The Wall Street Journal reported today that the UN's Secretary General, Ban Ki-moon's final budget request totals 25% more than last year. Wow, that is quite a spending increase. Of course there are many needs around the world such as providing relief to Darfur.
Unfortunately 75% of the increases are for salaries to expand the UN's bureaucracy, and not to helping the world's people. This would constitute the single largest funding increase in the UN's history. And the UN has still not implemented all of the reforms specified by Paul Volcker's report after the corruption of the oil for food scandal.
For an organization that accomplishes so little, that is rich.
Monday, December 17, 2007
Sunday, December 16, 2007
I'm Shocked, Shocked that the Mortgage Industry is Imploding!
The liberals want to unilaterally bust selected mortagage contracts and freeze the teaser rates for 5 to 7 years. Leading Democrats are berating the loan company "predators". Republicans are trying to get the mortgage industry to "voluntarily" take similar actions. Homeowners, and I use the term loosely, who got into houses without documentation and without equity, are walking away from those houses. They were renters 12-18 months ago and they will be renters again.
So as defaults rise, many are asking, "How did this happen?" The only explanation that those on the left will offer is that predatory lenders tricked borrowers with poor credit to sign up for home loans that they could not afford to pay back. What other explanation could there be?
Well, let's see. The development and culmination of the sub-prime mess was pretty easy to see coming for those close to the industry:
So as defaults rise, many are asking, "How did this happen?" The only explanation that those on the left will offer is that predatory lenders tricked borrowers with poor credit to sign up for home loans that they could not afford to pay back. What other explanation could there be?
Well, let's see. The development and culmination of the sub-prime mess was pretty easy to see coming for those close to the industry:
- Interest rates were so low for so long that anyone with decent credit who wanted to buy a home or refinance their home did.
- Historically low interest rates fueled a boom in real estate investment.
- Both #1 and #2 drove a higher than normal volume of mortgages. This higher volume provided substantial business to the traditional bank lenders. But is also spurred the growth of non-bank lenders who needed a greater and greater volume of loans to grow, or even maintain at a zero growth rate, their businesses.
- As interest rates began to creep up once again the only way to sustain this expanded mortgage industry was to find a source of new loans. Loans originating from real estate investors slowed. As described in #1, the surge in loans from refinancing, or getting into a home via a prime loan, was over. The only source of new loans left were subprime.
- These loans were packaged up and sold to greedy investors who were blinded by the yields without ever really understanding what they were buying in some of the lower rated tranches.
So it was not predatory practices that drove the sub-prime industry. It was desperation. Desperation to sustain an industry that was overextended. Most of the higher than usual defaults and foreclosures are from loans that were made in late 2005 and 2006. During this time, desparate to originate loans at any cost, many lenders offered deals that could never turn out well. In doing so, they sowed the seeds of their own destruction.
Many of the people who are now saying they don't know how this could have happened remind me of Captain Renault, the character played by Claude Rains in Casablanca. Captain Renault disenginuously declares, "I a shocked, shocked that there is gambling going on here!" Then he pockets his winnings.
Of course everyone knew there was gambling at Rick's, just as it was obvious that the mortgage industry would impode. The year's best performing hedge funds saw it coming and made giant money shorting the industry.
Liberal Power by Invoking Victimization
By invoking victimization liberals justify government intervention and control of wealth, income and commerce. The most recent example is railing by the Democratic Party against "predatory" lending. Hillary Clinton has come out strongly for legislating a freeze on adjustable rate mortgages for 5 years - holding the interest rate at the low "teaser" rate. She has even hinted at a 7 year freeze.
What is the justification for the government of the U.S. illegally busting these contracts? The Democrats claim the borrowers are victims of unscrupulous lenders whose predatory business practices took advantage of sub-prime borrowers. Clinton states that people were, "lured into risky mortgages" and "led into bad situations".
This "predator" business model intrigues me. Apparently the argument goes that these sub-prime lenders loaned money to people who they knew could not pay it back. That means that the lenders made loans understanding that they were going to lose a lot of money when the borrower defaulted on the loan. That is some business model. Who took advantage of who?
Many of the sub-prime borrowers took advantage of all sorts of crazy offers which in many cases allowed them to get into a house without putting up any money. It makes perfect economic sense for them to walk away. They were renters before and now they are renters again. In his latest column George Will argues that in the case of no money down, interest only loans, the "borrowers" were really just renting anyway.
The interest rate freeze would be available for some borrowers but not others. If you can't afford the new adjusted rate then I guess the government would bust the mortgage holder's contract and maintain the lower teaser rate. If you lied about your income as part of a no documentation loan, and now cannot afford it you get a break so you don't have to go back to renting. But if your were honest about your income, and you've been able to stay current on your payments, then it is likely you will not get relief. You will have to pay the higher rate. How is this fair?
So who is the victim? The "predatory" lenders are losing huge sums of money and in many cases are going out of business. Large number of employees have lost their jobs. The homebuilders have excess inventory and are taking huge write downs. The holders of collateralized loan obligations are getting pennies on the dollar to unload their holdings, or are taking the obligations onto their balance sheets, damaging the capital structure of the firms. If you are a holder of a mortgage obligation and are legally entitled to a defined payment stream, the government's intervention to freeze teaser rates will deprive the holder of that payment stream. How is this fair?
In fact the only people who are not victims are the people that are walking away from the homes they lived in for a short time. But the Democrats, and even some Republicans, want to define these irresponsible borrowers as victims to justify the government expanding a central planning model of commerce. Never underestimate the Democrats' desire to create a new entitlement. Unfortunately, this newly proposed mortgage rate entitlement will only be available to those who acted irresponsibly.
What is the justification for the government of the U.S. illegally busting these contracts? The Democrats claim the borrowers are victims of unscrupulous lenders whose predatory business practices took advantage of sub-prime borrowers. Clinton states that people were, "lured into risky mortgages" and "led into bad situations".
This "predator" business model intrigues me. Apparently the argument goes that these sub-prime lenders loaned money to people who they knew could not pay it back. That means that the lenders made loans understanding that they were going to lose a lot of money when the borrower defaulted on the loan. That is some business model. Who took advantage of who?
Many of the sub-prime borrowers took advantage of all sorts of crazy offers which in many cases allowed them to get into a house without putting up any money. It makes perfect economic sense for them to walk away. They were renters before and now they are renters again. In his latest column George Will argues that in the case of no money down, interest only loans, the "borrowers" were really just renting anyway.
The interest rate freeze would be available for some borrowers but not others. If you can't afford the new adjusted rate then I guess the government would bust the mortgage holder's contract and maintain the lower teaser rate. If you lied about your income as part of a no documentation loan, and now cannot afford it you get a break so you don't have to go back to renting. But if your were honest about your income, and you've been able to stay current on your payments, then it is likely you will not get relief. You will have to pay the higher rate. How is this fair?
So who is the victim? The "predatory" lenders are losing huge sums of money and in many cases are going out of business. Large number of employees have lost their jobs. The homebuilders have excess inventory and are taking huge write downs. The holders of collateralized loan obligations are getting pennies on the dollar to unload their holdings, or are taking the obligations onto their balance sheets, damaging the capital structure of the firms. If you are a holder of a mortgage obligation and are legally entitled to a defined payment stream, the government's intervention to freeze teaser rates will deprive the holder of that payment stream. How is this fair?
In fact the only people who are not victims are the people that are walking away from the homes they lived in for a short time. But the Democrats, and even some Republicans, want to define these irresponsible borrowers as victims to justify the government expanding a central planning model of commerce. Never underestimate the Democrats' desire to create a new entitlement. Unfortunately, this newly proposed mortgage rate entitlement will only be available to those who acted irresponsibly.
Hillary's Kindergarten Caper
Hillary Clinton's presidential campaign continues to careen wildly between professionalism and amateurism. She has the biggest political "machine". If she knows the question in advance, she can deliver a well-coached and well-rehearsed answer that you can time an egg with. Her campaign has raised an extraordinary amount of money.
But then comes the stunningly amateurish attack on Barak Obama's presidential ambitions. Barak has made statements that he has not had a long-term plan to be president. The Clinton campaign responded in a "gotcha" press release that referenced an "essay" Barak Obama had written in kindergarten about wanting to be president when he grew up. Wow, now that is really digging for dirt! Delving all the way back to when Barak was 5 years old to prove that Obama is a life-long schemer that is driven to capture the White House.
It sounds a lot more like Hillary is projecting her own view of destiny on Senator Obama. But even more, how silly does this make the Clinton Campaign look? Is Hillary's kindergarten caper and her attacks on Obama for his self-admitted experimentation with recreational drugs in his mis-spent youth really the worst "dirt" the Clinton's can dig up? I'd say Obama has nothing to worry about.
But then comes the stunningly amateurish attack on Barak Obama's presidential ambitions. Barak has made statements that he has not had a long-term plan to be president. The Clinton campaign responded in a "gotcha" press release that referenced an "essay" Barak Obama had written in kindergarten about wanting to be president when he grew up. Wow, now that is really digging for dirt! Delving all the way back to when Barak was 5 years old to prove that Obama is a life-long schemer that is driven to capture the White House.
It sounds a lot more like Hillary is projecting her own view of destiny on Senator Obama. But even more, how silly does this make the Clinton Campaign look? Is Hillary's kindergarten caper and her attacks on Obama for his self-admitted experimentation with recreational drugs in his mis-spent youth really the worst "dirt" the Clinton's can dig up? I'd say Obama has nothing to worry about.
Thursday, December 13, 2007
Iraq Progress Is Accelerating
Steady progress continues to be made in Iraq. This is a problem for the Democrats who have to keep changing their story on why we are failing.
First we achieved a number of important benchmarks, including writing and ratifying a constitution and holding free elections. The Democrats argued that benchmarks were not meaningful and that the carnage on the ground showed we had no hope of success.
Recognizing that a political solution could not be achieved without a change in military strategy, President Bush re-made the team, now led by Defense Secretary Gates and General Petreaus.
General Petreaus engineered a radically different strategy to combating the insurgency. Previously the U.S. forces had been based in large, heavily fortified bases like the one near the Bagdahd airport. Bolstered by the additional brigades from the surge, General Petreaus sent the troops into the field, setting up local security stations in each neighborhood, manned by a joint Iraqi and U.S. team. Combined with Al Qaeda badly overplaying its hand this neighborhood security and policing strategy made all the difference.
Iraq is far from being a safe place. But the violence throughout the country has dropped farther and faster than anyone could have hoped. The Democrat's response? They now are insisting that achieving benchmarks is the most important measure of success. Sure, they say, the security situation has improved dramatically. But benchmarks that were set by Congress such as ratifying an oil revenue sharing plan have not been achieved.
But what the Democrats are ignoring is that in practice, if not in law, the spirit of the benchmarks is being achieved on the ground. The Iraqi legislature has not been able to finalize an oil revenue sharing agreement. But in fact, oil revenues are being distributed by the Maliki government to the provinces in a fair way. In many other ways the lack of legislatively achieving benchmarks is being offset by pragmatically achieving the same results on the ground.
In Southern Iraq, British troops have been able to completely hand over the administration and security of the region to the Iraqis. Rival Shiite factions that had been warring now have decided that it is better to cooperate and benefit from the riches of Iraq's most productive oil reserves.
In Northern Iraq, where sabotage to oil fields and pipelines has been rampant, oil production has steadily increased. Today's Wall Street Journal reported that oil production for Iraq as a whole now equals pre-war levels.
So first the Democrats were against benchmarks as a measure of success. Now they insist that only legislative benchmarks are a measure of success. And all along, they are blind to the practical progress that is happening every day at the grass root level.
First we achieved a number of important benchmarks, including writing and ratifying a constitution and holding free elections. The Democrats argued that benchmarks were not meaningful and that the carnage on the ground showed we had no hope of success.
Recognizing that a political solution could not be achieved without a change in military strategy, President Bush re-made the team, now led by Defense Secretary Gates and General Petreaus.
General Petreaus engineered a radically different strategy to combating the insurgency. Previously the U.S. forces had been based in large, heavily fortified bases like the one near the Bagdahd airport. Bolstered by the additional brigades from the surge, General Petreaus sent the troops into the field, setting up local security stations in each neighborhood, manned by a joint Iraqi and U.S. team. Combined with Al Qaeda badly overplaying its hand this neighborhood security and policing strategy made all the difference.
Iraq is far from being a safe place. But the violence throughout the country has dropped farther and faster than anyone could have hoped. The Democrat's response? They now are insisting that achieving benchmarks is the most important measure of success. Sure, they say, the security situation has improved dramatically. But benchmarks that were set by Congress such as ratifying an oil revenue sharing plan have not been achieved.
But what the Democrats are ignoring is that in practice, if not in law, the spirit of the benchmarks is being achieved on the ground. The Iraqi legislature has not been able to finalize an oil revenue sharing agreement. But in fact, oil revenues are being distributed by the Maliki government to the provinces in a fair way. In many other ways the lack of legislatively achieving benchmarks is being offset by pragmatically achieving the same results on the ground.
In Southern Iraq, British troops have been able to completely hand over the administration and security of the region to the Iraqis. Rival Shiite factions that had been warring now have decided that it is better to cooperate and benefit from the riches of Iraq's most productive oil reserves.
In Northern Iraq, where sabotage to oil fields and pipelines has been rampant, oil production has steadily increased. Today's Wall Street Journal reported that oil production for Iraq as a whole now equals pre-war levels.
So first the Democrats were against benchmarks as a measure of success. Now they insist that only legislative benchmarks are a measure of success. And all along, they are blind to the practical progress that is happening every day at the grass root level.
Wednesday, December 12, 2007
Bank of America Is Taking Mortgage Market Share
Now that many of the institutions outside of the traditional banking system have blown up who is going to be left to capture the lucrative mortgage market? I believe Bank of America is taking mortgage market share and will be able to use the disruption in the credit markets to benefit financially in the long run.
Bank of America has the geographic footprint and market scale to take advantage of the vacuum. They also have a strong deposit base which provides ample liquidity to make loans. With less competition they will have greater pricing power and can hold the line on mortgage loan fees.
Major disruptions and downturns can be a boon to the very best companies - they take market share while lessor companies go out of business. When the market improves the strong emerge even stronger. It may not be a smooth ride, but I believe that Bank of America will be a winner when the dust eventually settles.
Meanwhile, over at Citi, they have just promoted insiders to the CEO and Chairman jobs. This appears to be a board of directors affirmation that the current business model can be fixed. It cannot.
Citi needs to be taken apart and put back together again. Whole lines of business need to be divested. An outsider coming in could have wiped the slate clean in terms of taking all write downs possible. Promoting insiders just continues the pursuit of a business model that has already been proven not to work.
Disclosure: at the time of this posting the author was long BAC.
Bank of America has the geographic footprint and market scale to take advantage of the vacuum. They also have a strong deposit base which provides ample liquidity to make loans. With less competition they will have greater pricing power and can hold the line on mortgage loan fees.
Major disruptions and downturns can be a boon to the very best companies - they take market share while lessor companies go out of business. When the market improves the strong emerge even stronger. It may not be a smooth ride, but I believe that Bank of America will be a winner when the dust eventually settles.
Meanwhile, over at Citi, they have just promoted insiders to the CEO and Chairman jobs. This appears to be a board of directors affirmation that the current business model can be fixed. It cannot.
Citi needs to be taken apart and put back together again. Whole lines of business need to be divested. An outsider coming in could have wiped the slate clean in terms of taking all write downs possible. Promoting insiders just continues the pursuit of a business model that has already been proven not to work.
Disclosure: at the time of this posting the author was long BAC.
A Difficult Stock Market Continues - No Thanks to the Fed
The stock market has remained highly volatile. Contributing to the instability this week is the Federal Reserve's bungling. First they cut rates by only 25 basis points, which means that the relationship of the Fed's target rate to the 10 year T-bill. This means that member banks are effectively being "taxed" a rate higher than the market rate. The banking system can not work if you can not borrow short and lend long. The inverted Federal Funds rate essentially assures that this frozen liquidity will not be unfrozen.
Second, they announced this coordinated plan with other central banks around the world to provide some additional liquidity into the global financial system. This is not going to hurt anything, but is not going to overcome the first problem.
The Federal Reserve must, at least temporarily, "float" the Federal Funds Rate to correct the rate inversion in the market. The Fed can not set a target rate that is disconnected to the market rates.
I'm not sure the Fed is able to see past academia to the practical reality of what is happening in the real world. This is dangerous. I hope they will come to their senses soon.
Defensive stocks and high growth big tech stocks will continue to be the safest bets while we wait.
Second, they announced this coordinated plan with other central banks around the world to provide some additional liquidity into the global financial system. This is not going to hurt anything, but is not going to overcome the first problem.
The Federal Reserve must, at least temporarily, "float" the Federal Funds Rate to correct the rate inversion in the market. The Fed can not set a target rate that is disconnected to the market rates.
I'm not sure the Fed is able to see past academia to the practical reality of what is happening in the real world. This is dangerous. I hope they will come to their senses soon.
Defensive stocks and high growth big tech stocks will continue to be the safest bets while we wait.
Hillary's Class Warfare Hypocrisy
Hillary Clinton just made a bold statement - that she opposes repealing the estate tax, aka "death tax" because it is un-American. Senator Clinton's rationale is that passing earned wealth goes against the principle of America being a meritocracy. The clear implication is that the government must confiscate this wealth to force each generation to start over in our merit-based society.
Let's be clear. Every penny of the money that remains in an estate when an individual dies, unless it resides in an a tax deferred retirement account (i.e., IRA, 401(k)), has been taxed at least once. Even though the money has already been taxed for income, capital gains, or dividends, when you die the money is taxed again at exorbitant rates. For money in an IRA or 401(k), it is taxed as income, and then taxed again at the much higher estate tax rates.
Now here is the hypocrisy part of this class warfare position. Where does the money go that is confiscated by the estate tax to promote a meritocracy? Hillary and the Democrats want to use it for income and wealth redistribution. In other words, the money is taken away from the people that earned it and given to people, through entitlements and other redistribution policies, and given to people that did not earn it.
How does this support a society based on merit? Of course it does not. It is simply disingenuous language to promote an increasingly aggressive redistribution of wealth.
Here is a question to ponder. Think about the proposals for domestic policies advocated by Hillary Clinton and all of the other Democratic presidential candidates. Is there a single policy proposal that does not involve income or wealth redistribution? Is there a single domestic policy view that instead of income redistribution creatively uses the power of the government to enable success without taking money from producers and giving it non-producers? If you can think of one, then it is the exception that proves the rule.
Let's be clear. Every penny of the money that remains in an estate when an individual dies, unless it resides in an a tax deferred retirement account (i.e., IRA, 401(k)), has been taxed at least once. Even though the money has already been taxed for income, capital gains, or dividends, when you die the money is taxed again at exorbitant rates. For money in an IRA or 401(k), it is taxed as income, and then taxed again at the much higher estate tax rates.
Now here is the hypocrisy part of this class warfare position. Where does the money go that is confiscated by the estate tax to promote a meritocracy? Hillary and the Democrats want to use it for income and wealth redistribution. In other words, the money is taken away from the people that earned it and given to people, through entitlements and other redistribution policies, and given to people that did not earn it.
How does this support a society based on merit? Of course it does not. It is simply disingenuous language to promote an increasingly aggressive redistribution of wealth.
Here is a question to ponder. Think about the proposals for domestic policies advocated by Hillary Clinton and all of the other Democratic presidential candidates. Is there a single policy proposal that does not involve income or wealth redistribution? Is there a single domestic policy view that instead of income redistribution creatively uses the power of the government to enable success without taking money from producers and giving it non-producers? If you can think of one, then it is the exception that proves the rule.
Wednesday, December 5, 2007
Bush Administration's Subprime Solution - Is it Legal? Is it Right?
Secretary Paulson has been working on a number of fronts to address the credit mess triggered by excesses in the subprime market. My current concern is the plan to put a hold on foreclosures and to freeze subprime teaser rates - for as much as 5 years.
If the holders of a mortgage want to voluntarily work out new terms with the homeowner that is fine. I've seen some pundits that have argued that it is in the best fiduciary interest for the mortgage companies to "work out" a deal that will keep people in the homes rather than foreclose. If in fact it is in the best financial interest of the mortgage holder to make a new arrangement then I'm sure they will.
But I don't see how the government can mandate, or legislate, a freeze on interest rates. The government can not override a private legal contract between two independent parties. This would constitute an illegal seizure of property.
There is the added difficulty of how the many individuals risking foreclosure will be classified as being eligible or ineligible for the freeze on interest rates. The tort lawyers are licking their chops. Class action lawsuits are probably already being drawn up.
Individuals and mortgage companies entered into a contract. Loans were made to people that couldn't really afford a house and both the holders of the loans and the people living in the homes will be hurt. But the government muddling around trying to centrally orchestrate a "solution" will only make things worse. The "market" has the capacity to work this out without the government mounting a Katrinaesque "rescue" operation.
What is equally disappointing is the rhetoric from Hillary Clinton and others on the left that Wall Street is to blame for the mess and must be held accountable. In fact, the many securitizations that Wall Street firms packaged, provided large amounts of liquidity to the mortgage market, helping many people become homeowners who would not have been otherwise.
For years the Democrats railed against the mortgage industry about needing to be more aggressive in providing mortgages to lower income families. When they finally did the results speak for themselves.
Interestingly, housing prices recovering from the excesses of Greenspan liquidity, will make homes more affordable for a greater number of Americans.
If the holders of a mortgage want to voluntarily work out new terms with the homeowner that is fine. I've seen some pundits that have argued that it is in the best fiduciary interest for the mortgage companies to "work out" a deal that will keep people in the homes rather than foreclose. If in fact it is in the best financial interest of the mortgage holder to make a new arrangement then I'm sure they will.
But I don't see how the government can mandate, or legislate, a freeze on interest rates. The government can not override a private legal contract between two independent parties. This would constitute an illegal seizure of property.
There is the added difficulty of how the many individuals risking foreclosure will be classified as being eligible or ineligible for the freeze on interest rates. The tort lawyers are licking their chops. Class action lawsuits are probably already being drawn up.
Individuals and mortgage companies entered into a contract. Loans were made to people that couldn't really afford a house and both the holders of the loans and the people living in the homes will be hurt. But the government muddling around trying to centrally orchestrate a "solution" will only make things worse. The "market" has the capacity to work this out without the government mounting a Katrinaesque "rescue" operation.
What is equally disappointing is the rhetoric from Hillary Clinton and others on the left that Wall Street is to blame for the mess and must be held accountable. In fact, the many securitizations that Wall Street firms packaged, provided large amounts of liquidity to the mortgage market, helping many people become homeowners who would not have been otherwise.
For years the Democrats railed against the mortgage industry about needing to be more aggressive in providing mortgages to lower income families. When they finally did the results speak for themselves.
Interestingly, housing prices recovering from the excesses of Greenspan liquidity, will make homes more affordable for a greater number of Americans.
Stock Market Bottom Continuing to Firm
Last week was a strong up week. Monday and Tuesday this week were down but today was a very strong up day with good volume. The general "action" looked pretty good. The S&P 500 has closed in on major resistance of 1490, ending at 1485 today.
I continue to be optimistic on an improving market into year-end. The tech stocks have recovered and are performing very well. The financial stocks have improved but I think there will continue to be a lot of us and downs. I have added to my positions in the financials over the last week. One position I have increased is Bank of America. I believe that Bank of America will be a major beneficiary of the shift of mortgage origination and servicing now that all the non-bank players have been blown out of the water. Consumer staples are strong as many are looking for more defensive positions going into next year.
A major "tell" for the financial sector will be the brokerage and investment earnings, coming up in over the next several weeks.
I continue to be optimistic on an improving market into year-end. The tech stocks have recovered and are performing very well. The financial stocks have improved but I think there will continue to be a lot of us and downs. I have added to my positions in the financials over the last week. One position I have increased is Bank of America. I believe that Bank of America will be a major beneficiary of the shift of mortgage origination and servicing now that all the non-bank players have been blown out of the water. Consumer staples are strong as many are looking for more defensive positions going into next year.
A major "tell" for the financial sector will be the brokerage and investment earnings, coming up in over the next several weeks.
Sunday, December 2, 2007
A Case for Value in Freddie Mac
http://www.kiplinger.com/columns/picks/archive/2007/pick1129.htm
Rich Pzena made a compelling case for Freddie Mac as a value play at last week's Value Investing Conference. Based on his Mr. Pzena's discussion, my own research, and my belief that a bottom is forming in the stock market, I took a position in Freddie Mac on Friday. I continue to be concerned with the lack of congressional reform of Freddie and Fannie but the upside potential after the correction is just too compelling. I also increased my position in Bank of America last week.
Disclosure: at the time of this posting the author was long FRE and BAC.
Rich Pzena made a compelling case for Freddie Mac as a value play at last week's Value Investing Conference. Based on his Mr. Pzena's discussion, my own research, and my belief that a bottom is forming in the stock market, I took a position in Freddie Mac on Friday. I continue to be concerned with the lack of congressional reform of Freddie and Fannie but the upside potential after the correction is just too compelling. I also increased my position in Bank of America last week.
Disclosure: at the time of this posting the author was long FRE and BAC.
Activision - A Bit of Luck
Activision is a company that has seen terrific growth year after year. The recent phenomenal success of Guitar Hero 3 has been a huge boost to the company. Activision just raised guidance for the quarter and the year based on its strong start to the holiday season.
Today it was announced that a majority stake is being purchased in Activision by Vivendi. A new company will be constituted that combines Activision with the gaming division of Vivendi, forming an $18.9B gaming colossus: Activision Blizzard. Vivendi will purchase Activision shares at a tender price of $27.50. Friday's close was $22.15, giving the deal a premium of almost 25%.
There is an old saying that good luck is when opportunity meets preparation. I purchased Activision calls a while back. The stock had not moved that much in response to the Guitar Hero 3 launch or the raised guidance - so I doubled down. I will book a very healthy profit when the market opens on Monday.
Today it was announced that a majority stake is being purchased in Activision by Vivendi. A new company will be constituted that combines Activision with the gaming division of Vivendi, forming an $18.9B gaming colossus: Activision Blizzard. Vivendi will purchase Activision shares at a tender price of $27.50. Friday's close was $22.15, giving the deal a premium of almost 25%.
There is an old saying that good luck is when opportunity meets preparation. I purchased Activision calls a while back. The stock had not moved that much in response to the Guitar Hero 3 launch or the raised guidance - so I doubled down. I will book a very healthy profit when the market opens on Monday.
CNN - "Corrupt News Network"
http://www.latimes.com/entertainment/la-et-rutten1dec01,0,4122002.column?coll=la-home-center
This article from the normally liberal leaning LA Times articulates the bias, incompetence and self-serving corruption of CNN that was highlighted in the recent GOP presidential "debate".
The author correctly points out that when 5,000 YouTube questions are submitted, and CNN chooses a small number for the event, they are really CNN's questions. What seems to be ignored by CNN is that this is a GOP primary debate. That means that the debate is for the benefit of Republicans and should explore issues that are important to people that are going to be voting in the primaries to choose a GOP presidential candidate.
Instead, the questions selected by CNN seemed to exclusively focus on issues that were less important, but also that would paint conservatives in a negative light. How else do you reconcile selecting questions on the infallibility of the bible, the confederate flag, gays in the military and the like?
To expand on the LA Times commentary, I'm not sure what to make of the whole debacle. There are certainly convincing arguements that can be made for both incompetence and bias. Frankly, I think it demonstrates how the liberal media outlets view conservatives. They think all conservatives are right wing extremist kooks. It is possible that this bizarre selection of questions and questioners represents CNN's view of "mainstream conservatives". One of the questioners looked like the Unibomber had been let out of prison and given access to YouTube.
The now infamous truth that questions were selected from committed Democrat voters can only be explained by a deliberate effort to support the Democratic Party or complete incompetence. There are no other choices. A simple Google search by whoever at CNN that was charged with vetting the questioners would have discovered the Democratic Party connections. But when you not only feature a question by a member of a Hillary Clinton campaign committee, but also fly him in to further challenge the GOP candidates, the denials by CNN that "we didn't know" ring hollow.
Not only has CNN confirmed the liberal agenda in their portrayal of the news but also that they are too incompetent to be viewed as a legitimate news source.
This article from the normally liberal leaning LA Times articulates the bias, incompetence and self-serving corruption of CNN that was highlighted in the recent GOP presidential "debate".
The author correctly points out that when 5,000 YouTube questions are submitted, and CNN chooses a small number for the event, they are really CNN's questions. What seems to be ignored by CNN is that this is a GOP primary debate. That means that the debate is for the benefit of Republicans and should explore issues that are important to people that are going to be voting in the primaries to choose a GOP presidential candidate.
Instead, the questions selected by CNN seemed to exclusively focus on issues that were less important, but also that would paint conservatives in a negative light. How else do you reconcile selecting questions on the infallibility of the bible, the confederate flag, gays in the military and the like?
To expand on the LA Times commentary, I'm not sure what to make of the whole debacle. There are certainly convincing arguements that can be made for both incompetence and bias. Frankly, I think it demonstrates how the liberal media outlets view conservatives. They think all conservatives are right wing extremist kooks. It is possible that this bizarre selection of questions and questioners represents CNN's view of "mainstream conservatives". One of the questioners looked like the Unibomber had been let out of prison and given access to YouTube.
The now infamous truth that questions were selected from committed Democrat voters can only be explained by a deliberate effort to support the Democratic Party or complete incompetence. There are no other choices. A simple Google search by whoever at CNN that was charged with vetting the questioners would have discovered the Democratic Party connections. But when you not only feature a question by a member of a Hillary Clinton campaign committee, but also fly him in to further challenge the GOP candidates, the denials by CNN that "we didn't know" ring hollow.
Not only has CNN confirmed the liberal agenda in their portrayal of the news but also that they are too incompetent to be viewed as a legitimate news source.
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