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Ignore what others say and listen to what the man himself says..

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The kjuch talked about new offering from Research in motion (RIMM)

Disclosure (“none” means no position):None

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Just a little video of the upcoming GPhone from Google (GOOG)

Disclosure (“none” means no position):None

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Ben Bernanke gave a speech today in Jackson Hole on “Reducing Systemic Risk”

Here are some parts and a full text link the end.

On Bear Stern episode:

“An effective means of increasing the resilience of the financial system is to strengthen its infrastructure. For my purposes today, I want to construe “financial infrastructure” very broadly, to include not only the “hardware” components of that infrastructure–the physical systems on which market participants rely for the quick and accurate execution, clearing, and settlement of transactions–but also the associated “software,” including the statutory, regulatory, and contractual frameworks and the business practices that govern the actions and obligations of market participants on both sides of each transaction. Of course, a robust financial infrastructure has many benefits even in normal times, including lower transactions costs and greater market liquidity. In periods of extreme stress, however, the quality of the financial infrastructure may prove critical. For example, it greatly affects the ability of market participants to quickly determine their own positions and exposures, including exposures to key counterparties, and to adjust their positions as necessary. When positions and exposures cannot be determined rapidly–as was the case, for example, when program trades overwhelmed the system during the 1987 stock market crash–potential outcomes include highly risk-averse behavior by market participants, sharp declines in market liquidity, and high volatility in asset prices. The financial infrastructure also has important effects on how market participants respond to perceived changes in counterparty risk. For example, during a period of heightened stress, participants may be willing to provide liquidity to a market if a strong central counterparty is present but not otherwise.

Considerations of this type were very much in our minds during the Bear Stearns episode in March. The collapse of Bear Stearns was triggered by a run of its creditors and customers, analogous to the run of depositors on a commercial bank. This run was surprising, however, in that Bear Stearns’s borrowings were largely secured–that is, its lenders held collateral to ensure repayment even if the company itself failed. However, the illiquidity of markets in mid-March was so severe that creditors lost confidence that they could recoup their loans by selling the collateral. Many short-term lenders declined to renew their loans, driving Bear to the brink of default.

Although not an extraordinarily large company by many metrics, Bear Stearns was deeply involved in a number of critical markets, including (as I have noted) markets for short-term secured funding as well as those for over-the-counter (OTC) derivatives. One of our concerns was that the infrastructures of those markets and the risk- and liquidity-management practices of market participants would not be adequate to deal in an orderly way with the collapse of a major counterparty. With financial conditions already quite fragile, the sudden, unanticipated failure of Bear Stearns would have led to a sharp unwinding of positions in those markets that could have severely shaken the confidence of market participants. The company’s failure could also have cast doubt on the financial conditions of some of Bear Stearns’s many counterparties or of companies with similar businesses and funding practices, impairing the ability of those firms to meet their funding needs or to carry out normal transactions. As more firms lost access to funding, the vicious circle of forced selling, increased volatility, and higher haircuts and margin calls that was already well advanced at the time would likely have intensified. The broader economy could hardly have remained immune from such severe financial disruptions. Largely because of these concerns, the Federal Reserve took actions that facilitated the purchase of Bear Stearns and the assumption of Bear’s financial obligations by JPMorgan Chase & Co.

This experience has led me to believe that one of the best ways to protect the financial system against future systemic shocks, including the possible failure of a major counterparty, is by strengthening the financial infrastructure, including both the “hardware” and the “software” components.”

On regulation:

“A systemwide focus for financial regulation would also increase attention to how the incentives and constraints created by regulations affect behavior, especially risk-taking, through the credit cycle. During a period of economic weakness, for example, a prudential supervisor concerned only with the safety and soundness of a particular institution will tend to push for very conservative lending policies. In contrast, the macroprudential supervisor would recognize that, for the system as a whole, excessively conservative lending policies could prove counterproductive if they contribute to a weaker economic and credit environment. Similarly, risk concentrations that might be acceptable at a single institution in a period of economic expansion could be dangerous if they existed at a large number of institutions simultaneously. I do not have the time today to do justice to the question of the procyclicality of, say, capital regulations and accounting rules. This topic has received a great deal of attention elsewhere and has also engaged the attention of regulators; in particular, the framers of the Basel II capital accord have made significant efforts to measure regulatory capital needs “through the cycle” to mitigate procyclicality. However, as we consider ways to strengthen the system for the future in light of what we have learned over the past year, we should critically examine capital regulations, provisioning policies, and other rules applied to financial institutions to determine whether, collectively, they increase the procyclicality of credit extension beyond the point that is best for the system as a whole.

A yet more ambitious approach to macroprudential regulation would involve an attempt by regulators to develop a more fully integrated overview of the entire financial system. In principle, such an approach would appear well justified, as our financial system has become less bank-centered and because activities or risk-taking not permitted to regulated institutions have a way of migrating to other financial firms or markets. Some caution is in order, however, as this more comprehensive approach would be technically demanding and possibly very costly both for the regulators and the firms they supervise. It would likely require at least periodic surveillance and information-gathering from a wide range of nonbank institutions. Increased coordination would be required among the private- and public-sector supervisors of exchanges and other financial markets to keep up to date with evolving practices and products and to try to identify those which may pose risks outside the purview of each individual regulator. International regulatory coordination, already quite extensive, would need to be expanded further.”

Read full speech here:

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Bloggers, Greenspan, Waksal, College Drinking, ethanol

– David Merkel set the record straight

– Felix is right……….just shut up

– Raise your hand if you forgot about him…be honest..

– OK, This is the most important thing educators have to deal with? How about this, ACTUALLY PUNISH PEOPLE FOR BREAKING THE LAW. Maybe if the rule was, “you are underage and get caught with booze on campus, your out of school”? Right, “then will go off campus and drink”, “educators” will say. OK, then let the police ARREST THEM. This is imbecilic. You mean to tell me if 18 year olds are allowed to break the rules without repercussions they do it? Really?

– Proof it is cheaper than gas

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I think people may look back at at the Gap trading around $15 earlier this summer and in time it may turn out to be the steal of the summer..

Before Glenn Murphy was even hired by Gap I said that if the new CEO was in the Edward Lampert at Sears (SHLD) or Julian Day at RadioShack (RSH) mold, shareholders would really benefit.

After he was hired I was positive on the choice based on his track record and continued to think he could produce there.

After Murphy announced his plans for the company, I could not help noticing something familiar about it.

As it has unfolded, the blueprint become more obvious. Shares have responded climbing 14% from their last summer low’s after Murphy’s hire.

Back in June I said:

Gap shareholders are going to do just fine under Murphy. Let’s not forget, with the exception of Wal-Mart (WMT), retailers are being savaged right now. The fact that Murphy’s shareholders (because of the company’s results) have escaped that must be telling us something, the plan is working.

Tonight Gap released results and surprised many:
G

ap (GPS) reported that second quarter net earnings increased 51 percent through the combination of driving healthy margins and effectively managing costs.

For the quarter ended August 2, 2008, net earnings were $229 million, or $0.32 per share on a diluted basis, compared with $152 million, or $0.19 per share, for the second quarter last year.

The 2007 second quarter diluted earnings per share included $0.02 of expenses related to the company’s cost reduction initiatives. Excluding the $0.02 per share of expenses, second quarter diluted earnings per share last year on a non-GAAP basis were $0.21 per share. Please see the reconciliation of diluted earnings per share on a GAAP basis to diluted earnings per share excluding the expenses associated with the company’s cost reduction initiatives, a non-GAAP financial measure, in the table at the end of this release.

“External conditions aside, we continue to deliver improved earnings with healthy margins and I am pleased with our second quarter results,” said Glenn Murphy, chairman and chief executive officer of Gap Inc. “While we continue to pursue our 2008 financial strategy, we are very focused on bringing more customers into our stores.”

If that was not good enough, they backed their full year guidance and also said they are sitting on $1.7 billion in cash after bringing in another $340 plus million during the quarter and buying back 16.3 million shares. Here is an interesting number, 12.3% of the Gap’s current market cap consists of the cash it has sitting in the bank.

Over the past year retailer like Target (TGT), Macy’s (M), Kohl’s (KSS) and JC Penny (JCP) have all seen their profits and share prices (50% decrease in some cases) shrunk. Murphy’s Gap has held it’s own and it share price, essentially flat over that time reflects that.

My guess is Gap shareholders are some pretty happy folks right about now

Disclosure (“none” means no position):

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Doug Kass has a piece in the FT today that is a must-read in the current environment.

Coming on the heals of my post last night, I think what Mr. Kass has to say, as an actual short seller is gospel on the subject.

Kass writes:

Short-selling runs deep in financial history. Perhaps the first case dates to 1609 when the Dutch trader, Isaac Le Maire, targeted the shares of the shipping company Vereenigde Oostindische Compagnie (the Dutch East India Company). VOC was the first multinational corporation in history and had broad powers. Nonetheless, Le Maire, concerned about threats of attack by English ships, sold VOC’s shares short. After learning about Le Maire’s tactics, the stock exchange governing VOC’s trading banned short-selling (although the ban was later revoked).

In the early 1630s, the Dutch economy fell into a depression following a speculative peak in the trading of tulips. Again, short-selling raised the ire of regulators, many of whom saw it as magnifying the effect on the Dutch economic downturn. As a result, England banned short-selling outright.

Almost 420 years later – in the late 1920s – short-sellers warned of the consequences of speculation. But in the aftermath of the Wall Street crash of 1929, many blamed them and the uptick rule – which banned short-selling on downticks – was instituted (and stayed in effect until 2007). More regulation governing short-selling came into force in 1940, with a ban on mutual funds from short-selling (though that law was lifted in 1997). In early 2005, the SEC again sought to restrict the practice.

Yet short-sellers have served as financial watchdogs, as many of their warnings have been spot on. The delusional dotcom boom in the late 1990s brought Cassandra-like utterings from the short-selling cabal that proved insightful but were largely ignored. After the subsequent 75 per cent collapse of the Nasdaq, a bull market in corporate fraud emerged and short-sellers such as David Rocker, founder of Rocker Partners, highlighted accounting problems at companies such as Sunbeam, Tyco and Lernout & Hauspie. Kynikos’ Jim Chanos played a role in uncovering the largest fraud in history when his contrary-minded analysis warned of Enron’s accounting shenanigans – which were emulated (but ignored by investors) in the banks’ recent dalliance with structured investment vehicles.

By the middle of the decade the property cycle was in full bloom and David Tice of the Prudent Bear Fund warned of the dire ramifications of a downward spiral in home prices on the levered balanced sheets of Fannie Mae (FNM) and Freddie Mac (FRE). Soon thereafter, Nouriel Roubini, the economist, voiced particularly pessimistic forecasts about the housing market’s impact on credit.

Drawing a line between economic and market progress as against fantasy is a role taken by the few. Short-sellers provide an anchor of objectivity in an investment world populated by those more interested in rewards than in un­covering systemic risks. This week, Mr Cox said the SEC would announce new regulations to restrict short-selling. Instead of more regulation, the chairman and investors should begin listening to what short-sellers have to say about our economy and credit markets.

Full FT Article

Kass points out the truth, until the things short sellers warn us of stop coming true, the SEC would be well advised to focus its energies elsewhere.

Disclosure (“none” means no position):None

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Leucadia (LUK) tonihjy has filed a 13D/A with the SEC in AmeriCredit (ACF)

Applicable portion:

ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.

Item 5 of the Schedule 13D is hereby amended and restated in its entirety, with effect from the date of this Amendment, as follows:

As of the date of this Amendment, the Leucadia Reporting Persons may be deemed to beneficially own an aggregate of 32,715,440 shares of Common Stock, representing approximately 28.1%of the shares of Common Stock outstanding. All percentages in this Item 5 are based on 116,311,716 shares of Common Stock outstanding as of the date of this Amendment.

Full SEC filing

Disclosure (“none” means no position):None

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WSJ on blackberry, Reporting, Gphone, Frugality

– This reader is the best yet

– Any wonder folks do not reader papers for business anymore?

– Here it comes

– Less debt would be better for all

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