Sense on Cents

Should Uncle Sam Bailout California?

Posted by Larry Doyle on January 7th, 2010 8:07 AM |

Should 49 states bail out one? Should the American public be compelled to cover the fiscal disaster of our largest state? Will America ever face reality?

The ticking time bomb that is the fiscal disaster of the state of California is making its way to Washington. As reported in yesterday’s Wall Street Journal, the Governator Arnold Schwarzenegger Seeks U.S. Funds. If Uncle Sam bails out California, then who is next?

Not surprisingly, the general media is not giving this story even close to the attention it deserves. I wrote extensively on this ticking time bomb last spring and summer. Tick…tick…tick. The fuse is running short.

Let’s quickly review some general statistics about the state on our Left Coast (in more ways than one). As I highlighted last May in writing “As California’s Economy Goes, So Goes the Country,” California has:

– 8 of the 50 largest cities

– population of approximately 37 million people (that we know of), a full 12% of our national population

– an economy similar in size to Italy, ranking it as one of the top 10 in the world (I have seen rankings of 8th and 9th)

– California’s economic output represents 13% of our national GDP!!

– an unemployment rate north of 11% compared to the national average of 8.9%. With a high unemployment rate amongst illegal immigrants, it is not a stretch that California’s unemployment rate is approaching 15% and its underemployment rate is greater than 20%!! (LD’s edit, the current rate is 12.3%).

What is Schwarzenegger’s case? The WSJ reports: Read the rest »

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Wall Street Economic and Market Outlook 2010

Posted by Larry Doyle on January 6th, 2010 12:06 PM |

The New Year brings us the traditional economic and market outlooks from Wall Street firms. High five to a loyal Sense on Cents reader for sharing this recap collated by Birinyi Associates. (Click on image to access full report)

>> LD’s SUMMARY
The overall average calls across the economic and market landscape are as follows:

GDP: +3.1% increase
S&P 500 close at year end 2010: 1222, a 9.6% increase
S&P 500 earnings: $76/share
Oil: $80/barrel, effectively flat on the year
Dollar/Euro: 1.45, effectively flat on the year

The overall outlook does project that analysts believe better opportunities for growth lie outside the United States.

With all due respect to the analysts making these calls, there are no major market calls and especially outliers in this report. Why? Analysts know they have more downside in being bold and wrong. Additionally, the analysts are ultimately a public face for Wall Street salespeople trying to collect assets and sell products. What environment characteristics are most conducive for those pursuits? Low volatility with positive bias and trend. What have the analysts provided? Exactly that.

Wall Street is truly an oligopoly. Group think and coordinated — if not collusive — pricing and projections are simply how the game is played.

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Chris Dodd: Wall Street-Washington Incest Personified

Posted by Larry Doyle on January 6th, 2010 7:56 AM |

Senator Chris Dodd (D-CT)

Chris Dodd is the embodiment of what is wrong with American politics.

Why?

The incestuous relationship between Wall Street and Washington took time and willing participants. Career politicians willing to sell their soul at the expense of the American taxpayer are critical for this incest to truly develop. Enter Chris Dodd.

Who was one of Freddie and Fannie’s big money recipients? Chris Dodd.

Who received a sweetheart mortgage deal from Countrywide’s Angelo Mozilo? Chris Dodd.

Who received huge campaign dough from the Wall Street mob? Chris Dodd.

Now that Dodd’s flow of money from his incestuous partners at Freddie, Fannie, and other large financial outlets has stopped, he knows the gig is up. As the residents of Connecticut were preparing to fire him, he now pulls the classic, “You can’t fire me because I just quit.” No surprise. Quitters never win.

America may have been forced to bail out Wall Street, but they certainly have no interest in bailing out Chris Dodd.

Dodd will stand in front of the microphone, shed a tear or two, talk about his lifelong efforts of working for the people of Connecticut and America. He will have his fellow career politicians and partners in incest sing his praises. America will collectively vomit. Read the rest »

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Barney Frank Wants to Roll the Dice Back on Sub-Prime Lending

Posted by Larry Doyle on January 5th, 2010 4:39 PM |

If you wonder why America is broke, look no further than the individual who wanted to roll the dice on sub-prime lending, that is the Democrat from The People’s Republic of Massachusetts, Barney Frank. In an interview this morning on CNBC, Frank as much admits that maybe sub-prime lending should have been more regulated. Wow! What balls!

America doesn’t need legislators who operate by looking in the rear view mirror. With the sole exception of Frank’s remark in support of auditing the Fed, he offers platitudes that can only be compared to a social misfit. In fact, as I watched this clip, I constantly envisioned Barney collecting tickets and serving soda at a local theatre . . . said with all due respect to ticket takers and soda jerks.

For Barney Frank to effectively absolve himself of the massive and corrupt bankrupting of Freddie Mac and Fannie Mae is a sin. For America not to hold him accountable is a greater sin.

This clip runs 18 minutes. WARNING: Barf bags highly recommended!

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IMG’s Ted Forstmann: “Wall Street Never Had Principles”

Posted by Larry Doyle on January 5th, 2010 2:36 PM |

Theodore J. Forstmann, IMG Chairman and CEO

Ted Forstmann is a Wall Street legend.

Those on Wall Street know Ted for his dealmaking prowess. His deal to purchase IMG (International Management Group) in 2004 positioned him atop this sports, entertainment, and media enterprise. Forstmann is a world renowned philanthropist. What more can we learn about this entrepreneur? From the IMG website:

Ted Forstmann is Chairman and CEO of IMG and the senior founding partner of the pre-eminent leveraged buyout firm, Forstmann Little & Co.

Since acquiring IMG in 2004, Mr. Forstmann has established a world-class management team at IMG and leads the company’s growth by expanding its global footprint, acquiring new businesses and talent that complement its breadth of services, creating and owning content, and streamlining the organization and its cost structure. He has transitioned IMG from a company known primarily for its sports businesses to one that is now taking advantage of the strong synergies between sports, entertainment and media. Read the rest »

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Public Pension “Smoothies” Will Cost $2 Trillion

Posted by Larry Doyle on January 5th, 2010 11:11 AM |

Life will get increasingly expensive in America 2010.

Just because the calendar changed does not mean the smoke and mirrors disguising massive losses in banks, insurance companies, and federal and municipal operations have undergone some massive purging. If anything, the policies and programs developed in 2009 have likely only exacerbated the losses across a wide cross section of our economic landscape.

Our federal deficit obviously dwarfs all public and private deficits combined. That said, the obfuscation in other financial corners of our economic landscape are egregious. This obfuscation is often accomplished via an accounting practice known as smoothing. While this practice is not necessarily an indication of improper – if not illegal – financial chicanery, very often the two go hand in hand. Which financial institutions most seriously violated generally accepted accounting practices via smoothing? Hello Freddie. Hello Fannie. And we will pay.

Where else will American taxpayers pay? Public pensions. How much will the smoothie cost at the public pension Dairy Queen? How does $2 trillion sound, or a full four to five times the currently projected cost? Read the rest »

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Judge Rakoff Throws Out BofA’s Hypocrisy

Posted by Larry Doyle on January 5th, 2010 8:40 AM |

Judge Jed Rakoff

The economic landscape of 2009 remains littered with amazing stories and tales yet to be told. Sense on Cents would hope that all these stories generate a full dose of truth, transparency, and integrity.

To eliminate the hypocrisy presented by the financial industry, America needs more arbiters like Judge Jed Rakoff. Let’s review recent developments in the merger of then failing Merrill Lynch with Bank of America.

Were the multiple billions in bonus payments accelerated to Merrill Lynch executives in late 2008 anything short of a total misappropriation of taxpayer funds at large and Bank of America shareholder funds specifically? Did BofA executives conveniently look the other way as Merrill “robbed the bank?” This point of debate is the central premise of the current court proceeding being heard by Judge Jed Rakoff.

BofA very conveniently did not include details of the Merrill bonus payments in pre-merger disclosure materials. What is BofA’s argument for that oversight? Yesterday, BofA attorneys made the case that its shareholders should have been aware of these bonus payments from media reports. Interesting. The media becomes the punching bag for not properly reporting, and now BofA attorneys use the media as a punching bag for reporting. Is this a joke or what?

How did Judge Jed Rakoff respond to such a ‘reach’ defense? Read the rest »

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Why Doesn’t the Market Move?

Posted by Larry Doyle on January 4th, 2010 2:55 PM |

Have you ever wondered why the market often times makes a very early move one way or the other then just seems to sit all day? Take today, for instance. The market moved solidly higher on the open, but has sat at up 160 points all day. Why? Let’s look at a 5 minute graph of today’s price movement for the Dow Jones Industrial Average:

The market has traded in a 10 to 15 point range for the better part of the last 4 hours. Why isn’t it moving? A lack of overall trading volume and accompanying conviction on the part of many investors. With fewer market participants involved, volatility diminishes, and the market sits.

Is this good, bad, right, wrong? It’s none of the above. This is merely the market.

All other things being equal, it is healthier for a market to trade up and down on heavier volume as that indicates a stronger conviction and develops a stronger foundation. One may agree or disagree with the price action of a market. That said, a market will do whatever it may want. That is, “the market is the market.”

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Will 2010 Bring Real Financial Regulatory Reform?

Posted by Larry Doyle on January 4th, 2010 12:04 PM |

Will the change in the calendar bring about change in the prospects for real financial regulatory reform? Will Wall Street and Washington recycle the streamers and party hats used for New Year’s Eve celebrations and declare that the market is up so all is well? If the general media allows the charlatans in Washington and their consorts on Wall Street to frame the regulatory reform debate, America should expect little to no change on this front. In the process, a tremendous opportunity will have been squandered and real risks for our collective future will remain.

The haggling over regulatory turf continues again with Ben Bernanke’s declaration yesterday that our housing crisis resulted not from excessively easy monetary policy but rather lax regulatory oversight of mortgage lending. Whose domain is that to regulate? Oh right, that is the charge of the Federal Reserve. The joke on the American public continues, given that Bernanke is not called on the carpet for that sort of grandstanding. Read the rest »

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Sense on Cents 2009 Halls of Fame and Shame

Posted by Larry Doyle on January 4th, 2010 9:47 AM |

For those who missed last evening’s No Quarter Radio’s Sense on Cents with Larry Doyle Hall of Fame and Shame Induction, I am compelled to provide a recap and listing of all those honored or dishonored — depending on one’s perspective. What was the measuring stick to make these assessments? Very simply, the pursuit and promotion of truth, transparency and integrity as we navigate the economic landscape.

Some names you will immediately recognize, others you may not. Additional information about these individuals can be found via the search window (located above the right sidebar) at Sense on Cents. The names appear in no specific order of priority or importance. With no further adieu . . .

Sense on Cents 2009 Hall of Shame Inductees

1. Bernie Madoff
2. Nicholas Cosmo: ran financial scam at Agape World
3. Tim Geithner: tax cheat amongst other things
4. Larry Summers: arrogant, condescending, and sleep deprived
5. Auction-Rate Securities dealers and managers, especially Oppenheimer Holdings, E-Trade, Schwab, Pimco, Van-Kampen, Blackrock
6. The Wall Street Journal
7. George Soros
8. Chris Dodd (D-CT): reasons too numerous to mention
9. The Board of FINRA
10. Franklin Raines and Leland Brendsel: former CEOs of Fannie and Freddie
11. Wall Street management, especially Lloyd Blankfein of Goldman Sachs
12. Frank Dipascali: a special place in hell for Madoff’s CFO
13. Rahm Emanuel
14. Jimmy Cayne: CEO of Bear Stearns
15. Dick Fuld: CEO of Lehman Bros.
16. Congress collectively
17. Barney Frank (D-MA): reasons too numerous to mention, but start with “I want to roll the dice…”
18. Bank Stress Tests: a total sham
19. Allen Stanford
20. Steven Rattner: car czar
21. Bruce Malkenhorst: receiving a 500k pension from Vernon, CA
22. Barack Obama: just another politician Read the rest »