Switzerland with only 7.5 M people has a reputation that belies its small size.  Read this article about how they did it. DFW by the way has about 6 M people.

Classic lows in consumer confidence relate to recesions.   No surprise in that!  And no surprise that they bring changes at the White House.  Markets are all about psychlogy.  Candidates are all about, like markets, hope fear and gree.  Frankly I don’t thnk a majority is for any of the current three Presidential candidates as they all seem to have lots of negatives. The very uncertainty of the outcome of the Dem nominatino probalby adds to the lack of confidence, here we have a major party that cannot fashion a way to even pick a candidate. Meanwhile the othe party ends up with a former ‘maverick’ that everyone had written off just months ago. Is this anyway to pick a leader?

I would not agree that American markets reigned supreme just moths ago. A few years back 24 of the 25 biggest IPOs originated outside the country.

Here is an article on the author of The Black Swan.  Nassim Taleb writes that Wall Street models for risk are faulty. He argues for the presence of so called Black Swans, irregular unexpected events which do not fit math models.  We are discussin options in Intermed II.  This is an excellent article exploring the quant view of risk taking. He made his money buying out of the money call options of the Euro currency just before the crash of 1987.  Now he is in demand as a speaker at all sorts of events including NASA as they ponder sending humans into far space. These are the sort of books that you should be reviewing!

Put Taleb into Amazon.com and read about his books.

Here is Goldman Sachs speak on how they missed this crisis though they did get out of most of their sub prime paper unlike Bear Merrill and Lehman.

and CRPGMII means you should trust us though there is no evidence for that….

In truth there have been lots of independent writers warning of a collapse in housing, this blog alone the last couple of years has mentioned the number of pages of advertising in luxury properties in the WSJ for example, wondering who will be the last person left holding that proverbial bag. I read a book several years ago predicting that easy lending brought on drive by appraisals and way too much risk, which is precisely what happened.  Fancy phrases like ‘pricing credit risk’ is a cover up for we took way too much risk and thought our quant models would take care of it. Or as Dad used to say, those guys are not as smart as they think they are. Wall Street is forever creating its own alternate reality and then taking the firm and the clients down in their latest misadventures, the above articles mention several instances of this., without of course admitting any culpability.

James Cayne, Bear Stearns Chairman, sold $61.3 M in stock this week.   He and his wife waited until the price rose from $02 to $10+.  He remains Chairman. Question, why isn’t he required to put that money back in the pot for the employees, investors, or the FED that is rescuing the firm. It was his decisions that got the firm to this point.

Look for more calls for ‘regulation’ as a result of this sort of fiasco.  BSC goes bust, Chair makes millions, what’s wrong with this picture? I am pretty sure he obtained the shares via options paying little or nothing for them.

Here  is another take on rescuing Wall Street but not the Little Guy. I expect, and rightly so, that the Dems will make this a huge bone of contention in the election, well assuming they can pick a candidate.

As the saying goes, follow the money. Out with the Aluminum siding salesman and the railroad engineer as Treasury Secretaries. In with Hank Paulson, former Goldman Sachs bigwig.  Memo, Presidents come and go, Goldman is always in the White House, Rubin was from Goldman. 

Now remember, the Glass Stegall Act forbidding banks to engage in Wall Street chicanery, er make that lending and securities trading, was repealed in 1999, by your political heroes in Congress led by none other than Texas Senator Phil Gramm.  Now that a Wall St Investment Firm, Bear Stearns BSC is in trouble, Hank leans on Ben (Bernake) to bail them out. And Ben does. We are told this avoided massive meltdown of markets. But isn’t that what the President et al ALWAYS says about their actions, making us safe, for the children……

This article traces the action thus far. But the FED could have offered some help in an auction sale of what Bear had.  Then we might know what Bear actually did. As it is, Lehman et al soldier on confident that they are now too big to fail. Will TMA raise their needed capital this week, if not will the FED bail them out?

Moody’s now has SIX rated as C or well into the junk debt category.

WAshington Redskiin owner Dan Snyder seems to be having problems handling the debt he amassed in buyin SIX..

Now that Ford has spent billions fixing the problems, we think TATA netted a great deal with Jag and Land Rover.   Apparently Henry Ford II always envied the cachet of Jag.  Ford bought the firm two years after his death. Ford poured billions into it to fix terrible quality problems.  But Ford in my opinion never had a coherent strategy to compete in the premium brand market with BMW and Mercedes.  The X type Jag sedan sells for a fraction of its sticker in the used car market, the peceptino being that is is really a thinly disguised Ford. Now TATA is set to change all that.  Will TATA be the Mouse that Roared?

Last year Jag sold a pitiful 15,000 vehicles total in the US,that will not work.  TATA is buying at the bottom sales wise just as new Jag models come on stream. Where will they be sold, I will be TATA is eyeing the lucrative new markets in the Far East, read the article.

Carl Icahn is demanding a breakup of Motorola MOT. This is an excellent story to help you understand the equity side of the balance sheet. 

Icahn is described in this BW article as famous for taking a stake and demanding change in a company.

This is a practice that gained prominence in the 1980s Corporate raiders, flush with cash from Mike Miliken’s junk bond money machine would amass a stake in a company. Then they would demand changes to get the stock price up. The company would either have to change or buy the ‘raider off’. Otherwise as Mel Brooks so famously remarked in one scene of Blazing Saddles, gentelmen we may lose our phoney baloney jobs! This practice was also known as greenmail rather than outright blackmail.

MOT stock is now down to $10.  It is a famous player in the chip and mobile phone market, who will win here, will MOT get split up? This also shows how important managerial accounting is to a company, the failure to perform in the short run can have the raiders knocking on the door.

Scottish chip maker Wolfson said it will not get the nod for its chips in the next generation of media players from ‘one customer.’  That would be Apple. The stock dropped 22%. Now would we make an accounting entry to reflect that? The answer is no.  Following our discussion in class Tuesday, should there be some kind of fourth statement that reflects changes in stock price and the company fortunes?

A Texas District Judge has ordered a group of banks to fund the Clear Channel Buyout loan package.

Why is a judge involved? Well, the banks all backed out of the funding amid their unknown losses in the subprime mess. Here is the evidence that lending standards are being tightened but as they say,the barn door is being closed after the cows got out.

The result is that CCU stock has dropped dramatically in price from the $39 offer.  CCU owns many top radio stations and a group in San Antonio is trying to use leverage, ie debt to buy them. We are studying hte equity side of the balance sheet. Once again, are the ‘assets’ worth’ their value on the balance sheet. As of today the stock market is saying no.  Look for this case to be appealed. District Courts are the first level of courts in Texas for a case of this magnitude.