• The Timmy Plan
    Posted by on March 23rd, 2009 at 7:53 am

    The Treasury Department has announced its bank plan:

    The federal government will use up to $100 billion in funds from the Troubled Asset Relief Program, or TARP, and capital from private investors in order to generate $500 billion in purchasing power to buy legacy assets, Treasury said in documents provided early Monday. The department noted that the program could potentially expand to $1 trillion over time.
    The program has two parts. It will address both the legacy loans and the legacy securities clogging the balance sheets of financial firms.
    Under the legacy loan program, banks will identify the assets they wish to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio. Eligible assets will be determined by banks, regulators, the FDIC and the Treasury Department.

    Here’s the statement from Treasury.
    Paul Krugman has described this as basically a rehash of the Paulson plan: “if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.”
    The only thing I would add is that TARP has been such a failure that it may force banks to play ball since it will get Treasury off their back.

  • The Sweet Sixteen
    Posted by on March 22nd, 2009 at 6:38 pm

    The selection committee did a pretty good job this year. The sweet sixteen consists of four #1s, four #2s, four #3s, two #4s, a #5 and a #12. The first weekend was almost not needed.

  • Lehman Stress Balls, Paperweights, Bags Coughed Up by Barclays
    Posted by on March 22nd, 2009 at 10:07 am

    Not sure what to make of this:

    Lehman Brothers Holdings Inc. has negotiated the return of thousands of Lehman-logoed knickknacks that were mistakenly transferred to Barclays Plc through the sale of the bankrupt securities firm’s brokerage unit.
    Tote bags, umbrellas, stress balls, Tiffany paperweights and other items now stored in closets and warehouses from New York to Chicago will be returned to Lehman and sold to pay creditors, according to a court filing on March 19. Lehman filed the largest bankruptcy in U.S. history in September and has about $200 billion in unsecured liabilities left to pay, Chief Executive Officer Bryan Marsal said Jan. 28.

  • Weekend Poll
    Posted by on March 20th, 2009 at 5:09 pm

  • Gold Against Stocks
    Posted by on March 20th, 2009 at 2:27 pm

    Gold has had a pretty good run over the past few years. But over the past few decades, gold has badly trailed stocks. Here’s a look at gold divided by the Wilshire 5000 Total Return Index.
    image786.png

  • Prices Are Still Down
    Posted by on March 20th, 2009 at 1:49 pm

    I thought this was in interesting chart.
    image785.png
    Prices are still down, though energy prices have made a large impact.

  • AIG Outrage
    Posted by on March 20th, 2009 at 9:59 am

    Michael Lewis on AIG hysteria:

    Every recriminatory bone in the political body is aroused; the one thing you can do right now in Washington without getting an argument is to rail against the ethics of AIG’s bonus payment.
    Apart from Andrew Ross Sorkin at the New York Times, it occurs to no one to say that a) the vast majority of the employees at AIG had as little as you or I to do with its quasi- criminal risk taking and catastrophic losses; b) that the most- valuable of those employees can easily find work at AIG’s competitors; and c) that if the government insists on punishing those valuable employees they will understandably leave, and leave behind a company even less viable than it is, and less likely to give the taxpayer back his money.
    And also — oh, yes — that if the government can arbitrarily break contracts made by firms in which it has taken a stake no one in his right mind will ever again make a contract with one of those firms. And so all of the banks in which the government has investment will be damaged.

    Daniel Gross wonders why more people aren’t angry with Goldman Sachs:

    People sometimes refer to the firm as Government Sachs because so many of its former employees wind up in high positions in Washington (Robert Rubin, Henry Paulson, etc.). But the sobriquet sticks today because the company is heavily reliant on the government for support. Tally up the various forms of direct and indirect taxpayer assistance Goldman has received in the last several months, and it turns out that you and I are providing billions of dollars to bail out the proud firm. The former undisputed heavyweight champion of the financial services sector has become one of New York’s biggest welfare queens.

  • NCAA Tournament First Two Rounds
    Posted by on March 18th, 2009 at 11:26 pm

    Here’s a look at how seeds have performed during the first two rounds of the NCAA Basketball Tournament.
    Seed…….Round One……Round Two
    #1……………96-0……………84-12
    #2……………92-4……………60-32
    #3……………81-15………….48-33
    #4……………76-20………….41-35
    #5……………65-31………….35-30
    #6……………66-30………….35-31
    #7……………60-36………….18-42
    #8……………44-52……………9-35
    #9……………52-44……………3-49
    #10………….36-60………….18-18
    #11………….30-66………….11-19
    #12………….31-65………….16-15
    #13………….20-76……………4-16
    #14………….15-81……………2-13
    #15……………4-92…………….0-4
    #16……………0-96
    Here are a few thoughts.
    I’m guessing the distribution of teams is a high peek with a long downward slope. In other words, the difference between a #1 and a #3 is probably about the same as between a #5 and a #12. Since many brackets use points by seed—geometric scoring for a non-geometric—this makes some lower seeds much better bets.
    I hate to admit this but for a very high likelihood, it’s really a 12 team tournament. I know we all like the Cinderella aspect of the tournament, but the odds are very much against the underdogs.
    In the 24 years since the field was expanded, 21 of the finals winners and 20 of the losers were ranked #1, #2 or #3. I’m not advocating a change. I’m just pointing out that the dividing line seems to begin at #3.
    You’ll also notice that some seeds are pretty choice locations. For example, #12 has a decent record against #5—even better than #11 against #5, and close to #10 against #7. Whenever a #12 wins, it’s often reported as a big upset, but it’s really not. On average, more than one #12 wins each year.
    After that, #12 plays the winner of #4 versus #13. They actually have a winning record in the second round. A total of 16 #12 seeds have made it to the Sweet Sixteen.
    Compare that with #8 or #9 who have always had to play #1 in the second round. The lesson is that the longer you avoid a top three team, the better. Of course in the tournament, you’ll eventually meet one.
    Finally, #1 seeds have a very good chance to make it a perfect 100-0 this year.

  • Citigroup Back Over $3
    Posted by on March 18th, 2009 at 11:11 pm

    Shares of Citigroup (C) closed at $3.08 today. Don’t get me wrong. I’m not saying the company is in good health, or that a rally from $1 to $3 is impressive when it follows a fall from $50 to $1.
    Still, it’s up. Might things not be as bad as it looked? Is anyone out there dipping their toes in?

  • 1,000-Point Rally
    Posted by on March 18th, 2009 at 8:53 pm

    My apologies Mr. President. You’re a better market-timer than I thought:
    big.chart031809a.gif