Parisian Family Office, CEO. Began Wall Street, 1982. Founded investment firm, CHIPPEWA PARTNERS, Native American Advisors. Active Trader. White Earth Chippewa Tribal member. Was NYSE/FINRA arb. Conservative, raised on Great Plains reservations. Pureblood, clot-shot free. In a world elevated on a dopamine binge, this is his take! Written from MT Ghost Ranch on the Yellowstone River, TN farm Pamelot or San Jose del Cabo, Mexico, CASA TULE'. Always been, will always be, an optimist.
Monday, September 29, 2008
Barney Frank blaming the Republicans is great comedy. Look, America needs to shut down these politicians. Congress needs term limits and they need them now. They need to shut off the spigots of the lobbyists. Congress, Wall Street and the inept regulators (SEC, FINRA) are all to blame besides those ungodly Americans who did all the lying on their mortgage applications the past few years. The government is not the answer. Government got us into this mess. Maybe they should legislate the Community Reinvestment Act out of existence for starters.
The stock market looks to be trading just fine. Sellers are meeting buyers at lower prices.
The Democratic leaderships response to this vote is as expected. Priceless rhetoric blaming everyone but themselves. Listening to these Congressmen tell the media about how hard they worked all weekend up until 1 a.m. on Sunday morning is also great comedy. Just the hours of about any small business person in America.
Friday, September 26, 2008
Thursday, September 25, 2008
Mr Paulson’s record does not inspire the confidence necessary to give him discretion over $700bn. His actions last week brought on the crisis that makes rescue necessary. On Monday he allowed Lehman Brothers to fail and refused to make government funds available to save AIG. By Tuesday he had to reverse himself and provide an $85bn loan to AIG on punitive terms. The demise of Lehman disrupted the commercial paper market. A large money market fund “broke the buck” and investment banks that relied on the commercial paper market had difficulty financing their operations. By Thursday a run on money market funds was in full swing and we came as close to a meltdown as at any time since the 1930s. Mr Paulson reversed again and proposed a systemic rescue.
Mr Paulson had got a blank cheque from Congress once before. That was to deal with Fannie Mae and Freddie Mac. His solution landed the housing market in the worst of all worlds: their managements knew that if the blank cheques were filled out they would lose their jobs, so they retrenched and made mortgages more expensive and less available. Within a few weeks the market forced Mr Paulson’s hand and he had to take them over.
Mr Paulson’s proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information. The securities are hard to value but the sellers know more about them than the buyer: in any auction process the Treasury would end up with the dregs. The proposal is also rife with latent conflict of interest issues. Unless the Treasury overpays for the securities, the scheme would not bring relief. But if the scheme is used to bail out insolvent banks, what will the taxpayers get in return?
Barack Obama has outlined four conditions that ought to be imposed: an upside for the taxpayers as well as a downside; a bipartisan board to oversee the process; help for the homeowners as well as the holders of the mortgages; and some limits on the compensation of those who benefit from taxpayers’ money. These are the right principles. They could be applied more effectively by capitalising the institutions that are burdened by distressed securities directly rather than by relieving them of the distressed securities.
The injection of government funds would be much less problematic if it were applied to the equity rather than the balance sheet. $700bn in preferred stock with warrants may be sufficient to make up the hole created by the bursting of the housing bubble. By contrast, the addition of $700bn on the demand side of an $11,000bn market may not be sufficient to arrest the decline of housing prices.
Something also needs to be done on the supply side. To prevent housing prices from overshooting on the downside, the number of foreclosures has to be kept to a minimum. The terms of mortgages need to be adjusted to the homeowners’ ability to pay.
The rescue package leaves this task undone. Making the necessary modifications is a delicate task rendered more difficult by the fact that many mortgages have been sliced up and repackaged in the form of collateralised debt obligations. The holders of the various slices have conflicting interests. It would take too long to work out the conflicts to include a mortgage modification scheme in the rescue package. The package can, however, prepare the ground by modifying bankruptcy law as it relates to principal residences.
Now that the crisis has been unleashed a large-scale rescue package is probably indispensable to bring it under control. Rebuilding the depleted balance sheets of the banking system is the right way to go. Not every bank deserves to be saved, but the experts at the Federal Reserve, with proper supervision, can be counted on to make the right judgments. Managements that are reluctant to accept the consequences of past mistakes could be penalised by depriving them of the Fed’s credit facilities. Making government funds available should also encourage the private sector to participate in recapitalising the banking sector and bringing the financial crisis to a close.
The writer is chairman of Soros Fund Management
Tuesday, September 23, 2008
This plan needs to be thought out over several weeks, not a quick vote.
Our republic is in danger. These loons are speaking out of both sides of their mouth.
Both of her parents, liberal Democrats, were standing there, so I asked her, 'If you were President what would be the first thing you would do?' She replied, 'I'd give food and houses to all the homeless people. ''Wow - what a worthy goal,' I told her. 'You don't have to wait until you're President to do that. You can come over to my house and mow the grass, pull weeds, and sweep my yard, and I'll pay you $50. Then I'll take you over to the grocery store where the homeless guy hangs out, and you can give him the $50 to use toward food or a new house.'
She thought that over for a few seconds 'cause she's only 6. And while her Mom glared at me, she looked me straight in the eye and asked, 'Why doesn't the homeless guy come over and do the work, and you can just pay him the $50?'
And I said, 'Welcome to the Republican Party.'
Her folks still aren't talking to me.
Monday, September 22, 2008
Thursday, September 11, 2008
ALPHARETTA, Ga. -- The front lawn of Milton High School is blanketed with flags as students arrived to school. "I am at a lost for words really," said Milton High School junior Michael Smith. For many, the impact is immediate, visceral. 2, 977 flags remind every student at Milton High School of every life lost.
"It really shows you how big of a catastrophe that was," said Smith, who organized the tribute.
8:46 A.M. The hall intercom cracks with the announcement "now, we are going to hold a moment of silent reflection for the September 11 victims." The halls of Milton High School fall silent. "Really every American was affected by it," said Smith. This time 7 years ago, the high school students sat in elementary school, too young to understand then, what they simply cannot forget now. "We must not let our resolve to be weaken with the passage of time," said a student's voice over the intercom. "I was in 4th grade. I just remember seeing the expressions on my teachers' faces," said Smith. "And coming home and watching my mom cry, turning on the TV and seeing the images." Smith was only 9 then, but that memory brought him to help organize the "9/11: Never Forget" Memorial at Milton.
For more than 4 hours the night before until 11 p.m., Smith -- with the help of dozens of others -- created a poignant memorial to each 9/11 victim -- one-by-one. So the students remember, and Smith says, the memorial in front of his school a reminder, "to never forget."
Milton High School was one of more than 180 high school, college, and university campuses, who participated in the "9/11: Never Forget Project."
Wednesday, September 10, 2008
Stock market success is a function of two things: first, recognition that the markets will go down and sometimes go down a lot and two: preparation to regard declines as a non-events and never as an occasion to sell in a panic.
The simple lesson to remember is that markets are not logical or reasonable; they are emotional and unstable. Markets are crowds of people. Today the black boxes at a handful of firms scan the exchange order books every millisecond and automatically execute algorithmic trades, ripping any conceivable advantage away from the public. The market is not an exercise in calculus. It is primarily an experiment in crowd psychology. Stocks are on sale, we are in a recession. The 40 point S&P decline last Thursday was the fourth largest decline on a Thursday ever and being down 12 out of the last 14 trading sessions doesn't feel good. This isn' the time to throw stocks out of your portfolio. Believe it.