Sunday, March 16, 2008

SAR #8077

It's Saint Patrick's Day, wear Orange, support the Queen.

Risk/Reward: For $2 a share, JPMorgan gets Bear Stearns, a Fed promise to make good the first $30 billion in bad assets, and the Bear Stearns office building - which is, in itself, worth close to a billion. Real estate prices are falling.

Update: There are no atheists free-market libertarians in foxholes a financial crisis.

Explanation: The New York Times, in explaining the how the new threat to the credit markets - Alt-A mortgages - differed from the old threat: "In other words, this isn’t the tip of the iceberg; it’s another iceberg entirely." Exactly.

Das Capital: Bernanke is quietly nationalizing the banks, both commercial and investment. The big hurdle is finding a way to make it palatable to the public - the big boys know they need rescuing and see no reason why the taxpayers shouldn't take the loss. They are indispensable; we but the dispensers.

Stop It! Cameras at stop-lights do not work, in fact they significantly increase crashes. The insurance industry favors them, though. And no, not because the more crashes their drivers have the more they can charge for insurance. Shame on you for thinking of that.

Frying Pan: If you’re fuming about how high gasoline prices have gotten, why not relax, have beer and a hamburger. Oops. Beer is made from grain. Beef are fed grain. Cars are burning grain. It's enough to give you gas.

Two Step: If you expect everything to be worse than expected you will do far better at predicting what's going to happen than 85% of economists and 95% of real estate agents. If you expect things to be far worse than expected you will likely do better than all of them.

Capital Fellows: Some say that the Fed rescue of Bear Stearns is illegal: (1) Stearns is not a bank, it is a brokerage - the Fed's mandate is the banking system, not the stock market. (2) only 4 members of the board approved the move, and by law 5 must. (3) Allowing the nation's 3rd largest bank to merge with the 5th largest brokerage raises anti-trust questions, if not outright violations. All true. So, what would be your point?

Something's Fishy: The drive to increase corn crops to produce ethanol requires more fertilizers, more plowing, more pesticides. All of which results in more runoff which leads to an increase in the "Dead Zone" in the Gulf of Mexico where all the nitrogen and phosphorus and topsoil end up. The future may be in aqua-culture.

Big Dogs: Housing developments involving the nation's largest home builders are defaulting on $765 million in construction loans. Real Estate is all about location and Las Vegas is a bad one.

Revisionist History: Remember the 2.6 billion barrels of petroleum Shell claimed as reserves last year? Funny thing, they checked the closet and only half of them are still there. They also anticipate that production will not increase this year. Or next year. Or the year after.

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