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HomeLet’s Really Question Ms. Schapiro….
Posted by Larry Doyle on January 16th, 2009 2:54 PM |
In light of the disaster that is Wall Street, I do not know if I am simply dumbfounded or merely dismayed by the softball questioning of prospective SEC chairwoman Mary Schapiro yesterday.
With the dissolution of the investment banking model, the massive injections of government capital, and potential indictments of major Wall Street icons in the offing, I looked forward to some very juicy testimony. The results were beyond disappointing. The public deserves so much better.
Mary Schapiro may end up being the best SEC commissioner ever, but let’s make her earn a few stripes before anointing her. It’s not as if there isn’t enough material. Let me provide a little background before I propose my line of questioning for Ms. Schapiro.
FINRA, the Financial Industry Regulatory Authority, was formed as a result of the merger between the regulatory arms of the NYSE and NASD. While there is another securities industry watchdog, SIFMA (Securities Industry and Financial Markets Association), that body is more a trade association or good cop.
FINRA is supposed to be the real watchdog or the bad cop. (more…)
When Big Ben Speaks….
Posted by Larry Doyle on January 14th, 2009 9:40 PM |
Against the backdrop of the frozen tundra, numerous members of the storied Pittsburgh Steelers franchise have reached
Chairman of Federal Reserve, Ben Bernanke
legendary status. Included in this family are such greats as Jack Lambert, Mean Joe Greene, Terry Bradshaw, Rocky Bleier, Franco Harris, John Stallworth, Lynn Swann, Chuck Noll, and the longtime owner Art Rooney. For lovers of the NFL, these men are true giants. The current Steelers franchise is led by budding legend and All-Pro quarterback Ben Roethlisberger. When “Big Ben” leads, Pittsburgh follows. You can discuss this “Big Ben” tonight and every Wednesday night at 9PM on “No Topic Taboo . . . Everything Else with Jay.”
With all due respect to Mr. Roethlisberger, though, there are two other “Big Bens” that crossed paths just yesterday and hold much greater sway and impact in world affairs. I speak of Ben Bernanke and the famous London clock tower.
While the NFL is a great diversion, we ultimately return to the real world and need to deal with the realities it presents. Fed chairman, “Big Ben” Bernanke, presented chilling testimony yesterday in the shadows of the famous clock tower at the London School of Economics.
Understand that every message delivered by a Fed chairman is very carefully scripted. In years past, the Fed was much less transparent than it is today. That said, the Fed chairman speaks carefully so as not to unsettle markets but also to provide an outline as to future policy. In so doing, the general public is often hard pressed to decipher what he is saying and what it means. The general media typically does not capture the nuances and subtleties offered by the Fed. To that end, our work here at No Quarter looks to fill that void.
Got Insurance? 529 Plans? Financial Aid? Read On . . .
Posted by Larry Doyle on January 13th, 2009 5:10 PM |
At the request of numerous readers, I am offering a transcript review of my interview this past Sunday evening with insurance and financial planning expert, Sean D’Arcy. Additionally, if you’d like to listen to this interview in its entirety, 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. Archived programs are also available as a podcast from iTunes.
As a disclaimer, the opinions offered are Sean’s alone. The transcription is mine. I have no vested financial interest in Sean’s business or any of the views or companies mentioned. The purpose of providing this recap is strictly as a public service. To the extent that you find this material beneficial, my mission is accomplished. If you find this material helpful, please forward it along. If we grow our audience in the process that would be great!
Sean is a self-employed independent insurance and financial planning executive. He is a graduate of Columbia ’81.
LD: Sean, can you address how the insurance industry is regulated?
SD: The insurance industry is regulated by 50 separate state insurance offices. Each of those offices is responsible for the oversight of insurance business done within their state. Some states are very disciplined in this process, for example New York has very strong oversight. Other states are clearly lacking in the professional expertise to properly oversee insurance business within their state. Each state insurance commissioner is appointed by the respective governors. Each state insurance office is funded by a tax on the premiums written in that state. For example, New York imposes a 4% tax on each policy written in the state. An emergency fund is also put in place to address potential funding problems with individual companies.
Market Musings on a Monday
Posted by Larry Doyle on January 12th, 2009 10:05 PM |
With so many cross-currents in our economy and markets, it is little wonder that people feel overwhelmed and disoriented. The powers-that-be in Washington are in a period of transition with plenty of backroom dealing going on from both a political and economic standpoint. The financial markets remain challenged from a liquidity and valuation standpoint. Against these backdrops, I hope readers are becoming more comfortable with my analysis of the economy, the markets, and the world of finance at large. Let’s dive into the issues and topics I find most compelling.
Earnings and Outlooks
On the equity front, the bottom line — that being earnings — is ultimately what drives prices. Time and time again we will hear analysts and money managers “talk their positions.” These individuals are either blinded by the big picture or talking the party line. In our piece on January 8th, “Time, Why You Punish Me?” I stated that “earnings expectations truly concern me.”
Fast forward to today and we see that Citigroup is leaking information into the market that their Q4 2008 earnings will be significantly worse than expected. Initially, Citi’s Q4 2008 earnings (why do we still use that term? They have not made money in so long. Wouldn’t it be better to merely call them losses and save ourselves the headache?) were expected to be -$4 billion. Citi is now leaking to the market that earnings will more likely be -$6 billion and that is only because they are recognizing a gain of $4 billion on the sale of a German retail banking business. Thus, ex that sale, Citi had a $10 billion operating loss for the Q4 2008.
Market Highlights 12/1/08: “Space Mountain”
Posted by Larry Doyle on December 2nd, 2008 11:05 AM |
I was never one that “enjoyed” roller-coasters. In fact the last time I went on a roller-coaster at an amusement park I went on it strictly to “surprise” my son. On that ride I closed my eyes, held on for dear life and figured that within a few minutes, I’d be back on terra firma. If I did not make it, the premiums were all paid and the family would be just fine. If today’s roller-coaster were only that easy.
While I did not get overly ebullient about the 15% move upward in the equity markets from 11/21 through 11/28, I am not reading too much into today’s 8% selloff. The fact is we remain very much in a delevering process, will continue to see exceedingly weak economic reports, and are far too focused on what is coming out of Washington than what and how businesses are handling this downturn. I still believe that we will largely remain in a trading range of between 7000 and 7500 on the downside and 9500 on the upside. Overall trend lines remain negative. Be better sellers of rallies !!
In fact, please look at this graph of the price action for the Dow over the last decade. On 10/06/02 we had an an intraday low of 7177. The market got down to the low 7200- to 7500 range a few times before holding and moving higher. We have been down there once so far on 11/20th. I think it is an easy call to say that we will revisit at least once more if not a few times. Check it out…
A quick review of today’s “lowlights” and then some commentary. (more…)
Economic/Market Highlights 11/22-11/29/08: “Whack a Mole”
Posted by Larry Doyle on November 30th, 2008 3:15 PM |
The domestic equity markets rebounded by 15% over the last week which is the single strongest week since the 1930s. With that rebound the markets still ended down app 5% for the month. Despite the enormous rebound, albeit on moderate volume and in a shortened week, the overall sentiment and fundamentals to the market remain decidedly negative.
The Dow has been in a range of 9600-7500 over the last 6 months so the rebound off the lows of 11/20 bring the market back slightly above the midpoint of this short-term range. I would counsel those who trade the market to trade it against those levels with an overall negative bias.
The rebound started with the announcement of Geithner as Treasury Secretary but then received another 1.1trillion reasons to move higher in the form of the rescue package thrown to Citigroup (300bln) and 800bln in the form of more rescue money for Freddie/Fannie, more purchases of debt issues by Freddie/Fannie and Federal Home Loan Banks, and funding for a facility to facilitate increased liquidity for consumer finance markets.
With those announcements, the equity markets continued to rally as did the U.S. government bond market, and the U.S. mortgage market (each of those debt markets rallied by app 40 to 50 basis points). The corporate credit markets, the high yield markets, and the municipal markets did not rally, however. Those markets remain largely frozen for entities looking to issue debt.
Economic/Market Highlights 11/21/08: V-O-L-A-T-I-L-I-T-Y !!
Posted by Larry Doyle on November 22nd, 2008 4:10 PM |
The fact that the equity markets totally reversed yesterday’s 5-6% selloff is not the biggest story of the day. In short, 400-500 point swings either way have become so normal as to not be a big deal. But they are a big deal and I will explain why shortly.
At 2:30pm the equity markets were basically unchanged. By 3:45pm the equity markets had rallied by 5-6% primarily on the announcement of Tim Geithner, NY Fed chair, as the nominee to be Treasury Secretary, while the other candidate for that role, Harvard professor and former Tsy Secretary for Bill Clinton, Larry Summers will be a senior White House economic advisor. Well done by Barack to get both on the team.
The markets respect Geithner and he will be easily approved. Summers would have faced some grilling for sexist comments he made while President of Harvard as well as the fact that he has already been Tsy Secy and it would have been viewed as “the more things change the more they stay the same”. Geithner obviously knows where all the bones are buried on Wall St. having worked very closely with Paulson over the entirety of this financial fiasco. The transition should be seamless. Geithner and Paulson have different styles but both are respected by Wall St. even if Paulson is not fully liked by Main St. The markets respect Geithner and this is obviously very important.
Read more here as to “Obama Likely to Pick Fed’s Geithner for Treasury.”
While Geithner and Summers are obviously highly respected they are not Houdini and they will not be able to singlehandedly turn our economy or markets around based on their name alone. (more…)
Economic/Market Highlights 11/20/08: D-E-L-E-V-E-R-I-N-G !!
Posted by Larry Doyle on November 21st, 2008 7:55 AM |
There were major forced liquidations on the parts of hedge funds, asset managers, and insurance companies that went through the markets Thursday. Laszlo Birinyi, a noted market tactician whom I follow quite closely, indicated today that given the market price action that making investment decisions now is “strictly guesswork”.
Equity markets traded down another 5.5% to 6.5% Thursday with much of that selloff occurring in the last hour which is an indication that orders from asset managers and mutual funds built into the close. The delevering process (the selling of assets purchased with borrowed money) continues!! Volume on the NYSE was 8.8bln shares, 44% above average. Clearly a strong indication of massive liquidations. Oil and copper were down 6% and 4% respectively given continued expectations of economic weakness. When does OPEC come out and announce aggressive cuts in production?
Government bonds rallied by 30basis points in the 10yr (a huge move) in a “flight to safety” trade.
While the safest bonds rallied, bonds with a risk component (high grade corporates, mortgage-backed bonds, high yield) either did not move or in the case of high yield traded down in sync with equities. (more…)
What Has Meredith Whitney Got to Say?
Posted by Larry Doyle on December 11th, 2008 6:20 AM |
You have heard me sing the praises of those whom I consider to be some of the wisest minds in the financial markets. Included in this group are Nouriel Roubini, Laszlo Birinyi, Sheila Bair, and Meredith Whitney. It is not often that we have the opportunity to hear timely, insightful, and extensive analysis from these individuals. This morning we have one of those opportunities as Meredith Whitney, the TOP bank and financial services analyst on Wall St., is interviewed.
This attached video clip of her interview runs 12 minutes but it is extremely insightful on the current state and future outlook for the following:
1. Consumer Credit….it is going to get MUCH tighter, which is the very reason why we are STRONGLY encouraging people to pay down debt.
2. Outlook for large money center banks….”on life support for the next 18-36 months”
3. AIG….needs more money as they have incurred ANOTHER 10bln loss. (more…)
Tags: Meredith Whitney, Meredith Whitney commentary, Meredith Whitney speaks, Meredith Whitney speaks on banks
Posted in American Consumers, Current Affairs, Economic Stimulus, Economy, Meredith Whitney | 1 Comment »