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HomeToo Much Debt: Restructure, Default, or Devalue?
Posted by Larry Doyle on March 30th, 2009 11:10 AM |
Virtually every sector in the economy is faced with the same predicament: excessive debt. Whether residential housing, commercial real estate, consumer finance, automotive, municipal finance, or Uncle Sam, the current debt service along with future debt service is overwhelming.
In my opinion, the amount of influence with your lender (creditor) is directly related to the amount of debt and the terms of that debt. Regrettably for many taxpayers, the amount of debt from residential mortgage payments along with credit card bills and other household debts are not sufficient to create much influence. For larger corporations or municipalities, the influence is greater as these entities threaten to default. Thus, we see ongoing games of “chicken” being played between debtors and creditors while debt service typically gets restructured.
What about the largest debtor of all, that being Uncle Sam? He can’t play the “default” card and expect the market to treat him with any degree of credibility. Thus, Uncle Sam does not have the option of restructuring or default. The only real option left to Uncle Sam is devaluation. How does that get played out? In the very manner that the Fed and Treasury are doing right now. Pump money into the system like there is no tomorrow. (more…)
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
Audio Recording: NoQuarter Radio’s Sense on Cents with Larry Doyle
Posted by Larry Doyle on March 29th, 2009 9:06 PM |
In case you missed LD’s Sunday night radio show, 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.
It was a fabulous show, featuring Wall Street veteran and author Michael Panzner. Don’t miss it!
Sunday night, March 29th, 2009
NoQuarter Radio’s “Sense on Cents with Larry Doyle”
What is Michael Panzner Saying?
Posted by Larry Doyle on March 29th, 2009 6:08 PM |
In anticipation of this evening’s guest on my radio show, let’s see what Michael Panzner has to say:
No doubt a lot has changed over the past few years. But not just in terms of financial markets and the economy. There has also been a seismic shift in attitudes about America and its role in the world. When the going was good, many nations were willing to accomodate U.S. arrogance and heavyhandedness in global affairs, and were happy to follow our lead in various areas. Now that the bubble has burst, however, a lot of people aren’t all that interested in even hearing what we have to say, especially when it comes to economic matters. One result, suggests the New York Times, is that “Obama Will Face a Defiant World on Foreign Visit.”
Michael Panzner is held in very high regard by a wide array of esteemed analysts, economists, and money managers. Read his entire piece, Not Buying What We Are Selling.
LD
Tune in Sunday Evening to NoQuarter Radio’s “Sense on Cents with Larry Doyle”
Posted by Larry Doyle on March 29th, 2009 9:14 AM |
Please join us Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. With the stock market near 12 year lows, what is driving 
the flows? What is truly going on in the economy? Where are markets headed? Given the Washington political circus, how will new legislation impact the future of Wall Street? So much to cover.
I will be speaking with Michael J. Panzner, a 25-year veteran of the global stock, bond, and currency markets who has worked in New York and London for such leading companies as HSBC, Soros Funds, ABN Amro, Dresdner Bank, and J.P. Morgan Chase.
He is the author of When Giants Fall: An Economic Roadmap for the End of the American Era, Financial Armageddon: Protecting Your Future from Four Impending Catastrophes, and The New Laws of the Stock Market Jungle: An Insider’s Guide to Successful Investing in a Changing World.
He has also been a columnist at TheStreet.com’s RealMoney paid-subscription service and a contributor to AOL’s BloggingStocks.com. In addition, Panzner has appeared on or been quoted byCNBC, Bloomberg, The Wall Street Journal, USA Today, Barron’s Reuters, CNN, MarketWatch, BusinessWeek Online, TheStreet.com, Slate, CFO.com, and other print, radio and television outlets. (more…)
