Sunday, September 26, 2010

Gas on the fire...

Well, after a fair amount of weekend reading it seems to me that there is a developing consensus on Wall Street that something big is coming.

The group think of the week seems to be that the Fed is heading toward another substantial round of asset purchases that could equal or exceed their first round. This could add $1 to $2 Trillion to the Fed's balance sheet and the long term ramifications are too numbing and scary to get into so let's focus on what you'll see every night.

"Stocks rallied today because a butterfly flapped it's wings in Mumbai."

"Bonds rallied because well frankly we have no idea why."

"Gold, silver, and every other hunk of metal is suddenly worth more than the air you breathe."

In layman's terms, these moves by the Fed will again weaken the US dollar which will light a fire under every asset class priced in US dollars. This is likely to be very short lived and I don't think anyone will see a real change in the underlying fundamentals of the US economy but it sure won't hurt going into an election season if the stock market soars twenty percent in 2 months.

However, it seems clear that everyone is on this side of the bet. Sometimes things can get interesting when everyone has the same idea.

Ok, if you have been paying attention you know that I'm a bit of cynic when it comes to goofy, feel good stories. Well, Mr. Zuckerberg's $100 million gift to the schools of Newark fits that mold.

1) The timing of the announcement was clearly designed to distract everyone from the opening of a movie about Mr. Zuckerberg which casts him in an unfavorable light.

2) The thing that no one seems to question is that it doesn't appear that Mr. Zuckerberg has $100 million. He owns a large stake in a private company. Remember with a private company it's not easy to "sell your stock" because there isn't always a market for the stock. Some owners of enormous, profitable, private companies would have a hard time writing a check for $100 million. I imagine Mr. Zuckerberg will fund the donation through a combination of loans or by selling some of his shares, but it's a question worth asking.

3. There was a bloomberg report today that the donation is to be made at Mr. Zuckerberg's discretion over a number of years and he can cancel the agreement if he is unhappy with the progress.

Hmmm, if he could just figure out a way to sell ad space for Farmville on the back of the chairs in Newark's schools it would sound an awful lot like Facebook's privacy policy with all of these contingencies. I hope this works and Newark's schools turn around overnight, but I think it sounds like a super rich guy buying a bit of good publicity with about 1.4 percent of his net worth.

Talk about a HUGE recall (that's an inside joke for local readers). I find it funny that Hyundai currently proclaims on their website that the 2011 Sonata received the Insurance Institute for Highway Safety’s selection as a “Top Safety Pick”.

However, they seem to forget to mention that the U.S. National Highway Traffic Safety Administration has forced a recall of some 140,000 Sonata sedans in the U.S. because of a safety defect that could result in a loss of, or reduced, steering. You can see the recall document here.

Steering is overrated, anyway. Honestly, though it sounds like a small issue but since everyone drives a Hyundia in NNY I thought I'd mention it.


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