Feb 29, 2008

Next on chopping blocks. There are som many more to come. Mr. Cassano’s exit follows the report of AIG’s largest quarterly loss of $5.29 billion, or $2.08, per diluted share. That’s down from $3.44 billion, or $1.31, per diluted share for the same period in 2006.

Who will go down first? Do we need them all? Moody’s affirmed MBIA’s triple-A rating, after the company raised $3 billion in capital. The company also agreed to separate its municipal and asset-backed businesses in the next five years, and to stop granting coverage to asset-backed debt for at least six months. Moody's Investors Service announced today that it has concluded its analysis of the residential mortgage and mortgage-related CDO exposures of Ambac Assurance Corporation, and is continuing a review for possible downgrade that was initiated on Jan. 16.

Buffet's letter released

Feb 26, 2008

China growth- chinese to build 5 new airports in next 5 years

Steel billet futures, launched on the London Metal Exchange (LME) on Monday, will eventually attract fund managers as they are an excellent indicator of the global economy, the LME's chief executive has said. Initial liquidity would be driven by steel merchants and traders. Steel billets, semi-finished products used mainly in the construction industry, began trading on the LME overnight via electronic and telephone trading, known as a 'soft launch'.

Stagflation worries - Big jump in wholesale inflation The U.S. Labor Department reported producer prices jumped a monthly 1 percent in January on rising energy costs and saw an annual 7.4 percent increase. It was the biggest 12-month gain in more than 26 years, when the United States was emerging from a period of low growth and high inflation known as stagflation.

Feb 25, 2008

SCARY STUFF - San Francisco Bay Area Cash Concerns (per FigPartners): This weekend in The San Francisco Chronicle , there was an article about a local municipality currently facing a cash crunch caused in part by evaporating revenues from property taxes. The city of Vallejo is contemplating a bankruptcy filing and we do not think it will be the last municipality to do so in either the Bay Area or the Central Valley. So far, Vallejo has reduced staffing at libraries and emergency call-centers, rotated fire station closures and indefinitely deferred maintenance to streets and public parks. Increased business taxes and decreased city employment are likely next. The sudden inability for home owners to pay their mortgages – let alone property taxes – and the swift decline in property values has combined to put municipal governments in a pinch. While most all governments in California will face similar cash shortages, those that financed current capital expenditures (i.e. streets and schools) with future property tax dollars will likely be hurt the most and there are a lot of them. Contra Costa County – perhaps the biggest county in the Bay Area – is experiencing the sharpest increase in foreclosures and several cities in the Central Valley built entirely new downtowns in the last few years. The double whammy of increased taxes and lower quality of life will undoubtedly impact California’s small business and community banks. The effect will be most felt by banks in municipalities that declare bankruptcy, but it is something to keep an eye on.

Finally two India-focused ETFs The WisdomTree India Earnings Fund (EPI) began trading on the NYSE Arca this morning, trading a million shares straight out of the gate. On Monday or Tuesday, PowerShares will follow up with its own India ETF: the PowerShares India Portfolio (PIN).

The suits begin: HSH Nordbank alleges that UBS did not manage the assets in line with its "prudent investment objectives".

Feb 21, 2008

Established in 1994, the Miami-based closed-end equity mutual fund (NASDAQ: CUBA) trades like a stock and invests in companies that stand to benefit from the end of the U.S. embargo on Cuba. The fund hit a midday high of $9.50, and closed up $1.26, or 16.94 percent, to $8.70

The Conference Board's gauge of leading economic indicators

The report is designed to predict where the U.S. economy is headed in the next three to six months.

Philadelphia Federal Reserve's February manufacturing index.

Massive deleveraging taking place.

Silver hasn't seen today's prices since Nov 1980.

Feb 20, 2008

(per research note) Macroeconomic trends/analysis, basic research and an awareness of the political situation in several grain producing countries.
1. Rising standards of living in China, India, and many other countries will mean more consumption of meat. Increased meat consumption requires a lot of grain to feed animals. As most everyone knows it takes several pounds of grain to produce one pound of meat.
2. If more corn is used as animal feed, other grains will need to be substituted for other purposes. When other grains are substituted for corn, demand for those grains grows and their prices also rise. It is a simple case of rising demand and almost static supply.
3. Supply of grains is hard to increase as it can take a very long time to build the infrastructure to store and deliver any new grains produced in previously unfarmed areas. To add production in already farmed areas is very difficult. More fertilizer and special seeds are two methods available to increase crop yields.
On top of these, many politicians have created unintended consequences when they sought to pander to farm voters. For example, corn availability is being further diminished by the politically popular, but highly economically and environmentally flawed system of using corn for ethanol production. In the U.S., it has become politically popular to suggest that ethanol will reduce our dependence on foreign oil. Ethanol production from corn is incentivized with tariffs on imported ethanol and economic subsidies of various types in the U.S. and in several other grain producing countries.

Ethanol will prove to be a poor alternative fuel and very costly environmentally and financially. Of course, ethanol production from corn has the effect of diminishing the amount of corn available for animal feed, therefore further driving up prices.

May '08 contract prices over 100% odds of a 75bps cut by the April 30th meeting, and even a 77% chance that Fed Funds reaches 2.00% (or -100bps) by July ‘08.

Feb 14, 2008

FGIC Corp. lost its Aaa bond insurance rating at Moody's Investors Service, which said the company is in worse financial shape than larger competitors MBIA Inc. and Ambac Financial Group Inc.

FGIC, the fourth-largest bond insurer, is about $4 billion short of the amount of capital needed to justify a Aaa ranking

Oil- demand projected at about 90MM barrels of oil a day in 2010. Current production is about 85MM a day. Oil production has averaged about 2.3% per annum since 1965.

Feb 13, 2008

MBIA and others would much prefer reinsuring the part of their business that is at greater risk for future losses. They would like to pay a smaller premium than what Berkshire has suggested. Buffet only wants to ensure policies on the $800B of muni bonds not the mortgage piece. Insureres would pay a steep premium and prob not accept terms of 150% of premiums to Buffet.

A plan is better than a genius with no plan.

Feb 12, 2008

Def rate on inv grade munis is .1 over 10 yrs vs 2.1 for inv grade corp.

tech has been kicked senseless down about 20%

SPDR Lehman Int'l T Bond (BWX) - .5% exp ratio and doesn't hedge currency exposure.

Feb 11, 2008

Emerging markets stocks have produced a cum 383% return over the past 5 yrs vs 83% for S&P 500. Remember the dollar seems undervalued and could make situation worse assuming we have rebound.

Emerging markets returned about 37% for 2007 / developed nations 12% / HY 2% / US large cap 7%.

Risk is taking shape as HY bonds now return about 6 pts above the 10 yr.

Feb 08, 2008

MENA - middle east north africa investing. Funds would be Algebra Capital, T Row Price Europe and Med, SPDR MEAF etf.
FXI - HK and mostly China H Shares
EWH - HK market

Feb 07, 2008

The muni chain of events - if AMBAC and MBIA are eventually downgraded it will make it harder for munis to be sold. Investors will demand a higher yld to compensate for perceived higher risk. If cost to the municipality increases they might to increase taxes at the local level... Attractive opt now as Buffet has moved into bond insurance business.

Feb 05, 2008

ism services index came in at lowerst level in 6 yrs- bringing back recessionary thoughts.

LCDX - index of leverage loans has dramatically fallen since mid '07

Feb 04, 2008

We have seen recent moves to the upside in Silver. Economy strengthens the industrial demand will increase.

Jan 31, 2008

Interesting to see that the VIX, a measure of stock market volatility / fear, declined by about 17% for this week. Stocks rose significantly for the week.

The dollar has been very strong vs more and more bad news. A sign that the weakness might be over. Could see strengthening in the near term vs the Euro.

Feb 1, 2008

Wall Street's best week in almost five years. The difficulty of market timing - why you don't get out and the fact that you lose on fear. In a week during which the Federal Reserve slashed benchmark U.S. short-term interest rates, the Dow and the S&P 500 notched their best weekly advances in almost five years, gaining 4.4 percent and 4.9 percent, respectively. The Nasdaq posted its best one-week jump in nearly 18 months, finishing up 3.8 percent in the same period.

Trading was moderate on the New York Stock Exchange - 1.79 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion. Nasdaq about 3.10 billion shares traded, topping last year's daily average of 2.17 billion.