Sunday, November 30, 2008

Jeremy Grantham - first TV interview

Jeremy Grantham recently sat down with Consuelo Mack's WealthTrack program for his first ever television interview.



The famed investor and GMO money manager is renowned for his insights, his investing track record, and his steely resolve. During the dot.com boom, Grantham refused to invest in the high-flying internet and tech sectors, a move that led many clients to leave his firm.

Grantham was vindicated when the Nasdaq and tech bubble burst in 2000. His emphasis on buying investment quality and value seems to have served his clients well.

Now, in the aftermath of the 2003-2007 bull market in shares (a move Grantham once referred to as the "biggest sucker rally in history"), he is once again focusing on areas of value in the stock market. Grantham says there are opportunities in stocks for those who are willing to search for value and take a long-term view of their holdings.

In listening to this interview, I found it refreshing to hear an investment manager make the case for stocks, while at the same time acknowledging the risk in purchasing shares at a time when the economy and corporate profits could easily continue to go down further. I think this makes him a realist, and yet, one who is not afraid to enter the fray and seek out value for his investing clients.

On to the interview. I came across this item while reading the recent linkfest at the Kirk Report yesterday, and it seems many of my favorite investing bloggers have already featured this clip on their sites.

So for those, like myself, who haven't seen this clip until now, enjoy!

Related articles and posts:

1. "Still holding back: interview with Jeremy Grantham" - Barron's.

2. "Seasoned investors search for values" - Finance Trends.

Friday, November 28, 2008

Mumbai attacks: latest accounts

New details of the recent and horrible terrorist attacks in Mumbai.

Financial Times - "Mumbai hostage buildings taken":

"Indian commandos on Friday night managed finally to wrest control of two of the three buildings taken by militants in one of the worst terror attacks on Indian soil.

The siege of Mumbai’s Oberoi hotel and a Jewish centre ended, as officials reported that the death toll had risen to 155 at nine locations with about 327 wounded. Nine gunmen and eight foreigners were among the dead.

A day-long effort to regain control of the Jewish community centre, Nariman House, ended with the news that at least five hostages including a young rabbi and his wife had been killed."

Hopefully, further reports will confirm that this terrible wave of attacks is subsiding. As FT reports, commandos are still fighting the remaining militants holed up in the Taj hotel.

Unfortunately, the Mumbai attacks are viewed as a "significant success" for the terrorists in question. More from the FT:

"...Analysts said the terrorists had achieved a “significant success” by managing to keep the Indian security forces at bay for so long since the attack began on Wednesday night.

“The attackers received as much attention as they could possibly have hoped for, and the Mumbai outrage can only be described as a very significant terrorist success,” said Paul Cornish, head of the international security programme at Chatham House in London."

We hope this crisis will end just as quickly as it began.

More info and analysis on the Mumbai attacks can be found below in our related articles and links section.

Related articles and posts:

1. Night the city became scene of a bloodbath - FT.com

2. Indian forces struggle to retake control - IHT.

3. Indian markets resilient after attacks - WSJ.com

4. Was al-Qaeda pulling the strings in Mumbai? - Times Online.

5. Militant attacks in Mumbai and their consequences - Stratfor.

Wednesday, November 26, 2008

Obama picks Volcker to lead committee

Former Fed chairman Paul Volcker has been selected by President-elect Barack Obama to lead a new White House economic advisory committee.

New York Times has the details:

"Mr. Obama made the announcement at his third news conference in three days. The public appearances by the president-elect are intended to show Americans that his team is focusing on resolving the financial crisis, which Mr. Obama said Wednesday demands “fresh thinking and bold new ideas from the leading minds across America.”

Mr. Volcker, 81, has been providing Mr. Obama with advice on the economy for months. After briefly considering him for Treasury secretary, Mr. Obama instead asked Mr. Volcker to lead the President’s Economic Recovery Advisory Board, a new panel to be comprised of leading figurees als from a variety of business sectors. The group is supposed to advise Mr. Obama on how to jump-start the economy and stabilize the financial markets...

Mr. Volcker became chairman of the Federal Reserve in August 1979 as President Jimmy Carter was fighting to rein in the inflation caused by the oil shocks of 1973 and 1978. Mr. Volcker, who led the Fed until 1987, often used tactics that were unpopular, like rapid increases in interest rates. Criticized at the time for causing a recession, Mr. Volcker was later praised for the effectiveness of his efforts."

The appointment of Volcker to head this committe will be seen as a smart move on Obama's part, especially by those who favorably recall Volcker's efforts to wring excess inflation from the US economy in the early 1980s.

Some, like Marc Faber, might even say that Obama should go one step further and try to appoint Paul Volcker as the new Federal Reserve chairman!

Related articles and posts:

1. Discussion on the economic crisis with Paul Volcker - Charlie Rose.

Tuesday, November 25, 2008

Jim Rogers on Bloomberg "Night Talk"



Jim Rogers appeared on Bloomberg's "Night Talk" program last night. We've posted the full video interview here.

Rogers' appearance came right on the heels of the Citigroup bailout announcements, so you know Jim will have a thing or two to say about that. He does not disappoint on that count.

While the subjects of Citigroup and government interventions into the economy take up a good chunk of this interview, Rogers and host Mike Shneider also find time to discuss US monetary policy, the causes of our current financial crisis, Obama's economic advisers, the recent plunge in commodity prices, opportunities in agricultural commodities, the outlook for America, and a whole lot more. 

I won't summarize the interview points here; just be sure to watch this clip. After watching this interview, you'll probably want to forward it on to some of your family, colleagues, and friends. There's a real wake up call here, especially for those who may still be under the spell of our politicians, unelected officials, and the nightly TV news. 

Related articles and posts:

1. Jim Rogers interview on FT.com - Finance Trends Matter. 

2. Citigroup: the latest government rescue - Finance Trends Matter. 

Visit the Finance Trends home page to see our most recent posts.

Monday, November 24, 2008

Citigroup: the latest government rescue

Is your company in danger of failing as the share price plummets? Fear not; government funded bailouts can have a restorative effect on stock prices, at least in the short term.

From Marketwatch, "Citigroup soars as US acts to backstop losses":

"Citigroup shares rocketed more than 60% higher Monday after federal officials agreed to a $326 billion rescue of the company that was once the largest U.S. bank as it pioneered the one-stop-shop model combining business and consumer financial services.

The government intends to invest $20 billion in Citigroup (C) and to guarantee as much as $306 billion of the company's troubled assets in a deal reached late Sunday evening. The agreement also gives the government control of executive bonuses, and it places limits on dividend payments.

The deal would likely make the government the largest Citi shareholder. The U.S. will end up with a 7.8% stake in Citigroup, Chief Financial Officer Gary Crittenden said on CNBC television Monday."

So the government has become the largest shareholder in a highly troubled bank (Citigroup). That's always a good sign...

And where is the money for this latest rescue package/government "investment" coming from?

You already know the answer to that question, I'll wager. But just in case, here's a summary view from the LA Times Money & Co. blog:

"Under the plan, Citigroup would absorb the first $29 billion in losses on a pool of $306 billion in troubled assets. After that, the government –- that is, taxpayers –- would shoulder 90% of any additional write-downs with Citigroup responsible for the other 10%."

So America, are you thrilled with your latest indirect purchase?

Related articles and posts:

1. "Citigroup gets US rescue from losses" - Bloomberg.

2. "Meredith Whitney on FT.com" - Finance Trends.

3. "Jim Rogers: 'let banks fail'" - Finance Trends.

4. "US pledges top $7.7 trillion to ease frozen credit" - Bloomberg.

Sunday, November 23, 2008

Jukebox

Tonight's jukebox: Def Leppard - Live "In the Round", 1988.

80's rock chicks, ripped jeans, and rock god poses are all included, of course. Have fun with this one.

1. Stagefright.

2. Too Late For Love.

3. Hysteria.

4. Gods of War.

5. Die Hard the Hunter.

6. Bringin' on the Heartbreak.

7. Foolin'.

8. Armageddon It.

9. Pour Some Sugar On Me.

10. Rock of Ages.

Friday, November 21, 2008

Features of the week

Ready to review/look ahead? Get set for our, "Features of the week".

1. US stocks rally on expectations Geithner will head Treasury.

2. Gold futures surge, briefly topping $800 an ounce.

3. Warren Buffett is unshaken by the latest market meltdown.

4. Fox Business is airing a Warren Buffett Q&A session.

5. European stocks decline, Stoxx index down 50 percent in 2008.

6. Trichet says ECB may cut rates again as economy worsens.

7. Marc Faber sees a potential stock rebound amidst reflation.

8. Treasuries fall, eroding biggest weekly gain since 1987.

9. Niall Fergusson explains the financial crisis in Vanity Fair.

10. Ron Paul on sound money and his latest exchange with Bernanke.

11. Forget Bretton Woods II - we need a gold standard.

12. The TARP is dead, long live TARP.

13. Jim Rogers shares his thoughts on the markets with FT.com.

14. John Paulson adds to $987m profits as Barclay shares slide.

15. Listed derivatives boosted by need for transparency.

16. CME and rivals vie for central clearing and trading of CDS.

17. Bloomberg without Bloomberg - Bloomberg News is expanding at a time when the media industry as a whole is retrenching.

Thanks for reading Finance Trends Matter. If you would like to keep up with all our latest posts, you can bookmark this site to your favorites folder or subscribe to our full blog feed. Ciao!

Thursday, November 20, 2008

Jim Rogers on FT.com

Jim Rogers joins FT.com for their "View from the Markets" interview series.

The famed Singapore-based investor discusses a number of timely issues with the FT's John Authers, so let's have a quick overview of this video interview.

On the dollar: Rogers does not deny the current strength of the dollar rally, and says he will use the interim strength to unload his remaining dollar-based assets. Still, he feels that the policies of Bernanke and Paulson will ensure the US dollar's eventual demise.

Recession: Jim feels that the current recession will be the worst since World War II, a point on which he and Nouriel Roubini seem to agree. However, unlike Roubini, Rogers feels that the policies and stimulus packages enacted by politicians and central bankers around the world will only lengthen and prolong the recession.

Commodities - bull or bear?: Forced selling of all assets has contributed to the sharp decline in commodities. Also, demand for commodities has suffered as the world slumps into a global recession. Despite these factors, Rogers sees a sound fundamental case for commodities over the longer term, and notes that commodities were first to rebound in previous recession and depressions.

China: Rogers is unrepentant for holding on to his Chinese shares and not selling as the stock market plunged in 2008. In fact, he has bought more shares in recent months. He offers, "selling China in 2008 would be like selling America in 1908". It might be a great short-term timing move, but in the long term it would seem rather silly.

Regulators' failings: According to Rogers, most of our current problems are rooted in the failings of regulators and central bank officials who encouraged moral hazard with easy money policies and a string of financial firm bailouts. We have not allowed business failures to occur in recent years, and this has prevented the economic system from cleaning itself out.

Lots more to hear in this interview. If you take one thing away from this interview, I hope it is an understanding of the futility of governments' attempts to turn back the economic tides.

As Rogers has repeatedly noted, most government interventions into the economy will only serve to worsen and prolong recessions and depressions, and lead to further problems down the road.

Thoughts, comments? Voice them here, and then head on over to our home page for more new posts.

Nouriel Roubini on Bloomberg TV

Nouriel Roubini speaks with Bloomberg TV, saying that he expects the worst US recession in 50 years, and a global recession that will last through next year.

Roubini is widely seen as having correctly forecast the current credit crunch and the problems associated with the spreading financial crisis, but the frequent knock on him is that he was too early in his calls and consistently bearish on the economy for the past several years.

This is a point that was brought up in the interview, when Bloomberg's anchor asked Roubini why he is so certain about his dour economic outlook in the near term.

Roubini sticks to his guns, citing a panoply of falling economic indicators and the futility of the Fed's stimulative actions in affecting market interest rates, where spreads of high yield bonds over Treasuries are higher than they've ever been. The credit crunch has continually spread and "it doesn't matter what the Fed does".

Having said all that, Roubini still calls for more fiscal stimulus from the government in order to help those affected by the recession and credit crisis, as well as more "unorthodox" actions from the Fed on the monetary policy side.

This prescription for government/Fed stimulus is in stark contrast to the views of Jim Rogers, who you'll hear from in our next interview clip. Stop back in later this afternoon to hear more on that.

Wednesday, November 19, 2008

John Paulson buys mortgage securities

Hedge fund manager and John Paulson is now buying mortgage-backed securities for his newly launced Paulson Recovery Fund.

This latest move brings Paulson & Co.'s involvement in the mortgage-backed market full circle. Back in 2007, Paulson and his investors reaped a windfall return from the firm's short positions in subprime mortgage bonds.

More on this story from the Financial Times:

"John Paulson, the hedge fund manager who was called before Congress last week to discuss the big profits he made by foreseeing the collapse of the subprime mortgage market, has started to buy securities backed by residential mortgages.

Mr Paulson's move marks the latest example of a famously bearish investor shifting gears to profit from depressed prices in the global credit markets.

US residential mortgage securities fell in value last week after Hank Paulson, Treasury secret-ary, said that the federal government had decided against buying toxic assets as part of its $700bn (£466bn) troubled asset relief programme (Tarp).

John Paulson, who is not related to the Treasury secretary, has told his investors that he started buying troubled mortgage-backed securities at the end of last week, hoping to capitalise on price falls that followed the Treasury announcement."

As we noted in our recent post, "Seasoned investors search for value", Paulson's firm had been readying themselves to begin buying through their recently launced Paulson Recovery Fund.

Now that the starting pistol has been fired in this mortgage-backed turnaround race, we'll see how many investment groups decide to follow Paulson & Co.'s lead and start buying these well-shunned securities.

Related articles and posts:

1. John Paulson buys mortgages after US drops TARP purchases - Bloomberg.

2. Excellent timing: John Paulson - Finance Trends.

3. Paulson & Co. push subprime bets - Finance Trends.

4. Seasoned investors search for values - Finance Trends.

Monday, November 17, 2008

Hedge funds: regulations and redemptions

I have to tell you: I'm kind of surprised that last week's news of the Congressional hearings on hedge funds and the financial markets didn't get more attention in the blogosphere and the non-business press.

It sounds a bit funny to say that, as the hearings did secure front page attention from several newspapers (that I happened to see) the following day. This coverage was probably due, in no small part, to the snapshot images of five highly successful and media-shy hedge fund managers being brought before a congressional committee and a bevy of photographers.

Despite this momentous occassion, the hearings did not exactly attract a whirlwind of coverage from bloggers outside the financial sphere, although several business and investing blogs were live-blogging the event. It could be that the weight of this event was lost on bloggers less familiar with the hedge fund industry and the spectacle surrounding some of its prime players.

Still, I have to think that last week's hearings marked an important shift in the hedge fund industry. The push for increased regulation of hedge funds seems to gathering steam here.

In fact, many of the hedge fund managers assembled before the House committee said they supported increased regulations and reporting guidelines, so long as these requirements did not lead to public disclosure of hedge fund positions.

This is an important point, as a hedge fund manager's strategy and the details of his positions may form the core of his business edge, a "secret sauce" not to be divulged to competitors. So I have to wonder: can government regulators be trusted to keep these secrets?

There's also the question of how additional regulation might affect future competition within the hedge fund industry.

Right now, investor redemptions and an ongoing shake-out of existing firms are the immediate concerns for most hedge funds. But what will happen to future entrants in the hedge fund industry if new regulatory demands arise?

Increased regulatory burdens and compliance costs may prevent smaller funds from entering the business, thereby limiting the future competition for larger, more entrenched funds. The costs of regulatory compliance would fall especially hard on small new firms with limited resources. Such costs would effectively serve as a barrier to entry for new funds, while limiting the field for investors and financial entrepreneurs.

This is a crucial point to consider, as even the largest and most successful firms often start life as small and nimble business ventures operating out of a spare room or garage. Just ask Steve Jobs, Henry Ford, or Ken Griffin.

Related articles and posts:

1. Hedge fund hearings: video and notes - Finance Trends Matter.

2. Interview with hearings witness Houman Shadab - All About Alpha.

3. Get Over the Hedge - Forbes.

4. Signs of hope for the hedge fund industry - All About Alpha.

Friday, November 14, 2008

Features of the week

Welcome to this week's edition of our "Features" linkfest. There are plenty of great articles, investor interviews, and video clips ahead, so relax and stay awhile.

1. Everything you ever wanted to know about TARP, but were afraid to ask: US backs away from plan to buy bad assets; TARP and Fed Facilities unravel; Treasury draws fire for shift in rescue; The bailout formerly known as TARP; $700 billion bailout becomes power grab; Hammerin' on Hank; Jim Bianco sees confidence problem from rescue changes.

2. Eurozone tumbles into first-ever recession.

3. Obama pushes for $50 billion bailout for US automakers.

4. Why are bailouts a substitute for Chapter 11 bankruptcy?

5. Jim Rogers shares his views on the markets, the world, and government intervention in the economy.

6. Julian Robertson speaks with Bloomberg about America's economy.

7. Marc Faber says corporate bonds more attractive than stocks.

8. Where valuations and technical support intersect - Chris Ciovacco.

9. US dollar breakout: the USD has broken out to the upside.

10. Bretton Woods II - A Roadmap - Axel Merk.

11. The tab is on us: $5 trillion spent on economic stimulus.

12. Recession deniers peddle same lame excuses - Caroline Baum.

13. CRB roundtrip: commodities plunge erases 4 years of index gains.

14. An interesting history of the electric vehicle (EV) industry.

15. Charlie Rose interviews investor Bill Ackman.

16. Hedge fund chiefs face D.C. hearings on financial system.

17. New legislation paves the way for Putin's swift return.

18. Oil bear markets: charting the current decline in oil.

19. Deflation and decling asset prices are two separate things.

20. Ron Paul discusses the G-20 global economic summit.

Thanks for reading Finance Trends Matter. Enjoy your weekend!

Thursday, November 13, 2008

Hedge fund chiefs face D.C. hearings

Top performing hedge fund managers have been summoned to Washington D.C. to face questioning from a congressional oversight committee on hedge funds and the credit crisis.

Rep. Henry Waxman, who chairs the committee, seems peeved about the perceived lack of hedge fund regulation and the high earning power of successful hedge fund managers.

"Currently, hedge funds are virtually unregulated," said Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform, in opening statements. "They are not required to report information on their holdings, their leverage, or their strategies. Regulators aren't even certain how many hedge funds exist or how much money they control.

"Waxman said the industry is "growing rapidly," increasing five-fold over the last decade to exceed $2 trillion. He said he was concerned that hedge funds, like other sectors in the financial market, could "blow up."

Yeah, the funds could blow up, like any other firm in a capitalist economy (remember... that was back when firms were allowed to fail?). Hedge funds have been starting up, thriving, and failing ever since A.W. Jones launched his first hedged fund back in 1949.

It's true that the possibility of a hedge fund blowup seems scary to most because of the interconnected nature of the financial system.

But as John Paulson and Kenneth Griffin just pointed out in their answers to Waxman's questioning, the problems in the current financial crisis have largely centered around issues at highly leveraged, and regulated, investment banks.

John Paulson also pointed out that, to date, none of the public bailout funds for troubled firms have found their way to hedge funds. These US taxpayer funds have largely been directed at propping up failed investments at commercial and investment banks. Programs such as TARP amount to a transfer of wealth from US taxpayers to banks and other struggling firms, and have been enacted without sufficient safeguards of these taxpayer funds.

As for the claims that hedge funds are unregulated and not required to report their holdings, I'll let those with a closer view of the industry respond to these accusations.

But if the regulators are, as Waxman claims, uncertain as to how many hedge funds exist and how much money they control, they might want to check out some of the available hedge fund databases to get a lead on that kind of information.

Live video of the hearings, with testimony from John Paulson, James Simons, Philip Falcone, George Soros, and Kenneth Griffin, can be found at the House website (Hat tip to Infectious Greed).

C-SPAN video archives (these are Real Media files) document the testimonies from witness panel one (academics) and witness panel two (hedge fund managers).

Written testimonies from these fund managers, and others, can also be found at the House webpage for the committee on hedge funds and the financial market.

Tuesday, November 11, 2008

Do Finance Trends Matter?

Today I'm going to pose a simple question to you, the reader. Why do you read Finance Trends Matter?

Now, you don't have to answer this question, but thinking about it might help us all figure out what we're doing here on this blog. It may also help us understand why people spend time on any finance or investing blog, and what we hope to take away from our visits.

Do we visit investing and finance blogs in search of education, uncovering investment ideas, entertainment, or fellowship with other readers? What motivates us, the reportedly small percentage of web-browsing folks who count themselves as blog readers, to visit sites such as this?

In order to better understand this issue, I will point the question back to myself. Why do I write this stuff? What is the purpose behind Finance Trends Matter?

I started Finance Trends as a new outlet for sharing my thoughts and notes on financial news, world events and culture, and investing. Since I started writing the blog, I've found that it also serves as a journal that helps me record and clarify my thoughts on any number of issues.

The articles that I originally posted and commented on helped me to organize and record a growing stack of news clippings and article notes related to the economy, energy, commodities, precious metals, and the world's stock markets. The posts also helped me to hone my blogging and writing skills in between article submissions to Financial Sense Online and Safehaven.com.

Over time this blog has evolved a bit, from a kind of free-form journal of business and world events stories, to more of a "bigger picture", trend-focused site. The level of information available to us today is unprecedented; it's easy to get lost in the noise of daily events and a 24-hour news cycle. This is why we try to limit our intake of general mainstream news/gossip, and instead, focus on what's important to us.

As I mentioned in last year's radio interview with Financial Blog Watch, we find it crucial to selectively sift and choose the information we receive daily, and organize it in a way that helps us understand more about the markets and our world. That's what we try to do here.

You'll still find all the big news and off-beat, fascinating, and often-overlooked items that came before, only now I try harder than ever to connect these disparate stories and themes together so that we can step back and place these items into the grand scheme of things.

I think we'll also continue to branch out a bit, and look more at the non-finance side of life. You're likely to find more articles here on freedom, art, culture, music, and other great things. Of course, we'll relate these back to our main themes whenever relevant!

But enough about me and why I write this site. What I really want to know is: are you getting what you want out of Finance Trends Matter?

Tell us what you think we should be doing to improve the site. What would you like to see more of? Are there any special features we might add or topics you'd like to know more about?

Maybe you have some ideas on how we can create more value or reach others who haven't seen this site, or don't read finance blogs in general. I am always interested to hear what our friends and readers (in over 80 countries) have to say.

Thanks for your ideas, and for reading Finance Trends Matter!

Monday, November 10, 2008

Market notes - 11/10/08

Some of the more notable stories and market items of the day.

1. AIG gets $150 billion government bailout; posts huge loss.

2. Obama set to push "big bang" reform package.

3. Hedge fund star Greg Coffey astounds City. (Hat tip: Fintag)

4. Fed reverses itself on promises of transparency.

5. Treasury illegally repeals tax law; a quiet windfall for banks.

6. Bear Stearns risk manager to guard henhouse: Caroline Baum.

7. Meredith Whitney joins FT.com for a video interview.

8. Northern Trust commentary on China's stimulus package.

Thanks for stopping in. Join us tomorrow, as we discuss the bigger picture of finance blogging and the future of this blog (your input will help us here). See you then!

Sunday, November 09, 2008

Meredith Whitney on FT.com

Banking analyst Meredith Whitney is interviewed for FT.com's "View from the Markets" video series. Parts one, two, three, and four.

In this interview segment, Whitney sticks to her claim that "the worst is not over" for the financial industry, and says the credit crisis is moving into a new phase in which bank on-balance sheet lending will "shut down" and overall mortgage lending in the US will decline.

Also up for discussion: how banks will use (or not use) the Troubled Asset Relief Program (TARP), accounting for investment losses and writedowns, bank earnings and business restructuring/resizing, government ownership of banks, and looming problems associated with credit card debt and the "de-risking" of available bank credit.

Having said all that, enjoy the interview.

Related articles and posts:

"Whitney: Credit crunch 'far from over'" - Finance Trends Matter.

"Meredith Whitney on the Banks" - Jesse's Cafe Americain.

Friday, November 07, 2008

Features of the week

Lots to read and watch in our latest, "Features of the week".

1. Zero interest rate world lies ahead as England, ECB cut rates.

2. Hugh Hendry spoke of drastic rate cuts on CNBC recently.

3. Jobs lost in 2008: 1.2 million. US unemployment continues to rise.

4. Oil prices have plunged, but another spike may be on the way.

5. Oil demand may decline next year, says Wood Mackenzie

6. Mushrooms and plant waste may hold key to energy crisis.

7. Art market rout - FT Lex. Art market rout persists - Bloomberg.

8. Twenty-something investors seem optimistic about market.

9. Why Obama's "green jobs" plan won't work.

10. Down and out in Beverly Hills: Rolexes, Picassos hit pawnshops.

11. It's a great time to start a business, says James Altucher.

12. An audio slideshow tour of the Googleplex.

13. The bailout: more changes, more questions.

14. Record wide credit spreads may be near peak: CreditSights.

15. Sir David Tweedie: fair value accounting not to blame for crisis.

16. Transitions from bear markets to bull markets - Chris Ciovacco.

Thanks for reading Finance Trends Matter. Enjoy your weekend.

If you'd like to keep up with our posts in the RSS reader of your choice, subscribe to our free site feed. Spread the word!

Wednesday, November 05, 2008

Ted Forstmann on Charlie Rose

Well, by now I think everyone with electricity knows that Barack Obama has won the election to become America's 44th President.

If you're still trying to get your political news fix, head on over to Tuesday's handy election coverage post for more. There's plenty of interesting and thought-provoking stuff there to keep you busy.

Today I wanted to get us back to the topic of finance, while at the same time addressing some of the big issues looming over America as we head into 2009 and beyond.



I think a good way of doing that is by sharing this recent clip from the Charlie Rose show, "A conversation with Ted Forstmann".

In this 22 minute interview, we hear one man's view of the current financial crisis, America's financial situation, philanthropy, and education in America.

And what's so interesting to me about this program is that this is the first time I can remember hearing one of Charlie Rose's guests talking about the role that the Fed's easy money policies had in fostering the bubble and sowing the seeds of our current financial crisis.

This is a familiar view to those of us who have tuned in to recent interviews with the likes of Jim Rogers, Marc Faber, and Peter Schiff. But to hear these sentiments expressed on the Charlie Rose show was, for me, a bit of a surprise, even at this late date.

A bit of background: Ted Forstmann is known for his role in founding buyout firm Forstmann Little & Company, one of the biggest players in the private equity/LBO world during the 1980s and '90s.

During that time, he attracted attention for his vocal attacks on junk bond financing of LBO deals, singling out rival firms like Kohlberg Kravis Roberts for their role in furthering such deals.

After suffering some large personal and professional setbacks in the early part of this decade, Forstmann has come back and is now running talent agency IMG. He recently said that the junk-bond excesses of the 1980s were "minor league compared to what's been going on in the credit markets the last five years".

I'd like to offer a hat tip to John at Controlled Greed for highlighting this very interesting discussion in a recent post on his blog. Hope you enjoy the interview and the discussion.

Tuesday, November 04, 2008

US election coverage

A handy link guide to tonight's US Presidential election coverage.

1. Wall Street Journal - Election guide and graphics.

2. Financial Times - US elections 2008 in depth.

3. Google News - Election results page.

Plus, a few important things to consider on this election day.

1. Bailout 2008: US Representatives and Senators who voted "Yes".

2. Ron Paul on CNN American Morning - 11/04/08.

3. Mises.org - Mock the Vote (Why politics is a lot like pro wrestling).

4. John Stossel's Guide to Politics - YouTube via Mises.org.

"Always vote for principle, though you may vote alone,and you may cherish the sweetest reflection that your vote is never lost." - John Quincy Adams.

Monday, November 03, 2008

Monday's economic notes

What's on the docket for the start of this week?

We've got: credit card losses at Citigroup, a credit card crisis for America, movers and shakers in the hedge fund world, another deflation scare in a time of likely rising future inflation, a US manufacturing slowdown, an interview with Jim Rogers, and a citywide construction halt in Chicago, my hometown.

Oh, and there's that election that's been attracting some attention...

All this and more, in Monday's economic & market notes.

1. "Citi says credit card losses may rise through 2009" - MarketWatch.

"...Citigroup said that it lost $1.4 billion in the third quarter from credit card securitizations and that it expects such losses will continue, possibly reaching record levels in 2009.

The result compared to a gain of $169 million from credit card securitizations in the year-earlier period.

"Credit card losses may continue to rise well into 2009, and it is possible that the company's loss rates may exceed their historical peaks," the banking giant said in its filing with the Securities and Exchange Commission late Friday..."

This problem is bigger than Citibank; see the next article.

2. "US braces for next crisis: Credit cards" - Domain-b.

"The defaults that started with the sub-prime loans crisis in the US leading to a global $7.7-trillion loss in stock market value since October, are now showing signs of moving into the US credit card industry that will hit the balace sheets of the card issuing banks.

Reports indicate that a substantial portion of of the 158 million US card holders using 1.5 billion cards have started defaulting and banks had to write of approx $21 billion in bad credit loans in the first six months of this year and expect a further loss of $55 billion in the next 12 months.

The mortgage crisis has been the focus of the US public, media and the government alike that no one noticed or too tired to view the oncoming of the next shockwave – credit cards, as the lethal combination of mortgage losses and now the surge in credit card defaults has the potential to bring the entire US economy to its knees."

It's untrue that "no one noticed" this looming problem with credit card debt. I have been reading reports on the looming credit card defaults and the problems that are likely to follow for months now.

Any thoughts from readers on the severity of this latest wrinkle in the US' economic picture?

3. "Embedded inflation reduces deflation threat" - FT.

"The D-word is back. Five years after the last deflation scare, economists are again debating whether the US and other industrialised nations could see sustained declines in consumer prices.

Some go as far as to predict that much of the industrialised world might soon resemble Japan in the 1990s, with interest rates at zero, falling prices and no economic growth."

Yeah, we heard this sort of thing nonstop during 2002 and early 2003. It turned out to be nothing more than a scare-tactic cover for pumping up the nation's money supply, which by the way, helped fuel our now infamous housing boom/bubble and the resulting "bubble economy".

4. Greg Coffey to join Louis Bacon's Moore Capital - FT.

"Greg Coffey, the star hedge fund manager who gave up about $250m (£155m) of bonuses and stock options at GLG Partners to pursue an ambition to set up his own fund, has instead opted to join one of the industry's most successful figures.

After leaving GLG last week, Mr Coffey yesterday announced he was joining Louis Bacon's Moore Capital as co-chief investment officer alongside the American who made his fortune taking big bets on macro-economic trends in the 1990s.

Mr Coffey, 37 and an Australian, announced in April he would leave GLG, one of the biggest hedge fund groups. His decision to join Mr Bacon comes as the hedge fund industry struggles with a combination of market turmoil, increased pressure from lenders and heavy redemption demands from investors."

I was wondering lately what Coffey would wind up doing, given the state of the markets and the current cloud over the hedge fund industry. More on this at the Journal.

5. "Manufacturing screeching to a halt" - MarketWatch

"In the clearest evidence yet that the economy has fallen into a deep recession, U.S. manufacturing firms are offering their grimmest views on the economy since the early 1980s.

Not only is domestic demand still weakening significantly, but export growth has ground to a halt, according to the highly regarded Institute for Supply Management index released Monday."

If hedge funds, financial firms, and manufacturing are all doing this poorly, then you know we are well into a recession.

6. Our skyline on pause - Chicago Tribune.

"In the wake of the global credit crisis, Chicago's once-superheated skyline—radically transformed during the last 10 years by one of the greatest building booms in the city's history—is on the verge of being frozen in place.

With future projects on hold, the construction cranes that symbolize the city's vitality gradually will disappear. There will be less outlandish architecture for the city's boosters to crow about. Chicago, which prides itself on skyscrapers that combine the soaring artistry of the architect and the cunning ambition of the developer, will lose some of its swagger.

How long the freeze will last is hard to predict. But it's clear that a chill has set in. And the trend reaches beyond the halt in construction on two supertall skyscrapers, including the twisting Chicago Spire that promised to soar 2,000 feet above the city's lakefront."

Oh well. The Hancock building is enough for me.

7. Obama, McCain race through swing states - Bloomberg.

8. Crisis creates opening for FDR-like economic overhaul - Bloomberg.

"No matter who wins the election tomorrow, the new president is likely to create a vastly larger economic role for the government. He'll also permanently alter the relationship between financial markets and Washington, finish the job of reshaping the U.S. banking system begun under Bush, and -- like it or not -- will probably go down in history as the biggest deficit spender ever."

This will not be a good thing, despite loud calls for government intervention.

9. Jim Rogers joins Bloomberg TV to talk about markets and the economy.

Watch this clip to understand why the above proposed government "economic overhaul" is the worst idea possible. Plus, a few investment ideas from JR.

You're up to date! Join us tomorrow for more on the elections and the markets.