SubscribeTDI Podcast 98: Why is Buffett discussing Venereal Disease?
March 2, 2009 12:45 am
Guests: Vad Yazvinski and Mish Shedlock talk about all that is wrong with our banking system. Bailouts and bustouts, preferences and preferreds. It is a horrific mess. We review Buffett’s annual letter as well as the reasons behind why the U.S. is keeping Citibank (C) alive.
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LISTEN TO PODCAST NOW | LISTEN @ ZUNE - @ iTUNES
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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. He is a regular guest on TDI Podcast and has helped thousands of listeners protect their money during these very turbulent financial times. As Mish tells us, “Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.”
See: Why Citgroup (C) will not get nationalized – A $3 Trillion Mistake
Vad Yazvinski likes buying stocks that offer growth at a reasonable price. He does not tolerate losing positions for too long. He is a permanent student of economics and of the investing world who is not only unafraid of challenges but who spends his free time looking for them. According to Vad, “I intend to stay that way, because, as the quote I cited above says, I know that while I might not be able to change my past, it is certainly within my powers to make a brand new ending.”
Stocks mentioned in this episode: Bank of America (BAC), Citigroup (C), Royal Bank of Scotland (RBS), Goldman Sachs (GS). Lehman Brothers (LEHQ), AIG (AIG), Fannie Mae (FNM), Freddie Mac (FRE), Wells Fargo (WFC), Preferred Trust (PFG)
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Click HERE for the 2008 Berkshire Hathaway (BRK.A) Annual Report (pdf). If you want to see the last 20 years of annual letters, click HERE.
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4 Responses to “TDI Podcast 98: Why is Buffett discussing Venereal Disease?”
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Good episode, you turned me on to Mish's excellent blog which I read daily now.
While we are bashing gurus though, what about Peter Lynch? I read on MSN a few weeks ago that he owned both AIG and Fannie back in September.
barrrrrr, buzzer says your wrong. US will partialy nationalise banks and insurance co's especially those that can destroy other companies and destory other peoples wealth. Government has decided to preserve wealth and encourage keeping those affloat which probably dont deserve it. Why ? cause thats what England is doing.
They have no idea if it will work but they will find out in around twelve months.
The government is preserving wealth? By "government", you mean the taxpayer, you and me, but we don't get a choice in the matter. We're stuck with the crap being bailed out that caused the mess. The banks are broke, and our government has a history of making a mess of things like Iraq, social Security. I would not put my faith in them to solve problems they allowed to happen.
Consider this:
The Government Relief Index, created by the Nasdaq OMX to measure the performance of the 21 stocks that received at least $1 billion in emergency government funding, is down a whopping 58 percent.
And that’s just since January 5, when the index started. By comparison, the S&P 500 Index is down 25.9 percent over the same 60 days, the Dow Jones Industrial Average 25.4 percent and the Nasdaq 20.4 percent.
Granted, the QGRI has a bit of a disadvantage compared to the other measures – it’s loaded with shares of banks, insurance companies and General Motors. The worst-performing holding in the QGRI is Huntington Bancshares, down 86.7 percent since January 5, followed by Citigroup, down 84.7 percent. Bank of America and AIG are both off 77.7 percent.
A single stock in the QGRI is positive during the period – Morgan Stanley, which is up 7.1 percent. Northern Trust, down 9.1 percent, and Goldman Sachs, off 10.4 percent, are next.
Yours and my tax dollars at work.
If you own assets and you use these asset as collateral so you can borrow money at say 3% interest and then you lend money out to customers at say 6%. If your customer cannot pay his loan and his assets are worth much less than the money you lent them how do you pay back the money you borrowed when your own assets are worth much less?
You see the problem, most banks borrow using tier 1 cash to lend money out however what happens when the tier 1 banks assets collapse in value? You have a totaly unworkable situation right throughout your lending system. Without the banks getting more cash to lend and to go about their business it doesnt matter what the assets are worth cause without liquidity the banks cannot go about their business which is to lend to businesses and consumers.
Without these cash injections from the government you will be left with a system that wont or cannot lend to anyone. Eventually when the situation stabilizes the assets will begin to inflate in value provided the whole system does not collapse.