Mind on Money

In all the newly-discovered outrage at AIG’s payoffs to its CDS counterparties, we had a typical public humiliation session today.

Uninformed partisan hacks all lined up with their rotten vegetables to throw at (Tiny) Tim Geithner and Hank (Elmer Fudd) Paulson while they were locked in the stocks in the Town Green.

The Republicans lined up on the right with their tomatoes, and the Democrats lined up on the left with their cabbages.  I’m sure Timmy and Hank didn’t see much difference between the organic matter hurled at them, and just thanked their lucky stars for the time limit on the punishment.

Continue reading AIG CDS We Don’t Hear About…

I did commit the last of the cash that is in the brokerage accounts today.

The immediate results, of course, was for the prices to decline on what I had bought.   Luckily, I make it take an extra step and an extra few days to allocate any more money to the brokerage (casino) accounts.

The most questionable addition, a very small piece of the pie, was the Citibank flyer taken at $3.24 a share.  I suspect that will be close to the price the Salomon traders get their stock awards as bonus payment.

I also suspect that absolutely nothing will be done to make Citi small enough to fail at this point.

Continue reading Still Holding 50% Cash…

As I think back to the group madness that overtakes Wall Street in the runup to Bonus Day, a passing thought on timing came to me.

Since most of the heavy paychecks are going to be slanted toward common stock this year, and since the pay itself will still be figured on the basis of dollar amounts — e.g. a top salesman might get a $2 million bonus — the people who matter at the major Wall Street houses will temporarily want their stock prices to go down.

Continue reading Cynical Timing…

It’s time to start developing a watch list of companies that can take fate into their own hands and steer it in the direction that maximizes profit.

Now that our Supreme Court saw fit to redefine the rights of citizens to apply to corporations (wherever they might reside), the field is wide open for companies to buy cheap political put and call options that can pay off 1000-1 or more.

We know that advertising has become a precision tool, and that a good ad campaign can sell almost anything.  The question is — what will unlimited political advertising do for shareholders of corporations that use it effectively?

Continue reading Political Option Power…

I considered calling this post “Dumb and Dumber.”

Dumb is thinking that only the losers in the last great speculation had anything to do with the problem, and not the winners.

Dumber is thinking that only the kind of speculation that caused the latest problem for taxpayers is worth preventing.

Continue reading Re-Regulation…

Remember when I posted about buying Agency MBS at a decent discount?

For a couple of them, it’s here.  The price of MBS have continued to rise, causing enough pain that fund managers are willing to be quoted about what a wonderful short sale they are.

The fact is, though, that with even non-Agency MBS now getting financed at 10-1 leverage, all the Agency mortgage REITs (amREITs) have lots of leverage upside available.  On top of that, with prices near last month’s local multi-year high, barring extraordinarily bad spculation disguised as hedging, book values are quite a bit higher than they were at the end of Q3.

Continue reading Here It Is…

If Fed Chairman Ben Bernanke is not confirmed by the senate this week it could cause a sharp sell off in the market. Not only would it raise questions about monetary policy in the future, but the way this whole confirmation vote is unfolding raises serious questions about the ability of the Congress and the administration to lead. Barbara Boxer and Russ Feingold have chosen to defend their own seats rather than to vote based on the best public policy decision.

It will now be difficult to predict government’s response, should the economic crisis take a turn for worse. Just as bad, it is now unclear what positions a government driven by a search for votes will take on any given economic issue. The Bernanke vote obviously has broad implications for the economy and the market.

Continue reading Bernanke Vote Could Cause Sell-off…

As regular readers probably can tell, I had a nice conversation with George Ure yesterday.

The take-off point was yesterday’s blog on destructive oscillation, which he mentioned on his wildly popular netblog today.

[Reading this before hitting the "send" button, I think it's only fair to issue a rant alert.]

George asked how it was that he can just pick up the phone in East Texas and get the straight skinny about structured finance, yet somehow Larry Kudlow (to pick an example) doesn’t have someone like me in his Rolodex.

Continue reading Belief and Blame…

We’ve all seen the crystal goblets shatter when the right pitch of sound hits them long enough and loud enough.  The classic “Galloping Gerty” video shows how even steel and concrete is no match for the right kind of oscillation, even from something as ephemeral as the wind.

[Video of Tacoma Narrows Bridge]

A system consisting of yield spreads and leverage can oscillate, too.  Occasionally it oscillates out of control.  It’s the nature of the beast.

What some of those who worship at the altar of “free capitalism” just can’t imagine is that the system allows and encourages destructive oscillation.  Thus, when the catastrophic oscillation pushes too far and the system breaks down, they desperately look for some other cause for the collapse.

Continue reading Destructive Oscillation…

When Annaly (NLY) dropped through $17.50 a share recently, I started adding to my position.

My golden touch worked again, and the support at $17.40 failed today, putting the latest purchases underwater.

While not the “screaming buy” owning this stock at a discount to book value in our current rate environment would make it, I do think the prospects for continued high dividends for at least another year make it a better value than it’s been since last spring.

Continue reading In Too Soon…