Thursday, March 5, 2009

Lots of stories, none good.

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.


qadi said...

Explica how banks are not totally f'ed if GE needs a bailout?

Btw, STT just raised new debt issue with FDIC backing: reeks of desperation.

As for value, the best I've seen, so far, is the materials space, you know, the sector that Obongo promised to developed but never did, since he had to shovel more cash into the AIG covert recursive naked shorting machine.

Hopefully, north and south korea go to war, and CNX will go back to 40.

D said...

qadi -

I love my bear-brother MTG, but I always have to remind him to tone down the bullish nonsense. There might be a value case to be made based on past earnings, but if it's not TOTALLY obvious now...the destruction of money is happening far faster than the treasury can sell debt.


A margin call on the capital structure of the entire system. MTGBRO is picturing the equity market as somewhat removed from the debt market. In reality, he should be evaluating the entire capital structure of the globe and realize it is no different in structure from the CDOs he's so familiar with. The super-senior tranche being the USD which is backed by the tax revenues of the US tax payer.

Caveat - The market doesn't go up/down in a straight line...we'd leave too much money on the table if we let that happen!

MTGSPY said...

when we the wretched poor huddled together shorting the first 1,000 shares of indymac 2 years ago, you did recall we were only with the Che's spirit, were you? What makes you think we changed since then? LOL.

qadi said...

Well, I can positively contribute now:

A well-informed friend of mine knows someone who had dinner recently with TurboTimmy: turns out that his position is NOT in jeopardy AT ALL and that, in fact, he's having a hard time getting confirmations etc given the irascible congress yaddya.

Those wishing for Darth Volker... well, let's just say Quebec will be independent before that happens.

MTGSPY said...

Ask D why Volcker is popular meecheegan. :)

Greenie said...

"he should be evaluating the entire capital structure of the globe and realize it is no different in structure from the CDOs he's so familiar with. The super-senior tranche being the USD which is backed by the tax revenues of the US tax payer."

Hey, hey, hey.....I read that b4.

MTGSPY said...

Not everything is backed by the taxpayer. I still have to pay to buy toothpastes. And JNJ 45 calls. :)

D said...


My buddy also independently observed that the entire financial system is structured like a CDO and shall suffer a similar fate in due time.

qadi - Not for one minute did I believe we would see Volker. The infamous MIers are a foreclosed paralegal and her boyfriend who know everything. I remember in the early days of TF when the paralegal had never traded a single share and was giving trading advice to someone on the board. I PMed the person to make sure they were not led astray. The nonsense got so far out of control that I pretty much lurk everywhere now except for the hideout and greenie's bunker.

As far as how long have I been a bear?

I turned bearish on the MARKET on Thursday, July 26, 2007 1:56 AM to be exact. That is when I went to cash and I did not start shorting heavily until September 27, 2007.

I was hibernating uncomfortably long until then. I played long energy/commodities/gold/exchange stocks before then. Bearish on real estate since 2005. I sent out a couple emails to clients with vested interests in CFC to divest in February/March '07 whenever it was that Cramer pumped the MER buyout rumor.

ps - karl is buying physical gold now.

D said...

my buddy greenie that is

MTGSPY said...

label me naive, but the action this morning so far looks insanely bad. For #s already this low it is worthwhile noting.

Greenie said...

treasury got another Goldman guy -

Greenie said...

"label me naive, but the action this morning so far looks insanely bad. For #s already this low it is worthwhile noting."

One day of pump, three days of selling. Has anything changed?