OBGibby's Account Talk

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I finished Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves by Andrew Ross Sorkin last night. A good read, with a "behind the curtain" type feel to the big leagues of investment banking and the Treasury Department.

From Amazon.com:

"...comprehensive and chilling..."
-TIME

"...his action scenes are intimate and engaging..."
-The New Yorker

"Sorkin's prodigious reporting and lively writing put the reader in the room for some of the biggest-dollar conference calls in history. It's an entertaining book, brisk book...Sorkin skillfully captures the raucous enthusiasm and riotous greed that fueled this rational irrationality."
-The New York Times Book Review

"...brings the drama alive with unusual inside access and compelling detail...A deeply researched account of the financial meltdown."
-BusinessWeek

"...meticulously researched...told brilliantly. Other blow-by-blow accounts are in the works. It is hard to imagine them being this riveting."
-The Economist

"Sorkin's densely detailed and astonishing narrative of the epic financial crisis of 2008 is an extraordinary achievement that will be hard to surpass as the definitive account...as a dramatic close-up, his book is hard to beat."
-Financial Times

"Sorkin's book, like its author, is a phenom...an absolute tour de force."
-The American Prospect

"Andrew Ross Sorkin pens what may be the definitive history of the banking crisis."
-The Atlantic Monthly

"Andrew Ross Sorkin has written a fascinating, scene-by-scene saga of the eyeless trying to march the clueless through Great Depression II."
-Tom Wolfe

"...Sorkin has succeeded in writing the book of the crisis, with amazing levels of detail and access."
-Reuters

"Sorkin can write. His storytelling makes "Liar's Poker" look like a children's book."
-SNL Financial
 
The China Bubble


With over a billion people and an economy poised to surpass Japan’s as the 2nd largest in the world, it seems everything that happens in China has an oversize impact on the rest of the world. So what if China’s economic growth turns out to be as reliant on inflated collateral and unsustainable debt as the Europeans or the Americans? Is there a China bubble?

A recent report on CBS “60 Minutes” provided visceral evidence that formation of a real estate bubble is undoubtedly already well underway in China. The report showed entire cities in China’s northeast that were newly constructed and completely unoccupied. This anecdotal evidence is backed up by other reports, such as noted by fund manager Jim Chanos in an interview on Charlie Rose on April 14th, 2010. In the transcript, “Jim Chanos on China’s Property Bubble: Charlie Rose Interview,” Chanos is quoted as saying “The fact of the matter is the game [real estate speculation] has to keep going…because so much of their GDP growth is in construction…50% to 60% of China’s GDP is in construction.”

The more you dig, the more it appears China is not just starting to inflate their real estate bubble, but that China’s real estate bubble is about to pop. China is doing almost exactly the same thing the Americans did – and the fact China has stricter regulations on mortgage lending, with between 30%-50% down payments required on real estate purchases – has not slowed the growth in real estate asset values, the rate of new construction, or the growth in residential and commercial vacancy rates. Go all the way back to 2007 for these statistics from The China Expat, in the report “China Housing Bubble Late 2007 Update:”

“Apparently, housing prices in Suzhou averaged about 500 RMB per square meter six or so years ago. Now, the average seems to be hovering around 7-8000. A rise of 14-16 times, which is even greater percentage wise than the increase in Shanghai housing prices… At the low point in the late ’90s, much of the prime real estate in Pudong [Shanghai] was selling for 1000-2000 RMB per square meter. Today, decent real estate in Pudong starts at 13,000 RMB per square meter. Residential apartments near the famed Oriental Pearl Tower goes for over 100,000 RMB per square meter.”

If you run the numbers, a 14x appreciation in the six years between 2001 and 2007 equates to a 55% increase every year. Fast forward 2.5 years to the present – how much more appreciation has occurred?
In a USA Today report from April 24th, 2010, entitled “If hot China real estate market stumbles, will USA get bruised?,” here is evidence that China’s real estate asset appreciation hasn’t begun to slow:......

More at http://civfi.com/2010/06/08/the-china-bubble/
 
BOB DOLL: THE S&P 500 IS GOING TO 1,250

11 June 2010

Bob Doll, the Chief Equity Strategy at the world’s largest money management firm, Blackrock, sees the markets substantially higher later this year. Doll says the markets are overreacting to the recent concerns in China and Europe. He believes the recovery will continue unabated:
“Despite the negative tenor of these events, we believe the financial stress in the system should be better controlled than it was in 2008, and we are not expecting a return to the conditions that plagued the global economy and financial markets two years ago. Central banks are still operating under many of the facilities put into place then, and the banking system as a whole has benefited from deleveraging, write-down and capital rebuilding. Additionally, the overall magnitude of sovereign debt exposures is significantly smaller than that of the mortgage-related holdings that ultimately provoked the 2008 credit crisis.
​
From our perspective, as long as the world economy does not sink back into recession (an event we consider unlikely), equity markets should be able to weather the current period of uncertainty. The economic recovery should continue, although we expect the pace to be relatively slow and interrupted along the way by periods of disappointing data. We believe investors will need to see a recovery in European debt markets and evidence that contagion can be contained before confidence can be restored.”
​
Ultimately, Doll sees the S&P 500 surging back up to 1250.
 
"This energy bill of goods, as dangled before us by the administration since the 2008 campaign, obscures practical and economic realities. To wit, trucks and cars don't run on sunlight or wind, and coal -- whose cost of generation the U.S. energy department priced at 44 cents per megawatt three years ago -- is our second cheapest form of energy, next to oil and gas, at 25 cents per megawatt. Nuclear power is $1.59. And how much, according to the energy department, is wind power? Oh, $23.37 per megawatt. Solar power? A whopping $24.34. Green jobs, anybody?" --columnist Bill Murchison
 
ZUCKERMAN: World Sees Obama as Incompetent, Amateur...

Mort Zuckerman: World Sees Obama as Incompetent and Amateur

The president is well-intentioned but can't walk the walk on the world stage

By Mortimer B. Zuckerman
Posted June 18, 2010

President Obama came into office as the heir to a great foreign policy legacy enjoyed by every recent U.S. president. Why? Because the United States stands on top of the power ladder, not necessarily as the dominant power, but certainly as the leading one. As such we are the sole nation capable of exercising global leadership on a whole range of international issues from security, trade, and climate to counterterrorism. We also benefit from the fact that most countries distrust the United States far less than they distrust one another, so we uniquely have the power to build coalitions. As a result, most of the world still looks to Washington for help in their region and protection against potential regional threats.....

.....Obama clearly wishes to do good and means well. But he is one of those people who believe that the world was born with the word and exists by means of persuasion, such that there is no person or country that you cannot, by means of logical and moral argument, bring around to your side. He speaks as a teacher, as someone imparting values and generalities appropriate for a Sunday morning sermon, not as a tough-minded leader. He urges that things "must be done" and "should be done" and that "it is time" to do them.....

....As the former president of the Council on Foreign Relations, Les Gelb, put it, there is "the impression that Obama might confuse speeches with policy." Another journalist put it differently when he described Obama as an "NPR [National Public Radio] president who gives wonderful speeches." In other words, he talks the talk but doesn't know how to walk the walk. The Obama presidency has so far been characterized by a well-intentioned but excessive belief in the power of rhetoric with too little appreciation of reality and loyalty....

.....The end result is that a critical mass of influential people in world affairs who once held high hopes for the president have begun to wonder whether they misjudged the man. They are no longer dazzled by his rock star personality and there is a sense that there is something amateurish and even incompetent about how Obama is managing U.S. power.

America right now appears to be unreliable to traditional friends, compliant to rivals, and weak to enemies. One renowned Asian leader stated recently at a private dinner in the United States, "We in Asia are convinced that Obama is not strong enough to confront his opponents, but we fear that he is not strong enough to support his friends."

.....The United States for 60 years has met its responsibilities as the leader and the defender of the democracies of the free world. We have policed the sea lanes, protected the air and space domains, countered terrorism, responded to genocide, and been the bulwark against rogue states engaging in aggression. The world now senses, in the context of the erosion of America's economic power and the pressures of our budget deficits, that we will compress our commitments. But the world needs the vision, idealism, and strong leadership that America brings to international affairs. This can be done and must be done. But we are the only ones who can do it.

Complete version at http://www.usnews.com/articles/opinion/2010/06/18/mort-zuckerman-world-sees-obama-as-incompetent-and-amateur.html
 
J. Mark Iwry Is Planning Your Retirement

"The Wall Street Journal profiles J. Mark Iwry, senior benefits official at the Treasury Department, responsible for figuring out how best to achieve the administration’s goal of getting Americans to save more. The profile gives a sense of the temperament required to tackle these complex issues (saying Iwry “chooses his words as if he is giving a deposition”) and also summarizes some of the changes he’s proposing to make to 401(k) and IRA accounts."​
 
According to my tsp.gov online account, my 'Personal Investment Performance' (PIP) for the twelve months ending June 30, 2010, was up 9.46%.

Previous 12 Months Ending:

May 31, 2009 -27.15%
Jun 30, 2009 -21.34%
Jul 30, 2009 -12.23%
Aug 31, 2009 -8.27%
Sep 30, 2009 +4.27%
Oct 31, 2009 +18.69%
Nov 30, 2009 +31.51%
Dec 30, 2009 +29.86%
Jan 31, 2010 +34.15%
Feb 28, 2010 +49.48%
Mar 31, 2010 +47.16%
Apr 30, 2010 +34.73%
May 31, 2010 +15.22%
Jun 30, 2010 +9.46%
 
"For instance, federal workers receive a defined benefit pension with benefit levels comparable to those from private 401(k) plans, except that federal workers contribute only 0.8% of pay and are not subject to any market risk."

Not sure anyone on this MB would agree with that.

"They also receive employer matches to the defined contribution Thrift Savings Plan that significantly exceed the typical private employer match."

I agree we have a good TSP match program and some companies may have suspended matches for a little while but our match is very much in line with good companies.

Also, I was hired for a specific job with specific PD. I have numerous other titles with responsibilities that are not in my PD but I do them out of neccessity. I have a friend who says his union would never allow such abuse. So in reality they would hire a second person in which case my salary would be matched against 2 individuals. I'm certain that there are many people who work harder than me and make less but I'm also certain there are those who do little making more. Having said that I do fear that our public payroll has gotten to big, that's why I've been preparing for the possibility of having to move on.
 
You mean Rif'd? If you are a veteran you're okay I'd say. If you are not but have more than say 5 yrs, you're probably okay. I'd take a buyout right now, effective in 90 days. :)
 
I am a veteran and I've been there for five years but I am not going to underestimate how big of a RIF it will require to satisfy the ballooning debt hawks. (which I believe in)
There is no one item that will bring things under control. It will be painful for those let go but there will be a string of pay freezes that will make it stagnant for the (lack of a better word) Lucky.

Sorry OBG but the article was a good read which I believe is the sentiment of the private sector.
 
FICO.jpg

​
“Figures provided by FICO Inc. show that 25.5 percent of consumers — nearly 43.4 million people — now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.”

http://pragcap.com/our-credit-scores-stink
 
According to my tsp.gov online account, my 'Personal Investment Performance' (PIP) for the twelve months ending July 31, 2010, was up 10.7%.

Previous 12 Months Ending:

May 31, 2009 -27.15%
Jun 30, 2009 -21.34%
Jul 30, 2009 -12.23%
Aug 31, 2009 -8.27%
Sep 30, 2009 +4.27%
Oct 31, 2009 +18.69%
Nov 30, 2009 +31.51%
Dec 30, 2009 +29.86%
Jan 31, 2010 +34.15%
Feb 28, 2010 +49.48%
Mar 31, 2010 +47.16%
Apr 30, 2010 +34.73%
May 31, 2010 +15.22%
Jun 30, 2010 +9.46%
Jul 31, 2010 +10.7%
 
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