Wednesday, February 25, 2009

Wild West Capitalism & Brooksley Born/Emerson Describes Events Today/ Sold LNC/Japan Exports Plunge/T

There was an interesting story in Newsweek about a call received by Brooksley Born, Brooksley Born -Wikipedia, chairwoman of the Commodity Futures Trading Commission, from an irate Larry Summers in 1998. Summers was then Clinton's Deputy Treasury Secretary and he is now Obama's chief economic adviser. By all accounts, Summers dressed Born down in a loud and rude manner.

What was her offense? Born was proposing that her agency explore regulating the vast market in derivatives.  While necessary, it would potentially step on a few Wall Street toes in their practice of wild west capitalism regardless of the consequences to civilization. That was why Larry was yelling at her that morning on the phone back in 1998. Born's effort to regulate derivatives was shot down by Alan Greenspan, Arthur Levitt,  Robert Rubin and Larry Summers.  NYT

Levitt is quoted by Newsweek as saying: "All tragedies in life are preceded by a warning. We had a warning. It was from Brooksley Born. We didn't listen". Newsweek.com

So Levitt, who is not one of the Masters of Disaster, admits that he made a mistake. I will not hold my breath for Robert Rubin and Larry Summers, fellow travelers of the Masters of Disaster, to ever admit to being wrong.  

Zillow estimates that 75% of the homes in Maricopa County in Arizona (Phoenix), including those with no debt (total homes) owe more on the mortgage than the current value of their homes.WSJ.com

I bought 30 shares of Lincoln National at 6.45 late last year during one of the now periodic meltdowns. Time to Fire my Head Trader: He Bought LNC I sold last year the higher cost shares acquired a few weeks earlier. Buy of Kraft Food and Partial Sell of LNC Postion LNC announced last night that it was reducing its dividend to a penny a quarter form 21 cents which was a dividend cut from its mid 2008 dividend. In fact, I believe the 21 cent dividend was paid just for one quarter, having just been cut from 41.5 cents. Business Journal My tolerance for dividend cuts is at a low ebb at the moment and I am just fed up. Even though my position is small and I should not care that LNC just cut its dividend to a penny, I want to lodge my protest so I just sold my 30 shares at 11.02.   

I have already forgiven GE for its dividend cut that will be made later this year.

The effort of AIG to auction its crown jewels, it Asian insurance operations, so that it could start paying something back to the government, failed with bidders scrambling for the exits. WSJ.com

The WSJ has a new name for AIG, American Insatiable Group. WSJ

The recent news has had a severe negative impact on the pricing of International Lease and American General bonds, which Bill Gross had recommended. What to Do When There is No Let UP in Bad News/JPM/ECB Rate Cut & the Dollar/BAC & AIG sub Bonds

I tried to sell both International Lease bonds that I own last week and could not generate a bid. One matures in May and the other in September of this year.  International Lease is in much better condition than American General Finance, a consumer lending subsidiary of AIG.  If the government bails out AIG again this weekend, pricing may improve next week. If bankruptcy is filed, I suspect the American General bonds to be priced at what the "smart money" would expect to recover in bankruptcy court (looks like 20 cents on the dollar as of today based on the quotes that I saw this morning) and International Lease bonds will likewise suffer but not as much.  

Emerson wrote a poem "Ode: Inscribed to W.H. Channing" where he said "Things are in the saddle, And ride mankind" Ode, Inscribed to William H. Channing Translation: Events are in the saddle and are in control of mankind. Ralph Waldo Emerson : The Poetry Foundation


Japan's exports plunged 45.7% in January. WSJ.com

The bankruptcy court allow Delphi to eliminate health care benefits for 15,000 current and former employees. Bloomberg 

Yesterday was a wimpish bear market rally that did not even recover the prior trading day losses.

ISIS, one of my speculative small biotech plays, reported financial reports. The company is still a developmental stage biotech and I am already familiar with the news summarized in its release.

It ended 2008 with 490.998 million in cash which does not include the IBIS sale to Abbott which happened this year. This increased cash to around 650 million at the start of 2009. I just look at the cash burn rate and the company expects to end 2009 with "more than $550 million in cash". It is not material whether the company beats or misses expectations since it has no products for sale. The value will be determined ultimately by the success of its pipeline. 

AT & T, a recent buy before my trading model required a halt to purchases in all taxable accounts, was upgraded to overweight by J P Morgan. MarketWatch

I was asked for my gambler's odds on ING or Aegon deferring a preferred stock dividend for at least one or two quarters within the next two years. My odds on that event, based on currently available information, is 50/50. If I continue to read reports like their respective financial reports for the 4th quarter of 2008, those odds will increase. That is one reason that I have placed most of the recent buys in a retirement account, to avoid having to pay taxes on deferred dividends. I would also increase my odds on bankruptcy in the event preferred dividends are deferred since I view such an event from a financial institution to be a sign of severe distress.  

I read a story the Hearst corporation may soon close the San Francisco Chronicle quickly without an agreement on significant costs cuts from the union and others. Several "conservative" bloggers were pleased with the potential closure of a newspaper, and blame the potential failure of the paper on its alleged failure to cater to them.

Most of the ones who believe that Fox news is fair and balanced and listen to Rush on the radio would rejoice at the complete elimination of the "mainstream" media. They are at their core anti First Amendment.


I  own only cumulative preferred shares of Lexington Realty (LXP). Under the circumstances, and relatively speaking, the earnings release this morning was okay, and I see no reason to dispose of my preferred stock.

DISCLAIMER:
  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

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