Relative Value

February 26, 2010

Ron W asked a good question in response to the post about the share buyback authorized by ANH.

“Wondering your view of ANH after seeing the vulnerability of their holdings to GSE buyback. Book could take quite the hit.”

Now that the selloff in ANH shares looks near the end of its run in response to those fears, I think once again we see that share price can be more vulnerable than the business it represents.

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Thank You For Smoking

February 22, 2010

With apologies to Chris Buckley (not just for stealing his clever title), I’m looking at the economics of health care costs.

In a debate over health insurance with a particularly health-conscious friend, he was adamant that obese people should be charged three times the norm for their health insurance.

That’s when I realized that smokers probably already pay a premium that big or more, with no justification from an actuarial standpoint.

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The Curling Channel

February 22, 2010

Why not?

There’s a Golf Channel, a Yankees Channel, and who knows what else.  I even see that they’ve been trying it out every night with CNBC.

I think it might even be better for our portfolios.

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Buying at the Top

February 15, 2010

Check out this quote from 2008.

“We came to the inescapable conclusion last year that owning our own building was the smartest long term investment for the Association

You might think it was from a naive buyer that was swept up in the real estate bubble hysteria.  You would be right.

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How Crazy Is This?

February 8, 2010

Sometimes I think our collective memory is suffering Alzheimer’s Disease.

Can it be that we have already forgotten the multiplier effect of subprime mortgage CDS?  Can it be that we don’t know that AIG’s derivative book could have been the lynchpin of a cascading avalanche of defaults that would have sent us back to the 18th century financially?

A friend sent this along this morning.  Color me stunned.

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Latest ECRI Report – Analyzing the Analyst

February 5, 2010

There are some new developments in ECRIs latest press release today. For two weeks in a row WLI, the influential weekly leading economic indicator, has gone down and WLI Growth has now dropped to its lowest reading in a year and a half.

Lakshman Achuthan, the Managing Director, just by the act of mentioning that a double dip is unlikely, introduces the idea that such a decline is actually now a realistic possibility. This is his venue and he has made the decision to introduce the issue of the double dip recession.

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A Herd of Elephants

February 5, 2010

And they’re all in the room with us.

This evening I saw an interview I didn’t expect with David Stockman, probably best known for his role as Director of the Office of Management and Budget under Ronald Reagan, youngest Cabinet level officer in our modern history.

Maybe some will know him for coming up with the bumper sticker description of the “starve the beast” strategy of shrinking government by cutting its revenues (taxes).

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Bad News is Good News

February 5, 2010

Or is it?

This is the title of Chapter 25 of my manuscript called Mortgage Market Mayhem, written in early 2008.  The quintessential example proffered is the day employment numbers come out.

Strangely, though, after 25 years of being true, today’s employment numbers weren’t following the pattern.

I’ll just share an extract from the manuscript to frame the issue, and then take a guess at why the old bond market truth is no longer reliable.

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The Power of 10

February 4, 2010

Do you still have your commemorative baseball cap?

Seeing the Dow Industrials closing almost exactly at 10,000 today reminded me of a raging debate more than ten years ago.

As some of my buds from the Colorado Longwaves group (George Ure, Rick Ackerman and Tom Drake to name a few) may recall,  Peter Eliades pointed out during the first run-up to to Dow 10,000 that the new digit Dow levels had historically proven to be powerful attractors that later turned into nearly insurmountable resting points.

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Fast Forward on IOC

February 4, 2010

Don’t try this at home.

Hopefully my temerity will be enough for the action junkies in the crowd to enjoy watching without risking their own money.

I’ve been watching the IOC drama for a couple of months now, and I was feeling a sense of withdrawal (and satisfaction) at being out of the name, except for the negative cost basis vertical call option spread I mentioned the other day.

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