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HomeKeep Bailing: GMAC Needs More of YOUR Money
Posted by Larry Doyle on October 27th, 2009 8:33 PM |
Turning the corner? No more bailouts? You didn’t actually believe the wizards in Washington, did you? Why?
GMAC is back in line for another injection of YOUR money. Recall that GMAC was bailed out initially during the government takeover of GM. GMAC was then spun off in order for Uncle Sam to effectively provide taxpayer funded consumer auto loans and mortgages.
GMAC is not a public entity and thus not currently able to hoodwink investors and raise equity capital. What’s a cash strapped entity to do? Let’s play some more of that ‘bailout bonanza.’ The Wall Street Journal just reported on this developing story and writes, GMAC Asks for Fresh Lifeline:
In a stark reminder of how some battered financial firms remain dependent on government lifelines, GMAC Financial Services Inc. and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money, people familiar with the matter said.
The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government’s 34% stake in the company could increase if existing shares eventually are converted into common equity. (more…)
Jobs + Housing = Consumer Confidence
Posted by Larry Doyle on October 27th, 2009 3:05 PM |
Market analysts and government officials would attempt to define overall confidence in the economy utilizing a variety of data. In my opinion, consumer confidence is ultimately a function of two factors: employment and housing.
While Uncle Sam has spent trillions of dollars backstopping various sectors of the financial markets and billions in economic stimulus, the size and scope of our employment and housing markets vastly overwhelm Uncle Sam’s ability to ‘prop them up.’ As a result, I am not surprised to see the monthly data on consumer confidence reflecting real weakness.
Bloomberg provides further insight on this topic in writing, U.S. Economy: Consumer Confidence Drops On Unemployment Concern:
Confidence among U.S. consumers unexpectedly fell for a second month in October, reinforcing the views of Federal Reserve policy makers who say household spending will be restrained by rising unemployment.
The Conference Board’s confidence index dropped to 47.7, trailing the lowest economist forecast, from a revised 53.4 in September, a report from the New York-based private research group showed today. A measure of employment availability slid to a 26-year low. (LD’s highlight) (more…)
Nouriel Roubini Agrees with Jeff Gundlach
Posted by Larry Doyle on October 27th, 2009 11:18 AM |
Dr. Doom agrees with Wall Street’s top fixed income manger? Who are these individuals and on what do they agree?
Both these individuals are Economic All-Stars here at Sense on Cents (see left sidebar). Nouriel Roubini (aka Dr. Doom) and Jeff Gundlach (aka Wall Street’s top fixed income manger) possess a contrarian view on the future of the U.S. dollar. While most analysts, economists, traders, investors, and speculators call for ongoing weakness in the greenback, Roubini and Gundlach believe the dollar will rebound and risk-based assets will retreat.
I addressed Gundlach’s views on this market driving principle on September 10th when I wrote “Jeff Gundlach of TCW Calling for Deflation and Dollar Rally”: (more…)
Wiretaps on Wall Street
Posted by Larry Doyle on October 26th, 2009 11:11 AM |
“Leave the gun, take the cannoli.”
The world of organized crime evokes thoughts of payoffs, extortion, racketeering, and wiretaps. Are regulators now utilizing tools previously relegated to infiltrating the backroom dealings of the underworld to discover illegal activities on Wall Street? Yes, they are.
The news that regulators are now employing wiretaps to investigate financial frauds on Wall Street is sending a chill through Wall Street in general and hedge funds in particular. Why do regulators feel the need to utilize wiretaps?
Recall from the SEC’s and FINRA’s own internal reviews of their handlings of the Madoff and Stanford frauds that the regulators were woefully deficient in tracking and stopping these frauds. One of the greatest regulatory deficiencies highlighted is the use of technology.
Many hedge funds have spent millions upon millions of dollars on technology. These tools allow these funds to move with cat-like quickness in allocating capital and seizing investment opportunities. As we are learning, not all of these movements would seem to have been executed in a legal and ethical fashion.
How quickly can the regulators move to develop the necessary technical capabilities to track hedge fund activities? Don’t hold your breath.
Jules Kroll addressed the capabilities of the regulators relative to the tools employed by hedge funds on a Bloomberg interview this morning. Prior to my sharing Mr. Kroll’s assessment of the regulators’ capabilities, who is Jules Kroll? He recently founded a new firm, K2 Global Partners, which will look to “provide specialized risk services and solutions” to a wide array of global clients. (more…)
“KYC” and “Suitability” Violations Occur All Too Often on Wall Street
Posted by Larry Doyle on October 26th, 2009 9:33 AM |
“We’re in the moving business, not the storage business!!”
If I had a nickel for the number of times I heard that line on Wall Street, I’d have a lot of nickels. That statement would coarse across many trading floors to push salespeople to sell, sell, sell and sell some more.
The sales process on Wall Street is not supposed to be the ‘boiler-room’ operations as so often depicted in films and books. Wall Street sales is not supposed to be a mere “dialing for dollars.” Prior to engaging prospective clients, salespeople and sales managers are obligated to address certain requirements. What may they be? The two primary requirements are:
1. KYC, an abbreviation for “know your customer.” This requirement addresses the need to fully understand the client’s business, its source of funds, its investment objectives, and much more. This requirement is extremely important, but regrettably often not fulfilled. Instead of “KYC,” many salespeople and sales managers view customers more from the standpoint of “he has money, I like him.” Given that shortsighted view, Wall Street often violates the second cardinal rule of sales.
2. Suitability addresses the requirement that an investment product meets the objectives of the customer. Interpreting this requirement is not as easy as some may believe. Where is the line drawn? What product may fit? What products definitely do not fit? All too often, the topic of suitability is addressed after the fact rather than prior to sale. Why does this happen? (more…)
No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Allan Dodds Frank
Posted by Larry Doyle on October 24th, 2009 3:08 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.
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Follow the money.
Despite what analysts and pundits may say, if you want to get to the root of an issue, there is one simple rule…follow the money. In taking that track, more truth and transparency will be revealed than we might ever imagine. To that end, No Quarter Radio’s Sense on Cents with Larry Doyle welcomes Allan Dodds Frank who perhaps more than any other investigative reporter and journalist has been ‘following the money’ for the last 40 years. Who is Allan Dodds Frank? He is currently the President of the Overseas Press Club of America and has been on the cutting edge of almost every major financial scandal of our lifetime.
Allan Dodds Frank is a contributor to The Daily Beast, the website founded by Tina Brown. He has been a television correspondent for ABC News, CNN and Bloomberg. Frank has been an Overseas Press Club member since 1985, most recently served as second vice president and previously OPC treasurer, governor, chairman of the OPC Awards Committee and President of the Overseas Press Club Foundation, where he serves on the board and executive committee.
Developing the OPC as one of the leading forums and meeting places for journalists continues to be his top priority. He would like to expand the OPC’s reach among younger journalists, especially those committed to international reporting. He also strongly supports the OPC’s embrace of the Internet as a way to enrich and enhance its role in defending reporters and freedom of the press.
His career includes reporting for the Anchorage Daily News, The Washington Star, Forbes, ABC News, CNN and Bloomberg. His specialties include reporting on complex white-collar crime and terrorism. Among his awards: the Gerald Loeb Award for the best Financial Reporting on television and Emmys for reporting on the financing of terrorism and for exposing the degree to which presidential candidate Ross Perot relied on taxpayer funding to build an airport in Fort Worth, Texas. Frank also has won newspaper guild and Alaska Press Club awards for outstanding reporting at The Washington Star and the Anchorage Daily News.
What drives the men who engage in financial frauds? Where does the money come from that funds international terrorism? How has Washington fought these crimes? How has Washington facilitated these crimes? How has white collar crime grown over the years? What has changed? What remains the same?
Please join me on BlogTalkRadio this Sunday evening October 25th at 8pm EDT as we address these questions and so much more with the Emmy-award winning investigative reporter and journalist Allan Dodds Frank.
LD
October 24, 2009: Month to Date Market Review
Posted by Larry Doyle on October 24th, 2009 7:32 AM |
Did the market merely take a breather this week or is the ‘little engine that could’ getting tired? Are we distinguishing the winners from the laggards? Are the cracks in our economic foundation repairing or are some just too large to hold back the flow of red ink, i.e. embedded losses? Perhaps we are experiencing all of the above as we continue our journey along the new and varied trails of our economy. Let’s review the major economic statistics for the week, along with the month to date returns across a wide array of market segments.
I thank you for reading my work, and now let’s collectively ‘navigate the economic landscape,’ the mission of Sense on Cents. If you have any questions, please do not hesitate to ask.
ECONOMIC DATA
I largely discount positive news on the housing front as I view them largely manipulated by Uncle Sam while delinquencies, defaults, and foreclosures move ever higher. This may be an oversight on my part, but so be it.
Aside from that, I believe the most meaningful news this week was the GDP report from the UK. Please see my Friday morning commentary highlighting how the UK remains mired in recession.
Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis:
U.S. DOLLAR
$/Yen: 92.08 versus 89.68, +2.7%
Euro/Dollar: 1.500 versus 1.4635, +2.5%
U.S. Dollar Index: 75.44 versus 76.72, -1.7%
Commentary: the overall U.S. Dollar Index declined marginally this week. The dollar has improved versus the Japanese yen, but remains decidedly weak versus the Euro. The U.S. Dollar Index did break below 75.00 at one point early Friday. The correlation between the U.S. Dollar Index and the equity markets remains quite high. Both markets ended the week close to unchanged. Have too many people bought equities and commodities while having sold the U.S. greenback? I have been asking that question for the last month so no reason to stop now. The biggest impact of the weak dollar is seen in the commodity markets and long term interest rates. Commodities continue to trade with a firm tone while interest rates move higher.
I reiterate my comment from previous weeks: while I think Washington is not disappointed in a relatively weak dollar, although they should be (“Dollar Devaluation Is a Dangerous Game”), other countries are not overly keen about further dollar weakness. Why? A weak dollar puts those countries in a marginally less competitive position in international trade. On this topic, please read “Brazil Wants A ‘Real’ity Check.”
COMMODITIES
Oil: $79.65/barrel versus $70.39, +13.1% REMAINS VERY FIRM
Gold: $1055/oz. versus $1008.2, +4.6%
DJ-UBS Commodity Index: 137.32 versus 127.683, +7.5%
Commentary: I repeat from last week, unless you grow your own crops or have your own source of energy, you should expect to get increasingly squeezed as prices at the supermarket and gas station are likely to head higher. While Washington will not address this development, these price moves are directly correlated with Washington’s weak dollar policy. The banks and others able to borrow cheap money for trading and investing benefit from the weak dollar. American consumers and savers get stuck with the bill.
The Baltic Dry Index once again moved higher and got back above the 3000 level. Is the improvement in the non-Japan Asian economic bloc for real? Certainly the economies in Europe and North American remain decidedly challenged.
I continue to believe these commodity tea leaves are an indication of inflationary expectations in these ‘inputs,’ while we encounter deflationary pressures in wages and real estate. (more…)
