Barack In Wonderland

It would appear my imagination was pretty accurate. President Obama announced today the bankruptcy of Chrysler. However, I’m a little sketchy on what the President said. No, not on his belittling of the bond holders, who thought they were investing in an asset, that, by law, comes ahead of stock holders (spelled UAW), that’s just political.

What’s confusing me is that the President said this bankruptcy would take only thirty to sixty days. I understand that Chrysler will file a reorganization plan by August 28th. Let’s see, I know the President is good, and he guarantees things, but April 30th to August 28th.....sixty days? My math says 121 days, but who am I to disagree with the President.

To quote Alice in Wonderland, things are getting “curiouser and curiouser.”

Till next time,

Bill


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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Time Flies When You're Having Fun

Happy 100th day to President Obama! Will he announce the bankruptcy of Chrysler at his press conference tonight, or will he wait until tomorrow?

Or, maybe I’m just imagining it.

Till next time,

Bill


P.S. 3.10% yield on the ten-year treasury after today’s Fed announcement. Could 4% be in its future?



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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Play It Again, Sam

Lawrence Welk used to say: “Once again, with feeling.”

Commercial real estate is a $3.4 trillion problem that’s just beginning. One example, on April 23, Fontainebleau Resorts, which owns the Las Vegas project Fontainebleau Las Vegas, filed a $3 billion lawsuit against several large banks, Merrill Lynch Capital Corp., and other lenders. The lawsuit claims the banks reneged on their commitments to provide pre-arranged funding to complete the Fontainebleau Las Vegas project.

Haven’t we seen this story before? I think it was called “housing.”

Till next time,

Bill



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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

All Clear?

Over the past few years, we have enjoyed the experience of first watching Ben Bernanke, then Hank Paulson, (or was it first Hank Paulson, and then Ben Bernanke, I sometimes got that confused), appearing in front of the television camera on a daily basis telling us the subprime mortgage problem had been contained without threat to the economy, there would be no recession, and finally, our banking system was strong, viable, and the envy of the world. You know those results. Now it appears that we are to be treated to a daily lecturing by Treasury Secretary “Little Timmy Geithner” (my quotes), on how the proper corrective measures have been, and are being taken, to put the global crisis in the past.

Geithner worked at the IMF (International Monetary Fund) for two years, and as much as I dislike the some of the IMF’s policies, I think it’s noteworthy to see if they concur with their former employee. The G20 Financial Ministers, while meeting in London last month, directed the IMF to find out precisely how the balance sheets of the world’s major banks would look if they got back to lending at the approximate same level as before the crisis began. In a sense, an unbiased stress test. Yesterday, they published the “Global Financial Stability Report.” Page thirty-three says it all. “If banks were to bring forward, to today, loss provisions for the next two years, before expected earnings, U.S and European banks, in aggregate, would have tangible equity close to zero.” In layman’s terms, the entire global banking system would be bankrupt if they wrote off all the toxic assets that had been discussed ad nauseam, and that’s after all the money that has already been thrown at the problem. The IMF calculated that not enough money has been thrown at the problem, yet. More will definitely be needed.

Little Timmy should have read the IMF report, especially page thirty-three, before he declared all is well. I guess he figured if Ben and Hank could declare an all clear signal, and the stock market would buy it, why couldn’t he?

Till next time,

Bill



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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

In Goldman, Sachs We Trust

It was recently announced that Goldman Sachs ($121.19 - 4/15/09) initiated a $5 billion public offering of common stock in order to pay back the money borrowed in the TARP program. Once again, the pundits declare Goldman Sachs: “Brilliant, Wonderful, Masterful, The Best of Wall Street, Geniuses, Perfect Timing.” Wait a minute. When the same adjectives were used to describe Goldman Sachs on July 26th 1929, they were issuing a trust called the Shenandoah Group, for over $102 million. Then on August 20th of that same year, they issued a trust called The Blue Ridge Corporation for $142 million. On both issues, insiders were given a substantial discount to what the American public would ultimately pay for the stock. Slick trick.

If you could have looked inside the Shenandoah Group, you would have found the same board of directors as the Blue Ridge Corporation. Also, inside that same trust, the Shenandoah holdings were primarily Blue Ridge stock. Inside the Blue Ridge Corporation, the holdings were, you guessed it, the Shenandoah Group stock. In addition, it was all wrapped up in a third trust called the Goldman Sachs Trading Corporation. In hearings of April to June of 1932, the following occurred:

Senator Couzens: Did Goldman Sachs and Company organize the Goldman Sachs Trading Corporation?
Mr. Sachs: Yes, sir.
Senator Couzens: And it sold its stock to the public?
Mr. Sachs: A portion of it. The firms invested originally in 10% of the entire issue for the sum of $10 million.
Senator Couzens: And the other 90% was sold to the public?
Mr. Sachs: Yes, sir.
Senator Couzens: At what price?
Mr. Sachs: At $104. That was the old stock. The stock was split two-for-one. (Meaning $208.)
Senator Couzens: And what is the price of the stock now?
Mr. Sachs: Approximately $1.75.

Brilliant. Wonderful. Masterful. The best of Wall Street. Geniuses. Perfect timing.

Buyer beware. I’ve said it before, and I’ll say it again. Those who don’t learn from history are doomed to repeat it.

Till next time,

Bill




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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Magic Erasers

Many years ago, I was caddying for old Judge Sypes, a crusty octogenarian who walked and talked as slow as his age would indicate. But make no mistake, he was a man whose mind was as clear and concise as any twenty-five year old, and who would spend another six years on both the bench, and the golf course. For one of the holes, I marked his scorecard incorrectly, having given him a five, instead of a six. The Judge quickly pointed out my error; he played and scored the game of golf with the same honesty he took to the bench. As I was crossing out my mistake, I said: “Why don’t they have erasers on these pencils?” “Well,” the Judge said, “If they gave erasers to those who don’t respect the game, when the scorecard is handed in, the truth and the scorecard may be at odds.” I didn’t quite understand because I always thought that in golf, whether high or low, the score was just the basic honest truth, like Judge Sypes said.

Recently, by changing back to the mark-to-model method, the Financial Accounting Standards Board (FASB) gave the banking community erasers for their pencils. Keep in mind that mark-to-model is a system of reporting what you think assets are worth, versus mark-to-market, which gives a current unbiased value of your assets. By succumbing to the pressures of politicians, TV pundits, Wall Street, and the bankers themselves, we have reverted back to the days of what started our current economic fiasco. Leverage based upon fictitious assumptions, was, is, and always will be, the death knell of a financial system.

As the earnings and guidance are reported this week, the stock market may move higher, in anticipation that the worst is over. Never mind that the banks are sitting on trillions of dollars of worthless assets. Never mind that unemployment may not be a lagging indicator, but a leading indicator, and never mind that house foreclosures, credit cards, and leveraged commercial real estate may experience a tsunami of destruction.

Not to fear, the bankers have their erasers, and all’s right with the world! Judge Sypes would probably agree that using the eraser to your best advantage may be legal. But he, I’m sure, would be as disgusted as I am.

Till next time,

Bill



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A disclaimer: None of the content published on BillTatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.