Posts tagged ‘Timothy Geithner’

Turkey Stuffing, Wall Street Style

There will be no shortage of turkey stuffing this year, thanks to a story from Joshua Brown’s The Reformed Broker site (Wall Street Turkeys…Full of Stuffing).

In the spirit of Thanksgiving, which turkeys did journalist Terry Keenan roast?

Timothy Geithner: A fledgling economy and aggressive fiscal measures have painted a big target on Geithner’s back. I don’t fall into the “let’s lynch Geithner” camp, but Keenan feels “It’s a fair bet President Obama’s least-popular appointed official won’t be around to roast next Thanksgiving. “

John Thain: The former Merrill Lynch CEO and Bank of America executive who spent $1.2 million redecorating his Manhattan office made the list too. The man referred to as “I-Robot” may be difficult to cook, but regardless the article claims he is seeking to find employment running a different public company in the mean time.

Larry Summers: As the Director of President Obama’s National Economic Council, Mr. Summers has done a respectable job of flying below the radar, but not low enough to escape his past as Harvard University’s President (and the associate poor performing endowment).

Jeffrey Immelt: GE is no weakling, weighing in around $170 billion in market cap, but Keenan highlights the fledgling performance of NBC over the last two decades as reason to stuff this turkey.

Vikrim Pandit: The CEO of Citigroup survived a tumultuous period in 2009. Keenan however underscores how:

“His image suffered a big blow at the hands of Andrew Ross Sorkin, who paints an unflattering portrait of Pandit in his best-selling book, Too Big to Fail. If Pandit can’t play the “source game” to his advantage, it’s hard to see how he’s up to the much tougher task of reviving Citi’s fortunes.”

Now that we’re done with the turkey, could you please pass the stuffing.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management (SCM) and its clients own certain exchange traded funds (including VFH), but currently have no direct positions in BAC, GE, or C. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

November 25, 2009 at 2:08 am Leave a comment

Timothy Geithner, the Eddie Haskell Dollar Czar

Geithner Haskell

Treasury Secretary Timothy Geithner recently stated after a meeting of G-7 financial officials that “it is very important to the United States that we continue to have a strong dollar.”

With comments like this, why does Timothy Geithner remind me so much of Eddie Haskell (played by Ken Osmond) from the 1950s suburban sitcom Leave It to Beaver? Eddie Haskell plays the scheming trouble maker who is extremely polite on the exterior around adults, but reverts to a crafty conniver once the grown-ups leave the room.

I can just picture the conversations between Treasury Secretary Geithner and President Obama before a high powered meeting with Chinese administration officials:

Geithner: “Barack, the skyrocketing debt will be no problem, we can we shovel plenty of this paper on these Chinese.”

Barack: “Uh, oh…Hu is here for our meeting.”

Geithner: “Oh hello Mr. President Jintao – what a lovely trade surplus you have. We look forward to keeping a very fiscally responsible agenda here in the United States, so you can keep buying our valuable debt.”

Where did Timothy Haskell get his crafty dollar oration skills?

According to David Malpass, president of the research firm Encima Global and deputy assistant Treasury Secretary, Geithner training came from “using a code phrase, a carryover from the Bush administration. It means that the U.S. approves of a constantly weakening dollar but doesn’t want a disruptive collapse.”

These tactics and rhetoric can only work for so long. Exploding deficits and skyrocketing debt levels will eventually lead to a dumping of our debt, rising interest rates, crowding-out of private investments, and a damaging decline in the dollar. Sure, the weakening dollar helps us in the short-run with exports but eventually major U.S. debtholders will no longer buy our sweet talking.

With all the “U.S. dollar is going to collapse” talk, one would think a shift to an SDR  (Special Drawing Rights)  global currency structure is an inevitable outcome. Just six months ago the governor of China’s central bank argued the U.S. dollar’s role as the world’s reserve currency should be restructured. The SDR model has already been implemented by the IMF (International Monetary Fund), so if the Chinese wanted to create an SDR proxy, they could easily purchase euros, sterling, and yen in proper proportions. Would the Chinese want to make any sudden changes? Certainly not, because any quick adjustments would destroy the value of the Chinese’s existing dollar denominated portfolio. The logistics surrounding a legitimate SDR program would require the IMF or some other international agency to act as a global central bank, which would not only need to determine the appropriate mix of currencies in the SDR, but also decide future global liquidity actions. In order to legitimately run a new SDR program, countries like China would need to give up sovereignty – not a likely scenario.

Until a new SDR regime is agreed upon, dollar-reliant countries will continue to have barks bigger than their bites and Timothy Geithner Haskell will continue to sweet talk U.S. dollar owners.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

Hear Eddie (or Treasury Secretary) Speak Here:

October 12, 2009 at 2:00 am 2 comments

Ackman Builds Fortune Through Optimism and Confidence

Source: Portfolio.com

Source: Portfolio.com

Bill Ackman, 43 year old famed hedge fund manager and activist, was profiled by Jesse Eisenger in a May 2009 Portfolio.com piece with a title that has special meaning to me…The Optimist. I would never be presumptuous enough to compare myself to Mr. Ackman, but my firm, Sidoxia Capital Management, shares something in common with him – the name of my firm is actually derived from the Greek word for optimism (aisiodoxia).

Some confuse his confidence with arrogance, but regardless of your opinion, he has a track record to back up his bold assertions. For example, his six year investment in MBIA Inc. (MBI) netted Ackman about $1.1 billion in profits. At the end of 2008, his firm (Pershing Square Capital Management) managed $4.4 billion.  His brainpower has been sought after by the upper echelon of Washington finance – Ackman has rubbed elbows and provided his views to the likes of Lawrence Summers (director of President Barack Obama’s National Economic Council) and Timothy Geithner (Treasury Secretary). Those who have invested for long periods know there is a fine balance between confidence and hubris as Ackman recognizes:

“The investment business is about being confident enough to know that you’re right and everyone else is wrong. Yet you have to be humble enough that you recognize when you’ve made a mistake.”

 

Another common trait with all good investors is the ability and willingness to put yourself out on a limb. As legendary investor Benjamin Graham states, “You’re neither right nor wrong because others agree with you. You’re right because your facts and reasoning are right.” This is exactly the approach Ackman took when he researched MBIA. While the rest of the world was following the real estate herd as they were about to fall off a cliff, Ackman realized the calamitous situation brewing and warned others of the pending disaster. Being a contrarian is hard-work, and requires detailed analysis for the necessary conviction, a key ingredient for successful investments. Lots of blood, sweat, and tears were certainly used in Ackman’s long-lasting review and attack on MBIA Inc. that began in 2002, punctuated with a 66 page report entitled “Is MBIA Triple A?”

Ackman Charlie Rose

                     Click Here to Watch November 2008 Interview With Charlie Rose

There is another universal bond between all great investors – failure. Ackman is no exception and suffered his fair share of bumps along the road. Most notably, the forced closure of his hedge fund and investment firm Gotham Partners in 2003 was an unpleasant experience. His concentrated fund that held Target (TGT) investments was down -93% in early March 2009, according to Portfolio.com. Throughout all the trials and tribulations, Ackman remains as he likes to call  it, “resilient.”

Life is never easy for the great investors, or as Don Hays says, “You are only right on your stock purchases (and sales) when you are sweating.” Ackman has had to sweat out a volatile ride ever since he first dove in to purchase Target Corp. shares. As the article in Portfolio.com points out, at one point Ackman had nearly lost $2 billion with his bet on Target and suffered a hard fought loss in a proxy battle with the Target board.

Investing bystanders should do themselves a favor and carefully track Ackman’s moves. The outcome of his Target investment is unknown; however I’m confident and optimistic that Bill Ackman will ultimately build on his long-term track record of success.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

 Wade W. Slome, CFA, CFP®  

Plan. Invest. Prosper.  

www.Sidoxia.com 

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds and AAPL, but at the time of publishing SCM had no direct position in MBI, TGT, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

August 5, 2009 at 4:00 am 1 comment

PPIP Becomes Miniaturized “Mini Me”

Mini-Me and Dr. Evil from famed Austin Powers movies

Mini-Me and Dr. Evil from famed Austin Powers movies

In two of Mike Myer’s Austin Powers movies, Verne Troyer plays Dr. Evil’s miniature clone, Mini-Me.  At a “breathtaking” one-eighth the size of the fully-sized villain, Mini-Me didn’t quite pack the same evil punch as his surrogate daddy, Dr. Evil. The same can be said of the government’s PPIP (Public Private Investment Program), which was originally designed to unclog the financial system by removing toxic and illiquid investments from owners desiring liquidity.

Unfortunately, the PPIP size has been reduced to ppip dimensions. The Fundamental Analyst (FA) blogger (www.fundamentalanalyst.com) points out that the program’s scope  has likely shrunk to $100 billion from the original goal of $1 trilllion – a proportion even smaller than Mini-Me’s relative size to Dr. Evil. Treasury Secretary Timothy Geithner’s explanation for the decline in program size is due to the improving financial market conditions and the capital raising activities of the banks. Perhaps partially true, but “not so fast” says FA – he blames the suspension of mark-to-market accounting as the driver for positive overstated banking earnings, which allowed the banks to hoodwink investors and raise capital under false pretenses.

Read the Fundamental Analyst’s Article on PPIP Here

FA goes onto highlight what little skin the participants (including, AllianceBernstein,  BlackRock, Invesco, Oaktree Capital Management, TCW Group, and Wellington Management) have in the game relative to the other 93% of capital fronted by the taxpayers. I agree – the surplus taxpayer exposure is evil. Time will tell how effective the Mini-Me ppip program will be…

Original PPIP plan drawn up by the Financial Times

Original PPIP plan drawn up by the Financial Times

July 16, 2009 at 4:12 am Leave a comment

TARP: Squeezing Blood from Banking Stones

Collecting Bank Dividends Will Become Tougher

Collecting Bank Dividends Will Become Tougher

There was a sense of relief in the financial markets when it was announced that 10 banks repaid Troubled Asset Relief Program (TARP) funds in the amount of $68 billion back to the federal government. The ten banks included JPMorgan Chase, Goldman Sachs, Morgan Stanley and American Express. Timothy Geithner, the Treasury Secretary, said the repayments were encouraging, but warned that the crisis in the banking industry was not over yet (Economist).

Unfortunately, the falling tide has left some banks stranded, unable to repay TARP loans or the dividends on the preferred shares issued to the government.

The Wall Street Journal reported the following:

At least three small, cash-strapped banks have stopped paying the U.S. government dividends that they owe because they got $315.4 million in capital infusions under the Troubled Asset Relief Program. Pacific Capital Bancorp, a Santa Barbara, Calif., lender that got $180.6 million from the Treasury Department in November, has since posted net losses of $49.7 million. Pacific Capital said … that it suspended dividend payments on its common and preferred stock as part of a wider effort to save about $8 million per quarter. A bank spokeswoman confirmed that the U.S.’s preferred shares are included in the dividend freeze.

 

Click Here For Full Article

TARP DivsWith around 40 bank failures already in 2009, these TARP dividend suspensions may be more the trend rather than the exception. Maybe next time the Treasury will ask for a deposit or driver’s license to guarantee dividend payments before they fork over more TARP money?

Wade W. Slome, CFA, CFP®  

Plan. Invest. Prosper.  

www.Sidoxia.com

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in JPMorgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS), American Express (AXP), or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

July 7, 2009 at 4:00 am 1 comment


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