With much lighter load in my portfolio, I feel finally less pressure to offer some serious thinkings for the weeks ahead.
1. GE - completely surrounded with no escape. They will get government "cooperation" and will trade like C. Impact:
a. 401ks/pension plans - nuff said.
b. insolvent CDS writers: The "fundamentals" writer such as insurance companies, who didn't hedge as effectively as the hedge funds and GS of the world. Typically run by eggheads, these would go to government for another round of handout. Names? Just throw a few dart and one will hit - PRU? HIG? AIG? (just kidding on the last one).
2. Chinese did the right thing - no explicit stimulus. US has trapped itself.
a. Many argues pushing the "demand" side (rebate checks, shovel-ready jobs) is the way to go. The reality is that "supply" or "demand" side are both constrained by the fact that only about 10% of the money will come back as consumption, and the rest will go paying off debt. In fact, contrary to gov't mantras: the less money someone has at this point, the more likely he/she uses the stimulus to pay off debt. They see this as a "source" of their ongoing problems recently. Private polls and recent underground studies have confirmed that.
b. Of course some eggheads in Obama cabinet realized this as well and instead of calling it "spending" bill, called it "National Investment Whatever" Act. If I must guess, the "investment" content vs. the "spending" content is about 1:5 at the most. No bills go out without a debate and those debates invariably demand the "faster" cure, which is chronically over the ages perceived to be the "spending" part.
c. I don't advocate tax cuts (supply siders). Why? I don't believe in Jesus. Ok, just kidding - aside from my disdain of the neo-cons and christian fanatics, such thing does not address the current situation, or too slow to do anything at the moment.
So the Chinese have figured it out, and Obama did not in the stimulus front. Therefore some economy will grow and some will absolutely falter. Decoupling? By definition, if two people committed two opposite acts, you will expect opposite results, hao bu hao?
3. Misconception about health care and education. There are some hopes that Obama will correctly address issues in this space, that people pay too much for too little. Where's the red meat? The for-profit education sectors - which has not fallen nearly as much as the health-care insurers/providers. The executives in these two sectors in many cases were extracting 200% - 300% more money than their counterparts in C / AIG / ABK. Don't believe me? Then do your own research and let me know when you're ready for another raid. :)
4. There have been ill developments on the "private capital" stories that I have shared a few weeks back, about them buying portfolios that the insolvent banks could no longer hold due to lack of capital. I have received news that about $100B of this will be disbanded for "other" use in 2 weeks time, to my disappointment. In my opinion, these were the last hopes of actually clearing the market in any significant way, and the administration has failed to follow through their promises in lieu of political agendas. While the impact may seem muted initially, the long term hit will be felt around may-june, in ways that I could not conceive beyond further chronic stock weaknesses.
Until then be well. Don't eat too much beef.
The right enemy
5 years ago