Tuesday, March 10, 2009

Buy of KO at 38.72/Newt Gingrich & GOP Ideology on Financial Regulations/UTX/

So I have temporarily shelved my trading model since the animal spirit is more powerful sometimes, even in a nerd, than the rational mind.  I am still hunkered down on discretionary spending until I see whether this downturn turns into the GD Part Deux.  The left brain is by far the most dominant part in this investor and will gain control over this situation soon.

Pakistan As a Haven for the Taliban 

But for now, I am way off the reservation, as shown by my purchases over the past few days of DD, IR, NYX, MDT, SYY, CPB and several trust certificates.

I added to my recently established position in Coca Cola by buying more shares at 38.72 this morning.

This may be a start of a bear market rally. Tech Ticker

I view it as far less likely, though possible, that the bottom was established near my prediction of DJIA 6400.  I placed limit orders below the market for a bond and one common stock, as I leave HG HQ for my morning chores. 

United Technologies is going to cut 11,600 jobs worldwide. The company also revised its earning guidance for 2009 down to $4 to $4.5 per share. MarketWatch

Citigroup said that it had an operating profit of over 8 billion for the first two months of 2009.  This would be before write-downs and loan loss provisions. 

The cost to insure GE Capital debt has fallen over the past few days but it is still high. To insure 10 million, the cost yesterday was an upfront payment of $900,000 plus $500,000 per year for five years. GE Capital CDS tighten to 9 pct upfront from 12 pct | Markets | Markets News | Reuters To me that article is still very scary.

Two of the primary causes of this Not-So-Great Depression are the absence of regulation in key segments of the financial markets and the elimination of the rule limiting leverage to 12 to 1. TOP TWELVE CAUSES OF THE NOT SO GREAT DEPRESSION/POM  The advocacy of freedom from regulation and rules is a core GOP belief and none of them will ever accept any responsibility for what has happened since they are incapable of learning even from recent historical events.  Really, it is just impossible for them.  This is why they have clung to blaming poor minorities, Barney Frank, and the Community Reinvestment Act. Idealogues on A Mission: Revisionism Already Well Under Way to Explain the Origins of the Mortgage Crisis There is nothing in my view inconsistent with conservative ideology and regulations.  

Since I view myself as a conservative, a somewhat cerebral one, I simply view one's attitude toward regulations as irrelevant in making a distinction between conservative and liberal ideology.  The ones who masquerade as conservatives wish to eliminate virtually all regulations to pave the way to financial nirvana.  For me it is only question whether the regulation makes sense as I discussed in this  linked post.  Financials: 3 Strikes and Your Out/CISCO/Regulations and Conservatism 

I watched Warren's interview on CNBC yesterday. The most important lesson that he learned from 2008, which just re-enforced what he already believed, was the danger of extreme leverage. The seminal event in the current crisis was the SEC rule change in 2004 that allowed the investment banks to do whatever they wanted to do, police themselves, gorge their appetite for 40 to 1 leverage so that a few could earn hundreds of millions dollars based on illusory gains.  Newt Gingrich said in the roundtable discussion on Meet the Press that he was against any clawback provision in employment contracts that would take back compensation from  the financial wizards when the end result of their actions was to blow up the firm.  Of course, he made it sound different than the reality of the proposal as if every individual in America, as opposed  to just a few executives from banks who received bailout funds, would be subject to clawback which is just the usual effort to mislead the public.  (Newt quote:"Well, what does clawback mean? 

Clawback means the government's going to decide that whatever you thought you had earned is not yours, and they can intervene and take it back from you post facto." MSNBC- msnbc.com) Bernanke at least understands the problem, even though Newt will never grasp it since the lessons taught by the absence of financial regulations in key areas are inconsistent with Newt's core ideology and must therefore be rejected by him. Bernanke is calling for a financial regulatory overhaul and this will help to prevent another implosion caused by Wall Street at least until the GOP successfully undermines it in the future as they did for the regulations enacted as a result of the lessons learned from the last Great Depression. WSJ.com Whatever regulations are adopted in response to the latest crash will eventually be abolished or undermined by the GOP.  This process of undermining regulations, to resort once again to wild west capitalism, will have as its origins the interests of a limited number of people with a great deal of money at their disposal.  The rationale for repealing financial regulations soon to be enacted will be couched in terms of the common good rather than the narrow self interest of the few.    

It will happen again, just as before. I am more critical of the Clinton Democrats (e.g. Rubin, Summers, & the 3 Dems who voted for the 2004 SEC rule change)  on this issue than I am the True Believers. They should have known better.   A true conservative, to be distinguished from GOP ideologues, will learn from history and embrace the lessons learned particularly as they relate to the catastrophic mistakes humans will make in pursuit of their personal greed.  Maybe Newt needs to put his rhetoric and ideology aside and take a good hard look at the AIG financial products unit in London, their compensation and what they did to contribute to the worldwide economic mini-depression in an area of financial engineering that was beyond the scope of any type of regulation.  I understand that the GOP believes those individuals in the AIG London unit should be able to keep every dollar of the hundreds of millions paid to them based on illusory profits that they generated which actually turned out to be losses capable of being measured only with a yardstick where 1/4 inch equals a 1 billion dollar loss.    

I really can not see how the government is negotiating a plea deal with Madoff when the lawyer advising him lost money in Bernie's "alleged" Ponzi scheme. WSJ It seems to me that this would allow an attack later on based on the lawyer's conflict.  

  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.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. 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.