Today is dog picture day with the infamous Honey Girl featured along with Ollie the Yorkie and his best friend Jack the longhair dachshund.
AIG had a 4th quarter loss of 61.7 billion-a new record for the Masters of Disaster.
I do not think that historians will describe what is happening now with the R word.
Since my activities in the market have now moved from a crawl to virtually motionless, I have some time to start ranking the causes of the Not So Great Depression in order of importance. I am not guided in this endeavor by the rants of the titular head of the GOP, Rush Limbaugh and their intellectual leader, Ann Coulter, who blame the poor and liberal Democrats:
1. AIG FINANCIAL PRODUCTS LONDON UNIT
2. SEC 2004 RULE CHANGE ALLOWING INVESTMENT BANKS TO INCREASE LEVERAGE (GOP IDEOLOGY SUPPORTED BY CLINTON DEMOCRATS)
3. MOODY'S AND S & P RATING TOXIC TRASH AAA (LACK OF REGULATION OVER & GOP IDEOLOGY)
4. LACK OF MEANINGFUL REGULATION OVER MORTGAGE ORIGINATIONS (GOP IDEOLOGY)
5. CATCH ALL CATEGORY PSYCHOLOGICAL AND MORAL FACTORS: LACK OF ETHICS, FRAUD AND THE FBI's UNWILLINGNESS TO INVESTIGATE RAMPANT FRAUD; MOB PSYCHOLOGY, WILD WEST CAPITALIST MENTALITY (GOP IDEOLOGY), FAITH IN NERDS WITH MODELS, GREED & STUPIDITY
6. CHUCK PRINCE AND THE TOP BRASS AT CITIGROUP
7. STAN O'NEAL AND THE TOP BRASS AT MERRILL LYNCH
8. SPECULATORS IN THE REAL ESTATE MARKET
9. FANNIE AND FREDDIE (PLUS CONGRESS, BARNEY FRANK AND LIBERAL DEMOCRATS, & THE COMMUNITY REINVESTMENT ACT)
10. (TIE) DICK FULD AND THE TOP BRASS AT LEHMAN BROTHERS/
BEAR STEARNS/ COUNTRYWIDE/KEN LEWIS/ROBERT RUBIN/LARRY SUMMERS
11. LACK OF REGULATION OVER DERIVATIVES (GOP IDEOLOGY)
12. LACK OF REGULATION OVER CREDIT DEFAULT SWAPS (GOP IDEOLOGY)
SEE GENERALLY, THE NYT "THE RECKONING" The Reckoning - Series - The New York Times (E.G. Behind Insurer’s Crisis, Blind Eye to a Web of Risk; How Merrill Lynch Faltered and Fell; Citigroup Saw No Red Flags Even as It Made Bolder Bets; Debt Watchdogs: Tamed or Caught Napping?)
SEE GENERALLY, THE NYT "THE RECKONING" The Reckoning - Series - The New York Times (E.G. Behind Insurer’s Crisis, Blind Eye to a Web of Risk; How Merrill Lynch Faltered and Fell; Citigroup Saw No Red Flags Even as It Made Bolder Bets; Debt Watchdogs: Tamed or Caught Napping?)
The reasons for the rankings are scattered in about 30 or so prior posts and the articles cited therein which are just too numerous to link here. They can be located by entering appropriate search terms in the box at the top of this post. The most helpful series of articles in developing this ranking comes from the NYT series called The Reckoning.
The reference to GOP ideology or theology in the above rankings refers to the link between the cause and the core beliefs of the GOP which are as immutable as any religious theology for the True Believer. In most cases, the GOP ideology referenced above was accepted and furthered by Clinton Democrats such as Robert Rubin, Larry Summers and the 3 Democrats SEC Commissioners who voted for the 2004 SEC rule change that allowed investment banks to increase their leverage.
The life insurance companies received another jolt last Friday after S & P downgraded the debt issued by ten of them. The latest concern impacting this group is the cram down provision being considered by Congress that would give a bankruptcy judge the power to alter mortgages. Credit Suisse released a report saying the Protective Life would be most adversely impacted by the passage of this legislation followed by Met Life (MET), Principal Financial (PFG) and Lincoln National (LNC)
PFG fell almost 24% last Friday closing at $7.99, down from a 52 week high of $59.53. A.M. Best also downgraded PFG on Friday. I have the life insurers on my avoid list and expect more difficulties ahead for them. I own senior bonds issued by Prudential and the Met Life floating rate preferred stock, METPRA. I would not buy any life insurance common stock, even if I was not under a self-imposed trading restriction and I have cut back on my bond positions by the recent sale of a Hartford bond. On Friday A M Best downgraded Hartford. I also have some exposure to Aegon and ING by owning some of their equity preferred issues, bought on an opportunistic basis, and both are based in the Netherlands. ING has a significant banking operation in addition to life insurance and both companies have received substantial assistance from the Dutch government on favorable terms to them.
I am in a trading mode for all of the preferred securities issued by AEG an ING that I currently own, including AEB, IND, AEV, INZ, and ISF. Due to trading restriction, I can no longer buy equity preferred issues but I can of course sell what I own.
I am going to stick with the Canadian energy trusts that I own, including PWE, ERF, PVX, & HTE, notwithstanding their cuts in their respective monthly dividends and the fall in natural gas prices. This is a link to a good article on PWE. Seeking Alpha The author is commenting on PWE's recent earnings release for the 4th quarter of 2008. I would agree with two points made by the author of the article in Seeking Alpha. First, the share prices of the Canadian energy trusts will start to recover when natural gas and oil prices stabilize and start to increase again. This may not happen until there is an economic recovery. Second, due to the tax changes in Canada due to take effect in 2011, any new investment in these companies needs to be subdued, which is what I have done or just halted until there is more clarity in 2012 or thereafter on how this tax change will impact them. I intend to hold what I have now.
I was successful trading those companies prior to 2008 and was completely out of my positions when oil and natural gas tanked. I started, however, to rebuild positions prematurely during the 4th quarter of 2008. All common stock purchases are now on hold. I am not reinvesting any dividends from the Canadian royalty trusts into additional shares, all dividends are taken in cash. I do include the Canadian tax withheld as cash flow that may be used to fund additional purchases down the road, due to recoupment of foreign taxes paid.
PNC reduced its dividend by 85%. WSJ.com I did not see any statement in this release about management cutting their pay. But, I am sure that they feel bad for their shareholders. This bank did recently announce over 5000 job cuts.
Pepco (POM), a holding in both the taxable and retirement accounts, announced earnings of 32 cents compared to 29 cents in the year ago quarter, with more shares outstanding in the latest quarter due to a share issuance. Pepco sold about 16 million shares in the 4th quarter at $16.5. The consensus estimate was 30 cents. Net income increased 18%. MarketWatch
I mentioned in a post from yesterday that I owned Coca Cola. This was a recent add before the shutdown, buying shares at 41.07. I do not attempt to discuss everything that I do in these posts. Now, the only thing that I will do is buy a bond ETF or a senior investment grade bond, and I do believe some opportunities are about to arrive in that sector. Possibly, I might add a small position in a precious metal ETF like SLV, but I already have what I want in precious metals.I would just like to wave a magic wand and have the contents in my safe deposit boxes converted instantly into a dollar for dollar exchange of shares in GLD and SLV.
Worldwide semiconductor chip sales fell 28.6% in January.
International Paper (IP), which has never been owned by me, reduced its dividend from 25 cents a quarter to 2.5 cents. The company did mention it was freezing salaries but nothing about cutting management's pay.
I do believe Obama has bit off more than he can chew in his budget. The Dems can do whatever they want in the the House but the Senate still requires 60 votes for cloture and some of the Senate Democrats may not be too enthusiastic about some of his proposals.
The first mortgage bond issued by Entergy Mississippi (EMO) paid its quarterly interest today. Buys of a First Mortgage Bond EMO and a JPM TC PYV It is currently trading at around its par value.
I wonder who is going to want to sit on the new revamped Citigroup Board of Directors.
I thought that I would give a kudos to Chubb (CB) for raising its dividend. MarketWatch I do not own it.
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