Toro's Running of the Bulls Market Blog

"A Huge Mistake"

From an academic

Former Federal Reserve Governor Frederic Mishkin, a professor at Columbia Business School, said it was "a huge mistake for the government to think it knows the best size of financial institutions." At the same time, he acknowledged that financial institutions are encouraged to get too big "because they are likely to be bailed out."

And I suppose allowing banks to get as big as they wanted such that they threatened the economic viability of the world is a "minor mistake?"

The Economics of the New Yankees Stadium

Kottke.org has an interesting cost comparison of the costs of attending a Yankees-Mariners game.  It is cheaper to fly from Seattle to New York and spend a weekend in the Big Apple than it is to buy the best seats in the house and watch the actual game.

Surely, this was a top in the insane money culture.

France Threatens to Walk

From Bloomberg

French President Nicolas Sarkozy will walk out of this week’s Group of 20 summit if his push for stricter international financial regulation flops, Finance Minister Christine Lagarde told the British Broadcasting Corp.

Sarkozy will refuse to sign any statement if he feels “the deliverables are not there,” Lagarde said in the interview. “I think he is very determined.”

My first thought was "So?  Who cares?"

But amazingly, someone (who isn't French) does.

"It’s a bombshell to be honest,” said Philip Whyte, senior research fellow at the London-based Center for European Reform. “If such a high-profile leader would walk out of the summit, it likely would be seen as very negative on the stock and bond markets. It would highlight the disunity among the leaders when the times require a show of unity, concrete actions and stabilization.”

I just can't see it.

Heck, I didn't even know France had a stock market...

Bottom in Financials Near!

Oh why oh why did I not see this when it was first announced!  A friend made this observation to me today.

Surely, Meredith Whitney quitting Oppenheimer to start her own firm rings the bell at the bottom for the bank stocks!

Bank analyst Meredith Whitney — one of the few names on Wall Street that actually gained favor during the financial crisis — is leaving Oppenheimer & Co. to start her own stock advisory firm.

DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!! DING!!

Bernanke's Childhood Home Foreclosed

Oh, the irony...

Travis Jackson walks through his modest ranch house, admiring the kitchen's built-in spice rack and the red-oak floors. He draws back the curtains, and sunlight illuminates the pride on his face.

The young banker just bought Federal Reserve Chairman Ben Bernanke's childhood home at a foreclosure sale.

"This is where it all happened," marvels Mr. Jackson, a 27-year-old loan officer at First Citizens Bancorp, which is down the street from the old Bernanke place. "Kind of a surreal feeling, isn't it?"

Mr. Bernanke's family sold the property more than a decade ago. It ended up on the block late last year after its former owners fell behind on their mortgage payments.

Bailout Application

Since the government is giving money to just about anyone with a pulse - as long as they screwed up really badly - we here at Running of the Bulls would like to expedite the process of distributing trillions of dollars to the unworthy.

If you are a CEO of an American auto company, or the clueless head of a giant American financial institution who never took financial history at your Ivy League school, Running of the Bulls is happy to offer you this easy application so you can patch up that black hole on the balance sheet you incompetently destroyed.

Download Bailout 

(Thanks to Bill.)

BAC, C Death Watch

So now that it appears that as long as Bank of America and Citigroup remain alive, the two house of cards banks are going to act as a giant anchor on the stock market, taking all stocks down on their journey towards zero.

Since we've seen this movie before, so much so that deep down, we all know the end game, there is no point prolonging the inevitable.

Therefore, I ask you, how long before BoA and/or Citi go toes up?

a.) end of the week
b.) end of the month
c.) end of summer at the latest
d.) they will rise from the ashes and bestride the world as beacon's of American financial capitalism once again!

Getting "AIG-ed" - whereby the government effectively wipes out the shareholders - is, for our exercise, considered a zero.

Pick accordingly.

Analogy of the US Economy

Posted at Dealbreaker

Damn that made me laugh.

Post-Crisis Corporate Logos

From Business Pundit, via Financial Ninja

 

America Hedged Partners, LLC

Dear Mr. Paulson

I noticed today that the debt instruments of the entity you head are trading at levels for which you pay virtually nothing.  For example, one-month and three-month T-bills were yielding a knee-scraping 0.02%, the 2-year was at 0.97% and the 10-year at a shade under 3%.

Clearly, everybody loves you, even though you are issuing boatloads of the stuff.

Contrast that to everything else fixed income that is not guaranteed by the government.  CMBS spreads have blown out of record highs.  Junk bonds are yielding over 20%.  Corporate bond spreads are at or above all-time highs.  Leveraged loans, mezzanine debt, and securitized paper are all trading at mouth-watering levels.

Everybody hates them.  Nobody will touch risky assets with a 10-foot pole.

Now, Mr Paulson, you worked at Goldman Sachs, a hedge fund in drag.  You know how this works.  Create a special purpose entity (SPE) - preferably incorporated in the Cayman Islands to avoid taxes, and off balance sheet so we are all fooled that it is non-recourse to the US government - issue a trillion dollars of debt and transfer it to the SPE, sell it to those who believe the end of the world is upon us, then buy all those risky assets at mind-blowing yields.

I figure you could probably earn 8%-10% over Treasuries in aggregate for at least the next seven years.  At a trillion dollars, you could earn up to $700 billion, enough to fund your wildly successful TARP program!

Leveraged assets got us into this mess.  Let's get leveraged assets to get us out of this mess Mr. Paulson.