SubscribeTDI Episode 71: The Dick and The Lehman
August 24, 2008
Guest: Mish Shedlock and Andrew discuss Fannie, Freddie and the market direction. We take apart Ladenburg Thalmann’s banking analyst Dick Bove and look at Cramer’s recent discussion about the Fed, SEC and the markets.
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. As Mish tell us, Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
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We are both amazed that Bove expects Lehman Brothers (LEH) to “shrink about $100 billion off of its assets” and that the investment bank is “stable enough to go through a tough environment.” Bove, speaking at the Reuters 2008 Investment Outlook Summit in New York on Wednesday, also said that it will be at least “three to four years” before Lehman is once again a “vibrant, growing company.”
What is really confusing is that Bove has recently upgraded Lehman. It is important to remember that a few months ago, he had suggested that we should all start to once again buy financial stocks as they have hit bottom. EXCELLENT TIMING, MR. BOVE - What should we do now?
Andrew also looks at the Cramer commentary from this week and how Cramer is suggesting that the market is rigged. If this is the case, how does buy-and-hold make any sense???
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Stocks Discussed: General Motors (GM) Ford (F) Lehman Brothers (LEH) Citigroup (C) Wachovia (WB) Washiongton Mutual (WM) Capital One Financial (COF) MasterCard (MA) Potash (POT) Mosiac (MOS) Freddie Mac (FRE) Fannie Mae (FNM)
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The Steak is Perfect, but The Big Apple is Rotten
August 12, 2008
This is way overdue. I have been writing this over the past few weeks and have been researching New York’s financial woes. This is definitely on my watch list… But truth be told, my travel plans have prevented me from getting this posted. So, in light of the recent announcement by Mayor Bloomberg, here is the start to my lunatic fringed discussion about New York’s coming problems.
(Now, I am looking for ways to short this for profit. I am not coming up with good answers just yet..more to come)
Steakous-Interruptous
I sit and write this in the center of the action. Sunday night in the Big Apple and the buzz at Rue 57 is high. This is one of my favorite French Bistro style restaurants on par with the likes of Balthazar, Les Halles and others that serve superb steak and the freshest seafood - so fresh that you may need to slap it ! 
After mulling the great choices, I think that I will order a standard, Steak pomme frits au poivre. (Steak with a green peppercorn sauce and fries). Usually this is a New York strip but here it is a mouth pleasing sirloin. The preparation is simple, crusted with peppercorns and then served with a brown sauce finished with a dash of brandy and saturated with green peppercorns.
Somehow I have always felt this is the perfect combination as both the sauce and the meat dramatically enhance each other. To be perfectly honest, if this had to be my last meal, it would be just fine. I mean, unless something is really off, you can’t go wrong with this. So, if you have never had this dish, I highly recommend it at this particular restaurant. Just add a glass of your favorite Cabernet or Merlot and life will slow down be perfect.
While this was a wonderful memory, the fact that it appears that New York is about to have some major financial problems cannot be avoided. MSNBC is reporting:
New York Gov. David Paterson is summoning lawmakers into an emergency session in mid-August to deal with a “mammoth collapse in revenue,” including a 97 percent drop in banking taxes from a year ago. He ordered a hiring freeze and called for a $1.23 billion cut in state spending that could affect such things as colleges and hospitals. He has also proposed leasing state roads, bridges and tunnels as well as the lottery to outside companies.
The problem is much greater. Selling the Brooklyn bridge and the tunnels may sound funny, but this is done all of the time. In the world of finance don’t they do this through revenue bonds? Sure, but the problem is that New York will need to sell off a revenue producing assets and one that may be financed through Municipal revenue bonds. But this is highly improbable.
Economists are warning of further revenue losses in the months ahead that could force lawmakers in many states to reopen their budgets and make midyear cuts.
Don Boyd, a public policy researcher with the Rockefeller Institute of Government in New York, said states will face the second wave of lost revenue next year when residents and businesses file tax returns reflecting their heavy losses on the stock market.
“You should expect significant proposals from governors, certainly for spending cuts, probably for more tax increases and certainly for more gimmicks,” he said. “And I’m sure you’ll see hiring freezes and layoffs.”
With that, how best to position a portfolio for profit and/or protection with this potentiality? Certainly the use of insurance through MBIA, FGIC, or AMBAC does not necessarily mean that holders of bonds are safe. In fact, a common misnomer as the interest is protected, not the principal.
Just recently, the CEO of upscale restaurant chain Smith & Wollensky was on CNBC explaining how New York is a different place than any other part of the country. In fact, he is predicting that there are no problems as he sees it with the foot traffic and the fact that people will still pay to eat. Yet, he forgets that now is the time to become cautious as the foreign money x-factor along with the confluence of factors that will bring in a nasty slowdown for the state.
Note: No Positions as of now
That Sound? The FDIC Insurance Suck
August 10, 2008
According to Meredith Whitney of Oppenheimer, there is a huge amount of uninsured deposits at many of banks which could soon be causing a huge problem. If you think about it, it makes sense. As time goes on, more and more money will be moved from bank to bank as depositors become more concerned about the amount of money they are insured for. Essentially, money will be spreading around and:
- Fewer people qualifying for mortgages
- Banks recapitalizing and not providing credit
- Wachovia 35% uninsured
- Capital with be flowing from weak hands to strong hands
- People who need capital/credit will not get it, those that don’t, will.
- Available credit for consumers will shrink
- Some financial stocks will revisit lows
Think about the above list for a moment. What I think is the most interesting takeaway here is the fact that money will be moving out of banks at a very fast pace if we continue to see banks taken over by FDIC. This is because it will actually be detrimental for the FDIC to rescue Read more
The Housing Bill: Uncle Sam is moving into the spare bedroom
July 28, 2008
Well, over the weekend the Housing Bill was passed by a 72-13 vote in the Senate. Now, we wait for President Bush to sign and all will be fixed it seems. Yeah right !
It must have been an interesting conversation that the Senators had when they discussed how the U.S. government would now be partners with homeowners their home’s future price appreciation, as long as they take a deal they cannot refuse. To be honest, I think it is unconscionable that the the U.S. government is now going to “own” a portion of the greatest asset that most people will ever have.
Of course that is only after lenders “volunteer” to write-off a portion of what they are due to help out borrowers. Also, with that, Senators also asked Santa for a new train set and a puppy Read more
TDI Episode 67: The #1 Read Investing Columnist
July 25, 2008
Guest: Jim Jubak. MSN Money and Andrew discuss how to spot the end of a bear market. We also review the financial stocks and Andrew provides insight in the Main-stream-media. (MSM)
I will admit it; I am in quandary. Do we really know what is going on? Do the newspapers, magazines and site that are providing us with the latest business news and insight know what is going on? How did the Holy-19 get on the list and why?
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Jim Jubak is the senior markets editor for MSN Money. Previously, he served as senior financial editor at Worth magazine and as editor of Venture magazine. Jubak was a Bagehot Business Journalism Fellow at Columbia University and has written “The Worth Guide to Electronic Investing“ and “In the Image of the Brain: Breaking the Barrier Between the Human Mind and Intelligent Machines.”
Jim is also the #1 read investing columnist of the web, according to Neilsen’s.
As an investor, he says he believes the conventional wisdom is always wrong — but that he will nonetheless go with the herd if he believes there’s a profit to be made. His column, Jubak’s Journal, appears on MSN Money every Tuesday and Friday.
Also, it appears that in December 2008, there is a book coming that explains how Jim has been able to rack us those amazing gains on an annual basis. The Jubak Picks: Based on The 10 Year Stock-Picking Track Record That Has Returned More Than 300%
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The ZachZone Stocks: GT Solar International, Inc. (SOLR), China Distance Educational Holdings (DL)
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Stocks Discussed in this episode: U.S. Bancorp (USB) , Wells Fargo & Company (WFC), Wachovia (WB) , Adobe (ADBE), ITT Educational Services, Inc. (ESI) , Devon Energy Corporation (DVN) , Pepsi (PEP), Washington Mutual (WM), AECOM Technology Corporation (ACM),
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