Perry Glasser

Archive for September, 2008|Monthly archive page

Taking It in the Neck

In Economics, Politics, Wall Street on September 30, 2008 at 11:12 am

Yesterday, the League of Weasels, Buccaneers and Wizards learned the limit to American stupidity. Weasel in Chief, Georgie Bush, commander of American forces deployed to export democracy by force of arms to medieval shepherds, is disappointed. The American people want the Wizards and Buccaneers to take it in the neck.

They have the strange idea that duplicitous, lying, irresponsible leadership needs to be held accountable, and so will happily stand aside while Big Investors lose trillions.

According to the Wall Street Journal, the defeated bailout proposal included

  • insufficient “mortgage reductions for homewoners in bankruptcy”;
  • left unspecified the size of the equity stake taxpayers would have in exchange for their tax dollars given to mismanaged coprporations
    (Dollar$ NO BS definition: “equity stake” = “what we get for our dough”);
  • only lightly addressed executive compensation
    (Dollar$ NO BS definition: “executive compensation” = “Bucanner rake”);
  • handed procedural decisions to the Treasury
    (Dollar$ NO BS definition: “procedural decisons” = “rules to be made up as they go along by the people who put us in this shit-storm”).

Short version: probably by accident and for the wrong reasons having more to do with partisan politics than clarity of thought, Congress rejected a safety net embroidred for the rich out of taxpayer money.

Recipient of a Dollar$ Wizard Award, bank lobbyist Ed Yingling, successfully campaigned inclusion in the unpassed bill of a tax levy on banks to pay for the bailout as it was an unfair “punishment” to banks that did not make uncreditworthy loans (Wizard Yingling called them subprime) and would “put a cloud over bank stocks.”

In my town, we pay taxes for the public good. Can you imagine, some of us without children pay the taxes that pay for schools, several of us are happy to pay for a fire department that we pray we never need, and none of us consider taxes a punishment. We call taxes the price of civilization. Wizard Yingling must have been absent that day in his 4th grade Civics class.

Maybe Weasel in Chief Georgie will resurrect his idea that Social Security should be privatized, bringing the blessings of the Holy Open Market to old age. We dodged that bit of Wizardry a few years ago: even the Leaugue of Weasels (aka: Congress) had too much shame to legalize a statutory money pump pushing taxpayer cash into stocks that could then be sold at inflated prices by Buccaneer investors. Some of us poor schmucks do not own computerized trading program that automate leveraged orders to be executed at light-speed, but cling to our 401ks, 403bs, IRAs, SEP-IRAs, IRAs, Roth IRAs, variable annuities, portable health plans, 501(c) education funds, variable life insurance, and the rest of the full panoply of Wizard-created financial instruments designed to empty our wallets in exchange for a false sense of security.

We will all feel the the pain, but yesterday’s trillon dollar drop in the value of America is felt a lot more by those Big Investors, the holders of American promissory notes that have financed the War on Shepherds–the governments of China, India, and Dubai, that are growing concerned that the dollars they collect as interest are not worth much.

A pity, ain’t it?

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Weasels Triumphant

In Business, Economy, Politics, Wall Street on September 29, 2008 at 7:20 pm

The gang of weasels who run the US are leaderless.
Georgie Bush today could not marshal sufficient Republicans to endorse an alleged bipartisan bailout of the financial industry. In a parliamentary system, unable to govern, Georgie would have been forced to call for elections a while ago, and he’d have been out on his keister. We’d have found someone—anyone—to replace the current president. Superior candidates abound in Leavenworth, Attica, Angola, or Dannemora.
Georgie, however, need not resign. Dollar$ is happy to keep him around.
Yes, happy!
While Georgie’s place in American history beside Herbert Hoover is assured, Dollar$ happily observes that as long as Georgie hangs on, we can avoid President Dick Cheney. Even if we somehow forced a package deal and was rid of the Oil Patch Twins, our laws would have gifted us with the Speaker if the House, Democratic weasel, Nancy Pelosi.
This afternoon, with the economy of the United States in the balance, Weasel Pelosi had the high purpose and exquisite judgment to piss-off just about everyone within earshot. With the vote about to be taken, standing before the House of Representatives, she said, “Democrats believe in the free market, which can and does create jobs, wealth, and capital, but left to its own devices it has created chaos. …Democrats insisted that legislation responding to this crisis must protect the American people and Main Street from the meltdown on Wall Street.”
For an experienced weasel, this has to an act of deliberate sabotage. Poking a stick in the eye of Republicans is not the best strategy to make things work. Weasels themselves, incapable of allowing bygones be bygones, 12 Republican “Yeas” converted themselves to 12 “Nays.”
While Weasel Pelosi gets to point at the Bad Republicans while vaulting Obama into the White House, this bit of political strategy sent the Dow Jones Industrial Average into the crapper. What matter? So what if retirements are being delayed, college educations pushed out of reach, jobs immolated…for weasels, all that matters is power.
Weasels are about as subtle as a brick hurled through plate glass.

Dollar$ Wizard Award #3

In Business, Finance, Politics on September 28, 2008 at 10:58 am

Dollar$ salutes yet another Wizard, Edward L. Yingling, president and CEO of American Bankers Association!

Dollar$ No Bull Definition: ABA = the bank lobby.

On September 23, Yingling released a statement expressing “disappointment” at the passing of H.R. 5244, the House of Representatives bill some call “The Creditcard Holders’ Bill of Rights.” The fools who represent us passed this evil little bill with a vote of 312-112, roughly 3 to 1. What can our reps be smoking?

Imagine! Elected officials have the mad idea that 45 days notice ought to be required for a credit card issuer to change interest rates! Our elected officials think 25 days notice on your credit card bills ought to be ordinary! They think the phrase “fixed rate” ought to mean…well, “fixed.” How will banks make money??

With his eye on the ball and the unrestricted right to screw the consumer, Yingling says, ““Sometimes things that appear attractive on the surface often come with too high a price tag. Increasing prices for consumers, reducing low-cost credit alternatives for small businesses, and causing more ripples in the securitization market make little sense.”

Ah, if only Wizard Yingling’s foresight was available to us when his organization’s members embraced uncreditworthy mortgages! If only Wizard Yingling’s insight about banks begging for $700 billion taxpayers dollars to haul their chestnuts out of the wreckage of the American economy!

Bank business; bank profit. Bank losses, taxpayer bill. 

So….Stand! Salute!

For distributing a strong dose of hypocrisy-laced Kool-Aid he’d never drink, for self-impotance brought to new levels, for fautous stupidity, for rapaciousness, greed, and disdain for the public,

The Dollar$ Wizard Award goes to Edward Yingling!

Dollar$ readers who wish to share their opinion of Mr Yingling’s enlightened stance should not hesitate to contact Yingling’s PR serfs.

ABA Media Contact: Peter Garuccio
(202) 663-5452
E-mail: pgarucci@aba.com

Let’s not be shy now… tell ’em how we REALLY feel!

The End of Reagonomics

In Business, Economics, Economy, Politics, Wall Street on September 27, 2008 at 7:16 pm

Ronald Reagan’s presidency is oft-heralded as marking the dawn of a new era. Reagan implemented the winning Republican political strategy that, except for the Clinton years, dominated American elections for 25 years.

But this week, Georgie Bush called for swift, new, regulatory changes in how business operates.  Regeanomics is ended.

Prosperity was supposed to trickle down, but this past week Americans saw catastrophe coming at us like an avalanche of crap.  It seems both shit and money flow downhill–shit with far more velocity.

For 25 years, Democrats were tarred with the phrase “liberal” meaning “tax and spend.” Democratic dolts believed political office to be about effecting and affecting economic and social betterment. Crazy fools. Reagan changed that by lowering taxes and lowering spending.

Georgie Bush got Reagan’s economic lesson half right. He lowered taxes (for the wealthy), but spends like a drunken liberal on anything except social programs. Our infrastructure is in ruins; we are driving around in the same technology that motorized America in 1920; we are the only industrial nation in the world that does not consider healhcare an entitlement. But we got us a war! Two, in fact.

To finance Georgie’s wars, we mortgaged the United States to the hilt and beyond. We sold so many bundles of mortgages, that the world can’t take anymore. The dollar is worth less than the loonie. Still, as the longest war in US history goes forward as our national nightmare, we can rest easy knowing shepherds in Iraq will never unleash weapons of mass destruction upon us. (Rumors that a dreaded contagion like anthrax was originally contracted by those shepherds after having carnal relations with a goat are likely false.)

Politics and money are inextricably intertwined. Back in the 1980s, Republicans forged a winning strategy. The spiritual purity of the nation’s soul somehow became a voting issue.

Forget that the US Constitution gives no hint that the Founders imagined an American president consulting with the likes of Billy Graham or Jerry Falwell. Never mind that Jefferson had a slave mistress or that Franklin bedded any number of French aristocrats. Roosevelt died of a stroke in his mistress’s pool. Eisenhower slept with his chaffeur. John Kenndy bedded more women than we will ever know.

No doubt. In the 20th century, Satan walked astride the land. Roosevelt’s New Deal was conceived in Sin; Eisenhower’s Interstate Highway system was spawn of the Devil; Kennedy’s leading us to the Moon must have been an offense to God. As penance, we need to put the moon rocks back and maybe tear up Interstate 40.

But with 33% of all US citizens identifying themselves as “born again” and with 40% of the population certain angels care for them, Republicans saw a good thing. Such statistics should have been an argument for spending more on public education, but why bother? Republicans had the voters of Ohio and Kansas “crawl[ing] on their knees over the shattered glass of their economies to vote against their own best interests.”  Who needs jobs when homosexuals might be marrying in any neighborhood!  What fool wants universal access to state-sponsored healthcare when some 15-year-old might demand an abortion! Why, during  the Clinton years Amerca was shocked–shocked!–to learn that a middle-aged man might enjoy dalliance with a 21-year-old not his wife!

There’s no carryng on like that in the Bible. No sirree bob-a-roonie, now, is there? (All right, maybe just a little. Those Old Testament types just could not get a zipper on it.)

Ah, hell, if nursery school children could vote, Republicans would have run the Easter Bunny.

Dollar$ notes that a nation preoccupied with the private lives of its fellow citizens, its leadership, and the imperative political questions governing each woman’s uterus may have missed how Wall Street’s Wizards and Bucanneers elevated the Open Market to secular religious status. Deregulate! Deregulate! Deregulate! Downsize! Downsize! Downsize! Wouldn’t Jesus outsource??

Still, some pesky rules remained–we persist in wanting milk purer than the poison China serves, and we become uneasy at lead paint on children’s toys. But what self-respecting Buccaneer can’t get around a rule or two? Change the rule or invent rhetorical dodges!

As long as the population is kept ignorant of basic financial education, they’ll get away with it. Our kids are taught how to slip a condom on a banana and to parallel park, but how to balance a checkbook or the ruinous nature of consumer debt on plastic at 21% is not a fitting subject for school.

So when Georgie Bush calls for new regulations, the world is upside-down. Georgie is acknowledging the failure of his policies: deregulation coupled with the sanctity of open markets at modern technological speeds just brings ruin.

The Wizards and Buccaneers have slaughtered what was the the envy of the world, the Golden Goose Economy. We are just laying an ordinary egg these days, and probably will for the foreseeable future, and we have no one to blame but ourselves.

Reassured?

In Business, Economy, Finance, Wall Street on September 26, 2008 at 8:10 pm

Edward M. Liddy, Chairman, CEO and Buccaneer Extraordinaire of American Internationa Group (AIG), took a full-page ad in today’s Wall Street Journal . It’s a note addressed to customers, agents, brokers, advisors and other partners, thanking them for staying with AIG. Chairman Liddy’s letter contains the news, “Regulations ensure that the assets of our insurance companies are there to back up each policy.”
While we are happy to read that something is backing up AIG’s policies, alert readers will note that it sure ain’t AIG’s business practices, strong financial condition, or future growth prospects.
Ninety percent of AIG was nationalized by the US government last week, and we can only hope this isn’t the beginning of a double drowning–you know, when the lifesaver is dragged to the bottom in the embrace of the victim.
Readers will note that Chairman Liddy’s puny attempt to keep customers from jumping ship:

  • includes no apology to screwed shareholders;
  • omits any address to frightened employees;
  • omits any apology to employees facing ruin because they held AIG stock in their retirement funds;
  • adresses “partners.” Dollar$ translation: any schmuck unlucky enough to have given Chairman Liddy’s company any money;
  • pointedly omits any admission of guilt that AIG, a reinsurance company, exposed itself to high risk investments on Liddy’s watch;
  • omits any expression of gratitude to the American people whose “regulations” are saving his job–so far.

Let’s hope Chairman Liddy paid for this ad out of his own pocket….naaaah, who am I kidding?

Dollar$ Wizard Award #2

In Business, Economics, Finance, Politics, Wall Street on September 26, 2008 at 5:13 pm

Buccaneers like to say, “Let the markets work!”
They like to say that a lot. They like to say that until they need their own chestnuts pulled from the fire. Then they become ardent socialists, calling for “subsidies” and “bailouts” — you know, welfare for the rich.
Dollar$ congratulates the Wizards of the Securities and Exchange Commission for its outstanding work in enabling the worst financial crisis in US history!
Hats off!

How They Did It

In July, 2007, the SEC abolished the Uptick Rule on short selling, thus orchestrating a new era of stock market manipulation that will out-do the world-wide catastrophe of the 1930s. With luck, we may avoid the fun of totaliatrian fascism and other political ills precipitated when frightened, desperate people don’t know where to turn or who to blame.
But that calls for luck.
Look: the 70-year-old rule Uptick Rule was in the way of Wall Street Buccaneers. Buccaneers have a right not to be restrained from making ever more cash by exploiting the naive and helpless.

The Uptick Rule

Shortly after the stock market crash of 1929, at a time when regulation of markets seemed like a better idea than allowing lying, thieving, duplicitous Wall Street Buccaneers to rape and pillage entire economies in the name of Holy Open Markets, the Uptick Rule originated.
The Uptick Rule disallows piling-on in a down market. At its extreme, that’s a form of market manipulation called a Bear Raid, a strategy that shorts a stock into bankruptcy.
The Uptick Rule stoppede that. It required a positive trade precede any short sale.
Modern Buccaneers claimed such restrictions were in the way of their right to make coin, and the good SEC heeded their cry. The Buccaneers claim is that shorting is a simple market operation: every short position is an obligation to buy in the future. It all comes out all right in the end.
Right, sure.
In 1850, this was true, but when you’ve got a few Cray computers triggering orders faster than any mere human can think, the idea of allowing unrestrained shorts boggles the mind. Heck, if you ran a hedge fund, if you could carry it, you’d keep your Cray computer right next to your cold heart, snug against your Blackberry. As for naked shorts, those marvelous instruments that are a ledger entry that don’t even require an equity transfer…Katie, bar the door!
If the price at buyback time can be forced so low as to be meaningless, some people may ask how deregulation and open markets had to mean that their retirement plans were snuffed out, and a few others may be wondering about their jobs or their kids’ educations. Ask the folks at Lehman, at Fannie Mae, at WaMu, Freddie Mac if open markets and deregulation are what America needs.
So…
Wizards who aid and abet Buccaneers, STAND and get your due recognition!
This time, I’ll bring the pitchforks and you bring the torches.

WaMu, George Bailey & Fear

In Business, Economics, Economy, Finance, Politics, Wall Street on September 26, 2008 at 12:31 pm

Georgie Bush’s foreign adventures are not enough to save the faltering US economy. After the vain attempt of giving $600 to every taxpayer in America, we are about to print $700 billion in cash to give it to failed Buccaneers and Wizards. The only thing our elected representatives are debating is how to do it.
Washington Mutual was sold to JP Morgan this morning. A run on the bank’s deposits left the Federal Reserve no choice other than to broker the deal, and the House of Morgan stepped up with an open wallet. The alternative was for the Fed to step up with FDIC insurance, costing each of us up to $100,000 per depositor. Yikes!

BANK RUNS

Readers will recall the moment in Frank Capra’s It’s A Wonderful Life when George Bailey’s bank nearly fails. For movie-goers in 1946, the scene depicted recent history. Shortly after the stock market crash of 1929, US banks dropped like rotten fruit from trees in a high wind.
The Wizards and Buccaneers who vie to manage your money trade in fear. By keeping us ignorant of basic financial principals, we make better sheep, willing to pay for what we think is arcane, complicated advice–which it is not.
Illness and old age are terrifying enough, but in America we add the terror of being broke. In a nation devoted to Life, Liberty and the Pursuit of Happiness, we keep our population complacent and productive by making healthcare and comfort in old age a matter of money.
Wizards and Buccaneers remind us of the efficiencies benefits of the markets. These are the same tearful repentant gang members weeping for forgiveness and asking $700 billion in bailout money. Their screw-up; our bankruptcy. This is like having your kid drive the family Toyota off a bridge.
In the 1920s, lightly regulated financial markets pumped up the value of equities far beyond the value of the underlying assets. Land is land is land, but its market value is set by a buyer and seller: nothing has intrinsic value. Not railroads, not gold, not fruitcake, not peanut butter. Not even beer.
The Wizards of the time allowed the Buccaneers of the time to buy huge positions at 90% margin—that is to say, for every dime a speculator put up, he controlled $1 worth of equity. Funny money pursued a limited number of shares of stock. The law of supply and demand kicked in; The Roaring Twenties roared. Stocks soared on imaginary wealth and bathtub gin.
But a few people grew wary. The economy was good, but not that good. They not-so-quietly went to cash out. That reduced demand for stocks. Prices fell. More people grew more wary. The few became many. The many became a torrent. Stocks plummeted.
In the panic of October 28 and 29, 1929, markets crashed.
Does this sound familiar yet?
Soon, far from the canyons of Wall Street, the George Baileys of America who operated thrifts and savings banks saw their depositors line up. They had “demand deposits,” and they made demands.
Only children believe banks keep every dollar in the vault. Banks make money by putting our dollars onto the street in the form of car loans, business loans, and mortgages. They collect a lot; they payout a little; they keep the difference.
The Federal Reserve —which did not exist for George Bailey—sets the ratio of money that must be kept in…well, reserve. That’s cash in the vault. The reserve rate is 10%, and has been for a long time. For every dollar the bank accepts, it can loan $9.
Never forget that the vast majority of what out nation calls money is nothing more than a ledger entry.
Panic was abroad in the land in the early 1930s. The rules and regulation for banking were created during the Hoover and Roosevelt administrations. A good thing, too. The national money supply by 1933 was 40% less than it had been in 1929, and national unemployment was at 25%. The Federal Deposit Insurance Company (FDIC) was created, putting the full faith and credit of the United States behind every depositor’s dollar.

BUCANEERS & WIZARDS

WaMu faced what George Bailey did, and no sweet old lady worked her way to the front of the line with a deposit slip.
In 2008, Wall Street Buccaneers and Wizards have lived high because the regulations have gradually eroded.
Most of that is a good thing. The world changed.
We’ve seen two decades of mergers and acquisitions: Wells Fargo and Bank of America became national consumer banking concerns. US businesses cannot compete in a global economy with consumer banks chartered to do business only in isolated states. Technology has made backroom operations swifter than some guy with a green eyeshade on a high stool with pots of red and black ink could ever hope to be. Small banks merged and grew to become large regional banks such as Huntington and Sovereign.
Every small bank wants to become a big bank. Call it lust; call it vision, call it greed, call it the American Dream.
The buccaneers who run the Seattle-based regional WaMu grew and grew by accepting trusting depositors’ money, putting it out as high yielding uncreditworthy loans (you will never see the word “subprime” here) to real estate speculators and people who just weren’t capable of paying back the many mortgage instruments WaMu offered—balloon payments, interest-only mortgages and the like. Those are more rhetorical dodges created to masquerade products, all of which mean only to “high risk for the lender, steeper and longer payments for the borrower, and shit in the fan for all of us if the price of housing falls.” Bundles of these crap loans were sold to Fannie Mae and Freddie Mac, which to encourage businss created a market for “noncorming” loans. “Nonconforming” means “violating accepted banking practice,” which means “crap.” Those companies made those bundles into even bigger bundles, that they sold to South Korea, China, Dubai, and several other countries enjoying liquidity while US treasure is being used to shell shepherds in Iraq and Afghanistan, the surest way to convert them to be allies of democracy.
When WaMu’s collapse came, it was accelerated by the reserve principal. For every dollar depositors were demanding, the bank had only a dime. Worse yet, the paper it carried on its books as assets was Monopoly money. “Underperforming assets,” is another rhetorical dodge. It translates to “crap.”
If you owned shares in WaMu, I am sorry for you. You were screwed by Wizards and Buccaneers who somehow never saw It’s a Wonderful Life. Look for no angels.
You bring the pitchforks. I’ll bring the torches.

Dollar$ Wizard Award

In Business, Wall Street on September 24, 2008 at 5:37 pm

Today’s Wall Street Journal on a deep interior section buries the story of Bruce Bent. Writers Diya Gullpalli and Shefali Anand tell us that the founder of the Reserve Primary Fund, a money market that broke the buck, as late as last July was telling shareholders that their fund had “unwavering discipline focused on protecting your principal.”
However, the fund Mr. Bent built many years ago just last year made a tiny change in its bylaws. The change  allowed the fund to up its exposure to commercial paper. The Journal tells us that from May 2007 to May 2008 the Reserve Primary Fund’s exposure to commercial paper went from .09 % of controlled assets to 53.9% of controlled assets.
In that period, while accepting greater risk, the fund’s marketing  hammered home Bent’s philosophy of safety and liquidity, just what you’d want from a money market mutual fund.
Not so incidentally, by placing more than half of assets under management invested in commercial paper, the yield soared; new dollars came through the door, lured by the high yields. The total amount managed by Reserve went from a mere $27.87 billion to more than $80 billion. Execs at Reserve may have been lighting cigars with investor money.
Burning money–why not?
But then came trouble. The kind of trouble conservative investors who buy safety and liquidity do NOT look for.
As the fund’s cash reserves plunged in value, the assets under management went down 90%, to $8 billion.
On September 16, the fund broke the buck. The fund had no choice. The fund could not meet investor demands. Those fools wanted liquidity!!!
So investors learned that the par value of their savings was worth less than a dollar per share. Further, the fund froze redemptions. Never mind losses–investors were denied access to their own money. 
The Journal reports that it seems the remaining investors are all little guys–the rumor having it that institutional investors were forewarned to get their money out before Bent and his crionies put a lock on the vault.
The Journal runs this story in section C.  Waaaaaay back.
Grab your pitchforks, light the torches, there’s a Wizard in need of re-education.

A Case of the Shorts

In Business, Economics, Personal Finance, Wall Street on September 24, 2008 at 11:50 am

 

Short selling is much in the news these days, but a lot of non-Wizards find the idea of selling something they do not own hard to grasp.

Actually, it is easy, and, before the Wizards changed the rules, made great sense. 

The Cat Food Story

Suppose you live in the middle of a street and both of your neighbors, East and West, own cats. The East family asks you to feed their cat, Iolanthe, while they are out of town for a week. Being a good neighbor, you accept. They leave you with seven cans of cat food.

A week after they are gone, the Easts call your from O’Hare Airport with an urgent request. Their return home is being delayed (This is O’Hare—if this is January, they will be lucky to get out of Chicago at all). They’ll need you to feed Iolanthe an eighth day, and they ask you to pick up some cat food, for which they will happily reimburse you.

Pressed for time, as you leave for work, you stop at the Wests and ask to buy a can of cat food from them. They happily oblige. The can is plainly marked $1.29; all they ask is that you replace the can soon.

You feed Iolanthe, leave the price-marked empty can at the East home to show the cat food price, dash off to work, and you stop at the pet store on the way home. Lo! Cat food is on sale for $.79!

You buy one can. You return it to the Wests.

The next day, the Easts return home. They write you a check for $1.29—the price of the empty can of food.

You just made $.50, and you did it by selling a borrowed asset that you sold before you purchased a replacement asset at a lower market price.

  • You borrowed an asset from the Wests.
  • You sold the assets to the Easts for $1.29.
  • You went to the market to purchase the asset for $.79.
  • You restored the assets to the Wests.

Look! You just made money by selling before you bought anything!

Hedging

Selling short is a time-honored financial strategy that the modern Wizards have made dangerous by ever so slightly changing the rules while they did their work behind the curtain. The purpose of short-selling is to hedge.

Hedging is a fancy word that translates to: KEEP THY FINANCIAL ASS COVERED!!

Suppose you were sitting on a pile of assets you believed over the short term were going to diminish in value. Rather than sell and re-purchase later, for a fraction of the cost of a sale and repurchase, you could short part or all of your position and lessen the pain of the loss. When you borrow your own shares to sell, while maintaining ownership to collect benefits of ownership such as voting rights or dividends, the strategy is called “short against the box.”

Short against the box is very, very conservative, a tactic not designed to make bundles of cash, but to cut losses…to hedge.

Enter the Wizards.

Naked Shorts

 

Despite the name, which sounds like a product from Victoria’s Secret, naked shorts are a bit of wizardry designed to make what was conservative the play of a buccaneer.

These are your pros at work, the financial managers in $1,000 suits who humbly accept responsibility for our money,and once they get supervision of a trillion here and a trillion there, management of our financial system

Unlike cat food, Wizards are aware that most transactions do not call for the transfer of any underlying  real asset, but only a bookkeeping entry, with the blessing of government supervisory agencies, the Wizards created the naked short.

In the cat story, they have cut out the Wests. No cat food, in fact.  No need to borrow cans anymore, just make the ledger entry. Conceivably, we could put in more short-selling orders than there are cans of cat food in all the world…

Now substitute for the phrase “cans of cat food” the phrase, “shares of financial stocks” and you’ll see why the US Financial system is not worth a bucket of kitty litter.

Saving Goldman and Selling America

In Business, Economics, Finance, Wall Street on September 24, 2008 at 11:38 am

Maybe Warren Buffet with $5 billion really can rescue Goldman-Sachs. With Morgan Stanley reduced to the status of your corner bank, now able to accept deposit accounts and all the rules that go with taking shelter under the Fed’s depositor insurance umbrella, Wall Street is beginning to look like Dodge City in 1880—dusty, windblown and streets all but deserted.
Except for the piece Buffet may have saved.
The mechanisms of capitalism are being nationalized. If any entrepreneurs out there go to the markets for capital infusion, the crazy idea that selling shares in private enterprise to spread risk precipitates a healthy economic system by rewarding the bold and innovative with wealth, right now the only underwriter left on the Street is Uncle Sam.
Uncle Sam—that would be you and me.
Last we looked, government is a creature of the people, not its competitor. I have it on the word of Abe Lincoln. “Government by the people, for the people…” It was a hot day at Gettysburg that day, Lincoln kept his remarks brief.
So the nationalization of the mechanisms of capitalism is wonderful news, though probably not what Lincoln had in mind.
With capitalism now nationalized, we can look forward to an annual check from the Fed, your share of fees for underwriting, M&A activity, and interest from loans. Expect soon to be free of income taxes.
How Uncle Sam will manage mergers and acquisitions remains to be seen. Will we do so with the force of the state, or allow shareholders to vote their own interests? Are their synergies to be had by merging Ford and GM, for example? Can we by force of the state make shareholders vote in favor of that merger? How about returning to a single national phone service? Might the nationalization of capitalism be the mechanism to get the insurance business out of the healthcare business and at long last provide healthcare to American citizens in the same way we supply education police protection, and fire protection?
In much of the industrialized world, these services are rights, not purchases of privilege. Look,
when was the last time the fire department pulled up at a flaming address and before tackling a hazard checked the nature of the owner’s coverage? Why should healthcare providers do that if your body is burning with cancer?
Given the resemblance between the Federal Treasury and the Grand Canyon, two very large holes, bith National Wonders, Uncle Sam will soon discover some national advantage in encouraging spin-offs of lucrative US businesses to liquid investors. There are only so many Warren Buffets around, so we will have to look overseas.
The market for American notes is saturated, the dollar is shaky, so it may be time to sell off assets for the needed infusion of cash that will allow us to prosecute Georgie’s Wars. Dubai has money; China has money. They don’t want any more bonds; the poor bastards are already choking on American paper. They’ll want assets, this time. Performing assets.
So with Uncle Sam as the last underwriter, let’s sell them our infrastructure. Port management, for example. The Interstate highway system—they can build all the toll roads they want, assume maintenance costs, and look for revenue—say $.05 per mile of highway. If the Interstate goes for a cool trillion, Uncle Sam as underwriter takes 15 percent.
Lo! $150 billion into the Treasury!
Underwriting and M&A are lucrative businesses. With the market for initial offerings now a nationalized monopoly, I can’t wait to get in on the ground floor when International Widget goes public.
The Wizard of Omaha is no fool; if Goldman is the last man standing on Wall Street, Buffet has bought the last vestige of private enterprise for a song.