Sense on Cents

What is Lincoln Thinkin’?

Posted by Larry Doyle on March 30th, 2009 3:56 PM |

Lincoln Financial Group is not exactly a small or even medium sized insurance company. LNC has a current market capitalization of approximately $2.5 billion. The stock is down almost 40% on the day, trading at approximately $6.50. The 52 week high for Lincoln was $59.99. Clearly, Lincoln has a whole host of issues.

What is Lincoln thinkin’? What should a company do in circumstances like this? Well, how do they put themselves in a position of getting access to government bailout money currently allocated to banks?

Perhaps Lincoln could become a bank. But how does an insurance company become a bank? Well, how about they just go buy one. So that is what Lincoln did. The WSJ reports:

Lincoln National was believed to have qualified for TLGP (Temporary Liquidity Guarantee Program) and other government programs after it acquired Newton County Loan & Savings in Indiana and converted into a savings and loan in November. However, in the company’s filing with the Securities and Exchange Commission, it said it does not believe it qualifies under the current provisions of the TGLP and thus voluntarily withdrew its application to participate.

Read the rest »

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Oppy’s Pain in the ARS!!

Posted by Larry Doyle on March 30th, 2009 12:46 PM |

There is little doubt the American populace is getting increasingly frustrated with the pace and level of government bailouts. Are we about to literally “go over the line?”

Is the United States about to allow a Canadian company to incorporate itself here in the U.S. for the purpose of receiving a bailout? Is this the height of hypocrisy or what?

I refer to the fact that Oppenheimer Holdings, a Toronto based investment company involved in the travesty surrounding the sale of ARS (Auction Rate Securities) is looking to incorporate in Delaware in order to receive federal bailout funds. From Bloomberg’s If Oppenheimer Gets Handout, Blame Canada:

Oppenheimer “is exploring becoming a U.S. corporation and a U.S. bank holding company in order to help resolve the ARS problem for our clients,” the company said in its annual letter to shareholders released last week. (Toronto’s Oppenheimer & Co. isn’t related to OppenheimerFunds Inc., a unit of Massachusetts Mutual Life Insurance Co.)

The “ARS problem,” of course, is the nasty pickle Oppenheimer has gotten itself into with customers who hold $929.6 million in auction-rate securities, the ill-fated investments that flat-lined in February 2008. The auction-rate meltdown left investors at Oppenheimer and many of its Wall Street brethren unable to liquidate positions that had been marketed as, well, pretty darned liquid, to customers who often had no clue about the product’s risks.

Why should U.S. taxpayers bail out an investment company that improperly marketed securities? Why shouldn’t Oppenheimer, and every other investment manager or bank that improperly – if not fraudulently – marketed ARPS, be forced to make their own investors whole? Read the rest »

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Too Much Debt: Restructure, Default, or Devalue?

Posted by Larry Doyle on March 30th, 2009 11:10 AM |

Virtually every sector in the economy is faced with the same predicament: excessive debt. Whether residential housing, commercial real estate, consumer finance, automotive, municipal finance, or Uncle Sam, the current debt service along with future debt service is overwhelming.

In my opinion, the amount of influence with your lender (creditor) is directly related to the amount of debt and the terms of that debt. Regrettably for many taxpayers, the amount of debt from residential mortgage payments along with credit card bills and other household debts are not sufficient to create much influence. For larger corporations or municipalities, the influence is greater as these entities threaten to default. Thus, we see ongoing games of “chicken” being played between debtors and creditors while debt service typically gets restructured.

What about the largest debtor of all, that being Uncle Sam? He can’t play the “default” card and expect the market to treat him with any degree of credibility. Thus, Uncle Sam does not have the option of restructuring or default. The only real option left to Uncle Sam is devaluation. How does that get played out? In the very manner that the Fed and Treasury are doing right now. Pump money into the system like there is no tomorrow. Read the rest »

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Mr. Geithner, “I Want Some More”

Posted by Larry Doyle on March 30th, 2009 5:15 AM |

Poor Oliver Twist faced the wrath of the workhouse master when he asked for more soup. Why is it that certain banks do not face similar wrath when they go back to Uncle Sam for more “bread” with the soup?

They want more??!!

I have commented extensively on the banks’ need for more capital. Bernanke and Geithner now share that the banking industry has significant embedded losses which need more capital: Geithner Says Some Banks to Need ‘Large Amounts’ of Assistance.

Over and above this fact, it is now widely speculated that significant revenues at certain banks (Citi and BofA) were generated in the last few months via unwinding exposure to AIG. In short, AIG entered into massive transactions with these banks to eliminate further exposure on pre-existing trades. In the process, AIG (taxpayers) incurred larger losses while these banks generated large profits. Why would AIG do this? It’s part of a “going out of business sale” and executed with a “volume discount.”

As an investor, though, am I supposed to think that bank revenues are improving because of positive trends in the economy? No way.

Risks remain extraordinarily high. To that end, I STRONGLY encourage people to listen to the audio recording or the podcast of my interview with Michael Panzner from last evening. Michael has had the economy and the market called for the last few years. His books are comprehensive in laying out a sobering reality and potentially a daunting future.

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Audio Recording: NoQuarter Radio’s Sense on Cents with Larry Doyle

Posted by Larry Doyle on March 29th, 2009 9:06 PM |

In case you missed LD’s Sunday night radio show, just click on the Play button below for the audio recording. Once the playback has started, you can fast forward or rewind to any portion of the show by clicking at any point along the play bar.

It was a fabulous show, featuring Wall Street veteran and author Michael Panzner. Don’t miss it!

Sunday night, March 29th, 2009
NoQuarter Radio’s “Sense on Cents with Larry Doyle”

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What is Michael Panzner Saying?

Posted by Larry Doyle on March 29th, 2009 6:08 PM |

In anticipation of this evening’s guest on my radio show, let’s see what Michael Panzner has to say:

No doubt a lot has changed over the past few years. But not just in terms of financial markets and the economy. There has also been a seismic shift in attitudes about America and its role in the world. When the going was good, many nations were willing to accomodate U.S. arrogance and heavyhandedness in global affairs, and were happy to follow our lead in various areas. Now that the bubble has burst, however, a lot of people aren’t all that interested in even hearing what we have to say, especially when it comes to economic matters. One result, suggests the New York Times, is that “Obama Will Face a Defiant World on Foreign Visit.”

Michael Panzner is held in very high regard by a wide array of esteemed analysts, economists, and money managers. Read his entire piece, Not Buying What We Are Selling.

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Wall Street: Moving Business or Storage Business?

Posted by Larry Doyle on March 29th, 2009 11:39 AM |

A standing joke on Wall Street trading desks was a question posed by sales management to trading management.

Sales Manager, looking to sell products and generate commissions, would ask Trading Manager, looking to manage risk and maximize profits or minimize losses, “Are we here at Bank (fill in the blank) in the “moving” business or “storage” business?” Meaning, would the trading desk be competitive in pricing so as to allow the sales desk an opportunity to sell product (stocks, bonds, loans, et al).

This very question is at the heart of a rapidly developing conflict in the PPIP (Public-Private Investment Program) and an expectation of relaxing the FASB’s (Federal Accounting Standard Board) mark to market. Read the rest »

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Tune in Sunday Evening to NoQuarter Radio’s “Sense on Cents with Larry Doyle”

Posted by Larry Doyle on March 29th, 2009 9:14 AM |

Please join us Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. With the stock market near 12 year lows, what is driving the flows? What is truly going on in the economy? Where are markets headed? Given the Washington political circus, how will new legislation impact the future of Wall Street? So much to cover.

I will be speaking with Michael J. Panzner, a 25-year veteran of the global stock, bond, and currency markets who has worked in New York and London for such leading companies as HSBC, Soros Funds, ABN Amro, Dresdner Bank, and J.P. Morgan Chase.

He is the author of When Giants Fall: An Economic Roadmap for the End of the American Era, Financial Armageddon: Protecting Your Future from Four Impending Catastrophes, and The New Laws of the Stock Market Jungle: An Insider’s Guide to Successful Investing in a Changing World.

He has also been a columnist at TheStreet.com’s RealMoney paid-subscription service and a contributor to AOL’s BloggingStocks.com. In addition, Panzner has appeared on or been quoted byCNBC, Bloomberg, The Wall Street Journal, USA Today, Barron’s Reuters, CNN, MarketWatch, BusinessWeek Online, TheStreet.com, Slate, CFO.com, and other print, radio and television outlets. Read the rest »

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From the Archives: The Greatest Generation

Posted by Larry Doyle on March 29th, 2009 5:30 AM |

Our economy and country are experiencing challenges which will not be fixed in short order. While our economic foundation is being tested, is our moral fiber being questioned as well? I would clearly say it is. While I am not here to address specific social questions of a moral nature, I remain convinced that as a nation we need to rediscover the virtues of sacrifice, decency, integrity, love of family, and love of country. While the media may put these topics in the category of political correctness, any fair measure or assessment of our nation on these topics would, in my opinion, show us to be deficient.

In light of that, I believe an increase in civil service is necessary and important to redirecting our nation. I called on this civil service to be mandatory last November. My call was not well received but that is OK, I do not write to be popular.

How prophetic that a measure passing through the House and Senate for Expanding National Service is receiving strong bipartisan support.

I am happy to share my piece from last November, The Greatest Generation, with our newer readers.

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Earth Hour 2009

Posted by Larry Doyle on March 28th, 2009 7:10 PM |

Earth Hour is tonight, Saturday March 28th from 8:30-9:30PM local time.

From EarthHour.org:

THIS YEAR, EARTH HOUR HAS BEEN TRANSFORMED INTO THE WORLD’S FIRST GLOBAL ELECTION, between Earth and global warming. For the first time in history, people of all ages, nationalities, race and background have the opportunity to use their light switch as their vote – Switching off your lights is a vote for Earth, or leaving them on is a vote for global warming. WWF (World Wildlife Fund) are urging the world to VOTE EARTH and reach the target of 1 billion votes, which will be presented to world leaders at the Global Climate Change Conference in Copenhagen 2009. This meeting will determine official government policies to take action against global warming, which will replace the Kyoto Protocol. It is the chance for the people of the world to make their voice heard. Read the rest »