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Archive for October, 2009

No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Helen Davis Chaitman, Sunday Evening at 8pm EST

Posted by Larry Doyle on October 31st, 2009 3:49 PM |

UPDATE: This episode of NQR’s Sense on Cents with Larry Doyle has concluded. You can listen to a recording of the episode in its entirety by clicking the play button on the audio player provided below. Once the audio begins, you can advance or rewind to any portion of the episode by clicking at any point along the play bar. We did have some technical difficulties connecting with our guest at around the 12 minute mark of the show. You can listen up to that point, and then advance it to the 24 minute mark when Helen Davis Chaitman joins the program.

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Who truly protects the average American investor? Our financial regulators are licking their wounds and playing catch up from seemingly 20-plus years of being asleep at the wheel. Banks and brokers are fighting tooth and nail against instituting a fiduciary code of conduct. Why do more and more investors not trust Wall Street? Where should one turn to navigate this corner of our economic landscape?

Welcome to No Quarter Radio’s Sense on Cents with Larry Doyle as I welcome Helen Davis Chaitman this Sunday evening at 8pm EST.  Helen Davis Chaitman is a prominent attorney and partner in the New York based law firm Phillips Nizer LLP. Her career spans a vast part of our economic landscape.

Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense.  In 1995, Ms. Chaitman was named one of the nation’s top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants’ malpractice case.  Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990) which is periodically updated and, since 1987, has authored the monthly newsletter, The Lender Liability Law Report.  In early 2009, Ms. Chaitman spearheaded the firm’s pro bono representation of investors in Bernard L. Madoff Investment Securities LLC.  She has been an outspoken advocate for  the victims of Madoff’s Ponzi scheme and for the government failures which caused massive losses to innocent investors. (more…)

October 31, 2009 Market Review: Cinderella’s Ball?

Posted by Larry Doyle on October 31st, 2009 8:34 AM |

HAPPY HALLOWEEN!! Is the clock getting ready to strike twelve? Is it time to get home? Is the magical ball that has enchanted many market participants about to end? How so? As quantitative easing programs around the world end and global governments start to increase interest rates, will we experience a double dip in the global economy?

Or, are the Uncle Sam economy and numerous global economies blazing new trails and redefining the economic landscape?

As with most things economic and market related, the answers are never ‘crystal’ clear nor do they fit like a ‘slipper,’ but let’s do our best to read the October market moves and project our way forward.

ECONOMY

The U.S. economy came out of recession in the 3rd quarter with a positive 3.5% print. While that number surprised to the upside, please review my post “Grossly Distorted Product” or “Christmas in July” to get a pulse on just how weak the American consumer remains. Further confirmation of a subdued American consumer is reflected in the decidedly weak Consumer Confidence report highlighted in my post, “Jobs + Housing = Consumer Confidence.”

Around the globe, non-Japan Asia is generating some real growth. To wit, we have already seen Australia raise interest rates to stem fears of inflation. Who next raised rates? Norway. The U.K remains mired in a recession. Eastern Europe is struggling while Germany is leading the EU. If we know anything about Germany, they have little interest in any hints of inflation.

While there are pockets of strength around the globe, many economies – including the U.S. – remain challenged. What will continue to happen? International trade tensions as weak countries try to generate greater exports via weak currencies.

Let’s review market returns. (more…)

‘There’s Something About Mary’ as Madoff Calls Schapiro “a Dear Friend”

Posted by Larry Doyle on October 30th, 2009 7:57 PM |

Did FINRA invest its own funds from its internal investment portfolio with Bernie Madoff? Would FINRA’s head Mary Schapiro invest with her “dear friend” Bernie? Stick with me on this and let’s navigate the newest development in this ongoing scam. My concluding remarks provide insights you won’t find in many mainstream media outlets.

High five to JD for tipping me off to a segment about Bernie Madoff that just aired on CNBC. While little is truly new in this segment, Bernie’s assessment of his relationship with former FINRA head and current SEC chief Mary Schapiro is startling. While Ms. Schapiro and her colleagues at FINRA have downplayed any sort of relationship with Madoff, Bernie has a different take.

There’s something about Mary as Bernie calls her “a dear friend.”

Will the government powers have the cojones to more fully explore this relationship? Or, are they already aware of it? As I wrote in my commentary of October 22nd, “Nasdaq Sale: Why Would Schapiro and FINRA Execs Lie?”:

Did Ms. Schapiro receive the “E-Z Pass” to the SEC from FINRA with the support of the powers that be on Wall Street? Was the chair of the SEC the ultimate payoff to Ms. Schapiro for the successful completion of the merger between NASD and NYSE Regulation to form FINRA?

What does Bernie have to say? Let’s review the CNBC segment, Madoff: It’s ‘Amazing’ I Didn’t Get Caught Sooner. . .

Jailed swindler Bernie Madoff said it was “amazing” that he didn’t get caught sooner in his multi-billion-dollar Ponzi scheme, and that everything the SEC did to investigate him prior to 2006 was a waste of time, according to a jailhouse interview he gave to SEC Inspector General H. David Kotz.

Madoff also told Kotz that SEC Chairwoman Mary Schapiro was a “dear friend,” although she “probably thinks, ‘I wish I never knew this guy.’” (more…)

Corporate Titans Master the Obvious

Posted by Larry Doyle on October 30th, 2009 3:25 PM |

Why is the market breaking down today?

A number of analysts are pointing to comments by corporate titans, Wilbur Ross, George Soros, and bank analyst Mike Mayo.

What did Ross, Soros, and Mayo have to say? With all due respect, these corporate titans do not offer any new news. That said, let’s navigate.

1. Wilbur Ross sees a pending crash in commercial real estate.

Really? Is this news? This story has been touted for the last 6 months. The banking system has well over a hundred billion in impending losses on commercial real estate.

In a Bloomberg interview as I write, Carl Icahn concurs with Ross’ assessment. Icahn can’t understand why REITS are currently as highly valued as they are.

2. George Soros also harps on the pending doom on the commercial real estate market. Additionally, he highlighted the fact that the American consumer can not and will not be the engine for global growth. Soros offered that the economy may slip back into recession.

Really? Is this news? George, please tell us something we don’t know.

3. Mike Mayo, highly regarded banking analyst, highlights that Citigroup may very well have $10 billion in unrealized losses yet to take.

That’s all? Really? I think Mayo is likely low by a significant margin.

Recall that the IMF projects global banking losses to total $3.4 trillion and that approximately just slightly more than half of those have been taken to date. Another $1.7 trillion in losses and Citigroup has only got $10 billion to recognize?

The fact is the overall economy remains mired somewhere between intensive care and critical condition despite what the wizards in Washington would have us believe.

Today’s pullback in the market is not an indication of any real change in the economy. The economy is still quite ill. Today’s pullback is an indication that the speculative money in a highly speculative market is sending a signal for “everybody out of the pool.”

LD

Goldman’s Hatzius v Morgan’s Kasman: “Let’s Get Ready to Rumble”

Posted by Larry Doyle on October 30th, 2009 11:20 AM |

I love a good debate. Much like a prize fight, a healthy debate can ebb and flow as those ‘in the ring’ bob and weave while trying to score points. I so enjoyed a debate highlighted by The Wall Street Journal between the chief economists from Goldman Sachs and JP Morgan that I highlighted it in the Newsworthy section of Sense on Cents. For those who don’t visit that section of my site, I am compelled to replay this debate here.

In the inimitable words of Michael Buffer, “let’s get ready to rumble” as Goldman, J.P. Morgan Economists Debate Shape of Recovery:

The recession might be over, but how goes the recovery?

We posed that question to two prominent Wall Street economists with two very different views of 2010. Bruce Kasman, chief economist at J.P. Morgan, sees the U.S. growing at about a 3.5% pace for most of next year. That appears optimistic compared to Jan Hatzius, chief economist at Goldman Sachs, who sees gross domestic product growth of 2% or so at the start of the year tapering off to just 1.5% by year-end.

The following is an edited transcript of their remarks during a recent conference call with The Wall Street Journal.

Looking ahead to 2010, what kind of recovery do you see? (more…)

“Grossly Distorted Product” or “Christmas in July”

Posted by Larry Doyle on October 30th, 2009 9:10 AM |

What is the real economy doing? While yesterday’s GDP printed a surprisingly strong 3.5%, are we to take that on face value? If we care to most effectively navigate the economic landscape, we should dig a little deeper.

A full 2.2% of the 3.5% rise was directly correlated to Uncle Sam’s support of the auto and residential construction sectors of the economy. Another .6% of the GDP was directly correlated to federal spending. Obviously, the Uncle Sam economy implies a large presence by that jolly old man. However, all that money Sam is pumping is nothing more than borrowing from future generations and pulling demand forward.

What would the economy have done on its own without the government support? Let’s listen to Christina Romer. Recall that Ms. Romer referenced last week that this quarter would provide the peak impact of benefits accruing from Uncle Sam’s economic stimulus. What does she say about this GDP report?  The Wall Street Journal references Ms. Romer in writing, Economy Snaps Long Slump:

Without stimulus programs such as “cash for clunkers” and a first-time homebuyer’s credit, “real GDP would have risen little, if at all, this past quarter,” Christina Romer, president of the White House Council of Economic Advisers, said in a statement.

Why does Ms. Romer provide that sobering view of the economy? Very simply, if the American consumer represents 70% of the economy, then we should largely focus on that consumer. What did we learn about the consumer over the last quarter?

The Financial Times’ John Auther informs us in writing, Short View: GDP Grows, but Pain Remains:

Household disposable incomes actually fell during the quarter, by 3.4 per cent, but consumer spending rose, also by 3.4 per cent. This is not a pattern that can be sustained for long, and it is inconsistent with the need for US families to pay down their debts.

What does that disparity between income and spending represent? An unsustainable economic path. What else does it mean? The U.S. economy just had “Christmas in July.”

Did you get anything in your stocking?

LD

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Mortgage Modifications: Statistically Insignificant

Posted by Larry Doyle on October 29th, 2009 4:16 PM |

How meaningful is the mortgage modification program? What have we gotten for the billions committed to this initiative? Are you sitting down?

For frame of reference, the U.S. Census Housing Data indicates there were 110.3 million occupied housing units in the country in 2007. Of that number, 68.1% were owner-occupied. Simple math tells us 75.1 million people owned their home at that point.

Various studies indicate that approximately one of every three homeowners are now ‘underwater’ (mortgage balance exceeds home value). Many analysts believe that number is headed higher. A Deutsche Bank analyst projects one of every two homeowners will ultimately be ‘underwater.’

Simple math indicates that approximately 25 million homeowners are underwater. What is being done to support these homeowners? Uncle Sam’s primary program to support this growing problem is the ‘mortgage modification’ program. This program is supposed to be driven by mortgage servicers. How is it working? Let’s navigate. (more…)

Mentoring Is Good Business

Posted by Larry Doyle on October 29th, 2009 12:33 PM |

I am humbled when other outlets ask for my opinion and thoughts on financial topics. To that end, I have provided a few guest commentaries for UK-based  eFinancial Careers.

On the heels of writing “Fatal Character Flaws Bring Down Wall Street Titans”, a representative of eFinancial Careers asked me to further expound on this topic. I welcomed the opportunity and wrote this guest commentary:

How is it that an individual with untold hundreds of millions of dollars in wealth could put himself in a position of risking it all?

Welcome to the world of Raj Rajaratnam, the owner of the hedge fund Galleon and the major kingpin arrested in the most recent insider trading scandal to rock Wall Street.

Why would Rajaratnam take such professional risks? (more…)

Sheila Bair Trumps Tim Geithner

Posted by Larry Doyle on October 29th, 2009 9:52 AM |

FDIC Head Sheila Bair

“Too big to fail.”

Do you think the American public is sufficiently sickened by that phrase? No doubt.

How will our ‘wizards in Washington’ handle this monstrous issue going forward? Is there any doubt that the industry itself should be held accountable to provide the necessary capital to unwind firms deemed ‘too big to fail?’ Of course not. However, the execution of that policy is where the rubber meets the road and where we learn who in Washington is truly working for the American public and who is working for the financial industry. How so? Let’s navigate. (more…)

When Did Cheating Become Acceptable?

Posted by Larry Doyle on October 28th, 2009 4:13 PM |

There have been cheaters and con artists throughout history. While I do not present myself as an economic historian, I think it would be interesting to review the depth of cheating and scandals today relative to other eras. The challenge for many individuals and businesses is competing honestly yet coming up short in the process. What is one to do?

We witness this cheating throughout society. From the steroid scandals in sports to financial frauds on Wall Street and at every point in between, the lack of real moral integrity has eroded our economic foundation. The excuse commonly utilized by cheaters is the need to keep up with the competition.

I lost all respect for Bill Belichick of the New England Patriots when it was revealed he cheated. What was the common refrain around the NFL? “If you’re not cheating, you’re not really trying.” (more…)






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