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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.
Spotted over at NetNet was this video of a GM banner being added to the front of the New York Stock Exchange as the auto company’s shares began trading there again yesterday.
However you feel about bailouts, you’ve got to feel good about some of those three or four generation families of auto workers in Michigan that now have a little more hope for a brighter future for the generations to come.
Spotted over at the Business Insider today was this video of former George W. Bush economic advisor Keith Hennessey dissecting and responding point-by-point to a recent white board presentation about the U.S. economy by Austin Goolsbee, current Chairman of President Obama’s Council of Economic Advisors.
You can see how, to some degree, our troubles are as much political as they are economic since defending entrenched views and the policies that they spawn on each side obscures certain truths that neither side wants to acknowledge. For example, that we’ve reached the end of a massive 30-year credit and debt binge for which there are no painless solutions.
Spotted over at the Pragmatic Capitalist was this interview with Chris Whalen of Institutional Risk Analytics in which he talks about the sorry shape of the banking industry a full two years after the worst of the financial crisis.
A related presentation can be found here – the crisis is far from over…
Over a bowl of cereal just a few minutes ago, this Associated Press story reprinted in the local newspaper was happened upon and I couldn’t help but think of the sorry state the stock market has come to, what with retail investors shunning equities like the plague and trading now dominated by super fast computers in the little understood world of high frequency trading along with shell-shocked hedge funds and pensions funds that, according to a Wall Street Journal report over the weekend, are still assuming that they can get an eight percent annual return and retirees depending on that happening.
Is that what it’s come to? After freakishly low interest rates and a trillion and a half dollars of money printing by the central bank and after the Federal government intervened in ways never thought possible before to prop up the banking sector, the auto sector, and nearly the entire housing market, it’s now up to the Federal Reserve to deliver more money printing so that the economy and, by extension, the stock market can be similarly propped up?
You have to wonder what someone waking up today from a 15-year coma would think about our current condition, one that, increasingly seems to be accepted as the status quo, the casual reference in the AP story above being the latest example.
It seems that, as we venture further into the post-2008 crash financial world, the word “zombie” is popping up more and more, two sightings to be found in just a cursory scan of the news this morning, zombie buildings in Spain as reported by the Wall Street Journal and this commentary about zombie banks by Jonathan Weil at Bloomberg.
Zombie Banks Have Us Right Where They Want Us
…
Here’s the kind of thing that passes for free enterprise now. Last month a fellow named Michael Carpenter, who is the chief executive officer of Ally Financial, got on a conference call with securities analysts and gushed with delight about the $3.5 billion price that General Motors had just agreed to pay for the subprime auto lender AmeriCredit. Based on that transaction, he proclaimed, Ally might be worth $30 billion.
GM, which owns a 6.7 percent stake in Ally, is Ally’s former parent.
“I love the AmeriCredit deal,” said Carpenter, whom some might remember from his days as the head of the securities firm Kidder Peabody. “I don’t have any doubt about our ability to repay the U.S. Treasury. So I think it’s great.”
The federal government so far has spent $17.2 billion to bail out Ally, the lender formerly known as GMAC Inc. Taxpayers hold a 56.3 percent stake in the company, which says it may hold an initial public offering next year if it can’t find a buyer.
What a spectacle. Here you had the CEO of a thrice-bailed- out zombie bank, drooling over how much a government-owned carmaker was going to pay for a publicly traded subprime lender, and using this price as a yardstick for his own bank’s paper worth. In a sane world, Ally would have been liquidated already. Any capital it’s able to raise is money that otherwise might go to more deserving enterprises.
Weil goes on to lament the propping up of the housing market, savers being punished with low interest rates, and how we need to throw the bums in Washington out.
Long time commodity bull Jim Rogers, chairman of Rogers Holdings, was on CNBC a short time ago and shared some thoughts about how the Fed should stop printing money and advised investors to bet against Ben Bernanke and his printing press rather than with them.
Nothing Bernanke has ever said has turned out to be right. Please go back and look up his record and you will see. The man just doesn’t understand economics. He doesn’t understand finance. He doesn’t understand currencies. All he understands is printing money. This is not going to work.
Lest you think this is just spouting off, see the classic clip Ben Bernanke Was Wrong.
By Tim Iacono, Since 2005
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