Tuesday, March 31, 2009

Will He Look Good Up Close ?

I mean Obama to his worshipers in Europe.

Do they expect a cultured sophisticate ? A glassy-eyed greenie ? Or a poodle for their socialist ideas ? I think the pop cultural reaction might be the most interesting thing to come out of this European vacation for Obama. As far an anything substantive, I expect nothing.

Europe and the rest of the world want the US to be the engine of economic growth again, but then gripe about the US ... being the leader. Europe and the rest of the world want the US to buy their goods ... and then gripe about US current account deficits and the US need to sell dollar debt the world. Do you see the contradictions ? In the end, the long term cure for the problems in the other nations economies require a shift to more consumer demand and internal or regional consumer demand, not exports. But those nations did not make the changes when times were good, as they should have. So they all get an F.

Now the US ... if one would spark those memory cells a bit, one would remember that the US WAS shifting more from a consumer, import-dominant economy to one more export oriented WHEN times were good. As the dollar was falling, the US was indeed exporting a lot more. Who was fixing problems in international trade when times were good ? The US.

Hello world ? Fix your own messes before you deign to tell us what to do. Otherwise, you suffer your condign* fates.

[*see word of the day]


It's remarkable how much learning a language helps one's memory and mind. I have noticed that I can remember new words and facts and relationships much better after seven months of effort in French. So I am now trying a bit of German, too. Maybe I'm now using areas of my brain long neglected. Whatever it is, it does work.

German pronunciation seems quite easy for me, a native English speaker, compared to French or Russian. This is just a small effort now.


The big drop yesterday should be no shock. After a 25% move up, a big pullback is natural. I'm happy to see lower prices for my planned buying in April.

Word of the Day

"Condign" - adjective [$10]; from the card file and my reinvigorated memory
Condign means deserved, adequate; (of a punishment) severe and well-deserved.
Sentence: see * above.

Le Mot du Jour

"Redresser" - verb, transitive, regular -er conjugation.
Redresser means 1. to straighten up, to knock out, to rectify; 2. to right; 3. to put right.
Le Phrase: Est-ce que Obama peut redresser GM?
Sentence: Can Obama straighten up GM?

Monday, March 30, 2009

He bought it.

Obama now owns the problems of GM and the auto industry. By forcing out the GM CEO, Obama now becomes the face of the auto industry and will be perceived by the public as its savior or its destroyer. Politically, this seems to be an error, but I suppose he needs a CEO scalp to wave when the US provides DIP* financing for the auto industry. [*DIP means debtor in possession financing in bankruptcy, which is super-senior before all other creditors.]

Timmy Geitner blabs again about banks needing capital, without specifics. Why does he do this ? More and more, he is showing himself to be a minor league player in the "Show". The bears are attacking this morning with all markets down sharply, thanks to Timmy. Hello Timmy ... shut up until you have something clear to say and do.

Personally, I'm happy to see a pullback. My sales in Obama Fund combined with the new money in April mean I can re-load and add at lower prices.

French newspapers have much talk about new restrictions on executive pay. Over the weekend, I commented to another that it seems the left was right when complaining over the past 15 years that executive pay compared to the pay of the average worker was out of line. We now see that such executive pay was wasted and did not conduce lasting value. Shareholders and Boards of Directors really blew it in paying these guys so much while stock prices were rising, as many were taking excessive risks and inflating stock prices with buybacks, tax tricks, etc., when business growth and debt paydown would made been correct behavior.

[ Did you notice that 'clever' contraPUNtal expression - the "left was right" ? ]

G20 b***s*** [that's 'connerie' in French] is all over the news. Ugh ... this reminds me of Davos: the godlike government leaders to be our saviors.

That reminds me - a friend mentioned a link to a South Park episode which is so hilarious, I was convulsing with laughter for 20 minutes. This is the same one which a loquacious commentor mentioned a few days ago in the comments. Here is a link to view it online.


Word of the Day

"Tacit" - adjective [$10]; an easy one from the files
Tacit means understood or implied without being stated.
Sentence: Bankrupcty restructuring for GM and Chrysler is the tacit message of the weekend's leaks about the auto industry. This is no surprise to anyone who is realistic about the industry and companies.

Le Mot du Jour

"Encadrer" - verb, regular -er conjugation.
Encadrer means 1. to frame; 2. to train and supervise, to restrict, to take in hand; to frame, to surround.
La Phrase: Nouvelle conduite par les actionnaires devrait encadrer les rémunérations des diregeants des entreprises. S'ils n'est pas stupides.
Sentence: New supervision by shareholders should restrict the remuneration of executives of companies. If they aren't stupid.

Friday, March 27, 2009

TGIF and taxes

Ugh ... it's time to do my taxes. I do my own with a spreadsheet that I wrote long ago and have slowly embellished. The spreadsheet simply mimics the actual tax forms and worksheets that I need, so when I'm done, I can just copy the entries onto the actual forms with perfect arithmetic. But I still have to compile all the data, which is a lot of work. I think I'll start today with the brokerage statements, that have to be combined for aggregate numbers for things like interest and dividends, etc.

More ...

The Brazilian president made some stupid statements about "white people" with "blue eyes" causing the crisis. I suppose he's speaking to the folks back home. And he seems to have never taken a look at Stan O'Neal of Merrill Lynch debacle fame.


Another up day. The few living bulls are very wary and the more numerous bears are complacent, either lurking in the woods (in cash) for victims to maul or suffering as their existing shorts are bleeding while they wait for (certain) redemption. It makes me wonder about this market. I've written before about the 1974 analogy. Today Blabberg described it rather well from the charts - that is, if you were up at 3:30 AM ET to watch it. The guy did a pretty good job. He was British, by the way. That figures. Few American faces can articulate a complex thought.

The 1974 analogy implies a fast rally back to around S&P 1500 in 18 months. That would completely kill the bears with losses or permanent underperformance. Aw shucks, can it really happen ? Of course, analogies are just ... analogies.

Word of the Day

"Invious" - adjective [$1000] and "inviousness" - noun [$1000]; obsolete
Invious means impassible; inaccessible; without paths or roads; trackless.
Inviousness means the state or condition of being invious.
Example from geography (original usage): some places in the Rockies, or the Scottish highlands, or Siberia.
Sentence: The bears (and Krondrativans) claim that Tolstoyan historiography applies: that the economic crisis is invious and man cannot find a short cut out of lengthy purgatory. The bulls deny this, thinking that massive monetary expansion to replace vanished credit, plus plenty of stimulus to generate demand, is the short cut to economic paradise, viz., moderate growth. Time will tell.

Le Mot du Jour

"Internaute" - noun, MF.
Internaute means net surfer, Internet user.
La Phrase: Augmenter les nombres des internautes tue lentement des journals.
Sentence: Increasing the numbers of internet users is slowly killing newspapers.

Thursday, March 26, 2009

Lots of Clues

The news stories of yesterday and today have lots of clues that the decline caused by last fall's panic might be over. Existing home sales increased. Durable goods orders increased. From the past weekend, multiple bidders competed for California homes at the new, low prices. All that is news from the "real" economy.

Meanwhile, reports that short sellers actually increased their positions in recent weeks was quite intriguing. And the ideologues and marionettes of the short sellers are out in force claiming great benefits and little harm from bear raids. Or that such don't exist. One would think the Soros article yesterday would shut them up, but no, the WSJ has another silly piece today. WSJ Online: "The short-sellers probably saved us five to 10 years of poor bank earnings, writes Andy Kessler" What a dope ! They caused a panic that led to a few million people losing their jobs and destroyed a few major financial institutions. I suppose Andy Kessler would write that the Vikings invigorated Europe by looting the monasteries.

Ideology can certainly blind people to facts.

Last week's analysis in this blog on the sleazy role of AIG in the financial markets got proof in today's WSJ Online.

"Banque AIG enabled AIG to generate revenue by helping European banks lower the amount of capital they are required to hold to protect against losses on assets such as mortgage and corporate loans. ...

"In the event of a default, European banks that have done these trades with AIG could be forced to take back responsibility for billions of dollars in assets. That could require them to raise billions of dollars in capital, AIG has said.

"In May 2007, a British executive in the financial-products office in London told investors: 'For the European banks and the Asian banks, this is very much a regulatory capital arbitrage business. By structuring their businesses, whether it's their mortgage lending or their corporate loans into these sorts of trades and tranching the risk up, they're able to significantly reduce the capital they have to hold against their portfolios.' "

It was all just a scam to beat the sleepy or compromised regulators.


I made some sales in Obama Fund yesterday near the early highs of the day. Obama Fund are at 150% long and I reduced it to about 120% long. I'll reload on a serious dip. Sales: all of GE and FCT; 1/2 of MS, FCX, MT, X; 1/3 of CETV, CAB. All those positions had received had adds much lower, so were a big large. I own more GE in Fido Fund, so just chucked the Obama Fund piece.

By the way, the price of copper is over $1.80 this morning.

Word of the Day

"Monkeyshine" - noun [$10]; US Colloquial, a Mencken word.
Monkeyshine = monkey tricks or monkey business, meaning mischief.
Sentence: Monkeyshine of beefer short sellers is hazardous to the jobs of the common man.

Le Mot du Jour

"Supprimer" - verb, regular -er.
Supprimer means 1. to delete, to remove; 2. to cancel; 3. to do away with, elimnate.
La Phrase: Beaucoup de entreprises suppriment emploies en payant les primes à leurs dirigeants.
Sentence: A great many companies eliminate jobs while paying bonuses to their executives.

Wednesday, March 25, 2009

A Whatnot Wednesday

You ask, "what's a whatnot ?"

"Whatnot" is a noun meaning (1) a small, trivial, or unspecified object, or (2) a set of light, open shelves for ornaments. Today's blog contains small items in an open format, hence is a whatnot of whatnots, figuratively.

The Bloviator continues to bloviate the blather of buncombe.

Successful hedge fund managers make billions. And pay low taxes on their skim. Unsuccessful hedge fund managers close their funds and go out to raise more money for new funds so their fee "high water mark" can be low again. The analogy is re-pricing stock options. Heads they win, tails investors lose.

The press reports more whiners and worryers.

Japan GDP falls 12% in Q4 and exports are cut in half. Nations like Japan need a balanced economy with local consumer demand. They cannot expect the US to pull their wagon again.

Ukraine nears financial meltdown. Unfortunately, that nation blew its chance to reform when times were good, so the suffering of the people will likely be great.

The Czech government falls.

A WSJ article about pensions in Hungary shows why its pension system is bankrupting the nation. A 40 year old guy with an injured foot gets a paycheck for life. No retraining, etc. Of course he could do a job sitting on his butt answering the phone or doing paperwork. In some ways it's similar to the pension systems for many US State governments. They will be a huge burden on taxpayers forever unless reformed.

The "card check" bill that would let union goons force people to sign up and then let the union get recognized is losing steam. Good - that was one of the worst ideas ever to hit Washington. Imagine, legislating Stalinist union "elections".


The big rally held rather well yesterday. I have subscribed to the HBC rights offering in Fido Fund, as did Mrs. B in her Sky Fund.

Word of the Day

"Protreptic" - adjective and noun [$1000]
Protreptic means (adjective) directive, instructive, didactic; (noun) a book, writing or speech intended to exhort or instruct; an exhortation, instruction.
Sentence: When will Obama get off his interminably protreptic butt and do something ?

Le Mot du Jour

"Exprimer" - verb, regular -er conjugation; "s'exprimer" - the related pronominal verb.
"Exprimer" means to express.
"S'exprimer" means to express oneself.
La Phrase: Obama s'exprime, et s'exprime, et s'exprime sans cesse. Faites quelque chose !
Sentence: Obama expresses himself, and expresses himself and expresses himself endlessly. Do something !

Tuesday, March 24, 2009

So What ?

That seems to be the jizz* of yesterday's strong upward move in stocks from my reading of the news and a bit of painful listening to Blabberg. [aside: Why are the faces on financial news mostly imbeciles who ask stupid questions and make silly comments?]

*see Word of the Day

The move has two sparks: Timmy's plan was well-received by potential private investors and existing homes sales jumped. Regarding the former, I wonder why it took him so long to get the plan out ? The general outline was written in this blog months ago and was rather obvious. Regarding the latter, even though much of the sales were from foreclosures, clearly the bloated home inventories are being cleared slowly now. It's not getting worse. Buyers are stepping up for bargains.

More Readers ...

Now I learn that George Soros is a secret reader of this blog. Check out his op-ed in the WSJ today. Here's a quote: "it's clear that AIG, Bear Stearns, Lehman Brothers and others were destroyed by bear raids in which the shorting of stocks and buying CDS mutually amplified and reinforced each other. The unlimited shorting of stocks was made possible by the abolition of the uptick rule, which would have hindered bear raids by allowing short selling only when prices were rising. The unlimited shorting of bonds was facilitated by the CDS market. The two made a lethal combination."

And more: "Many argue now that CDS ought to be traded on regulated exchanges. I believe that they are toxic and should only be allowed to be used by those who own the bonds, not by others who want to speculate against countries or companies. "

Good ideas, George. Sigh ... imitation is indeed the sincerest form of flattery ;)

By the way, above for the first time in an actual post, I borrowed from the text message dialect of written English to use its sign ;) to mean I am joking about something. It's a wink. I think this is appropriate now as this blog is becoming more multilingual with my French phrases, so adding the text message dialect fits, too.

PS: If you are voting proxies on stock you own, I urge you to vote against executive compensation plans, against any directors of companies which have cut dividends, and in favor of shareholder proposals that seem to help shareholders get more power. I just voted against all GE directors and in favor of all five shareholder proposals.

Word of the Day

"Jizz" - noun [$10]; a reprise selection
Jizz means the characteristic (immediate) impression given by an animal or plant.
Sentence: Yesterday's huge rally had the jizz of a yawn for the public. Perhaps that signals that it's real this time ?

Le Mot du Jour

"Pouvoir" - noun, masculine [this is a common verb, too]
Le pouvior means power, ability, capacity.
La Phrase: Les pouvoirs de l'État sont grandes pour relancer l'économie.
Sentence: The powers of the State are great for reviving the economy.

Monday, March 23, 2009

Spring comes

At long last, Spring has arrived - at least astronomically, as the vernal equinox occurred Friday morning. The crocuses are coming up as are the daffodils. Afternoon temperatures here crawl up to 50F. But there are still winter risks around as overnight temperatures still fall to 20F.

At the risk of being wrong again, I wonder if a new bull market has begun. Who is left to panic ? Companies with cash are buying beaten up firms. China is buying up resources at cycle low prices. A WSJ story over the weekend reported multiple bidders for homes in some California locations.

Obama got stuffed by Iran. Perhaps the Bloviator might now realize Iran plays by its own rules, which its leaders believe are divinely ordained.

Timmy introduces his asset purchase plan this morning. I await the details. I surmise that he will use the rumored $100 billion of government money as a first loss position to get private equity for another 10% equity, and then get a 1% nonrecourse loan from the Fed for the remaining 80%. Private equity would control the bid prices. The government would share in profits pari-passu. This is my guess (and how I would try to structure it). Details later this morning.

Obama Fund is fully invested at 150% long. Fido Fund is fully invested at 150% long. Krypto Fund needs new money in April to top off its stock and real estate investments. I expect Krypto Fund will be a buyer of stocks & real estate all year as new money flows into it.

Word of the Day

"Risible" - adjective [$10]; DO NOT confuse with irascible.
Risible means 1. a. capable of laughing; b. disposed to laugh; 2. arousing or provoking laughter: FUNNY; 3. associated with or relating to or used in laughing.
Sentence: We don't need a risible plan out of Timmy - we need a workable one.

Le Mot du Jour

"Lueur" - noun, feminine
Lueur means glimmer, (faint) light, glow
La Phrase: L'homme du bunker voit une lueur d'espoir qu'un nouveau marché haussier à commencé ce mois.
Sentence: Bunkerman sees a glimmer of hope that a new bull market began this month.

Friday, March 20, 2009

Zzzzzzzzzzzz ...

I overslept - more later.

Some News - Des Nouvelles

** The Bloviator wants a date with Iran. With her in a burka, I suspect he won't get far.

** Leon Black of Apollo "warns" about commercial property losses for banks. I suppose he wants more victims. Interesting past - do a search on him with now defunct Credit Lyonnaise.

From the Internet: "The defendants' motion to dismiss the Attorney General's case comes almost a month after the insurance commission entered into a key immunity deal with Leon Black and two of his partners at Apollo Advisors L.P., who served as financial advisors on the Executive Life sale. Black and his partners, Craig Cogut and John Hannan, agreed to testify against Credit Lyonnais and the other defendants in exchange for the insurance commission agreeing not to sue Apollo. "

A lot more is available online.

** Chavez nationalizes another bank in Venezuela. He's leading that bation back to the 19th century.

** Beefers barging into commodities. And Blabberg says the financial group is the only group up for the year so far. Interesting.

** Bigtime bonus tax coming on persons working for companies getting aid. This is just the beginnning. And something really is needed here. The guys at the top are taking far more than they have proven themselves to be worth.

I expect JPM, GS, etc to raise capital to repay the TARP, or just cut lending and send it back.

Word of the Day

"Retradition" - noun [$1000] rare
Retradition means the action of handing back.
Sentence: Retradition of a few excess AIG bonuses has been announced, but for most, I suspect some stick will be necessary.

Le Mot Du Jour

Clôture - noun, feminine
Clôture means 1. fence, hedge, wall; 2. closing, closure; 3. closing date (de for).
La Phrase: Hier en clôture, Wall Street a été en baisse.
Sentence: Yesterday at closing, Wall Street was lower.

Thursday, March 19, 2009

Another Salvo

Battleship Ben fired another full broadside at the doom-mongers yesterday. All nine 16" guns let loose with well-aimed fire. The Fed will buy $300 billion of intermediate term Treasuries, up to another $750 billion of Fannie and Freddie mortgage-backed securities, and $200 billion of their debt. Big guns indeed. This should help keep intermediate term interest rates low as the Treasury funds its stimulus plan.

The move also ensures the frightened rich and institutions will receive little income from hiding in Treasury investments, instead of investing in the real economy. Good news all around.

BO continues to bloviate. Timmy tried to talk tough. {wow a five word alliteration !} Maybe I should give BO a more elevated nickname. How about the Bloviator? More buncombe from the Bloviator ?

Uh ... BO ... perhaps you should spend some time on staffing your administration instead of being a male cheerleader at a roving pep rally.


Another up day. I wonder when the bears will counterattack ? They rolled out Molotova in recent days, but her cocktails sputtered and died. Did her departure to run her own shop signal a bottom ? I wonder.

If Obama would perform as a President and not merely as the Bloviator, I'd say yes. But he is surely doing a poor job and his radical proposals on carbon credits, among others, might cause long term damage. Watching ...


Blabberg reports that 33 million shares of LEH were sold short and NOT delivered. What a fraud! Hello SEC, are you there ? File some charges !

More ...

I see Lyndon aka W is writing about his decision as President. I wonder who will be the artist for that comic book ?

Word of the Day

"Repristinate" - verb, transitive [$10]; from the card file
Repristinate means to restore to an original state or condition.
Sentence: One cannot repristinate the economy to conditions of September 2008 to reform the TARP. Decisions had to be made under exigencies at once. From the current low LIBOR rates and the restored faith in money market funds, obviously the bulk of Hank the Tank's decisions did work as planned. Some mistakes were made, as we now see à propos AIG. Overall, Hank gets an A-. The '-' is for not delegating someone to check out AIG and stops its frauds.

Le Mot du Jour

Prêter - verb, regular -er conjugation
Prêter means 1. (transitive) a. to lend, b. to attribute, to ascribe, c. to give, to lend; (transitive indirect with à) to be open to, to lay oneself open to.
La Phrase: (from a headline in Le Monde today) La Fed prête à intervenir massivement sur les marchés.
Sentence: The Fed is open to intervening massively in the markets.

Wednesday, March 18, 2009

To Do

Here is a "To Do" list for Big Obama and little Timmy.

1. Put AIG into bankruptcy and break all its financial contracts.
2. Eliminate credit default swaps.
3. Eliminate all derivatives except traded futures and options.
4. Reinstate the uptick rule in a strong form including all derivatives.
5. Require all executive bonuses be paid on five year performance in restricted stock.
6. Provide shareholders with real power to approve bonuses.
7. Require all shareholders votes to be secret ballot.
8. Eliminate all restrictions on intra-shareholder communications and coordination.
9. Compensation committee members and nomination committee to be nominated by shareholders directly.
10. Eliminate mark-to-market accounting for all except public actively traded securities.

Maybe I'll think of more later.

WSJ says hedge funds may get bailout cash. You can imagine how angry that makes me. Molotova's clients cashing in on the fires they started. Buy fire insurance on some buildings ... start a fire ... collect. What a scam!

Financial Vikings buy insurance on defaults via CDS, then drive companies to BK, then collect. What a wonderful system ! Isn't pure libertarianism great for financial markets ! It's a return to the 9th century of Vikings raiding the monasteries - burnings, looting, on and on.

Gosh, too bad Obama's surname isn't Shariff. Then Barack Shariff would be "BS".

I suppose his new nickmane should be BO (Plenty), after the L'il Abner cartoon character, for his smelly, rotten policies.

Word of the Day

"Abysm" - noun [$100 and $1000]; a Mencken word
Abysm means ($100) a superlative of abyss; ($1000) 1. The great deep, the bottomless gulf, believed in the old cosmogony to lie beneath the earth, and supposed to be, specifically, (a) an imaginary subterranean reservoir of waters; or (b) hell or the 'bottomless pit', the 'infernal regions'.
Sentence: Without the vision and perseverance of Battleship Ben, the world financial system and economy would likely now be in the abysm of a strictly cash society. It's good he reads this blog and knows what to do. [joke]

Le Mot du Jour

"Nourri, e" - adjective; past participle of nourrir.
Nourri means heavy, hearty, prolonged, lively, rich.
La Phrase: J'espère que le prochain marché haussier est très nourri.
Sentence: I hope the next bull market is very hearty.

Tuesday, March 17, 2009


That's the reality of the financial industry's pay practices. Why is AIG not in bankruptcy now? Are they not simply looting from the taxpayer now? That would prevent further "bonuses" for the "financial products group". Why is that group not in liquidation? One has to be delusional to think such a group can have any existence beyond orderly liquidation. One simply needs clerks to liquidation, not highly paid traders.

Timmy Geitner is all alone in his sandbox with no staff, so he's being scammed by the sharks on the Street. Wonderful.

Obama talks more & more, but can't or won't fill the positions at Treasury. His chief of staff is a politico. Does no one in the Obama administration know how to run an operation ?

Credit Default Swaps

For this CDS clearing house that is being created, I hope that strict position limits and collateral requirements are being imposed. Otherwise, it's a giant pitfall that can bring down all participants in some future severe recession.


Amazing to see AA at $5/share. I'm wary of its perennially poor management, but I think I'll look at its balance sheet to see if an Obama Fund investment in it might be a reasonable risk-reward opportunity.

The GE investment by Obama Fund has worked well, so far.

PS: Doing AA work, it's sickening to see that stupid management spent billions buying back stock in 2007 at high prices. I can see why they are doing that stock offering and convert, as they have excess short term liabilities and too few truly liquid current assets. More management stupidity: as cyclical company running on little net working capital and even too much of that in inventories.

Word of the Day

"Purulent" - adjective [$10]
Purulent means 1. consisting of or containing pus; 2. discharging pus.
Sentence: Is it not now obvious that AIG is a purulent wound in the financial markets that needs to be cauterized?

Le Mot du Jour

"Épreuve" - noun, feminine
Épreuve means 1. test; 2. ordeal, trial, hardship.
La Phrase: L'administration Obama est mise à l'épreuve de AIG
Sentence: The Obama administration is put to the test by AIG.

Monday, March 16, 2009

Another Fat Hog and a Full Barnyard

A Very Fat Hog

Every week I am surprised at the huge pay packages given to CEOs. For example, a guy makes $28 million for 2008 and just a bit less for 2007. He's supposed to be creating value. But under his leadership, the stock price of the firm is back to its value of over 12 years ago.

Today's fat hog is the CEO of State Street Bank. From the WSJ:

"State Street Corp. said compensation for Chief Executive Ronald Logue rose to $28.7 million in 2008, a year when the bank's shares plunged as it disclosed billions in unrealized losses and received a capital infusion from the federal government. Mr. Logue made $28.3 million in 2007. State Street is a money-management concern and major services provider to the securities industry. It received $2 billion in October under the federal government's Troubled Asset Relief Program, which places restrictions on executive compensation at companies getting funds."

The stock price of State Street is in the low 20s. That range was last reached in 1997, over twelve years ago. So the fat hogs get fatter at the trough while the stockholders get gruel and starve.

And a Full Barnyard

That's AIG, the engine of fraud behind this credit bubble. From the WSJ:

"AIG was lambasted for about $450 million in bonus payments planned for employees at a business unit that lost $40.5 billion last year. The unit's woes pushed the company to near-collapse, forcing the government bailout." ...

"The list of AIG's trading partners reads like a who's who of global finance. It includes big U.S. banks such as Goldman Sachs Group Inc., which received nearly $13 billion. Large European firms, such as Société Générale SA and Deutsche Bank also appear, each having received nearly $12 billion."

"Much, but not all, of the money was linked to contracts AIG sold the firms to insure against losses on securities -- notably those related to U.S. mortgages. As AIG's condition deteriorated, the trading partners were given more collateral to protect against losses. Some were made whole late last year when the securities were bought by a company funded largely by the Federal Reserve."

If one looks at charts of the growth in CDOs and related financial products they exploded in volume from 2004 onward. AIG was "insuring" much of those so the banks could hold them on their balance assets without any capital to back them. This is such a colossal cluster FUBAR that its almost beyond belief that the "smart guys" could be so stupid. They don't seem to have truly understood what they created. Or were just sticking their biscuit in the gravy while it was still hot.

What does this mean now?

Very harsh pay restrictions are coming to the boyz at the top. And it's rather hard to argue against them on practical grounds. Simple ideological arguments sound bit foolish in the face of this looting. But that debate is for another post.

Word of the Day

"Autogenous" - noun [$10]; a Mencken word
Autogenous means self-produced.
Sentence: Autogenous restrictions and cutbacks for CEO and other top executive pay by Boards of Directors would be the best for a free economy, but the SEC actively prevents even minor shareholder cooperation. And shareholders can't vote in secret for the directors either. Why are we surprised the system is broken ?

Le Mot du Jour

"Partage" - noun, masculine
Partage means 1. the division, dividing up; 2. sharing out; 3. sharing.
La Phrase: Le partage des profits donne trop aux diregeants d'enterprise.
Sentence: The division of profits gives too much to company executives.

Friday, March 13, 2009

Ferrago for a Friday

Farrago may not have been a recent "Word of the Day", so I'll help: a farrago is a confused mixture; a hodgepodge; a medley. Example: A farrago of doubts, fears, hopes and wishes.

That word alliterates with Friday and fits my post for today - no logical, unified thesis, just a collection of observations and thoughts.

Oh, for any Philistines - an "alliteration" is the occurrence in a phrase or line of speech of two or more words that begin with the same sound.

My, my so much alliteration in this post: farrago, Friday and Philistine.

To work ...

China -
Chinese Premier Wen is quoted in FT as worrying about Chinese holdings of US Treasury securities. “We have lent a huge amount of money to the United States,” Mr Wen said. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the US to maintain its good credit, to honour its promises and to guarantee the safety of China’s assets.”

Dear Mr. Wen: You bought US Treasury T-bills with the $ that US consumers used to buy Chinese products. You use those bonds as reserves for your currency so that someone might think the renminbi is something other that a worthless scrap of paper printed by a Communist, crypto-fascist government. The promise that US made is to give you US dollars (nominal, not real unless you own TIPs) in repayment. If you are 'worried" about those T-bills, redeem then for dollars and come over here and buy some US products or assets. Stop using the US as an engine of growth for your economy. Give you own people some spending power so they can buy more US products. Otherwise, shut up.

Madoff -
Madoff says he's sorry ... sure ... he's sorry he got caught before he could die in peace in his apartment. So far, it looks like about $17 billion actual $ were invested. Apparently this Blogger was correct as where most money stole Madoff went: taxes, fees, his front operation and his lavish lifestyle.

Expectations -
Are very low. The WSJ has a big, high-five, headline cheering that the DJIA broke 7000. Wow. Gosh. amazing.


Obama Fund is fully invested, doing nothing. Fido Fund is fully invested, doing nothing. Krypto Fund is as invested in stocks as possible, but is quite underweight. It's sutructurally unable to transfer more $ to stocks as its remaining bond investments are locked up in non-tradeable fixed income investments and must fund the shortfall with new money.

Word of the Day

Demijohn - noun [$10]; a Mencken word
Demijohn means a bulbous narrow necked bottle holding from 3 to 10 gallons and usually in a wicker cover.
Sentence: If ever a new bull market has clearly begun and world economic growth is strong, Bunkerman thinks that perhaps fireworks, barbecues and celebrations with demijohns of one's favorite spirits are in order.

Le Mot du Jour

Niveau - noun, masculine; plural niveaux
Niveau means level: le niveau de l'eau - water level; au niveau du sol - at ground level; de niveau (avec) - level (with); niveau de vie - standard of living
La Phrase: Le niveau de vie du peuple des États-Unis a chuté dernièrement.
Sentence: The standard of living of the common people of the United States has fallen recently.

Thursday, March 12, 2009

Puking ...

as I listen to Blabberg cover the Forbes' 400 list of richest people in the world. That is one annual event that always makes me grab the barf bag. This adulation of the richest and most powerful is simply one of the most foolish actions of the American press. I can only reply with that fine quote from Pericles, the famed leader of ancient Athens:

"We cultivate refinement without extravagance and knowledge without effeminacy; wealth we employ more for use than for show, and place the real disgrace of poverty not in owning to the fact but in declining the struggle against it."

The Forbes 400 is the antithesis of this laudable sentiment. Most of those people spend their time and money simply trying to make more money or spending it extravagantly. Bill Gates excepted.

Word of the Day

Misprision - noun [$10 - mis prizh' en]; from Shakespeare & Mrs. B.
Misprision means 1. maladministration of public affairs; 2. neglect in preventing or reporting a crime.
Sentence: The Obama administration so far deserves considerable opprobrium for misprision; perhaps it's due to his inexperience in the executive branch, but he needs to get some people in his government who know how to run complex systems.

Shakespeare's usage -
So thy great gift, upon misprision growing,
Comes home again, on better judgement making.

Le Mot du Jour

Remanier - verb, transitive; conjugated like 'prier'
Remanier means to rework, revise modify, reorganize.
La Phrase: Obama doit remanier sa adminstration dés que possible.
Sentence: Obama should reorganize his administration as soon as possible.

Wednesday, March 11, 2009

Another Hog at the Trough

I finished my early mission - taking a car to be serviced - quickly, so can make a short post. But before I do this, I suppose many are familiar with those keyless ignition systems. The loaner car the dealer gave me has it, and I've seen them before. Question: suppose one is at a mall or supermarket and one accidentally drops the gizmo on the concrete. Can it break and then not work ? Something similar happened to me recently for a simple automatic door lock/unlock device. The automatic door unlock did not work, but, of course, I had a real key, too. These new devices require the automatic signal for the car to start. But if your car can't be started, that's a big problem. I wonder if this "improvement" is a SNAFU waiting to hit people.

Hog of the Day

WSJ: "NEW YORK -- American Express Co. said its chairman and chief executive, Kenneth I. Chenault, earned salary, perks and stock-based awards in 2008 valued at $36.3 million.
According to a securities filing, Mr. Chenault's compensation included stock and options valued at $34.1 million at the time of the grants in early 2008. At the time, the credit-card firm's shares were trading at about $49. In New York Stock Exchange trading Tuesday, AmEx shares rose $1.53, or 14%, to $12.17, close to a 12-year low."

Imagine that - the stock gets crushed, earnings are poor and Mr. CEO takes home $36 million. It's great if you can get it. But the common man never gets it - only the ruling class hogs.

Word of the Day

"Philtre" - noun [$10] a Mencken word
Philtre means a drink suposed to excite sexual love in the drinker.
Sentence: I strongly doubt that real buyers quaffed quarts of philtres for stocks yesterday, rather the jump was likely short covering that found few real sellers higher.

Le Mot du Jour

Somme - noun, masculine.
Somme means nap, snooze.
La Phrase: L'homme du bunker aime bièn faire un petit somme après son déjeuner.
Sentence: Bunkerman likes to take a short nap after his lunch.

Tuesday, March 10, 2009

The Heavy Boot of Red Chinese Colonialism

Today is the 50th anniversary of the invasion and conquest of Tibet by the Communist Chinese army. I am quite happy to see this event noted prominently in both US and world newspapers. French newspapers provide quite strident coverage with photos and headlines.

WSJ: "Last year, a peaceful commemoration of the 1959 uprising by monks in Lhasa erupted into anti-Chinese rioting four days later and spread to surrounding provinces the most sustained and violent demonstrations by Tibetans in decades. This year, China has largely sealed off Tibet to the outside world. Recent visitors to Lhasa have described armed police posted on rooftops. Local governments in Tibetan areas have ordered foreign tourists out, and foreign journalists have been detained and told to leave. Internet and text-messaging services, which helped spread word of last year's protests, have been unplugged in parts of the region."

Obviously, at its internal core, Red China is still a fascist regime. Their use of the word, "democracy" is a reminder of the Orwellian newspeak of Leninist regimes. And their action over the 50 years shows the worst of cultural racism and ethnic cleansing.

WSJ: "Tibetan culture and identity are 'nearing extinction,' he [the Dalai Lama] told about 2,000 people, including Buddhist monks, Tibetan schoolchildren and a handful of foreign supporters. The group gathered in a courtyard that separates the Dalai Lama's home from the town's main temple, and monks blowing enormous conch shells and long brass horns heralded his arrival. 'Even today, Tibetans in Tibet live in constant fear and the Chinese authorities remain constantly suspicious of them,' the Dalai Lama said, blasting the 'brutal crackdown' in the region since protests last year turned violent."

One should simply disregard anything the Red Chinese say about this situation and their actions. That they seal off the area and prevent independent inspections is a self-admission of guilt.

Let's hope the world doesn't let them get away with this.

Word of the Day

"Aurignacian" - noun and adjective [$10]; a Mencken word
Aurignacian means (adjective) of or relating to a paleolithic culture in Europe and of the Near East, following the Mousterian and dated to circa 34,000 to 29,000 BCE; (noun) this culture. Mencken usage was as an adjective, describing crude, primitive, brutal behavior or people - an erudite method to call someone a caveman.
Sentence: The aurignacian core of the Communist Chinese government becomes apparent again in its oppression in Tibet.

Le Mot du Jour

"Affaiblir" - verb, regular -ir conjugation
"S'affaibler" - pronominal verb.
Affaiblir means (transitive) to weaken, to affect.
S'affaiblir means to become weaker.
La Phrase: L'optimisme de l'homme du bunker ne s'affaiblit pas.
Sentence: The optimism of Bunkerman does not weaken.

Monday, March 9, 2009

Some Analysis

AIG and the credit default swap.

Those seem to be at the core of the credit bubble that occurred in the past four years. I've been wondering: whence came all that credit? After all, it did not come from the Fed or the ECB or any other monetary authority. Money was rather tight.

I think the banks, hedge funds and AIG exploited a loophole in the banking regulations created after the 1990 recession and collapse of the savings and loans, commercial mortgage and junk bond markets. At that time capital requirements were increased for banks and insurance companies and re-written to be adjusted depending on presumed risk characteristics of the assets of those financial institutions.

Some assets had zero or near nil capital requirements, namely AAA/Aaa, AA/Aa and similar highly rated securities. I'd guess some regulator decided that having an insurance wrapper made even those bonds riskless. So what do the financial engineers do?

Find a way to "insure" financial assets. Enter AIG and the credit default swap..

AIG proceeds to write a huge unhedged book of credit default swaps for other financial institutions. Those institutions no longer need to hold capital against those assets, so can buy more assets. Where do they get the credit? From overnight repurchase agreements with other financial institutions. In other words, a daisy chain of overnight debt to fund supposedly riskless assets.

Which of course eventually collapsed. Who can insure a default on a AAA asset? No one except a government that can print the money. Any other institution is likely to be in trouble and unable to pay in a severe downturn. So AIG was a house of cards. As was and EVEN NOW IS the entire credit default swap market.

Why is the credit default swap allowed to exist? It is a fraud and a scam. Even a clearing house cannot provide the ability to pay off its insurance in a severe downturn, unless Treasury collateral is required. But we know that is not what Wall Street wants. That would eliminate the profits in that market.

Get rid of credit default swaps. NOW.

Other Frauds

From this morning's WSJ story, Madoff was apparently a fraud for over 20 years. Hmmm. And he helped loosen short sale rules. Which brings another matter to mind: Why isn't a strong short sale uptick rule in place?


The public and hedge funds are likely to continue selling until the near the end of March. I am being cautious, but plan to buy stocks in April with new money. Krypto Fund is severely underweight in stocks.

Futures are weak early, a poor sign.

Word of the Day

"Catholicon" - noun [$100]; a Mrs. B word.
Catholicon means a universal remedy, panacea.
Sentence: If there is a cathicon for the current severe downturn, it's not "investing" in green technologies. Almost all those are heavily subsidized pits for long term losses. However, a catholicon for avoiding another or even more financial market turmoil does exist: get rid of credit default swaps and regulate hedge funds.

Le Mot du Jour

"Haltère" - noun, masculine.
Haltère means weight, dumbell, barbell in context.
La Phrase: L'homme du bunker a font des haltères hier matin.
Sentence: Bunkerman lifted weights yesterday morning.

Friday, March 6, 2009

TGIF and a tidbit

La panique continue.

That's how the French would say, "The panic continues." The rich are pulling out of their stupid hedge fund "investments" worldwide. All those funds of funds and feeder funds in Europe got exposed as shams of "due negligence" by Madoff's ponzi scam. Don't be unduly Americo-centric in thinking about this stock market collapse. A lot or even most of the selling is in Europe. But because of the common 90 day notice provisions, most of the hedge fund liquidations will soon be over.

Obama needs to get going on his TALF plans and show more leadership. He's being pushed around by Nancy and her gang who clutter these plans and bills with sophomoric restrictions that prevent progress.

Wal-Mart raised its dividend yesterday.

Le détail le plus croustillant (aka the tidbit, literally the crispiest or spiciest detail)

Copper prices confirm the breakout from a multi-month base this morning. Prices for May high grade copper are around $1.70/lb this morning. Why? Can China really be recovering?

Word of the Day

"Anfractious" - adjective [$10 and $100]; a Mrs. B word.
Anfractious means 1. characterized by windings and turnings; sinuous; circuitous; 2. tortuous, unnecessarily complicated by twist and turns.
Sentence: Nancy [Pelosi] and her strident gang of nitpickers are ruining good plans to aid homeowners by festooning them with complex rules to ensure "fairness". Last summer's trumpeted mortgage relief law is a perfect example of an anfractious law the ended up helping no one.

Le Mot du Jour

"Dirigeant, e" - noun, M, F and adjective.
Dirigeant means (noun) 1. leader (of a party, union, nation), 2. ruler (= monarch, dictator); 3. ( __ d'enterprise) company director, company manager.
La Phrase: La plupart de dirigeants d'enterprises est payée trop.
Sentence: Most company managers are paid too much.

Thursday, March 5, 2009

Rome Wasn't Built in a Day

All the past studies of interest rates cuts and stimulus show that they take around nine months to have an effect. March 2009 minus nine months is June 2008. In June, 2008, the Fed was cutting rates, but not enough. And the wimpy Q2 2008 stimulus was still hitting consumer purses. And gasoline prices were sky high heading to $4/gallon.

So why does anyone thing the economy should already be showing signs of a turn ?

I suppose the shorter news cycles and hyperventilation on the financial press and other press leads the naive to expect quick results. Some efforts DID produce quick results. Hank the Tank and Battleship Ben's superlative work in October did prevent the banking system from collapse. Libor rates have fallen greatly and the risk of default by money market funds has receded. Commercial paper markets are looser and corporate bond markets are again seeing issuance.

But we must await the rest of the effects to hit in Q2 and Q3 of 2009. And Obama's stimulus will not hit hard until at least Q3.

I wait and think and pick my stocks. Over this year I will put all new cash to work in stocks as I am quite underweight there. Not by choice, but my substantial remaining fixed income investments are unfortunately locked in non-tradable investments. I've done all the easy re-balancing I can do and must do the rest with new money.

That's a reality of running a real fund, not a paper one. My Krypto Fund is mixture of several retirement accounts, taxable accounts and annuity-like investments (TIAA as Mrs. B was an academic). TIAA and its real estate fund cannot be withdrawn and used to re-balance. Neither can my old whole life policy.

Word of the Day

"Lubricious" - adjective [$10] from the card file
Lubricious means 1. smooth, oily, slipper; 2. lewd, prurient.
Sentence: I suppose it's no surprise that the many US congressmen and state legislators are lubricious in both senses of its meaning: they prey on young women or boys, grease their supporters with payoffs (aka earmarks) and are greased with bribes.

Le Mot du Jour

"Douleur" - noun, feminine.
Douleur means pain.
La Phrase: Pourquoi est-ce que la droite recommende d'habitude la douleur pour l'homme du commune pour réparer l'economie du pays?
Sentence: Why does the right usually recommend pain for the common man to repair the national economy?

Wednesday, March 4, 2009

The Looting ... more

More stories of the looting of corporations seems to arise daily. And if one applies some simple logic, a lot more can be inferred. They - the ruling classes - all wanted "to dip their biscuit in that gravy while it was still hot".

Quiz: What fine movie and actor are the source of that quote ?

Some examples ...

Bernanke - "“If there is a single episode in this entire 18 months that has made me more angry, I can’t think of one other than AIG,” he said. “There was no oversight of the financial products division. This was a hedge fund basically that was attached to a large and stable insurance company.” The crisis at AIG stemmed from its activities in the market for credit default swaps – derivatives that function as debt insurance.

We now know that Lehman Bros, Bear Stearns and Merrill Lynch were the same - huge hedge funds attached to other stable businesses. As we know is Goldman Sachs.

Stock options: a way to loot the stockholders and give pay for no work. Holders made huge profits from simple market fluctuations and excessive risk is encouraged.

Stock buybacks: a way to prop up the value of stock options and reward the SELLERS of corporate stocks, at the expense of the long term holders.

Private equity: just a fancy name for leveraged buyout, where excessive debt is taken on, workers lose jobs and the corporation is looted of assets.

All those traders on Wall Street wanted to get paid like hedge fund managers. So they took on idiotic risks. The whole hedge fund industry - in the US and Europe - is just full of non-productive speculation, trading funds, worthless management running "fund of funds" and feeder funds, etc.

Europe seems more aware of the abuses of hedge funds than the US: (FT) "Paris has recently proposed clampdowns on hedge funds and bankers’ bonuses, in both cases using the threat of tougher capital requirements as a way of reducing what it believes to be excessive risk-taking."

Let's regulate hedge funds as investment companies, get rid of all derivatives, require much more collateral for currency trading, and a lot more that I can't think of now. And somehow the stockholders must be given real power to control upper management pay. Europe seems way ahead in that, perhaps by social custom.

How does this trading speculation exist ? Derivatives let them do it without adequate capital or regulation. Get rid of derivatives. The capital markets worked fine for the real economy before derivatives were created.

Get rid of derivatives. Get rid of executive stock options. Get rid of stock buybacks. Get rid of excessive executive pay.


The price of copper seems to be breaking out up from a long base. It may be a feint, or ...

China's PMI was reported to be over 50, as I just heard on Blabberg. Perhaps they have real consumer demand. I also note that Chinese stock prices seem perky, too.

Word of the Day

"Interdict" - noun and verb [$10]
Interdict means (noun) 1. an authoritative prohibition; 2. (church) a sentence debarring person, or esp. a place, from ecclesiastical functions and privileges; (verb) to issue or promulgate an interdict.
Sentence: Governments around the world need to interdict derivatives from the financial system.

Le Mot du Jour

"Bourde" - noun, feminine.
Une Bourde means a blunder, slip, mistake.
La Phrase: Hier matin, l'homme du bunker à fait une bourde dans la phrase pour son mot du jour. Il l'à corrigé plus tard.
Sentence: Yesterday morning, Bunkerman made a blunder in the sentence for his word of the day. He fixed it later.

Tuesday, March 3, 2009

Irrational Exhuberance ?

A loquacious commentor yesterday remembered and posted what he was doing in 1996-1997 as stock prices have now fallen to levels roughly where they were then. I remembered that the speech by Elmer aka Alan Greenspan coining and popularizing the term, "irrational exuberance" was given around that time. Here's the quote from the speech given December 5, 1996.

"Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"

To modify the title, "Is that all There Is?", of a melancholy song recorded by Peggy Lee in 1969, is that all it was?

Is everything in the real economy of the world that has happened since 1995 simply been irrational exuberance? I choose that year since 1995 as that year was the lift off of the 1990s bull market.

Obviously some was simply irrational exuberance of one kind or another. Here's my list.

1. The tech bubble - billions were transferred from foolish investors and institutions to sellers of inflated shares in unprofitable or overvalued technology companies.

2. The housing bubble - more billions - trillions ? - wasted on homes that now no one wants in the sun & surf belt and for McMansions in exurbia.

3. The financial bubble - trillions wasted on unproductive financial engineering and speculation in hedge funds and Wall Street and big bank trading operations.

Who benefited: CEOs and selling stockholders of tech firms; grantees of stock options; grossly overpaid CEOs and CFOs and many other upper level executives of nearly every major corporation; housing speculators and big builders who sold stock in time; traders and hedge fund managers and private equity managers who created nothing, reaped billions in pay and sold before the collapse; and money managers in general.

So there was a lot of irrational exuberance.


A lot of real change and improvement occurred. Here's my list.

1. The Soviet Union collapsed peacefully and hundreds of millions of newly free people slowly became part of the free world.

2. China and India emerged from stifling communism and socialism, respectively, bringing the energy of billions of people into the global economy.

3. The Internet was a "Big Bang" leading to exponentially growing, virtually free access to information, goods and services for anyone, almost anywhere in the world.

Maybe my list will grow, but it's 5:30 AM and I need to finish this post.

Obviously the world is much wealthier and more productive than it was in 1995. The panic of the rich and hedge funds will soon run its course, and the induced panic in the public will also end then.


Very bad day yesterday. I plan to do a partial re-allocation this morning, as I need to buy some stocks. The fixed income classes in the Krypto Fund are too big. Tomorrow I will write about what I do today.

Word of the Day

"Execration" - noun [$10] from the card file.
Execration means 1. the act of cursing; 2. a curse; 3. someting that is cursed or loathed.
Sentence: Bunkerman withhheld his execration when asked if he would consider investing in a hedge fund, and replied sarcastically instead.

Le Mot du Jour

"Tourbillon" - noun, masculine.
Tourbillon means 1. (de vente - of wind) whirlwind; (dans 'l'eau - in water) eddy, whirlpool; (physics) vortex; 4. (figuratively) whirl.
La Phrase*: Si vous semeriez le vent, vous récolterez le tourbillion.
Sentence: If you sow the wind, you will reap the whirlwind. [paraphasing a famous quote from the Bible.]

[* fixed prior blunder ]

Monday, March 2, 2009


Global warming has been delayed. Weather here is driving snow and 20F temperature.

There are reports of more hedge fund liquidations, and the public seems to be selling out of equities.

AIG reports huge losses and gets more support - no surprise.

HBC is doing a private rights issue. HBC seems to be the only bank in the world that is able to raise capital privately now. I own some and will take up my rights, buying more stock at the offer price when it comes.

Futures are down big as are European stocks - usually this means a bad day.

I arose late this morning - may post more later.

Word of the Day

"Orthoëpy" - noun [$10]
Orthoëpy means the study of the (correct) pronunciation of words.
Sentence: An application of orthoëpy is its own pronunciation, viz. the trema (two dots) over the 'e' mean that it is pronounced individually and not as a diphthong with the 'o': or - tho - e - pi with the 'e' long as in feet.

Le Mot du Jour

"Échéance" - noun, feminine: la échéance
Échéance means expiration date, maturity day; term, run (econ)
La Phrase: À longue échéance, nous sommes tous morts.
Sentence: In the long run, we are all dead.