SAW simply can't figure out the rationale for this silly scheme in the US, now the latest recipient of government largesse. Cash is handed out for returning an old non-fuel-efficient car, which is then applied as part payment for the purchase of a newer fuel-efficient car.
Given that vast swathes of the American population are now in debt, all this scheme does is add debt on debt.
© 2009 Sanjeev Aaron Williams All Rights Reserved
Thursday, August 06, 2009
Wednesday, July 01, 2009
Show Me The Money
A stunning graphic that portrays the huge US bailouts between March 2008 and March 2009 - put in an historical context.
The graphic is taken from www.ritholz.com/blog
As that blog article says,
".....the bailouts managed to spend far in excess of nearly every major one time expenditure of the USA, including WW1&2 (omitted from graphic), the moon shot, the New Deal, total NASA budgets (omitted from graphic), Iraq, Viet Nam and Korean wars — COMBINED".
Total cost: US 15 Trillion and counting.
Tuesday, June 30, 2009
Lessons From Michael Jackson
1. OK, you've got tons of talent - but your 2 biggest assets are your health and your time. Let either of those slip, and you've had it.
2. Should those in your organization even be there?
3. How did they get into the organization in the first place?
4. Are you clear on what authority they actually have, as opposed to the authority they think they have?
5. Who's paying them? For what? And Why?
6. What's your cashflow burn rate? Per Week? Per Month?
7. How strong is your ability to draw on new sources of funding?
8. Are your contractual commitments clearly spelt out?
9. Will you be able to keep those commitments?
10. What are your financial, logistical and creative resources to stage a commercial comeback?
11. Do you have the physical, emotional and mental stamina to see it through?
12. What's your corporate succession policy after you've left the scene or the planet?
13. Just how much drama will you tolerate before creativity dies?
14. Your business legacy will be ..........what, exactly?
© 2009 Sanjeev Aaron Williams All Rights Reserved
2. Should those in your organization even be there?
3. How did they get into the organization in the first place?
4. Are you clear on what authority they actually have, as opposed to the authority they think they have?
5. Who's paying them? For what? And Why?
6. What's your cashflow burn rate? Per Week? Per Month?
7. How strong is your ability to draw on new sources of funding?
8. Are your contractual commitments clearly spelt out?
9. Will you be able to keep those commitments?
10. What are your financial, logistical and creative resources to stage a commercial comeback?
11. Do you have the physical, emotional and mental stamina to see it through?
12. What's your corporate succession policy after you've left the scene or the planet?
13. Just how much drama will you tolerate before creativity dies?
14. Your business legacy will be ..........what, exactly?
© 2009 Sanjeev Aaron Williams All Rights Reserved
Wednesday, May 13, 2009
US Bank Stress Tests
The 19 - bank stress tests in the US are unconvincing and predictable. While the intent might have been laudable, the heavy back room politicking that triggered the abandonment of mark-to-market accounting weeks beforehand, laid the groundwork for an equally creative outcome of the tests. SAW remains wary – there’s still the weak state of the commercial real estate market, the default rates of prime mortgages, the true extent of the reset of Option ARMs and a potentially major credit card default. The latter if it materializes, would dwarf the combined capitalization of some well known credit card issuers.
So…..what are price earning ratios on banks worth these days? As we wait for the next shoe to drop, the tension in the bank balance sheets is between retained earnings and writedowns.
And guess which one is going to win? Yeah, the writedowns, since retained earnings will drop as current earnings shrivel. It's a little premature to point out "green shoots" or to claim that the financial system is "healing" (per Tim Geithner).
© 2009 Sanjeev Aaron Williams All Rights Reserved
So…..what are price earning ratios on banks worth these days? As we wait for the next shoe to drop, the tension in the bank balance sheets is between retained earnings and writedowns.
And guess which one is going to win? Yeah, the writedowns, since retained earnings will drop as current earnings shrivel. It's a little premature to point out "green shoots" or to claim that the financial system is "healing" (per Tim Geithner).
© 2009 Sanjeev Aaron Williams All Rights Reserved
Tuesday, March 03, 2009
Humility & Humongous Banks
SAW having kept his mouth shut for a few weeks to see which way the financial winds of change were blowing, has discovered that other than shaking like leaves in a hurricane, the global elite of bankers and the hapless politicians don’t have a clue.
Davos 2009 was a washout, with some CEOs too embarrassed to attend.
The European Union has discovered to its horror that it’s not unified at all, but consists of 3 distinct economic blocs: firstly Germany France and the U; secondly the southern European countries like Portugal, Spain, Italy and Greece whose real estate bubble has burst; thirdly the impoverished Eastern European countries to whose toxic debt the other European countries were exposed in addition to the US garbage. With Germany emerging as a reluctant central banker to the EU, there are pleas to avoid protectionism within the Eurozone which carries with it the spectre of a new Iron Curtain between rich and poor Europe.
Obama grins while throwing trillions at an unquantifiable problem and simultaneously promises new infrastructure projects and increased government stakes in Citigroup and others that still pretend to be banks. How he proposes to spread the wealth back to the middle and working class in the face of the greatest and utterly fraudulent engineered scam, that for 7 years sucked the wealth into the hands of the (unprosecuted) banking elite, remains to be seen.
No doubt as part of his inclusive policies, he’ll have to defer to those bankers complaining that they’re being unfairly bashed. The American Bankers Association bleated to Obama that very few banks were involved in the toxic debts. Numerically, that may be true. But those on Wall Street and elsewhere who were involved, leveraged their exposure to outrageous levels and sabotaged the real economy. Any good that came out of it was the realization that merging fractional reserve banking with the debt addiction of US consumers, for whom repayment was a novel concept, was bound to affect the banks Balance Sheet sooner or later – no matter how exotic the debt instrument or the credit default swap daisy chain that purportedly backed it.
Case in point, AIG that insured those credit default swaps and is now described as a “systemic risk”, is back for a second bite of US30 Billion the government cherry after its first chomp of US150 Billion. It faced a credit downgrade in the face of a US 61.7 Billion loss for the last 3 months of 2008 (apparently the largest quarterly loss in corporate history).
It’s right up there with the talent to be found at RBS.
Or HSBC, whose sub-prime exposure to the US market necessitated a cash call of US 17.7 Billion through a rights issue in the UK (the biggest in UK history), the closure of its consumer lending business in the US, and a cut in dividend.
What really cracked SAW up were HSBC’s statements of contrition, which included this gem that there had to be a reversion to some of the older principles of banking in terms of a simpler sense of providing good customer service, good relationship management and a sensible approach to liquidity.
“Reversion”???!!! why on earth would an apparently prudent bank diverge from those principles?
Oh yeah……….unbridled greed coz everybody else was doing it.
© 2009 Sanjeev Aaron Williams All Rights Reserved
Davos 2009 was a washout, with some CEOs too embarrassed to attend.
The European Union has discovered to its horror that it’s not unified at all, but consists of 3 distinct economic blocs: firstly Germany France and the U; secondly the southern European countries like Portugal, Spain, Italy and Greece whose real estate bubble has burst; thirdly the impoverished Eastern European countries to whose toxic debt the other European countries were exposed in addition to the US garbage. With Germany emerging as a reluctant central banker to the EU, there are pleas to avoid protectionism within the Eurozone which carries with it the spectre of a new Iron Curtain between rich and poor Europe.
Obama grins while throwing trillions at an unquantifiable problem and simultaneously promises new infrastructure projects and increased government stakes in Citigroup and others that still pretend to be banks. How he proposes to spread the wealth back to the middle and working class in the face of the greatest and utterly fraudulent engineered scam, that for 7 years sucked the wealth into the hands of the (unprosecuted) banking elite, remains to be seen.
No doubt as part of his inclusive policies, he’ll have to defer to those bankers complaining that they’re being unfairly bashed. The American Bankers Association bleated to Obama that very few banks were involved in the toxic debts. Numerically, that may be true. But those on Wall Street and elsewhere who were involved, leveraged their exposure to outrageous levels and sabotaged the real economy. Any good that came out of it was the realization that merging fractional reserve banking with the debt addiction of US consumers, for whom repayment was a novel concept, was bound to affect the banks Balance Sheet sooner or later – no matter how exotic the debt instrument or the credit default swap daisy chain that purportedly backed it.
Case in point, AIG that insured those credit default swaps and is now described as a “systemic risk”, is back for a second bite of US30 Billion the government cherry after its first chomp of US150 Billion. It faced a credit downgrade in the face of a US 61.7 Billion loss for the last 3 months of 2008 (apparently the largest quarterly loss in corporate history).
It’s right up there with the talent to be found at RBS.
Or HSBC, whose sub-prime exposure to the US market necessitated a cash call of US 17.7 Billion through a rights issue in the UK (the biggest in UK history), the closure of its consumer lending business in the US, and a cut in dividend.
What really cracked SAW up were HSBC’s statements of contrition, which included this gem that there had to be a reversion to some of the older principles of banking in terms of a simpler sense of providing good customer service, good relationship management and a sensible approach to liquidity.
“Reversion”???!!! why on earth would an apparently prudent bank diverge from those principles?
Oh yeah……….unbridled greed coz everybody else was doing it.
© 2009 Sanjeev Aaron Williams All Rights Reserved
Thursday, January 22, 2009
A Whiter Shade Of Pale
So let’s see..........World Emperor Bush rode into the sunset and hopefully, will be consigned to the trash bin of history. 44 is in, sternly warned the planet that things wouldn’t be easy, partied all night, went to church and started work.
Meanwhile US, UK and Hong Kong markets – and markets pretty much everywhere else, tanked and still are. Bank of America, which swallowed Merrill Lynch is throwing up, divested its “strategic” shareholding in a Chinese bank and screamed for a cash bailout from the Feds. They got it – US138 Billion for them, US118 Billion in guarantees for Merrill’s crap err….assets.
Citibank, the world’s global bank, is a global embarrassment with a share price to match. It’s disembowelling itself and donating part of a vital organ, the brokerage arm, into a joint venture for a capital infusion.
Royal Bank of Scotland proudly announced it had scored another first: a 28 Billion Pound loss, the biggest in British history. One assumes that its overpriced leveraged acquisition of ABN AMRO for 49 Billion Pounds – at the time the largest banking acquisition in UK history –might have contributed to its backhanded stellar performance.
The British government is all set to open the floodgates of liquidity with 350 Billion Pounds of cash. They already have precedent on their side. First it was Northern Rock’s bailout of 55 Billion Pounds in September 2007, then Bradford & Bingley in September 2008, then credit guarantees, a liquidity scheme in October 2008, something about a toxic asset buy up plan etcetera, etcetera…….plus the hint that the Bank of England could be given license to print money, effectively at will to enable “quantitative easing”. That’s assuming that buying up the crap with UK Treasury Bills doesn’t work. And remember, British interest rates are the lowest they've been in 314 years.
Meanwhile US, UK and Hong Kong markets – and markets pretty much everywhere else, tanked and still are. Bank of America, which swallowed Merrill Lynch is throwing up, divested its “strategic” shareholding in a Chinese bank and screamed for a cash bailout from the Feds. They got it – US138 Billion for them, US118 Billion in guarantees for Merrill’s crap err….assets.
Citibank, the world’s global bank, is a global embarrassment with a share price to match. It’s disembowelling itself and donating part of a vital organ, the brokerage arm, into a joint venture for a capital infusion.
Royal Bank of Scotland proudly announced it had scored another first: a 28 Billion Pound loss, the biggest in British history. One assumes that its overpriced leveraged acquisition of ABN AMRO for 49 Billion Pounds – at the time the largest banking acquisition in UK history –might have contributed to its backhanded stellar performance.
The British government is all set to open the floodgates of liquidity with 350 Billion Pounds of cash. They already have precedent on their side. First it was Northern Rock’s bailout of 55 Billion Pounds in September 2007, then Bradford & Bingley in September 2008, then credit guarantees, a liquidity scheme in October 2008, something about a toxic asset buy up plan etcetera, etcetera…….plus the hint that the Bank of England could be given license to print money, effectively at will to enable “quantitative easing”. That’s assuming that buying up the crap with UK Treasury Bills doesn’t work. And remember, British interest rates are the lowest they've been in 314 years.
Australia is not looking so thrilled. Access Economics reported that the country is heading towards the sharpest recession in its history. Plumetting commodity prices mean a decrease in government royalties, taxes and increasing budget deficits.
With the scale of the toxic debt instrument creation belatedly becoming coherent, both the US and the UK governments have announced plans to set up a special bank to absorb those assets, in exchange for equity in the surrendeing banks.r
Great….so we have creeping trans-Atlantic nationalization, the Fed prints money at will, the Bank of England can print money at will and soon the European Central Bank, given the mess that Eurozone is in, will also be printing money at will. Effectively, every white country is up the creek and the loss of confidence is damaging emerging economies. It’s worth remembering that this scale of money creation, whether individually or jointly, has never been done before. We’re all watching an experiment in which nobody knows what’s going to happen and nobody can predict how much confidence there will be in all this freshly minted cash.
© 2009 Sanjeev Aaron Williams All Rights Reserved
© 2009 Sanjeev Aaron Williams All Rights Reserved
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