Wednesday, April 30, 2008

Vultures Circling

Nice Business Week article up right now about Vulture Investors. A few nice excerpts:

While Wall Street panicked over the fate of Bear Stearns (BSC) in mid-March, hedge fund manager Philip A. Falcone enjoyed a notably successful week. The founder of Harbinger Capital Partners made tens of millions of dollars on an earlier wager that Bear and other financial stocks would collapse.


Falcone is a Midas of Misery. With $19 billion—nearly 760 times the grubstake he started out with seven years ago—he is snapping up troubled assets in bankruptcy, shorting distressed bonds, and using huge stock positions to agitate for change at underperforming companies. His holdings read like a who's who of market castoffs: media companies, utilities, and steelmakers. Last year Harbinger netted $11 billion, thanks in large part to Falcone's gutsy bet against all things subprime. His personal windfall of $1.7 billion made him one of the highest-paid hedge fund managers in 2007.

Check it out

Tuesday, April 22, 2008

Surprise (not)

The number of California homes lost to foreclosure in the first quarter surged 327% from year-ago levels -- reaching an average of more than 500 foreclosures per day -- DataQuick said in a report, warning that the widening foreclosure problem could "spread beyond the current categories of dicey mortgages, and into mainstream home loans."
If a rising tide lifts all boads, what about a receding tide?

Tuesday, April 08, 2008


Former Federal Reserve Chairman Alan Greenspan said on Tuesday the U.S. economy was in recession, and said it would be appropriate to tap public funds to resolve the mortgage-related crisis that has helped pull the economy under.
Next question.

Rock vs Hard Place

The Fed reminds me of the Oracle at Delphi. No one really knew how it worked. But, people believed that it has special powers, that the priests of the temple could see the future, and that they could help avert disaster by appeasing the gods.

The Oracle worked because people believed in it. Unfortunately, in order to retain its powers, it had to carefully manage people's beliefs. When your power rests on being right, you have to be very careful what you say. You either don't say anything, you say things cryptically, or you are so vague that anything that happens could be interpreted as affirmation.

Unfortunately, when you have to ACT, you don't have the luxury of equivocating or obfuscating. That's the problem the Fed faces right now. To wit:

On the one hand, the Fed has been urgently moving to prevent the trio of economic woes—housing, credit and financial_ from plunging the country into a deep recession. On the other hand, with soaring energy prices and high food costs, policymakers realize that they can't afford to let inflation get out of control, either.
To attenuate the credit crisis (Recession, ie, Rock), they are printing more money. But printing more money makes prices go up (Inflation, ie, Hard Place).
You ever try to run without sweating? It looks ridiculous, and it's way too slow. But that's what the Fed is doing right now.

Wednesday, April 02, 2008

It only works if you believe in it

Wall Street began the second quarter with a big rally Tuesday as investors rushed back into stocks, optimistic that the worst of the credit crisis has passed and that the economy is faring better than expected.
When I first read that, I thought it was an April Fool's joke. But I guess they were serious. Oh well, I still got a chuckle out of it. But I must say, the powers that be are getting awfully careless about their Fnords.