AIG CDS We Don’t Hear About

January 27, 2010

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.

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Still Holding 50% Cash

January 26, 2010

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.

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Cynical Timing

January 26, 2010

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.

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Political Option Power

January 26, 2010

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?

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Re-Regulation

January 25, 2010

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.

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Here It Is

January 25, 2010

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.

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Bernanke Vote Could Cause Sell-off

January 25, 2010

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.

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