Thursday, January 22, 2009
The Banks, the U.S., the U.K., you name it. Just when you thought it couldn't get much worse, the next layer down was worse than you ever thought it could be. Anyone who believed there were managers out there who were above it all were as naive as those who have believed the market truisms throughout time.
Ken Lewis of BAC was supposed to have expertly navigated his company through the Countrywide purchase and swooped in to force Merrill into submission with government backing. With its stock at 15-year lows and impending nationalization, maybe it's John Thain (who resigned today) who has the last laugh. Merril's $15/share loss has forced BAC into uncharted loss territory.
Black Rock posted horrific earnings last quarter. While going on air to pump stocks everyday, management must have believed themselves and continued to dollar-cost-average their clients to death, literally.
State Street was supposed to be immune to CDS pain and had been praised for its stellar management. The same management that led to an 88% decline in profits. Capital One, a credit card company, just lost $1.4 billion dollars last quarter.
Seriously, who is still listening to these people? When the best companies in the world (and I define those as companies that actually make money like Microsoft) are telling you it's god awful, you better believe it, not the court jesters on CNBC. When each headline on the Marketwatch ticker is an announcement of layoffs, don't read between those lines that the market has priced in this type of unemployment. It hasn't. Retailer Williams-Sonoma, who I told you was a dead dog months ago, just laid off 1,400 people. Sony may lay off 16K people. GE may lay off 11K people just from its Capital division and is at risk of losing its AAA rating.
And what happens when those retailers continue to lay off 10%, 20% of their workforce? They close stores. Anchor stores that bring people to malls. Still think commercial real estate has found it's bottom? "The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears.The over-building was helped along by the irresponsibly low interest rates, but the main impetus came from the slide of the US saving rate to zero and the rise in household indebtedness. The shrinkage of savings and the increase in debt raised consumer spending to 72% of GDP. The proliferation of malls and the warehouses that service them reflect the rise in consumer spending as a share of GDP."
Mark McGwire's brother just ran over his head with a large yellow bus. But we've known for awhile now that he was on the juice. But when watching the Cardinals game the other day (Warner just locked up the HOF by the way, bringing the Rams and the Cards to the SB), there was an old Bulls game on at the bar. I noticed that Michael Jordan's headsize was about half of what it is today in recent commercials. Is it possible that #23 was juicing too?
Posted by AX at 1:22 PM