Monday, April 27, 2009

SAR #9117

People used to die of consumption; now whole economies do.

Bull, Market: Insider selling is reaching a crescendo. Directors and senior officers have dumped $353 million worth of stock in this month, 8 times more than they bought. I don't usually sell stock I think is going to increase in price, but I'm an amateur.

Voices of Experience: Veterans are again warning that military adventures in Afghanistan are doomed. American veterans, Russian veterans; even Rudyard Kipling.

Mystified: Jamie Dimon calls TARP money "a scarlet letter." Why is he still running our bank? If the firm would have failed without taxpayer money, then the taxpayers should own every penny of profits until we are paid back. You broke it, I bought it, it's mine. Capitalism.

Dieting : Farmers around the world are cutting back on potash because its price has skyrocketed - which will result in higher prices for food, either because they use the fertilizer, or because they don't.

Market Values: AmEx reported big and growing losses on its credit card operations and dropping spending by their cardholders. It stock went up. Can't wait until the write-offs reach 10%.

Opening Salvo? "Emanuel Says Obama Has '100% Confidence' in Fed Chief Bernanke."

Universal Salvation: The government said that some distressed banks will need to raise more cash, but that none will be allowed to fail, and "government must do whatever is necessary to save them."

Inquiring Minds: The US deficit will be over $2 trillion & it will need to be financed domestically - nobody nowhere's got an extra trillion or two. Explain how that's going to happen without the Fed monetizing the debt and pumping up inflation.

Dominoes: Kazakhstan's largest bank is no longer trying to repay its $11 billion in foreign debt. Next?

Along Came a Spider: An Air France plane enroute non-stop from Paris to Mexico City was refused entry into US airspace and force to divert to Martinique. It seems journalist Hernando Calvo Ospina was on board. , He's on the US no-fly list. Paranoia are US.

Spin: "Although home resales were down in March, one can make a reasonable argument that resales are bottoming ..." Also, new residential homes sales showed a 30% y/y decline and a 75% drop in sales from the peak. Been down so long, looks like up to me.

Quiz: Which system is better (a) capitalism (b) socialism (c) communism (d) none of the above. How come these things never include (e) fascism or (f) theocracy ?

Stupid is as Stupid Does: Canada claims that under NAFTA California is not allowed to mandate lower carbon fuels. Under Clinton the US apparently signed away its sovereignty and called it a good thing. Meanwhile, Dow is suing local governments in Canada for their pesticide bans (and they don't think Michelle should grow organic, either.)

3 Dog Night: Spain's unemployment rate has reached 17.5%, the number of jobless having doubled in the last year. But I kind'a like the music.

Cheerleaders: The overall health of the economy is a non-sequitur, all that matters is that traders can make a buck today - never mind that the entire system is going down the drain - all that matters is trading profits. We cannot consume our way to prosperity, we have already devoured ourselves. The inflation/deflation argument is but mental masturbation. We really are in uncharted waters and there is a hole in the hull. The only question is which poison will kill us first. Those who claim they will save us are the ones who poisoned us in the first place. Ah, but a loose translation.

A Dump is Also a Location: The value of the commercial properties underlying about $1.2 trillion in securitized fantasies has fallen 35 - 50% for those falling due in the 2010-2013 time period. It's called 'credit exposure'. Falling is a good description.

Porn O'Graph: The build-up.


Demetrius said...

Best systems? Aren't we all trying out anarchy at the moment? At least I am.

Anonymous said...

RE: Porn O'Graph:

Why don't I understand this chart. Is it good for the insurance companies?


TulsaTime said...

I cannot believe it!! US banks have actually writen off half of their bad assets, vs. 17% for european banks. whoduthinkit...


jfwells said...

RBM - The graph shows how much CMBS originations dropped off in 2008 for one thing. Commercial real estate loans are typically of 5 year terms if you get it from a bank (or thrift) and 10 from an insurance company or CMBS. The CMBS market went boom in late July 2007. Those loans that they originated in 2004 through 2007 are reflected in the maturities ten years later. Unfortunately, much of those loans were originated with fast & loose underwriting and many of those loans will be underwater when the property owner tries to refinance. Now that there is essentially no CMBS origination, the Banks and Life companies will need to take up the slack.

(have worked in loan origination for a Life Insurance company, Commercial RE Mortgage Banking, and now in Commercial RE underwriting for a Bank)

Anonymous said...


Thanks! I assume that the mutuals as well as the publicly traded have the same issue?


jfwells said...

RBM - CRE lending for insurance companies is pretty much the same for both mutual and public companies. They both are matching up the returns from those loans against liabilities that they expect to have from their insurance business. One thing that I heard from quite a few insurance companies when I was trying to place loans was, "why should I do that loan when my bond traders can get such a good deal on AAA CMBS paper?" Lots of money got allocated there when the CMBS market crashed. My argument always was, "who says that CMBS paper is really worth it's 'AAA' rating? You have no idea who originated those loans, how they underwrote them, or even what loans are in that bundle. With my loan you know exactly what you were getting." Sadly, didn't work too well. If you are looking at insurance companies I would keep an eye out for their bond portfolios.


Charles Kingsley Michaelson, III said...

jfwells - thanks for the on-going education.

jfwells said...

CKM - no, thank you! You daily compendium is always one of my first stops on the information superhighway. I especially appreciate the connections that you make between events/news that may often seem disassociated.