Category: Articles

This is a bit anticlimactic but coming tonight may help tomorrow

Press Release
Federal Reserve Press Release

Release Date: October 12, 2008
For immediate release

The Federal Reserve Board on Sunday announced its approval of the application and notice under sections 3 and 4 of the Bank Holding Company Act by Wells Fargo & Company (WFC), San Francisco, California, to acquire Wachovia Corporation and its subsidiary banks, Wachovia Bank (WB), National Association, both of Charlotte, North Carolina, and Wachovia Bank Delaware, National Association, Wilmington, Delaware, and the nonbanking subsidiaries of Wachovia Corporation.

FULL .PDF OF ORDER

Disclosure (“none” means no position):Long WFC, none
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Since I can’t watch my Bills today (bye weeks suck), some listening for us fans…

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Received this from reader Justin and thought it put some thingd in perspective..

Over the past few months, the media has discovered another story to strike fear into the hearts of America, and incidentally to sell newspapers and airtime. This time it’s not SARS, terrorists, or once-in-a-lifetime hurricanes (which seem to happen every year or so), it’s the Great Depression. I do not want to make light of the current economic situation because it is serious, and likely the most serious of our lifetime. However, as part of justifying my continued buying into the current market, I did some research to understand if perhaps this time the world was really coming to an end. Here’s what I’ve found regarding the Great Depression:

* S&P 500 PE multiple over 30
* 25% unemployment
* 5000+ bank failures with numerous panicked bank runs resulting in $140 billion lost by depositors (no FDIC insurance)
* 30% GNP contraction
* 50% duties on imports
* Huge drought that led to the Dustbowl in an economy heavily dependent upon agriculture
* No unemployment benefits
* No social security
* Severely delayed government interventions

Where are we today?

* Current S&P 500 PE 18
* 6.1% unemployment
* Under 20 bank failures with not a penny lost by depositors and an increased FDIC insurance
* 2008 GDP is up
* No Smoot-Hawley
* More diversified economy
* Increased unemployment benefits, which means they are spending money even if they aren’t working
* Numerous, ongoing domestic and international initiatives

Math of current situation:

Financial loss estimates (Jan Hatzius, Goldman Sachs; Nouriel Roubini, NYU) – -$2 trillion

US Govt. intervention (stimulus pkg, “bailout”, AIG loan) – +$1trillion

Private sector (SOV funds, Hedge Funds, Buffet, etc.) – +500 billion

___________

Potential Unrealized Losses -$500 billion

Actual losses (US Stocks $8 trillion; US Home Equity $4 trillion) ($12 trillion)

The $12 trillion loss appears to be an overshoot to the downside. How do I explain it? There are 2 answers I’ve come up with. First, in my opinion, the majority of these are paper losses, which will be “written up” over time, which is why I’m buying equities. I think the market will soon realize that companies are reporting solid earnings, and that there is pent up, quality consumer demand for cars and homes, albeit at lower levels than 2007. Second, it’s pure irrational fear, ie the best time to buy. Here’s a simple analogy to drive home my perspective. Someone yells “fire!” at the local movie theater. You have 2 choices. You can follow Jim Cramer and run for the exit, or you can sneak in with Warren Buffet and watch the movie for free in an empty theater. I think I’ll stay for the double feature.

Disclosure (“none” means no position):None
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From the guy who predicted the housing bubble….and its popping..

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This is hard to believe…he has been buying shares on margin???? Millions worth….

OKLAHOMA CITY–(BUSINESS WIRE)–Chesapeake Energy Corporation (NYSE:CHK) today disclosed that its Chief Executive Officer, Aubrey K. McClendon, involuntarily sold substantially all of his shares of Chesapeake common stock over the past three days in order to meet margin loan calls.

Management Comments

Mr. McClendon commented, “I am very disappointed to have been required to sell substantially all of my shares of Chesapeake. These involuntary and unexpected sales were precipitated by the extraordinary circumstances of the worldwide financial crisis. In no way do these sales reflect my view of the company’s financial position or my view of Chesapeake’s future performance potential. I have been the company’s largest individual shareholder for the past three years and frequently purchased additional shares of stock on margin as an expression of my complete confidence in the value of the company’s strategy and assets. My confidence in Chesapeake remains undiminished, and I look forward to rebuilding my ownership position in the company in the months and years ahead.”

Chesapeake Energy Corporation is the largest producer of natural gas in the U.S. Headquartered in Oklahoma City, the company’s operations are focused on exploratory and developmental drilling and corporate and property acquisitions in the Fort Worth Barnett Shale, Haynesville Shale, Fayetteville Shale, Anadarko Basin, Arkoma Basin, Appalachian Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States.

Does anyone want to know why the market is crashing???MARGIN… and forced selling

People….there are huge bargains here…huge…

Disclosure (“none” means no position):None
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This is a great explanation for those afraid to ask…

Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.

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From the Financial Times. on the lighter side…

A new bank model

By Robert Shrimsley

Published: October 9 2008 03:00 | Last updated: October 9 2008 03:00

1) Take money from members of the public in savings accounts on pretext of keeping it safe

2) Use that money to lend to people who are unlikely to repay it.

3) When loan defaults rise and wholesale markets dry up, start refusing loans and credit to those who are able to repay.

4) Resist paying more for insurance scheme to guarantee savings accounts. You can always take money from the public, through nationalisation, as the price of keeping their money safe.

5) As investors notice structural weakness, start hoarding cash.

6) When this leads to system crisis, take money from the public by offloading bad loans by swapping for Treasury bills at Bank of England.

7) As turbulence continues, stop lending money to businesses.

8) Take more money from the public through government recapitalisation, in return for promise to keep lending people their own money.

9) Slash dividend. Create new executive remuneration scheme.

Original Link

Disclosure (“none” means no position):
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Now that the Wachovia (WB) saga seems to be settled and Wells Fargo (WFC) is the winner, will Citi (C) turn its sights to National City (NCC)?

Capital World Investors now beneficially owns 103 million shares, up from 8 million in the last quarter.

From the filing:
Capital World Investors is deemed to be the beneficial owner of 103,764,990 shares or 5.1% of the 2,035,010,452 shares of Common Stock believed to be outstanding as a result of CRMC acting as investment adviser to various investment companies registered under Section 8 of the Investment Company Act of 1940.

Disclosure (“none” means no position):Long C,NCC, WFC, none
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This year will make for some good “year in review” clip on New’s Years..

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Looks like the path is cleared for Wells Fargo (WFC) to acquire Wachovia (WB) over Citigroup (C).

Release Date: October 9, 2008
For immediate release

The Federal Reserve acknowledges the considerable efforts of Citigroup Inc. and Wells Fargo & Company to reach an accord regarding the acquisition of Wachovia Corporation.

While no agreement between Wells Fargo and Citigroup was reached, the two parties have indicated that they will no longer seek injunctive relief to prevent a transaction.

The Federal Reserve will immediately begin consideration of the filings submitted by Wells Fargo for approval to acquire Wachovia Corporation.

So, here it is. We are done with the legal games and it would seem the decision is up to the Fed. The way I read it, the Fed is going to decide between either proposal, not decide how to break up Wachovia.

If that is the case, then Wells Fargo has to win because their deal involves no FDIC involvement. Simple. That, and it is a far better deal for shareholders.

Disclosure (“none” means no position):Long WFC, C
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