Financial topics

[Higgenbotham]

http://www.bloomberg.com/apps/news?pid= ... 2B0&pos=10

The TARP watchdog has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York.

The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges.

In Senate Finance Committee testimony on April 20, Barofsky said SIGTARP would investigate seven AIG-linked mortgage-related securities similar to Abacus 2007-AC1, the instrument underwritten by Goldman Sachs Group Inc. that is at the center of a U.S. Securities and Exchange Commission lawsuit filed against the investment bank on April 16.

Leading the Charge

“I’ve been in contact with the SEC,” he told the committee. “We’re going to coordinate with them, but we’re going to lead the charge. We’re going to review these transactions.”
Barofsky and Geithner’s offices have gone toe-to-toe over AIG, alleged lax oversight of TARP funds and even over the question of whom Barofsky reports to.

Barofsky says the question of whether the New York Fed engaged in a coverup will result in some sort of action.

“We’re either going to have criminal or civil charges against individuals or we’re going to have a report,” Barofsky says. “This is too important for us not to share our findings.”

He won’t say whether the investigation is targeting Geithner personally.

[The Grey Badger]

I would like to change the subject briefly to tell you what I've been doing and why. I guess you could call it an investment.

My house - the realtor claimed - dates back to 1950. An electrical contractor digging in the back of the fuse box (now replaced) found an inspection ticket dated 1939. This past month I've had a double system failure: the actual plumbing, repairs to which "could not be guaranteed due to age of system", and the sewer line. Which is clay piping with joints every 3 feet, and roots are getting in at every joint. I decided to end the entire business of stopgap repairs and go for a total replacement. How I financed that is of interest because my stockbroker and I totally disagreed on the stock I should sell.

I inherited stock in an oil company, let's call it E-M-Erl-Bidness, which on the surface seems blue chip. Stock prices are high, dividends are being paid, and all that. But I noted three things, one from their annual report and one from one of their avowed enemies. The three things are:

1) "What business are you in?" These days any energy or fuel company had better be in the energy or fuel business; these guys are proudly, narrowly "in the Erl bidness" and nothing else. Oops. As IBM was in the Mainframe business and not the Computing business back in the day? Strike One.

2) "What are you doing to remain competitive with firms exploring other options?" Dead silence and a repeated chorus of "Drill, baby, drill!"

3) But from their avowed enemy, "A massive PR campaign to convince everybody that any talk of alternate energy and the need for other energy and fuel sources is a bunch of nonsense and a dirty environmentalist - big government plot."

Let me get this straight. The dinosaur is being threatened by the mammals. Or, IBM by Bill Gates. The cure for this is a massive ad campaign against the little mammals rather than an examination of what was going on and how to move into the 21st century. I was there for the last round of that sort of thinking, when people lost a ton of money clinging to firms with their heads in the midcentury business models and technology.

And that's what they're spending the stockholders' money on.

I told my broker "Sell. They're dinosaurs and about to go down. Just like IBM was when Bill Gates was eating their lunch." Of course, I DO have a bias in favor of technological solutions to problems! Oh, he was so reluctant to do so because E-M looks SO solid! So does a middle-aged fat cat who ignores the warnings of his cardiologist. I unloaded 150 shares and wish I'd unloaded more.

Of course, the plumbing may be a foolish investment: at my age I could end up not needing the house any day now, and it if sold, a buyer might well gut it or tear it down as old, small, and poky. Nineties thinking, which is still prevalent. But assuming I'll be around for another 10 years ---

Meanwhile, XYI! Examine your investments. Dinosaurs abound. And remember the sunset effect: if it's at its biggest and brightest, it's abotu to set.

We now return you to your regular discussion of the sins of the Treasury and of Wall Street.

[ridgel]

Excellent post, Grey Badger. I've got a 1920s era house in western Washington, and for me investing in energy efficiency and cutting my utility bills has been a much better investment than the stock market in terms of cutting expenditure. So far I've cut my water and electric bills by almost half (family of six) through insulation, air gap sealing, florescent lights, and a front-loading washing machine. My project this summer is to replace the old oil fired boiler with a gas boiler - at current rates that will yield about $1200/yr. How much JNJ stock do you need for that kind of dividend?

The risks are exactly as you stated them. I might have to sell the house for some reason and home buyers rarely take those kinds of things into account as much as they're worth. But I don't have to stay that long for a payback. I get a more comfortable house in the meantime. And it's a return that's pleasantly immune from the typical inflation/deflation issues.

[abs]

Grey Badger -

I think you make a very persuasive point. I own a Telecom stock that was gifted to me 15 years ago and I fear exactly the same thing as you with your energy company. Yes, the stock pays a nice dividend and the "street" thinks it's a great investment. I recently heard an analyst talking about the US Telecom industry and that the reality is most of these companies earn the lion share of their profits from old tech copper lines. Although it is true that wireless has grown over time, the market is very competitive for wireless and in turn there is substantial downward pressure on pricing. At the same time, businesses and homes are moving away from the old copper infrastructure since other options abound (i.e. wireless, cable, etc.). Bottom line, according to this one analyst, is that long term these big telecoms in the US are looking at decreasing top line revenues. I've been watching this rally and feeling like now is as good a time as any to sell . . . I bet, as you stated, there are a lot of companies like that.

One other thought - why are you even dealing with a "broker"? You should be able to buy/sell through an online portal for under $10/trade and buy or sell whatever you want without lip service from some kid . . .

By the way, I've noticed that Apple and Google are off the charts - how long until something happens and those stocks crash? Bets anyone?

[OLD1953]

Given the shift in the discussion here, I'd like to point out there is a well proven and available technology that will reduce home energy bills by 25% to a third, isn't overly expensive and isnt' a bit obtrusive into your life, any more than any other appliance.

That's solar water heating. Whether or not you are in the proper place for solar electric, you almost certainly are for solar hot water. The capture of energy is much better, the costs aren't huge, and the payback can be as short as two years. Plus, you get the tax credit if you do it this year.

Now, why this isn't promoted more, you'll have to ask someone else. My wife's talking to installers about getting it done right now, since she's sick of seeing the electric bills jump every few months. And that's the biggest energy saver, short of insulating an uninsulated house, you will ever find.

[The Grey Badger]

I should have asked about it. The short answer is that in a house this age, retrofits can be truly expensive. But since the new water heater is already in, I will live with second best. But thanks for the reminder.

[richard5za]

Call the Cops

Have a look at the 30 April article "Call the Cops" on http://ftalphaville.ft.com/blog/

http://ftalphaville.ft.com/blog/2010/04 ... -the-cops/

With any luck someone from Goldman Sachs will go to jail.

[John]

-- Europe's 'nuclear option'

Responding to postings in the "30-Apr-10 News-Politicians assign
blame/euro crisis deepens" thread.
http://generationaldynamics.com/forum/v ... ?f=4&t=327

> Could Germany simply guarantee the interest payments? It would be
> a terrible deal in the long run, and they'd quit doing it
> eventually, but short term fixes are what the world is all about
> now.

The proposed aid package is essentially nothing more than that. It
doesn't pay off any debt, but it makes the minimum payments on
Greece's credit cards for three years.

> I must say that I am a "deflationist" through and
> through. However, isn't monetizing debt extremely inflationary?
> What if they did this? What if the US decided to monetize state
> debt in the same manner? I still think the gold bugs will be
> wrong, but at the same time these types of actions certainly add
> fodder to the argument against fiat currency. Actually, if the ECB
> did this it would certainly break the union. I am not sure what it
> would mean for ours if the Feds monetized state debt. I know you
> have addressed the inflation/deflation debate to the point of
> overkill, but you have to admit that it is fascinating.

Maybe it's my obsession speaking, but I will unhesitatingly admit to
being fascinated.

When I've talked about deflation, I've always emphasized that the
dollar is the international reserve currency, which makes a big
difference. The same arguments don't apply to other currencies,
including the euro.

I frequently use the word "momentum" in my writings. This is an
important concept in Generational Dynamics, since the reason that
momentum matters is because we're usually talking about a population
of hundreds of millions of people, or even billions. People think
that all you have to do is convince President Obama or some other
politician of something, and changes occur right away. That's like
saying that all you have to do is tell the captain of the Titanic to
turn the ship around, and the ship turns around instantly. That
didn't happen with the Titanic, as we know, and it won't happen with
currencies.

The dollar currency carries a great deal of momentum, having been an
international reserve currency for a long time.

The euro currency is only ten years old, and has very little momentum
on its side. I can easily imagine scenarios where it might
hyperinflate.

The Fed has already exercised the "nuclear option," in the sense that
it has a couple of trillion dollars worth of assets on its balance
sheets, and yet there are no signs of inflation. If the Fed bails out
a state or two, I doubt that it would change much.

If the ECB employs the "nuclear option" and bails out all the PIIGS
countries, what would happen to the euro currency? I don't know, but
I would at least expect it to weaken considerably against the dollar
and the yen.

John

[John]

-- Where should you put your money?

The world's insanity seems to be reaching new fantasyland heights, as
American traders happily pour (other people's) money into the bubble
stock market, while the euro currency, and possibly the European Union
itself, are disintegrating before our eyes, and may be near collapse.

There's only one green square left on my "State of the World" graphic
on my home page. It may be time to turn that remaining square to
yellow.

I would very much like to hear recommendations on what people should
be doing right now to protect themselves.

For Americans, I think the answers are the same, at least for now:
Keep your money in bank CDs and/or stuffed in your mattress at home.
Does anyone disagree with that?

But I feel very bad for the Europeans, and I'm particularly referring
to euroland. What choices do they have? Should they try to convert
their euros to dollars (or pounds sterling or yen)? If so, where
would the dollars be kept? Should they try to obtain gold?

I would appreciate any recommendations anyone might have.

Sincerely,

John

[thomasglee]

What about some of the conspiracy theorists out there that believe all these currency failings are being created and manipulated in an effort to force the emergence of a new "super currency" that would force the world into a globally centralized monetary control system? Does any of that talk have any legs or would that be, as was mentioned in another post, just pushing debt around and not actually dealing with it?