Economy | Sense on Cents - Part 21 Sense on Cents

Archive for the ‘Economy’ Category

When 12th Street Talks…

Posted by Larry Doyle on March 3rd, 2009 11:00 AM |

As I continue to develop the product at Sense on Cents, I will look to deliver a variety of angles and perspectives on the markets, the economy, and the world of global finance. On that note, my friends at 12th Street Capital are willing to allow me to share their insights into the mortgage market.

In the spirit of full disclosure, I have no professional relationship with 12th Street Capital. My brother, Kevin Doyle, works at 12th Street and is gracious enough to allow me to share this commentary with you, my readers. As we look to navigate the economic landscape, I thought this 12th Street piece may prove insightful. While there are some technical terms used in this piece, I do not want to edit and have it lose its integrity. Any questions, please do not hesitate to ask!!

Enjoy….and thank you 12th Street!! (more…)

Tags: 12th Street Capital, CDO, Economy, Global Finance, helocs, Kevin Doyle, mortgage market, subordinate bonds, subprime, Wall Street trading
Posted in American Consumers, Banking Institutions, Barack Obama, Business, Commerce, Congress, Credit Card companies, Economy, Education, Hedge Funds, Mortgage Cram-Down, Mortgage Crisis, Mortgages, Risk, Unemployment, Wall Street | 2 Comments »

Why is George Soros Short the Euro? MUST READ!

Posted by Larry Doyle on March 3rd, 2009 6:10 AM |

In very short order, I have gained a deep respect and regard for our Economic All-Star, John Mauldin. I have come to appreciate that Mauldin and I view the market through the same lens focused on the global economy. While many media outlets focus on the day to day, if not hour to hour trading activity, I believe they are truly missing the forest for the trees.

While I have written twice over the last week about eastern Europe being the weakest link in the world of global finance, Mauldin and his colleague Niels Jensen of Absolute Return Partners provided insights and analysis that is numbing.

Why is George Soros short the euro? Let me provide a synopsis of Mauldin’s and Jensen’s “Europe On the Ropes.” Assuming those visiting Sense on Cents have an interest in the markets and economy, this piece is somewhat lengthy, but a MUST READ!! A link is provided at the end of my review. (more…)

Tags: banking, CLOs, corporate loans, credit cards, Employment, Euro, Europe, European banks, George Soros, Global Finance, Housing Crisis, Hungary, John Mauldin, leverage, market, U.K.
Posted in Banking Institutions, Commerce, Credit Card companies, Credit Risk, Eastern Europe, Economy, Employment, Equity Markets, Euro, European Union, Global Finance, Government funds, Housing Crisis, Hungary, Wall Street | 4 Comments »

Control Your Finances

Posted by Larry Doyle on March 2nd, 2009 7:43 PM |

For those who have been tracking my work for the last few months, you have heard me repeat the theme, “control your finances, so that your finances do not control you.” Effectively, I am trying to address the financial disciplines that are less a series of individual transactions and more a way of life.

These disciplines are more easily formed at the earliest stages of one’s financial life and then reinforced throughout life. On that note, this piece is primarily targeted to our younger readers, although it certainly has applications for everybody.

Our social customs have relegated the virtue of thrift to the back burner. In the process, our massive debt burdens are crippling us. Well, let’s move that virtue of thrift front and center and get very specific on this topic. Sense on Cents provides a link to a great investing primer (found in the right sidebar). There’s a wealth of information included in the link, but for now check out Eight Financial Tips for Young Adults .

While reading the playbook is a good start, ultimately winning the game is all about execution. These plays may not be the answer to all your financial issues, but they are certainly a solid start in controlling your finances, so they do not control you!!

Tags: debt burden, finances, financial disciplines, Sense on Cents, social customs, thrift, transactions
Posted in American Consumers, Bailout, Commerce, Credit Card companies, Current Affairs, Economy, Education, Employment, Equity Markets, Families, Risk, Unemployment | No Comments »

A Virtual Smorgasbord

Posted by Larry Doyle on March 2nd, 2009 4:24 PM |

On the heels of the news about AIG, Berkshire, and HSBC, the equity markets have found no support today and are down 4%. While the malaise of the markets has much of the focus, let’s review a few other items that I see on today’s menu:

1. In regard to AIG, current CEO Edward Liddy and former CEO Hank Greenberg have started some public feuding over the nature of AIG’s problems. Greenberg is trying to make the case that the risks underwritten at AIG occurred after his departure. Liddy responded that the culture, the compensation system, and the division housing the bulk of AIG’s risk all developed under Greenberg. Wow!! When our country is screaming for leadership, we have senior executives playing the blame game and pointing fingers. How pathetic!! (more…)

Tags: 12th Street Capital, AIG, Berkshire Hathaway, California housing, CMBS, compensation, consumer finance, DJIA, economic activity, Economy, Edward Liddy, Hank Greenberg, housing, HSBC, Risk, RSI, Washington D.C.
Posted in Bailout, Banking Institutions, Business, Commerce, Credit Risk, Current Affairs, Deficit, Economic Stimulus, Economy, Employment, Equity Markets, General, Global Finance, Government funds, Housing Crisis, JP Morgan, Mortgage Crisis, Mortgages, Real Estate, Reputation, Unemployment, Wall Street, Warren Buffet | 8 Comments »

What’s Driving the Market Lower Today?

Posted by Larry Doyle on March 2nd, 2009 9:50 AM |

Stock markets are expected to open lower by another 1.5% on the open this morning. What’s driving them lower….again?

1. News that AIG reported an actual 4th quarter 2008 loss of $61 billion. The government will inject ANOTHER $30 billion into this black hole. WHY? Very simply because AIG is the largest holder of CDS (credit default swaps) that serve as insurance for a number of banks and money managers. These CDS cover a wide array of assets but primarily the sub-prime mortgage space. Kevin Doyle of 12th Street Capital, and a guest here on my weekly No Quarter Radio program back in early January, shares that the index that tracks the sub-prime market is at its lows. No surprise there.

While the various media outlets are highlighting this story now, I wrote extensively about AIG and How Does One Lose $125 Billion? on February 24th. I not only wrote about the losses, but also delved into the culture that developed over the years at AIG under Hank Greenberg. Not a pretty picture and seemingly not a lot of integrity in that company. Now we pay. (more…)

Tags: 12th Street Capital, AIG, credit derivatives, Hank Greenberg, Household Finance, HSBC, Sense on Cents, stock markets, sub-prime mortgage market, Warren Buffett
Posted in American Consumers, Business, Credit Derivative Swaps, Current Affairs, Economy, Employment, Equity Markets, Global Finance, Government funds, Housing Crisis, Wall Street, Warren Buffet | 16 Comments »

The Weakest Link is Weakening

Posted by Larry Doyle on March 2nd, 2009 6:00 AM |

The other day I highlighted the fact that 12 eastern European countries would solicit a bailout from the European Union over the weekend in Brussels. I defined this bloc of eastern European countries as currently the Weakest Link in the global economy. Well, if they were the weakest link then they just got weaker as they were rebuffed in their request for aid.

The dynamic at work in the weekend’s emergency meeting held in Brussels is a play on beggar-thy-neighbor policies implemented during times of economic stress.

There are actually a number of factors influencing the European Union’s refusal to provide bailout money to these eastern European nations. Included in these factors are the following: (more…)

Tags: Bailout, beggar-thy-neighbor, Brussels, coordination, Eastern Europe, economic stress, Economy, Euro, European Union, global economy, Hungary, instability, International Monetary Fund, Ireland, Poland, Portugal, Weimar republic
Posted in Bailout, Commerce, Credit Risk, Current Affairs, Deficit, Economic Stimulus, Economy, Equity Markets, Euro, European Union, Foreign Affairs, Foreign Policy, General, Germany, Government funds, Hungary, Russia, Ukraine, Wall Street | 2 Comments »

Why Are Interest Rates Headed Higher?

Posted by Larry Doyle on March 1st, 2009 3:57 PM |

While our domestic stock markets are down approximately 50% over the last 14 months, there has been a rush of cash into short term money market funds, government bond funds, and in the last few months corporate bond funds and municipal bond funds. As I mentioned in my February 2009 Market Review, I am increasingly nervous about bond investments at this juncture. Why? I’m glad you asked.

1. Primarily due to the massive global government funding needs which are just starting to hit the market. In a recent piece, the highly regarded Financial Times projects global government debt issuance to TRIPLE in 2009.

German Prime Minister Angela Merkel is concerned about European countries looking to tap the markets on or near the same dates. She is proposing global coordination of debt issuance so as to insure that rates are not DRIVEN higher. (more…)

Tags: Angela Merkel, bond markets, cash, consumers, Economy, European Community, Financial Times, GDP, German bunds, Greece, Ireland< Portugal, Money Market Funds, municipalities, pension funds, sovereign credit risk, stock markets, Warren Buffet
Posted in American Consumers, Auto Industry, Commerce, Congress, Credit Card companies, Credit Risk, Deficit, Economy, Employment | 7 Comments »

When the Oracle of Omaha Speaks..

Posted by Larry Doyle on February 28th, 2009 4:20 PM |

Warren Buffett’s annual letter to shareholders is always a highly anticipated event by market participants. Given the fact that Berkshire is effectively a diversified holdings company, Buffett has a unique perspective into a wide array of businesses. He also has the wisdom of investing over many years and through many challenging markets.

Well, if misery loves company, it has a solid partner in the person of Warren Buffett because 2008 was Berkshire Hathaway’s worst year ever. In reviewing Buffett’s letter allow me to offer some highlights. For those who have an even passing interest in the markets and investing, reading this letter is akin to attending an opera by Pavarotti.

I beg your indulgence as I attempt to be the opening act and provide an overview of the “Oracle of Omaha’s” thoughts on the markets and economy: (more…)

Tags: American Express, Berkshire Hathaway, Economy, Fannie Mae, Freddie Mac, markets, OFHEO, Oracle of Omaha, Pavarotti, U.S. Treasury, Wall Street Journal, Warren Buffet
Posted in Banking Institutions, Business, Commerce, Current Affairs, Deficit, Economic Stimulus, Economy, Employment, Equity Markets, Fannie Mae, Freddie Mac, General, Global Finance, Housing Crisis, Risk, S&P 500, Unemployment, Wall Street | 1 Comment »

“My Mama Told Me . . .

Posted by Larry Doyle on February 28th, 2009 2:20 PM |

. . . You Better Shop Around.”

What does that wonderful song from Smokey Robinson and the Miracles have to do with our economy? I’ll tie that in a bit later.

More and more people are inquiring of me how and why banks are making credit tighter both in terms of availability and in terms of rates charged.

This tightening of credit is due to the “crowding out effect” from dramatically increased government borrowing along with the actuality and likelihood of increased defaults across all consumer and corporate loans. In the face of those defaults, banks will set aside more capital in reserve to cushion those losses.

What is a consumer to do? There are two tactics:

1. Everything’s Negotiable which I highlighted in a post dated December 23, 2008. Talk to your bankers and/or credit providers. Put your banks and other credit providers in competition. Where does one start and how does one easily comparison shop? I’m glad you asked because that leads me to point #2.

2. Shop around (thank you, Smokey)! Sense on Cents provides links via our Primers (in the right sidebar) for a look across the market to virtually every consumer credit need. Remember I have NO professional relationship with any of these entities. From borrowing needs to investing, with many stops in between, I hope these primers help you navigate the economic landscape going forward!!

And now, a trip down memory lane . . .

Tags: banks, capital reserves, consumer credit, consumer loans, corporate loans, credit, crowding out effect, defaults, Economy
Posted in American Consumers, Auto Industry, Banking Institutions, Business, Commerce, Credit Card companies, Credit Risk, Current Affairs, Deficit, Economy, Employment, Fund managers, Global Finance, Government funds, Home Loan, Housing Crisis, Insurance Industry, Mortgage Cram-Down, Mortgage Crisis, Mortgages, Real Estate, Retail Business, Risk, Unemployment, Wall Street | 1 Comment »

February 2009 Market Review

Posted by Larry Doyle on February 28th, 2009 10:13 AM |

Prior to going to the comments section of my son’s report card, human nature dictates that I first look at the grades. In that same vein, let’s see how the markets performed for the month of February: