Monday, December 14, 2009

At least I won't have to blow my tax refund on Superbowl tickets...

That's kind of an inside joke for those that know I'm a lifelong Cowboy fan. Unfortunately, our current owner is more excited by using 3D technology on his giant TV than he is about winning, so my calendar will be free after the end of the NFL season....

One of my big complaints with the current administration is that they seemed determined to repeat the mistakes of the Bush Administration (please spare me your 8,000 word manifestos on why one political party is better than the other -- I'm just looking at the financial part of the equation and frankly both parties seem to be in Wall Street's back pocket).

The great takeaway from 2007-2008 is that too much risk was concentrated in too few institutions. Clearly, we've learned from that mistake and decided to prevent another global calamity by spreading risk, right??


Well, according to this chart, market share of deposits for the top 4 US banks has spiked from 28% in 2007 to almost 38% today. This is not totally representative of risk because it does not show total loans outstanding, but it gives an indication that the big banks that were too big to fail in 2007, have grown bigger! I'm sure this will work out fine...

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And you get a bailout and you get a bailout..... Abu Dhabi agreed to bailout Dubai through April with a $10 billion loan overnight. This caused massive swings in Asian markets overnight (The Hang Seng went from down 300 to up 300 in about 60 minutes) but by the time US markets opened we'd given up most of the gains. There is tremendous irony in the fact that after crashing world markets for a couple of days, a bailout for Dubai could somehow push the global markets to new heights.

This quote sums up my feelings as well "This is one of the most ridiculously irrational markets I’ve ever seen. The other "good" news this morning is also the same old songs: Citigroup will repay their $20Bn TARP loan by diluting their stock by about 20%."

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Insiders don't believe the hype... Insider moves are never a perfect predictor of future stock price action, but the lack of conviction shown by insiders (defined as C-level executives and directors) during the latest rally is surprising. Insiders continue to dump stock of their own companies as the market has risen 60%+ despite signs of a "recovery", what would be their rational?

It seems likely that the C-level executives are seeing and hearing many of the same things that I hear from people in the field. Business is at a standstill and the only way to increase profits is to cut costs, sell internationally (helped out by the weak $) or win a contract from the Federal government. Executives apparently want to take some chips off the table and have been cashing out at a furious pace --- "Selling for the latest week climbed 10.8% to $933.45MM from $842MM. More alarming, however, is the continuing very low levels of buying. Buying for the latest week fell to $17.35MM from $37.7MM." Courtesy Pracap.com

Insiders have many reasons for selling stock --- estate planning, tax evasi... I mean tax "planning", private school bills, property tax bills , etc... but the disparity between buying and selling has rarely been so wide.

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Cheers!

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