Sturm und Drang
Robust is not good enough.
“There’s just so much to contemplate right here, which is makes it so much fun to do this every day.” - Greg Weldon
I heard a question asked yesterday that sums up I think the dichotomy between Wall Street and Main Street:
“Do you think the Fed will ultimately be forced to choose between financial stability and inflation?”
The assumption in this question is that inflation is not financial instability. For many Americans, inflation causes financial instability.
“Financial instability” has a very different meaning to Larry Fink and the guy who fixes your car.
Keep in mind this was written six months before Obama was elected:
The Wall Street plan for the Obama-bubble presidency is that of the cleanup crew for the housing bubble: sweep all the corruption and losses, would-be indictments, perp walks and prosecutions under the rug and get on with an unprecedented taxpayer bailout of Wall Street…Who better to sell this agenda to the millions of duped mortgage holders and foreclosed homeowners in minority communities across America than our first, beloved, black president of hope and change?
“They have ample liquidity, as emphasized by management…”
some guy on CNBS talking about Charles Schwab
“When it comes to random events, “robust” is certainly not good enough.”
Rating Agency Comments on Lehman Liquidity, July 2008
“…its excess liquidity position ($34 billion at Feb. 29, 2008) is among the largest proportionately of the U.S. broker-dealers, and its sources-to-uses ratio is the strongest of the five.” – S&P, Research Update; March 21, 2008
“Lehman has consistently been among the top financial institutions in managing risk, including market, credit, and liquidity risks…Lehman’s liquidity management and position remain robust and are underpinned by a funding framework that is scaled to the firm’s expectations for, and vetting of, reliable secured funding… – Moody’s, Research Update; March 17, 2008
“Liquidity remains strong with Lehman’s lower reliance on short-term funding relative to its peers…Lehman has managed its liquidity well in the last eight months.” – Fitch, Research Update; April 1, 2008
“Lehman’s liquidity position is robust…” – DBRS, Research Update; March 19, 2008
Two uses of “robust.” I guess Lehman’s liquidity position wasn’t so robust.
“There was no capital hole. Lehman had the capital. We needed the liquidity.”
Dick Fuld did fine though.
First of all, let me just say that Anton Valukas and the lawyers at Jenner & Block who wrote the Examiner's Report did a masterful job. I was, and continue to be, in awe of the quality and comprehensiveness of the report. The fact that they were able to do all the research, conduct all the interviews, and write the 4,000+ page report in a little over one year is amazing, and makes me incredibly jealous of their productivity.
Now, since I read the whole damn thing, I think I have a pretty good handle on what went wrong at Lehman, and why it failed. Obviously, there isn't just one reason why Lehman failed, despite what most commentators would have you believe. But there's one issue that stands out to me as the biggest problem at Lehman — in short, they were misrepresenting their liquidity pool. In a huge way.
The only significant investigation of the Lehman Brothers failure was the so-called Valukas report—an investigation conducted by a private law firm on behalf of Lehman’s creditors.
The Valukas report found fraud surrounding the company’s statements on liquidity and exposed a scheme by which the firm concealed its metastasizing debt obligations in overleveraged repurchasing deals.
The firm’s investigators found that most of the people they talked to during their investigation hadn’t been interviewed by prosecutors. Breuer and Holder simply weren’t interested.
Matt Stoller, Lords of Misrule
“If you were in charge of feeding the city of Paris, you’d have an impossible job, and you wouldn’t know how to do it, because it would be so dauntingly complex, and yet the city of Paris got fed every day, because thousands of people responded to market incentives” - Gene Epstein
“What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”
Adam Smith, The Wealth of Nations
The "Real" Goods on the March Durable Goods Data
The Census Bureau has posted its Advance Report on the latest durable goods new orders for March. This series dates from 1992 and is not adjusted for either population growth or inflation.
We’re almost 50% off the year 2000 real per capita peak.
Meanwhile, I heard from one of the spokesmodels on the thing that the Enphase CEO said, "We’re not growing because of high rates.” Seems like we haven’t been growing much with the lowest rates in human history either.
The main thing growing this century has been the number of zeroes in Larry Fink’s net worth.
San Diego The author - who I followed since the last housing bubble a mere 15 or so years ago - is very bullish on housing, and I can’t argue with him.
About the time that the market starts to sputter in mid-to-late summer, we will be getting the spring data that will look red hot.
Good anti-Cathie Tesla rant from Chris Bloomstran
Seems to me a war zone is a stupid place for the World Health Organization to store polio, cholera and measles, but to not have had procedures in place to destroy these isolates in an emergency is criminally negligent.
So he [Robert F. Kennedy] was at a community college here in Los Angeles. And a student said to him, and this is a week before the primary, he knew he was going to win California. And if he won California, he was going to win the convention, in his head. Because the two guys who stood between him and the White House, he had already beat both of them. He beat Humphrey in ’60, and he had beat Nixon at ’60. He knew how to beat them, and he was not scared of it.
And one thing, the night of a primary, something happened he knew was going to happen, which was Richard Daley called him and said, “I’m going to grease the skids for you in Chicago.“
So at that point, I think my father knew that he was going to be president. He believed, anyway, that he would be president.
So a week before, he already sees California’s going his way.
And a student said to him, “If you become president, will you reopen the Warren Commission?“
And if you listen to the tape, there’s a long silence. And then he says, “Yes.“ And that’s it.
I think that would’ve scared a lot of people because he knew how to do an investigation and he would not have been steamrollered.
First Republic Bank
You remind me of sculptors who take complete dreck and put it together in a manner that takes your breath away.
You are an artist, Rudy, a dark one to be sure, but an artist.
RH, I gotta say your stuff hits squarely on the old funny bone. Honestly, this is professional level stuff. A beer and Havenstein at the end of a long day is one of my favorite pass-times. I wanted to give some appreciate after laughing for the past two minutes. TY