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HomeThe Modern Day Fall of the Roman Empire?
Posted by Larry Doyle on March 27th, 2009 1:36 PM |
I have focused on the problems in western and eastern Europe over the last few months. Those problems are not abating. Who would have thought that the host of next week’s G-20 may need the greatest amount of aid of all.
Should Prime Minister Gordon Brown look to increase the room rates for world leaders in attendance next week? Perhaps a slightly higher fee for the mini-bar? Every little bit helps.
In all seriousness, the U.K has spent proportionately almost three times as much in bailing out their financial institutions as the United States.
For those unaware, the U.K. was unable to fully place 40 year debt this week. That experience, known as a “failed auction,” is financially and politically embarrassing, aside from being fiscally frightening. If a country is not able to finance itself . . . (more…)
Is the Party REALLY Over?
Posted by Larry Doyle on March 27th, 2009 11:58 AM |
There is NO doubt that our financial markets and financial firms will experience significant changes in regulation on a going forward basis. Turbo-Tim Geithner laid out those plans this week. President Obama is hosting the heads of the major banks at noon today to lay the groundwork for the universal acceptance of the new rules, amongst other topics.
Over the next few weeks and months, new regulations will be defined and a new division of responsibilities will be outlined amongst the various bodies (Fed, Treasury, SEC, FDIC, FINRA, CME). Rest assured, there will be some power grabs by the heads of these agencies and regulatory bodies in the process.
We have clearly just come through an ENORMOUS party on Wall Street, leaving our entire economy with a MASSIVE hangover. Do not forget, though, as with any good party, we need to review who was working the door, who got let in, who got the discount cover, who brought some attractive friends, and who was taking a little something on the side. I won’t dare venture as to who left together. (more…)
How Many Investment Bankers and Campaign Aides Does It Take to Turn a Lug Wrench?
Posted by Larry Doyle on March 26th, 2009 5:16 PM |
In light of the hundreds of billions of dollars allocated to the financial sector, I never thought for a second that Washington would not bail out Detroit. While details are being finalized, rest assured there will be tens of billions of dollars injected into the automotive industry.
The question regarding the automotive industry’s viability has always revolved around the level of annual sales. These sales had run at an annual rate of 16 million during the “good” years. Sales in 2009 are now projected in the 8-9 million range. How much does the industry need to downsize and what rate of sales are necessary in order to breakeven? Will the capital injected be the proverbial “good money after bad?”
There are so many variables in the automotive equation (rate of sales, merger possibilities, debt covenants, union and pension obligations, dealerships, autoparts suppliers) as to make the entire equation untenable. (more…)
The Good Guys
Posted by Larry Doyle on March 26th, 2009 3:00 PM |
Wall Street has become a very easy target for our politicians, our populace, and a large part of the world. Wall Street is Gordon Gekko and the “greed is good” approach, correct? People would just as soon run you over as help you up, correct? The entire Wall Street machine is littered with Masters of the Universe, correct?
Well, I know plenty of people on Wall Street who fit that bill but I know multiples more who are truly decent, caring, hard working people trying to make an honest living for their family.
One of the early lessons I learned on Wall Street was the fact that there is NO security in the securities industry. As such, I needed to be exceedingly careful in who I engaged and how I engaged them. As I have highlighted in my Career Planning tab above, reputation is everything. I readily admit that not everybody on Wall Street shares that opinion. (more…)
How Long Can You Tread Water?
Posted by Larry Doyle on March 26th, 2009 11:10 AM |
The other day, I provided a cursory overview of the details embedded in the recently proposed Public-Private Investment Partnership, Will Banks Truly Sell these Toxic Assets?
The main point I tried to highlight in that piece was the need for true price discovery for these toxic assets. A loyal reader provided tremendous insight in highlighting that the PPIP needs to assure that sellers are truly at arm’s length from buyers to insure that the price discovery process is real and fair.
There are potential concerns with this price discovery process highlighted in my piece Send in the Clown. Are the bank portfolios, located within the largest banks needing to sell toxic assets, attempting to prop the market higher? (more…)
Roubini and Birinyi on the Market
Posted by Larry Doyle on March 26th, 2009 8:42 AM |
I always keep a close ear for the market insights of any of our Economic All-Stars. Highly proclaimed NYU professor and economist Nouriel Roubini is decidedly bearish on the state of financial companies, the economy, and the markets. Bloomberg reports, Roubini Says Stocks Will Drop as Banks Go Belly Up.
Laszlo Birinyi is more tempered in his assessment but believes the market has come too far, too fast and is subject to some pullbacks. Please remember that we saw a market bottom in the S&P 500 at the 666 level (pretty scary, eh) on Friday March 6. We have moved up 22% in a very short time frame. Birinyi further offers that this market is less geared for long term investors and more for short term traders focused on picking individual stocks.
LD
Send in the Clown
Posted by Larry Doyle on March 26th, 2009 5:15 AM |
In the process of a business transaction, have you ever encountered the sudden appearance of another interested buyer? Where does this other mysterious buyer suddenly come from? How is it that the new buyer appears at the most inopportune time? If you thought you were the primary buyer, do you feel as if your bid is being shopped? In business, this appearance of a supposed late buyer is known as “send in the clown!”
This part of the circus act is played out on Wall Street all the time. As we enter into the largest liquidation sale in the history of Wall Street, the big fellow with the red nose, floppy feet, baggy pants, and squeaky voice has just shown up, in the form of Citigroup and Bank of America’s bank portfolios. (more…)
Billions in Municipal Losses Later…Sorry
Posted by Larry Doyle on March 25th, 2009 8:03 PM |
The municipal bond sector has always been conducive to a “pay to play” mentality. Picture a municipal executive, compensated in a high 5 figure range, making a decision on a multi-million dollar bond transaction in which Wall Street underwriters were generating millions in fees. If that scenario is not ripe for abuse, I don’t know what is. The “pay to play” game has been going on for years in municipal finance.
Well, with the launch and growth in municipal derivatives, it appears that the “games” likely continued. Wall Street firms certainly booked huge profits. Municipal executives very likely received under the table payments. Taxpayers got screwed. (more…)
