The holiday season, the time where people go all out on their credit cards to buy things they don’t need won’t be anything like that of last year, or probably like any time this decade. This holiday season can’t be funded by credit, won’t be profitable like it was last year and will likely cause a far greater problem later this year. Read more…
The failure of the bailout bill struck wall street hard today as the Dow dropped 777 points to close at 10365. Everyone was expecting that the bailout would pass, even up until the wee hours of the morning the bailout was expected to pass the house with flying colors and make its way to the White House for a guaranteed signature from president Bush. Read more…
The $700 bailout package will pass through the House and make its way to the Senate and eventually to the president where the final decision will be made, though the consensus says this time the bailout package will stick. Read more…
Warren Buffett, the king of buying stocks in depressed markets has stepped up with $5 Billion to invest in Goldman Sachs. Buffett’s last big purchase of part of a financial institution came during similar economic turmoil when he purchased a hefty stake in American Express. Along with his $5 Billion purchase of preferred stock, the deal also gives Berkshire Hathaway the ability to buy an additional $5 Billion of common stock. Read more…
There is still so much that must be answered on Bush’s latest call for a $700 Billion bailout package that will be used to clear the balance sheets of banking institutions and be eventually paid back. The problem is that it is doubtful the government will ever see even half of its total $700 Billion investment into the mortgage industry. Read more…
Treasury secretary Paulson has addressed the credit crunch yet again, this time he is calling for the Fed and the Treasury to be allowed to buy illiquid bank assets. Not much more was stated, just that the future plan would involve the Fed and the Treasury to buy bank assets and cut through the credit crisis. This is a buyout in every sense of the word, bailout with inflation and tax dollars to save the largest financial institutions and the rapidly unwinding derivatives market. Read more…
Commodities have been pounded over the last few months. The ride up was attributed to inflation, and now that they’re falling off a cliff there is nothing fundamental to propel such a move. Today the commodities market is rallying a bit on lower oil supplies and the metals are coming back from their lows. If anything, the commodities market should be in a complete bull market run due to their resilience to inflation. Read more…
AIG, beaten on its insurance and credit portfolio will now be bailed out to the turn of $85 Billion of government money. This comes after Merrill Lynch is sold and Lehman Brothers starts brokering its assets for liquidation. The government has provided billions of liquidity through Fed rate cuts, bailouts and even an economic stimulus yet the outlook remains bleak. This is now the second time in one week that federal money was used in a bailout. Read more…
Merrill Lynch is sold to Bank of America, Lehman declares bankruptcy and AIGs cries for more liquidity. Each of these companies represents a dying breed. Merrill Lynch and Lehman are both blowups of more speculative investment banking and AIG has billions of annuity payments and a huge insurance business. The market is going to need a big catalyst soon to create a floor in this market. Read more…
Hurricanes are known for pushing up the price of gasoline while dropping the cost per barrel of oil. An interesting thing always happens after large hurricanes come from the gulf, the price of oil drops while the price of gasoline always rises. There are a few reasons as to why the prices do this. Read more…
Failing banks have all used the same system of dumping debt. Form a substitute bank simply planned to fail to dump the bad debt it holds. Simply, Lehman hopes to transfer its billions of bad loans to a company that it hopes will do well, but is miserably doomed from the start. The new company will likely fail in its first few months as writeoffs will be larger than what the company will make. Read more…
A small subsidiary of Berkshire Hathaway has decided that enough is enough in the bank insurance business. Kansas Bankers Surety Co. announced that it would no longer sell insurance on bank deposits over the FDIC limit of $100,000. In the days before the financial collapse, the insurance was extremely profitable as bank failures were few and far between. With a total of 11 fallen banks this year, insurers are worried that their clients may be in need of more protection from bank failure. Insuring deposits is no longer a profitable business considering the risks tied to the recent failures. Read more…
Pending home sales are off 6.8% since last July and it isn’t very hard to believe that they’ll continue to drop. The economic stimulus check may have put a boost in June numbers when people were more apt to be able to make down payments or have the financial ability to move. But as July came to a close, the number of pending homes dropped by 3.2% signaling weakness in a market that has certainly paid its dues over the past two years. Read more…
With government intervention swarming Wall Street its too risky to touch anything financial. Though in the case of both Fannie and Freddie where shareholder equity will be nulled, Bear Stearns was able to catch a $10 price tag for its shares and if Lehman ever decides enough is enough it is likely that they’ll be sold on the auction block as well. Read more…
The surge in the stock market today related to the bailout of the “mortgage giants” Freddie Mac and Fannie Mae may have given more faith to investors. Though shareholders of Freddie and Fannie are absolutely out of luck on this one, regional banks that hold shares in the two companies are likely to get a bailout from the federal government to cover their assets. Personal investors are going to have a hard time collecting money from the federal government, small investors just aren’t “too big to fail.” Read more…
So often we hear that traders are pushing up prices on a variety of things, be it oil or food or anything else that has us so sticker shocked. Traders reacted quickly when news of Gustav’s approach of the Gulf Coastline and traders, apparently, priced in a result that could only happen from Katrina-esque circumstances. Read more…
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