Archive - Oct 19, 2009

"My view is that we are still in a secular bear market...My big concern is that the market has gotten ahead of the economy. The S&P is pricing in $85 dollar of operating earnings which would be a double from where we are right now, and it usually takes four to five years to double earnings off a recession low... The market has clearly overshot the fundamentals. The government should be promoting more of a savings culture...I have a tough believing time you can destroy $14 trillion of net worth in the U.S. - right now bank lending is contracting at 15% annual rate and who is filling the void: the Fed, the FHA, Fannie, Freddie..." - David Rosenberg

• Must read Abelson: A whiff of reality (Barron's)
• BB&T reports slumps as credit issues weigh (Reuters)
• Dutch DSB Bank bankrupt after sale failure (BBC)
• CIT's changes do little to enhance debt swap, according to CreditSights (Bloomberg)
• Gennett ad sales still dropping despite Q3 profit (AP)
• C'mon Ben - it's time to raise rates (Barron's)

• Asian currencies advance for a seventh week as growth, yields draws funds.
• Asian stocks fell as losses at Casio, Yaskawa Electric spook expectations of recovery.
• Business-Jet demand likely to skid before recovering: Honeywell Intl.
• China’s economy grew by over 7% in the first nine months of the year: Govt official.
• China's regulator urged 5 biggest state lenders to maintain a 'reasonable pace' of lending.
• China's growth exceeds 7 pct in January-September, will easily hit 8 percent target.

Let me know the chances of the FDIC's absorbing a behemoth such as the CDO trading, CDS writing, off balance sheet VIE having, QSPE bulging, California and Florida Zero recovery 2nd lien sporting Wells Fargo in the case some of its arcane and non-performing assets really hit the fan. I am getting ahead of myself though. Let's take this from the beginning.

The following post is a revision of an article I wrote for my blog. The topic is the similarities between the leap of faith that investors took when they gave their money to Bernie Madoff and the leap of faith required of those who currently own and buy shares of Goldman Sachs. Upon some reflection, there are a number of interesting parallels. The data does not include the most recent earnings report, but given another incredible performance this quarter I thought the commentary was still very relevant.