RSS Feed
Twitter
Facebook
Email
HomeObama’s Economic Stimulus Plan: Big Dig Deja Vu??
Posted by Larry Doyle on December 7th, 2008 8:00 PM |
In the midst of the current economic turmoil, virtually every economist worth his salt can make valid cases for the necessity of both fiscal and monetary stimulus. I appreciate the use of PEBO’s use of the term “investment” rather than “spending” in proposing an economic stimulus program not seen in this country since the New Deal.
Read more here as to Obama’s Stimulus proposal, “Obama Outlines Stimulus Plan.”
I hope, though, that in proposing an “investment” program, that he is mindful of certain parameters that any qualified private or public investor would utilize prior to making his investment. What are those parameters?
1. With whom am I doing business?
2. As the investor (lender), what is the credit rating of the investment and of the borrower?
3. What is the “time to maturity” … that is when can I expect to generate a return on my investment dollars? (more…)
Economic/Market Highlights 11/17/08
Posted by Larry Doyle on November 17th, 2008 10:20 PM |
I am going to save all the readers here extensive verbiage so as not to be overly morose about the ongoing challenging economic environment. I will offer my thoughts and comments on a few of the higher profile stories as indicators of what is going on, broadly speaking.
1. G-20 Summit….I had high hopes that commitments to global coordinated tax cuts would emanate from this summit. Talk about a major “whiff” on behalf of the global leaders. All I see is that leaders expressed a “promise” to work together on the critical issues. Wow, how gracious of them. Over and above this promise, I sensed that global leaders want to wait until the Obama administration takes charge and work with them. Believe me, with all due respect to Barack and team, if anybody thinks they have a magic bullet and will “inspire” a heightened level of confidence in the markets and economy, well….don’t hold your breath.
Read more on how “G-20 leaders Tighten Grips on Banks” (more…)
“The Greatest Generation”
Posted by Larry Doyle on November 14th, 2008 7:45 AM |
I commend HRC for providing some real leadership at this point in time. There is no doubt that our country is screaming for real leadership. From Washington to Wall St. to Main St. our citizens are looking for people and programs that will look forward and take the vital and necessary steps to change our national mindset. Do you get the sense that perhaps some supporters of BO are getting a little nervous and now realize that he is a very high risk President-elect?
HRC’s stimulus proposal addresses a number of fronts (expanding unemployment insurance, addressing Medicaid, funding infrastructure projects and clean energy, modify mortgages) which will need focus from Congress to create a demonstrative impact on our economy. Some of the programs will clearly be impactful while others may have unintended negative consequences. We will have to take some prudent but necessary risks to achieve positive results.
The TARP bailout/rescue plan proposed to date has not inspired confidence nor generated any real impact for three reasons:
1. the banks have such sizable embedded losses that the funds already injected are being and will be used to recapitalize the balance sheets …
2. investors have little to no appetite to purchase loans currently on the banks’ books which were not properly underwritten and will likely continue to suffer an ever increasing level of delinquencies and defaults …
3. little to no demand for funds due to the fact that most individuals and institutions are looking to decrease their debt service not increase it …
As a result our economy spirals downward. HRC’s plan addresses some of our most serious needs. I commend her. (more…)
Economic/Market Highlights 11/12/08
Posted by Larry Doyle on November 13th, 2008 1:31 PM |
Markets trade down another 5% and close within spitting distance of October’s closing lows seen on Oct 10. I remain decidedly negative on the market and the economy despite every effort made by global governments. In fact, the pace of the economic slowdown is quickening. It’s all about delevering and liquidity.
We have much to address, so let’s get after it.
Retail….
1. Best Buy comments that they see a “seismic slowdown” in 4th quarter projected sales. Expect to see significant sales and price cuts on electronics going into the holiday season.
2. Survey of credit card holders indicates the following: 53% have more debt than they are comfortable handling. Of that group 73% indicate that they will likely spend less this holiday season….lots of regifting….
Economy
1. Julian Robertson, one of the most highly regarded money managers of the last 40 yrs, indicates that “we have not seen the capitulation in our economy and that the foreseeable future will be a long, tough period for the American people. He also offered that Nancy Pelosi wants to throw money down the toilet to save the automotive industry. (more on this later)
2. Moody’s ratings expects defaults on distressed debt situations to almost quadruple in the next year to north of 10%. This expected level of defaults is why high yield debt is trading near a 20% yield level. Lots of RISK! Companies will be severely challenged to refinance their debt.
3. Jamie Dimon, CEO of JP Morgan, indicates that the economic recession will be worse than the credit crisis.
Auto Situation
1. Pelosi, Frank, Obama and team clearly want to see a bailout for the automotive industry with GWB’s signature. The package being discussed is $25bln but with no specifics highlighted as of yet. Expect hearings next week in Washington on this issue. From the standpoint that Uncle Sam has already committed north of a trillion dollars to the financial system, a 25bln capital injection is a drop in the bucket but it goes a lot deeper than that. First off, the cash burn rate for the Big 3 at the anemic pace of auto sales is currently 5+bln per month, so 25bln gets us to next March. Big deal.
IMO, I would not give this industry $20 without an agreement to restructure. (more…)
The Economy–What Lies Ahead
Posted by Larry Doyle on October 14th, 2008 10:03 AM |
I share these opinions with you given the historic nature of the events currently going on in our global financial markets and economy. I hope that you find them of interest. I would be very interested in your thoughts as well. Much like that scene in the movie “Trading Places” when the wealthy tycoon “turn those machines back on,” I view this bailout package as nothing more than the best of a litany of very bad alternatives. Without being overly pessimistic, though, if you want to reduce this package to layman’s terms this package is the equivalent of a massive injection of capital/liquidity into a Ponzi scheme that was being played (whether they knew were playing it or not) by certain large financial institutions.
The systemic risk was so massive that something had to be done. That said, this injection of capital will not necessarily fully flow through to the economy.The banking system here in the U.S. likely has $1 trillion in embedded losses. This plan is trying to buy time for the system to recognize those losses. The recognition of those losses will curtail future growth for the banking system and the economy as a whole. The U.S. followed Europe’s lead and specifically Great Britains’ in making the direct capital injections into banks. If the U.S. did not there would likely have been a significant capital flight to Europe. However, while the U.S. is injecting 250mm (i.e., billion) as part of the 700mm package, Europe has injected 10 times that figure. We may still see a flight in capital away from our economy. Not that other economies are necessarily stronger, because they are not, but merely due to the fact that the level of nationalization of deposits is actually deeper. How do all these programs, both here in the U.S. and around the world get funded? What are the implications for the markets?
In my opinion, I see the following:
(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 »