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Home“The Greatest Generation”
Posted by Larry Doyle on November 14th, 2008 7:45 AM |
I commend HRC for providing some real leadership at this point in time. There is no doubt that our country is screaming for real leadership. From Washington to Wall St. to Main St. our citizens are looking for people and programs that will look forward and take the vital and necessary steps to change our national mindset. Do you get the sense that perhaps some supporters of BO are getting a little nervous and now realize that he is a very high risk President-elect?
HRC’s stimulus proposal addresses a number of fronts (expanding unemployment insurance, addressing Medicaid, funding infrastructure projects and clean energy, modify mortgages) which will need focus from Congress to create a demonstrative impact on our economy. Some of the programs will clearly be impactful while others may have unintended negative consequences. We will have to take some prudent but necessary risks to achieve positive results.
The TARP bailout/rescue plan proposed to date has not inspired confidence nor generated any real impact for three reasons:
1. the banks have such sizable embedded losses that the funds already injected are being and will be used to recapitalize the balance sheets …
2. investors have little to no appetite to purchase loans currently on the banks’ books which were not properly underwritten and will likely continue to suffer an ever increasing level of delinquencies and defaults …
3. little to no demand for funds due to the fact that most individuals and institutions are looking to decrease their debt service not increase it …
As a result our economy spirals downward. HRC’s plan addresses some of our most serious needs. I commend her. (more…)
Economic/Market Highlights 11/12/08
Posted by Larry Doyle on November 13th, 2008 1:31 PM |
Markets trade down another 5% and close within spitting distance of October’s closing lows seen on Oct 10. I remain decidedly negative on the market and the economy despite every effort made by global governments. In fact, the pace of the economic slowdown is quickening. It’s all about delevering and liquidity.
We have much to address, so let’s get after it.
Retail….
1. Best Buy comments that they see a “seismic slowdown” in 4th quarter projected sales. Expect to see significant sales and price cuts on electronics going into the holiday season.
2. Survey of credit card holders indicates the following: 53% have more debt than they are comfortable handling. Of that group 73% indicate that they will likely spend less this holiday season….lots of regifting….
Economy
1. Julian Robertson, one of the most highly regarded money managers of the last 40 yrs, indicates that “we have not seen the capitulation in our economy and that the foreseeable future will be a long, tough period for the American people. He also offered that Nancy Pelosi wants to throw money down the toilet to save the automotive industry. (more on this later)
2. Moody’s ratings expects defaults on distressed debt situations to almost quadruple in the next year to north of 10%. This expected level of defaults is why high yield debt is trading near a 20% yield level. Lots of RISK! Companies will be severely challenged to refinance their debt.
3. Jamie Dimon, CEO of JP Morgan, indicates that the economic recession will be worse than the credit crisis.
Auto Situation
1. Pelosi, Frank, Obama and team clearly want to see a bailout for the automotive industry with GWB’s signature. The package being discussed is $25bln but with no specifics highlighted as of yet. Expect hearings next week in Washington on this issue. From the standpoint that Uncle Sam has already committed north of a trillion dollars to the financial system, a 25bln capital injection is a drop in the bucket but it goes a lot deeper than that. First off, the cash burn rate for the Big 3 at the anemic pace of auto sales is currently 5+bln per month, so 25bln gets us to next March. Big deal.
IMO, I would not give this industry $20 without an agreement to restructure. (more…)
The Wall St. Model is Broken . . . and Won’t Soon be Fixed!!
Posted by Larry Doyle on November 12th, 2008 12:15 PM |
Despite billions and now trillions of dollars in capital injections and equity investments made by our government, private equity, and sovereign wealth funds, our economic turmoil is a long way from being over. I do find it interesting that despite numerous Wall Street titans having indicated to us at different points over the last year that we were in the 7th inning of this fiasco, now a recurring theme is that we should not expect any real economic recovery until 2010. Actually, maybe we were in the 7th inning but it was the 7th inning of the first game of a 4 game series.
Well, if we want to figure out where and when we are moving forward, I think it would be beneficial to know from where and when we came.
For those over 50 years of age, perhaps you remember when mortgage money dried up. Perhaps you also recall the days of putting down 20% before you even thought of buying a home. In any event, the growth of the secondary mortgage market in the mid 1980s was a result of some very sharp financial minds on Wall St. who engineered a product called a Collateralized Mortgage Obligation (CMO). (more…)
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Posted in American Consumers, Banking Institutions, Current Affairs, Economy, Housing Crisis, Mortgage Crisis | 13 Comments »