No, American Banks DON'T Need to Be Big to Compete with Bigger Foreign Rivals
As the markets once again approach historic highs - the overly exuberant tone, extreme complacency and weakness in the economic data, bring to mind Bob Farrell's 10 investment rules. These rules should be a staple for any long term successful investor. These rules are often quoted yet rarely heeded - just as they are now. Farrell became a pioneer in sentiment studies and market psychology. His 10 rules on investing stem from personal experience with dull markets, bull markets, bear markets, crashes and bubbles. In short, Farrell has seen it all and lived to tell about it. Despite endless warnings, repeated suggestions and outright recommendations - getting investors to sell, take profits and manage your portfolio risks is nearly a lost cause as long as the markets are rising. Unfortunately, by the time the fear, desperation or panic stages are reached it is far too late to act and we will only be able to say that we warned you.
Just watch markets lately and one realizes rather fast that more job cuts are on the way, and in a major way all across the spectrum from financial analysts, stock analysts, traders in most products, back office support staff, and management.
"Under the terms of the agreement, which has been unanimously approved by Heinz’s Board of Directors, Heinz shareholders will receive $72.50 in cash for each share of common stock they own, in a transaction valued at $28 billion, including the assumption of Heinz’s outstanding debt. The transaction will be financed through a combination of cash provided by Berkshire Hathaway and affiliates of 3G Capital, rollover of existing debt, as well as debt financing that has been committed by J.P. Morgan and Wells Fargo. Berkshire Hathaway owns and invests in leading businesses across a variety of industries, including numerous iconic brands. 3G Capital is a global investment firm focused on long-term value creation, with a particular emphasis on building and expanding great brands and businesses. Advisors for this transaction include: Centerview Partners and BofA Merrill Lynch as financial advisors to Heinz and Davis Polk & Wardwell LLP as legal advisor to Heinz. Moelis & Company acted as advisors to the Transaction Committee of Heinz’s Board of Directors and Wachtell, Lipton, Rosen & Katz served as legal advisor to the Transaction Committee of Heinz’s Board of Directors. Lazard served as lead financial advisor. J.P. Morgan and Wells Fargo also served as financial advisors to the investment consortium. Kirkland & Ellis LLP is acting as legal advisor to 3G Capital. Munger, Tolles & Olson LLP is acting as legal advisor to Berkshire Hathaway."
Europe’s banks are totally insolvent and have not been fixed. No EU leader is going to tell you this because their jobs depend on convincing people that everything is fine. Bankia was supposedly “fine” right up until the truth came out. Just like the Wall Street banks were “fine” going into 2008.
Back in 2007, at the peak of the credit and housing bubble, Wall Street knew very well the securitization (and every other) party was ending, which is why the internal names used for most of the Collateralized Debt Obligations - securitized products designed to provide a last dash trace of yield in a market in which all the upside had already been taken out - sold to less sophisticated, primarily European, investors were as follows: "Subprime Meltdown," "Hitman," "Nuclear Holocaust," "Mike Tyson's Punchout," and, naturally, "Shitbag." Yet even in the last days of the bubble, Wall Street had a certain integrity - it sold securitized products collateralized by houses, which as S&P, and certainly Moody's, will attest were expected to never drop in price again. But one thing that was hardly ever sold even in the peak days of the 2007 credit bubble were securitizations based on personal-loans, the reason being even back then everyone's memory was still fresh with the recollection that it was precisely personal-loan securitization that was at the core of the previous, and in some ways worse, credit bubble - that of the late 1990s, which resulted with the bankruptcy of Conseco Finance. Well, in a few short days, those stalwarts of suicidal financial innovation Fortress and AIG, are about to unleash on the market (or at least those who invest other people's money in the absolutely worst possible trash to preserve their Wall Street careers while chasing a few basis points of yield) the second coming of the very worst of the last two credit bubbles.
With a modest premium over yesterday's closing price (and 25% premium to Jan 11th price), and thanks to a big hand from Microsoft (with a bridge not an equity participation), Michael Dell (and Silver Lake) are taking Dell private.
- *DELL TO BE ACQUIRED BY MICHAEL DELL-SILVER LAKE FOR $13.65-SHR
- *DELL TO BE BOUGHT IN DEAL VALUED AT $24.4 BILLION :DELL US
- *DELL DEAL TO BE FINANCED BY FUNDS INCLUDING $2B MICROSOFT LOAN
- *DELL SAYS THERE IS NO FINANCING CONDITION :DELL US
- *DELL PACT PROVIDES GO SHOP PERIOD FOR 45 DAYS :DELL US
Funding by BofAML, Barclays, CS, and RBC - better hope the CLO demand keeps up. Full PR below:
Exxon reported 4Q profit at a five-year high boosted by its refining arm. However, Delta Airlines (DAL) can’t tell a similar success story with its newly acquired refinery at Trainer, PA.
Yesterday the stock of Italian offshore oil services company Saipem SpA imploded nearly 40% after the company said it expected 2013 net profits to be, oh, just around 50% below current consensus. In other words, merely another case of irrational investor exuberance where actual corporate cash flow is orders of magnitude below where the sellside expected it to be, and so indicative of what happens every time hopium collides with reality (and, tangentially, is the real valuation case for most public stocks were they to report real, not GAAP-massaged earnings). Only in this case there was a lot of hopium, because none other than Bank of America placed some 10 million share of Saipem stock at €30/share just hours ahead of the news release that sent the stock crashing! Nothing like getting a 40% wipeout minutes after naively believing the lies from the most incompetent bank of all time. "This is a disaster for the buyer of the placed shares and it is a disaster for Bank of America Merrill Lynch," one trader said. As Dow Jones reports, "Several traders said Tuesday's buyers, who face huge losses, are likely to push to revoke the deal, and that Bank of America will ask the seller if they had insider knowledge of the imminent news." But borderline criminal incompetence on the side of BofA is nothing new. Where this story gets really surreal is the response of the Italian regulato Consob, which this morning did the only thing it could do: it banned all shorting of the stock.
It was rumored that the 2008 crisis hit the Queen of England particularly hard – over USD 40 million in stock market losses. This experience must have jilted something, as when The Queen was visiting the esteemed London School of Economics she asked the professor a rather “un-queen” like question – why did economists fail to predict the biggest global recession since the Great Depression? Speaking on behalf of economists, investment managers and mutual fund sales people everywhere, the professor responded that “at every stage, someone was relying on somebody else and everyone thought they were doing the right thing.“ In short, no one could have predicted the 2008 crash. Meanwhile, in the parallel universe called America, Ben Bernanke January 2013 The Queen was selling everyone the exact same story. If the famed London School of Economics and the Chairman and full committee of the US Federal Reserve were unable to predict the crisis, what hope does the World have with predicting future crises? In actual truth, and despite claims by the US Federal Reserve and the London School of Economics, many people accurately predicted the collapse of the US housing market and the subsequent collapse of the stock market. Fortunately, it doesn’t have to be that way. Accepting, understanding, and embracing the fact that today there are plenty of investment professionals who are willing to view the World objectively should be comforting.
From a valuation perspective, Chinese equities do not, at first glance, look to be a likely candidate for trouble. The PE ratios are either 12 or 15 times on MSCI China, depending on whether you include financials or not, and do not scream 'bubble'. And yet, China has been a source of worry for GMO over the past three years and continues to be one. China scares them because it looks like a bubble economy. Understanding these kinds of bubbles is important because they represent a situation in which standard valuation methodologies may fail. Just as financial stocks gave a false signal of cheapness before the GFC because the credit bubble pushed their earnings well above sustainable levels and masked the risks they were taking, so some valuation models may fail in the face of the credit, real estate, and general fixed asset investment boom in China, since it has gone on long enough to warp the models' estimation of what "normal" is. Of course, every credit bubble involves a widening divergence between perception and reality. China's case is not fundamentally different. In GMO's extensive discussion below, they have documented rapid credit growth against the background of a nationwide property bubble, the worst of Asian crony lending practices, and the appearance of a voracious and unstable shadow banking system. "Bad" credit booms generally end in banking crises and are followed by periods of lackluster economic growth. China appears to be heading in this direction.
I read that Rich Bernstein, former chief investment strategist at Merrill Lynch, is very optimistic about US stocks; he believes we are at a point similar to where the market was in 1982 – at the beginning of the 1982-2000 secular bull. After you’ve gone through my slides, you’ll understand why it is so hard for me to share Rich’s excitement.
AIG Has Every Right & Responsibility To Sue The US For Excessive Interest Payments On It's Bailout! That's Right, I Said It!!!Submitted by Reggie Middleton on 01/09/2013 10:28 -0500
AIG shareholders aren't just paying interest on its own bailout, they are paying (paid) hefty interest charges on the bailout of the most connected entity in the history of finance, the VAMPIRE SQUID, Goldman Sachs!
- Secret and Lies of the Bailout (Rolling Stone)
- Banks Win 4-Year Delay as Basel Liquidity Rule Loosened (BBG)
- Hedge Funds Squeezed With Shorts Beating S&P 500 (BBG)
- Bankruptcy regime for nations urged (FT)
- Is the Fed Doing Enough—or Too Much—to Aid Recovery (WSJ)
- Cracks widen in US debt ceiling debate (FT)
- McConnell Takes Taxes Off the Table in Debt Limit Negotiations (BBG)
- Abe Seen Spending 12 Trillion Yen to Boost Japan’s Economy (BBG)
- Monti, Berlusconi Spar on Taxes in Weekend Media Barrage (BBG)
- Cameron Sets New Priorities for U.K. Coalition (BBG)
- Defiant Assad Rules Out Talks With Rebels (WSJ)
- Korea Seen Resisting Rate Cut as Won Threatens Exports (BBG)
You truly have to be mentally challenged if you follow the gold/silver market action and cannot appreciate something is very amiss, as per the confused Mitsui gold people, as brought to your attention the other day.