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HomeIs Washington Enacting Financial Regulatory Reform or Merely ‘Studying’ It?
Posted by Larry Doyle on July 8th, 2010 1:27 PM |
How often have you experienced a situation in which somebody tries to project an air of leadership while truly dodging an issue? In the course of my career, I have witnessed this reality all too often. When and why does this occur? Typically, managers who are weak and overly political play this card. Washington plays this game all the time. The Obama administration has made an art of forming committees to study issues.
Our ‘so called’ leaders would like to project themselves as real leaders doing the people’s business, meanwhile they are beholden to other constituencies. God forbid they actually take a stand and show their true mettle. So we witness our politicians agreeing to ‘study’ issues, which is more often the equivalent of putting issues on the back burner or letting them die on the vine. Who wins? Lobbyists. Who loses? Average Americans. Who tries to save face? Our political cowards. (more…)
Another Oppenheimer ARS Investor Unloads on New York AG Cuomo
Posted by Larry Doyle on March 8th, 2010 8:12 AM |
Investors defrauded in the distribution of auction-rate securities deserve a voice. Sense on Cents is happy to provide it. Aside from feeling screwed by Wall Street banks and money managers in the distribution of auction-rate securities as a cash surrogate, investors now feel increasingly incensed by the lack of support in the judicial system and in selected attorneys general offices in our country.
The latest AG to feel the wrath of ARS investors is New York AG Andrew Cuomo for his recent settlement with Oppenheimer Holdings. Rather than reading my opinion of Cuomo’s settlement, let’s listen to an investor (who remains nameless for obvious reasons). In my opinion, this individual’s letter speaks volumes and echoes the sentiments of thousands of investors who continue to hold the $150 BILLION in frozen ARS. (more…)
October 24, 2009: Month to Date Market Review
Posted by Larry Doyle on October 24th, 2009 7:32 AM |
Did the market merely take a breather this week or is the ‘little engine that could’ getting tired? Are we distinguishing the winners from the laggards? Are the cracks in our economic foundation repairing or are some just too large to hold back the flow of red ink, i.e. embedded losses? Perhaps we are experiencing all of the above as we continue our journey along the new and varied trails of our economy. Let’s review the major economic statistics for the week, along with the month to date returns across a wide array of market segments.
I thank you for reading my work, and now let’s collectively ‘navigate the economic landscape,’ the mission of Sense on Cents. If you have any questions, please do not hesitate to ask.
ECONOMIC DATA
I largely discount positive news on the housing front as I view them largely manipulated by Uncle Sam while delinquencies, defaults, and foreclosures move ever higher. This may be an oversight on my part, but so be it.
Aside from that, I believe the most meaningful news this week was the GDP report from the UK. Please see my Friday morning commentary highlighting how the UK remains mired in recession.
Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis:
U.S. DOLLAR
$/Yen: 92.08 versus 89.68, +2.7%
Euro/Dollar: 1.500 versus 1.4635, +2.5%
U.S. Dollar Index: 75.44 versus 76.72, -1.7%
Commentary: the overall U.S. Dollar Index declined marginally this week. The dollar has improved versus the Japanese yen, but remains decidedly weak versus the Euro. The U.S. Dollar Index did break below 75.00 at one point early Friday. The correlation between the U.S. Dollar Index and the equity markets remains quite high. Both markets ended the week close to unchanged. Have too many people bought equities and commodities while having sold the U.S. greenback? I have been asking that question for the last month so no reason to stop now. The biggest impact of the weak dollar is seen in the commodity markets and long term interest rates. Commodities continue to trade with a firm tone while interest rates move higher.
I reiterate my comment from previous weeks: while I think Washington is not disappointed in a relatively weak dollar, although they should be (“Dollar Devaluation Is a Dangerous Game”), other countries are not overly keen about further dollar weakness. Why? A weak dollar puts those countries in a marginally less competitive position in international trade. On this topic, please read “Brazil Wants A ‘Real’ity Check.”
COMMODITIES
Oil: $79.65/barrel versus $70.39, +13.1% REMAINS VERY FIRM
Gold: $1055/oz. versus $1008.2, +4.6%
DJ-UBS Commodity Index: 137.32 versus 127.683, +7.5%
Commentary: I repeat from last week, unless you grow your own crops or have your own source of energy, you should expect to get increasingly squeezed as prices at the supermarket and gas station are likely to head higher. While Washington will not address this development, these price moves are directly correlated with Washington’s weak dollar policy. The banks and others able to borrow cheap money for trading and investing benefit from the weak dollar. American consumers and savers get stuck with the bill.
The Baltic Dry Index once again moved higher and got back above the 3000 level. Is the improvement in the non-Japan Asian economic bloc for real? Certainly the economies in Europe and North American remain decidedly challenged.
I continue to believe these commodity tea leaves are an indication of inflationary expectations in these ‘inputs,’ while we encounter deflationary pressures in wages and real estate. (more…)
David Einhorn Provides Sense on Cents
Posted by Larry Doyle on October 21st, 2009 11:52 AM |
David Einhorn of Greenlight Capital
In the midst of my ‘navigating the economic landscape,’ I thoroughly enjoy reading the work of intelligent people. While I certainly never agree with all that I read, intelligent people force me to think and review my own opinions and beliefs. That process is always healthy. I also enjoy sharing the insights and perspectives of these people with those who read Sense on Cents. High five to KD of 12th Street Capital for bringing just such an individual to my attention.
David Einhorn runs Greenlight Capital, an investment management firm. He recently delivered an address entitled “Liquor Before Beer…In the Clear.” For those interested in an overview of David’s thoughts, I will clip those points I found most informative. For those with a keen interest in the economy and markets, the linked nine page document is a ‘must read.’ I agree with David’s views and welcome highlighting some of his points. Here are excerpts from David Einhorn’s speech:
1. The lesson that I have learned is that it isn’t reasonable to be agnostic about the big picture. For years I had believed that I didn’t need to take a view on the market or the economy because I considered myself to be a “bottom up” investor. Having my eyes open to the big picture doesn’t mean abandoning stock picking, but it does mean managing the long-short exposure ratio more actively, worrying about what may be brewing in certain industries, and when appropriate, buying some just-in-case insurance for foreseeable macro risks even if they are hard to time.
2. As I see it, there are two basic problems in how we have designed our government. The first is that officials favor policies with short-term impact over those in our long-term interest because they need to be popular while they are in office and they want to be reelected. In recent times, opinion tracking polls, the immediate reactions of focus groups, the 24/7 news cycle, the constant campaign, and the moment-to-moment obsession with the Dow Jones Industrial Average have magnified the political pressures to favor short-term solutions.
3. The second weakness in our government is “concentrated benefit versus diffuse harm” also known as the problem of special interests. Decision makers help small groups who care about narrow issues and whose “special interests” invest substantial resources to be better heard through lobbying, public relations and campaign support. The special interests benefit while the associated costs and consequences are spread broadly through the rest of the population.
4. Americans understand that the Washington-Wall Street relationship has rewarded the least deserving people and institutions at the expense of the prudent.
5. The proper way to deal with too-big-to-fail, or too inter-connected to fail, is to make sure that no institution is too big or inter-connected to fail. The test ought to be that no institution should ever be of individual importance such that if we were faced with its demise the government would be forced to intervene. The real solution is to break up anything that fails that test. (more…)
Unemployment Report 3-6-09
Posted by Larry Doyle on March 6th, 2009 9:21 AM |
The highly anticipated monthly unemployment report was just released. On the surface, the numbers may appear to be in line with expectations, but looking deeper into the numbers the report is actually worse than expected. Let’s dive into the numbers and comment on what they mean for our economy and markets.
The Unemployment Rate jumped from 7.6% to 8.1%. The rate was expected to move to 7.9%. The 8.1% rate is a 25 year high.
Non-farm Payrolls lost 651k jobs against an expectation of a loss of 650k jobs. In line with expectations, right? Well, one needs to look at the revisions to the prior two months to get the full picture. Non-farm payroll revisions from the prior two months show a further loss of 161k jobs over and above initial reports. That’s ugly!! Total jobs lost since December 2007, when the recession officially began, are 4.4 million!! More than half of those jobs have been lost in the last 4 months.
Average hourly earnings only rose .2. This number is not exactly robust and will further pressure consumers who are already cash constrained. (more…)
How Wall Street and Washington Betrayed America!!
Posted by Larry Doyle on March 4th, 2009 11:03 AM |
While politicians, bankers, regulators, and commentators can and will point fingers as to where and how our system of financial oversight broke down, make no mistake it was due to too many people making and taking too much money!! I have highlighted the grotesque system of lobbying that has developed and corrupted our society in More Legalized Bribery.
We watch daily hearings on Capitol Hill in the spirit of doing what is right for our country. Please!! Spare me the nonsense and pandering. While collectively we deal with markets that are now down over 50%, the pols and the bankers have effectively robbed the bank and left the taxpayers with the bill to clean up the mess. Barron’s wrote a brief piece on this topic: how the Financial Sector Spent $5 Billion Lobbying Washington Over the Last Decade!!
It is high time we attach names and faces to those politicians and lobbyists who fed at this trough!!
LD
A Virtual Smorgasbord
Posted by Larry Doyle on March 2nd, 2009 4:24 PM |
On the heels of the news about AIG, Berkshire, and HSBC, the equity markets have found no support today and are down 4%. While the malaise of the markets has much of the focus, let’s review a few other items that I see on today’s menu:
1. In regard to AIG, current CEO Edward Liddy and former CEO Hank Greenberg have started some public feuding over the nature of AIG’s problems. Greenberg is trying to make the case that the risks underwritten at AIG occurred after his departure. Liddy responded that the culture, the compensation system, and the division housing the bulk of AIG’s risk all developed under Greenberg. Wow!! When our country is screaming for leadership, we have senior executives playing the blame game and pointing fingers. How pathetic!! (more…)
February 2009 Market Review
Posted by Larry Doyle on February 28th, 2009 10:13 AM |
Prior to going to the comments section of my son’s report card, human nature dictates that I first look at the grades. In that same vein, let’s see how the markets performed for the month of February:
Let’s review my specific projections from the January 2009 Recap: (more…)
