Ron Paul had an interesting perspective on this topic.
Reading Time: < 1 minute
Author: stlplace
Categories
In Buffett we trust: II
Reading Time: < 1 minute
In this turbulent market, most of my stocks took hits, from China Mobile (NYSE:CHL) to Arch Coal (NYSE:ACI), to Chesepeake Energy (NYSE:CHK), Marathon Oil (NYSE:MRO), not to mention the once-high-flyers such as Sohu (Nasdaq:SOHU) and Wuxi Pharma (Nasdaq:WX), both of which I already sold. At the same time, I am happy to see my two shares of Berkshire Hathaway (NYSE:BRK.B) stood calm, and even went up a bit. Why?
(Fox interview David Sokol, Chairman of MidAmerican Energy, a Berkshire Hathaway holding)
Reading Time: < 1 minute
March 16: Bear Stearns, $29 billon
Sept. 6: Fannie/Freddie, $200 billion
Lehman Brothers: sorry baby no bail
AIG: $85 billion
Who is the next???
Essentially Fed/Treasury are transfering the downside risks from individual companies to the fed/treasury/greenbacks. Note the money pledged to support Fannie/Freddie/AIG could exceed the original number if the problem worsens.
I can only say: gold, baby, gold!
Categories
AIG IS too big to fail
Reading Time: < 1 minute
At least that’s what Fed chairman Bernenke and Treasury secretary Paulson think, and the congress and president agree with them. But how about the shareholders and we the tax payers? The AIG shareholders are almost wiped out (slightly better than Fannie and Freddie), and the price tag is $85 billion for now.
So summary, the price tag of recent big financial firms fallout.
Reading Time: < 1 minute
and here is President Bush has to say this morning (source: yahoo):
“We are working to reduce disruptions and minimize the impact of these financial market developments on the broader economy,” Bush said in the Rose Garden, choosing to address the market turmoil at the top of an appearance with visiting Ghanian President John Kufuor. “The policymakers will focus on the health of the financial system as a whole,” Bush said.
In the weekend, the No. 4 US invesetment bank Lehman Brothers went under, the No. 3. US investment bank Merrill Lynch was bought by Bank of America under recommendation by Fed (Bloomberg news). The goal was to make the buck stop at the Merrill. No one wants to see the No. 1 Goldman and No. 2 Morgan Stanley go under.
But they only got a temporary break. The focus now is on AIG and Washington Mutual. The problem for GS and MS, with BoA got Merrill, no company in the world has the resource to buy GS/MS without any goverment help. And the US goverment set a precedent they are not going to bail out anyone (Lehman, for example).
Categories
Thinking GOLD now
Reading Time: 2 minutes
With the Lehman Brothers discussion underway in its 3rd day, and Asian market is anxious waiting for positive outcome. I am thinking otherwise. Regardless Lehman gets sold (as a piece or in several pieces), continue its business with bankrupcy in mind, this Lehman thing is just a tip of iceberger we are going to see. What? You may ask we already see Bear Stearns, Fannie and Freddie bailout, and that’s only the tip of iceberger? The problem is not only AIG, WaMu: the next two in the line; the problem is now I am afraid the dollar and the world financial market will collapse.
As we have seen from the difficulty of Lehman discussion, the key is US goverment is not going to provide any kind of finance support, as they did in the Bear, Fannie, Freddie deal (total $229 billion). For the goverment, they don’t want to do this due to two reasons: 1) Moral hazard; 2) The increasing debt on the US goverment and tax payers, and the the pressure on USD comes with it.
If the worst happens, nothing will be spared, except the gold (Wiki: ways investing in gold). Because before the 1970s un-pegging of dollar and gold happened, gold was the central banks reserve/deposit to print paper money. And if we could go back history a bit more, we know gold is the most widely used precious metal for money.
So, I am seriously thinking about the Gold ETF (GLD). Another way, if you are like my friend Sun, you can buy the gold bar from bullion direct.
I am trusting the good old gold much more than the Lehmans, the wall street, the US goverment (treasury department, the federal reserve), will you 🙂
Categories
Lehman is NOT too big to fail
Reading Time: < 1 minute
This is the message Paulson sent to the street this morning. In other words, Paulson was saying “speculators, you should know this coming in last 6 months, sorry but I can not help you out this time, because in doing so I could lose my job too”. Pauslon gave two reasons he won’t bail out Lehman Brothers: 1) Since the Bear Stearns crisis, Lehman has been in the news for almost 6 months, the partites should have taken steps in the case of “go under” of Lehman; 2) Since the Bear Stearns Crisis, Fed has opened the discount windows to investment banks. Lehman should have done its own job to raise capital, keep its house in order.
(Obviously, the reporters are not welcomed in the Lehman building)
Reading Time: 2 minutes
Today is a special day, the seven anniversary of 9-11. I still remember that morning, when I watch the morning TV as usual, I saw the smoke coming out of World Trader Center Tower, and wondering “what absent-minded pilot fly his/her plane into the tower”?
We all know what happened after that. The war against Talian in Afganistan, the war for “weapon of mass distruction” in Iraq. More importantly, the gas price went from around $1.50 (I still remember some gas stations price gauging in the evening of 9-11) to $3.50, the US federal deficit and trade deficit grew significantly, and last but not least, the housing and credit crisis in the last year. Since my interest is mainly in economy and finance, let me go there for a minute.
This week (last Sunday) marks another hard-working weekend for US treasury secratery Henry Paulson, because of the goverment take over of Fannie Mac and Freddie Mac. The two Goverment Sponsored Entities have $5 trillion of US mortgages, half of US mortage size. Interestingly, roughly $1.5 trillion of that $5 trillion was purchased by the foreign goverments: China, Korea, Japan and Russia etc. This is the direct reason for the US goverment take over, because the foreign goverment lost confidence on the Fannie and Freddie. On the surface, with the take over, now the mortgage has the full faith of US goverment, now things are goody and dandy again. But wait a minute, the US goverment itself has $10 trillion deficit, what if the US goverment fails to pay its own debt? Well, there are two ways out of it:
Categories
Fannie Freddie and the market
Reading Time: < 1 minute
Fannie/Freddie
Short term I think it’s a deal for fed. But long term (it seems nobody is caring about long term these days), why should China continue to buy the Fannie/Freddie debt, for some premium over the US treasuries with substantial mortgage market risk (liquidity). I agree the US treasuries and Fannie/Freddie debt are co-related. It seems the greenback will continue to be a large part of China foreign exchange holdings.
But think a minute, if the United States can not sort out this mortage thing, why should China/Japan mess with it? I think the implication of this mortage crisis will be much greater than many peoeple (convention wisdom) think. The house will NOT always go up. The housing sector and homeownership are good thing, but sometimes too much of a good thing could be a bad thing. I think the people in China state investment Cos. should seriously think about their strategy.
The Market
Categories
The great bailout of Fannie Freddie
Reading Time: 2 minutes
(Update, according to WSJ) The deal in summary: the US treasury dept. will put up to 200 billion ($100 billion each) to support the mortgages loss from Fannie and Freddie; the treasury will buy $1 billlon of preferred shares for 10% divivend, the preferred are senior to all other preferred previously issued (I believe all the other preferred holders won’t have much left); the treasury will have warrant to buy FNM and FRE up to 79.9% of company common stock for a nonimal (i.e. the current shareholders such as Legg Mason, Dodge Cox mutual funds will be diluted 1:5 after recent big stock price drop).
(Source: Yahoo Tech-ticker)
It appears the direct cause of the bailout is Chinese and Russian goverments are no longer willing to buy the debt of Fannie/Freddie. So what US goverment did is “all right, we will eat our own dog food”, and hopefully Chinese and Russians will follow.
Did China got a deal?