Tuesday, November 11, 2008


The comments by John Thain, CEO of Merrill Lynch, that the current economic downturn more closely resembled 1929 than prior slowdowns is the kind of comment that adds fuel to the fire.Reuters While Thain was not CEO when Merrill help to facilitate this crisis, I could not help but notice the story next to the Thain story at yahoo finance. That story said CDO lawsuits from disgrunted investors would spike in 2009-2010 according to Sanford Bernstein.  Reuters And guess who was one of the three largest sponsors of CDOs? Answer: Merrill Lynch. Merrill has already had 42 CDOs default!Managers Turn Focus To LiquidationOf Defaulted CDOs

It appears that General Growth Properties (GGP), a large owner of malls, will be the first large REIT to file for bankruptcy during this credit crisis. The stock is currently selling for $.36 down from its 52 week high of 51.24. The company was done in by debt.Yahoo! Finance It has some large loans in need of refinancing and it has not been able to secure new loans yet. Now, tell me, what has happened to the almost 300 billion recently sent by Uncle Sam to the banks? The Treasury has already committed 290 billion of the first 350 billion available under TARP. WSJ.com

I think most people agree that Freddie Mac is in worse shape than Fannie Mae. However, looking at the Fannie Mae earnings release yesterday, I have to wonder whether the existing Fed commitment to it will be enough. WSJ.com.WSJ.com One of the imponderables, for me at least, is what happens to the huge debt loads of the GSEs when the Government's conservatorship ends at the end of 2009? Since I do not know the answer to that question, and I am not sure anyone really does, I will avoid buying their debt or any bond ETFs that have heavy exposure to Fannie and Freddie, which would include all of the Vanguard bond ETFs that I previously owned and sold earlier in the year, including BSV and BND.

CB Richard Ellis demolished its own stock today by offering to sell 50 million shares Yahoo! Finance When your stock is at an all time low, selling stock to raise capital smells of desperation. I believe the stock will be sold below the company's current book value. CBG went public in an IPO in June 2004 at $6.33 adjusted for the subsequent 3 for 1 stock split and the price reached 42.7 by mid 2007. It is now struggling to stay over 4. I do not currently own the stock but it is on my monitor list.

After being bombarded with negative news day after day, I am modifying my investment plan for the remainder of the year to allow for new investments or adds only to the extent of cash flow from investments but only after the cash has been received. Previously, I have been estimating the flow for the month which allowed me to do the investment before receiving the cash. The cash now has to be in the account before being utilized to make an add, and any new investment can not exceed the amount received.

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