Tag Archive 'markets'

Three Banks to Rule the World

The winners of the global financial turmoil look to be three American ’superbanks’: JP Morgan Chase, Bank of America and Wells Fargo. The institutions have all grown to occupy such a predominant position in the marketplace, that all three recently surpassed the Federal cap intended to prevent any one institution from controlling more than 10% of domestic deposits. A staggering realization of their scale.


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The SEC doesn’t get the short end of the stick

If they did, then they wouldn’t have banned short selling. People may have noticed that the ban hasn’t helped, and today we see one of the real costs.

See, when markets collapse like today, short sellers dive into the market to cover their short positions, in these times they are often the only ones buying. They aren’t there today, and the market has lost one of its stabilizers.

Frankly, this whole affair has been drenched in idiocy.

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Short of Wisdom, Common Sense and a Grasp of Reality

The hedge fund industry is feeling gloomy, and so is Mayfair.

Meanwhile our government is considering following London’s lead and making their lives even more difficult, by banning short selling for a while. Yep, Fannie would have been just fine with mismatched liabilities, toxic assets and corrupt accounting mixed in with 40-1 leverage if nobody had been selling their stock, which is really all a short sale is.

This is crazy, and likely to lead to a much worse environment for both investing and the smooth functioning of capital markets, which are supposed to over time allocate capital. They are not supposed to lead to higher returns regardless of the worth of a company.

Wealth is not created out of thin air, it is supposed to be connected to the actual income stream a company can produce over time.

Market corrections are what keep wealth from being a product of a mere price we would like for assets, which is awfully disappointing to those who want wealth to be a casino where the house always loses, the drinks are free and the girls (or young men) always accommodating. (more…)

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Talk about your free markets

“We live in a capitalist society,” she tells us. “Why shouldn’t I be
allowed to capitalize on my virginity?”
  Is this a hoax or just free markets?

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Mixed Economies: Efficacy Without Moral Narrative

(photo: Ian Murchison | website)

The nationalization of Fannie & Freddie is often presented as a crisis of faith for the political right, due to its manifest incompatibility with the advertised belief in the “free market.” However, Sunder Katwala at NextLeft cleverly recognizes that it also presents a challenge to orthodoxy on the left, given that the insisted purpose of the nationalization isn’t government ownership, but to rescue businesses for a stable return to the private sector.


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Black Signs at the Exhibition

The IMF has come through for Georgia in an enormous way, approving a $750 million credit line for the beleaguered republic. Beyond the much needed aid, it’s a powerful political reminder for Russia of the gargantuan economic advantage the West maintains.

But in that article notice the black banner in the feature photograph. It’s a promotional piece for the slick SOSGeorgia site, written in very literate English and produced by a Georgian IT firm. Have you noticed how much better the Georgians are at appealing to world opinion than the Russians? Granted, theirs is the far more sympathetic cause, but there is some native skill involved in the marketing that may have something to do with the country’s cultural, political and commercial orientation toward the West. I hate to speculate too deeply on it, but it’s possible that disconnection from the West simply leads to bad public relations strategy. At least when you need to persuade the West, as both the Russians and Georgians do.


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The Saddleback Effect

Astute Bloggers
Let’s see if this pans out. It would be a big lift for McCain. I wonder if InTrade will react?

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Eager to Invest in an Emerging International Pariah?

Russia suddenly has an investor confidence problem. Can’t imagine why.

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The Tidal Empires of War

Bashar Assad stickers in Syria
(photo: Charles RoffeyCharles & Fred)

Someone once said that in Damascus you truly can get a little bit pregnant. It’s a good aphorism, because if you asked the foreign minister of almost any state in the Middle East or the Mediterranean what his government’s policy relationship was with Syria, he would automatically furrow his brow and call it “complicated.” You always seem to be about half-way somewhere with Syria. Lately that appears to be true even for Tzipi Livni. If so for Israel, doubly so for Lebanon.

Surveying it, Jihad Yazigi describes the situation that exists between the two countries as customarily “complicated”, but the dimension of complication he’s seeing is something relatively new. Where before thirty years of Syrian military occupation (and often not very covert political subversion) might be the most obvious locus, Yazigi is today talking about labor and direct investment in Syria by Lebanese:

Syria would probably not be liberalizing its economy and going through a revival of its services sector without the thousands of Lebanese managers that are running Syrian firms. Lebanese managerial know-how is being exported throughout the Arab world and Syria will continue to need it if it wants to further the opening up of its economy.
(The Syria Report)

That’s a very new economic relationship, as historically it is Syrian labor that has traveled to liberal and cosmopolitan Beirut. It is Syrian enterprise that has worked to create a paternalistic relationship between the two countries with one-way investment, generally government directed.


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Are we in a recession yet?

Personally I think we have been negative since November. Given the large positive number in the third quarter, the barely above break even number in the fourth quarter virtually guarantees that the economy went negative sometime in November and December. However, if we are not, it is highly likely coming. Here is a graphic which should put it in perspective. From Moody’s we get this look at freight (Click to enlarge)


That is a pretty stunning collapse. Few things correlate with economic activity more than freight, and for rather obvious reasons.

While I have been very negative on the economy shorter term for some time, I will say I doubt this will be a particularly deep recession. On the other hand, I also expect it to be rather drawn out. Obviously I could easily be wrong on both counts.

I will repeat what I have said over and over, in a probabilistic world we cannot know the future, but we can say that the risks are rather high and we should all consider lowering the amount of risk we face. That means more cash in our savings accounts, more defense in your portfolios (if you are going to take risk, make it risk that doesn’t correlate with US financial markets) and reducing debt.

With both financial markets and housing prices I would be wary. Your situation may differ, but I keep hearing people say things must be attractive at this point. Housing is a much better deal than it was, etc.

That is exactly right, but I suspect that this also likely holds true. It is approximately 4 1/2 hours from Baton Rouge to Shreveport. Alexandria lies halfway between. When my children ask me how far we still have to go, while I undoubtedly have far less distance to go than when I started, I still have just as far to drive as I have already driven.

In many areas of the financial markets and housing things may be less expensive than they were, but they are still way too expensive and there is a lot more bad news coming down the pike.

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Money Honey Memories

Horrible audio and video quality, but here’s Joey Ramone performing . Joey would be dead six months later, but the financial industry and markets he celebrated and loved live forever. You can download a high quality version of this classic track here for ninety-nine cents.

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Overseas Markets Plunge Again

From the New York Times:

Heavy selling hit each Asian and European stock market as soon as it opened. Some of Asia’s easternmost exchanges, which had closed on Monday before the sharpest declines occurred in India and then Europe, suffered particularly steep drops.

The Japanese stock market dropped 5.7 percent, for the worst two-day loss in 17 years, while the Australian stock market tumbled 7.1 percent, its worst single-day loss in nearly two decades. The Shanghai market lost 7.2 percent while the Hang Seng index in Hong Kong plummeted 8.7 percent.

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