The study of the Chinese language, Mandarin, is on the rise.   Oddly many still study Spanish, why i wonder?  Clearly the Chinese economy will become more dominate in years to come.  And so more folks are  trying to learn the language to speak Chinese on their visits to the Mainland.

I thought you might find this letter to the shareholders of MBIA, a large bond insurer and credit default swap guarantor, interesting. Seems Moody’s and S & P maintain their AAA rating on both MBIA and AMBAC.

Now click on the chart thru March 20 and take a look. Does this look like a AAA company to you?  Clearly the market does not think so!  Have accountants valued the ‘assets’ on their balance sheet along with their liabilities correctly?  Either Moodys or the market is wrong, which would you guess is right?  We will be studying the equity side of the balance sheet in coming weeks in Intermed II.  A = L + OE assuming A and L are correct!

Greenspan loved the adoration but denies an responsibility now.   He says that raising interest rates has never stopped inflation, gee it did for Paul Volcker in 1981!  I managed to get to page 200 in his book Turbulence. I don’t see how he can dis claim responsibility and but admit to lowering rates thirteen times in less than two years.  What is the old saying-success has many parents but failure is always an orphan.

Here is an update on just what and who the FED is.   Prof. Elam observation. Now that rates are 2.25-2.5% and T bill rates are less than 1%, wht if this does not work?  The FED cannot lower rates below zero. And surely there is a limit on just how much money it can promise to throw at apparently bottomless problems.

Now even the supposedly conservative Swiss Banks are writing down ‘assets.’  I urged the Intermed II class to read the assignments on derivatives and options over the break. Here is another example of a brokerage firm / investment bank / just what are you doing? firm writing down ‘assets.’ In principles of accounting we told you that Asets = Liab + Equity. Hmmm, maybe not when the assets have to be moved to the liability side and then we need an injection from Dubai to make the equation balance as Merrill is doing.  Pricing such ‘assets’ will be a major challenge for accountants.

Jim Rogers holds forth on what the takeover of Bear BSC really means. As he points out, BSC paid out big bonuses in January. In a bankruptcy they would have to pay them back! As it is they get to keep driving their Maseratis and let you and I pay for them. A CFA goes on to make the point that in a bankruptcy we would finally be able to unravel what BSC and others have really done. As it is Morgan will not let us know.

And, just how much money does the FED have anyway?

I have been demonstrating a bit of technical analysis in class. Here is an explanation of the 90% indicator.

Today Delta asked 30,000 employees to voluntarily leave. Citing the need to cut costs, DAL ad UAL also are cutting back the size of their fleets.  Most of these workers are fixed costs, letting them go lowers the fixed cost line in the CVP chart, something we study in Cost Accounting. The firm will spend an additional $2 B on jet fuel costs.  They have not given up hope of earning a profit this year!

Here is a good explanation of how currencies find their value. I have made the point that

the FED needs to defend the dollar which would bring confidence in buying assets such as foreign buyers purchasing homes here

dumping the dollar to create more dollars is false economy

we will learn how much more the FED lowers rates today but that well is running dry anyway, unless the Govt plans on paying us to take their ever more worthless fiat money

Robert Samuleson points out that most investment banks operate on a 32 to 1 leverage basis.  Wow, the official rule when I studied for my Principal’s License with the NASD was 10 to 1.  Clearly it does not take much lack of faith to see such a house of cards fail.

Steve Forbes on the weak dollar, the flat tax in Slovakia, and how and why Clinton got it right!  I have not heard a word from Dems on the dollar, has anyone?

Even the Vietnamese dong is going up against the US Dollar!

Dallas City Council may be forced to ‘idle’ red light cameras.   Because they are too effective and therefore not generating enough revenue…only in government.

Here is a classic government cost volume profit fiasco.  Now so many people are obeying the stop lights at camera monitored intersections, the projected revenue is not what is was supposed to be. Yep projected revenue is already down. The naive among you might think, great we are all safer.  No way, the City Councilis now considering staggering when the cameras work hoping to catch more law breakers and get the revenue up.  Note one council woman long skeptical of this approah points ot increased rear ene collisions as motorists brake to a stop to avoid a ticket. Swell, our govt in action,literally.

For those wishing to keep up with fast breaking market news I suggest

www.marketwatch.com

.finance.yahoo.com

http://online.wsj.com/

www.bloomberg.com

www.realclearmarkets.com

http://www.reuters.com/finance

Now Bush is being compared to Herbert Hoover.   The initial reaction to the crash of 1929 was to assure everyone that it was not as bad as the media portrayed it to be. What was that crash all about anyway?

Back then banks were involved in the securities business.  Eventually the Glass Stegall Act was passed which prevented banks from dealing in securities. Interestingly this provision was repealed in 1999, greed among bankers won out. The real crash of 1929 did not occur until 1930. By March of 19360 everyone realized that the banks had loaned 10 to 1 on securities.  You put up 10 cents the bank loans you 90 cents to invest on Wall Street.  Once the value of the securities or collateral collapsed the banks collapsed. One third of all banks closed along with their deposits. This caused one third of the money supply to vanish overnight.  And that boys and girls was what caused the real crash.

We have much more liberal margin policie today what with options, derivatives, CMOs, CDOs, and malarky passed off as commercial paper. And so the potential as Bear Stearns employess will learn this morning, for calamity is as or greater.  And this is especialy so when the ultimate guarantor is the FED which can only deal with fiat money that is falling in value every day. 

Molly Ivins used to refer to Bush II as Shrub, look for that comparison to be unearthed again in coming weeks.  Such is the nature of public angst looking for a scapegoat, in reality Bush like Hoover probably has little understanding of what his advisors have wrought.