Thursday, January 29, 2009

If Christopher Dodd is Delighted ...

We are all in deep kaka. When the chairman of the Senate Banking Committee is happy with a policy decision at the Fed, I immediately reach for my wallet, to make sure its still there. Sort of like when I am in a crowd and someone bumps into me.

The Fed decision to take action against foreclosures can only turn out poorly. For 2 decades Washington and the economists they have employed, have meddled with and held back economic tides which were not meant to be messed with. Preventing foreclosures should not be the goal of the Fed, the Treasury or the Senate Banking Committee. They should be concerned with guiding the US economy out of the wilderness and back to an equilibrium which we can use as a starting point for new growth. Preventing foreclosures is like holding back the tides. It can't work for long and its likely to cause stiffer consequences. If anything has been evident over the last couple of years, its exactly that. Our financial policy makers need to take their hands off of things which they can't really control and allow our economy to reset itself to a normal and sustainable level.

Instead we have a feltcher like Christopher Dodd influencing financial policies about which he knows nothing and is not qualified to be meddling with. There were no economics courses at the Mr. Potatohead State law school Christopher Dodd went to. Seriously, read this part ...
The school fails to make an appearance on any of USNews’ specialty rankings lists, and is not well known outside of its own region.

Christopher Dodd, went to Louisville, after growing up and living his entire life in Connecticut, which means he couldn't get in anywhere close to home and he obviously didn't get in there any place desireable.

Wednesday, January 28, 2009

Don't Believe Me?

How about CNBC? Cram downs are just an out and out bad idea that will only extend the housing downturn.

Tuesday, January 27, 2009

What is the President's Word Worth?

Less and less, every day.

I seem to recall a point in time, when Senator Barack Hussein Obama was running for the presidency, when he was being very critical of the spending programs of George W Bush while trying to tie Senator John McCain to those programs. That’s fine, that’s the business of electoral politics.

Even as Senator Barack Hussein Obama promised that he would not tolerate special interests or the Washington old guard to reign supreme in his vision of Washington, something sounded too good to be true. Slowly, but surely, President-elect Barack Hussein Obama began laying out his policies and appointees. Surprise, surprise, the self-anointed candidate for change is already straying from his promises, by appointing long time Washington insiders to key and glamorous roles in his administration and going against campaign & pre-inauguration promises. He appointed a derisive Congressman and former Clinton advisor from his home state as Chief of Staff. Long time Senator Tom Daschle was appointed Secretary of Health and Human Services. Another long time Clintonista, Susan Elizabeth Rice is the nominee for ambassador to the United Nations. And then there is Hillary Clinton, as big an insider as there ever was.

Today, the New York Post is reporting President Barack Hussein Obama, as part of his "stimulus" package has included a $4.19 billion line item for groups like ACORN. Keep in mind, as President-elect, Barack Hussein Obama promised a line by line review of wasteful programs. Let’s not forget that the Ohio state electoral board called 12% of the voter registrations turned in by ACORN questionable. At least with Hillary Clinton or John McCain, you knew what you were getting.

By the way, where is the NY Times, cnn, MSNBC coverage of this story?

Monday, January 26, 2009

Thanks Peter Schiff

I have been beating this drum for year, but now, someone with some real credentials is now saying what I have been saying for so long. Let home prices fall, let the foreclosure process run its course. The run up in housing prices was artificial; it needs to be allowed to correct itself.

So easy, even a software engineer with 6 credits of college economics can do it.

Thursday, January 22, 2009

Your TARP Recipients

Bank of America Corporation $40,000,000,000.00
Bank of New York Mellon Corporation $25,000,000,000.00
Citigroup Inc. $25,000,000,000.00
The Goldman Sachs Group, Inc. $25,000,000,000.00
JPMorgan Chase & Co. $20,000,000,000.00
Morgan Stanley $15,000,000,000.00
State Street Corporation $10,000,000,000.00
Wells Fargo & Company $10,000,000,000.00
Merrill Lynch & Co., Inc. $10,000,000,000.00
Bank of Commerce Holdings $9,400,000,000.00
1st FS Corporation $7,579,200,000.00
UCBH Holdings, Inc. $6,599,000,000.00
Northern Trust Corporation $5,000,000,000.00
SunTrust Banks, Inc. $4,000,000,000.00
Broadway Financial Corporation $3,555,199,000.00
Washington Federal Inc. $3,500,000,000.00
BB&T Corp. $3,500,000,000.00
Provident Bancshares Corp. $3,408,000,000.00
Umpqua Holdings Corp. $3,133,640,000.00
Comerica Inc. $3,000,000,000.00
Regions Financial Corp. $2,500,000,000.00
Capital One Financial Corporation $2,330,000,000.00
First Horizon National Corporation $2,250,000,000.00
Huntington Bancshares $2,000,000,000.00
KeyCorp $1,715,000,000.00
Valley National Bancorp $1,576,000,000.00
Zions Bancorporation $1,400,000,000.00
Marshall & Ilsley Corporation $1,398,071,000.00
U.S. Bancorp $1,350,000,000.00
TCF Financial Corporation $1,000,000,000.00
First Niagara Financial Group $967,870,000.00
HF Financial Corp. $935,000,000.00
Centerstate Banks of Florida Inc. $866,540,000.00
City National Corporation $600,000,000.00
First Community Bankshares Inc. $525,000,000.00
Western Alliance Bancorporation $400,000,000.00
Webster Financial Corporation $400,000,000.00
Pacific Capital Bancorp $376,500,000.00
Heritage Commerce Corp. $361,172,000.00
Ameris Bancorp $347,000,000.00
Porter Bancorp Inc. $330,000,000.00
Banner Corporation $306,546,000.00
Cascade Financial Corporation $303,000,000.00
Columbia Banking System, Inc. $300,000,000.00
Heritage Financial Corporation $300,000,000.00
First PacTrust Bancorp, Inc. $300,000,000.00
Severn Bancorp, Inc. $300,000,000.00
Boston Private Financial Holdings, Inc. $298,737,000.00
Associated Banc-Corp $295,400,000.00
Trustmark Corporation $250,000,000.00
First Community Corporation $235,000,000.00
Taylor Capital Group $216,000,000.00
Nara Bancorp, Inc. $215,000,000.00
Midwest Banc Holdings, Inc. $214,181,000.00
MB Financial Inc. $200,000,000.00
First Midwest Bancorp, Inc. $196,000,000.00
United Community Banks, Inc. $193,000,000.00
Wesbanco Bank Inc. $184,011,000.00
Encore Bancshares Inc. $180,634,000.00
Manhattan Bancorp $180,000,000.00
Iberiabank Corporation $154,000,000.00
Eagle Bancorp, Inc. $151,500,000.00
Sandy Spring Bancorp, Inc. $150,000,000.00
Coastal Banking Company, Inc. $140,000,000.00
East West Bancorp $130,000,000.00
South Financial Group, Inc. $125,198,000.00
Great Southern Bancorp $124,000,000.00
Southern Community Financial Corp. $120,000,000.00
CVB Financial Corp $104,823,000.00
First Defiance Financial Corp. $100,000,000.00
First Financial Holdings Inc. $100,000,000.00
Superior Bancorp Inc. $95,000,000.00
Southwest Bancorp, Inc. $90,000,000.00
Popular, Inc. $87,631,000.00
Blue Valley Ban Corp $84,784,000.00
Central Federal Corporation $83,094,000.00
Bank of Marin Bancorp $81,698,000.00
Bank of North Carolina $80,347,000.00
Central Bancorp, Inc. $80,000,000.00
Southern Missouri Bancorp, Inc. $76,898,000.00
State Bancorp, Inc. $76,458,000.00
TIB Financial Corp $75,000,000.00
Unity Bancorp, Inc. $75,000,000.00
Old Line Bancshares, Inc. $72,278,000.00
FPB Bancorp, Inc. $72,000,000.00
Sterling Financial Corporation $71,000,000.00
Oak Valley Bancorp $70,000,000.00
Old National Bancorp $70,000,000.00
Capital Bank Corporation $69,000,000.00
Pacific International Bancorp $67,000,000.00
SVB Financial Group $65,000,000.00
LNB Bancorp Inc. $64,450,000.00
Wilmington Trust Corporation $62,158,000.00
Susquehanna Bancshares, Inc $59,000,000.00
Signature Bank $58,000,000.00
Citizens Republic Bancorp, Inc. $55,000,000.00
Indiana Community Bancorp $52,372,000.00
Bank of the Ozarks, Inc. $52,000,000.00
Center Financial Corporation $50,000,000.00
NewBridge Bancorp $50,000,000.00
Sterling Bancshares, Inc. $48,200,000.00
The Bancorp, Inc. $45,220,000.00
TowneBank $43,000,000.00
Wilshire Bancorp, Inc. $42,750,000.00
Valley Financial Corporation $42,000,000.00
Independent Bank Corporation $41,500,000.00
Pinnacle Financial Partners, Inc. $41,279,000.00
First Litchfield Financial Corporation $40,000,000.00
National Penn Bancshares, Inc. $40,000,000.00
Northeast Bancorp $38,970,000.00
Citizens South Banking Corporation $38,235,000.00
Virginia Commerce Bancorp $38,000,000.00
Fidelity Bancorp, Inc. $37,515,000.00
LSB Corporation $37,000,000.00
Intermountain Community Bancorp $37,000,000.00
Community West Bancshares $36,842,000.00
Synovus Financial Corp. $36,282,000.00
Tennessee Commerce Bancorp, Inc. $36,000,000.00
Community Bankers Trust Corporation $35,500,000.00
BancTrust Financial Group, Inc. $35,000,000.00
Enterprise Financial Services Corp. $35,000,000.00
Mid Penn Bancorp, Inc. $34,000,000.00
Summit State Bank $32,382,000.00
VIST Financial Corp. $31,762,000.00
Wainwright Bank & Trust Company $31,260,000.00
Whitney Holding Corporation $30,255,000.00
The Connecticut Bank and Trust Company $30,000,000.00
CoBiz Financial Inc. $30,000,000.00
Santa Lucia Bancorp $30,000,000.00
Seacoast Banking Corporation of Florida $28,000,000.00
Horizon Bancorp $27,875,000.00
Fidelity Southern Corporation $27,000,000.00
Community Financial Corporation $26,918,000.00
Berkshire Hills Bancorp, Inc. $26,038,000.00
First California Financial Group, Inc $26,000,000.00
AmeriServ Financial, Inc $25,223,000.00
Security Federal Corporation $25,054,000.00
Wintrust Financial Corporation $25,000,000.00
Flushing Financial Corporation $25,000,000.00
Monarch Financial Holdings, Inc. $25,000,000.00
StellarOne Corporation $25,000,000.00
Union Bankshares Corporation $25,000,000.00
Tidelands Bancshares, Inc $24,000,000.00
Bancorp Rhode Island, Inc. $23,864,000.00
Hawthorn Bancshares, Inc. $23,393,000.00
The Elmira Savings Bank, FSB $22,000,000.00
Alliance Financial Corporation $21,750,000.00
Heartland Financial USA, Inc. $21,500,000.00
Citizens First Corporation $21,000,000.00
FFW Corporation $20,649,000.00
Plains Capital Corporation $20,500,000.00
Tri-County Financial Corporation $19,300,000.00
OneUnited Bank $18,000,000.00
Patriot Bancshares, Inc. $17,680,000.00
Pacific City Finacial Corporation $17,000,000.00
Marquette National Corporation $16,641,000.00
Exchange Bank $16,369,000.00
Monadnock Bancorp, Inc. $16,200,000.00
Bridgeview Bancorp, Inc. $16,019,000.00
Fidelity Financial Corporation $15,600,000.00
Patapsco Bancorp, Inc. $15,540,000.00
NCAL Bancorp $15,000,000.00
FCB Bancorp, Inc. $14,964,000.00
First Financial Bancorp $14,700,000.00
Bridge Capital Holdings $14,448,000.00
International Bancshares Corporation $13,795,000.00
First Sound Bank $13,500,000.00
M&T Bank Corporation $12,643,000.00
Emclaire Financial Corp. $12,063,000.00
Park National Corporation $12,000,000.00
Green Bankshares, Inc. $11,600,000.00
Cecil Bancorp, Inc. $11,560,000.00
Financial Institutions, Inc. $11,350,000.00
Fulton Financial Corporation $11,300,000.00
United Bancorporation of Alabama, Inc. $10,800,000.00
MutualFirst Financial, Inc. $10,685,000.00
BCSB Bancorp, Inc. $10,400,000.00
HMN Financial, Inc. $10,300,000.00
First Community Bank Corporation of America $10,000,000.00
Sterling Bancorp $10,000,000.00
Intervest Bancshares Corporation $10,000,000.00
Peoples Bancorp of North Carolina, Inc. $10,000,000.00
Parkvale Financial Corporation $10,000,000.00
Timberland Bancorp, Inc. $9,950,000.00
1st Constitution Bancorp $9,550,000.00
Central Jersey Bancorp $9,294,000.00
Western Illinois Bancshares Inc. $9,090,000.00
Saigon National Bank $9,000,000.00
Capital Pacific Bancorp $8,779,000.00
Uwharrie Capital Corp $8,500,000.00
Mission Valley Bancorp $7,500,000.00
The Little Bank, Incorporated $7,500,000.00
Pacific Commerce Bank $7,400,000.00
Citizens Community Bank $7,290,000.00
Seacoast Commerce Bank $7,289,000.00
TCNB Financial Corp. $7,225,000.00
Leader Bancorp, Inc. $7,000,000.00
Nicolet Bankshares, Inc. $7,000,000.00
Magna Bank $6,855,000.00
Western Community Bancshares, Inc. $6,500,000.00
Community Investors Bancorp, Inc. $6,000,000.00
Capital Bancorp, Inc. $5,830,000.00
Cache Valley Banking Company $5,800,000.00
Citizens Bancorp $5,500,000.00
Tennessee Valley Financial Holdings, Inc. $5,448,000.00
Pacific Coast Bankers' Bancshares $4,767,000.00
SunTrust Banks, Inc. $4,700,000.00
The PNC Financial Services Group Inc. $4,227,000.00
Fifth Third Bancorp $4,060,000.00
Hampton Roads Bankshares, Inc. $4,000,000.00
CIT Group Inc. $4,000,000.00
West Bancorporation, Inc. $3,000,000.00
First Banks Inc. $3,000,000.00
AIG $2,600,000.00
GMAC LLC $2,000,000.00
General Motors Corp. $1,834,000.00

Wednesday, January 21, 2009

Tim Geithner, Makes Me Wonder

How can a guy who had the kind of experience and net worth that Mr. Geithner has, be using Turbo Tax to do his taxes? We're not talking about some guy who lives in a $200,000 house with his wife, 2 kids and a dog filing a plain vanilla tax return. This guy was short $34,000 in Social Security and Medicare withholding. $34,000 in withholding. $34,000. The median household income in this country is only little over $50,000. This guy failed to pay $34,000 in taxes. I've used Turbo Tax, its not hard to get right.

I am guessing that a guy with those kinds of resources (7 or 8 figure net worth) does not have a plain vanilla tax return. This is a man with vast experience in banking, wealth management and financial services. I guess I could buy where someone could forget to do that withholding, but I can't buy that he trusted his tax return to a piece of computer software. I have to wonder why he was being so cheap or perhaps it is something else. A good accountant couldn't have run him more than grand to do his taxes, which have to be far more than the basic tax returns ordinary Americans fill out every spring. Yet he resorts to a $75 piece of software to fill out the year’s most important paperwork. The wife and I make a nice living, but we still pay a couple hundred bucks for an accountant to do our taxes. I really have to question the wisdom of having a Secretary of the Treasury who does his taxes with Turbo Tax. In my eyes, he's either foolish, naive or just plain dumb at best. I don't think that those are qualities that I want to see in a person who is being elevated to the job of Secretary of the Treasury. At worst, he's a bold faced tax cheat. Either way, this is not the type of person you want to entrust with a job this important.

I have serious questions and issues with how Ben Bernake went about handing the bailouts and buyouts of Bear Stearns, AIG and others, but I never felt like the guy was foolish, naive or dumb. I question his judgment in giving out taxpayer dollars without getting something in return. However, I am not armed with all of the facts and my 6 credits of college economics only qualifies me to get up on my soap box and demand answers to questions which I think are common sense. In fact Tim Geithner was not far removed from many of those decisions Ben Bernake was making, in his role as head of the Federal Reserve Bank of New York.

Sunday, January 18, 2009

Affirmation Baby! Affirmation!

It was nice of MSNBC to pick up an AP story about how a lot of conservative economists believe that further stimulus spending will not only fail to break the current recession, but also cause the current economic maliase to be prolonged. One of my personal favorites is Mark Zandi from Moody's, he thinks the stimulus could work, but he also cites a variety of potential areas where it could fail. Of course, I have been saying all of this for months. Big pat on the back for me. Yay!

Friday, January 16, 2009

Do As He Says, Not As He Does

At some point in time, President Elect Obama threatened to bankrupt anyone building a coal fired power plant, in the name reducing CO2 emmissions and advancing a green agenda. Yet the people of Pennsylvania still voted for him. Go figure.

Today we find out that the carbon footprint for his inauguration will be in the region of 575 million pounds of CO2. I was curious as to what went into this calculation. Here are some of the highlights...
25,000,000 lbs - 600+ private jets flying in people like Oprah.
262,000,000 lbs - all the lemmings who drive cars to the coronation.
215,000,000 lbs - the really inconsiderate lemmings who fly.

I guess you would call this an inconvient truth, but I guess things like this don't count for the emperor.

In Roman times, when the emperor was parading through the city, celebrating victory, there would be a slave riding with him, politely reminding him that he is just a man. I wonder if our new king will observe a similar tradition and perhaps have an intern riding along, reminding him that the statute of limitations for blaming George W Bush will soon be up.

Tuesday, January 13, 2009

Monday, January 12, 2009

Because I Couldn't Resist

Could you call the KFC Box Meal a redneck bento box?I saw this on TV the other day and for some reason I couldn't help myself, I just had to make fun of it, on what is otherwise a blog with a pretty grim outlook on things.

Friday, January 09, 2009

The Fuel to Drive Prices Lower

In spite of the short sighted Citi deal to allow bankrupcy court cram downs, thousands of homes will foreclosed in the next few years, courtsey of foolish buyers desperate to follow a 1950s dogma that dictates living as high as possible. See the link to the right for the Shallowest Generation. As you can see, there will be plenty of kindling for the bonfire of home prices. You can thank the Bill Clinton and his expansion of the Community Reinviestment Act. You can thank Barack Obama for participating in litagation against lenders who didn't lend "enough" under the CRA, for our current mess. And to a lessor extent, you can thank the Republicans for deregulating the banking industry through the 80s and 90s, although they did try to get the genie back in the bottle after they realized it had escaped with the help of the CRA expansion.

Thursday, January 08, 2009

Why Your Financial Advisor Failed You

Bloomberg is reporting that a lot of people are unhappy with the performance of their financial advisors.

Financial advisor is the 21st century euphuism for what we called a stock broker in the 1980s & 1990s. Watch the first 10 minutes of Wall Street with Charlie Sheen and Michael Douglas. That’s what a stock broker is and does. A stock broker/financial advisor is someone who sells equity stocks and other investment vehicles in order to earn commissions.

I spent a few years as a stock broker in the mid 90s. I was modestly successful, but the business wasn't the gentleman’s business I had hoped it would be. Instead, its an industry dominated by boiler rooms like DH Blair, FN Wolf or South Richmond Securities and slightly more refined stock brokers who elevated themselves to more reputable companies Prudential, Merrill Lynch, etc.

With that sort of understanding, let me offer an example of how unqualified your financial advisor is to be handling your retirement and you children's college savings. The kid from Geek Squad who comes to your house to set up you flat screen or fix your laptop is more qualified as an electrician than your financial advisor is an investment advisor. I worked for 3 years as a series 7 licensed stock broker. I worked for a boiler room firm for a short time and then moved on to a more reputable firm that we've all heard of and earned a decent living before deciding that calculus, physics and computer science were more desirable ways to spend my days and less likely to burn a hole in my stomach like selling was.

The goal of the stock broker was not to make money for his clients, but to make money for himself and the firm. Making money for your clients was ancillary. I knew hundreds of stock brokers. Some had BAs from a variety of schools, most didn't and very few possessed MBAs. Plenty of guys did the job and did it well without any sort of college education. They succeeded because the goal was not to make people money, but to sell them stock and generate commissions. They were good salesmen. They would have succeeded in selling just about anything, but selling stock was more lucrative and prestigious than selling cars or magazine subscriptions. But, they would have been no less successful.

Selling stock is easy to do in a bull market. In a bear market, you need some luck. I got to Wall St in late 1993, right before things tanked in the spring of 1994. I sold a lot stock on the back of a sales pitch which asked prospective clients why they hadn't heard from their current stock broker when the market was tanking. The stock I was selling at that time is irrelevant. It was going up that week, that month and that is all my current customers cared about. Its all my prospective customers would care about. Customers are funny, you could make them money for 2 years straight with lucky pick after lucky pick, but if you lose their money once your neck was on the line. One bad stock pick could ruin your book of clients. Especially if some ambitious hot shot like myself happened to find their name and phone number in an alumni directory, a professional society register, in the white pages or on some list of dubious origin.

For most stock brokers the day begins with the walk and train ride to work. The ambitious ones "read" the Wall Street Journal. The more savvy guys "read" the Investors Business Daily. We all shrugged at the guy reading the Financial Times. Near our office, we stopped at one of the carts and picked up a 1000 calorie cranberry muffin because it sounded healthy or perhaps we chose the bagel with a quarter inch slab of cream cheese to go with our coffee. Then we went upstairs to cushy offices. Maybe we sold a lot of stock last year and they decided to call us vice-president or even senior vice-president which entitled us to a window office. If you were really a good hustler, you were an executive vice-president or perhaps you got some nice logo on your business card which said something like Chairman's Council which impressed your customer, but all it really meant was that you sold a boat load of stock and made a ton of money. You were probably a million dollar producer, which means you produced a million dollars in commissions. It meant you won a nice trip with the rest of hot shot sales guys to a golf resort in Florida or Arizona and took home some nice corporate swag, you know, like the Enron or Bernie Madhoff stuff people sell on ebay all the time.

So, you've got upstairs, you attempted to put your stamp of authority on the rest of the guys with whom you’re competing with for that Chairman’s Council logo and made your way to the office. You lose your suit coat and put on your headset that is wired to the phone. You are literally going to make 300 phone calls today, minimum. Remember the first few minutes of Wall St? A headset is essential to not ending up with the world’s worst stiff neck and cauliflower ear. You'll hit up that list of alumni directories for fresh fish to sling your stock to. You'll also sort though your book of clients and see who has been in the current stock du jour the longest, if they are up a good bit, its time to hit them up to take a profit or perhaps talk them into terminating a relationship with one of their other stock brokers who might be under performing. Those were always the best days, nothing like raking in fifty or one hundred thousand dollars in new money. Sure, you throw them a bone and only charged them commission on the buy side of the account transfer which saves them a 2-3 grand. That’s it, you do that all day long. Perhaps it was a good day, you made a few sales, brought in a few grand in commissions. Commissions are split with the firm. That split is determined by how much in total commissions you generated for the month. On the low end the stock broker takes 45%. On the high side, the Chairman’s Council guys take about 55%.

Determining what to sell ... Well, as a young broker, someone who has finished their indentured servitude or apprenticeship to a full broker you sell what the firm tells you sell for the most part. That’s where you really find out who the true hot shot sales guys are. The guys who can make blue chip companies sound interesting and sell enough to make a true living, they are the guys who could make a million bucks selling you the clothes your wearing. Other guys who barely scrape by have to get a little lucky. They are never going to make a living selling blue chips. Plenty of them fail and go sell insurance or work back office operations. I would guess the attrition rate is a solid 85% or more. Those guys have to catch lightning in a bottle. If they get lucky, deviate from the script and start selling something risky, something they heard someone else selling. If that works out, they have a sporting chance of sticking around, for a little while, assuming that stock doesn't tank like the dog it always was.

This posting is 10 paragraphs long and I haven't talked about the financial analysis that your stock broker performs. That’s because he doesn't. I say he, because there are very few women in this business. The ones that make it are tigers (who will grow in to cougars), but for the most part, it’s a boys club. If your buying some kind of high flying investment funds or equities from your broker, odds are he got a tip from someplace or perhaps his dartboard is on. The best days for a stock broker are the days when one of the talking heads on one of the financial networks touts a stock that he has been building a position in for his clients. That’s the golden palace of the Himalayas. The stock in question is bound to jump. The stock broker is going to look like a soothsayer to his customers. Now, your sitting at home watching the talking heads tout this stock or that stock. You can run and buy it, but the real money has already been made. Faster than your little fingers can click the mouse or dial your stock broker. You’re now just a block near the bottom of the pyramid. Your stock broker isn't much smarter than you, sitting there watching the talking heads on the boob tube, except that he knows that train has already left the station. Its ok to get on the train in Chicago, but you gotta hope that the train will still get to LA, while everyone who got on in New York already has their profit all but locked in. In essence, stock brokers and stock tips are like teens and sex, the info is traded on the ball fields and street corners. It’s diluted, it’s less likely to be accurate. Sure, there are some stock brokers who are capable of doing true financial analysis, but its hard to do without the right education, experience and most importantly information.

Information, as Gordon Geko taught us is the most valuable thing. It’s what allows experienced professionals who are in a position to take of advantage of the information to come to the right conclusion. Stock analysts, you know the James Spader character in the movie, only seem to be eclipsed in their poor performance as prognosticators, by meteorologists. Bottom line, neither you nor your financial advisor are often in a position where information, experience and opportunity come together to make that perfect storm, to buy that stock as it’s on the verge of starting its run to doubling.

So, there it is, this is probably why your financial advisor failed you. And just because your financial advisor lost you money in 2008, doesn't mean he failed you. There are plenty of Harvard and Wharton MBAs running multi-billion dollar funds who were down 30% or more. Everything is relative. My advice, it's your money, it's your future. Spend the time, do your homework, make your own picks. Pick solid blue chip style companies that are going to succede in the long haul. Be in it for the long haul. Doubles don't happen often. Remember the stock brokerage commercial where the guy said he was going to "get rich quick and retire by 35"? Get rich quick more often means broke and starting over 6 months later.

Tuesday, January 06, 2009

That Giant Sucking Sound

Is a TRILLION dollars going down the drain. I can't be the only person who thinks the upcoming trillion dollar stimulus package is going to be colossal waste of money.

Write it down, book mark this page, remember this posting. The checks will go out, our weekly salary deductions will be lower, but as soon as its done, the spending will tank, just like this summer when the Bush-bucks stopped following. I suspect that people will be buying gas, milk or paying down the credit card bill with their soon to be received Obama-bucks.

What will we have to show for a trillion dollar stimulus package? Nothing very good. We'll have a devalued currency and an international community that will demand higher interest rates to buy our debt, assuming that they are dumb enough to buy it. Once they stop funding our spending, we will truely be S.O.L.

Monday, January 05, 2009

This Didn't Take Long

It is January 5th and already the morons are coming out of the woodwork. John Burns, the president of some real estate consulting agency that he founded so that he could be president, is suggesting that if you have a long term plan, 2009 is the year to buy and his favorite market is right here in my back yard, Washington DC, because affordability is no longer an issue.

I'll start with the first part of his statement. Calling 2009 as the year to buy if you have long term plan is just asinine. Nearly every market in the country is predicting a year over year decline in the double digits. Why buy something that you KNOW is going to decline in value? Certainly not to make this guy look like some kind of genius. Then he calls DC his favorite market. Sure his observation about a stronger job market than most areas of the country is a keen statement of the obvious, but its not the reason to jump into a market that is going to be declining as much as 20%. Heck, even overly optimistic CNN/Money called DC one of its worst markets for 2009. If you want to buy a house that will appreciate, I'd try hitting up a market that isn't on anyone's 10 worst list. Mr. Burns (lol, Simpsons reference) even says that affordability is not an issue, yet the latest from Case/Shiller still shows that nearly all markets are still over priced.

Thomas Lawler who is also the president of a consulting agency that bears his own name is off trawling for a stimulus package that will likely be close to a trillion dollars. We just had a stimulus/wealth redistribution this past summer. Once the checks stopped going out, the stimulation went away and we discovered that we were only deluding ourselves into believing that putting a couple hundred bucks in people’s pockets would stop our economic decline. Surprise, people spent the money on gas and milk rather than big screen TVs and cars. It will be the same thing once these checks go out and get spent at the grocery store or better yet, they get mailed to the credit card company. Lets face it, everyone already has their big screen HDTV’s and most people are still paying down their loan shark 22% Bank of America credit lines that they used to buy these TVs.

Michael Felder who is the president of a company I have never heard of, but at least isn't named after him is being rather moderate in his pessimism. He's only predicting a 5-10% downside for 2009 and isn't stumping for much from Washington. I think he is being optimistic in seeing any signs of recovery this year. With 3 more years of hard core ARM resets, the bottom is not before 2012. Builders have to stop building and people who can’t afford the homes they over paid for have to put them back on the market at reasonable prices. You can’t prop up the system anymore.

Sam Liber who is the CEO of Alpine Woods Capital Investors, is riding the fence. He predicts either a death spiral for housing or a scenario where lower interest rates motivate qualified first time buyers to jump into the market while ignoring the downside on the largest investment of their short lives. I am not sure there will be a death spiral, but prices have to come down a lot more before they are believable as affordable.

If you look at the chart below, from Robert Shiller, you'll see where the last two housing booms have been followed by declines to pre-boom levels. There is no reason to believe that the current boom will be any different. Just because its 5 times as large as the booms in the 70s or 80s doesn't mean that it will behave any differently. Hang onto your hats.
The only thing missing from this article is Lawrence Yun predicting that prices have bottomed for the 500th time in the last 2 years.