Conduits are first on the FCC agenda. It is becoming too popular for companies in need of financing to raise capital through government munis. So far, they were targeted by the IRS for the revenue lost. Interest payments are paid by the company, and the government gets fees and projected economic growth.With lower standards for filing, corporations access to capital at lower rates that they would have on their own.
Governments don't carry the liability on the issue, but the munis carry the government's brand. It works for municipalities in good financial standing, but look for the ones who are sliding under the radar, and a good opportunity for speculation arises. 35% of munis in default were conduits.
Another tick:
Credit default swaps. Even though the brains of Long Term Capital Management were crowned the kings of M&A hedging, the credit default swaps are said to be a nicer arena for speculation. When rumors of take over start, prices of the other targets get bidden higher. But depending on the debt involved in the takeover, a higher payout happens in the credit default swaps. Credit default instruments go up in price at a higher payout than the actual stock price without the risk of the stock collapsing right after the take over because debt stays in the books for good.
Tuesday, October 26, 2010
Friday, October 22, 2010
The China that will be in spite of
There has been somber predictions and dangers from the Chinese growth. Inequality between the country and the city, unrest of farmers, ecological problems, disillusion in the communist party. However, it seems the financial crisis has strengthen the country's belief in its leadership.
Talking about numbers about China is just mind blowing. In 2007, China had already 460 million cell phone users. Maybe it is not that impressive.
But for example, every US phone user pays a tax to subsidy poor income bracket' phone usage. Economical studies have proven that a cell phone to a low level income bracket person is one of the most effective ways to increase its ability to generate economical activity. In the last two years, those subsidies have been put into practice, and poor income bracket's consumers have been getting a free cell phone and service paid by the US government.
If it has been proven by the numbers in the US, just imagine the multiplier effect of 460 million cell phones users in China.
Now, with all the risks and threats of China's growth, there is one figure that is really extraordinary. Its consequences are unimaginable. Avoiding a natural disaster which doesn't seem to stop China like the Earthquake, these figures just show the incredible potential for indefinite growth.
The US has 9 cities with population of over 1 million people. China has 300 cities with populations of over 1 million people counting the migrant workers (200 mill) which I don't think are included in the figures (they are still asking for equal rights, so they are not even counted yet). High speed trains will interconnect these 300 cities in the near future. They go from 1 million to a city like Shanghai with over 18 million.
The possible combinations of 300 cities interconnected with such high populations are unimaginable. It is like a mini Earth. The future products developed to supply this demand, and the mini ecologies of demand, supply, tourism, population movement, and services could easily beat any expectations. The number of permutations of this amount of people interconnected and with economical freedom will render any focus groups in the US meaningless because its consequences are just almost impossible to foresee. This is assuming China's individuals continue to gain economical freedom and "adequate" legal commercial rights.
All these cities have budgets and are landscaping, planning, building and creating services. They just don't have any other choice. There has been a migration of 200 to 300 million people into these cities. If that is not a train of growth, I don't know what it is. They are graduating and creating mini countries onto themselves.
I believe it was Philips which sold around $200 million in city lights in one year. Almost every important architect has been hired to work in one of these cities. It is true that it might be an artificial demand for now fueled by city budgets competing among each other about who has the best city hall, but this has always been the beginning of cities. Five hundred years ago, the church and the plaza identified a city. Then a city was the one that had a post office. Then it is the constant fight for which has the tallest building.
China with its three hundred cities of this magnitude with every major corporation present, 200 million migrant workers, erecting streets, city lights, fire houses, city halls, trade surplus with Europe and the US, political stability, economical freedom supported by their government, and inter-connecting themselves at the speed of a bullet train at the same time of entering the information and Internet age is at least the most clear indication of future economical growth I have ever heard.
Talking about numbers about China is just mind blowing. In 2007, China had already 460 million cell phone users. Maybe it is not that impressive.
But for example, every US phone user pays a tax to subsidy poor income bracket' phone usage. Economical studies have proven that a cell phone to a low level income bracket person is one of the most effective ways to increase its ability to generate economical activity. In the last two years, those subsidies have been put into practice, and poor income bracket's consumers have been getting a free cell phone and service paid by the US government.
If it has been proven by the numbers in the US, just imagine the multiplier effect of 460 million cell phones users in China.
Now, with all the risks and threats of China's growth, there is one figure that is really extraordinary. Its consequences are unimaginable. Avoiding a natural disaster which doesn't seem to stop China like the Earthquake, these figures just show the incredible potential for indefinite growth.
The US has 9 cities with population of over 1 million people. China has 300 cities with populations of over 1 million people counting the migrant workers (200 mill) which I don't think are included in the figures (they are still asking for equal rights, so they are not even counted yet). High speed trains will interconnect these 300 cities in the near future. They go from 1 million to a city like Shanghai with over 18 million.
The possible combinations of 300 cities interconnected with such high populations are unimaginable. It is like a mini Earth. The future products developed to supply this demand, and the mini ecologies of demand, supply, tourism, population movement, and services could easily beat any expectations. The number of permutations of this amount of people interconnected and with economical freedom will render any focus groups in the US meaningless because its consequences are just almost impossible to foresee. This is assuming China's individuals continue to gain economical freedom and "adequate" legal commercial rights.
All these cities have budgets and are landscaping, planning, building and creating services. They just don't have any other choice. There has been a migration of 200 to 300 million people into these cities. If that is not a train of growth, I don't know what it is. They are graduating and creating mini countries onto themselves.
I believe it was Philips which sold around $200 million in city lights in one year. Almost every important architect has been hired to work in one of these cities. It is true that it might be an artificial demand for now fueled by city budgets competing among each other about who has the best city hall, but this has always been the beginning of cities. Five hundred years ago, the church and the plaza identified a city. Then a city was the one that had a post office. Then it is the constant fight for which has the tallest building.
China with its three hundred cities of this magnitude with every major corporation present, 200 million migrant workers, erecting streets, city lights, fire houses, city halls, trade surplus with Europe and the US, political stability, economical freedom supported by their government, and inter-connecting themselves at the speed of a bullet train at the same time of entering the information and Internet age is at least the most clear indication of future economical growth I have ever heard.
Monday, October 18, 2010
So much
So much happening, not enough time to keep up. I am not even talking about looking at the numbers. That is not an option. So much noise: Foreclosures, Russia, Pension funds everywhere with issues - pulling out of stocks, failing, accounting issues; then regulation passed, now implementation of regulation, Cuba, IPad slow but changing a lot of things, app world forming, where is google going?, yahoo, etc.
But of course, the obvious is the constant prediction and the prophesy: IBM with "Strong demand in developing markets." It would be news if they weren't the supply. They had to face the issue of you can't hire the whole world to work for the whole world, so they change the strategy a bit: hire a populous country instead which is half the world.
I even forgot that Benjamin Netanyahu is back in power.
China's new subtle PR is interesting. It is hopeful. Once a country portraits that image, it will have to follow through. I have lived the opposite, but slowly they might be raising their own bar. It is interesting to see young modern nations. It gets childish at times. They speak about protecting their jobs with so much innocence like an enlightenment concept never heard before. Almost like if they repeat it over and over, people will understand. But these are issues western nations have faced every single quarter for at least a century. Sometimes you just have to loose. It is almost like Russian roulette by the primer ministers of any country that matters.
Blogs and their lack of structure. I thought a concrete title will keep it on topic. Let's try that again.
But the main news which has moved to second page is Bernanke: "no all who wander are lost". We hope.
But of course, the obvious is the constant prediction and the prophesy: IBM with "Strong demand in developing markets." It would be news if they weren't the supply. They had to face the issue of you can't hire the whole world to work for the whole world, so they change the strategy a bit: hire a populous country instead which is half the world.
I even forgot that Benjamin Netanyahu is back in power.
China's new subtle PR is interesting. It is hopeful. Once a country portraits that image, it will have to follow through. I have lived the opposite, but slowly they might be raising their own bar. It is interesting to see young modern nations. It gets childish at times. They speak about protecting their jobs with so much innocence like an enlightenment concept never heard before. Almost like if they repeat it over and over, people will understand. But these are issues western nations have faced every single quarter for at least a century. Sometimes you just have to loose. It is almost like Russian roulette by the primer ministers of any country that matters.
Blogs and their lack of structure. I thought a concrete title will keep it on topic. Let's try that again.
But the main news which has moved to second page is Bernanke: "no all who wander are lost". We hope.
Saturday, October 16, 2010
Foreign Exchange -
the new economic weapon misfiring
What a mess.
The Feds getting ready to buy tons of debt. This will probably lower long term interest rates. This will weaken the dollar which will strengthen foreign currencies which is the opposite that almost every other foreign government wants because most countries need to export in order to grow.
Then capital is escaping developed countries because interest rates are so low into the developing world expecting higher returns on emerging markets. The higher demand for these currencies continues to pressure these currencies up, and their governments can't do anything. More in trouble are the poorer countries of the Euro zone. They don't even have a currency to work with or by which to do economic plans.
Meanwhile, the countries that don't let their currency to float freely (e.g. China) are the ones winning. Is this a lesson for the rest?
It would be nice to see where all this is going. It is the new riddle. Maybe we should continue waiting for the bursting of the China real state bubble like James Chanos continues to predict like a new Enron: "Once the cranes stop going up like in Miami. Then you know."
An interesting idea came up (I think from the Feds), the world needs to start exporting inwards by creating and supporting their middle classes given US consumers won't be able to continue fueling the world economic growth.
The Feds getting ready to buy tons of debt. This will probably lower long term interest rates. This will weaken the dollar which will strengthen foreign currencies which is the opposite that almost every other foreign government wants because most countries need to export in order to grow.
Then capital is escaping developed countries because interest rates are so low into the developing world expecting higher returns on emerging markets. The higher demand for these currencies continues to pressure these currencies up, and their governments can't do anything. More in trouble are the poorer countries of the Euro zone. They don't even have a currency to work with or by which to do economic plans.
Meanwhile, the countries that don't let their currency to float freely (e.g. China) are the ones winning. Is this a lesson for the rest?
It would be nice to see where all this is going. It is the new riddle. Maybe we should continue waiting for the bursting of the China real state bubble like James Chanos continues to predict like a new Enron: "Once the cranes stop going up like in Miami. Then you know."
An interesting idea came up (I think from the Feds), the world needs to start exporting inwards by creating and supporting their middle classes given US consumers won't be able to continue fueling the world economic growth.
Saturday, October 9, 2010
Stress Test
The European stress test. The calming voice of reason.
With any pronouncement from any government about the stability of the financial systems comes the fear of making things worse, so they bring with them their actual area of expertise: PR.
The European stress tests were said to be more stringent than their American counterparts. Everyone applauded and understood everything was fine, really. Next to the bank assets reported in the European test, there was reporting of Gross and Net Debt.
Debt net of collateral and hedges. A company with billions in Debt was able to do some "risk management", and they can omit reporting on some of the b's. They actually pushed this so much that they were not disclosing the government debt in their balance sheets. Debt disappears in the test report. Take it off. Let's call it Net Debt of everything we don't want to disclose.
I am starting to believe the rumor that we have come to the point where financial information is meaningless. Thank God for economists. No wonder most people trading are following charts. It is like everyone knows without knowing that there is no point in reading financial statements. It is better just to find some overall hyper generalized pattern. All these misstatements and advertisements get summed up at some moment in bars moving up and down. Simpler and more effective to follow primitive but certain technologies like star charts, bird's migrations, the moon cycle, and the calendar month than tracking currents, ocean temperature, or global warming.
Over 200 years ago, the Rothschild's knew which government had money and which one didn't. Nowadays, the day trader knows more than the banker.
With any pronouncement from any government about the stability of the financial systems comes the fear of making things worse, so they bring with them their actual area of expertise: PR.
The European stress tests were said to be more stringent than their American counterparts. Everyone applauded and understood everything was fine, really. Next to the bank assets reported in the European test, there was reporting of Gross and Net Debt.
Debt net of collateral and hedges. A company with billions in Debt was able to do some "risk management", and they can omit reporting on some of the b's. They actually pushed this so much that they were not disclosing the government debt in their balance sheets. Debt disappears in the test report. Take it off. Let's call it Net Debt of everything we don't want to disclose.
I am starting to believe the rumor that we have come to the point where financial information is meaningless. Thank God for economists. No wonder most people trading are following charts. It is like everyone knows without knowing that there is no point in reading financial statements. It is better just to find some overall hyper generalized pattern. All these misstatements and advertisements get summed up at some moment in bars moving up and down. Simpler and more effective to follow primitive but certain technologies like star charts, bird's migrations, the moon cycle, and the calendar month than tracking currents, ocean temperature, or global warming.
Over 200 years ago, the Rothschild's knew which government had money and which one didn't. Nowadays, the day trader knows more than the banker.
Friday, October 1, 2010
Sox and the Too Big to Fail
It seems SOX might only apply to bigger companies. No time to explore more right now, but maybe this is where the Too Big to Fail question gets answered. Let's have the big ones do all the paperwork.
The mess would probably come when the smaller ones get bought up. At times, it might not be an acquisition but a siege of procedures.
Two business worlds are to be born: the responsible and the not. Maybe it is better just to extend the term Privately Held Company to smaller public companies. It will have the same effect of allowing no questions or liabilities on the financial statements. Extending the term "Privately Held" would be better than making the statement "public and reputably audited financial information" dubious.
The mess would probably come when the smaller ones get bought up. At times, it might not be an acquisition but a siege of procedures.
Two business worlds are to be born: the responsible and the not. Maybe it is better just to extend the term Privately Held Company to smaller public companies. It will have the same effect of allowing no questions or liabilities on the financial statements. Extending the term "Privately Held" would be better than making the statement "public and reputably audited financial information" dubious.
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