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HomeWhat 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.
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.
LD
Bullish on Ms. Bair!!
Posted by Larry Doyle on March 28th, 2009 3:30 PM |
The Bull and the "Bair"
Is there anything worse than engaging a dishonest broker? Regrettably, our financial landscape (banking, investing, real estate, insurance, et al) is littered with shady brokers. How and why these people remain in business is another topic for another day. This piece is to highlight the integrity of an honest broker, Sheila Bair, and her involvement in the PPIP (Public-Private Investment Program) designed to handle toxic assets, both securities and loans.
For those unaware of the specifics of the PPIP, the toxic securitized assets will be sold via a facility known as the TALF (Term Asset Backed Lending Facility) and via partnerships with 5 large private money managers.
Toxic loans (unsecuritized) are the much more difficult part of the program. The bulk of these loans are likely still held on banks’ books at origination cost (not yet marked down) and pose a much greater disparity in perceived value and challenge in reaching agreeable prices. (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 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…)
Goldman and AIG
Posted by Larry Doyle on March 21st, 2009 5:49 AM |
There has been extensive speculation that Goldman Sachs unjustifiably benefited from the weakness at AIG over the last 6 months. While conspiracy theorists can and will have a field day with this story, at its core I think Goldman did what any well run firm should always do — protect its shareholders.
While the stock values of Merrill Lynch, Morgan Stanley, and Bank of America flirted with total disaster, Goldman Sachs traded down but bottomed out at approximately $50 a share. That price does not strike me as indicative of a firm on the brink of bankruptcy. As Goldman now reveals, it had significant exposure to AIG but it also significantly hedged this exposure to AIG via other transactions. Thus, Goldman would have been negatively impacted by an AIG bankruptcy but not fatally impacted. (more…)
Will Jamie Dimon be the Next Treasury Secretary?
Posted by Larry Doyle on March 20th, 2009 9:02 PM |
The pressure on Treasury Secretary Tim Geithner is increasing from within the Democratic Party, across the aisle, and the media. Will Tim be fed to the lions? Well, the standard procedures of implementing change seem to be occurring. What are those steps?
JP Morgan Chairman and CEO, Jamie Dimon
1. A vote of confidence by the Administration. Always a kiss of death!
2. Leak the name of a strong prospective secretary.
Who might that be? JP Morgan Chairman and CEO, Jamie Dimon.
Dimon is enormously well respected in Washington and Wall Street. He can quickly build a team. He has run very large organizations. He has been a longtime Democratic supporter and publicly promoted President Obama and his plans.
I find it interesting that Dimon’s name was bandied about last October as a prospective leader of Treasury. Market Watch highlighted this fact in reporting The Next Treasury Secretary Is…
As the firestorm over the prospective legislation to restrict Wall Street bonuses grows, do not be surprised to see Dimon ride in on the white horse to broker peace between Washington, the financial community, and the public at large.
LD
AIG: Ain’t It Great!!!
Posted by Larry Doyle on March 18th, 2009 8:54 AM |
Where can one generate billions in losses and still walk out the door with millions in compensation? Welcome to AIG, now known here at Sense on Cents as “Ain’t It Great!!”
As details leak out of Congress as to who knew what and when did they know it, the level of political posturing is soaring. Senator Charles Schumer (D-NY), who has fed at the Wall Street trough for years, offers us these pearls of wisdom: “We intend to do everything in our power to prevent the payments from being made and to recoup the payments that have already been made. We will take this back and return it to its rightful owners, the American taxpayers.” Chuck, where were you six months ago when the initial AIG loan was negotiated? (more…)
Sense on Cents “Central Station”
Posted by Larry Doyle on March 13th, 2009 6:30 PM |
I am pleased to relaunch our weekly departure from “Central Station” on Saturday mornings. This endeavor here at Sense on Cents is a few hours of written Q/A with your resident host. I like to utilize the theme of a ride on the rails, so please allow me to expound.
With so many cross currents at play in the markets, economy, and world of global finance, where can one go to develop a framework of understanding, enjoy the company of friends, and make sense of the madness? Welcome to Sense on Cents “Central Station.” Our ride departs Saturday morning at 9 a.m. with an expected return at 12 noon. While we traverse the curves along our track, we can address a wide range of issues, including: Obama’s economic plans, Secretary Geithner’s outlook, the market performance this week, month, and year to date, developments overseas, the outlook for our financial regulatory structure, issues of personal finance, or anything else on your mind.
Our ride is most productive with as many people participating as possible. Please bring not only your questions, but also your views. Invite friends, neighbors, and colleagues along for the ride as well.
Your conductor is not a professional financial planner. I recommend that you consult with a licensed, qualified professional before making any investment decisions. I am merely a Wall Street veteran looking to help you navigate the economic landscape!!
Come on back tomorrow morning at 9, submit your questions in the comments section, and away we go.. Aaaaaaaaaaaaaaaall Aboard!!
LD
