Con-tango

September 22, 2008
In Economy, Views
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Of mice and mousetraps

Mouse on a mission!
Courtesy of bluegreen.blog

Mr. Paulson recalls this foretelling conversation with Ben Bernanke:

“Going back a long time, maybe a year ago, Ben, as a world-class
economist, said to me, ‘When you look at the housing bubble and the
correction, if the price decline was significant enough,’ ” the only
solution might be a large-scale government intervention, Mr. Paulson
said. “He talked about what had happened when there had been other
situations historically.”

Mr. Paulson said he agreed but hoped it
would not come to that. “I knew he was right theoretically,” he said.
“But I also had, and we both did, some hope that, with all the
liquidity out there from investors, that after a certain decline that
we would reach a bottom.”

So, this odd couple, finally decided that holistic sweeping measures needed to be brought to the attention and approved by Congress in order to solve the financial crisis, –the one at a time institution approach was not working.

So, the $1 Trillion question is, are these measures the right ones?

September 21, 2008
In Economy, Views
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China plays its Morgan card

Andy Xie. Economist
Courtesy of ICBI

Picked up this comment in the Washington Post:

Andy Xie, an independent economist who was formerly Morgan Stanley‘s
chief Asia economist, said the United States needs to accept that a
large amount of U.S. assets must be transferred to other countries’
ownership. "If the U.S. is not willing to accept that," Xie said, "they
will have to print money and the dollar will fall. And we will be
headed toward a global financial meltdown."

Quite startling, if you ask me, Andy has a point there.

September 15, 2008
In Economy, Views
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Lehman will be remembered

Henry M Paulson, Jr
Secretary of the Treasury

A pivotal point, in my opinion, credit is tightening within a weak economy.

According to this Bloomberg note, today:

Sept. 15 (Bloomberg) — The Federal Reserve added $70
billion in reserves to the banking system, the most since the
September 2001 terrorist attacks, to keep bank borrowing costs
low after the bankruptcy of Leman Brothers Holdings Inc.

Fed funds traded as high as 6 percent, or 4 percentage
points above the central bank’s target rate for overnight loans
between banks, according to ICAP Plc, the world’s largest inter-
dealer broker. The margin is the greatest since Bloomberg began
tracking the data in 1998. The rate dropped to as low as
1.75 percent after the Fed added the temporary reserves.

June 27, 2008
In Economy, Views
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Solar Energy

SUNRGI Solar Cell Array

Ok, I know, yesterday was a bloodbath… The DOW dropped 350+, oil touched its highest ever, $140…
Not to mention, Bank of America’s 7,500 layoff and Citigroup’s $8.9 billion writeoff…

So things are not looking good. But, they could be worse, and they’re not because Bernanke is there, and that’s that.

But, I recently ran into the amazing advances of alternative fuels, in particular, solar generation of energy.

It’s a fascinating subject, with plenty of opportunities to invest. But, I also think it’s relevant because it will start to shape, sooner than we think, the investment landscape.

August 17, 2007
In Economy, Views
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The pivot

I just finished reading The game is up from The Economist.

If these securities are now downgraded, banks could be forced to
offload lots of illiquid instruments into a falling market—one of the
fastest ways to lose money yet devised. But if there are no buyers,
banks may have to sell something else to shore up their balance sheets.