Thursday, January 15, 2009

If You Start Me Up, If You Start Me Up I'll Never Stop

First off, hats off to the amazing pilots and airline crew that saved the ENTIRE plane full of passengers with an incredible crash landing on the Hudson river this evening. I cannot imagine the strength of mind and nerve required to keep one's head clear and thinking when faced with such a calamity. The crew and the passengers are truly amazing.

About 10 degrees here today with a goose egg (zero) set for all day tomorrow. I keep waiting for this global warming thing to get it in gear! I had a request for the board. If anyone uses a canoe, could they recommend one for me? I would like to get a small canoe to fish some small ponds and small rivers here in the spring and summer. I want one 14 feet or shorter. If you know a good manufacturer or a good place to get a good price, drop a comment and let me know. Thanks in advance!

No Reason to Own bank Stocks As You Own Them Already
Full Disclosure: I am a Bank of America customer. I first used Bank Boston, which then became Fleet Bank, which was finally gobbled up by BAC. I am just too lazy to change banks!

Today was another bloodbath for Citigroup (C) and Bank of America (BAC). It seems that after the Countrywide Financial grab that did not go as well as thought, BAC had the notion that eating Merrill Lynch would work out so much better. It seems that MER maybe, might have been less than totally upfront about their balance sheet issues. It amazes me why people still trot out that line about "why do banks not trust each other?" The answer should be clear by now. As for C, they seem destined for breaking up into pieces, none of which will be strong money making units.

So this brings us to the latest round of government intervention. Without guarantees to the tune of 100-200 Billion dollars BAC has indicated the MER deal will not go through. This would bring out the good old "systemic risk" play that must be avoided at all costs. BAC may be pushing the FED/Treasury around using the very criteria set forth by previous bailouts. I have written about how the FED and Treasury had no idea how dirty the dogs were that they are climbing into bed with by allowing banks to access their balance sheets. Maybe now they will learn.

This brings me to my main point (yes, there is one!). There is no reason to be in stocks like BAC or C, or any bank really. They all are on life support and will end up being indebted to the government for the foreseeable future (think 10-15 years). As a taxpayer you already are the proud owner of plenty of banking stocks, so you should diversify and not buy any more on the open market. I have yet to hear a solid argument why any banking stock is a buy. If they were they would not need government funding as they could secure it on their own. Enough said.
Full Disclosure: I do not own BAC or C stock or any banking stock. Do you? If yes, why?

If You Start Me Up, If You Start Me Up I'll Never Stop
"If you start me up
If you start me up I'll never stop" - Rolling Stones "Start Me Up"

When you are about to do something wrong or stupid, there is a point when you feel apprehensive and scared. You know it may be wrong or dangerous but for whatever reason you continue with an action regardless. Then a funny thing happens. the next time the same situation comes up, it gets much easier! And every time after that even easier still. Shop-o-holics are known for this.

It seems that what was at first a difficult thing for the US congress to do, in this case spend even more wildly than any other time in history, it has become not only easy but a game of outdoing everyone else. Where the trillion dollar mark used to be taboo, it is now at the small end of most spending ideas. Congress used to pretend that the US was serious about being fiscally responsible, but now after nobody has called their bluff, they are ready to let it rip.

Take a look over some excerpts from this Yahoo Finance article:
AP
Bank troubles raise fears of growing bailout
Thursday January 15, 6:13 pm ET
By Stevenson Jacobs and Daniel Wagner, AP Business Writer
New aid for Bank of America raises fears that more bailout money is needed
NEW YORK (AP) -- The banks may need a bigger bailout.
The government is mulling another multibillion-dollar aid package for Bank of America Corp., raising the possibility that much more taxpayer money will be needed to keep the banking industry from edging back toward the abyss.

Back towards the abyss? You mean the banks left the abyss?
But the sense of panic that has hovered over Wall Street in recent days does not seem to have breached Capitol Hill. Lawmakers, wary of pushback from constituents, reluctantly released the second $350 billion in the Treasury's financial rescue fund Thursday after assurances that $50 billion to $100 billion would be spent to try to reduce foreclosures. Many lawmakers have resisted giving banks more money.

Panic had not reached Capital hill? That is why with no real debate the second half of TARP is approved? How much resistance was there really?
Such a move would support the growing consensus among financial experts that Treasury's bailout program so far won't be enough to stabilize banks reeling from bad mortgage loans and falling home prices. As the recession deepens, consumers and businesses are increasingly defaulting on other loans, such as those involving credit cards and commercial real estate, analysts say.
"It was getting better for a while, but now it's just going to hell," Bert Ely, an independent banking consultant said. "The worse it gets, the more the government is going to have to do -- and the problem is, we just don't know.
"There may have to be additional TARP money put on the table.... There's nothing magic about the $700 billion number. That could be increased to a trillion, a trillion and a half in a flash."

And now we come to it. At first 700 Billion was plenty to get the job done. Maybe even just half of that. Now 700 Billion is not set in stone. Why not a Trillion? Trillion and a half? Do I hear 2 trillion?
The prospect of pumping more taxpayer money into Bank of America raised troubling questions about whether other banks may need more capital infusions.
"Will we need TARP 2.0?" asked Vincent R. Reinhart, former director of the Federal Reserve's monetary affairs division. "The first half wasn't used effectively, so we're certainly going to need the second half. But it probably won't be enough."
He said the fact that some of the money will be used for mortgage relief will mean there will be less money "to deal with the banking problem."
House Financial Services Committee Chair Barney Frank, D-Mass., said the problems in the financial sector could mean "we have to do more."
"Things have been worse than anticipated, there's no question," he said in an interview Thursday on C-SPAN. He compared the financial system to a patient under emergency care, saying, "You don't say, 'Well, that didn't work, I'm cutting it off.'"

TARP 2.0 used to be an inside joke many of us financial bloggers used to make fun of another round of bailouts. Now TARP 2.0 is the mainstream term for it! You cannot make this stuff up anymore, I dare you to even try!

While Goerge Bush was lampooned constantly for his poor vocabulary and word enunciation, Barney Frank may be the most impossible to understand politician in America. Watch a YouTube clip of this buffoon speaking and you will think Mr. Bush was Cicero of the old roman republic! Luckily this article just had a transcript, so I can read what Mr. Frank had to say.

I have news for Mr. Frank. There are indeed many cutoff points in emergency treatment. One of the easiest is when an accident victim is brought in with minimal vital functions and a head wound so severe that gray matter of the brain is hemorrhaging out. That patient is made "comfortable" until they expire. While I would not want to make the analogy that C and BAC ever had any brains, certainly the disaster each has become qualifies them to "be made comfortable" until expiration. Instead it seems our government is determined to try a brain transplant. Why not? It has worked many times before, right? Oh.

Have a good night.

4 comments:

Anonymous said...

GYSC

I know you are kidding, you already know where Barney Franks loyalties are.

Congressman Barney Frank 2007 - 2008
Brown Brothers Harriman & Co $29,300
Manulife Financial $15,000
Royal Bank of Scotland $13,800
Deloitte Touche Tohmatsu $13,000
Bank of America $12,750
CME Group $12,000
National Assn of Realtors $12,000
American Bankers Assn $11,300
American Society of Appraisers $11,000
JPMorgan Chase & Co $11,000
Morgan Stanley $11,000
Bernstein, Litowitz et al $10,900
Ernst & Young $10,900
UBS AG $10,500
American Institute of CPAs $10,000
Chicago Board Options Exchange $10,000
Credit Suisse Group $10,000
Credit Union National Assn $10,000
Equifax Inc $10,000
Grant Thornton LLP $10,000
GUS plc $10,000
Hartford Financial Services $10,000
Independent Community Bankers of America $10,000
Investment Co Institute $10,000
KPMG LLP $10,000
Laborers Union $10,000
Massachusetts Mutual Life Insurance $10,000
Mortgage Bankers Assn $10,000
National Assn of Home Builders $10,000
National Multi Housing Council $10,000
New York Life Insurance $10,000
Securities Industry & Financial Mkt Assn $10,000
Service Employees International Union $10,000
Trans Union Corp $10,000
http://www.opensecrets.org/politicians/contrib.php?cycle=2008&cid=N00000275

These guys are bought and paid for.

Kevin

watchtower said...

Like the first shockwave of an atom bomb the slowdown has finally hit the heartland here. No, we did not run houses up to bubbly heights and as I have said before most of our manufacting had left a long time ago but the layoffs around here are spiraling upwards at an ever increasing pace.
Is it as bad as 80-81? Not yet IMO, but as that line in Platoon says:
"Somewhere out there is the beast and he's hungry tonight..."

getyourselfconnected said...

Kevin,
Nice compilation of Mr. Weiner, I mean Franks paymasters. Sadly he is yet another example of Massachusetts politicians: corrupt and without fear of losing an election this century.
Watchtower,
Sad to hear things are rough where you are. One wonders why "we" allow our fortunes to be controlled by fools and idiots. Maybe things will change. Not!

Anonymous said...

I bought the smaller "guide" canoe a couple years ago from Dicks. Townsend is the manufacturer? Can't recall, but the thing is heavy duty and light weight. Mainly use it for tourism.

For fishing, I'd try to find a 8' or 10' john boat. More stable, more space, more easily transportable in a pick-up.