• Ireland To Get Bailed Out
    Posted by on November 22nd, 2010 at 8:54 am

    Now it’s Ireland’s turn for a bailout. This is a tough one since Ireland had been the shining star of the benefits of European economic integration. Sure, we all kinda knew that Greece was a mess, but Ireland? They were supposed to be the good student doing it right.

    European Union officials, who had been pushing Ireland to accept help, quickly agreed to the request late Sunday, committing a staggering amount of funds to an ailing member for the second time in six months.

    The total amount of the package was not announced, but several officials said it would be €80 billion to €90 billion, or $109 billion to $123 billion. Last spring, Europe disbursed €110 billion to Greece to save it from bankruptcy.

    What happened is that Ireland, like many countries, bailed out its banks two years ago. The problem was that Irish banks were in much bigger trouble than everyone thought, and now the bailouters need a bailout. The reason it’s taken so long between 2008 and today is that only now have investors wised up and started to dump Irish bonds. Up until two weeks ago, the Irish government was telling us that nothing was wrong. The lesson is that markets, for all their noise, are more honest than governments.

    Now there are worries that Spain and Portugal are next. The Prime Minister of Luxembourg, Jean-Claude Juncker, said “Speculative actions against Portugal and Spain are not justified, though it can’t be excluded.” Hate to break this to you, Jean-Claude, but if they can’t be excluded, they are by a certain measure, justified. For reasons unclear, Mr. Juncker is a big-time muckety muck in European affairs.

    There’s an odd perception/reality game in these situations. If people think Ireland will be bailed out, the yield spreads on Irish debt will narrow and that will greatly help the country’s fiscal situation. If the EU had elected to “Bear Stearnsify” Ireland, well…things would be very different right now.

  • Morning News: November 22, 2010
    Posted by on November 22nd, 2010 at 7:54 am

    Ireland is Second Euro Nation to Seek Aid as Banks Wobble

    Stock Index Futures Rise After Irish Bailout

    After Ireland, traders turn to Portugal, Spain

    Lack of Hiring to Restrain U.S. Economy in 2011, Survey Shows

    Yuan Loses to Taiwan Dollar as Growth Rates Converge at 10%: China Credit

    Economists See ‘Sub-par’ Growth Ahead

    Top Banks Face $100 Billion Basel Shortfall

    China Takes Aim at Inflation Expectations

    Orascom Telecom to Sell Tunisia Stake in $1.2B Deal

    Comcast’s Plans for Executives Offer Clues to Future of NBC

    On The Inequality Of Wealth

  • Happy Birthday Otto
    Posted by on November 22nd, 2010 at 7:04 am

    I’d like to wish a belated happy birthday to Otto von Habsburg who turned 98 on Saturday.

    For the last 88 years, he’s been the pretender to the Austrian throne. His father, Charles I, was the last Emperor of Austria and King of Hungary. Charles became emperor after Franz Joseph, who was born in 1830, died in 1916. He had been on the throne since 1848.

    The heir had been Archduke Franz Ferdinand, but in 1914…well, you probably know what happened. After that, Charles was next in line, and Otto after Charles.

    If things had worked out differently, Austria would have had two kings for 156 of the last 162 years.

    Here’s a picture of Otto with Franz Joseph. In others, he’s a picture of a man alive today with a man born 180 years ago.

  • Reader Poll: Which State Would You Kick Out?
    Posted by on November 19th, 2010 at 4:24 pm


  • Time to Shut Down the Laptop
    Posted by on November 19th, 2010 at 4:01 pm

    The weekend is here. Enjoy some classic E&B:

  • Days of Wine and Liquidity
    Posted by on November 19th, 2010 at 3:04 pm

    Gary Alexander celebrates what would be Johnny Mercer’s 101st birthday (yesterday) with some market talk:

    Call me Old Fashioned, but if I Had my Druthers, markets would rise Day In and Day Out, Come Rain or Come Shine. But Jeepers Creepers, the Days of Wine and Roses can also be a Charade. Fools Rush In, seeking Out of This World riches, while those who Hit the Road to Dreamland may be Building Up for an Awful Letdown, and I Wanna Be Around to Pick up the Pieces when they sing The Blues in the Night.

    Turning to the Fed, Something’s Gotta Give in the war between inflation and deflation, so the Lazy Bones at the Fed use That Old Black Magic to print more money, saying “This Time the Dream’s on Me.”

    Seasonally, markets tend to fall in Early Autumn, when Autumn Leaves begin to fall In the Cool, Cool, Cool of the Evening. But When October Goes, If I Had a Million Dollars (One for My Baby and Another One for the Road), my Dream (My Shining Hour) would be to Take the Long Road Home, on the Atcheson, Topeka and the Santa Fe, with my Dearly Beloved Satin Doll (Laura), to Moon River, where the Skylark and Bob White sing. After all, Any Place I Hang My Hat is Home. It’s all Too Marvelous for Words!

  • Hansen Natural Takes Out 2006 High
    Posted by on November 19th, 2010 at 1:00 pm

    How’s this for a comeback? Hansen Natural (HANS), the Monster Energy Drink stock, just took out its 2006 high.

    For those of you keeping score at home, the stock went from 50 cents (post-split) in 2003 to a high of $52.72 in 2006. HANS then dropped to $26 before rising to an all-time high of $68. By October 2008, it was back below $21 and now it’s been as high as $52.85 today.

    We try to analyze stocks as best as we can using reason and logic, yet sometimes the market has other ideas.

  • Harrah’s Shelves IPO
    Posted by on November 19th, 2010 at 10:33 am

    Harrah’s Entertainment Inc. was set to IPO this week but canceled due to “market conditions.” I’m not sure what changed so much over the past week, but they didn’t ask my opinion.

    In the years leading up to the financial crisis, gobs of companies were taken off the market by private equity firms. Now the companies are being unloaded and many are for losses. Bloomberg estimates that 40% of the IPOs from private equity firms are for losses.

    Harrah’s had been bought out by Apollo Global Management and TPG Capital in January 2008. The stock had been hugely successful for investors over the years.

  • Bernanke Defends QE2
    Posted by on November 19th, 2010 at 9:17 am

    I continue to think Ben Bernanke is doing a very good job. Instead of hearing what other people say his plans are, you can listen to him.

    Here’s a brief excerpt of his defense of QE2:

    The Federal Reserve’s policy target for the federal funds rate has been near zero since December 2008, so another means of providing monetary accommodation has been necessary since that time. Accordingly, the FOMC purchased Treasury and agency-backed securities on a large scale from December 2008 through March 2010, a policy that appears to have been quite successful in helping to stabilize the economy and support the recovery during that period. Following up on this earlier success, the Committee announced this month that it would purchase additional Treasury securities. In taking that action, the Committee seeks to support the economic recovery, promote a faster pace of job creation, and reduce the risk of a further decline in inflation that would prove damaging to the recovery.

    Although securities purchases are a different tool for conducting monetary policy than the more familiar approach of managing the overnight interest rate, the goals and transmission mechanisms are very similar. In particular, securities purchases by the central bank affect the economy primarily by lowering interest rates on securities of longer maturities, just as conventional monetary policy, by affecting the expected path of short-term rates, also influences longer-term rates. Lower longer-term rates in turn lead to more accommodative financial conditions, which support household and business spending. As I noted, the evidence suggests that asset purchases can be an effective tool; indeed, financial conditions eased notably in anticipation of the Federal Reserve’s policy announcement.

    Incidentally, in my view, the use of the term “quantitative easing” to refer to the Federal Reserve’s policies is inappropriate. Quantitative easing typically refers to policies that seek to have effects by changing the quantity of bank reserves, a channel which seems relatively weak, at least in the U.S. context. In contrast, securities purchases work by affecting the yields on the acquired securities and, via substitution effects in investors’ portfolios, on a wider range of assets.

    This policy tool will be used in a manner that is measured and responsive to economic conditions. In particular, the Committee stated that it would review its asset-purchase program regularly in light of incoming information and would adjust the program as needed to meet its objectives. Importantly, the Committee remains unwaveringly committed to price stability and does not seek inflation above the level of 2 percent or a bit less that most FOMC participants see as consistent with the Federal Reserve’s mandate. In that regard, it bears emphasizing that the Federal Reserve has worked hard to ensure that it will not have any problems exiting from this program at the appropriate time. The Fed’s power to pay interest on banks’ reserves held at the Federal Reserve will allow it to manage short-term interest rates effectively and thus to tighten policy when needed, even if bank reserves remain high. Moreover, the Fed has invested considerable effort in developing tools that will allow it to drain or immobilize bank reserves as needed to facilitate the smooth withdrawal of policy accommodation when conditions warrant. If necessary, the Committee could also tighten policy by redeeming or selling securities.

  • Fiserv Buys Back “Up To” 7 Million Shares
    Posted by on November 19th, 2010 at 8:46 am

    Groan.

    Fiserv, Inc., the leading global provider of financial services technology solutions, today announced that its Board of Directors has authorized a repurchase of up to seven million additional shares of the company’s common stock, which represents approximately five percent of its outstanding shares.

    Fiserv may repurchase shares in the open market or in privately negotiated transactions at the discretion of management subject to its assessment of market conditions and other factors. This authorization does not expire.

    Let’s work out the math. Seven million shares at the current price comes to $385 million. At last count, FISV has 149 million shares outstanding.

    I’m pretty sure most shareholders would rather have $2.58 per share of cash dividends in their pockets than have the board buying FISV shares near a 52-week high.

    Of course, the board has only authorized a purchase “up to” 7 million, which also includes zero shares. These share repurchase statements are good for PR, but they don’t do much for shareholders.