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HomeEuro Crisis Merely Delayed, Not Averted
Posted by Larry Doyle on May 10th, 2010 8:39 AM |
They blinked.
The European Union and European Central Bank stole a play from the wizards in Washington to avert an immediate currency crisis in the EU and the potential ripple effect around the world. Did they do the right thing? For me, the question of addressing the fiscal crisis within the EU is not one of right or wrong; rather, when the crisis comes, how large will it be and how long will it last?
The trillion dollar package provided by the European Central Bank, the European Union itself, and the IMF is a combination of loan guarantees and quantitative easing. Shock and awe and punish those who would dare sell the Euro short, right? Clearly, the massive injection of capital will squeeze those who have shorted the Euro, but what about the long haul?
The EU is subverting the very tenets upon which the union was founded. Those tenets precluded this type of financial bailout. (more…)
Increasing Vacancy Rates Will Pressure Both the Rental Market and Home Values
Posted by Larry Doyle on October 6th, 2009 11:42 AM |
You do not need to take Economics 101 to understand that an increase in supply of any asset will almost always lead to a decline in prices. This ‘tremendous grasp of the obvious’ in regard to housing runs right in the face of assertions put forth by many real estate brokers and housing experts.
High five to our friends at 12th Street Capital for bringing attention to The Wall Street Journal‘s writing, Apartment Glut Expands:
Signs advertise apartments for rent in San Francisco in July. Rents declined during the third quarter, usually a strong period for rentals. (Getty Images)
Apartment vacancies hit their highest point since 1986, surging in cities from Raleigh, N.C., to Tacoma, Wash., as rising unemployment continued to chip away at demand during the traditionally strong summer rental months.
The U.S. vacancy rate reached 7.8%, a 23-year high, according to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets. The rate is expected to climb further in the fall and winter, when rental demand is weaker, pushing vacancies to the highest levels since Reis began its count in 1980.
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Board of Health Condemns Due to Moral Hazards
Posted by Larry Doyle on April 13th, 2009 11:05 AM |
The best organizations are managed not only for today but for tomorrow. What do I mean by that? Great organizations assess risks, develop talent, diversify products, and grow market share. Aside from those basic business tenets, the best organizations respond well in times of crisis.
Every business and organization is ultimately a reflection of its people. To that end, the depth and quality of the people are the single greatest factors in the long term success of the organization.
Any individual or organization would relish developing a system that generates untold success and then automates the process. Neither business nor life works that way. Change is constant. How organizations proactively stay ahead of change and respond to change is paramount in succeeding in business and life.
The best sports organizations have developed a deep bench of talent both on and off the field. When players or executives leave – as they always do – the general manager moves another body in and the team does not miss a beat. The same scenario occurs in the best companies. This transition process is part of the culture of the organization. (more…)
“Beholden to Failed Banksters”
Posted by Larry Doyle on April 9th, 2009 3:56 PM |
Any investor or manager with a degree of experience knows that the “first loss is the best loss.” What do I mean by that? Once the market detects a loss or a weakened position, the price for that asset will remain capped unless and until the asset is sold or liquidated. This price action occurs in every sector of every market.
Welcome to the world of global finance 2009. As banks, insurance companies, hedge funds, and other financial entities deal with losses, we see a lack of aggressive posture being taken on dealing with these losses. Why? Once moral hazard is violated with a single entity, every other entity will look to violate it as well.
Immediate losses are forestalled in hopes that they will be covered or disguised. However, every loss ultimately must be recognized. By whom and how is the question.
At this juncture, more of the losses in our financial system are being directed toward the taxpayers. How? Via the wide array of government programs. What is the cost? A likely underperforming economy due to a lack of credit, and higher taxes to offset lower revenues. (more…)
Lessons from Bear Stearns
Posted by Larry Doyle on March 16th, 2009 10:37 AM |
It was one year ago that the Federal Reserve and Treasury delivered Bear Stearns into the hands of JP Morgan for $2 a share. Bear Stearns stock had traded above $170 a share in 2006. With the passage of time, what are some of the lessons learned and what questions remain unanswered.
1. Although Bear Stearns employees and shareholders may not qualify a price of $2 a share (revised to $10 a few weeks later) as being saved, would the financial system have been better off letting Bear totally fail? Why? If Bear had failed, many people do not believe we would have had the breakdowns in our financial systems that occurred because of Lehman’s failure.
2. Did Dick Fuld, CEO of Lehman, assume that the Fed and Treasury would save Lehman much as they did Bear? Was he less aggressive in pursuing increased capital injections during the Summer 2008 as a result? Many people believe this to be the case. (more…)
