Friday, October 17, 2008

A Hedge Fund Manager Says Goodbye.

Andrew Ladhe Goes out in style.
I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.
Capitalism worked for two hundred years, but times change, and systems become corrupt. ...My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles.
From the Financial Times Hat tip Matt

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"Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible," NAR President Richard F. Gaylord said in a press statement.

Thursday, October 16, 2008

Wednesday, October 15, 2008

The Shorts Are Comming

A different kind of short. (Hat tip Matt) As reported earlier tightening credit markets threaten to wreak havoc on on world trade. Bloomberg's Chan Sue Ling reports that Hong Kongs biggest try bulk carrier Pacific Basin Shipping Ltd. is having trouble moving it's shipments due to lack of credit availablility.

The Baltic Dry Index dropped 8.5 percent to 1,809 points yesterday, the lowest since August 2005. Pacific Basin dropped 6.5 percent to HK$4.75 in Hong Kong and Precious Shipping declined 5.5 percent to 12.1 baht in Bangkok.

Banks worldwide have curbed lending because of increased concerns about getting their money back. Shipowners are already struggling to obtain funding for new vessels. Precious Shipping took as long as 15 months to secure financing for 18 vessels it has on order, Hashim said.


Why is this important?

This is important because it could mean significant shortages of imported goods. Areas that rely on a significant amount of food imports could see strong price increases as supplies are depleted.

It will bring about a significant slow down in international trade. Goods traveling over-seas won't make it here, or anywhere. This will mean a reduction in the supply of available imports.

Retailers in this country could see this affecting their ability to provide products for sale during the holiday season.

As Matt pointed out to me the effects won't be noticed for some time, as things slow down and as it takes some time for the consumer at the end of the chain to notice a problem in a supply chain.

It could be weeks before we see a problem in our local supermarkets and stores if it comes to that.

I would assume eventually demand would go up enough that someone would work to finance the shipments, but in the meant time this could have many troubling effects.

Thursday, October 9, 2008

Trouble Ahead; Not Enough Cash To Cover...

Consider the following:
  • The Dow Jones is now down 40% from it's peak. In the last 7 trading days it's dropped 20%.
  • Those declines will mean a significant drop in tax revenues as tax revenue will not the same as it was during years of market growth when market players took profits. Their losses will now be written off for years to come. That tax revenue will not be there for some time.
  • While trillions in investments have been lost, many soon to be retired Baby Boomers have lost money from their retirement accounts.
  • With anticipation of greater and greater job lay-offs the tax roles will be further depleted by the lack of payee's into the payroll tax system will mean great deficits in the social security system.
  • Great declines in housing markets are shrinking tax revenues for states and local governments throughout the country.
  • We've committed over a trillion dollars so far to a bailout into failed tactics that will lead to greater losses, and further depletion of government accounts.
  • The FDIC does not have enough money to cover the bank defaults to come, and will need to be recapitalized.
  • Were currently devoting trillions of dollars to fight wars in Afghanistan and Iraq.

A glimps of the problems we are facing. (seizure)

The Financial Post today has an example for us of how we are being affected by tightening credit markets. Short term lending makes the world go round. And right now with the lack of transparency between banks, many business activities are not able to take place on a bank.

"There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."

Financial Post, [Via: Naked Capitalism]

Tuesday, October 7, 2008

Changes and Not

From the Chicago Tribune, Via Transparent Real Estate

Leading up to the bailout

This is a pretty good story of what's happened with the bailout and Paulson's relationship to it. It goes into some of Paulson's more ambitious possibilities for the TARP as well.

Federal ethics laws let him sell $484 million in Goldman stock tax-free when he left. Net worth, about $700 million... 

First Goldman pays Paulson megabucks, then "lends" him to Bush, a virtual Trojan Horse. Now Paulson's preparing the way for his grand march back into private life by throwing billions of taxpayer dollars to his old buddies. So Goldman gets billions, and taxpayers get a pile of illiquid junk. Scam? Yes, and a classic case of moral hazard: Freed of risky liabilities, Wall Street dances off into the sunset, laughing at the stupidity of the American taxpayer. If Paulson did return to Goldman, his future bonuses would likely more than double his net worth. In short, his 30 months in government will undoubtedly make him a billionaire while costing taxpayers a trillion in new debt as a result of his inaction and incompetence.