living in the past! These brands are the walking dead.
Sears Slips on Surprise Loss in 2nd Quarter
Shares of Sears Holdings Corporation fell 12 percent on Thursday in Nasdaq trading after the retailer reported an unexpected second-quarter loss.
Excluding some items, the loss was 17 cents a share. Analysts had projected profit of 35 cents, the average of six estimates compiled by Bloomberg News.
Sales at Sears stores in the United States open at least 12 months declined 13 percent as consumers bought fewer washers, dryers, refrigerators and clothing, the company said in a statement. Same-store sales at Kmart, which is owned by Sears, fell 3.9 percent.
The retailer’s net loss was $94 million, or 79 cents a share, in contrast to a profit of $65 million, or 50 cents a share, a year earlier, the company said. Sales fell to $10.6 billion, from $11.76 billion in the year-ago quarter. The results were below the $10.7 billion average estimate of analysts.
Sears’s stock fell $8.76 on Thursday, or 12 percent, to $65. That was the biggest percentage decline since Dec. 1.
“The decline at Sears Domestic continues to be driven by categories impacted by housing market conditions,” including home appliances, the company said.
Separately, Gap Inc., operator of the Old Navy and Banana Republic chains, reported second-quarter profit that was little changed from a year ago.
Net income was $228 million, or 33 cents a share, compared with $229 million, or 32 cents, a year earlier, the company said Thursday in a statement. The retailer said on Aug. 6 that earnings would be 30 to 32 cents a share. Revenue fell 7.3 percent, to $3.25 billion, from $3.5 billion a year ago.
The company reduced operating expenses and inventory to make up for sales declines as consumers cut spending on clothes. Sales at stores open at least a year decreased 8 percent in the three months that ended Aug. 1.
“Our focus is to find the right balance between maintaining our cost discipline and making appropriate, targeted investments to gain back market share,” Glenn K. Murphy, Gap’s chairman and chief executive, said in the statement.
Comparable-store sales in North America dropped 4 percent at Old Navy, which sells the least expensive clothes of Gap’s three chains, less than the 16 percent decline a year earlier. They fell 10 percent at Gap stores and 15 percent at Banana Republic.
Separately, Aéropostale, the mall-based retailer aimed at the teenage market, said profit rose 83 percent, to $38.6 million, or 57 cents a share. Comparable-store sales advanced 12 percent in the three months ended Aug. 1, the company said in a statement.
Gap and Aéropostale reported earnings after markets had closed.
Gap shares rose 24 cents, to $18.85. Aéropostale gained 21 cents, to $35.88.
Wednesday, August 19, 2009
Commercial Real Estate Rumblings
Major rumors circulating that a major, international third party real estate firm is all but done for. Several large offices in the United States have closed in primary markets and the veteran brokers have fled. The old maxim that a company is only as good as its people epitomizes the commercial real estate industry. The only product they sell is the expertise and service of their people...when the people leave, there is no company. Stockholders don't seem to understand this.
In other news, secondary players like Maguire Properties have defaulted. Mid level firms in this category are taking it on the chin while larger corporations like Vornado and Tishman Speyer are proving vulnerable as well.
Each city/market/submarket will tell a different story. Underwater assets in D.C. as described in the article below, will be refinanced with more debt or bought by international money.
Tishman Faces Office Downturn
Portfolio in Washington in Default; If No Risks, 'Don't Have Any Rewards'
A partnership led by Tishman Speyer Properties is in default on debt tied to one of the largest office portfolios in the Washington area, the latest in a line of humbling turns for the prominent property developer.
Tishman Speyer paid $2.8 billion in late 2006 for what was known as the CarrAmerica portfolio, a collection of 28 buildings leased to law firms, lobbyists and other upscale tenants in and around Washington. But in taking advantage of the easy credit terms of the time, Tishman ended up overpaying.
With office vacancies rising and rents falling, the partnership has violated lender's covenants. Tishman also must find a way to refinance the debt when it comes due in 2011, something that analysts say could be a struggle.
Tishman Speyer itself isn't threatened by the problems.
Despite its size, CarrAmerica is one of the lesser-known investments in the Tishman Speyer empire, which includes Manhattan's Rockefeller Center and the Chrysler Building. In addition to the CarrAmerica deal, it also is facing stress from its other top-of-the-market acquisitions including Archstone-Smith, a high-end apartment real-estate investment trust, and the sprawling New York apartment complexes of Peter Cooper Village and Stuyvesant Town.
It is proving a test of the business mettle of Rob Speyer, a 39-year old former newspaper reporter. The son of Jerry Speyer -- former chairman of the board of the Federal Reserve Bank of New York and chairman of the Museum of Modern Art -- is being groomed to take over Tishman Speyer, a closely held 31-year-old firm that owns or manages real estate valued at over $35 billion from Brazil to Germany to China.
Like other deals done in the boom years, the CarrAmerica transaction was underwritten on the assumption that rents and occupancy would rise, not fall. Now, according to people familiar with the matter, the Tishman partnership has violated covenants on $200 million in its revolving credit line because the properties' cash flow barely covers debt service.
'A Good Track Record'
"We have a handful of tough deals that we made at the top of the market," Rob Speyer said. But the company has "a good track record we're proud to stand behind," said Mr. Speyer, who spoke from São Paolo, Brazil, where he was visiting the firm's projects and scouting for new opportunities.
The Tishman partnership that bought the CarrAmerica portfolio has been in talks with its lenders, led by Lehman Brothers Holdings Inc., since late 2008 about modifying the credit agreement, according to S&P. But so far, nothing has happened and, until now, the talks have been kept quiet. "We have confidence in the long-term value of the properties," Rob Speyer said.
S&P warned even if Tishman wins new covenants, its ability to refinance the loans in 2011 "will likely require additional capital investment or a recapitalization."
The woes of Tishman and other landlords is stoking fears among regulators and bankers that turmoil in commercial real estate may derail the hoped-for economic recovery. There are more commercial-mortgage-backed securities outstanding than credit-card debt, student loans and car loans combined and many of those loans are going bad rapidly. About $128 billion in office buildings, hotels, stores and other commercial property are in default, foreclosure or bankruptcy, according to Real Capital Analytics.
Tishman took advantage of easy credit and didn't put much of its own cash into its troubled deals. In the $2.8 billion CarrAmerica transaction, Tishman recruited about a dozen partners, including Lehman, to put equity into the highly leveraged deal, according to people familiar with the matter. The seller was Blackstone Group, which sold the portfolio for an enormous profit just months after buying it from CarrAmerica Realty Corp.
he Speyers point out that their firm has made more than 20% annual returns on investments since its inception three decades ago, and currently has more than $2 billion of liquidity to invest in new deals. In the phone interview that included Rob Speyer, Jerry Speyer noted that his son also was responsible for selling more than $12 billion of property at the top of the market.
Tishman's Distraction
But the foundering deals remain a blow to Tishman Speyer's reputation, which was honed over the decades as the company's reach extended from New York to the rest of the world. The company became known for solid returns and smart deal-making. But now the troubled deals have become a distraction as company officials wrestle with creditors to restructure debt.
Another headache is resulting from the 2007 leveraged buyout of Archstone, in which Tishman and Lehman each put up $250 million in equity for control of the company. Lehman also cobbled together a $20 billion financing package, with $7 billion sold to Fannie Mae and $2 billion to Freddie Mac. Lehman, Barclays PLC and Bank of America Corp. together provided a $4.6 billion bridge-equity loan to get the deal done.
Archstone has struggled to sell buildings to pay down debt. The properties are current on their debt service but needed a capital infusion earlier this year. Lehman received the bankruptcy court approval to put $230 million more into Archstone, hoping its big city luxury apartments regain their value on the other end of the recession.
An even bigger problem is the Peter Cooper Village and Stuyvesant Town transaction. A venture of Tishman and BlackRock Realty Advisors financed its $5.4 billion purchase of the complex with $4.4 billion in debt. As the weakening New York economy hinders the venture's ability to boost the rental income of the complex, the project is running the risk of defaulting.
The venture is burning through its interest reserve used to pay the difference between the property's cash flow and debt service. It is expected to be depleted by early next year. In the past, the partnership has said it would put up more capital as needed.
Jerry Speyer said that any potential loss in his company's troubled deals represent only a "small part" of the profits it has reaped over the years. "If you don't take any risks, you don't have any rewards," he said.
In other news, secondary players like Maguire Properties have defaulted. Mid level firms in this category are taking it on the chin while larger corporations like Vornado and Tishman Speyer are proving vulnerable as well.
Each city/market/submarket will tell a different story. Underwater assets in D.C. as described in the article below, will be refinanced with more debt or bought by international money.
Tishman Faces Office Downturn
Portfolio in Washington in Default; If No Risks, 'Don't Have Any Rewards'
A partnership led by Tishman Speyer Properties is in default on debt tied to one of the largest office portfolios in the Washington area, the latest in a line of humbling turns for the prominent property developer.
Tishman Speyer paid $2.8 billion in late 2006 for what was known as the CarrAmerica portfolio, a collection of 28 buildings leased to law firms, lobbyists and other upscale tenants in and around Washington. But in taking advantage of the easy credit terms of the time, Tishman ended up overpaying.
With office vacancies rising and rents falling, the partnership has violated lender's covenants. Tishman also must find a way to refinance the debt when it comes due in 2011, something that analysts say could be a struggle.
Tishman Speyer itself isn't threatened by the problems.
Despite its size, CarrAmerica is one of the lesser-known investments in the Tishman Speyer empire, which includes Manhattan's Rockefeller Center and the Chrysler Building. In addition to the CarrAmerica deal, it also is facing stress from its other top-of-the-market acquisitions including Archstone-Smith, a high-end apartment real-estate investment trust, and the sprawling New York apartment complexes of Peter Cooper Village and Stuyvesant Town.
It is proving a test of the business mettle of Rob Speyer, a 39-year old former newspaper reporter. The son of Jerry Speyer -- former chairman of the board of the Federal Reserve Bank of New York and chairman of the Museum of Modern Art -- is being groomed to take over Tishman Speyer, a closely held 31-year-old firm that owns or manages real estate valued at over $35 billion from Brazil to Germany to China.
Like other deals done in the boom years, the CarrAmerica transaction was underwritten on the assumption that rents and occupancy would rise, not fall. Now, according to people familiar with the matter, the Tishman partnership has violated covenants on $200 million in its revolving credit line because the properties' cash flow barely covers debt service.
'A Good Track Record'
"We have a handful of tough deals that we made at the top of the market," Rob Speyer said. But the company has "a good track record we're proud to stand behind," said Mr. Speyer, who spoke from São Paolo, Brazil, where he was visiting the firm's projects and scouting for new opportunities.
The Tishman partnership that bought the CarrAmerica portfolio has been in talks with its lenders, led by Lehman Brothers Holdings Inc., since late 2008 about modifying the credit agreement, according to S&P. But so far, nothing has happened and, until now, the talks have been kept quiet. "We have confidence in the long-term value of the properties," Rob Speyer said.
S&P warned even if Tishman wins new covenants, its ability to refinance the loans in 2011 "will likely require additional capital investment or a recapitalization."
The woes of Tishman and other landlords is stoking fears among regulators and bankers that turmoil in commercial real estate may derail the hoped-for economic recovery. There are more commercial-mortgage-backed securities outstanding than credit-card debt, student loans and car loans combined and many of those loans are going bad rapidly. About $128 billion in office buildings, hotels, stores and other commercial property are in default, foreclosure or bankruptcy, according to Real Capital Analytics.
Tishman took advantage of easy credit and didn't put much of its own cash into its troubled deals. In the $2.8 billion CarrAmerica transaction, Tishman recruited about a dozen partners, including Lehman, to put equity into the highly leveraged deal, according to people familiar with the matter. The seller was Blackstone Group, which sold the portfolio for an enormous profit just months after buying it from CarrAmerica Realty Corp.
he Speyers point out that their firm has made more than 20% annual returns on investments since its inception three decades ago, and currently has more than $2 billion of liquidity to invest in new deals. In the phone interview that included Rob Speyer, Jerry Speyer noted that his son also was responsible for selling more than $12 billion of property at the top of the market.
Tishman's Distraction
But the foundering deals remain a blow to Tishman Speyer's reputation, which was honed over the decades as the company's reach extended from New York to the rest of the world. The company became known for solid returns and smart deal-making. But now the troubled deals have become a distraction as company officials wrestle with creditors to restructure debt.
Another headache is resulting from the 2007 leveraged buyout of Archstone, in which Tishman and Lehman each put up $250 million in equity for control of the company. Lehman also cobbled together a $20 billion financing package, with $7 billion sold to Fannie Mae and $2 billion to Freddie Mac. Lehman, Barclays PLC and Bank of America Corp. together provided a $4.6 billion bridge-equity loan to get the deal done.
Archstone has struggled to sell buildings to pay down debt. The properties are current on their debt service but needed a capital infusion earlier this year. Lehman received the bankruptcy court approval to put $230 million more into Archstone, hoping its big city luxury apartments regain their value on the other end of the recession.
An even bigger problem is the Peter Cooper Village and Stuyvesant Town transaction. A venture of Tishman and BlackRock Realty Advisors financed its $5.4 billion purchase of the complex with $4.4 billion in debt. As the weakening New York economy hinders the venture's ability to boost the rental income of the complex, the project is running the risk of defaulting.
The venture is burning through its interest reserve used to pay the difference between the property's cash flow and debt service. It is expected to be depleted by early next year. In the past, the partnership has said it would put up more capital as needed.
Jerry Speyer said that any potential loss in his company's troubled deals represent only a "small part" of the profits it has reaped over the years. "If you don't take any risks, you don't have any rewards," he said.
Neverending Wars (Cash Cows for Contractors)
The Federal budget for the "war on drugs" this year in 2009 is more than $22 billion. When including state and local costs, the true number exceeds $40 billion each year. In many large cities is easier for a teenager to score illegal drugs than it is to obtain alcohol. 1,200,000 people are expected to be arrested in 2009 for drug related offenses, half of which are marijuana charges.
The cost of the Iraq war is now more than $640 billion per year. Each soldier deployed costs roughly $390,000 for a year in Iraq. A car bomb killed 38 people in Baghdad yesterday and injured hundreds. More than 2,000,000 Iraqis have died in the two conflicts and embargoes since the early 1990s.
The cost of the Afghanistan occupation is more than $240 billion, before the escalation of conflict into Pakistan and not including conflicts in Uzbekistan. President Obama recently warned troops that things are about to get "bloody" in Afghanistan - a region where 800 American troops have already given their life.
The Defense Department reports 69 more members of the U.S. military died in support of Operation Enduring Freedom. Of those, three were the result of hostile action. The military lists these other locations as Guantanamo Bay Naval Base, Cuba; Djibouti; Eritrea; Ethiopia; Jordan; Kenya; Kyrgyzstan; Philippines; Seychelles; Sudan; Tajikistan; Turkey; and Yemen.
If we are not winning these wars, have been losing them for in some cases decades, and continue to pay the steep price in terms of life, reputation and costs why are they being fought?
The cost of the Iraq war is now more than $640 billion per year. Each soldier deployed costs roughly $390,000 for a year in Iraq. A car bomb killed 38 people in Baghdad yesterday and injured hundreds. More than 2,000,000 Iraqis have died in the two conflicts and embargoes since the early 1990s.
The cost of the Afghanistan occupation is more than $240 billion, before the escalation of conflict into Pakistan and not including conflicts in Uzbekistan. President Obama recently warned troops that things are about to get "bloody" in Afghanistan - a region where 800 American troops have already given their life.
The Defense Department reports 69 more members of the U.S. military died in support of Operation Enduring Freedom. Of those, three were the result of hostile action. The military lists these other locations as Guantanamo Bay Naval Base, Cuba; Djibouti; Eritrea; Ethiopia; Jordan; Kenya; Kyrgyzstan; Philippines; Seychelles; Sudan; Tajikistan; Turkey; and Yemen.
If we are not winning these wars, have been losing them for in some cases decades, and continue to pay the steep price in terms of life, reputation and costs why are they being fought?
Tuesday, August 18, 2009
Toyota Passes GM Clunkers
Is anybody really surprised that Toyota is selling more cars than GM in the clunkers war?
Taking a quick spin around the Toyota and Chevrolet sites, I did a side by side comparison of the Toyota Camry versus the Chevy Malibu. Not only is the base model of the Camry $2,000 cheaper but it comes with additional features and is heads above the Chevy in both reliability, resale value and miles per gallon. Load both cars up and you get a hybrid, keyless ignition luxury package on the Toyota and a gas guzzling, $32,000 300 HP Chevy. In the $30,000 range, why not look at the Maxima or TL which feature reverse camera, navigation, leather, 280 hp, etc.?
The real kick in the pants is that the Camry is made in Kentucky by Americans while several of the Chevy and GM models are made in Mexico.
Perhaps we Americans are answering President Obama's call to "buy American" by shunning the real foreign cars made by General Motors.
Clunkers: Toyota Passes GM as Top Seller
Cash for Clunkers buyers are still showing strong preference for smaller cars, as program tops 350,000 sales.
NEW YORK (CNNMoney.com) -- More customers trading in vehicles under the Cash for Clunkers program bought cars from Toyota than any other manufacturer, according to new government statistics. In previous reports, General Motors has topped that list.
Toyota has so far sold 18.9% of the vehicles bought through the Clunkers program, while GM is now second, with 17.6% of Clunkers sales. Ford Motor Co (F, Fortune 500). ranks third in Clunker sales, followed by Honda and Chrysler.
Toyota is doing better in Clunker sales than in overall U.S. auto sales, where it stands second to GM. So far this year, GM's overall U.S. market share is 19.6% and Toyota's is 16.3%, according to analysts at the automotive Web site Edmunds.com.
Despite the prominence of Asian brands among the top ranks of Cars for Clunker beneficiaries, slightly more than half of all vehicles purchased under the program were manufactured in the United States.
Buyers have mostly been trading in trucks in favor of small cars, according to data provided the National Highway Traffic Safety Administration, the agency responsible for running the program. The vast majority of trade-ins, 83%, have been trucks, while 59% of new vehicle purchases have been cars.
The average fuel economy of vehicles being traded in under the program has been 15.8 miles per gallon, according to the latest government data, while the fuel economy of vehicles purchased has averaged 25 mpg, a 58% improvement.
The Toyota Corolla is the most popular car purchased under the program, according the NHTSA, followed by the Honda Civic, Ford Focus compact cars and the Toyota Camry mid-sized car.
The government's system for tallying sales of individual models counts different versions of a car as different models, however, which tends to hurt the rankings of models that have, for instance, two-wheel and four-wheel drive versions. The formula splits their sales figures.
According to analysts at the automotive Web site Edmunds.com, the Ford Escape compact crossover SUV is actually the most popular vehicle purchased under the program, followed by the Ford Focus compact car, the Honda Civic compact car and the Jeep Patriot compact SUV.
The Senate passed a $2 billion extension of the Cash for Clunkers program on Thursday. The program quickly burned through an initial $1 billion in funding after its official kick-off on July 24. So far, about $1.5 billion of claims have been submitted by dealers who have sold a total of about 360,000 cars.
Taking a quick spin around the Toyota and Chevrolet sites, I did a side by side comparison of the Toyota Camry versus the Chevy Malibu. Not only is the base model of the Camry $2,000 cheaper but it comes with additional features and is heads above the Chevy in both reliability, resale value and miles per gallon. Load both cars up and you get a hybrid, keyless ignition luxury package on the Toyota and a gas guzzling, $32,000 300 HP Chevy. In the $30,000 range, why not look at the Maxima or TL which feature reverse camera, navigation, leather, 280 hp, etc.?
The real kick in the pants is that the Camry is made in Kentucky by Americans while several of the Chevy and GM models are made in Mexico.
Perhaps we Americans are answering President Obama's call to "buy American" by shunning the real foreign cars made by General Motors.
Clunkers: Toyota Passes GM as Top Seller
Cash for Clunkers buyers are still showing strong preference for smaller cars, as program tops 350,000 sales.
NEW YORK (CNNMoney.com) -- More customers trading in vehicles under the Cash for Clunkers program bought cars from Toyota than any other manufacturer, according to new government statistics. In previous reports, General Motors has topped that list.
Toyota has so far sold 18.9% of the vehicles bought through the Clunkers program, while GM is now second, with 17.6% of Clunkers sales. Ford Motor Co (F, Fortune 500). ranks third in Clunker sales, followed by Honda and Chrysler.
Toyota is doing better in Clunker sales than in overall U.S. auto sales, where it stands second to GM. So far this year, GM's overall U.S. market share is 19.6% and Toyota's is 16.3%, according to analysts at the automotive Web site Edmunds.com.
Despite the prominence of Asian brands among the top ranks of Cars for Clunker beneficiaries, slightly more than half of all vehicles purchased under the program were manufactured in the United States.
Buyers have mostly been trading in trucks in favor of small cars, according to data provided the National Highway Traffic Safety Administration, the agency responsible for running the program. The vast majority of trade-ins, 83%, have been trucks, while 59% of new vehicle purchases have been cars.
The average fuel economy of vehicles being traded in under the program has been 15.8 miles per gallon, according to the latest government data, while the fuel economy of vehicles purchased has averaged 25 mpg, a 58% improvement.
The Toyota Corolla is the most popular car purchased under the program, according the NHTSA, followed by the Honda Civic, Ford Focus compact cars and the Toyota Camry mid-sized car.
The government's system for tallying sales of individual models counts different versions of a car as different models, however, which tends to hurt the rankings of models that have, for instance, two-wheel and four-wheel drive versions. The formula splits their sales figures.
According to analysts at the automotive Web site Edmunds.com, the Ford Escape compact crossover SUV is actually the most popular vehicle purchased under the program, followed by the Ford Focus compact car, the Honda Civic compact car and the Jeep Patriot compact SUV.
The Senate passed a $2 billion extension of the Cash for Clunkers program on Thursday. The program quickly burned through an initial $1 billion in funding after its official kick-off on July 24. So far, about $1.5 billion of claims have been submitted by dealers who have sold a total of about 360,000 cars.
Monday, August 17, 2009
This Just In: Recession Now Over (HA!)
When corporate interests and government policy intertwine, we call the marriage fascism as defined by Benito Mussolini who knew a thing or two about it.
The recession is over for the power money because their losses have been negated and papered over with the federal plays like AIG, GM and Citibank using taxpayer dollars. There is no limit to the bailouts and most won't realize this until it's too late and the purchasing power of their dollars has evaporated.
The depression and collapse is on in full force for the middle class. The power money is blowing one more bubble to extract any remaining capital from the United States and move it off shores pulling the underpinnings of the American dream and ushering in Thomas Jefferson's worst nightmare:
If we run into such debts as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, and give the earnings of fifteen of these to the government for their debts and daily expenses; And the sixteen being insufficient to afford us bread, we must live, as they do now, on oatmeal and potatoes, have no time to think, no means of calling the mismanagers to account; But be glad to obtain subsistence by hiring ourselves to rivet their chains around the necks of our fellow sufferers; And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for a second, that second for a third, and so on 'til the bulk of society is reduced to mere automatons of misery, to have no sensibilities left but for sinning and suffering...and the forehorse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.
Goldman Sachs’s Cohen Says Recession Is Ending ‘Now’
By Thomas R. Keene and Lynn Thomasson
Aug. 17 (Bloomberg) -- The U.S. recession is ending “right now,” said Abby Joseph Cohen, a senior investment strategist at Goldman Sachs Group Inc.
The economy may grow by 3 percent in the next couple of quarters and expand by 1.5 percent to 2 percent next year, Cohen said. While consumer spending is likely to rise, it probably won’t increase as fast as at the end of prior periods when the U.S. was emerging from a recession, she said.
“Clearly the economy is on the mend,” Cohen said in an interview with Bloomberg Radio. “We do think that profit growth will be more substantial going forward.”
Cohen, known for her optimistic forecasts for stocks during the 1990s stock-market rally, was replaced in March 2008 as the bank’s chief forecaster for the U.S. equity market. She predicted in a May 1 interview that the Standard & Poor’s 500 Index might jump 20 percent to 1,050 in the next 6 to 12 months. The index climbed 15 percent to 1,010.48 through Aug. 7 before retreating 0.6 percent last week.
The S&P 500 has rallied 48 percent from a 12-year low on March 9 as 76 percent of companies in the benchmark reported better-than-estimated second quarter results and economic reports showed improvement. Equities fell last week for the first time in five weeks as a drop in consumer confidence fueled concern the steepest rally since the 1930s isn’t justified by economic prospects.
So-called fair value for the S&P 500 is between 1,050 and 1,100, Cohen said. David Kostin, who replaced Cohen as Goldman Sachs’s chief U.S. market forecaster, estimates the index will end the year at 1,060 and earn $52 a share for 2009.
“The bottom line looks pretty good,” she said. “The companies that are still in business are showing that they have pretty good margins.”
The recession is over for the power money because their losses have been negated and papered over with the federal plays like AIG, GM and Citibank using taxpayer dollars. There is no limit to the bailouts and most won't realize this until it's too late and the purchasing power of their dollars has evaporated.
The depression and collapse is on in full force for the middle class. The power money is blowing one more bubble to extract any remaining capital from the United States and move it off shores pulling the underpinnings of the American dream and ushering in Thomas Jefferson's worst nightmare:
If we run into such debts as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, and give the earnings of fifteen of these to the government for their debts and daily expenses; And the sixteen being insufficient to afford us bread, we must live, as they do now, on oatmeal and potatoes, have no time to think, no means of calling the mismanagers to account; But be glad to obtain subsistence by hiring ourselves to rivet their chains around the necks of our fellow sufferers; And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for a second, that second for a third, and so on 'til the bulk of society is reduced to mere automatons of misery, to have no sensibilities left but for sinning and suffering...and the forehorse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.
Goldman Sachs’s Cohen Says Recession Is Ending ‘Now’
By Thomas R. Keene and Lynn Thomasson
Aug. 17 (Bloomberg) -- The U.S. recession is ending “right now,” said Abby Joseph Cohen, a senior investment strategist at Goldman Sachs Group Inc.
The economy may grow by 3 percent in the next couple of quarters and expand by 1.5 percent to 2 percent next year, Cohen said. While consumer spending is likely to rise, it probably won’t increase as fast as at the end of prior periods when the U.S. was emerging from a recession, she said.
“Clearly the economy is on the mend,” Cohen said in an interview with Bloomberg Radio. “We do think that profit growth will be more substantial going forward.”
Cohen, known for her optimistic forecasts for stocks during the 1990s stock-market rally, was replaced in March 2008 as the bank’s chief forecaster for the U.S. equity market. She predicted in a May 1 interview that the Standard & Poor’s 500 Index might jump 20 percent to 1,050 in the next 6 to 12 months. The index climbed 15 percent to 1,010.48 through Aug. 7 before retreating 0.6 percent last week.
The S&P 500 has rallied 48 percent from a 12-year low on March 9 as 76 percent of companies in the benchmark reported better-than-estimated second quarter results and economic reports showed improvement. Equities fell last week for the first time in five weeks as a drop in consumer confidence fueled concern the steepest rally since the 1930s isn’t justified by economic prospects.
So-called fair value for the S&P 500 is between 1,050 and 1,100, Cohen said. David Kostin, who replaced Cohen as Goldman Sachs’s chief U.S. market forecaster, estimates the index will end the year at 1,060 and earn $52 a share for 2009.
“The bottom line looks pretty good,” she said. “The companies that are still in business are showing that they have pretty good margins.”
China Prefers Toxic Assets to Fed's TALF Program
In a laugher, China Investment Corporation has boldly thrown its weight behind U.S. taxpayer-subsidized funds that focus on "toxic" mortgage-backed securities over the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF).
The TALF program announced in 2008, issues asset backed securities collateralized with student, auto and credit card loans in a "AAA" packaging.
CIC perceives toxic, residential and potentially subprime properties as more stable than the Federal Reserve's program!
China's CIC Set to Invest In U.S. Mortgages
By George Chen, Asia Private Equity Correspondent
HONG KONG (Reuters) - China's $200 billion sovereign wealth fund, which lost big on its ill-timed 2007 Morgan Stanley and Blackstone bets, plans to invest up to $2 billion in U.S. mortgages as it eyes a property market rebound, two people with direct knowledge of the matter said Monday.
China Investment Corp plans to soon invest in U.S. taxpayer-subsidized investment funds that will acquire "toxic" mortgage-backed securities from the nation's banks. CIC believes these assets are a safer bet than buying into the U.S. Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF), the people with direct knowledge said.
The TALF program announced in 2008, issues asset backed securities collateralized with student, auto and credit card loans in a "AAA" packaging.
CIC perceives toxic, residential and potentially subprime properties as more stable than the Federal Reserve's program!
China's CIC Set to Invest In U.S. Mortgages
By George Chen, Asia Private Equity Correspondent
HONG KONG (Reuters) - China's $200 billion sovereign wealth fund, which lost big on its ill-timed 2007 Morgan Stanley and Blackstone bets, plans to invest up to $2 billion in U.S. mortgages as it eyes a property market rebound, two people with direct knowledge of the matter said Monday.
China Investment Corp plans to soon invest in U.S. taxpayer-subsidized investment funds that will acquire "toxic" mortgage-backed securities from the nation's banks. CIC believes these assets are a safer bet than buying into the U.S. Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF), the people with direct knowledge said.
FDIC Has No Budget Constraints
In a country with a $2 trillion deficit and a dear leader with a degree in quantitative easing, there really is no doubt that "the full faith and credit" of the country is behind the FDIC.
Losing control is not an option on the table for these people.
Why the FDIC Won't Run Out of Money
With the FDIC insurance fund running low, there’s a fair amount of confusion out there about whether the FDIC can run out of money. The answer is no, it can’t. The insurance fund might be down to its last $13 billion, but that number is really useful only for accounting purposes. There’s a government guarantee on bank deposits; the FDIC is merely the arm of the government which administers that guarantee and tries to make sure, by charging banks insurance premiums, that it doesn’t cost the taxpayer any money over the long term.
Joe Weisenthal, this morning, says that we needn’t worry about the FDIC’s money running out because “Congress will replenish the FDIC instantly” — implying that there’s at least the possibility that Congress wouldn’t replenish the FDIC. But that’s not the case. In May, President Obama signed a bill providing the FDIC with as much as $500 billion in credit at the Treasury — more than enough to cover anybody’s bank-failure worst-case scenario. That bill is now a law, which means that Congress needs to do nothing in the event that the FDIC’s funds go to zero.
I wish that the reporting on the FDIC insurance fund were clearer on this front: it’s basically just a way of keeping score, and working out whether the cost of FDIC bailouts is greater than or less than the insurance premiums that the FDIC has received from the banking industry. It has no bearing at all on the FDIC’s ability to backstop bank deposits.
Losing control is not an option on the table for these people.
Why the FDIC Won't Run Out of Money
With the FDIC insurance fund running low, there’s a fair amount of confusion out there about whether the FDIC can run out of money. The answer is no, it can’t. The insurance fund might be down to its last $13 billion, but that number is really useful only for accounting purposes. There’s a government guarantee on bank deposits; the FDIC is merely the arm of the government which administers that guarantee and tries to make sure, by charging banks insurance premiums, that it doesn’t cost the taxpayer any money over the long term.
Joe Weisenthal, this morning, says that we needn’t worry about the FDIC’s money running out because “Congress will replenish the FDIC instantly” — implying that there’s at least the possibility that Congress wouldn’t replenish the FDIC. But that’s not the case. In May, President Obama signed a bill providing the FDIC with as much as $500 billion in credit at the Treasury — more than enough to cover anybody’s bank-failure worst-case scenario. That bill is now a law, which means that Congress needs to do nothing in the event that the FDIC’s funds go to zero.
I wish that the reporting on the FDIC insurance fund were clearer on this front: it’s basically just a way of keeping score, and working out whether the cost of FDIC bailouts is greater than or less than the insurance premiums that the FDIC has received from the banking industry. It has no bearing at all on the FDIC’s ability to backstop bank deposits.
Friday, August 14, 2009
See Capital Run
The power money is moving east - Carlyle, Warburg...Blackstone. It doesn't take more than a quick google search to see who is behind these juggernauts.
China's Homegrown Private Equity
New tax laws and a little help from the government in Beijing are giving domestic private equity firms a big boost against foreign players
Hong Kong - The barbarians, it seems, have arrived at the Great Wall—and now they're coming from both sides. In China the top players in private equity—the proverbial barbarians at the gate—have been Carlyle, TPG, Warburg Pincus, and other foreigners. But lately those global heavyweights have had to contend with increasing numbers of homegrown rivals. "Local competition is our biggest challenge," says Wayne Tsou, head of Carlyle Asia Growth Partners.
Blackstone to Team With Shanghai on First Domestic Chinese Fund
By Cathy Chan
Aug. 15 (Bloomberg) -- Blackstone Group LP, the world’s biggest buyout company, agreed to set up a 5 billion yuan ($731 million) private-equity fund with Shanghai, the first venture between a global buyout firm and the Chinese government.
The Blackstone Zhonghua Development Investment Fund will be created with the newly formed government of Pudong New Area, Blackstone said in a statement today. The fund will target investments in Shanghai and the neighboring areas. China and Blackstone didn’t disclose the structure of the fund. Blackstone spokesman Peter Rose declined to comment beyond the statement.
Blackstone will be the first global private-equity firm to secure investment from a tier-one city government in China. The agreement signifies China’s endorsement of private equity to bolster corporate governance and profit, said Vincent Chan, co- founder of China-focused fund Spring Capital Asia Ltd. TPG, Carlyle Group and KKR & Co. haven’t established domestic funds.
“The Blackstone deal represents China’s willingness to use private equity to shake up the economy,” Chan said. “China’s future economy will be driven by its private enterprises.” Many first-time chief executive officers “will need help on matters from boosting corporate governance to acquisitions.”
Playing Catch-Up
Shanghai, home to the nation’s largest stock exchange, is playing catch-up with Tianjin, Beijing and Hong Kong to become a private-equity hub by proposing tax breaks to attract buyout firms.
The northern city of Tianjin became the first to allow buyout firms to set up in 2006. The Bohai Industrial Investment Fund Management Co., whose shareholders include Bank of China Group Investment Ltd., China Life Insurance Co. and China’s Social Security Fund, was the first domestic yuan-denominated private-equity fund set up in the nation.
Fang Fenglei, a Chinese partner at Goldman Sachs Group Inc., also is planning to raise a domestic private-equity fund for his Beijing-based Hopu Investment Management Co., after raising $2.5 billion from overseas investors.
Shanghai imposes tax rates of up to 35 percent on private- equity and venture-capital firms under limited partnership structures, and charges 20 percent on capital gains earned by non-executive partners, according to rules announced in August last year. In Hong Kong, capital gains are exempt from taxation and the corporate tax rate was cut to 16.5 percent.
China's Homegrown Private Equity
New tax laws and a little help from the government in Beijing are giving domestic private equity firms a big boost against foreign players
Hong Kong - The barbarians, it seems, have arrived at the Great Wall—and now they're coming from both sides. In China the top players in private equity—the proverbial barbarians at the gate—have been Carlyle, TPG, Warburg Pincus, and other foreigners. But lately those global heavyweights have had to contend with increasing numbers of homegrown rivals. "Local competition is our biggest challenge," says Wayne Tsou, head of Carlyle Asia Growth Partners.
Blackstone to Team With Shanghai on First Domestic Chinese Fund
By Cathy Chan
Aug. 15 (Bloomberg) -- Blackstone Group LP, the world’s biggest buyout company, agreed to set up a 5 billion yuan ($731 million) private-equity fund with Shanghai, the first venture between a global buyout firm and the Chinese government.
The Blackstone Zhonghua Development Investment Fund will be created with the newly formed government of Pudong New Area, Blackstone said in a statement today. The fund will target investments in Shanghai and the neighboring areas. China and Blackstone didn’t disclose the structure of the fund. Blackstone spokesman Peter Rose declined to comment beyond the statement.
Blackstone will be the first global private-equity firm to secure investment from a tier-one city government in China. The agreement signifies China’s endorsement of private equity to bolster corporate governance and profit, said Vincent Chan, co- founder of China-focused fund Spring Capital Asia Ltd. TPG, Carlyle Group and KKR & Co. haven’t established domestic funds.
“The Blackstone deal represents China’s willingness to use private equity to shake up the economy,” Chan said. “China’s future economy will be driven by its private enterprises.” Many first-time chief executive officers “will need help on matters from boosting corporate governance to acquisitions.”
Playing Catch-Up
Shanghai, home to the nation’s largest stock exchange, is playing catch-up with Tianjin, Beijing and Hong Kong to become a private-equity hub by proposing tax breaks to attract buyout firms.
The northern city of Tianjin became the first to allow buyout firms to set up in 2006. The Bohai Industrial Investment Fund Management Co., whose shareholders include Bank of China Group Investment Ltd., China Life Insurance Co. and China’s Social Security Fund, was the first domestic yuan-denominated private-equity fund set up in the nation.
Fang Fenglei, a Chinese partner at Goldman Sachs Group Inc., also is planning to raise a domestic private-equity fund for his Beijing-based Hopu Investment Management Co., after raising $2.5 billion from overseas investors.
Shanghai imposes tax rates of up to 35 percent on private- equity and venture-capital firms under limited partnership structures, and charges 20 percent on capital gains earned by non-executive partners, according to rules announced in August last year. In Hong Kong, capital gains are exempt from taxation and the corporate tax rate was cut to 16.5 percent.
Thursday, August 13, 2009
Eutanizing the US Economy
The idea behind Keynesian economics is simple: when the government expands the money supply, the value of the existing currency decreases and those holding it are motivated to maximize its buying power by spending it today as opposed to waiting to spend it with diminished buying power tomorrow. In effect, if forces money off the sidelines and into the economy.
The problem with this manipulation, however, is that it does not create capital but simply redistributes it and it cannot control the laws of supply and demand. This can create a lethal combination of wildly fluctuating prices.
We are starting to see the first signs of rapid price increases in commodities like aluminum and resin. Aluminum seems to have developed anti gravity properties as it is up nearly 40% this year in England and 35% in the United States with INCREASING supply and DECREASING demand. Your trip to the grocery store will start looking very different, very soon as these prices begin to be passed on to the consumer through the aluminum in soda cans (and sugar is short supply...good thing they don't use that any more!) to the plastic used in every wrapper or bag in a grocery store.
After more than two years on the sidelines, major players are coming back off the bench like Blackrock which is putting together its largest fund ever and whose CEO is calling for 1,200 in the S&P by year's end. Although the commercial real estate market is cratering, large equity sources are scooping up distressed and even stabilized assets in the middle of the night. This has all happened with in a matter of weeks. In speaking with a commercial real estate professional with almost 30 years of experience, this past August was described as the busiest he has ever seen.
Although most of the signs seem to be pointing towards a crash this fall, a surprise and epic turn upwards should not be counted out. With the total lack of transparency at the Federal Reserve, there is no limit we know of to the amount of paper and zeroes that can be pumped into the system behind closed doors.
What's this, sounding like a bull am I? The bull(sh#%) may be back but the economy is worse than ever, there are no jobs left and we are staring down the barrel of a hyperinflationary cannon with the potential to blow prices sky high. At least in Weimar, there was a limit to how fast they could print the marks. In this era, it takes but a few strokes of the keyboard to create a trillion here or there.
Like the famous race horse Eight Belles that broke two ankles down the stretch, was forced to finish the race and then euthanized just over the finish line...the US economy is being primed for one final run allowing capital to gather and prepare for its flight out of the country.
The problem with this manipulation, however, is that it does not create capital but simply redistributes it and it cannot control the laws of supply and demand. This can create a lethal combination of wildly fluctuating prices.
We are starting to see the first signs of rapid price increases in commodities like aluminum and resin. Aluminum seems to have developed anti gravity properties as it is up nearly 40% this year in England and 35% in the United States with INCREASING supply and DECREASING demand. Your trip to the grocery store will start looking very different, very soon as these prices begin to be passed on to the consumer through the aluminum in soda cans (and sugar is short supply...good thing they don't use that any more!) to the plastic used in every wrapper or bag in a grocery store.
After more than two years on the sidelines, major players are coming back off the bench like Blackrock which is putting together its largest fund ever and whose CEO is calling for 1,200 in the S&P by year's end. Although the commercial real estate market is cratering, large equity sources are scooping up distressed and even stabilized assets in the middle of the night. This has all happened with in a matter of weeks. In speaking with a commercial real estate professional with almost 30 years of experience, this past August was described as the busiest he has ever seen.
Although most of the signs seem to be pointing towards a crash this fall, a surprise and epic turn upwards should not be counted out. With the total lack of transparency at the Federal Reserve, there is no limit we know of to the amount of paper and zeroes that can be pumped into the system behind closed doors.
What's this, sounding like a bull am I? The bull(sh#%) may be back but the economy is worse than ever, there are no jobs left and we are staring down the barrel of a hyperinflationary cannon with the potential to blow prices sky high. At least in Weimar, there was a limit to how fast they could print the marks. In this era, it takes but a few strokes of the keyboard to create a trillion here or there.
Like the famous race horse Eight Belles that broke two ankles down the stretch, was forced to finish the race and then euthanized just over the finish line...the US economy is being primed for one final run allowing capital to gather and prepare for its flight out of the country.
Sugar Shortages Prelude to Further Food Supply Issues
This paired with our report yesterday regarding other agricultural commodity increases should be setting off the warning bells.
U.S. Food Giants Warn of Sugar Shortage: Report
(Reuters) - Large U.S. food companies said the country could "virtually run out of sugar" unless the Obama administration eased import curbs, the Wall Street Journal said.
In a letter to Agriculture Secretary Thomas Vilsack, the companies -- including Kraft Foods Inc (KFT.N), General Mills Inc (GIS.N), Hershey Co (HSY.N) and Mars Inc -- said there could be a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products, the paper said.
The companies warned they would hike consumer prices and lay off workers if the agriculture department did not allow them to import more tariff-free sugar, the paper said.
Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil, the paper said.
Sugar prices are poised to hit 30-year highs on a perfect storm of huge Indian imports and tight supplies.
The U.S. Department of Agriculture, Kraft, General Mills, Hershey and Mars did not immediately return calls seeking comment that were made outside regular U.S. business hours.
U.S. Food Giants Warn of Sugar Shortage: Report
(Reuters) - Large U.S. food companies said the country could "virtually run out of sugar" unless the Obama administration eased import curbs, the Wall Street Journal said.
In a letter to Agriculture Secretary Thomas Vilsack, the companies -- including Kraft Foods Inc (KFT.N), General Mills Inc (GIS.N), Hershey Co (HSY.N) and Mars Inc -- said there could be a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products, the paper said.
The companies warned they would hike consumer prices and lay off workers if the agriculture department did not allow them to import more tariff-free sugar, the paper said.
Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil, the paper said.
Sugar prices are poised to hit 30-year highs on a perfect storm of huge Indian imports and tight supplies.
The U.S. Department of Agriculture, Kraft, General Mills, Hershey and Mars did not immediately return calls seeking comment that were made outside regular U.S. business hours.
Tuesday, August 11, 2009
Just Another Day In Paradise
Today we see the economic crisis reaching a critical level in Poland where Polish Government Approves Asset Sales to Cover Swollen Deficit. We have already seen this here in Arizona where the State has put public assets up for sale.
U.S. Stocks Fall as MBIA Downgraded, Bove Says Banks to Retreat has shaken the markets up in tandem with the CIT hitting the fan once again as CIT Shares Fall on Bankruptcy Warning.
For the first time in 15 years the average size of new homes has shrunk in The Incredible Shrinking Home. Perhaps its due in part to the fact that according to the “Working Poor” report: Nearly 30 Percent of US Families Subsist on Poverty Wages.
Seems that the main streamers have caught on in Stocks: The Latest Fed Bubble. Welcome to the party...sorry, we're all out of kool-aid.
Keep your eye on food prices as headlines continue to pour in like Food Crisis Could Force Wartime Rations and Vegetarian Diet on Britons.
I think we are starting to see a pattern here in food prices bottoming. As Jim Rogers loves to point out, the fundamentals are strong in agricultural commodities. The world is growing, the number of farmers is steadily decreasing and the farmers that are in the business are having tremendous difficulty in securing financing to grow their crops.
Wheat
Corn
Orange Juice
Milk
U.S. Stocks Fall as MBIA Downgraded, Bove Says Banks to Retreat has shaken the markets up in tandem with the CIT hitting the fan once again as CIT Shares Fall on Bankruptcy Warning.
For the first time in 15 years the average size of new homes has shrunk in The Incredible Shrinking Home. Perhaps its due in part to the fact that according to the “Working Poor” report: Nearly 30 Percent of US Families Subsist on Poverty Wages.
Seems that the main streamers have caught on in Stocks: The Latest Fed Bubble. Welcome to the party...sorry, we're all out of kool-aid.
Keep your eye on food prices as headlines continue to pour in like Food Crisis Could Force Wartime Rations and Vegetarian Diet on Britons.
I think we are starting to see a pattern here in food prices bottoming. As Jim Rogers loves to point out, the fundamentals are strong in agricultural commodities. The world is growing, the number of farmers is steadily decreasing and the farmers that are in the business are having tremendous difficulty in securing financing to grow their crops.
Wheat
Corn
Orange Juice
Milk
Business School 101
A business school and Keynesian apologist classic is that running a deficit and accumulating a national debt is acceptable and innocuous because the largest holder of the debt is the Federal Reserve and Intragovernmental Holdings itself.
For those of you familiar with the ownership structure of the Federal Reserve, you understand that it is owned by private banks in "stock certificate form."
Who owns the Federal Reserve?
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.
As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."
The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
What happens when a country, corporation or person borrows money? Why they pay INTEREST of course! Rest well knowing that most of our debt is owed to the Federal Reserve, which is in turn owned by its members...therefore, any interest payments are going to the "owners" or member banks.
This is of course a controversial claim, however, we know we are not paying zero percent interest on our debt, that member banks receive a 6% dividend PER ANUM and we do not have the ability to audit the Federal Reserve's books.
Another business school classic is that printing money is irresponsible and only third world nations like Zimbabwe participate in such antiquated monetary policy. The western world has a much more clever scheme devised by simply using debt.
When one dollar is "borrowed" into circulation, it passes through the system roughly 26 times in effect, creating $26. With some creative accounting, we don't have to print, own or hold the money...we can just create it in an electronic account.
The best part of it is, the poor suckers that own those dollars don't understand why the standard of living for the middle class has gone down significantly (even though they are making slightly more money...with two sources of income...ravaged by purchasing power decreases) while over the past 30 years, the income of the top 1 percent, adjusted for inflation, doubled: the top one-tenth of 1 percent tripled, and the top one-one-hundredth quadrupled.
So what's the difference between borrowing more money into circulation and simply printing it into existence? By printing it, you don't have to pay interest. If the United States would have printed its deficits over the past 20 years it would have saved $6 trillion in interest payments.
For those of you familiar with the ownership structure of the Federal Reserve, you understand that it is owned by private banks in "stock certificate form."
Who owns the Federal Reserve?
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.
As the nation's central bank, the Federal Reserve derives its authority from the U.S. Congress. It is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute. Also, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."
The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
What happens when a country, corporation or person borrows money? Why they pay INTEREST of course! Rest well knowing that most of our debt is owed to the Federal Reserve, which is in turn owned by its members...therefore, any interest payments are going to the "owners" or member banks.
This is of course a controversial claim, however, we know we are not paying zero percent interest on our debt, that member banks receive a 6% dividend PER ANUM and we do not have the ability to audit the Federal Reserve's books.
Another business school classic is that printing money is irresponsible and only third world nations like Zimbabwe participate in such antiquated monetary policy. The western world has a much more clever scheme devised by simply using debt.
When one dollar is "borrowed" into circulation, it passes through the system roughly 26 times in effect, creating $26. With some creative accounting, we don't have to print, own or hold the money...we can just create it in an electronic account.
The best part of it is, the poor suckers that own those dollars don't understand why the standard of living for the middle class has gone down significantly (even though they are making slightly more money...with two sources of income...ravaged by purchasing power decreases) while over the past 30 years, the income of the top 1 percent, adjusted for inflation, doubled: the top one-tenth of 1 percent tripled, and the top one-one-hundredth quadrupled.
So what's the difference between borrowing more money into circulation and simply printing it into existence? By printing it, you don't have to pay interest. If the United States would have printed its deficits over the past 20 years it would have saved $6 trillion in interest payments.
Monday, August 10, 2009
CALPERS Takes 23.6% Decline on the Chin
23.6% is child's play. We have already seen Broadway partners default on the Hancock center in Boston which fetched less than 50% of what Broadway had paid just two years earlier. We will start to get into major trouble when core/trophy/class A properties with bellwethers like a major law firm or even state or federal governments see their tenants cut back on space needs.
Tanking Real Estate Values Take Toll on Pension Funds
Public pension funds are under enormous pressure to claw back a seemingly endless decline in the value of their real estate investments. The extent of the damage is revealed in the release of a few of the larger funds’ annual reports.
The nation’s largest pension fund, the California Public Employees’ Retirement System (CalPERS), has reported a litany of recent troubles.
The bellwether institutional investor reported that the value of total assets under management at the end of June was $180.9 billion, down from $237 billion a year earlier, or a drop of 23.6%.
Real estate values accounted for the biggest chunk of the decline, falling 35.8% during the period, followed by private equity with a 31.4% decline.
In July, CalPERS’ joint venture with Houston-based Hines defaulted on a $152 million mortgage secured by three office buildings in Emeryville, Calif. The buildings, totaling 814,000 sq. ft., are part of the 1.2 million sq. ft. Watergate office complex. A fourth building on the site is owned by a separate entity, Hines REIT, and is not part of the default.
Read Full Story
Tanking Real Estate Values Take Toll on Pension Funds
Public pension funds are under enormous pressure to claw back a seemingly endless decline in the value of their real estate investments. The extent of the damage is revealed in the release of a few of the larger funds’ annual reports.
The nation’s largest pension fund, the California Public Employees’ Retirement System (CalPERS), has reported a litany of recent troubles.
The bellwether institutional investor reported that the value of total assets under management at the end of June was $180.9 billion, down from $237 billion a year earlier, or a drop of 23.6%.
Real estate values accounted for the biggest chunk of the decline, falling 35.8% during the period, followed by private equity with a 31.4% decline.
In July, CalPERS’ joint venture with Houston-based Hines defaulted on a $152 million mortgage secured by three office buildings in Emeryville, Calif. The buildings, totaling 814,000 sq. ft., are part of the 1.2 million sq. ft. Watergate office complex. A fourth building on the site is owned by a separate entity, Hines REIT, and is not part of the default.
Read Full Story
Harry Schultz on the Bank Holiday
Harry Schultz in his June 24th, 2009 newsletter warned of impending bank holidays. He recently revised his forecast on August 7th, 2009 to point out that the FDIC will be reporting it's 2nd quarter results on August 25th 2009 and that investors should "stand by for a potential bank run and holiday on August 26th, 2009."Don't...count...this...scenario...out!
Sunday, August 9, 2009
Two Roads & The Invisible Crash?
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth.
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same.
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I--
I took the one less traveled by,
And that has made all the difference. - Robert Frost
As sure as the sun does rise and set every day, we are witnessing the decline of the US dollar as the world's reserve currency, the end of the United States reign as the world's largest economy (the European Union has already passed the US) and the beginning of the end to empire building from America. After World War II the United States was the last industrialized nation standing with its infrastructure intact and a choke hold on more than three quarters of the world's gold.
More than 60 years later, the industry has rotted from the inside out, the education rates have fallen to the point that less than half of all teenagers in major cities graduate high school and now the gap between rich and poor is the largest of any industrialized nation in the world.
The leaders of the United States are facing this inevitable reality and confronted with a very difficult decision regarding our economic fork in the road: take the road less traveled and correct our economic problems today or take the temporary and well traveled route away from our economic day or reckoning.
The only true cure to our present economic condition is to accept that consumption on personal and governmental levels must at the least match production and that all debts need to be defaulted on or repaid. This can only be done, however, when a country produces goods and services which in turn creates capital - not just currency or derivatives. This in effect necessitates a re-industrializing of the United States and an ultimately embracing a lower standard of living for the average American citizen. Not everybody can go to college and business/law school (didn't you know the JD is the new MBA?), live in a million dollar house and go to Europe every summer for vacation. There needs to be a middle class between the wealthy and poor.
From a political perspective, this scenario will be passed like a hot potato from one administration to the other. Irrespective of whether or not restructuring may be better for the United States, an administration will put this off as long as possible so as not to be known as the Romulus Augustulus of the United States. What they need to recognize is that this is not a 3-6 month or even year problem - it's a 30-60 year, multi geneartional challenge to completely rebuild the United States economy and the longer it is delayed, the more difficult the process will be.
Ben Bernanke, as a student of the great depression, has made it known time and again that he will do everything in his power to avoid deflation. With the absence of meaningful alternatives in borrowing money, he will continue to crank up and crank out monetized dollars and notes even if it means The Fed Buy's Last Week's Treasury Notes. The view that the current stock market rally is not sustainable is known by many, including Bernanke. Facing the reality that another crash may be imminent, the printing presses and zeroes on the keyboards are likely being maxed out to prevent this. Although the markets may crash, it may be invisible to the untrained eye (at first) and more likely that it is done through vastly diminished buying power when measuring the S&P 500 and DJIA in gold. It's a lot harder for the average American to put a finger on how their standard of living is going down and who is giving them the screw job when they see their bank accounts and iras going up (Monopoly board game effect). Mike Whitney, in Fed Laundering Money Through Big Banks Into The Stock Market supports the idea that the Federal Reserve is doing just this.
Civil unrest in town hall meetings, organized protests and public confidence on egg shells are are more than enough to scare the current administration and the Federal Reserve into delaying the inevitable through inflation which will in turn lead to hyperinflation and or a currency devaluation. Unfortunately, they are not looking for long term solutions but means to get through the day without the entire system collapsing. Faber's forecasts have emphasized the delay of the collapse but the increased magnitude of the economic fallout.
As scary as the future may be, think about it this way - it's all been done before throughout history and in your blood you carry the strength to endure passed on from your battle tested ancestors. It's time to embrace the change, save capital and recognize that there will be tremendous opportunities as the United States goes through its re birthing process. The mantra "cash is king" will be replaced with "capital is king!"
Just because the United States government may take the path that has been well traveled over time (inflation leading to hyperinflation) does not mean you have to follow. Take the less traveled, "yellow brick" road of gold and while you're at it, bring your "silver slippers" (the ruby slippers were silver in the original Wizard of Oz).
Friday, August 7, 2009
CDS Cheaper for Russia than California
We have all heard about the emergence of the BRIC nations (Brazil, Russia, India and China) as major economic forces to be reckoned with in the 21st century. Few saw their influence growing so strong so quickly.
Trading in Yuans and Real was merely the opening salvo for the emerging markets as now many are being deemed less risky investments than the "developed" i.e. Western economies by the world of finance.
Today we see that Russia Beats California as Default Swaps Favor BRICs, meaning the invisible hand of the market sees California as more likely to default on their debts than Russia. This is the same Russian economy plagued with fears of currency devaluation: Ruble Slumps on Devaluation Fears by Ruble Devaluation. The Ruble has been battered by 26% year over year against other major currencies including the U.S. Dollar.
Martin Armstrong describes this process of rapid decline and or ascension as a "phase change" and likens the process to boiling water as it heats up and remains water to the point that almost instantaneously it turns into vapor. If you have not yet read his latest work, check out How All Systems Can Collapse Overnight.
Trading in Yuans and Real was merely the opening salvo for the emerging markets as now many are being deemed less risky investments than the "developed" i.e. Western economies by the world of finance.
Today we see that Russia Beats California as Default Swaps Favor BRICs, meaning the invisible hand of the market sees California as more likely to default on their debts than Russia. This is the same Russian economy plagued with fears of currency devaluation: Ruble Slumps on Devaluation Fears by Ruble Devaluation. The Ruble has been battered by 26% year over year against other major currencies including the U.S. Dollar.
Martin Armstrong describes this process of rapid decline and or ascension as a "phase change" and likens the process to boiling water as it heats up and remains water to the point that almost instantaneously it turns into vapor. If you have not yet read his latest work, check out How All Systems Can Collapse Overnight.
Thursday, August 6, 2009
Current Market Mirroring 1930s With 0.8 Correlation
According to Ron Coby, an investment manager at Coby Lamson in Oregon the current stock market is mirroring the market of the 1930s with a 0.8 correlation.
This is in fact astounding as Graham Summers points out in his article "in finance, you’re lucky if you get a correlation above 0.6. (gold and the dollar are only 0.28 inversely correlated). A 0.8 correlation is virtually unheard of. But that’s exactly how closely today’s market is mirroring that of the ‘30s."
Read Graham's latest "Why Another Stock Market Collapse Could Be Imminent."
So if we are in fact at the top of the next peak on the financial roller coaster that is the second great depression, the folks in the front few cars are probably just now hanging over the next precipice. Deutsche Bank in their latest report About Half of U.S. Mortgages Seen Underwater By 2011 seems to be leading the way.
The problem with the next trough, as opposed to those the US and World economies have endured in the past, is that the downward trajectory has no bottom as the gravity of the world of debt we live in is pulling us all towards the core of default, currency devaluation and conflict on personal and governmental levels. There are no savings, there is no productive capacity and no capital effectively rendering "capital-ism" dead.
In 2007 and 2008 most could not put a finger on what was weighing on them much as a horse forgets the load it carries on its back. Americans had come to a state of complacency for so long and had suffered from delusional existence: as Thomas Paine put it, we developed and felt "A long habit of not thinking a thing wrong gives it a superficial appearance of being right."
That is changing and changing quickly in 2009. Anger and despair are at boiling points here in the United States as evidenced by the explosive town hall meetings and disturbing murder/suicide wave that has hit this summer. These emotions build up on a national level to the point that powder kegs of frustration mount creating dozens of Archduke Ferdinands across the globe.
Let us pray that we do not await a similar fate as our forefathers did in the years leading up to 1939 and avoid conflict through our tradition of "Common Sense" here in the United States. Reason and Peace shall be our guiding light.
This is in fact astounding as Graham Summers points out in his article "in finance, you’re lucky if you get a correlation above 0.6. (gold and the dollar are only 0.28 inversely correlated). A 0.8 correlation is virtually unheard of. But that’s exactly how closely today’s market is mirroring that of the ‘30s."
Read Graham's latest "Why Another Stock Market Collapse Could Be Imminent."
So if we are in fact at the top of the next peak on the financial roller coaster that is the second great depression, the folks in the front few cars are probably just now hanging over the next precipice. Deutsche Bank in their latest report About Half of U.S. Mortgages Seen Underwater By 2011 seems to be leading the way.
The problem with the next trough, as opposed to those the US and World economies have endured in the past, is that the downward trajectory has no bottom as the gravity of the world of debt we live in is pulling us all towards the core of default, currency devaluation and conflict on personal and governmental levels. There are no savings, there is no productive capacity and no capital effectively rendering "capital-ism" dead.
In 2007 and 2008 most could not put a finger on what was weighing on them much as a horse forgets the load it carries on its back. Americans had come to a state of complacency for so long and had suffered from delusional existence: as Thomas Paine put it, we developed and felt "A long habit of not thinking a thing wrong gives it a superficial appearance of being right."
That is changing and changing quickly in 2009. Anger and despair are at boiling points here in the United States as evidenced by the explosive town hall meetings and disturbing murder/suicide wave that has hit this summer. These emotions build up on a national level to the point that powder kegs of frustration mount creating dozens of Archduke Ferdinands across the globe.
Let us pray that we do not await a similar fate as our forefathers did in the years leading up to 1939 and avoid conflict through our tradition of "Common Sense" here in the United States. Reason and Peace shall be our guiding light.
Wednesday, August 5, 2009
Report From The Trenches
Sitting in on a "state of the market" presentation yesterday regarding commercial real estate, a power point slide was put up highlighting the revenue for one of the industry juggernauts, Holliday, Fenoglio & Fowler. This publicly traded, national investment sales firm is rumored to be off almost 90% in revenue from just two years ago. The terrifying aspect of this is that business is not slated to improve for at least two to three years in the industry and is expected to never return to the level of volume as seen in 2005-2007.Unfortunately, this example is no exception but rule. The industry's largest players, CB Richard Ellis and Jones Lang LaSalle are bloated with debt after a costly merger and acquisition period and smaller, regional players like GVA Advantis out of Virginia are closing down for good.
At the helm of GVA was Washington, D.C. real estate mogul Jeff Neal - former co-founder of Monument Realty, the now infamous partner of Lehman Brothers in the Watergate Hotel deal. For ten years Monument was the hot hand in the region led by the unflappable Neal and his partner Michael Darby.
In a recent interview with Biz Journals Neal was humbled in this candid excerpt:
"For weeks, months, I’ve been not sleeping and kicking myself for not doing better,” Neal said, shaking his head quietly at a conference room table in the company’s 11th floor offices along Pennsylvania Avenue. But, short of designing and patenting a crystal ball that could predict the uniquely unpredictable economic collapse, he’s not sure what he could have done differently.
The lesson from all of this is that the economy, the deals and the players are changing and even the most well heeled veterans are forced to cut their teeth all over again. Foresight, determination and the courage to think differently are all there is to fall back on.
As professionals in all disciplines of real estate continue to leave the business, it has gotten so bad that even veterans of the industry with graduate degrees are unable to obtain volunteer positions.
Although some did see the collapse coming, it's no time for bragging rights but a moral call to be courageous in educating others on what is to come. However, like on an airplane going down, secure your own oxygen mask first before assisting your neighbor.
Nassim Taleb On The "Triplets"
Throw in in Robert Rubin and Alan Greenspan...for good measure include Warren Buffet because I'm sick of hearing him pussyfoot both sides of the aisle.
Nassim Taleb Rips Summers, Geithner, Bernanke (VIDEO)
By: Sam Stein
One of earliest and most outspoken experts who warned of disaster before the nation plunged into an economic crisis called out the president Monday for turning to advisers who either missed, fundamentally misunderstood, or contributed to the financial industry meltdown.
Nassim Taleb, author of the book "The Black Swan," took some highly personalized swipes at what he deemed "the triplets" -- Barack Obama's chief economic adviser, Larry Summers, Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernake -- during an appearance on MSNBC's "Morning Meeting with Dylan Ratigan."
"Let's look at them," said Taleb. "They don't seem to understand risk. They have their models and were blinded by their models. The first person not to understand risk is Larry Summers ... [L]ook at Harvard's finances, all right? He is going to do to us what he did to Harvard?"
"Second one, look at Geithner," he added. "In the rare instance in which you have to look at someone's behavior, the gentleman's house, he couldn't understand the risk of the real estate market? That the house could drop in value? Look at him. He is stuck with his house. Look at the numbers. You can see a lot of jokes on the way with someone with these mortgages."
"The third person is Bernanke," Taleb said. "We're giving more power to the Fed, who got us here?"
Read More Here: http://www.huffingtonpost.com/2009/08/03/nassim-taleb-rips-summers_n_249972.html
Nassim Taleb Rips Summers, Geithner, Bernanke (VIDEO)
By: Sam Stein
One of earliest and most outspoken experts who warned of disaster before the nation plunged into an economic crisis called out the president Monday for turning to advisers who either missed, fundamentally misunderstood, or contributed to the financial industry meltdown.
Nassim Taleb, author of the book "The Black Swan," took some highly personalized swipes at what he deemed "the triplets" -- Barack Obama's chief economic adviser, Larry Summers, Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernake -- during an appearance on MSNBC's "Morning Meeting with Dylan Ratigan."
"Let's look at them," said Taleb. "They don't seem to understand risk. They have their models and were blinded by their models. The first person not to understand risk is Larry Summers ... [L]ook at Harvard's finances, all right? He is going to do to us what he did to Harvard?"
"Second one, look at Geithner," he added. "In the rare instance in which you have to look at someone's behavior, the gentleman's house, he couldn't understand the risk of the real estate market? That the house could drop in value? Look at him. He is stuck with his house. Look at the numbers. You can see a lot of jokes on the way with someone with these mortgages."
"The third person is Bernanke," Taleb said. "We're giving more power to the Fed, who got us here?"
Read More Here: http://www.huffingtonpost.com/2009/08/03/nassim-taleb-rips-summers_n_249972.html
Dollar Devaluation: What Isn't Being Reported
Again, we hear about an imminent dollar devaluation. All of the below is news to many Americans as it has not been reported here. This event could be inclusive of the sale of public assets. In the italicized portion below notice the choice of wording using "limited" as opposed to "avoided" when speaking about a devaluation.
Fading Europe Aids China's US Ties
By Francesco Sisci
China, America’s largest creditor with almost US$2.2 trillion of reserves, has the largest say among foreign countries in the destiny of the greenback. In America, many economists reckon that a devaluation of the dollar could improve the overall balance of banks and credit institutions and could help the country to get out of its present financial crisis.
China is scared of a possible dollar devaluation, which would devalue its dollar-denominated assets. However, even this possibly major source of friction can be avoided. In almost-bankrupt California, Republican senatorial candidate Bill Mundell says that dollar devaluation could be limited if the state were to privatize public assets to replenish its coffers. This plan could be extended nationwide and help turn around the crisis, argues Mundell - something that would be welcomed by China and could draw the two countries even closer together.
Read More Here: http://www.atimes.com/atimes/China/KH06Ad01.html
Fading Europe Aids China's US Ties
By Francesco Sisci
China, America’s largest creditor with almost US$2.2 trillion of reserves, has the largest say among foreign countries in the destiny of the greenback. In America, many economists reckon that a devaluation of the dollar could improve the overall balance of banks and credit institutions and could help the country to get out of its present financial crisis.
China is scared of a possible dollar devaluation, which would devalue its dollar-denominated assets. However, even this possibly major source of friction can be avoided. In almost-bankrupt California, Republican senatorial candidate Bill Mundell says that dollar devaluation could be limited if the state were to privatize public assets to replenish its coffers. This plan could be extended nationwide and help turn around the crisis, argues Mundell - something that would be welcomed by China and could draw the two countries even closer together.
Read More Here: http://www.atimes.com/atimes/China/KH06Ad01.html
Heading For a Crash This Fall?
The above chart tracks the majors in derivative exposure - measured in TRILLIONS.The true kingmaker in all of finance is JP Morgan with connections to Morgan Stanley and Chase. Goldman Sachs is a headfake.
The markets are up almost 50% from their March lows. Does anybody remember the term, bubble?
Five Reasons the Market Could Crash This Fall
By Graham Summers
1) High Frequency Trading Programs account for 70% of market volume
2) Even counting HFTP volume, market volume has contracted the most since 1989
3) This Latest Market Rally is a Short-Squeeze and Nothing More
4) 13 Million Americans Exhaust Unemployment by 12/09
5) The $1 QUADRILLION Derivatives Time Bomb
Read Full Text Here: http://seekingalpha.com/article/153555-five-reasons-the-market-could-crash-this-fall?source=hp_mostpopular
Tuesday, August 4, 2009
China May Become Top "Power Money" Consumer in 2009
With fewer than one ounce of gold per person that has been mined by humanity over the course of history, there are a lot of folks with severe exposure in any currency crises or collapse. The illustration above is an easy way to envision the pyramid scheme that has become the world economy. The question is, is your head up in space or are you down here on earth?On a pure dollar basis, gold has been estimated to have a true value of somewhere between $1,500 and $2,500 right now. It has been discounted through short sales and other plays to help maintain the integrity of other investment vehicles.
This was attempted before where gold was pinned at $35 an ounce, however, dollars continued to be printed faster than gold was added to the stock. Therefore, those recognizing the arbitrage opportunity of purchasing gold exchanged their discounted dollar bills for the real deal. This caused a crises where in the early 1970s the gold window was closed all together and the US treasury would no longer exchange gold for dollars.
Trusting in the pure fiat system is tantamount to relying upon snake oil pitchmen as opposed to doctors in curing an ailment. China and India as the world's largest consumers of gold seem to understand its value. Listen to our founders and get educated.
All the perplexities, confusions, and distress in America, arise, not from defects in their Constitution or Confederation, not from a want of honor or virtue, so much as from downright ignorance of the nature of coin, credit, and circulation. -John Adams to Thomas Jefferson in 1787
Sino Gold Mining Plans to Double Production by 2012
By Jason Scott
Aug. 3 (Bloomberg) -- Sino Gold Mining Ltd., owner of China’s second-largest gold mine, plans to double production of the precious metal by 2012, helped by the start of new mines.
The Eastern Dragon mine, to start in late 2010, will produce an average of 90,000 ounces a year at a cost of $125 per ounce for at least five years, Chief Operating Officer Cobb Johnstone said today at the Diggers and Dealers conference in Kalgoorlie, Western Australia. He didn’t say what the targeted output was, or the comparison for the doubling projection.
“It starts to give us some pretty attractive margins,” Johnstone said of Eastern Dragon, in Heilongjiang province. “Gold price margins in 2009 should be close to $500 an ounce.”
China, where Sino Gold is targeting to start as many as five gold mines to add to its Jinfeng, White Mountain and Eastern Dragon projects, may overtake India as the world’s top gold consumer this year, the World Gold Council said July 24.
Sino Gold rose 2.8 percent to close at A$5.44 in Sydney trading. Gold has gained 8.3 percent this year, and traded at $954.83 an ounce at 4:37 p.m. Singapore time.
The company wants to cut production costs to $300 an ounce, Johnstone also said. The company produced gold at an average cost of $391 an ounce in the second quarter.
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