Presiding over Supply
November 5, 2008
The transformation of the financial landscape over the past several months has left investors searching for a safe haven for their money. As evidenced by periods of negative t-bill yields, the flight to safety has investors flooding the risk-free market or sitting in cash. The freezing of the credit markets has been a product not just of uncertainty amongst borrowers and lenders, but of uncertainty regarding the role of government in our capital markets. The unprecedented actions taken by the Federal Reserve have changed the traditional thought process on investing. Moreover, with the looming Presidential election, the investment framework has another big question mark. Assuming Senator Obama takes Read more
Credit Default Swaps – A Disastrous Unwind
October 21, 2008
Although mortgage backed securities and mortgage related assets have plagued the financial sector for the past 12-14 months, the sector is about to come under considerable pressure because of a uniquely structured product called a credit default swap or CDS. The government’s decision to allow Lehman Brothers to fail last month may be just another decision in this stressed market that is about to come back to haunt them. Read more
The Top 5 Misconceptions of 2008
October 14, 2008
This has been one of the hardest markets to stomach in a long time, unless of course you are one of those blood sucking shorts. The daily triple digit swings in the Dow and the volatility in this market has been unparalleled. Even some of the best money managers in the world are down double digits as people are left scrambling trying to figure out what happened with their money. That being said, there is no point in dwelling on your losses; instead we should learn from our mistakes, correct them and move forward. Read more
Worldwide Action, Interest Rate Cut
October 9, 2008
Many investors woke up yesterday morning to a surprising news headline that six central banks moved in coordination to cut their respective interest rates. The coordinated effort came from the central banks in the U.K., Canada, Sweden, Switzerland, and the U.S. The 50 bps cut stimulated the pre-market trading, which led the futures to the major U.S. indexes higher. Read more
Credence in Capitalism
October 8, 2008
My interest in writing this piece was sparked by a spirited debate with a fellow Bullish Banker regarding the implications of the financial crisis on the next President Elect. Upon watching the debates, it is clear neither candidate wants to address how such a financial bailout (and overall financial deterioration) will affect their campaign promises. The bottom line in all of this financial noise is that the standard of living must come down. The American consumer (yes with the help of the investment banks) is now being disciplined for their largesse over the past several years, which in the end is what drove speculation in many of the markets that have now become the problem. The deficit at the national level was not the problem as it turns out; it was the deficit at the consumer level. Read more
The End of An(other) Era
September 23, 2008
Speaking from a most cynical viewpoint, I can’t help but see the events of the 
past several weeks as a nation that privatizes its gains while socializing its losses. No taxpayers were clamoring for a share of the profits when AIG’s business was flush with cash the past five years. The basis for a capitalistic market presupposes winners and losers; reward does not come without risk. While I am sure I am not enlightening anyone to ideas that haven’t previously been exposed, the bottom line is that economic Read more
Introduction to Healthcare Reform
September 22, 2008
Socializing our Financial System with a $700 billion dollar bailout of the m
ortgage industry has healthcare reformers scratching their heads. This weekend Treasury Secretary Hank Paulson urged lawmakers to approve an unprecedented rescue plan to stabilize our financial system. The plan would allow the government to buy troubled loans over the next few years and then sell them as they became profitable. This would considerably raise our nation’s debt from about $10.6 trillion today to $11.3 trillion. Read more
No More Bull
September 17, 2008
The landscape of Wall Street, ever changing, transformed this weekend with the liquidation of Lehman Brothers [LEH: 0.00, N/A (N/A)] and the purchase of Merrill Lynch [MER: 13.20, -0.60 (-4.35%)] by Bank of America [BAC: 16.42, -0.68 (-3.98%)]. The latter took down one of the largest and most venerable institutions on Wall Street in less than 48 hours of negotiations between the two banks. Read more
Wait, The Fed May Cut Again?!?
September 15, 2008
Yes, it is actually a possibility, contrary to popular belief. Many of you are probably wondering if I am insane for writing this, but I would tell you not to rule this option out. I am in no way predicting or guaranteeing that the Federal Reserve and Helicopter Ben are going to lower the funds rate again, but I would not put it past them. If you step back and look at some of the underlying economic issues that are driving his decision, you will understand why Ben Bernanke and the other FOMC governors might not Read more
Strong International Exposure? Think Again
September 11, 2008
You know, it is kind of funny if you look back to last year, almost anyone who was bullish on a stock would be able to cite strong international growth as a key driver going forward. Rightfully so, given the turmoil that was about to unravel within the United States credit and housing market, people needed to make sure their stocks would be able to weather a significant downturn in US corporate and consumer spending. Subscribing to the theory of international markets decoupling from US markets Read more
 
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