Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Archive for March 2009

Public Private Investment Program, a.k.a. Geithner’s Folly

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The best summary of my thoughts on the “toxic bank asset” plan comes from another writer, Tom Fant of Atlantic Advisors Asset Management appearing on Minyanville’s Buzz and Banter. (Minyanville is worth every penny.)

 

PPIP(Public Private Investment Program)-At first glance this makes very little sense to me. Geithner seems to avoid specifics like income tax. But from what I can tell, this is not going to help much. 

Enticing investors to buy loans that the bankruptcy courts can now modify (Home Affordability Act- see law of unintended consequences!) is a tough sell to begin with, but sweetening the pot with cheap financing is almost ridiculous. Aren’t they asking private investors to do what the banks never should’ve done which is buy bad assets and magnify returns with cheap financing? How can anyone be comfortable levering an asset where the underlying cash flows can be changed in a way that is nearly impossible to analyze? And even if I get lucky and make a huge return, I’m going to partner with a government that might take my bonus back? Not so much. 

Here’s the fundamental problem that the government doesn’t get:  The banks CAN’T sell. There is no lack of buyers for these “legacy assets.” After all, there’s no such thing as bad bonds, only bad prices. The problem is where the bonds are marked relative to where investors will buy. If a bank sells a bond at 50 that they have marked at 95, the losses would pile up pretty quick until they are bankrupt.  (emphasis is from Heyercapital)

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Written by heyercapital

March 23, 2009 at 9:43 am

Fiddling

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I encourage people to not get distracted by the $163 Million in bonuses AIG is contractually obligated to pay. It’s the Washington ruse to keep our eyes off the fact that the taxpayers have paid $173 BILLION to AIG, most of which funneled directly out the door to its counterparties: Goldman Sachs, Deutche Bank, Société Générale, Bank of America, hedge funds, et al.

No wonder the Feds have been so blasted secretive about telling who got what.  As Bloomberg commentator Michael Lewis put it, the American taxpayer is paying off AIG’s gambling debts.

A week ago, the Chinese premier expressed concern over getting paid back all the dollars they’d loaned us. Our response? This week the Fed said they’d whistle up another $1.2 trillion out of thin air in order to manipulate the bond market and erode the dollar. The Federal Reserve is destroying the dollar, while the conservative media tries to get people get lathered up about $500,000 earmarks in a $3.5 TRILLION monstrosity. What was that about Nero fiddling?

Written by heyercapital

March 20, 2009 at 7:32 am

Posted in Uncategorized

AIG bonuses

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Perhaps it’s better to just pay the AIG bonuses. Heck, double the bonuses.

 The last thing we’d want are these corncob AIG managers out of the street looking to infect another company with their financial acumen.

h/t to Kevin Depew, the sharpest pen on Wall Street.

Written by heyercapital

March 16, 2009 at 1:44 pm

Follow up on the Follow Through Day

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One of the defining characteristics of a Follow Through Day is the strength of leadership shown by quality growth stocks.  You want to see solid companies leaping ahead of the market, advancing on higher volume.

Ryan Krueger of Krueger & Catalano Capital Partners posts that out of the top 25 performers last week out of the entire S&P 500, how many were non-financials above $10 per share?   Exactly zero.

Written by heyercapital

March 16, 2009 at 1:40 pm

Follow through day

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If we hold together through the market close, today should qualify as the follow through day of the rally beginning from the March 6 lows. 

The “follow through day” is a day of heavy percentage gains in a major index accompanied by heavy volume and leadership from quality growth stocks.  To qualify, it must come on or after Day 4 from the market bottom. (IBD research shows the most common follow through days come on Days 4-7.)

This is not a raw “buy” signal. We’re in a bear market; all rallies must be treated with suspicion.

Written by heyercapital

March 12, 2009 at 1:36 pm

What is the free market?

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Here’s the best summary I could steal and call my own: 

 

Brian Saint-Paul: The popular media is blaming the economic collapse on the free market and “laissez-faire capitalism.” And yet these same commentators seem largely ignorant of what a laissez-faire economy actually involves. So first things first: What is free market capitalism?

 

Thomas Woods Jr.: Well, it’s not nearly as scary as people think it is. Free market capitalism simply involves the free exchange of property between individuals. The idea is that you’re free to enter into contracts with other people. These contracts are reached on a voluntary basis; both parties must consent to the terms. The system proceeds along the lines of mutual respect. In other words, the free market is civilized behavior, institutionalized: You can’t initiate physical force against somebody else to make him do something — you have to get his consent. It’s a system based on private property and free exchange. And that’s really it.

 

Order the book Meltdown by Dr. Tom Woods through this link.

Written by heyercapital

March 12, 2009 at 7:09 am