I’ve neglected my own blog. Sad but true. These things happen when you’re time-constrained. And in my defense – what’s really changed out there???
I’ve been remiss
Reply
Hello again
I’ve been away from blogging on my personal site for a long time, but I’ve been blogging in my capacity as Director of Investments for a cleantech-focused asset management group (more on this later.)
Mais le plus ca change, le plus le meme chose…
http://money.cnn.com/galleries/2010/real_estate/1010/gallery.cities_rent_buy/2.html
Housing and asset prices generally
The SIGTARP has apparently gone and illustrated the ways in which is government is propping up home prices in the US.
As an investor, why would I buy something when I know the prices are being artificially inflated?
Further, why is the government using tax dollars to attempt to force me to overpay for a home?
As a renter, shouldn’t I be entitled to the same tax rebate as a home buyer? Is it not effectively a tax on all renters in the US?
Unfortunately, I guess stupid, overlevered property owners are a larger voting block than rational thrifty renters…
Kass Predicts 2010
Doug is a great guy and smart as hell – I’ve actually met him. (Loves the Veal Parm at the Palm.)
At any rate he’s gone and done his 20 for 2010. Good reading if you’ve got a couple of minutes.
Notice #8…
And notice what I wrote back in May 2009:
Guess we’ll see how it all plays out in 365.
Zero Hedge does the US Govt and the GSEs
Ahh Marla… ever the lady.
Origins of an American Kleptocracy
Although I was about a year earlier on it…
Moderate Republicans defecting
1. This is the Bush legacy. Sane people are abandoning the Republican party as they realize how radical (to say nothing of just plain dumb) it’s gotten. Scozzafava is pro-choice, anti-gun control, and well-educated. In exchange for a mobilized base, Bush alienated intelligent moderates around the county.
2. This is a self-reinforcing cycle. As more moderates defect, the more radicalized the party becomes. Palin and the religious right are all that remain of the coalition that was the Republican party. Literally, Obama could fly a plane into a building HIMSELF and still win posthumously in 2012.
A lot of people said “Bush isn’t running” in 2008. And that was true. Unfortunately, Bush’s tactical, campaign, and policy decisions from 2000 to 2008 have all left a very long shadow that looms over the GOP. There are some things that are far more important to the essence of the United States than low marginal federal tax rates. Bush obviously lost sight of that.
3. Frankly, I’d love to see Palin get the nod in ’12 so the gal from Alaska can go to town on the law professor. Better than a mid-season Giants’ game.
Housekeeping
I’ve moved to London and taken a new job in VC, so the posts may be more sporadic as I settle in. Yes, they were already sporadic enough during the summer.
On another note, did you know the UK is now considered a third world country? Yup. One of my friends told me so.
Let me get this straight
The Fed and the Treasury bailed out the large banks last year to the tune of several Trillion dollars. The banks and their minions went from zeros to heros in about 6 months time. Strangely, the banks haven’t increased their lending. In fact, they’ve done the exact opposite by squeezing borrowers with new and improved credit card rates up to 29.99%.
So where did all that bailout money go? Judging by some of the banks’ quarterly reports, mostly prop trading and speculation since that’s the only place they can make a buck.
Want to know why oil is pushing $80+ with no end-user demand in sight and storage facilities at max capacity? Taxpayer-backed Speculators masquerading as Investment Banks.
Bernanke says that we need to save more to fix the global imbalance.
If everything is so flippin’ hunky-dory, suck some liquidity out of the system and start paying savers SOMETHING instead of ripping them off to bail-out the losers!
Paying 1.2% and Charging 29.99% ???
Remind me again why they got bailed out? Was it so they could run around and gouge their customers? Or maybe so they could threaten and extort more cheap capital from the captured Washington geniuses?
Sometimes I feel like I’m in the Twilight Zone and I’ve woken up to find the world has gone mad, but everyone is treating me like I’m the crazy one. I guess it’s ok because in the end, Washington will reap what its sown when they realize they’ve gone and re-empowered the psychopaths on Wall St. Basically guarantees we get a W-shaped recession.
One more thought on Banks and lending
The banks have largely started to decry additional regulation or restrictions. They’ve threatened (and I use that word quite intentionally) that if there are additional strictures, they will be forced to reduce lending.
Let me make a few things clear:
- The banks lend because that’s how they make money. They borrow cheaply from the Fed or depositors and lend at higher rates. Hopefully without too much of a duration mismatch (pdf link), but that has actually been at least one source of their problems. Otherwise, they’re just speculators (a post for another day).
- When the Fed drops the overnight rate to 0-0.25% and institutes a policy of paying interest on excess reserves, it has impaired the fundamental reason for banks to lend: profit. Since banks can now earn a risk-free return with absolute liquidity while not lending, they have a reduced need to do so. They also have no need to pay interest on deposits since they have more liquidity than they know what to do with.
- Banks can’t force people or businesses to borrow. Right now, there are basically ZERO marginal borrowers because the whole world is over-leveraged.
If the Fed wanted banks to lend, they would reduce some of the liquidity programs and stop incentivizing the banks to sit on what liquidity remains. To the extent that additional regulation would require leverage limits at the banks, it’s true that some lending would be reduced. Massively increased leverage levels was what allowed the banks to lend with such reckless abandon. So, yes, if we return to a world with Glass-Steagal and leverage limits for ALL banks, lending could be reduced. However, this is not a bad thing (despite legislators’ protestations to the contrary).
We need to deleverage as a society because excessive debt has clogged our economic engine. You can’t fix it by borrowing more money. Hopefully the US Government will figure that out as well.
EDIT – Barry Ritholtz, after REALLY stinking up the joint on GS bonuses, posts reports largely the same analysis I just walked you through as done by John Mauldin.
Funny the Way it is…
People always say that the Fed or other Central Banks can’t control where the liquidity flows when they cut rates.
I think we can safely say that when you cut rates to bail out the Banking industry, you inevitably blow a bubble in GS Executive Bonuses. Too bad the Fed can’t call such a surgical strike on the unemployment rate…
Or did I miss something?
(nod to DMB)