Friday, January 30, 2009

B.A.R.F Bagged

Thanks to reader GawainsGhost for his comment on last nights post that was chock full of interesting information. The best part of writing this blog is the great feedback from my wonderful readers. Thanks ladies and gentlemen.

Mish vs. Schiff Battle Royal
I had wanted to stay as far away from this ruckus as possible, but the amount of bad feelings from both sides is a too much to leave without comment.

In case you do not know, Mish Shedlock runs the great site Global Economic Analysis and is one of the sharpest minds in the business. Peter Schiff is a well regarded and TV popular analyst that runs the Euro Pacific Capital fund. He too is a sharp mind in a world of dull blades. Over the past week there has been bad feelings by fans of both men over a post that Mish ran which looked at Mr. Schiff's investment strategy as a whole, as well as some returns that the Euro Pacific Capital fund has had as of late. Mr. Schiff's response is here.

All I want to say about this is that I have no problem with Mish taking on Macro views held by Schiff. Certainly there were some areas that Schiff was way off on (decoupling was a bad oversight) and others like a stronger dollar may or may not last. Not all of Mish's ideas have come to pass either. Nobody's ever do. What I think was a bit overboard was Mish attacking the returns of Euro Capital based on a few samples he was able to see. I am sure 2008 went very bad if you bet on a weaker dollar and strong overseas markets. In the longer term these may not be bad bets at all.

I love debate and analysis. I love heated debate most of all. But pointing fingers at a short term return rate of any fund seems too far to go. Leave the "look at these terrible numbers" to the readers to find out based upon good analysis. Mr. Schiff is an honorable man that never tried to hide any information. He is also much better than Bill Gross who continues to be obscene with his call for the government to buy all the crap he holds at the taxpayer expense. Let's keep it clean all and keep illuminating what is important. Nuff said.

Gold and Silver Looking Shiny and Pretty
Gold and his little brother Silver really had a nice day today. While the metals are going up strong against the Euro and other currencies, they are still moving a bit slower against a puzzling stronger dollar. All in all today was the consolidation of strength I was looking for last week. I like both metals very much going forward.

On the treasure front, the Odyssey Marine Exploration (OMEX) show continues to be very intriguing. More and more potential targets have popped up. The stock itself now sits at $4, up a buck from where I bought in. Hopefully they will start pulling up some yellow metal and things will go from there. I still like this company very much, and I can even see another profitable side of the business other than just gold treasure hunting: Finding old relics like one of a kind cannons with tons of history attached to them.
Full Disclosure: I own gold miners GG, KGC and I own OMEX stock.

B.A.R.F Bagged
I am still surprised that the same act of the same bad play keeps being performed at the Globe Theater (Shakespeare reference) we call Washington DC. The whole "Bad Bank" idea is just another retread of the Hank Paulson "Super SIV" plan from a while back. Have some entity buy up the bad assets from the banks and presto! The banks are happy again! The same problem keeps coming up: The banks will not sell the assets unless they get a huge premium on their market value, and the entity (thats you and me the taxpayer) cannot be seen as taking too much of a hit by overpaying by too much. A little overpaying is good, a ton is not so great.

The new plan I have seen referred to as the Bad Asset Relief Fund or B.A.R.F. What could be more fitting. It seems these sticking points have caused the B.A.R.F to be bagged because no compromise could be reached. Clusterstock had this Charlie Gasparino CNBC transcript (sorry for the ALL CAPS):
I CAN'T REMEMBER THE TREASURY DEPARTMENT BAILING OUT STEVEN COHEN AND ART SANDBERG. THEY'RE BAILING OUT CITIGROUP AND BANK OF AMERICA AND THE BAILOUT PLAN THEY HAVE ON THE TABLE RIGHT THE NOW, AT LEAST ONE THAT'S BEEN RECENTLY TEED UP IN THE PRESS WHICH IS ESSENTIALLY THIS AGGREGATOR BAD BANK WHERE YOU BUY ALL THE BAD ASSETS BETWEEN $1 and 2 TRILLION. IT'S BEEN LEAKED OUT THEY'RE LOOKING TO DO THIS.
THIS THING, ACCORDING TO SOURCES, TELLING CNBC, THIS THING IS NOW OFFICIALLY BEEN PUT ON HOLD. IT'S HIT A MAJOR SNAG. THEY CAN'T FIGURE OUT EXACTLY HOW TO MAKE IT WORK. IT WAS THE SAME PROBLEM BACK IN SEPTEMBER WHEN WE BROKE THE STORY ABOUT THE T.A.R.P. WHEN THE MARKET WENT UP 500 POINTS BECAUSE IT MAKES GREAT CONCEPTUAL SENSE. IF THE GOVERNMENT CAN COME IN AND BUY UP ALL THE BAD STUFF OFF THE BALANCE SHEETS OF ALL THE BIG BANKS. IF THIS STUFF CAN TRADE UP IT'S WORTH 50 CENTS ON A DOLLAR AND NOT 22 CENTS ON THE DOLLAR, EVERYBODY'S HAPPY.
MAKING THAT THING WORK HAS BEEN PROVEN VERY DIFFICULT.

No doubt everyone would be happy if the 22 cents on the dollar items could fetch 50 cents or more. Everyone except the idiot that bought them that is. More:
THE TREASURY DEPARTMENT, THE FDIC AND THE FEDS RECENTLY, THE LAST COUPLE OF DAYS, HAS BEEN HAVING MEETINGS WITH SENIOR CEOs AT THE MAJOR WALL STREET FIRMS TO PRICE THE STUFF SOLD TO THIS AGGREGATOR BANK. YOU KNOW, THEY'RE MORE CONFUSED NOW THAN EVER BEFORE. THE FEELING I GET, AT LEAST THESE TALKS ARE ONGOING. THERE WAS TALK ABOUT A MEETING THIS WEEKEND WITH ALL THE CEOs TO TRY TO DO THIS THING. I HEARD THAT. THAT IS NOT HAPPENING, AT LEAST AS OF 10 MINUTES AGO. NO MEETING CALLED. NO WAY WALL STREET EXPECTS THAT MEETING TO BE CALLED.THEY CAN'T FIGURE OUT TO MAKE THIS WORK. THE PRICING IS AT ISSUE.IF YOU HOLD THE STUFF, WALL STREET HOLDS IT ON THE BALANCE SHEET, THEY CAN MARK IT TO THEIR MODEL 50 CENTS ON THE DOLLAR. OF THEY SELL IT, THE MARKETS SAYS IT’S 22 CENTS ON THE DOLLAR.
IF THE GOVERNMENT BUYS IT AT 22 CENTS, MOST OF THE BANKS WOULD TAKE MAJOR LOSSES. WE’LL BE BACK TO WHERE WE WERE A COUPLE OF WEEKS AGO. IF THE GOVERNMENT BUYS IT AT 50 CENTS ON THE DOLLAR, THE TAXPAYER COULD BE TAKING IT ON THE CHIN. THAT'S THE PROBLEM WE HAVE HERE. WHILE THEY MAY SHELF THIS AGGREGATOR BANK, THEY MAY COME UP IN WITH SOME OTHER ALTERNATIVE LIKE INSURANCE OR SOME SORT OF GUARANTEES ON THIS STUFF BLANKET ACROSS THE BOARD.

Let me just add that if the banks cannot sell at 22 cents on the dollar without going bust, 50 cents will not do the trick either. My bet is that the hold up on this plan is that the banks want about 70-75 cents on the dollar for assets that can only fetch 20 cents on the open market. If the difference was just 20 vs. 50 cents I think the Treasury would have sealed this deal up in 1 hour. Mark my words, when and if details come out the banks will have been asking for well over 3 times the market price.

At the end of the transcript Mr. Gasparino notes that due to the intractable differences of buying the junk, an insurance plan is being worked on instead. So the Treasury does not want to pay 70 cents for a 20 cent asset as the loss of 50 cents would be too much, but they will consider insuring the assets to 70 cents so that when they are sold they will have to pay the same 50 cents difference? This is what passes as thinking in Washington. This is a distinction without a difference. Those in the negotiations should remember one immutable fact of life: You Can't Polish a Turd.

Friday Night Entertainment
A little fun, a little music, and all will be well.

Say Hello to My Little Friend
Say hi (spelled hai in LOL speak) to this little fellow:
funny pictures of cats with captions
more animals

1969 502cid Chevrolet Camaro
There is nothing like the sound of a nasty old fashioned big block muscle engine. Take a listen to this monster; the camshaft is obviously dialed in for a higher RPM band as it is really rasping at idle. Sounds SWEEEEEEETTTTTT!!!:


Songs for the Weekend
A little music to end the week, as always.

I used to love this video when I was younger! Take a look at Duran Duran and "Rio":


With lyrics perfectly in step with our times, listen to Iron Maiden with "Be Quick or be Dead". Especially great "See what's ruling all our lives, see who's pulling strings":


I have always liked this song. Listen and remember Janis Joplin with "Bobby McGee":


Have a good night.

25 comments:

Anonymous said...

Gysc

The dollar is strong because gold is not a medium exchange for most purposes, and every frigging county is trying to do the same damn thing at the same time which is devalue their currency and run massive fiscal stimulus programs and running up budget deficit in the west, or in the east so they can export to us or to try and create inflation and inflate away the debt. The Yen is about the only exception and that has thrown Japan straight into a depression as the carry trades unwind due to deleveraging. Gold is also benefiting as this happens due to people in other countries buying it because their currencies are collapsing at a faster rate then the dollar which is used to settle international trade or at least what's left of it.
The real danger is a major policy blunder by these asshats in DC if they blow up the bond market it's over lights out end of story and the likely hood of that happening can not be understated. Argentina death dance.

One of the item on Obama's list was to back the unions while this would have been ok in boom time it is not good when the economy is in the toilet headed into a deflationary spiral. Labor is a commodity just like anything else and if there is a shit pot full of supply and zero demand prices or in this case wages must fall.

The problem with BARF is that the debt is still there, it doesn't matter if the banks hold it or the taxpayer until this stuff is flushed there will be no recovery and things will only get worse.

I starting to think the only requirement that there must be to be in Congress is to have flunked basic math.

Kevin

Anonymous said...

Great post as usual! Do you all like the new talk from the White House?

Come on Obama when are you going to bust out "Harsh Language" as all pulse rifle ammo and grenades have been confiscated so not to puncture the cooling towers?

Don't mind the minor ALIENS reference, but things get out of hand when you try to fight nasty space aliens with harsh language.

Next thing you know our intergalactic hunters called predators will drop on by to make matters worse.... for everyone.

;)

Hey is anyone else thinking about picking up some "Other" metals for investment purposes. My dealer hand rounds for each not normally mentioned in my posts. (Pt, Pd)

G

PS: In case you don't remember the Aliens scene I am referring to visit youtube:

http://tinyurl.com/aag4za

Anonymous said...

Kevin,

Straight up man you rock!!!

455|-|475! L0L

G

Anonymous said...

Treasuries are moving into a “full- blown” bear market as global stimulus packages increase demand for capital, according to Citigroup Inc.

“This may sound a bit ridiculous, but we think we have begun a full-blown bear market in fixed income,” wrote Tom Fitzpatrick, Citigroup’s New York-based chief technical analyst, and London-based strategist Shyam Devani. “The commodity that is going to be the most in demand as far as the eye can see is capital. As a consequence, the cost of capital can only go one way -- up.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLo0Fh1bNmVw&refer=home

Yup and if Big Bone Benny and his little band of merry makers tries to stop this look out.

Kevin

getyourselfconnected said...

Kevin,
I must say after a year of being blown away by your insightful posts, might I ask you something?

I would like to put your take in the comments tonight on a saturday blog post. With your permission of course. Going further, would you be interested in a "guest blog" spot where you can collect your thoughts say for the week and post them here? I know I would LOVE to see it and I think you have a ton to offer. Let me know and we can work out details.

That goes the same for all you out there. Often the content in the comments section dwarfs my simple writings. I can post snippets and thoughts and create a bigger picture on this site. Let me know what you think.

Great stuff tonight everyone. Thanks for making writing this blog so much fun.

getyourselfconnected said...

P.S.,
G, I know that scene from Aliens, great obscure reference pick up!

Where is Watchtower? I had hoped his baby would like the panda pic and I am sure he loved the raspy growl of that Camaro!

Anonymous said...

Gysc

You are more then welcome to use any of my comments with that caveat that I could very well be totally off base.

I could give you my thoughts on a weekly, one of the problems right now is that things are moving at the speed of light, that is also one of the problems with the markets, these clowns in DC keep changing the damn rules on an hourly basis along with having CNBULLSHIT parade these guys out isn't helping a damn thing. They need to put a stop the that crap. This rumor stuff from unidentified sources or ones close to the administration that don't want to be named should be treated just as any market manipulation. Jail. Can't name the source then you can't report it end of story. I'm not much of a writer however.

Kevin

Lisa said...

Kevin, I disagree. You are a writer! I run a financial blog, too, and I know that we need as many rational voices as possible right now. GYSC does an excellent job, and if you have the time, think about his offer :) I've been talking to a lot of people that have much to say, but feel the same way you do. Don't sell yourself short, please. I have enjoyed reading your work in the comments section.
GYSC- you are my favorite blogger! Keep up the great work!

Anonymous said...

Lisa,
What is the address of your blog? I would like to check it out.

Kevin

watchtower said...

Lisa has a financial blog? Cool, please post the address.

GYSC
My daughter loved the pic, we didn't know exactly what kind of critter that was (possum?) but we both agreed it was "adorable" (my daughter's exact word).

Just got the power back on about a half an hour ago, trying to blog and watch the "Superbowl" at the same time.

Power is still off for a ton of folks right now and FEMA has ran out of MRE's for those who are in dire straigts, I wish them the best and tried to help whoever I could.

The linemen who came out of all the various states to help us get the power back up have my thanks, they are real lifesavers (literately for the elderly).

It was the worst ice storm ever in my region, there is hardly a tree that the top is not out of, the weight of the ice simply snapped them off.

Anonymous said...

Watchtower

Ice storms suck, I see that a volcano is Alaska is about ready to blow and that is what cause the ice. hope it stays up in the atmosphere long enough to get threw winter before it comes down, Hail sucks too but at least it ain't cold. It could effect the growing season with cooler weather this summer. I got hit with hail last year and I'll be putting a new roof on the house and garage this spring. Every house around me has the same thing. Insurance is paying for most of it but I'll still have to fork over some coin.

Kevin

Lisa said...

My site has been under construction, but it's up and running again.
GYSC, if you don't mind I'll post my URL, as long as you understand I come here for your work, not to promote mine :)

Anonymous said...

Lisa just out of curiosity which state do you live in?
I'm in north central Nebraska.
Kevin

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