TDI Episode 52: Supercapitalism

April 14, 2008

Guest: Robert B. Reich, Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. We discuss the economy, politics and his latest book, Supercapitalism.

Professor Reich has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism.

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His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Professor Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s “Marketplace” are heard by nearly five million people. (Subscribe to Robert Reich Commentaries in iTunes)

In 2003, Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

We discuss:

  • Supercapitalism – The Transformation of Business, Democracy and Everyday Life.
  • People are taught all along that “the big guys” bend the rules to get wealthy…Why not them…?
  • Harry Dent theory 2009 – What is the chance that we are entering a long term recession? Depression?
  • WHERE IS THE NEXT PROBLEM?
  • Via Barry Ritholtz: “Who should Obama replace Bernanke with?”
  • The worldwide food shortage, how can we protect ourselves (fill them bunkers!)
  • Seems to be a transparency problem today … people scratching their heads about what is going on.
  • Unions..? Any good any more? Do they serve any purpose?

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The ZachZone focuses on: Chipotle Mexican Grill Inc. (CMG), Digital Domain (DTWO), American Water Works Co. (AWK), and Intrepid Potash (IPI)

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Stocks Discussed in this episode: Capital One Financial (COF), Washington Mutual Inc (WM), Wachovia Inc (WB), Bear Stearn (BSC)

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Federal Reserve Actions: Goose Eggs

March 13, 2008

Remember that game we used to play as children? Now the Fed is playing: Cut, Cut, Cut, Cut, GOOSE, Cut, Cut – GOOSE!

Below is a great chart from Investor’s Business Daily that illustrates how the recent actions, policies and interventions have helped(?) the equity markets. While the Fed’s primary goal has been to restore liquidity to the credit markets, the collateral damage from the sub-prime and housing malignancy has negatively effected the dollar and equity markets. Nothing new here.

If we were grading the Fed on originality: A-
If we were to give a grade on effectiveness: D-

So far, as far as the market is concerned, the Fed Plan(s) have come up as Big Fat Goose Eggs !

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Remarks from the March 4, Independent Community Bankers of America Annual Convention in Orlando, Florida that are rather frightening:

A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal.

50%? 50%? So, they are showing a 40% reduction in value for the subprime debt and another 10% for the miscellaneous administration.iTunes Subscribe

With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. Moreover, as the time to liquidation increases, the uncertainty about the losses increases as well. The low prices offered for subprime-related securities in secondary markets support the impression that the potential for recovery through foreclosure is limited.

The loss rate will likely Read more

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