October 2008 Archives
Argentine lawmakers will try to block the government's use of $29 billion in nationalized pension assets to repay debt when they consider President Cristina Fernandez de Kirchner's plan to seize the funds from private money managers.[via Bloomberg]I know that in the US we borrow from Social Security and other entitlements to pay for overspending but we don't seize funds from private money managers, yet.Â I wonder what would happen if Argentina's financial system collapsed and Juan's retirement account can't be repaid? He'd be screwed.
Tokyo's Nikkei 225 tumbled 5.9% to 8,796.10 points in early afternoon trading, as investors nervously anticipated a season of modest to dismal earnings reports and outlooks. Earlier, the Dow Jones industrial average fell 231.77 points, or 2.5%, to 9,033.66, after blue-chip companies posted bleak earnings. [via Forbes]It'll stop when people throw in the towel.Â I thought I saw that recently but people are still too optimistic.Â Maybe I'm just a permabear.
The trillion-dollar infusions by the U.S. and European countries into their financial systems didn't seem enough Wednesday to fuel more than a two-day rally. Major Asian markets fell on disappointing earnings and worries about a global recession.[via Forbes]Why should this time be any different?Â My targets for the S&P500 are still at 900 then 700.
To rid Wall Street of its Las Vegas tone, Munger suggests leveling the options exchanges in Chicago and New York, and banning completely all derivatives contracts, a rather impossible vision but one that's true to his spirit. He's also furious with the accountants, in particular for letting Wachovia (nyse: WB - news - people ) report actual profits on accrued interest from risky mortgages when, in fact, the interest wasn't paid but added to the principal amount due on the mortgages.[via Forbes]The idea to return to a more normal role for Wall Street institutions and sounder accounting methods is a great one and I welcome it, but I believe options have their place in the market. What are your thoughts?
Before markets opened in Europe, a statement from the Federal Reserve in Washington said that it, along with the Bank of England, the European Central Bank and the Swiss National Bank would provide funds at a fixed interest rate in advance of each operation â€œagainst the appropriate collateral in each jurisdiction.â€ The Federal Reserve said it would increase its swap lines with those central banks â€œto accommodate whatever quantity of U.S. dollar fundingâ€ institutions demand. The Bank of Japan was considering joining the plan, the Federal Reserve said in a statement. [via NY Times]This bailout plan is probably going to work but it will come at the expense of the US Dollar and a lot higher inflation.
If the private sector does not spend and/or cannot spend, old-fashioned traditional Keynesian spending by the government is necessary. It is true that we already have large and growing budget deficits; but $300 billion of public works is more effective and productive than spending $700 billion to buy toxic assets. [via Forbes]As an Austrian School of Ecomomics believer, I feel that the government should just be in business to create policies (i.e. taxes) and incentives that encourage private entities to build new infrastructure using their money instead of the governments.Â Why keep spending our way to another debt ridden future?
In Japan, the benchmark index dropped the most in 21 years as investors were chilled by a report in the Nikkei business daily based on unnamed sources that asserted that Toyota's profit was likely to fall around 40% in the year to next March on weak sales in the key North American market and slower growth in China--far worse than the automakerâ€™s previous forecast. [via Forbes]As I said before, my simulations show a race to 700 for the S&P500.Â I still have a little bit of cash left to inject into my 401k at that level.Â If it goes lower I'll be injecting my capital into new shotgun, spam, and toilet paper.
``Sentiment is extremely pessimistic, people believe we'll see a global recession despite the measures being taken by governments,'' said Jochen Hitzfeld, an analyst at UniCredit Markets & Investment Banking. ``Many commodities like platinum, agricultural commodities or gasoline have fallen below their production costs.''[via Bloomberg]It might be time to buy a bicycle and start walking to the grocery store.Â This market crash in equities and commodities will rewrite human history, as it did in 1932.
â€œFrom two very senior sources â€“ one incredibly senior source â€“ that he went to the gym after â€¦ Lehman was announced as going under. He was on a treadmill with a heart monitor on. Someone was in the corner, pumping iron and he walked over and he knocked him out cold. And frankly after having watched this [ed. Fuld's testimony], Iâ€™d have done the same too.â€ [via Businesandmedia]I wonder if some other "unlucky" CEO from another failed institution were to be dragged into the streets and beat to a bloody pulp, would other CEO's still be as eager to engage in risky investments in the future?
``We're seeing panic all over the markets right now,'' said Javier Barrio, head of equity sales for Spanish clients at Banco BPI SA in Madrid. ``Governments are taking steps to try to reduce investors' fears but confidence is weak.''[via Bloomberg]The scary thing is that one of my simulations show the S&P500 could reach 700 rather quickly.
After seven years of providing the cheapest source of funds for investors buying higher-yielding New Zealand dollars, Australian dollars and Brazil reais, the yen is appreciating as $587 billion of subprime mortgage-related losses force banks to restrict credit. It strengthened 4.4 percent on a trade-weighted basis in September, according to the Bank of Japan's effective exchange rate, the most since August 2007, when the seizure in capital markets began.[via Bloomberg]Shrewd is the answer.
I know this was so last week but CitiGroup is buying Wachovia's banking business.Â Whether or not its a smart move remains to be seen but things *might* be turning around for this bad boy.Â Any glimmer of hope is welcome news to long term shareholders, like myself.Â What'll make me feel really good is if CitiGroup (C) can get back above the 50 WMA.Â At least my $20 average cost positions would offset my $40 average cost positions.Â :)
Update: I must be cursed.Â Right after I posted this, news comes out that Wells Fargo wants to buy Wachovia in its entirety.Â Ugh!