File under: Desperate

(if you haven't noticed the trend yet, when a financial firm says they're well-capitalized and liquid you need run in the opposite direction as fast as you can)

clipped from dealbreaker.com

Quick Predictions: WM to be bought by WFC and other probabilities

Here's what I'm thinking:
WM: Will either go bankrupt (CDS has been trading as if it already is since last week) or get wrapped up on the cheap. I would say the latter is still slightly more likely, and I am calling out WFC as the most likely suitor in a deeply discounted all-stock deal. It's the only large regional that has fared well throughout this turmoil, and they could use WM's retail and small-biz base.
AIG: The "too big to fail" arguement doesn't float anymore with the taxpayers, and it's finally getting through to Washington. You can't open the floodgates and bail out every single large firm. Furthermore, AIG is in a position to sever a limb (their toxic Financial Services unit) to save their life, and they should do precisely that. All the financial executives have ruined themselves and their employees through the hubris of trying to remain an indepent going concern against all odds. Two words for those who are left standing: Stop Loss.
Fed Move: The market is pricing in a 25bps cut, and that's what I believe will happen. I would prefer the Fed holds tight, giving the markets the financial equivalent of a suppository, but I doubt Bernanke has the guts to bear the fallout. A 50bps cut, however, will deplete ammo that the Fed will very likely need should bigger problems surface. And they certainly will.

Did everyone forget what Ken Lewis said (including Ken Lewis)?

With all the talk of BAC buying LEH, I have to wonder if everyone forgot what BofA's CEO said less than a year ago, shortly before all but dismantling all of BofA's IB infrastructure.

clipped from blogs.wsj.com Here is what Lewis, the CEO of Bank of America, had to say on the company’s conference call to discuss its third-quarter results about an acquisition or joint-venture deal to salvage the dismal performance at its investment-banking unit (where profit fell 93% to $100 million). “I never say never, but I’ve had all the fun I can stand in investment banking at the moment.” So much for the hopes of some investors that the company will make an acquisition (of a Bear Stearns, or a Lehman Brothers or UBS’s Wall Street unit) to once and for all get into the top tier of investment banks — and perhaps acquire some adult supervision for its trading operation along the way.

Storm Before the Calm in Georgia

You know I'm rarely a fan of Purin's policies, but their retaliation to Georgia's attack on South Ossetia is a clear case of doing the right thing for strategic reasons. Sure it helps Russia in terms of securing invaluable alternative pipelines (precisely why they won’t get support from China, at least not for free), but at least Russia will be smart enough to utilize them once the situation stabilizes.

Conversely, the US is just now starting to even attempt to get any benefits from Iraq’s oil because we were so damn scared about giving credence to the hippie “blood for oil” propaganda. This is even though Iraqis desperately need the oil money, as well as help in creating modern machinery to extract and transport it. Naturally we should be able to pick American companies for this, and they should be compensated for their services. Does this help Exxon, et.al.? Of course – and the U.S. government too thanks to disproportionate taxes. Are the Iraqis better off? Indubitably, and they can solicit new bids once existing contracts expire.

For the world to call Georgia a small peaceful nation is a half truth – it is, in fact, quite small. Georgia was the original aggressor in this conflict, and Misha’s much-talked about Western education did him little good, as he was unable to predict the obvious outcome of attacking a region favored by Russia. While Russia certainly cares far less about collateral damage than Western nations, Georgians have been engaged in outright genocide for some time as anyone familiar with Ossetia will tell you.

Fortunately for the US and European propaganda machines, however, most people thought Ossetia was Borat’s whore sister until these recent news, and Putin with his sidekick doesn’t need much help in looking like a supervillain.

Of course while NATO and US can send over all the sideline troops they want, their commanders are [hopefully] not stupid enough, to actually engage Russia – in which case I’ll be blogging from the nearest nuclear shelter. A stern warning is all that the UN can give Russia, and Putin is well aware of this. As I said before, Putin’s activities over the past 2 years have really been testing the limits of his power, and now it seems he’s found an area of slightly more resistance than killing a former spy. All this means is that Mother Russia will wait for some time before officially adopting the new “independent” territories.

Unless the UN can get China to throw their full support behind them they have little alternative than to be angry spectators.

clipped from afp.google.com Russia's military said it would carefully monitor a "build-up" of NATO naval ships in the Black Sea, amid anger at Moscow's recognition of Abkhazia and South Ossetia , regions that broke from Georgian control in the early 1990s. "Certainly some measures of precaution are being taken.... Let's hope we do not see any direct confrontation in that," spokesman Dmitry Peskov said, adding: "It's not a common practice to deliver humanitarian aid using battleships." Russia's ambassador to NATO, Dmitry Rogozin, warned that any NATO attack on the Moscow-backed regions would "mean a declaration of war on Russia." In a departure from Beijing's usual firm support for Moscow, Chinese foreign ministry spokesman Qin Gang was quoted as saying: "China is concerned (about) the latest development in South Ossetia and Abkhazia." President George W. Bush said Russia should reverse its "irresponsible decision." Medvedev appeared unapologetic, saying on Tuesday: "We're not afraid of anything."

They never learn

Western firms will keep lining up at Russia's oil teat for a drop of black gold, no matter what they have to endure to get there, or how little substance they'll get from the deal before Russia thanks them for building the infrastructure by kicking them out on their ass and taking the enterprise over. I'm amazed at the gullibility and stupidity of these major corporations. You'd think they would learn after Sakhalin.
Ironically, in an earlier Bloomberg article BP stated they would love it if Gazprom bought out the current Russian partner's stake in the business. Right - because having a firm that has already established a clear policy on ethics in regard to foreign business (Page Intentially Left Blank) and is responsible for making billionaires out of most people in the government, including the current President, is a far better partner than 3 oligarchs who just want you to pay them off better.

clipped from online.wsj.com Robert Dudley, head of BP PLC's Russian joint venture TNK-BP Ltd, abandoned Russia Thursday for an undisclosed location after Russian authorities refused to issue him a new work visa. His move could mean that BP loses control of a company that accounts for a quarter of its global oil production and 19% of its reserves. Since the conflict between BP and its Russian partners dozens of TNK-BP foreign employees have been forced to leave Russia after difficulties renewing their visas. The company also has been subject to a flood of tax, police and other probes. In an interview, Tony Hayward, BP's chief executive, denied the dispute threatened the British oil major's presence in Russia. Western businessmen and governments had been watching the TNK-BP dispute for signs of the direction Russia was moving under Dmitry Medvedev, the new president, who has said he wants to improve the rule of law in Russia, especially for business. The fate of BP's landmark Russian venture was seen as a litmus test.

Speculator Scapegoats

So both sides of the political fence are suddenly blaming “speculators” for the move in oil prices. Of course I know why (big oil, bigger lobby vs. a vague and easily vilified group).

But how does this make any sense to someone with half a brain (i.e. 3% of the electorate):

1. How do you define speculators?
1. If Big Oil wasn’t speculating Grandma Millie would have her lights on and high-earning big oil traders wouldn’t have a job. I can create a black box model that will look at real-time S&D and put in the equilibrium trades in real time. Yet all big oil companies pay the most to their traders …who are only there to hedge?
2. All the biggest energy funds & prop desks in the world couldn’t put enough volume through to drive the price up that much compared to the volume that the “hedgers” do. Furthermore, how many “speculative” funds do outright directional bets instead of spreads?
3. The only thing close to a “legit” hedger is an airline/trucker type business if all they do is buy a bunch of CL12s and chillax.
2. Isn’t this locking up the free market?
1. Speculators shouldn’t have any inside information (unlike the big oil “hedgers” who by definition do), so aren’t they just providing “efficiency” to the market? Even my nemesis, Fama, would agree with me here. In fact, without speculators providing liquidity the true hedgers would be fucked and the market would be at the mercy of the faux hedgers.
2. Furthermore, arbitrary regulation of speculators goes against the very principles of capitalism. To stop someone from buying a good at the current price in the market just because you think they’re paying too much is so pinko it could be a gay groom’s dress in California. Hey, if they’re all wrong then the commodity bubble will burst (which I think it will, but not until >$150 oil at least) and magically gas will be $2/gallon again.

Now everything I've outlined above is very basic, so there's a good chance I'm missing something. If so, by all means make me a fool and point it out. Otherwise it looks like we're in for Big Government (just not for those who need the regulating) no matter who wins in November.

Village idiot goes bankrupt, remains optimistic

Shawn Forgaard is completely unfazed by the fact that his investment idiocy (9 homes with neg-am loans? with 800k in options to invest?) lost his family everything. Apparently he knew all along that the housing market was shaky as he bought properties in all the "hottest" (i.e. most overinflated) markets, but dismissed the law of buy low/sell high as "so Web 1.0". Now about to go into bumcracy somewhere in the Tenderloin this fellow is planning on starting a business with all his free time. Which begs the question - with whose money? I just can't see VCs lining up to his door ...or lack thereof. That being said, I've prepared a pitchbook to help Shawn on his path:

clipped from www.reuters.com Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience. "On the surface it looks like total devastation but it's just the opposite. I'm confident our lives will be much, much richer as a result." Using $800,000 in stock options, he began snapping up investment properties, putting 10 percent to 40 percent down on negative amortization loans -- in which payments do not cover the interest so that a borrower's balance grows over time. Forgaard bought his first investment home in the booming housing market of North Las Vegas in 2004, followed in the next two years by eight others in such hot markets as Phoenix and Palm Springs, California, before he realized in 2006 that the situation was worse than he had feared. "I knew I was sitting on time bombs," Forgaard said. "I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm. It really wasn't until five months ago that I realized, 'Hey, you know what? Not only am I going to lose everything I have invested but this is going to force me into bankruptcy," he said. "I'm going to lose my car and my primary (home) and we're not going to be able to live in Santa Cruz, where I was born and raised, and live by the beach. And that was pretty tough to take." The Forgaards likely will sell their Santa Cruz home and declare bankruptcy before banks start foreclosing on his properties. With a newborn son, they intend to start over in his wife's Northern California hometown. Forgaard said that some good has come out of the experience and that his family is optimistic. He is relieved that he no longer has to deal with 10 homes at once and now will pursue a lifelong dream of starting his own business.