Here are some key takeaways from articles I outlined today. I could do this on a somewhat regular basis if anyone is interested. I outline articles daily and archive them anyway (given I have the time to do so). They don't show up here in an outline format (spacing, tabs).
Big banks repay bailout money:
I. Big banks repay bailout money
A. As 8 biggest banks repay bailout money govt sees $4 B in profits
1. Roughly 15% annualized basis
2. Mosty from preferred stock that govt took stake in last year
a. $1.4 B from Goldman Sachs
b. $1.3 B from Morgan Stanley
c. $414 MM from American Express
B. Equivalent investments by private investors would have yielded 3x the profits
1. Government grossly overpaid
a. most estimates imply the govt overpaid by 34%
C. Still not out of the woods
1. Citi and Bank of America haven't repaid loans
2. As share prices have soared, govt sitting on $15 B in paper profits
a. still greatly at risk due to uncertainty in the 2 banks'
(i) potential losses could wipe out all profits to date
Analysts see an end to market rally:
I. Market soared since March lows and continued through summer
A. DJIA up 45% from March
B. Sp500 up 50% from March
1. 15% since mid-July
C. Bank stocks up 150% on average from March lows
D. Investors increasingly bullish currently
1. 89% respondents bullish compared to 2% in March
II. Problems seen insider trading patterns
A. Insider selling reached $6.1 B in August
1. highest level since May of 2008
B. 30 to 1 ratio of insider selling to buying
1. The people with real inside knowledge are cashing in and getting out
III. Influencial names getting out of markets citing problems
A. Heightened volatility in Chinese markets/economy
B. Pending commercial re troubles domestically
C. Jeremy Granthan cut equity position once SP reached 1000
1. cut equity allocation to 63% from 65%
D. Doug Kass taking profits
1. correctly called the March bottom as a "generational low"
2. current market has run its course, all profits based on unsustainable cost-cutting
Fed has seen $14 B in profits from loans to financial system:
I. Fed has made $14 bln in profits from loan programs to the financial system
A. Profits are from fees and interest vs interest foregone by purchasing treasuries
1. Procedure for calculating profits has not been audited, published
or risk adjusted
2. Calculation excludes company specific bailouts and long term
a. still faces substantial losses in Maiden Lane program
(i) Bear Stearns
B. Does not include unrealized gains/losses from portfolio of MBS and Treasury
purchases as part of the $1.75 trillion asset purchase program
1. Will lose money if interest rates are higher than when they purchased
a. no worries, only purchased them when rates were hovering around 0
Bank troubles deepen despite improving US economy:
I. Bank troubles deepen despite improving US economy
A. Lagging indicator
1. Takes time to bleed through the system to banks
a. lots of pain still ahead
2. Pace of failures accelerating
a. FDIC list of problem banks grew from 305 to 416 Q1 to Q2
B. How bad?
1. 84 bank failures in 2009
a. 25 in 2008
b. 3 in 2007
2. Colonial is biggest failure ytd
a. 6th largest in history
3. Estimates call for an additional 100 to 300 bank failures
1. Primary driver to date has been construction and development loans
a. highest delinquency levels since early 90's
2. Massive losses still foreseen in commercial real estate loans
New set of rules for central banks:
I. Old role of central banks
A. Old ideology was price stability
1. keeping inflation low
B. Fed has no explicit "inflation target"
II. Other ideas from around the globe
A. Monetary policy should care for the health of the financial system
1. Fed idea was to simply lower rates after bubble burst,
not monitor economy for bubbles
III. Potential problems with new idea
A. Financial health hard to measure and define
B. Using interest rates to stabilize financial health contrasts with
goals of inflation control
C. Current trend of lower growth and increasing debt is problematic
on all levels
Fiduciary duty battle as new regulation proposed:
I. New proposed regulation regarding brokers who give investment advice
A. Would hold brokers who give investment advice to higher standard
1. The standard is that they must act in their clients' best interest
(i) I can't believe they have to "regulate" to encourage this behavior
(ii) I can't believe that there are groups who are openly opposing this
II. Current rules
A. Brokers classified as investment advisers are currently held to standard of suitability
1. Any investment advice must be appropriate
(i) Never had to disclose if there were cheaper (lower fee) instruments
that could accomplish the same goal
A. Proposal by groups of brokerage industry and state regulators
1. Only brokers who call clients and give "personalized" advice subject to new rules
IV. SEC has encouraged the current regulation
A. Brokerage firms have moved away from brokerage to investment advice
1. SEC still always regulated them as brokers
As long as you keep it to facts so that those of us with brains can think it over...I'd definately appreciate the updates. I wish I had that sort of time
It's a pretty clear distinction as to which parts are facts straight from articles and which parts are my thoughts regarding those facts.
Regarding the time...it's my "job".
Thanks guys, like I said, if I have time, I'll post them every now and again. I have found that outlining is the way to go with a lot of this stuff. I read at least 3 newspapers cover to cover on a daily basis and have found that outlining and using the outlines as a tool is a much more effective means to adding some value for myself.
I can't engage in any sort of interaction with an asset manager, have them ask my opinion regarding something, and not have an answer.
1/19/09, the last day of Free America.
Pericles "Freedom is the sure possession of those alone who have the courage to defend it. "
"[T]he people alone have an incontestable, unalienable, and indefeasible right to institute government and to reform, alter, or totally change the same when their protection, safety, prosperity, and happiness require it." --Samuel Adams
The feds bail out the banks, borrowing money to do this, and get payed back the money with interest, right?
If this is true. Why is no one in congress, the media, or here, asking why the feds feel the need to add taxes to everything (sin tax) in sight, or tax the crap out of the "rich guys" (that by the way, pass that tax to us by way of higher prices) and blame it on the bail outs?
Or did I miss read something some where?
All men should know Honor first, above all else!
Honor is not holding your hand out for something you did not earn.
Honor is not forcing your ideas, or belief on others.
Honor is not something given to you by way of job, or title.
Honor is learned, earned, practiced and respected by all decent men and women.