The Automaker Smackdown

I thought the carmakers were going to get everything they demanded, no strings attached. I'll admit that I didn't see this coming:

The White House rejected turnaround plans from General Motors Corp. and Chrysler on Monday, warning that more concessions were needed from unions and creditors before they could be approved. Fears of an automaker bankruptcy have been looming over investors for months, and the latest developments made the market even more uneasy about the industry.

Another CEO bites the dust. Carmakers are going to have to get seriously small and forget about double-digit topline growth if they want any kind of future.

Nota bene: Anthony J. Alfidi holds no position in any automaker.

The Haiku of Finance for 03/28/09

I-banker paycheck
Made of sterner stuff than law
Oligarchy rules

Calls for Restraint Fall on Deaf Ears

Leopards don't change their spots, and neither do predators in the financial world. Asking them to do so is an exercise in futility:

President Barack Obama told chief executive officers from some of the largest U.S. banks to “show some restraint,” even as he courted their support for his plans to stabilize the financial markets.

And yet the thefts continue apace. BofA wants to throw more of your tax money to the Thundering Herd at Mother Merrill:

Bank of America Corp. plans to increase some investment bankers’ salaries by as much as 70 percent following the takeover earlier this year of Merrill Lynch & Co., people familiar with the proposal said.

Base pay is supposedly going up, but anyone who says total compensation will not increase must think their audience is stupid. I-bankers always find a way to get more money from their firms. Always. If you don't believe me, just read this:

Goldman Sachs Group Inc.’s top 10 executives received $49.6 million from their investments in hedge funds and private equity funds during 2008, more than most of them earned in compensation after agreeing to forgo bonuses.

See, i-bankers who are denied compensation from normal cash flows can make up for it in other ways, such as selling stakes in proprietary funds back to the firm. These games are going to continue until Washington gets serious about prosecuting executives at banks that misuse TARP money.

The Haiku of Finance for 03/27/09

States are losing jobs
Yet inflation is ignored
Prices climb away

Jobless States, Plus Real Spending Declines

Unemployment shows no sign of bottoming out:

More states logged double-digit unemployment rates in February, with North Carolina and Rhode Island seeing their rates hit record highs.
(snip)

Seven states have unemployment rates that topped 10 percent last month. That's up from four states in January.

This is what happens when you outsource highly skilled manufacturing jobs to China and replace them with brokers pushing paper into a FIRE economy. Creating more paper money to light on fire (my puns rock!) won't bring back lost jobs, but it will drive up prices:

A price gauge tied to consumer spending rose by 0.3 percent in February and was up 0.2 percent excluding food and energy, indicating that the recession has contributed to a significant moderate in inflation pressures.

That little tidbit is buried at the bottom of supposedly good news on a consumer spending increase of 0.2%. Let's be clear about this: If consumer spending increased by 0.2% this February but the corresponding price gauge increased by 0.3%, the difference between the two is a decline in spending of 0.1% in real terms! I can't be the only one who noticed that!

I refreshed my bearish option positions this week. Now you know why. As the Mogambo Guru might say, this investing stuff is easy!

Nota bene: Anthony J. Alfidi is short uncovered calls on SPY and IWM.

The Haiku of Finance for 03/26/09

Big regulator
Watching over all finance
Long overdue move

Iron Fist of Universal Regulation Coming to Punch Wall Street . . . and Silicon Valley

Say hello to the new boss, not quite the same as the old boss:

Treasury Secretary Timothy Geithner on Thursday called for broad reforms to curb risk taking on Wall Street, including a new regulator to oversee the entire financial system in a bid to restrain behavior that led to the worst credit crisis since the 1930s.

The U.S. is about to create the equivalent of the U.K.'s Financial Services Authority to keep all of these spoiled preppies in line. Further down the article, we see just how large Uncle Sam's regulatory maw will be:

In one key move, Geithner said hedge fund advisers and others who control big pools of capital like private-equity funds and venture capital firms should be forced to register with the Securities and Exchange Commission.

Oh snap, they're going after PE and VC. Is that really necessary? It's not like VC partnerships have 30:1 leverage like zombie banks. That probably means I'll have to register Alfidi Capital at some point. I guess that's a small price to pay to keep the big boys in line.

The Haiku of Finance for 03/25/09

Pension plans nix stocks
But bond yields disappoint now
Just wait 'til next year

Pensions Plan for Poor Performance

Pension plan managers are growing shy after getting burned by equity markets:

After sustaining record losses in 2008, U.S. pension funds are unlikely to return to the high level of stock market allocations favored before the global financial crisis and will probably favor greater bond allocations, the author of a study said on Tuesday.

Unfortunately for both plan sponsors and this study's authors, they're going to get burned again. The bond market is going through its own bubble phase now; any investor reallocating heavily to fixed income (esp. Treasuries) right now is going to be very disappointed when Fed-engineered inflation rots away their returns.

Nota bene: Anthony J. Alfidi holds no bonds at this time.

The Haiku of Finance for 03/22/09

Buy some bad assets
Just get loans from Treasury
Quick way to get rich?

Treasury's Plan Leaks Out

A part of the Treasury's rescue package is slowly coming into view:

The initiative will seek to entice private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases and also sharing risks if the assets fall further in value.

The Public Investment Corp. may turn out to be a boondoggle for taxpayers, but its subsidized loans for asset purchases will be a boon to hedge funds and other private investors. I may just take a look at the Corp.'s eligibility requirements to see if I can qualify to buy some distressed assets.

The Haiku of Finance for 03/21/09

Equities go down
Bond market overvalued
Gold doing just fine

The Haiku of Finance for 03/20/09

AIG payouts
Anger many taxpayers
Bailout jeopardized

Microsoft Still After Yahoo; A Potential Special Situation Play

Told ya so!

Microsoft Corp. Chief Executive Steve Ballmer is still signaling an interest in a deal to buy part of Yahoo Inc.

Mr. Ballmer had to wait a decent interval after Ms. Bartz took over Yahoo to avoid any perception that a proposed deal would be a slight against Jerry Yang. IMHO once they sit down to negotiate, the final deal will be to buy all of Yahoo and not just the search business. Microsoft never ever ever walks away from a strategically necessary acquisition, and Yahoo is a much more affordable target now that its shares trade at around half of where they were a year ago.

Nota bene: Anthony J. Alfidi holds no position in MSFT or YHOO at this time.

The Haiku of Finance for 3/19/09

Transportation woes
Frieght carriers suffering
No good buys right now