Category: Economy

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Business Economy

Fannie and Freddie crisis, InBev snaps AB

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Fannnie and Freddie crisis
I read Burham’s beat Fannie Mae’s Golden Goose article last Friday, after seeing the dramatic stock actions of FNM and FRE on that day. Following that, I also reviewed Barrons March 11 article, IS this Fannie Mae Toast?

Yeah, it looks like it. The bad thing is, those executives at Fannie and Freddie have made their money, we (tax payers) are bailing them out. So is the US still a free market capitalism country? Seems more like cronyism capitalism to me 🙂

An emotional day in St. Louis
As you may heard from the news, Anheuser Busch accepted the latest cash offer from InBev, and the AB global headquarter in STL will be the North American HQ of combined company Anheuser Busch InBev. Because it’s a cash offer, the current shareholders (Busch family, and Warren Buffett) will NOT have a stake in the new company. Interestingly, this morning I heard from radio Mayor Slay turned 180 degree about the merger, saying “I will work with AB/InBev starting tomorrow, next day, next week, next month…to ensure the success of AB/InBev in the region”.

Hm, what did he say a while earlier (before AB shareholders and board accepted the sweetened offer from $65 to $70 a share). Something like “this merger will destroy the shareholder value, lay off workers in AB, reduce the commitment to community”. All kind of bad things. What a difference $5 can make. Now everybody is happy.

Categories
China Economy

Ted Koppel and Discovery China series

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Ted Koppel is on the top of the journalists I admire. He always asks tough questions in a polite manner, and he has very good insights on international matters. That’s why I was sad to see he leaving ABC NightLine a while ago; and yesterday I was glad to learn his latest project Koppel on Discovery, People’s Republic of Capitalism (PRC), will be shown from July 9 to 12, on Discover Channel each night 10 PM (ET). Here is an excerpt of the show.
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We’ll trace the interconnected web of U.S./China trade, from Mexican migrant workers in North Carolina to a Chongqing teenager working on a boombox assembly line; quality control inspectors at Ethan Allen to a Chinese homemaker shopping at Wal-Mart in Chongqing; and laid-off workers from Briggs & Stratton’s Rolla, Missouri plant to the American who runs the Briggs & Stratton plant in Chongqing.
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Hm, Rolla is where my Alma Mater University of Missouri – Rolla (now Missouri S&T) is. Ethan Allen is one of the very first US stocks I bought (in 2002 🙂

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Categories
China earning Economy

GDP and stock options

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GRE analogy problem
China GDP number: politicians vs.
Corporate earning: executives stock options

Hint: the local officials pump up the GDP numbers so that they can get promoted; the corporate CEO/CFO pump up the earning number so that their stock options will be more valuable.

Of course in an ideal world, when the law is enforced, those kind of things will not happen.

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Categories
Economy

De-leveraging, moral hazard, friends and recession

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I heard a lot of buzz words in this Bear Stearns crisis, $100 oil, Spitzer scandal, global housing bust…world. Just list some new words I found interesting:

De-leveraging
This one is easy for me (because I don’t have much to leverage on). I was a little astonished by the leverage ratio of investment banks such as Goldman Sachs (see the GS balance sheet here) and Bear Stears. As of Nov 2007, Bear Stears has (in thousand dollars)

Total Liabilities 383,569,000
Total Stockholder Equity 11,793,000 (Net Tangible Assets $11,793,000)

Debt/Equity ratio is 32.5, in other words, they control $32.5 of asset while they have $1 to back it up. If they lose 3% in their assets (due to investment loss), all their equities are gone. Because Bear is heavily invested in mortgage back securities (MBS) and MBS pretty much went to trash can lately, I think a 3% loss is easy to achieve. (Therefore the bailout and fire sale of Bear in the weekend).

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Economy

Sub-prime credit crisis unfold

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sub prime loan pic
(source: www.stride.co.uk)

Last Monday was one year anniversary of sub-prime (and subsequent credit crisis), here is an interesting time line I found at BBC. Quote:

8 March (2007)
Biggest US house builder DR Horton warns of huge losses from sub-prime fall-out.

12 March (2007)
Shares in New Century Financial, one of the biggest sub-prime lenders in the US, were suspended amid fears it might be heading for bankruptcy. See the New Century entry at Wiki here.
…
A year later (lots of bad things happened in the past year):
…

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Categories
Economy

EQ of US presidential hopeful

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For fun, please note I am not endorsing any of the canidate…

donkey elephant logo

Economy policy using Google
I googled “Obama/Hillary/McCain economy policy” and here is what I got. Note I only looked at the results from their campaign web site (click on the the names below to see the search results).

Hillary: she does not has a full page on economy, here is the best I could get (an old speech). Her web page has lots of issues but does not single out economy.

McCain: here is the economy stimulus plan page.

Obama: He got a full page on this issue.

I think most people agree Hillary has the most experience on Economy, but her web page is no good (at least from Google search perspective).

Presidents influence on economy

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Categories
China Economy

Tax rebate, President Hu and work around

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US Tax Rebate
The US congress and president are on the same page for one thing: help every American buy an iPod (a.k.a. the tax rebate thing). For me while I am glad to get some of my tax dollor back (rather than been blew away in Iraq, or paying a Carribean trip for some congress members…). I think the mantra of quick fix is so prevelant in this country. Sometimes yours truely also fall into this. For instance:

*Got a headache? Take an Tylenol.

*Need some stimulus for work? Got a coffee. I did this every morning.

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