Monday, February 9, 2009
Weekend edition: The conspiracy to keep you poor and stupid
Thursday, February 5, 2009
How to guarantee your job in a Spanish bank
Wednesday, February 4, 2009
Those wonderful shops
Fiscal year | Same store sales |
1992 | 1% |
1993 | 7% |
1994 | 8% |
1995 | 15% |
1996 | 5% |
1997 | -8% |
1998 | -1% |
1999 | 8% |
2000 | 8% |
2001 | -4% |
2002 | -10% |
2003 | 4% |
2004 | -3% |
2005 | 1% |
2006 | 8% |
2007 | 6% |
2008 | -8% |
Fiscal year | Circuit City | Best Buy |
1992 | 1% | 14% |
1993 | 7% | 19% |
1994 | 8% | 27% |
1995 | 15% | 20% |
1996 | 5% | 6% |
1997 | -8% | -5% |
1998 | -1% | 2% |
1999 | 8% | 13% |
2000 | 8% | 11% |
2001 | -4% | 5% |
2002 | -10% | 2% |
2003 | 4% | 2.4% |
2004 | -3% | 7.1% |
2005 | 1% | 4.3% |
2006 | 8% | 4.9% |
2007 | 6% | 5.0% |
2008 | -8% | 2.9% |
And now you can see what happened. Circuit City just got crushed. Best Buy had superior sales per-square-foot or sales per unit of cost structure – and that difference got bigger and bigger and bigger.
Tuesday, February 3, 2009
Smashed up old fuddy-duddy guys
Sunday, February 1, 2009
John Paulson accuses his competitors of theft or fraud
Redemption policyAs a firm, we have not imposed any gates or other restrictions on clients withdrawing their assets. While we recognize the difficulties of the current environment, we think it’s a manager responsibility to raise liquidity to meet the needs of their investors. There is plenty of liquidity in the markets. Even in opaque areas of the markets such as in bank debt, mortgage backed securities and other distressed securities, we see hundreds of millions of dollars trading every day. We are especially surprised that many managers have restricted client withdrawas when: 1) the total redemptions are manageable (15-25% of AUM); 2) the managers have the cash; and 3) one of the stated reasons for restricting withdrawals is so the manager can continue to invest in new opportunities. Emphasis added.
Bad tax policy and bad government process – GM as a test case
If a tax system is poorly designed person A can lend to person B who can lend to person C etc. If the person at the end of the chain (lets call him person Z) loses the $100 he legitimately gets a tax loss. However if he fails to repay person Y then Y also legitimately has a tax loss. The same $100 will if you are not careful produce two tax losses. Indeed if the same thing happens along the whole chain the same $100 can produce 26 tax losses – and if that happens you rapidly have no tax system.
Thursday, January 29, 2009
Freshwater and Saltwater: macroeconomic theory and losing money
Wednesday, January 28, 2009
Scandinavian bank collapse - not all the same
It seems that some central bankers read this blog. I got an email from a senior Scandinavian central banker following the exchanges on this blog (see this exchange for an example).
Anyway he points me to a note by P Honohanen of the World Bank (written several years ago) and which I reproduce here. I think this should close some of the debate. Either way it is useful if you wish to know what actually went on...
For several years it has been fashionable to look to Sweden as offering a policy model for recovering from a banking crisis. And your editors have to admit that, along with most other commentators, they had been inclined to assume that the Swedish case was mirrored by the roughly contemporaneous crises in the rest of Scandinavia. But the Norwegian crisis actually predated that in Sweden and, as we have discovered by reading the comprehensive volume on the Norwegian case which has just been published by Norges Bank (“The Norwegian Banking Crisis”), containment and resolution policy was quite different. Certainly the two countries both made a good recovery: on some reckonings the Norwegian government, like that of Sweden, may have ended up with a small cash profit after selling back into the market bank shares that it had acquired in the crash. Though sometimes thought of as a classic macro boom-and-bust, the Norwegian crisis may be better classified as the result of inexperienced bankers trading in a newly liberalized market with recently lowered capital requirements and a sharply reduced frequency of on-site supervisory inspection. The crisis was a big one: the three largest banks (DNB, Fokus and Christiania) all failed along with many smaller banks including sizable regional banks. The privately owned and managed deposit protection schemes were overwhelmed and had to be nationalized – illustrating a weakness inherent in what is otherwise a good idea: distancing deposit protection from the government. Government took ownership of the major banks – and retains, for strategic or political reasons, a major stake in DNB. But, and this is the first important contrast with the policy stance adopted in Sweden, in no case were shareholders bailed out. (Yes, the authorities were sued by disappointed shareholders, but unsuccessfully.) Two other key points to notice: government did not issue a blanket deposit guarantee and they did not set up Asset Management Companies. These striking contrasts certainly argue for avoiding knee-jerk application of the Swedish policy approach in these three dimensions.
The perfect appointment
What is a non-performing loan?
Turning to the consumer portfolio, we also continued to be very aggressive in restructuring consumer loans, modifying over $200 million in the quarter. We believe restructuring loans where appropriate will result in significantly greater likelihood of payment and more value ultimately received by Fifth Third. These activities are beneficial not only to our shareholders, but are also consistent with the needs of our customers. [Sheila Bair’s line precisely – are they pandering?]As of year end, we had $574 million in troubled debt restructurings and NPAs, classified that way because they hadn't met the six-month consecutive performance threshold. [Hey wow – they count restructured loans as non-performing – so they are not producing the Conseco fake numbers… My cynicism is misplaced in this instance.]Fifth Third has been among the most active of banks in the US in restructuring loans for consumer borrowers, a process we began over a year ago. We've been among the most active among our peers in these restructurings only one of the 15 largest US banks reports a higher dollar amount of restructured loans among its nonaccrual loans, according to regulatory filings.
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The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.