Wednesday, January 14, 2009


It would be fair to say now that the rally in December was just a short bear market rally.  The market is acting as if it is shocked by the dismal state of the banks and the incompetency of their managers.  While Ken Lewis is a better banker than Chuck Prince, I would still have to give him an F for managing Bank of America in this crisis. Incompetent is the only appropriate description for his decisions over the past year.     Rather than hunkering down, Lewis recklessly hit the gas by making large acquisitions including LaSalle, Countrywide and Merrill, overpaying for damaged goods,  diluting existing shareholders, weakening the bank's capital base and damaging its balance sheet by acquiring toxic waste by the ton,  and he may have even placed the bank in line as the next Citigroup.  I give myself an F on every decision that I have made in connection with my common equity interest in this bank.  While I can not fire myself, sometimes I wish that I could, I would hope that all Bank of America shareholders will express their disapproval by voting against the Board at the upcoming annual meeting.  I will certainly take the time to cast a no vote.

This is a link to a sobering article by Paul Kennedy in the WSJ.  I read his book "The Rise and Fall of the Great Powers" which was sobering. 

The House Democrats want to bail out state's that refuse to put their own houses in order.   
You might as well reward everybody for being irresponsible.   I remember reading a book many moons ago called "Freedom from Responsibility".  Is that an apt description for today? I have already presented my proposal to Speaker Pelosi, and I thought that it was consistent with the principles of the Democrat party.  I proposed earlier sending every  American over the age of 18 who wants some extra dough, $100,000, a cheaper and probably more productive solution than anything being done now or being proposed by the Dems. FREE MONEY FOR THE TREASURY/Plan for Doling the Dough to the American People/JZJ & JZE
I have refined the proposal after more reflection, thinking that maybe I had been rash in formulating the earlier one.  Now, the only requirements to receive your own personal bailout are (1)  that you have to swear under penalty of perjury that you would like to have the money, (2) you must be alive, and (3) you must  pretend to be an American citizen, although actual citizenship would not be a requirement.  The government would ask you to pay it back whenever you feel like it, pick your own interest rate at zero or above,  and the treasury would just add the amount to our tab with the Chinese.     

Susan Bartz is a good choice for Yahoo's  Yahoo is not dead yet and there is hope. 

I am surprised only by the fact that General Growth Properties has not yet filed for bankruptcy.

HRPT Properties became the latest REIT to cut its common stock dividend.   Yahoo! Finance  Within the last week I did take a 50 position in one of its preferred issues.  The regular distribution rates for the preferred stocks were announced as the same time as the common share dividend cut. Yahoo! Finance  I classify that investment as moderate risk but my exposure was less than $500 with a dividend yield close to 17% at my cost. 

Goldman Sachs downgraded CB & L Properties last week to sell. Reuters  I view my small exposure to its common and preferred to be high risk.  I will wait until after its earnings release on 2/5 to make a decision on CBL and CBLPRC.  I have a small unrealized loss on the preferred with one dividend payment received to date. 
I mentioned in a post from 10/22 that the REIT Mall sub sector was undeniably in a crack up mode where the fear of lack of credit or credit on reasonable terms was just crushing those REITS. Japanese Market  Of course,  readers of these posts already know that I sometimes venture into the garbage dump looking for a gem or two.  I decided not to touch General Growth properties, just too far gone. I thought the DKR worked pretty good, even my buy of the CB & L common almost caught the bottom, and the Glimcher preferred, another mall REIT, did double in price. But, this tendency of mine, some would call it a character flaw in an otherwise logical, rational and conservative person, is not for the faint of heart or the easily flummoxed.  I would also have to say that some of the recent buys of the less than stellar investment grade bonds in TC form, like PJS, JZV (since sold), JZH, and all of the Aon TCs (sold and bought many times), did show a streak of intelligent life in this old man. 

I am actually impressed with one of my new small cap names.  I try to be impressed at least once or twice a year, to avoid any false labeling as having a craggy disposition.  Okay, maybe I am not the most sociable person in the world.  

 I do wonder about the driving habits of my fellow citizens here in the SUV Capital of the World, with the highest per capita number of W stickers still on the bumpers of large gas guzzling vehicles.  One habit which is simply beyond my comprehension, is accelerating into a stop light.  Another is passing a vehicle as traffic backs up waiting for a red light to change, swerving with near misses as they over estimate their driving ability, to move one car ahead at the light.  I thought that some of these types of habits, too numerous to even mention,  might change when gas moved over $4 a gallon but I erred in making that assumption.  Personally, and it may just be me, I take my foot of the gas when approaching a red light, hit the brake when appropriate, and just coast into it. 

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