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Wednesday, October 26, 2011

EU Agrees on deal; bondholders get screwed

Leaders of the EU countries plan to leverage the region's 440 billion euro ($609 billion) bailout fund to 1 trillion euros. The fund is known as the European Financial Stability Facility, (EFSF) and currently has between 250 billion to 275 billion euros left-over after bailouts for Greece, Ireland and Portugal. The plan is to leverage the fund by around four times through a special investment vehicle and a debt-insurance plan.  Excuse me?  Isn't this how we got into trouble in the first place?  


Okay, I just had to get that out of my system.  What are these people thinking??

The other key announcement out of the Euro-zone summit was that private holders of Greek bonds will take (be forced to take) a 50% write-down on the value of their Greek bonds, which will save Greece 100 billion euros - great for Greece, not so great if you are a bank or individual holding these bonds.  

This outcome was baked in the cake - we knew it had to happen, but the result is a structural default on the part of Greece.  We can only hope that these measures, as ill-conceived as they may be, will be enough to deflect attention away from Greece, at least int eh short-run, so we can get back to focusing on our own, very significant problems here at home.

I don't see how Greece will ever be able to pay-back the money they have borrowed, either from private investors or from the EU bailout.  Even the most optimistic estimates don't show them balancing their budget for many, many years.  I serious doubt they will ever get there, much less have the money left-over after paying their regular operating expenses to pay-back hundreds of billions of euros in debt.  The only positive I can draw from this situation is that I was unlucky enough or foolish enough to loan them any money.

Friday, October 21, 2011

Continuing Occupy Wall Street Article Saga

My latest posts to my Noozhawk article encapsulates the stupidity of the OWS movement participants:

For those who believe the OWS protesters are well-informed, consider this:
Wells Faro, the bank they were protesting in front of, chanting; “Banks got bailed out people got sold out,” was forced by Hank Paulson to take $25 billion in TARP money on October 28, 2008.  in December of 2009, they paid it back, along with roughly $132 million in dividends.  Pacific Capital, AKA Santa Barbara Bank & Trust, took approximately $181 million in TARP money.  Shortly thereafter they stopped making their dividend payments and the Treasury was forced to accept about $195 million in common stock.  To-date, SBB&T has not repurchased any of that stock owned by the Treasury.
If the OWS people are so well-informed, why were they protesting outside of Wells Fargo on Anacapa, when literally right across the street stands a bank that took taxpayer money and never paid it back?

Thursday, October 20, 2011

Noozhawk article draws fire

Wow, if you are interested in reading a lot of back and forth on the issue of the Occupy Wall Street protesters, revisit my article at:  I have drawn a lot of hate on this one!  I am really pleased to see so many people so passionate about an issue come down firmly on both sides.  Unfortunately many don't seem to have a clue as to what they are commenting on, but at least they are passionate about something.  It would be nice if they would do their homework and actually understand the issues and the facts surrounding those issues, but again, at least they are writing a post instead of playing video games, although some are probably playing video games while they are writing their posts.

Monday, October 10, 2011

Volatility in stocks results in tight window of opportunity

Stocks hit a high of 1356 on the S&P 500 back on July 7th and then dropped precipitously over the following two months, to an intraday low of 1074 on October 4th (last Tuesday).  This decline represented a 21% fall from that July 7th high.  I was buying heavily on Monday and Tuesday of last week, and was able to put a lot of cash to work at that time.  Since last Tuesday, the S&P 500 has rebounded roughly 10.5%, to a current level of 1188, gaining back fully half of what was lost over the prior 8 week period.  This quick rally from the low underscores the fact that buying opportunities in stocks do not last long in today's highly volatile environment.  Investors must be prepared with an actionable strategy in place, and must be ready to pull the trigger when the opportunity comes along, because that opportunity will not be around for long.

Stocks close the worst quarter since the depths of the recession; where do we go from here? Published in Noozhawk on Monday, October 10, 2011