Taipan Daily: Be Fearful When Others Are Greedy by Erin Beale, Group Publisher, Taipan Publishing Group
In the wake of Merrill Lynch’s recent declaration that the “recession is over,” the bulls have certainly run this week, sending the Dow back above the 9,000 mark. TheWall Street Journal chimes in that the “economy has hit bottom” and the “second half of 2009 will surprise us on the upside.”
Is it time to break out the party hats and go on a buying spree? Here’s why Justice and Adam both give an emphatic “NO” to that question…
You Only Need a Golden Parachute if You Have Actually Left the Plane
Over the past few months we’ve read endless arguments as to the wisdom, morality and necessity of allowing two out of our three major auto manufactures to go bankrupt.
In the end, both Chrysler and General Motors claimed that they simply couldn’t continue under the backbreaking load of promises they had made over the years. Even when the federal government bailed them out repeatedly, they still couldn’t make the nut they owed to stockholders, bondholders, current and former workers, suppliers and dealers.
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Why Bankers Are on Borrowed Time
To get rich in a capitalist system you need three things – hard work, smarts and luck. America, rightly, bears little or no ill will when fortunes are made through the combination of these three. Take the Google guys, for example... or Warren Buffett... or any other number of big winners in our (quasi) free market system.
Did Goldman Sachs finally get too greedy this time? Is their gravy train finally coming to an end?
The dollar, much as expected, has fallen hard from its lofty crisis peak. Gold stocks managed to pick themselves up off the floor. And U.S. investment capital flowed aggressively back out into the world as markets breathed a sigh of relief.
But, while a few things have changed, other things have stayed remarkably the same. We are still very much on the path to “endgame” as far as long-term realities are concerned. How this whole mess will be resolved is far from clear.
Morgan Stanley is trying desperately to wiggle out from under the Commissat’s rusty iron thumb by paying $10 billion in TRAP [sic] funds back to Washington.
Amid that whopping big check to Washington, payouts on its private bond financing, ongoing real estate losses, and a massive set aside (72% of quarterly revenue) for employee pay, benefits and bonuses, the investment bank is declaring a loss of $1.26 billion, a slide of some 219% from the same quarter in 2008. And then there’s Bank of America…
In China, Bloomberg reports that nearly half a million new trading accounts were opened in the past week. In the United States, the bulls are cheering the Dow’s retaking of the 9,000 line (presuming they can hold it).
The divergence of views as to what lies ahead for the global economy – i.e. the “spread” between bullish and bearish thinking – is now as wide as it has ever been. The bulls seem convinced that a full-stop, no-holds-barred global economic recovery is at hand. China, playing the role of Santa Claus, is set to lead the merry way.
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