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HomeLet’s Question the Bank CEOs
Posted by Larry Doyle on February 11th, 2009 9:27 AM |
This morning at 10am, the CEOs of the major money center banks in our country will be in Washington to face Congressional heat. Watch it LIVE on C-Span3.
These CEOs are easy targets for plenty of reasons. As a precursor to their testimony, I thought it may be helpful to view a 1-minute clip of Jamie Dimon, CEO of JP Morgan, commenting on the proposed stimulus plan, the state of the banking industry, and the concept of nationalizing the banking industry.
If I were questioning these CEOs, I would want to ask the following:
1. To all the CEOs, how do you justify paying $18+ billion in year end bonuses after having taken more than $150+ billion in government funding?
2. Why shouldn’t Citi be formally nationalized right now given the market’s belief that if positions were marked to market properly that the institution would be insolvent?
3. How do you justify the egregious process of raising rates on credit card lines for consumers who are not delinquent?
One MASSIVE Margin Call
Posted by Larry Doyle on February 10th, 2009 3:46 PM |
In light of the serious economic crisis facing our country and the world today, there is understandably heightened interest and anticipation towards both the proposed Stimulus Plan and the newly designated Financial Stability Plan. Clearly every individual in our country is impacted by this turmoil and we are hopeful that our leaders in both the private and public sectors can display the real leadership necessary to “right the ship.” Let’s provide a concise review of the newly designated Financial Stability Plan proposed today by Secretary Geithner. I’ll then move toward a further review of our economy and what it means for us going forward.
Financial Stability Plan
Secretary Geithner prefaced his remarks by highlighting that this process will “take time to resolve.” He offered that there is plenty of blame to go around to the public and private sectors, including the regulatory and rating agencies. He acknowledged that public distrust has heightened in the process. While he believes the government is being appropriately aggressive with this plan, I do not share that opinion. I commend him for emphatically stating that there will be total transparency in the process, along with strong contingencies for any entities that borrow public funds. All details will be posted on www.financialstability.gov.
While Geithner did lay out the overview of the plan, he did not extensively provide details. The market has sold off 3% in the process. I believe the market also sold off given the realization that this plan is going to take a LONG time to make a real impact. Let’s get to the meat of the plan: (more…)
When Big Ben Speaks….
Posted by Larry Doyle on January 14th, 2009 9:40 PM |
Against the backdrop of the frozen tundra, numerous members of the storied Pittsburgh Steelers franchise have reached
Chairman of Federal Reserve, Ben Bernanke
legendary status. Included in this family are such greats as Jack Lambert, Mean Joe Greene, Terry Bradshaw, Rocky Bleier, Franco Harris, John Stallworth, Lynn Swann, Chuck Noll, and the longtime owner Art Rooney. For lovers of the NFL, these men are true giants. The current Steelers franchise is led by budding legend and All-Pro quarterback Ben Roethlisberger. When “Big Ben” leads, Pittsburgh follows. You can discuss this “Big Ben” tonight and every Wednesday night at 9PM on “No Topic Taboo . . . Everything Else with Jay.”
With all due respect to Mr. Roethlisberger, though, there are two other “Big Bens” that crossed paths just yesterday and hold much greater sway and impact in world affairs. I speak of Ben Bernanke and the famous London clock tower.
While the NFL is a great diversion, we ultimately return to the real world and need to deal with the realities it presents. Fed chairman, “Big Ben” Bernanke, presented chilling testimony yesterday in the shadows of the famous clock tower at the London School of Economics.
Understand that every message delivered by a Fed chairman is very carefully scripted. In years past, the Fed was much less transparent than it is today. That said, the Fed chairman speaks carefully so as not to unsettle markets but also to provide an outline as to future policy. In so doing, the general public is often hard pressed to decipher what he is saying and what it means. The general media typically does not capture the nuances and subtleties offered by the Fed. To that end, our work here at No Quarter looks to fill that void.
Market Musings on a Monday
Posted by Larry Doyle on January 12th, 2009 10:05 PM |
With so many cross-currents in our economy and markets, it is little wonder that people feel overwhelmed and disoriented. The powers-that-be in Washington are in a period of transition with plenty of backroom dealing going on from both a political and economic standpoint. The financial markets remain challenged from a liquidity and valuation standpoint. Against these backdrops, I hope readers are becoming more comfortable with my analysis of the economy, the markets, and the world of finance at large. Let’s dive into the issues and topics I find most compelling.
Earnings and Outlooks
On the equity front, the bottom line — that being earnings — is ultimately what drives prices. Time and time again we will hear analysts and money managers “talk their positions.” These individuals are either blinded by the big picture or talking the party line. In our piece on January 8th, “Time, Why You Punish Me?” I stated that “earnings expectations truly concern me.”
Fast forward to today and we see that Citigroup is leaking information into the market that their Q4 2008 earnings will be significantly worse than expected. Initially, Citi’s Q4 2008 earnings (why do we still use that term? They have not made money in so long. Wouldn’t it be better to merely call them losses and save ourselves the headache?) were expected to be -$4 billion. Citi is now leaking to the market that earnings will more likely be -$6 billion and that is only because they are recognizing a gain of $4 billion on the sale of a German retail banking business. Thus, ex that sale, Citi had a $10 billion operating loss for the Q4 2008.
“Where’s The Money??….!!”
Posted by Larry Doyle on December 29th, 2008 6:38 PM |
I thought about providing an outlook for 2009. I considered offering further opinions on Obama’s economic plans. Perhaps a review of the Bush economic program would be well received. Then yesterday, the lead editorial in my local newspaper asked “Where did the bailout money go?” I had my answer. In previous pieces I have touched upon why I thought there was a very good chance why this money would not flow through the system. I hesitate to continue to refer back to my piece published on November 12th (The Wall St. Model is Broken…and Won’t Soon be Fixed), but for new readers I do firmly believe it is as good as anything I have read or seen in any publication in explaining how we find ourselves in our current position.
Please allow me to digress for a second. I will admit that I am not a movie buff, but I do enjoy films that focus on the success of underdogs, have a measure of financial intrigue, or perhaps a combination of the two. Not surprisingly, a few of my favorite movies are, Rocky, Jerry Maguire, and The Sting.
Everything’s Negotiable
Posted by Larry Doyle on December 23rd, 2008 7:15 AM |
At “Central Station” the other day, a loyal reader thought it may be useful to write about the implications of defaulting on a mortgage. Certainly nobody wants to default on a mortgage, but given the dynamics of our current housing market and economy, delinquencies and defaults are simple realities.
In thinking through this topic, it struck me that it may be just as beneficial to address what to do before defaulting as it is to know what happens after defaulting.
First and foremost, given the economic environment there should be no sense of shame or embarrassment in a deteriorating financial condition. That said, as one of my earliest mentors taught me “people in finance typically do not have problems with losses but they have big problems with surprises.” How does that piece of wisdom apply to today’s deteriorating housing market and rising foreclosures?
Economic/Market Highlights 11/17/08
Posted by Larry Doyle on November 17th, 2008 10:20 PM |
I am going to save all the readers here extensive verbiage so as not to be overly morose about the ongoing challenging economic environment. I will offer my thoughts and comments on a few of the higher profile stories as indicators of what is going on, broadly speaking.
1. G-20 Summit….I had high hopes that commitments to global coordinated tax cuts would emanate from this summit. Talk about a major “whiff” on behalf of the global leaders. All I see is that leaders expressed a “promise” to work together on the critical issues. Wow, how gracious of them. Over and above this promise, I sensed that global leaders want to wait until the Obama administration takes charge and work with them. Believe me, with all due respect to Barack and team, if anybody thinks they have a magic bullet and will “inspire” a heightened level of confidence in the markets and economy, well….don’t hold your breath.
Read more on how “G-20 leaders Tighten Grips on Banks” (more…)
Economic/Market Highlights 11/21/08: V-O-L-A-T-I-L-I-T-Y !!
Posted by Larry Doyle on November 22nd, 2008 4:10 PM |
The fact that the equity markets totally reversed yesterday’s 5-6% selloff is not the biggest story of the day. In short, 400-500 point swings either way have become so normal as to not be a big deal. But they are a big deal and I will explain why shortly.
At 2:30pm the equity markets were basically unchanged. By 3:45pm the equity markets had rallied by 5-6% primarily on the announcement of Tim Geithner, NY Fed chair, as the nominee to be Treasury Secretary, while the other candidate for that role, Harvard professor and former Tsy Secretary for Bill Clinton, Larry Summers will be a senior White House economic advisor. Well done by Barack to get both on the team.
The markets respect Geithner and he will be easily approved. Summers would have faced some grilling for sexist comments he made while President of Harvard as well as the fact that he has already been Tsy Secy and it would have been viewed as “the more things change the more they stay the same”. Geithner obviously knows where all the bones are buried on Wall St. having worked very closely with Paulson over the entirety of this financial fiasco. The transition should be seamless. Geithner and Paulson have different styles but both are respected by Wall St. even if Paulson is not fully liked by Main St. The markets respect Geithner and this is obviously very important.
Read more here as to “Obama Likely to Pick Fed’s Geithner for Treasury.”
While Geithner and Summers are obviously highly respected they are not Houdini and they will not be able to singlehandedly turn our economy or markets around based on their name alone. (more…)
Tags: Sense on Cents, Sense on Cents commentary on market, Sense on Cents view of economy and markets, Tim Geithner, unemployment call, volatility in markets
Posted in American Consumers, Auto Industry, Banking Institutions, Current Affairs, Economy, General, Tim Geithner, Warren Buffet | No Comments »