Not Too Big to Stick it to You The banks charged 35.8 billion dollars last year in fees for bad checks! Almost 36 billion dollars for what has to be one of the smallest parts of their revenues. Anybody think the banks need more of your money? I don’t and I will continue to scream that the banks have only filthy lucre as their motivation. Now, look; I have nothing against making a profit, but I find this obscene. During this most difficult of economic times in American history when we laid out 700 billion dollars of taxpayer money because these guys were “too big to fail”; and yet they took in 36 billion just from NSF charges indicates mismanagement of the severest kind. Note to the PR departments of the banks; you ought to consider halving your NSF charges; consider taking in a measly 18 billion dollars. One more thing; I would bet that given the staggering nature of the size of these fees, there just might be some finagling going on in order to pad that number even higher. Has anyone besides me had the bank charge you 35 bucks for bouncing a check that should not have bounced? Multiply that times 300 million customers and I get a smooth 10.5 billion buck starting place. Forgive the cynicism folks, but I’m tired of getting hosed whether it be by private enterprise or my own spendthrift government. We have got to get outraged about all of this. There is a moral truth; right and wrong does exist, and this is most decidedly……..WRONG. 2009-08-10T19:23:03Z 2009-08-10 8 1 2009-08-10T19:23:03Z The jobs report came out this morning and the market liked the news. The paradox for me is that a quarter of a million more jobs were lost. This is a little like the Titanic started to sink slower before it eventually went down. I do not mean this to be doom and gloom but clearly, we are not out of the woods fundamentally as much as we would like to be. Unemployment I’ll Take Door Number Three stands at 9.5% and this causes some problems that most folks don’t think about. Let’s start with the problem this causes within the Federal Budget. The Feds have the budget predicated on 8.5% unemployment. This may not seem like such a big deal but believe me when I tell you that a full percentage point difference means a ton of Federal tax dollars not being collected which increases the deficits. When you then pile on the additional spending taking place and the trillion dollar deficit already in place with the contemplation of another trillion in health care reform, the scenario can look mighty scary. Now, throw in the fact that even though the administration says the trillion dollar cost is offset, the one percentage point difference in unemployment makes it necessary to raise 289 billion dollars from all of you in the form of additional taxes. Now, throw in what the states are doing (my own state of NC raised the sales tax a full one percent and issued a surcharge income tax on incomes over 60,000 that goes from 1 to 3%, and you start to see the measure of the problem. We are not out of the woods. There is economic work to be done but we have to start with fiscal sanity and responsibility. Failing that, we face the prospect of trading the bird in the hand for the hump backed nag behind door number three. 2009-08-07T17:31:40Z 2009-08-07 7 1 2009-08-07T17:31:40Z Lemmings, Lemmings and More Lemmings Last night, Jim Cramer of Mad Money fame onCNBC, recommended that you buy Bank of America. Here’s the problem I have with all the folks on television who tell you what stocks to buy and sell and when. You have no recourse if they are wrong. Cramer can blow up millions of people (which he has done before) with complete impunity. All CNBC need do is put up the disclaimer that whatever Cramer says is his opinion and not theirs and you can’t go after them. It matters not whether Cramer is right or wrong about the Bank of America (I kinda wonder where he was when the stock was three bucks instead of sixteen). The point is that he has no relationship with you. He cannot gauge your risk tolerance. He doesn’t know whether or not your job is stable; how many kids you have; how much debt you carry. He knows nothing about you, and yet, people hang on his every word. Not only does this make you a lemming; it makes Cramer one as well. Let me point out that myself and many, many others have been talking about the financial services industry for six months. My good friend on Fox Business, Tobin Smith two weeks ago on Bulls and Bears said that Bank America doubles in a year. (the stock was 12 at the time). So, Cramer’s recommendation, far from brilliance, is merely coat-tailing. And, that’s the point. Folks, there has not been an original idea on Wall Street since the buttonwood tree. You would do well to remember that. 2009-08-05T14:53:19Z 2009-08-05 6 1 2009-08-05T14:53:19Z The Supreme Court of the United States okayed the Fiat/Chrysler merger yesterday. The ramifications of this will be felt for quite some time given the nature of what has transpired. Let me walk you through the events of the past year. Congress approved a stimulus package with 780 billion dollars of taxpayer money to be directed at the nation's financial institutions. Chrysler and GM ended up with some of that money. How is another question, but clearly that money was not meant for the auto industry. So, Congress passed a law and the administration took it upon themselves (both Bush and Obama) to alter it by doling out TARP funds. The auto union in Indiana took exception to that saying that Chrysler cannot declare bankruptcy, void their contracts, close dealerships, etc. because they took government money unconsititonally granted by the Federal Government. The Supreme Court refused to hear the case after an initial stay and the merger is now complete. The issue now becomes what has been gained. Will Chrysler take on the attributes of Fiat? Of course they will. Those of you who naively think that Fiat will be altered because of Chrysler don't understand the nature of majority ownerhship. The Big Three is now the Big One. The only guy left standing is Ford. GM will be much smaller and Chrysler will feature putt-putt cars that nobody wants. Hummer is gone; Saturn is gone; Pontiac is gone; Buick is gone. In its place are Honda, Toyota, Hyundai, et al. How did this happen? Simple, there was a knock on the big 3's door and when they went to answer it, the voice on the other side said, "Hi, I'm from the government and I'm here to help." Folks, governments have no business in business. They can't run the Post Office, and now they own a car company, and several banks. Heaven help us. I am obviously being intentionally tongue in cheek. I think the car companies should have gone under a year ago without the billions in aid that the government gave them. That was just pouring money down a rat hole. Clearly, management must suffer some of the blame along with renegade Congressman drunk with their new found power. Suffice it to say that America is in trouble economically. The stock market has recovered some 40% off the lows in March and some believe the recession is close to becoming a bad dream. It is not. We have considerable work to do, and if the inflation monster implodes because of the largesse of the Fed (it will, probably next year), more pain is in store. Where can you hide? Where you can always hide; in the bosom of time. That is the only thing that will get us out of this quagmire. Time and lots of it, but get out we will. We always have. To those of you who sold out in March; I'm sorry, but you were warned not to do it. Consider this your second warning. 2009-06-10T16:47:45Z 2009-06-10 4 1 2009-06-10T16:59:41Z Cautiously optimistic…Emphasis on cautious Out first quarter commentary reviewed what happened in 2008 and what must occur to have markets turn around: 1. Stabilization of credit and housing 2. Growth of earnings / Positive GDP 3. Confidence – Is this the start of another depression or the next bull market. Perception The DJIA is up 16.5% (3/31/09) from its low of 6440. (source: Yahoo.com) Reality Even with the rally, the DJIA is down 11.62% for the year (source: Marketwatch.com). Now let’s address the last question. Are investors confident or is this the next depression? Quickly addressing the latter, let’s examine the programs and assets in place today. When the market crashed on Black Friday 1929, we did not have social programs like social security, Medicare, or 401(k) plans. We do now, so don’t expect to see breadlines on your television. In 1929, the Federal Reserve was established just 16 years earlier in 1913. Just as age and experiences provide us wisdom and maturity in our personal lives, time and knowledge gained from the past are providing today’s Fed Governors with the options to accomplish their task. Finally, the ’29 crash was intensified by a stock market bubble due to inflated stock prices. If this were 2000, one could make that argument but there is no speculative fluff in this market So the question is, “Where are we?” We have seen positive earnings from several financials (JP Morgan, Wells Fargo, and Bank of America, source: WSJ April 09), which is the industry that led us into this downturn. However, we do not think it is sustainable. A large portion of the profit has come from the liquidation of assets (ie. BAC sale of Chinese Bank) or abnormally high refinancing for qualified buyers. Lastly, we have seen a relaxing of mark to market accounting to increase their assets on the books. All positive signs but are they sustainable? Possible, but not probable. We must have banks lending again and until TARP is repaid, that is not likely to happen. Pretty dismal we know but let’s look at the last time banks were overleveraged. During the 1973-1974 bear market, 75% of all brokerage firms disappeared. (source: Google Finance) During that time frame, the market’s 5 year annualized return from 1973-1979 was 34.4%. We are wading through this crisis, just like we did with the Savings & Loans, LBOs, conglomerates and hyperinflation. It will take patience and discipline but this time five years from now, or possibly sooner, we will be discussing the next bubble… Treasuries? Cash? 2009-06-12T19:31:13Z 2009-04-15 5 2009-06-12T19:31:13Z The stock market has seen a 15% advance in a week. Make no mistake that it will retreat from that level because the traders are in control. These are the professional guys who buy a billion shares, get fifty cents a share and pocket 500 million. If all of that sounds foreign to you, it should. These are mutual fund managers, money managers, hedge fund guys, etc. They are not Joe and Jane Six Pack struggling to make the mortgage payment. Because the traders are in control, it is difficult to be an investor. Now, an investor is the guy who puts his money in the market through his 401k program and does it for ten, twenty, even thirty years. This is the guy who has seen his portfolio go down 40% over the last year. The trader is in it for ten minutes; not ten years. Here is how this works. When the market goes up; it’s because the trader bought it; when the market goes down; the trader sold it. That is the kind of market we are in. What should you do? Buy when it goes down. When will the traders no longer be in control; when it is no longer a trading market, and that means when the economy can sustain itself higher. When GDP resumes an upward bias; that is when the Federal Reserve will change course and start taking liquidity out of the economy instead of putting trillions into it. We are not there yet. The market, if history means anything (it does), will see six to 9 months ahead and break out of the trading range and stay there. If the consensus is right, we should start to see a reversal in GDP at the end of this year; even Ben Bernanke said that could happen. If that is accurate, then the market should break through its resistance and out of the control of the traders, sometime in the July to September time frame. In the meantime, this market will stay in the control of the traders. If you are not prepared or you cannot afford to trade the market, patience will be required. If you are prepared to trade (translation; lose money quickly and not worry about it), this is the time to pursue that strategy. In any event, the challenges are not over even when we break out of the trading bias. We will still face massive deficits caused by the stimulus packages and global inflation going forward. With a healthier economy led by a healthier banking environment, we should be able to weather those storms, but first things first. We are stuck in a range. My advise is don’t fight the tape. 2009-03-25T16:59:19Z 2009-03-20 1 1 2009-03-25T18:06:55Z