Thursday, February 26, 2009

Blogging About Stock Pays Huge $

I think people are starting to figure it out....

Get a load of this video.

What's amazing to me is that this guy is actually smoking. After about 3 minutes into his rant I felt like I was back in the Marines and he was gonna pick up a 1/2 empty coke can to spit his tobacco into.

Monday, February 23, 2009

Our Arrows will Block out the Sun!

I'm fond of using the title of this post when exorting them to ever greater feats of internet marketing -- hey, what kind of marketer would i be if i couldn't even sell my own troops on hyperbole! :)

But, lately I've been talking about another kind of overwhelming force in the money markets. The specter of "government guaranteed" money is rising to such great quantities as to effectively crowd most other forms of debt out of the financial markets.

What do I mean by this?

Well, in the first phase of the "crisis" people were worried about getting a return OF capital. The answer (of course, said the financial cognescenti) was to just guarantee it. What? Apparently, nearly everything.

Well, the knock on effect of this is that coupled with a global deflationary collapse, funding needs for govts rising everywhere, and more and more crap getting "government guarantees" that anything withOUT a govt guarantee is more and more expensive to fund. During the "freeze" this fall it got nearly ridiculous with wireless carriers reportedly paying more than 25% for short term corporate borrowings (fortune 500 companies NOT involved in banking).

Well, clearly, govt guarantees on money are a "bubble". And, it will work really well, until it doesn't. What's the solution to things costing too much to fund without a govt guarantee? Why of course, guarantee that too!

Credit card debt, school debt, commercial real estate, commercial paper, etc etc etc etc. Of course, when it does break now, we can be assured of having all many of commerce grind to an immediate halt. No problem though, almost all food and energy is locally grown/produced and consumed right? What? You say those things are delivered to customers at the end of long international supply chains that depend on shipping and the free flow of commerce and credit to ensure payments for delivery of goods???? ooops. nevermind.

To wit, here is a story about the chinese wising up to the game. I blogged about this a couple of years ago, saying that anyone investing in mortgage products for hundredths of a point over treasuries was an IDIOT given the risk they were assuming. hey, if they really weren't assuming any more risk were they really idiots? (assuming a govt guarantee to backstop all losses). and, on the other hand, if the govt guarantees fannie/freddie can they really sell the treasuries they'll need to to continue to run the govt? me thinks not.
Feb. 20 (Bloomberg) -- Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.

The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.

Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank.

“Looking at the risk, they’re not so attractive,” he said. “We need a guarantee before we’ll buy.”

Foreign investors sold $170 billion of agency debt and securities in the second half of 2008, the largest amount since the Treasury began tracking sales in 1977, according to the most recent data. Asians, the biggest non-U.S. block of owners in the category, unloaded $70 billion worth from July through December, after scooping up $55 billion in the second quarter and being net buyers during much of the last decade.

Lack of Confidence

The sell-off and calls for a guarantee reflect a continuing lack of confidence among foreign investors five months after the U.S. seized control of Fannie Mae and Freddie Mac. The takeovers followed the biggest surge in mortgage defaults in three decades.

Without restoring foreign demand, Federal Reserve Chairman Ben S. Bernanke will find it more difficult to cut rates on housing loans, which depend on the ability of the finance companies to attract investors for their securities at the lowest possible yield. Fannie and Freddie sell debt to fund their purchases of mortgage assets and also guarantee home-loan bonds sold by lenders.

The Fed, which promised to buy as much as $100 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank corporate debt, may need to spend more, according to Margaret Kerins, an agency-debt strategist at RBS Greenwich Capital in Greenwich, Connecticut.

Buying Programs

The central bank last month indicated that it may increase this buying program as well as a second $500 billion one for mortgage-bond purchases. The Treasury has bought $94.2 billion worth of mortgage bonds under its own continuing program.

“You’d be back to the situation that prompted them to act” if the purchases of Fannie and Freddie debt were discontinued before foreign investors return, Kerins said. The agency-debt market has recently improved as the “crowding out effect” from sales of government-guaranteed bank debt has proven less than expected, something that may lessen the need for government buying, she added.

The Fed’s buying program resulted in a yield of 2.06 percent on Fannie Mae notes maturing May 2012 at the close of trading Feb. 18 -- 0.15 percentage point less than government-guaranteed Bank of America bonds maturing a month later and 0.12 percentage point less than similar Goldman Sachs Group Inc. debt, according to RBS Greenwich data.

Yield Spreads

Yield gaps between Fannie Mae’s 10-year debt and Treasuries have narrowed from the record of 1.75 percentage point set in November, after countries worldwide announced plans to back bank bonds and offer buyers more federal guarantees. At 0.64 percentage point, it is now 0.27 percentage point above what the spread averaged in 2006, according to data compiled by Bloomberg.

The average 30-year fixed mortgage rate fell to a record low of 4.96 percent last month from 6.47 percent in the last week of October, according to Freddie Mac surveys. It rose to 5.04 percent during the week ended yesterday.

Fannie Mae, based in Washington, and Freddie Mac, in McLean, Virginia, have about $1.7 trillion of corporate debt outstanding and $3.7 trillion of their guaranteed mortgage-backed securities held by other investors. The two mortgage companies finance almost half of the $12 trillion of residential loans outstanding.

The government-run conservatorship won’t end until the mortgage market recovers and the companies regain profitability, Federal Housing Finance Agency Director James Lockhart said yesterday on Bloomberg Television. He took charge of Fannie and Freddie last September and describes the companies’ U.S. backing as “effective,” though not “explicit.”

‘Full-Faith’ Guarantee

That’s not enough for foreign investors these days, said Laurie Goodman, a senior managing director at Austin, Texas-based Amherst Securities Group LP. Goodman was a former head of fixed- income research at UBS AG.

“Overseas investors are looking for the full-faith-and- credit clarification,” Goodman said. Such a pledge would essentially about double the U.S.’s debt, potentially boosting the country’s own borrowing costs.

“The U.S. government is worried about the agency market, and market participants feel the same way,” said Kei Katayama, head of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd., who oversees $1.6 billion of non-yen bonds for the arm of Japan’s second-biggest brokerage.

Katayama sold all of his agency debt on Sept. 16, the day after Lehman Brothers Holdings Inc. filed the biggest bankruptcy ever, taking it as a sign to get out of riskier assets, he said.

Difficult to Sell

The bonds also have been difficult to sell after credit markets froze last year, according to Jaemin Cheong, who trades U.S. securities in Seoul at Industrial Bank of Korea, South Korea’s biggest lender to small and mid-size companies. He said he won’t touch them.

Sellers in the fourth quarter included Caribbean-based investors, often hedge funds, which dumped a net $35.8 billion of the agency debt and securities after buying $15.7 billion in September. China sold $10.4 billion in the period after unloading $8 billion in September, while South Korea got rid of $10.5 billion.

“China’s demand for U.S. agency bonds will gradually decrease because China has drawn lessons from the credit crisis and learned to invest smarter,” said Yi Xianrong, a researcher at the Beijing-based financial research institute of the Chinese Academy of Social Sciences, which advises the government. “We will try to stay away from these types of bonds.”

Freddie Mac Treasurer

Freddie Mac Treasurer Peter Federico connects the sales to certain institutions and doesn’t think it is part of “a broader liquidation,” although “it kind of felt like that for a couple of weeks or months later in the year.

“There are a couple of institutions who continue to sell agency debt,” he said in a Feb. 18 telephone interview. “I think their reasoning for doing that is not related to their comfort with our credit. It’s their own monetary-management and currency-related issues. Apart from those institutions, I don’t believe there is a lot of demand to sell going forward.”

Federico spoke after the company completed a record $10 billion, three-year note sale at yields of 2.24 percent, or 0.02 percent more than JPMorgan Chase & Co. offered in a sale of government-guaranteed, three-year debt of the same size.

Asian investors bought 12 percent of this week’s sale, and North American investors purchased 72 percent, according to the company.

More U.S. Buyers

The U.S. share was high in comparison to recent years, “but it’s very consistent with what we’ve seen over the last six months, where the U.S. domestic investor who probably understands the conservatorship status better than foreign investors has really been supporting the market in a big way,” said Drew Ertman, head of financial-institutions debt coverage at Morgan Stanley, one of the underwriters.

Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment.

Sales of agency debt and securities may be more closely tied to the availability of better returns in corporate bonds than a lack of faith among investors, according to Andrew Harding, chief investment officer for fixed income at Allegiant Asset Management in Cleveland. Those include bank debt with explicit U.S. guarantees offering higher yields, he said.

“I don’t think the credit quality or housing market has precluded people from buying agency debt right now,” said Harding, who helps manage $20 billion for Allegiant. “There are just more attractive alternatives.”

Fukoku Mutual Life Insurance Co. spent last year trimming “risky assets,” and it sold all agency holdings in the third quarter, said Satoshi Okumoto, general manager at the company in Tokyo, which has $63.5 billion in assets.

“It’s not really the same credit” as government debt, Okumoto said. “It’s one step below.”

Tuesday, February 17, 2009

Money Never Sleep, Bud Fox just rolls over and dies...

love, LOVE, this scene. one of my favorite all time classics due to the "dated" cell phone :)

Wednesday, February 11, 2009

UBS Swiss Banking Follow Up

Well, I wasn't aware of it, but almost coincident with my last posting, UBS was getting ready to declare another major loss for the 4th Q of 2008.

I've been openly speculating for some time that the Swiss Banking industry is too big for the Swiss government to save. To be truthful, I haven't really bothered to put pencil to paper on that speculation to see if it is true, however, i saw some figures that were a little bit alarming last fall outlining the relative size of both.

Is there a country that is more dependent on its banking sector?

I'm not sure, both panama and singapore also have pretty signficant deep water port and of course the canal in the case of panama.

Liechtenstein, perhaps, however, to be honest I'm not even sure if the qualify as a country or just a monarchy that's been carved out of some other countries :)

Anyways, if they lose their bank secrecy I think the Switzerland brand takes a major hit, and private wealth will continue to drain out in droves. Here is the story that was released where they lost $6.9Billion dollars in on quarter. Ouch...that'll leave a mark....


Feb. 10 (Bloomberg) -- UBS AG, Switzerland’s largest bank, reported a fourth-quarter loss of 8.1 billion Swiss francs ($6.9 billion) after writedowns related to the credit crisis.

The net loss compares with a deficit of 13 billion francs in the year-earlier period, Zurich-based UBS said in a statement today. The loss was wider than the 7.5 billion-franc median estimate of 11 analysts surveyed by Bloomberg.

For the full-year, UBS recorded a loss of 19.7 billion francs. Chairman Peter Kurer and Chief Executive Officer Marcel Rohner pledged to return UBS to profitability this year after receiving a $59.2 billion lifeline from the Swiss government to split off toxic assets.

They’re scaling back risk at the securities division, where most of the losses have occurred, and seeking to stem defections by private banking clients. The investment banking “franchise seemed to have gone down to the seventh circle of hell,” Dirk Hoffmann-Becking, an analyst at Sanford Bernstein & Co., said in a note to clients. “Growth expectations for the bank are muted.”

UBS has fallen 65 percent over the past 12 months in Swiss trading, cutting the market value to 37.8 billion francs. The 64- company Bloomberg Europe Banks and Financial Services Index declined 63 percent in the same period. Before today, the bank had announced 9,000 job cuts, exited parts of debt trading and commodities businesses and raised $32 billion from investors to offset record losses at the securities unit. Clients at UBS’s wealth management units removed more than 140 billion francs in the first nine months of 2008.

U.S. Tax Probe Financial institutions worldwide have amassed $1.09 trillion of losses and shed almost 270,000 jobs since the U.S. subprime mortgage market collapsed, data compiled by Bloomberg show.

The U.S., Britain, France and Germany are among nations that injected billions into banks to prevent a wider financial calamity following the September collapse of Lehman Brothers Holdings Inc. Deutsche Bank AG, Germany’s biggest bank, reported last week a record 4.8 billion-euro ($6.3 billion) net loss for the fourth quarter and its first annual deficit in more than 50 years.

Credit Suisse Group AG, the second-biggest Swiss bank, may say tomorrow its fourth-quarter loss amounted to 4.2 billion francs, according to the median estimate of 11 analysts. Kurer, 59, told investors in Zurich last month that the recovery of UBS’s reputation and a settlement of a probe into whether the bank helped 20,000 wealthy clients avoid American taxes are two priorities for this year. Raoul Weil, the former head of wealth management, was indicted on conspiracy charges in the U.S. tax case and stepped down in November. He was declared a fugitive from U.S. justice last month. Weil has denied allegations through his lawyer.

‘Biggest Challenge’

“The biggest challenge by far is fixing the reputational loss of the core wealth management business,” said Georg Kanders, an analyst at WestLB in Duesseldorf. “If they don’t fix that fast, the future looks very gloomy.”

A combination of asset outflows and falling margins in money-management businesses may lower profits by a third at the private bank and by about 40 percent in asset management this year, according to estimates by Morgan Stanley analysts Huw van Steenis and Carlos Egea.

At the investment bank, the management is caught between pressure from shareholders to cut costs and discontent among employees facing a reduction in bonuses, which may delay the unit’s turnaround, according to analysts. UBS said it cut the 2008 bonus pool for staff, excluding U.S. brokers, by more than 80 percent to less than 2 billion francs.

Keeping ‘Rainmakers’ “It would be surprising if the bank could hold on to key senior rainmakers in their core businesses after such a reduced payout,” Hoffmann-Becking said. “At a minimum we should see bankers going into nine-to-five mode.” The pretax profit goal of 4 billion francs, set last May by Jerker Johansson, the head of the securities unit, probably won’t be reached this year or even next, according to estimates from analysts including Citigroup Inc.’s Jeremy Sigee.

The fixed-income unit, which was responsible for most of the $48.6 billion in writedowns and losses from the credit crisis, needs further “radical change” to return to profitability, Jeff Mayer and Carsten Kengeter, the heads of the business, said in a Jan. 21 memo to employees.

Todd Morakis, who ran commodities, Sascha Prinz and David Sacco, co-heads of global rates, and credit head Chris Ryan will leave the bank, the memo said. Jon Bass, who headed fixed-income client management, left UBS to help BTIG LLC, an institutional broker, enter credit trading markets.

Monday, February 09, 2009

The End of the Swiss Offshore Bank ?

Well, UBS is really feeling the heat lately.

I know that not many of you follow this kind of news, and for those of you that do, you're probably thinking "good" -- but the IRS is putting major pressure on UBS, Switzerland's biggest bank to give up information on depositors at the bank who also happen to be US citizens.

For years, Banks in Switzerland have had a certain, "je ne cest quoi" (did i spell that right? :) ) Tons of Hollyweird movies have portrayed them as secretive, mysterious, guarded locations, with security rivalling NORAD....secret pin access codes and anonymous numbered accounts.

It's true, there ARE some Swiss banks that function like this to this day, however, not too many numbered accounts to be had....and the price of entry is 1/2 million and up.

While mystique is a nice selling point, the big draw is the history of neutrality, long record in wealth management, and of course the confidentiality, protected by their bank secrecy act of 1934 -- hey, just in time for the Nazi's -- big coincidence I'm sure :)

Swiss Banking Secrecy

Switzerland has a reputation for banking secrecy that attractrs depositors seeking less regulation. This became a source of good and bad publicity.

While Switzerland became a well regarded offshore financial centre it also garnered a certain amout of infrmacy as a place where grey money was being laundered. As the reputation for the Swiss has grown so has international pressure for greater transparency. (aka, "less secrecy").

While the Swiss opted out of the EU to avoid having to water down its secrecy laws, it is not at all certain that Switzerland will remain forever outside of the Union.

In addition, Switzerland has acceded to the EU Tax Savings Initiative, which has allowed EU tax collectors a 'nose in the tent'.

In the middle of 2004, new anti-money laundering and anti terrorism regs sounded the death knell on the famous swiss numbered account.

The UBS Fiasco

The scandal involving UBS and wealthy private US clients risks hitting a tipping point. After it was "discovered" (duh) by the IRS that UBS was helping US clients to 'evade' taxes, Switzerland has come under huge pressure to start releasing client information on request.

The issue at hand is that these US clients thought they were covered by the Swiss penal code which distinguishes between tax fraud and tax evasion (which is not a criminal offence).

Witht the IRS out for blood the Swiss may have to sacrific confidentiality to continue as a financial centre.

Opening a Swiss Bank Account

Opening a swiss bank account can be somewhat difficult.

For upwards of 500,000USD you can get a private banking account in a swiss offshore bank.

Numbered accounts exist, but will involve showing all your personal documenation, including passport and proof of residence and often a bank reference letter.

Thursday, February 05, 2009

How To Be a ButtRocker

In preparation for the all-too-predictable retro move back to the whole buttrocker fiasco that defined the 80's rock music scene, I've prepared the definitive guide. OK, it's not really definitive -- more of a work in progress. Feel free to comment on it after you check it out here
How to Be a Buttrocker

Wednesday, February 04, 2009

Oh yeah....Machu Picchu, Peru

So, anyhow, I was leading up to telling you the story about our trip to Machu Picchu...But that was what seems like 100 years ago, so I'll just cut to the chase scene. Here are the pics.

Colonia Cleansing

A good friend of mine is rehabbing a home in Colonia and purchased a farm (chacra) in the outskirts of Colonia. He invited, me, Golden Lotus, and Midori (our lab) out for a visit in December.

The trip rocked. Of course, our visit coincided with a break in the month-long (at the time) drought. As we slept the rain rattled the corregated tin roof of the old farm house like an impossibly long drum-roll. The local farmers, and our lab, rejoiced, as it made the grass grow, and created a lot of mud for her to get filthy in. It was immediately obvious to everyone just how out of place our lab was in our apartment as she was a yellow ball of constant motion for the entire weekend.

To refresh everyone's memory, Colonia is on the south western corner of Uruguay, across the "river" from Buenos Aires.

Colonia is at once funky, fresh, hip, cool. It's the preferred spot (it seems) for the hippy, chilled out, artist, Cali-vibe culture that manages to make it down here. By virtue of its proximity to Buenos Aires, and it's being named a world heritage foundation site, the town seems to get by with having basically no industry whatsoever with the exception of tourism.

Oh, I'm sure that there are a couple of people trying to fish in the river or something...and like i mentioned, there is some farming and ranching as you move further away from town, but the ancient buildings and museums, restaurants, and aggressive restoration police keep the older buildings and funky vibe intact...and the influx of tourist money means no one has to be all that bothered with the less aesthetically pleasing aspects of commerce -- Montevideo seems to have most all of these.

I've included some pics below of our trip. Enjoy.

Life Down Under the Sun

I have to tell you, I've been so caught up with work lately I haven't really had time to enjoy this summer.

This is the same mistake I made last summer where I virtually missed the entire thing and only put my head up from work once the days were getting much shorter and colder.

...let's face it, entrepreneurism isn't all it's cracked up to be. And the Uruguayos seem to have figured this out. I have yet to meet one that is willing to work through the summer, and virtually all of them abandon the city wholesale during the summer and flee to the beaches for extended vacations -- euro style.

I can't say that I blame them, because summer is really the most pleasant and interesting time of the year -- by FAR. Winters down here are brutal in that there really is NO saving grace. The north american winters are broken up with holidays (thanksgiving, christmas, new years) football (superbowl), a full primetime t.v. schedule to keep you docile and stupid.

Meanwhile, the winters in South America are just a thankless three month slog.

I'll grant you that the winters down here are nowhere near as harsh as most of North America, but by the dreary, frownlines burrowed deep into the scowls of all the locals, you wouldn't know it.

An interesting exercise we do every spring is to walk around town and see if we can spot the tourists. In fact, the tourists are easy to spot, because they are the people walking on the street with a smile on their face. Sad but true.

So, time to put away the PC and plan a roadtrip to the beach.