Sunday, April 13, 2008

Sunday Mixed Bag

More technical difficulties last night. If there are any experts on the Netgear products XE102 Ethernet Bridge and the companion piece WGXB102 Powerline Range Extender please indicate so in the comments. For some help with these retarded things I may offer a major reward. If I can figure out how to get the pieces all talking correctly I will have brutal fast Internet after all!

Writedowns That Are Over, Still on Schedule For This Week
In the Sunday Time online, a UK paper, we learn that the writedowns that are now over with will continue next week courtesy of Merril Lynch and Citigroup:
From the Sunday Times
April 13, 2008
US banks Citigroup and Merrill Lynch reveal fresh $15bn loss
CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.
In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its 35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.
Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.
Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

I would love for the multitude of market commentators that were so sure things were over with a recently as last week to be asked to comment on this new round of writedowns. I imagine they would just say "Well this is the last of it this time I am sure!" Even though calls for the end of losses are constantly being shown to be wrong, don't expect these calls to stop anytime soon.

Alcoa, UPS, GE; Not Exactly Subprime Companies

Earnings season was off (haha, get it? OFF) to a poor start last week with misses by Alcoa, UPS and GE. While GE certainly has a bit of exposure to the finance angle of things, it is a broad business exposed to all facets of the economy. These bellweather companies are saying that the once "contained" subprime debacle has indded filtered out to the broader economy. While this is no surprise to the kind of folks that read blogs like this one, it is still fun to watch the CNBC types in the mainstream say they are "shocked", "surprised", or "blindsided" by such events. At some point soon the problems that the P/E 's of the DOW, S&P, and other indices have will be hard to ignore. Again, current stock prices do not reflect a slowdown at all. Nothing is in fact "priced in" regarding a possible recession. Keep this in mind if you are going to venture into the market.

Not Every Negative View is a Short

I know, I know, never read message boards! But if you do you will see that any negative observation or opinion is railed as a "short". This stupid idea has even extended as far as infecting Cramer and others who think everyone not waiving pom poms for the markets are all aggressively short stocks. I am currently out of all positions, but I am looking for a play to make. I am negative on MANY aspects of the economy and stock market. I DO NOT short. I don't like the idea of shorting and I am uncomfortable doing it. You can only make at most 100%, but you could lose a lot more. I only make plays on the long side myself. This is not a commentary on anyone else's strategies, just explaining my own. So not every negative voice out there is a short. And besides, shorting is a legal way to play the market, so just shut up. You do not see people screaming at the LONGS for jacking the market up on hype do you?

Books, TV, and Movies

On Saturday the mail brought the new book "Greed, Fraud, and Ignorance" by Richard Bitner. This book details an insider's view of the subprime shenanigans. I just read the opening chapter, and it seems like it is going to be pretty good. I will update in a while if the book is a full on recommendation.

The HBO series "John Adams" is down to its last few episodes. The series has been excellent and I easily advise checking it out.

I saw "No Country for Old Men" last night. I was both impressed and a little let down. The acting was top of the line. The filming was great and set the dark mood of the film. The Characters were all deep and multi layered. I just really did not think the ending was all that great. Still, a strong recommendation from me.

Other Stuff

Sunday diversions;

My favorite scene from the film "The Matrix", perception makes reality indeed!?

In a trilogy full of memorable scenes, one great one is Pippin's song from "The Lord of the Ring; Return of the King":

Have a good night.


Anonymous said...

I have a pretty large short position threw the Prudent Bear fund which you can buy and not need a margin account but I also have almost as big of one with Hussman although he does hedge. The main problem is that there is in my view to much manipulation with the FED taking full advantage of large short position to come in and do a prop job. So far I'm doing ok this year but anyone that think we have free market is nuts IMHOP.


Rob Dawg said...

Powerline ethernet is much slower than Wireless-N and subject to many interesting complications. Pop on down to Fry's and get an "N" router and matching PCI or PCMIA cards. $70 router, $40 cards, satisfaction priceless.

Anonymous said...

I am going to need some more info to help you troubleshoot the hardware or possibly software issue. When in doubt Google it ;)


watchtower said...

Has anyone here ever ran across Germany starting up a Social Security program in 1872? This is kind of lengthy but I keep thinking about it. This is from the comments section over at the "Skeptical CPA" website
and it's author is "Independent Accountant" The DW that IA is referring to is David Walker the former Comptroller General.

I consider DW an optimist! In about 1971, Richard Nixon "reformed" social security (SS), purportedly saving it for all time to come. That's not what happened. SS and Medicare are actuarially unsound. Their actuarial deficits are about $9 trillion and $44 trillion respectively. This can't be paid. The only question about them is: how they will be defaulted, through repudiation or inflation. My bet: inflation.
No politician will deal with the SS and Medicare "problem" because none wants to admit what must be done. People will have to go without. Some people will die because society can't afford to keep them alive. Which politician will speak that plainly?
Some history. SS began in 1872. What? Bismark started it in Germany after the Franco-Prussian War, 1870-71, to unify the German people. Bismark chose 65 as the retirement age since few lived to 65. Bismark was no fool. FDR, our ignorant patrician and Harvard man, also selected 65 as our retirement age not knowing why Bismark chose 65, i.e., Bismark made a promise to Germans that would rarely have to be kept.
FDR was such an ignoramus. Germany's economic system collapsed in the 1922-23 hyperinflation. Many blame WWI reparations for this, John Maynard Keynes being the principal proponent, see "The Economic Consequences of the Peace", 1926. I say nonsense. Germany's WWI reparations could have been paid as they were only 3% of Germany's GDP annually. What drove Germany bankrupt was its SS system founded 51 years earlier! Eventually Hitler dealt with his "undesireables". That's how I see it. Which politician wants to admit we face the same choices Germany did in 1922?
The actuarial deficiencies in SS were recognized 30 years ago. I discussed them with a senior SS actuary when I lived in Chicago in about 1978. Really. Peter Peterson wrote about this problem about 20 years ago. I'll have to find the reference.
I thought this was pretty good and worth a read.

I watched "The Good, the Bad, and the Ugly" for about the millionth time yesterday. Classic.
I read that Stephen King had watched one of Sergio Leone's "spaghetti westerns" and afterwords began his "The Dark Tower" gunslinger series. (going from memory, so cut me some slack here)