As mentioned in one of my earlier post that we will look into this ‘Green Shoots’ thingy well here I am on this highly debated ‘green shoots’ issue is it there OR not ?
First of all what is greenshoot and what does it mean ? well, it may mean many things but one thing that it does mean for many is that things are starting to get better and that is an encouraging sign, (..and then the speculation is..) if they continue on this path to be better then in the end we can declare victory.
Anyway…first part that things are starting to get better that it self is a flawed understanding and flawed advertising things are not getting better but the pace at which bad things were happening is slowing down, not sure how this can be good news…because the reality is that bad things are still happening…happening at a lesser pace but none the less happening…and that’s bad news period no matter how you see it.
No doubt, Situation will change, when good things will start to happen…may be at a slower pace..but none the less ‘good things’. They will be good things.
The course hasn’t reversed yet. Second part (..speculation about trend…) still stands some economist/investors see this as trend reversal others say don’t count on it. Trends can change their direction anytime.
So where are the green shoots ? why suddenly there is buzz in the media that things are getting better or going to get better ?
Just about 30-60 days ago we were shit scared fearing deflation, world financial system meltdown, biggest banks failing…financial armageddon …now we are seeing green shoots. If you’re not seeing it and I am definitely not seeing here is why……if there are green shoots I don’t need to be told that they are there I will see them because my tax bills would be falling, wages would be rising, unemployment would be running low, gas prices would be falling, more people would be taking vacations, restaurants would be full, airlines would be doing better, most of all people would be actually talking about where the jobs are. And that is how I will (..a normal person) would know there are greens hoots. I don’t need to be told by the media over and over again and again that there are green shoots. But hey ! that’s me…and may be it’s you. But than again there are enough god damn idiots out there, who will start to feel better just because they read in the news about it. Not only that…they might even go out and spend the heck out of their capacity. All because 6 months from now things will get better. And at least in my opinion that’s exactly what media is trying to achieve. Put a carrot in front of the donkey and let the donkey run.
By Alan Rappeport in New York, Published: June 12 2009 15:57 | Last updated: June 12 2009 15:57
US consumer confidence rose in June to its highest level in nine months as a recent stock market rally and signs of economic stability have begun to peel away some of gloom cast by the recession.
WASHINGTON, June 12 (Xinhua) — The U.S. unemployment rate has hit its highest point in a quarter century, and economists still expect the numbers to climb even higher.
“I would expect the unemployment rate to rise into the middle of 2010,” Beach said.
Every other place on planet if people are loosing their jobs they will conserve and spend less confidence would be low common sense dictates that..not in America. Both articles were published on June-12th check that.
And that’s pretty much how I see it, I see this as a desperate effort to encourage people all over the world to believe in this. Yet another miracle that America has pulled off. They have averted the crisis, one of the biggest, once in life time, once in a century crisis…and just like that they have fixed it. They didn’t see it coming (..so what). They could not control it (..so what). They did not understand it (..so what)..there are trillions of derivative that they have no knowledge and control on (..so what)…they have fixed the crisis and fixed it so well that good times will just roll in within 6 months.
This is simply marvelous.
I will cover following sectors individually each to see if there are green shoot..scroll down for links..
1. Banking. ( Published 06/11/09)
2. FDIC ( Published 06/11/09)
3. Commercial Mortgage ( Published 06/11/09)
4. Transport (Airline/Trucking/Rail) (Published 06/11/09)
5. Manufacturing (….to be published…)
6. Bonds/Currency (….to be published…)
7. Inflation (….to be published…)
8. Housing (….to be published…)
9. Pensions (….to be published…)
10. States/Cities/Towns in America (….to be published…)
11. Debt…( oh! boy) (….to be published…)
12 Unemployment (….to be published…)
14 Insurance (….to be published…)
Why so much propaganda about Green shoot is required you may question ?
Well in my understanding since Wall Street has cheated everybody on the planet from east to west all countries. By selling phony investments consisting sub-prime, alt-a, CDOs, CLOs, SIVs to name a few and then sold bonds from Fannie Mae and Freddy Mac (…of course supported by government, and we all know how those two companies are doing.) Then sold Shares of major Wall Street Banks Citi, Chase, Bank of America on artificially inflated prices..we all know how they are doing…and the list goes on. Madoff, Enron, Worldcom….on and on…!! while at it let us not forget AIG…Leahman, Bear, Wamu…just keep adding…oh ya! then again sold credit card securitization, commercial market securitization…just keep adding…..countrywide..go on…
Basically how to take shit, sprinkle it with caviar and present it to others for breakfast that technique is mastered very well by Wall Street bankers. Now trick here is to have investors focused on sprinkles of caviar but not the shit (..main ingredient). As long as people buy shit but pay the price of caviar all is well on wall street.
I am sure by now many Americans are thinking I am not American at all…such bad words I can’t be an American. And that is one other thing about Americans they must be lied to and constantly, about how good the things are and how good they can be otherwise the bubble they live in will burst and that’s bad because then they will have to wake up into an actual life, actual economy like the rest of the planet does. That’s too bad…all those fairy tale dreams they would all be gone.
So my apology if you are hurt with the wordings here and if you are so hurt, then you must stop reading right about now. You should go back to your sleep and enjoy your fairytale dreams. however, before you go let me tell you that my language here is a derivative of someone’s comments who most Americans consider American.
“Many of the crooks look like crooks,” said Mr Buffett. “Wall Street loves them as long as they are pushing out securities.” Mr Buffett, known affectionately as the Sage of Omaha, said a good way to spot possible frauds was to keep a close eye on those companies that reported results using Ebitda (earnings before interest, tax, depreciation and amortisation).
Mr Munger, 78, also sounded a warning over companies involved in derivatives, saying. “To say derivative accounting in America is in the sewer is an insult to sewage,” he fumed.
Now caviar does not flow in Sewage….shit does. Hence the word I chose. They were more polite in mentioning it I am not that is the only difference.
If you’re still hurting, may be you should tell Mr. Munger and Mr. Buffet too that they are not Americans either.
If you did click on that link above you could say ‘but that article is from 2002′. That’s the point, I posted it here to make you realize how deep their understanding of this problem is, they saw this coming way back in 2002….and now here is the latest….from May-4th-2009..let us see if their understanding about the ’sewage’ has changed.
Munger and Berkshire Chairman Warren Buffett spoke yesterday at a press conference one day after the Omaha, Nebraska-based firm’s annual shareholder meeting at the city’s Qwest Center. Excerpts from the press conference are below.
“You could argue that the people who created the securities were either delusional or flim-flam artists.”
“They were going to take a lot of sewage and mix it up in a different way and said it’s not sewage any more. And of course the laws of nature are such that it keeps its sewage-like qualities.”
Damn it ! here they go again. Once again they mentioned sewage/the law of nature…..yet again after 6 years. Looks like nothing has changed in their mind.
Anyway back to our analysis green shoots or ‘Shit’… sorry for that word again. I’ll be more careful going forward…
Anyway, unless we assume that foreigners are completely stupid and definitely idiots who just can’t differentiate between ‘that’ and the caviar…then chances are that they are actually not that big an idiot and have discovered that America cannot be trusted with their money. They will give in their money and instaed of ‘Caviar’ they will get ‘that’.
Then green shoots are suddenly more important then ever before. You see, they must be shown green shoots given some hope otherwise they will walk away with their money, then what will we do, it’s their money we play with. Duh !!
Chinese our biggest creditors have finally realized, Japan has realized. Hedge funds, retirement funds who bought Wall St. Securities have realized taste of ‘that’ and if they must be kept in the game (….after all it’s their money we used ) …they must be shown those GREENSHOOTS. That’s the only way the game can go on. And so the greenshoots…more greenshoots….the propaganda…
Term ‘Greenshoot’ is perfect as well. How to get a good green crop ? use some good fertilizer..we have plenty of ‘that’.
And folks you don’t have to agree with me there is a comment section here so if you hold a different opinion then fill out the form. Better still write up something and send it to me…I will publish it not as your comment but an article. It will only provide some, contrast some healthy debate. Which I think is very good for the readers. So far this blog has been going in one direction only…and that’s not good, I will like to see some good, cheering news published here, but only if it’s real not if it’s made to look real.
Anyway, following (scroll down if you wish) are the sectors I would cover giving references from articles published in major news papers (..as always) from around the world often written by major economist, writers, good journalists and importantly articles of most current dates that reflect recent trends …the sectors are as follows.
When I publish articles for these sectors a link will appear with date on which the article has been published else it will say to be published so keep watching this page..it will be updated until all sectors are complete.
Since we don’t live in isolated world..we will also look at few other countries to see if the trend ( down trend has reversed there…) may be they will provide a clue…in that category we will look at most industrialized countries with developed economy…such as Germany and Japan. We will also look at UK because of similarities of it’s economy with ours and again UK also is a developed country.
Did I miss anything ? is there any other sector you would like me to cover ? please mention it. This is going to be one of my largest post so not everything would be published at once. I will publish few now and few later but I would cover all these sectors. So, let us get started…
5. Manufacturing (….to be published…)
6. Bonds/Currency (….to be published…)
7. Inflation (….to be published…)
8. Housing (….to be published…)
9. Pensions (….to be published…)
10. States/Cities/Towns in America (….to be published…)
11. Debt…( oh! boy) (….to be published…)
12 Unemployment (….to be published…)
14 Insurance (….to be published…)
[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions or any other decision based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]
It’s only logical to cover FDIC right after banking because in case a bank fails, FDIC comes forward and takes over the bank.First of all I have made various posts about FDIC since last year and none of them have incicated anything good for FDIC they have all shown consistently that FDIC has more problems ahead..it’s almost a trend…news articles listed in those posts have clearly shown that there is constant on coming shortage of money with FDIC and it is constantly trying to raise/maintain funding.
Here are references to those posts I made earlier since last year..feel free to explore…all these combined together are probably the largest news repository on the net available anywhere.
Now FDIC did not find a need to advertise themselves as much in the past as they do now. Why ? I am not sure..is it so..that people are scared of their banks and taking their money out and putting them in shoe boxes ? You may be surprised but that’s what is actually happening…and FDIC’s own ad proves it.
Check this out..play this video…
And then….here is the latest report from Karl Denninger from Market Ticker as of Jun 1, 2009.
First of all he called this video clip you just played a propaganda…but why am I explaining that…just read what he said.
..this is extract from his article…
Now for some facts, after you watched the government propaganda ( that video you played..). All of these facts (listed below) , unlike that propaganda, are in fact mathematical realities.
From Bloomberg:
The agency’s deposit insurance fund, supported by fees paid by banks, fell to $13 billion in the first quarter from $17.3 billion in the preceding three -month period. The FDIC has imposed an emergency fee to raise $5.6 billion to rebuild the fund, with more assessments possible this year. The agency forecasts failures will cost $70 billion through 2013.
How much is the $13 billion in FDIC insurance?
The FDIC insures 4.8 trillion dollars in deposits in US banks and thrifts, and yet they have 0.27% - more than two-thirds less than they had a bit more than a year ago - in money to “cover” those deposits.
It is true that the FDIC also has the ability to borrow (up to $100 billion now, and they are trying to secure the ability to borrow up to $500 billion) from Treasury should they run short of money.
It is true that nobody has (yet) ever lost one penny of insured funds at an American bank.
And finally, it is almost certainly true that should Congress have to print up literally any amount of money, irrespective of whether that printing of raw money drives oil to $300 a barrel, gasoline to $10 a gallon, and bread to $20 a loaf, in order to prevent the FDIC from being able to pay you with (perhaps worthless) dollars, they will - because they understand full well that the alternative could quite easily be that you reach for a pitchfork - or worse.
But if you believe that having 0.27% of the insured base of deposits as a reserve, having lost more than two thirds of the original reserve due to malfeasance and misfeasance, when not one person has been indicted, prosecuted or imprisoned for their misconduct over the previous two years constitutes “well-capitalized, prudently operated and able to meet insurance obligations”…
Then there are increasingly more number of banks who are not able to see green shoots…again a very recent article from CNN.
Problem bank list tops 300
FDIC reports that the number of troubled lenders rose by more than 50 during the first quarter and hit its highest level since 1994.
By David Ellis, CNNMoney.com staff writer
Last Updated: May 27, 2009: 11:57 AM ET
The Federal Deposit Insurance Corp. said that the number of lenders on its so-called “problem bank” list jumped to 305 during the first three months of 2009, from 252 in the fourth quarter of last year. This is the highest level of troubled institutions since 1994.
“Banks are making good efforts to deal with the challenges they’re facing, but today’s report says that we’re not out of the woods yet,” FDIC Chairman Sheila Bair said in a statement.
We all know about those efforts…creative accounting you already read about then in banking.
And then these 2 banks which were recently shutdown..they couldn’t see ‘green shoots’ and couldn’t hold on till the green shoots became a tree….
Regulators Shut 2 Failed Banks In Illinois
Facebook Huffpost - Regulators Shut 2 Failed Banks In Illinois stumble.
IEVA M. AUGSTUMS | May 22, 2009 08:36 PM EST
CHARLOTTE, N.C. — Regulators on Friday shut down two more banks, boosting the number of federally insured bank failures this year to 36.
How the hell did that happen…how come they could not take advantage of those greenshoots.
[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions or any other decision based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]
I made a post about commercial mortgage earlier back in Jan-2009. Clearly indicating trouble brewing in that sector post was made in Jan. Please feel free
to read this report. I had put in a lot of work scraping news articles off the net to make that post.
But we are now in June almost 5 months have gone by so has the market improved for commercial real estate ? May be there are some green shoots here…let us have a look….let us check since Feb-09 as my earlier post was made in Jan.
Feb. 3 (Bloomberg) — Corporate debt defaults may cost U.S. life insurers “substantially” more than losses on securities linked to subprime, Alt-A and commercial mortgages, said Eric Berg, an analyst at Barclays Plc.
Corporate defaults are poised for a “significant” increase this year as the recession deepens, Berg, based in New York, said in a research note yesterday.
The American Council of Life Insurers estimated the industry, led by MetLife Inc. and Prudential Financial Inc., holds $1 trillion in corporate debt.
“None of the life insurers we studied appear to be doing a particularly good job” of picking bonds backed by companies, Berg said. “Understandably, investors
are concerned.”
Bank Failures May Reach 1,000 on Bad Loans, RBC Says (Update2)
By David Mildenberg and Margaret Chadbourn
Feb. 9 (Bloomberg) — As many as 1,000 U.S. banks may fail in the next three to five years, almost double the one-year tally at the height of the saving-and
-loan collapse, as losses mount on commercial real-estate loans, RBC Capital Markets analysts said.
Wall Street Banks Vacate Towers Pushing Empty Space to Record
By David M. Levitt
Feb. 26 (Bloomberg) — New York’s biggest banks and securities firms may relinquish 8 million square feet of office space this year, deepening the worst
commercial property slump in more than a decade as they abandon a record amount of property.
JPMorgan Chase & Co., Citigroup Inc., bankrupt Lehman Brothers Holdings Inc. and industry rivals have vacated 4.6 million feet, a figure that may climb by
another 4 million as businesses leave or sublet space they no longer need, according CB Richard Ellis Group Inc., the largest commercial property broker.
Banks, brokers and insurers have fired more than 177,000 employees in the Americas as the recession and credit crisis battered balance sheets. Financial
services firms occupy about a quarter of Manhattan’s 362 million square feet of office space and account for almost 40 percent now available for sublease, CB
Richard Ellis data show.
Geithner’s Plan May Not Save Commercial Real Estate (Update1)
By Bob Ivry and Jonathan Keehner
Feb. 12 (Bloomberg) — Treasury Secretary Timothy Geithner’s financial stability plan may come too late to rescue the commercial property market, which is
following housing into a slump.
Lending has dried up as $171 billion of commercial mortgages held by non-bank investors come due in 2009, according to the Mortgage Bankers Association.
Issuance of commercial mortgage- backed securities, which supply cash for lenders to make more loans, fell 95 percent in 2008, according to JPMorgan Chase & Co. Geithner wants to expand an existing federal lending program to buy the securities and spark loan-making.
“CMBS is a four-letter word,” said William Acheson, who tracks apartment real estate investment trusts for the Benchmark Co. LLC in New York. “The Treasury
plan gets questionable paper off questionable financial institutions’ books, but it will take an awful lot more confidence for people to come back to securitized mortgage pools.”
Commercial property under pressure across US
By Alan Rappeport and Nicole Bullock in New York
Published: March 5 2009 21:06 | Last updated: March 5 2009 21:06
Ben Bernanke, chairman of the Federal Reserve, this week called commercial property a “looming crisis” – but for Shawn O’Brien, a commercial broker in
Lansing, Michigan, the crisis has already arrived.
March 23 (Bloomberg) — U.S. banks, battered by record losses from the worst housing slump since the Great Depression, now must weather increasing loan delinquencies from owners of skyscrapers and shopping malls.
The country’s 10 biggest banks have $327.6 billion in commercial mortgages, which face a wave of defaults as office vacancies grow and retailers and casinos go bankrupt. A projected tripling in the default rate would result in losses of about 7 percent of total unpaid balances, according to estimates from analysts at research firm Reis Inc.
March 26 (Bloomberg) — Billionaire investor George Soros said U.S. commercial real estate will probably drop at least 30 percent in value, causing further strains on banks.
“Commercial real estate has not yet fallen in value,” Soros, speaking at a forum in Washington, said. “It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.”
WASHINGTON: With loan defaults rising, analysts say the struggling commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s.
Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or shut their doors.
The commercial real estate market’s fortunes are tied closely to those of the sinking economy, especially unemployment, which hit 8.1 percent in February.
March 4 (Bloomberg) — Federal Reserve Bank of Atlanta President Dennis Lockhart said falling property values and other problems in commercial real estate may worsen prospects for U.S. banks facing losses from tumbling home prices.
“Declining commercial real estate markets could put further pressure on already strained financial institutions and markets,” Lockhart said today in a speech in Miami. “And overcoming problems in the financial sector is central to achieving economic recovery.”
Lockhart’s comments echoed Fed Chairman Ben S. Bernanke, who warned in testimony to the Senate Budget Committee yesterday about a “looming crisis in commercial real estate” as owners of shopping centers, hotels and other buildings face difficulty refinancing debts.
April 8 (Bloomberg) -- The Federal Reserve may offer investors longer-term loans at higher interest rates to buy commercial mortgage-backed securities, aiming to protect the central bank’s balance sheet while acceding to an industry plea.
Lobbyists in the commercial mortgage-backed securities industry say the Fed needs to provide loans of at least five years, rather than the current three-year limit, to avert a meltdown in the market. Fed officials, wary of granting the request outright, are considering a compromise in altering terms of its $1 trillion emergency-lending program.
By Saskia Scholtes in New York Published: April 28 2009 23:31 | Last updated: April 28 2009 23:31
The volume of commercial mortgages at risk of default has quintupled since the beginning of 2008 as a deteriorating economy has made it increasingly difficult for shops and businesses to keep up with their payments.
Special servicers, companies that collect payments from borrowers in distress on behalf of mortgage bond investors, reported $23.7bn of mortgages under their care at the end of the first quarter, according to Fitch Ratings.
April 23 (Bloomberg) — The Federal Reserve released its most detailed breakdown to date on the types of assets it accepted from Bear Stearns Cos. a year ago and the cause of losses on the portfolio.
The biggest losses in the $25.7 billion portfolio of Bear Stearns assets as of the end of last year came from commercial and residential mortgages, according to a report released by the Fed in Washington today. The central bank agreed in March 2008 to buy the assets so JPMorgan Chase & Co. would acquire Bear Stearns and avert the investment bank’s bankruptcy.
“It’s just the tip of the iceberg when it comes to losses in the commercial real estate market,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. Lenders “were over-optimistic about tenant occupancy rates and rents,” he said.
About 9.3 percent of the commercial mortgages and 23 percent of the residential mortgages were nonperforming, the Fed said.
Sounds like taste of ’sewage’ (..dman ‘that’ thing comes to mind again but lets move on) Feds got….from commercial mortgage market. Then right after on May-1st in order to avoid further tasting of ’sewage’ a loan facitlity was extended for commercial real estate sector.
May 1 (Bloomberg) — The Federal Reserve authorized longer- term loans for investors buying securities backed by commercial mortgages in a $1 trillion emergency credit program, taking a step the industry said was needed to avert defaults.
Beginning in June, the Fed will offer five-year loans at higher interest rates than the three-year loans previously approved for the Term Asset-Backed Securities Loan Facility, the central bank said today in a statement from Washington. The Fed will also accept securities backed by loans designed to help small businesses buy insurance.
After reading all this I don’t see any greenshoot in this sector, Feds don’t see it….may be you do who knows…I have more banks on my side…
Bankers see more losses ahead
Credit cards, commercial real estate are just two trouble spots in 2009, Fed survey of loan officers reveals.
By David Ellis, CNNMoney.com staff writer
Last Updated: May 4, 2009: 3:37 PM ET
NEW YORK (CNNMoney.com) — Bankers are bracing for additional losses this year across a wide variety of loan categories, according to a report published Monday by the Federal Reserve, as the nation continues to suffer under the weight of a painful recession.
In the central bank’s latest survey of loan officers, more than 90% of domestic lenders warned of further deterioration across such loan portfolios as credit cards, commercial real estate and non-traditional mortgages.
– OK so there you have it…housing loan, commericial real estate and throw in the mix credit card loan defaults..but hey banks are making profit.
June 10 (Bloomberg) — MetLife Inc. Chief Investment Officer Steven Kandarian said commercial mortgage defaults will rise in the next two to three years after the economic slump subsides.
“The worst is to come,” Kandarian said in an interview today with Bloomberg Television in New York, where the biggest U.S. life insurer is based. “Typically
there’s a lag between when the economy softens and when the defaults actually occur.”
- Are you seeing Greenshoots in these sector ? Banking/Commerical realestate/ Insurenace (all commerical and housing propertis are insured)/Credit cards ?
[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions or any other decision based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]
Here we will look at Airlines/ Trucking / Railroad.
Airlines
IATA says global airlines to lose $9 bln in 2009
June 07, 2009: 09:30 PM ET
KUALA LUMPUR, June 8 (Reuters) - The global airline industry is facing an unprecedented crisis and is likely to lose $9 billion this year, nearly double an
estimate made just three months ago, the International Air Transport Association said on Monday.
–This pretty much tells you about Airlines in general…no need to go specific and increase complexities.
Troubled trucker YRC to seek $1 billion pension bailout
May 15, 2009 1:17 PM ET
CHICAGO (Reuters) - Struggling No. 1 U.S. trucking company YRC Worldwide Inc plans to seek $1 billion in bailout money from the Troubled Asset Relief Program to help it cover pension obligations, a move analysts say is unlikely to succeed as the company has no financial charter.
Associated Press As trucking goes, so goes the economy
By SAMANTHA BOMKAMP , 05.13.09, 04:33 PM ED
In the first quarter of 2009, about 480 trucking companies went under. That’s less than 1 percent of the nation’s total freight capacity, which still leaves too many trucks competing for fewer shipments, according to analyst Donald Broughton of investment bank Avondale Partners. More than 3,000 trucking companies went out of business last year - taking seven of every 100 trucks off the road.
Analysts think that the number of trucks on U.S. highways will continue to slide until supply is more aligned with demand. When the trucking business starts
to pick up again, they say, other economic factors - from the employment rate to the gross domestic product - will eventually follow.
..Now there is a good reason to relay on this trucking industry to see if the economy is recovering or not…here is what’s said about trucking and how economist use thier number to gauge economic recovery..
…..Looking for signs of economic recovery? Try counting the number of trucks on the road.
Trucks carry almost all the manufactured and retail goods in the country - from refrigerators to lumber, detergents to toys. Many economists gauge how fast
assembly lines are running, and how much consumers are buying, by the volume of goods hauled by trucks. But the most recent earnings reports show trucks are
not carrying enough yet to indicate recovery is near.
………..Anyway…do you see economic recovery in this sector ? I don’t see how those 100s of truckers able to see green shoots.
Rail…and this is probably the only good news in this sector, but way too small to make any difference.
Well, if you know anythig about America then you know it’s not a rail country it’s a car country. Or if you have to go long distnace it’s plane country. But
no..not rail..not too many. This is what has always puzzled me from the very bigining….
To fly an Airplane you need a very skiller person, skiller ground crew, highly skilled mechanic, lot of space to land and take off, big airports often outside the city, just about anything you can think about airplane and an airport is expensive…security..communication, radar system etc..
Rail…does not require any of that…it often leaves you in the city. It’s more fuel efficient, there have been electric trains for decades even before there have been a single electic car on the road. They are better for the environment.
Yet flying is often cheaper in America than taking a train…..I understand if one has to go 3000 miles from cost to cost and has to take a plane but even for near by towns and cities people would have no choice but to fly.
And here is the most stupid thing that can happen only in America…and no where else.
On some good days I can actually find a plane ticket to fly to Chicago or Miniapolis for $100 that’s 1000s of miles away, I would be security cleared, I
would be checked in, I would be flown by a very educated competative pilot for 1000s of miles, if lucky I might have my own video screen to watch a movie and
might get a free coke ride would be 3 hours or so..all in $100.
Now watch the stupidity….to go to the airport from my home in my town and airport which is only 20 miles I will have to pay taxi driver $50. Chances are the has not graduated and from insurance to maintenance nothing of that taxi can be nearly as much as the plane.
Anyway coming back to Rail….I think my puzzle for many years has been solved..someone…with better understanding than mine has realized that it’s not the Airline and not the Cars and not the trucks that are going to be the future but Rails would be.
5/29/2009 12:01 AM ET Where Buffett’s money is going now
Berkshire didn’t add any stocks to its 13-F portfolio during the first quarter of 2009, nor did it extinguish any holdings. The company did, however, add to its holdings in six securities. Berkshire built a larger stake in two railroad stocks, BNSF Railway (BNI, news, msgs) and Union Pacific (UNP, news, msgs), as well as two of its biggest bank holdings, Wells Fargo (WFC, news, msgs) and U.S. Bancorp (USB, news, msgs).
The largest increase in dollar terms was in BNSF Railway, which was a subject of some conversation at the company’s recent annual meeting as well as in an
article we published a few weeks ago. Buffett and Munger have long been leery of railroad investments, but not lately. They have cited how the economics of the railroad business have improved substantially over the years, in part due to the increased attractiveness of rail transport in terms of energy
efficiency. Companies such as BNSF have been making significant investments in more-energy-efficient rail equipment.
In the last do you see green shoots in transport sector ? in Airline ? in Trucking ?
[views and opinions expressed here are mine and you need not agree with them. You should not make any financial decisions or any other decision based upon material you read on this website. For that you must contact an expert in the relevant area of your need.]
Lately banks stocks have shown some progress, even declared profits. But, is it so ? Is it that all is suddenly well for banks specially those big banks ?
Goldman reported a first-quarter profit of $1.81 billion last Monday, even as it announced a new $5 billion stock offering. However, the bank was able to avoid including $2.7 billion worth of “fair value losses” on commercial real estate loans and other illiquid assets that it wrote down in December within the first-quarter results it reported. The firm was moving from a fiscal year ending in November to a fiscal year beginning in January as part of its decision in September to become a bank-holding company instead of an investment bank.
–What this means ? Whatever happened in December of 2008. Goldman did not report on any financial statement. Not in 2008 because they were investment bank
and year for them was ending in November. Then they became bank-holding company and opened new year in Jan-2009. So December 2008 goes un-accounted for from any finacial statement. All the losses from December…..since they are not reported they don’t exist. Surpirsed ?
Mr Munger, 78, also sounded a warning over companies involved in derivatives, saying. “To say derivative accounting in America is in the sewer is an insult to sewage,” he fumed.
Now let us look at Citi….
In the case of Citigroup, which reported its first-quarter results Friday, the revisions to the fair value measurement standard allowed the bank to report a $1.6 billion profit instead of a $900 million loss, as well as swing from a $6.8 billion loss to a $3.8 billion gain in trading profits. Citi was able to book just a portion of the loss on the value of some of its impaired assets, as opposed to the full loss, thanks to the new rules, giving it an extra $413 million in after-tax profits.
A credit value adjustment on its debt also enabled the bank to add $2.5 billion in unrealized gain to its net income. Although Citi’s debt declined in the bond market, the bank was able to book a one-time gain approximately equal to the decline, on the theory that it could buy back its own debt at a discount on the open market, even though it has not actually bought back its own debt.
–Credit value adjustment- this will clear it…take somebody’s house for example was bought for 100,000 dollars with zero down. Now if the value of this house dropped from $100,000 to $50,000 they have not lost money owner actually got richer OK..Watch this…banks come in cut a deal and let them stay in the house by writing up new mortgage for 50,000$. Owner of the house is now on the hook for 50,000$ loan instead of 100,000$ but none the less he is still under debt. Common sense would dictate that..not if you’re following American accouting rules.
As per American accounting rules….owner of this house can declare himself 50,000$ richer because he owns a 100,000$ house now for 50,000$ and this is his un-realized gain.
Another important item in the press release is the accounting rules that Citi adopted, which Dealscape pointed out might’ve helped Citigroup: “Citi adopted FASB’s recent rule changes regarding fair valuation (FAS 157) and other than temporary impairments (FAS 115). The adoption of the changes to FAS 157 had no impact on Citi’s financial results. The adoption of the changes to FAS 115 resulted in approximately $631 million pre-tax of lower impairment charges recorded in revenue in the current quarter. Additionally, the cumulative effect of the changes to FAS 115, which did not impact revenues, led to a $413 million after-tax increase in retained earnings and an offset in other comprehensive income on the balance sheet.”
In fact these accounting rules did help Citigroup. As Blogging Stocks points out:
“I could not believe my eyes when I read it but it turns out that Citi was able to take a $2.5 billion gain on a rule that lets it record any declines in the market value of its debt as an unrealized gain. The rule, which Citi adopted in 2007, reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit. But Citi didn’t do that — this has to be some kind of an error…And there should be a rule that forces Citi to take a loss for a decline in the market value of its assets too. But thanks to FAS 157-e, it can record any gain it wants on the value of its toxic waste — and I would not be surprised if Citi did just that in the first quarter.
Ned Kelly was also questioned by an analyst about the assets transferred from mark-to-market Kelly said that the bank moved $29 billion, and wrote up $540 million on the value.- Maria Woehr
Wells Fargo’s Profit Looks Too Good to Be True: Jonathan Weil
April 16 (Bloomberg) — Wells Fargo & Co. stunned the world last week by proclaiming it had just finished its most profitable quarter ever. This will go down as the moment when lots of investors decided it was safe again to place blind faith in a big bank’s earnings.
Gimmick No. 1: Cookie-jar reserves.
Wells’s earnings may have gotten a boost from an accounting maneuver, since banned, that it used last year as part of its $12.5 billion purchase of Wachovia
Corp. Specifically, Wells carried over a $7.5 billion loan-loss allowance from Wachovia’s balance sheet onto its own books — the effect of which I’ll explain in a moment.
First, a quick tutorial: Loan-loss allowances are the reserves lenders set up on their balance sheets in anticipation of future credit losses. The expenses that lenders record to boost their loan-loss allowances are called provisions. As loans are written off, lenders record charge-offs, reducing their allowance.
Free to Dip
Once it took control of the reserve from Wachovia, Wells was free to start dipping into it to absorb new credit losses on all sorts of loans, including loans Wells had originated itself. (Think of a child raiding a cookie jar.)
The upshot is that Wells could get by with reduced provisions until the $7.5 billion is used up, boosting net income.
Another quirk: The reserve was related to $352.2 billion of Wachovia loans for which Wells was not forecasting any future credit losses, according to Wells’s annual report.
Gimmick No. 2: Cooked capital.
The most closely watched measure of a bank’s capital these days is a bare-bones metric called tangible common equity. While the term doesn’t have a standardized definition under generally accepted accounting principles, it typically means a company’s shareholder equity, excluding preferred stock and intangible assets, such as goodwill leftover from past acquisitions.
Measured this way, Wells had $13.5 billion of tangible common equity as of Dec. 31, or 1.1 percent of tangible assets. Yet in a March 6 press release, Wells said its year-end tangible common equity was $36 billion. Wells didn’t say how it arrived at that figure. Nor could I figure out from the disclosures in Wells’s annual report how it got a number so high.
Shouldn’t Be Guessing
Investors shouldn’t have to guess. Under a Securities and Exchange Commission rule called Regulation G, companies that release non-GAAP financial measures are required to disclose “a reconciliation of the disclosed non-GAAP financial measure to the most directly comparable GAAP financial measure.” (The rule applies to press releases, as well as formal SEC filings.) That way, anyone can see how the numbers were calculated.
Wells didn’t do this in its March 6 release. A spokeswoman, Julia Tunis Bernard, declined to tell me the math Wells used. Silly me — I thought the SEC’s rules apply to Wells Fargo, too.
Gimmick No. 3: Otherworldly assets.
Look at Wells’s Dec. 31 balance sheet, and you’ll see a $109.8 billion line item called “other assets.” What’s in that number? For that breakdown, you need to go to a footnote in Wells’s financial statements. And here’s where it gets comical.
The footnote says the largest component was a $44.2 billion bucket that Wells labeled as “other.” Yes, that’s right: The biggest portion of “other assets” was “other.” And what did this include? The disclosure didn’t say. Neither would Bernard.
Talk about a black box. That $44.2 billion is more than Wells’s tangible common equity, even using the bank’s dodgy number. And we don’t have a clue what’s in there.
Gimmick No. 4: Buried losses.
How quickly investors forget. One week before Wells’s earnings news, the FASB caved to pressure by the banking industry and passed new rules that let companies ignore large, long-term losses on the debt securities they own when reporting net income.
Wells didn’t say what its first-quarter earnings would have been without the rule change, which companies can apply to their latest quarterly results. As of Dec. 31, though, Wells had $12.2 billion of gross losses on securities held for sale that weren’t included in earnings. Of those, $4.2 billion were on securities that had been worth less than their cost for more than a year.
C. JP Morgan/Bank of America and PNC Financial Services.
May 26 (Bloomberg) — JPMorgan Chase & Co. stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual Inc. into income.
Wells Fargo & Co., Bank of America Corp. and PNC Financial Services Group Inc. are also poised to benefit from taking over home lenders Wachovia Corp., Countrywide Financial Corp. and National City Corp., regulatory filings show. The deals provide a combined $56 billion in so-called accretable yield, the difference between the value of the loans on the banks’ balance sheets and the cash flow they’re expected to produce.
Faced with the highest U.S. unemployment in 25 years and a surging foreclosure rate, the lenders are seizing on a four- year-old rule aimed at standardizing how they book acquired loans that have deteriorated in credit quality. By applying the measure to mortgages and commercial loans that lost value during the worst financial crisis since the Great Depression, the banks will wring revenue from the wreckage, said Robert Willens, a former Lehman Brothers Holdings Inc. executive who runs a tax and accounting consulting firm in New York.
“It will benefit these guys dramatically,” Willens said. “There’s a great chance they’ll be able to record very substantial gains going forward.”
I guess that is enough..I am not going to cover all banking institutes..it’s bullshit anyway. Following article may give you an idea about the rest of them …..
May 4 (Bloomberg) — Berkshire Hathaway Inc. Chairman Warren Buffett lambasted bankers, insurers and regulators for being blind to the possibility home prices could fall, and said their shortcomings caused the worst recession in half a century. ‘Sewage-like Qualities’
“They were going to take a lot of sewage and mix it up in a different way and said it’s not sewage,” Munger said. “The laws of nature are such that it keeps its sewage-like qualities.”
Damn that word again…reminds me again what flows in the ’sewage’. Well, if you’re still interested go ahead and do your research on other banks..( I will rest my case believing what Mr Buffet said). Just when the economy is in middle of the biggest crisis, loans of all types are going bad and there is highest un-employment in a completely debt ridden society…banks…(..who created debt..and can’t collect them) are still booking profits….there are no losses in America.
Can’t be…if there is anything bad..just don’t look in that direction, look the other way..and all will be well. You see the idea is to have you focus on caviar not on the shit even though it’s given to you daily for breakfast. Think caviar not ‘that’..think caviar…not ‘that’..you should recite this as a mantra this will calm you down…and hey who knows may be you too will start to see ‘green shoots’….I don’t recite this mantra so I am not seeing any
Instead of green shoots in banking sector. I am actually thinking ‘IT’ might hit the fan sometime this year.
And wait..till you read the commercial-real-estate section where banks made even bigger loans….you will start to wonder how in hell these institutes can turn profit..but that’s magic my friend.
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