Greed Is Good

Finance

• Market Recap
• Interview with Manny Bello
• Chrysler Bankruptcy – chapter 11 with government DIP financing, UAW makes concessions
  • http://www.nytimes.com/2009/04/27/business/27chrysler.html?hp
• Stress tests to be released
  • http://online.wsj.com/article/SB124058562318953065.html

Politics

• Review of Obama’s First 100 Days
  • http://www.washingtonpost.com/wp-dyn/content/gallery/2009/01/21/GA2009012102666.html

• Predictions for Summer 2009

Misc.

• Cornell UAW
  • http://cornellsun.com/section/news/content/2009/04/10/univ-employees-seek-student-support-contract-talks
• Twitter
  • http://www.slate.com/id/2216793/

Greed is Good Ep. 3

Money:

• Market Update
  • Dow:
  • NASD:
  • S&P:
  • Big Movers:
• Rally or 5000?
  • With the Dow and S&P 500 both down more than 50% off their October 2007 highs, a decent bounce is not hard to imagine,
  • In tune with the bearish tone, investors pulled billions out of equity mutual funds last week. According to the latest report from Trim Tabs, investors pulled $29.9 billion out of stocks in the week ended March 4, versus an outflow of $18 billion in the previous week.
• Sen. Richard Shelby, R-Ala says “Let Banks Fail”
  • “Close them down, get them out of business. If they’re dead, they ought to be buried
    • Shelby did not mention any banks by name but, when asked about Citigroup, he said: “Citi’s always been a problem child.”
  • “Once these evaluations occur, there may be some banks — and we don’t know which ones, and I’m not going to name any — that will never make it,” Sen. Charles Schumer, D-N.Y., said on NBC’s “Meet the Press.” “You don’t just keep putting money in, money in, money in — and the bank never solves it self.”
  • Kansas City Federal Reserve President Thomas Hoenig criticized as piecemeal the approach taken by the government in handling of the banking upheaval.
  • “We understandably would prefer not to ‘nationalize’ these businesses but, reacting as we are, we nevertheless are drifting into a situation where institutions are being nationalized piecemeal with no resolution of the crisis,” Hoenig said in remarks to a local group.
• Mark to Market Accounting
  • According to Reuters, a U.S. House Financial Services subcommittee is expected to hold a hearing on mark-to-market accounting rules as soon as March 12. The SEC’s chief accountant and the chairman of the Financial Accounting Standards Board, will be asked to testify, the report said.
  • He says, “if the government relaxes mark-to-market for 12 to 18 months you could see financials move 100% in a matter of hours.”
• Nationalizing the Banks
  • the water torture that is keeping zombie banks alive is both expensive and dangerous. So why not just bite the proverbial bullet and nationalize them?
  • Why NOT TO NATIONALIZE
    • Domino Effect
    • Management Challenge
      • governments are ill-suited to manage businesses. I’d take the point a step further: Overseeing the management of dozens, or hundreds, or maybe even thousands of nationalized banks is a daunting task.
    • Political obstacles
      • GOP v. Liberals fighting
    • Confidence
      • there is a danger that it might undermine rather than bolster confidence
    • What to do – Good bank/bad bank
      • Bad bank inherits bad assets, markdown assets
      • Healthy company goes on its way
• AIG: Where Taxpayers money goes to die
  • A.I.G. nearly barreled off the cliff last September, when it couldn’t meet its obligations to customers who had bought a version of derivatives called credit default swaps. Such swaps are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt.
  • Some $440 billion in credit default swaps sat on the company’s books before it collapsed. Its biggest customers, European banks and United States investment banks, bought the swaps to insure against defaults on a variety of debt holdings, including pools of mortgages and corporate loans.
  • The rescue of A.I.G. also involved a bailout of its many customers, none of whom the insurer or the government is willing to identify.
    • On Wall Street, those customers are known as “counterparties,” and Mr. Liddy wouldn’t provide details on who the counterparties were or how much they received. But a person briefed on the deals said A.I.G.’s former customers include Goldman Sachs, Merrill Lynch and two large French banks, Société Générale and Calyon.
  • That means the geniuses at A.I.G. who wrote the insurance were willing to bet more than double their company’s value that defaults would not become problematic.

Politics:

• Record 31.8 Million people on food stamps
  • Increase of 700,000 food stamps in single month
  • Food stamps, which help poor people buy groceries, are the major U.S. anti-hunger program, forecast to cost at least $51 billion in this fiscal year ending Sept. 30, up $10 billion from fiscal 2008.
  • The average food stamp benefit is $115 a month for individuals and $255 a month per household.
  • In April, food stamp benefits will increase temporarily by 13% under provisions of the recently enacted economic stimulus law. Ellen Vollenger of the Food Research and Action Center said some families will see increases of $80 a month
• Obama is Killing the Dow
  • Increasing the top tax rates on earnings to 39.6% and on capital gains and dividends to 20% will reduce incentives for our most productive citizens and small businesses to work, save and invest — with effective rates higher still because of restrictions on itemized deductions and raising the Social Security cap
  • From the poorly designed stimulus bill and vague new financial rescue plan, to the enormous expansion of government spending, taxes and debt somehow permanently strengthening economic growth, the assumptions underlying the president’s economic program seem bereft of rigorous analysis and a careful reading of history.
• Obama reversing stem cell legislation
  • he is reversing Bush administration limits on federal financing for embryonic stem cell research as part of a pledge to separate science and politics, White House officials said Friday.
  • Mr. Obama’s announcement is not likely to lead to any immediate change in government policy, since it may take many months for the National Institutes of Health to develop new guidelines for research.
  • research advocates are expected to push for the process to go as quickly as possible to ensure that universities have time to submit grant proposals that can be reviewed and accepted before September 2010, when the health institutes must commit the last of the $10.4 billion given to the N.I.H. as part of the economic stimulus program.
  • Because embryonic stem cells are capable of developing into any type of cell in the body, many scientists believe that they may one day be able to provide tissues to replace worn-out organs or nonfunctioning cells and, thus, offer powerful new treatments for diabetes, heart disease, Parkinson’s disease and other ailments. Some researchers say the stem cells may even be used someday to treat catastrophic injuries like damage to the spinal cord.
  • But many people have a moral problem with embryonic stem cell research because creation of the cells entails destruction of human embryos. For that reason, Mr. Bush ordered in August 2001 that federal research be limited to lines of cells that were already in existence, since the embryo destruction for those had already taken place.

Other:

• Ann Coulter Bashes Ag School, among others
  • Except Keith didn’t go to the Ivy League Cornell; he went to the Old MacDonald Cornell.
  • Communications” is a major, along with “recreation science,” most commonly associated with linemen at USC. But at least the linemen can throw a football, which Keith cannot because his mother decided he was not physically robust enough to play outdoors as a child.
  • Finally, you can stop pretending that you went to the hard-to-get-into Cornell.
  • Response
• Cornell Basketball redeems itself, makes it to March Madness
• Cornell issuing debt
  • The Trustees authorized the University to sell up to $500 million in taxable bonds to provide working capital and institutional liquidity.
  • The University is also set to reduce spending from the endowment by 15 percent starting July 1, with further cuts planned for subsequent years.

http://dealbook.blogs.nytimes.com/2009/03/06/volcker-split-commercial-and-investment-banks/

Greed is Good Episode II.

Finance

• Market Recap
• Things to Come
• Obama Tax Increases
  • $1 Trillion in higher taxes for wealthiest Americans
    • Over $250,000 in household income
    • Occurs at end of 2010
  • New top tax brackets of 36% and 39.6%
    • Up from 33 and 35%
    • Affects 2.6 million taxpayers
  • Raise Capital Gains and Dividends to 20  % (up from 15%)
  • Cap the value of deductions
    • Charity, mortgage interest,
  • Stop repeal of estate tax in 2010
    • 45% on marrid couple’s estate of $7 Million
  • OPPOSITION
  • Representative Jeb Hensarling, a Texas Republican, said in an e-mail, “You cannot help the job-seeker by punishing the job creator.”
• AIG More bailout money
  • Once one of the world’s largest insurers, AIG has already received $150 billion in loans from the government. In return the government has taken an 80 percent stake in the insurer.
  • Shares of AIG closed at 42 cents on Friday. The stock, which traded at $49.50 a year ago, has lost nearly all of its value since the market meltdown began in September.
• Obama Budget
  • 1) Cut Deficit in half by 2012
  • 2) Sharply raise taxes on rich (see above) ; tax cuts to others
  • 3) Allocate
    • Put a price on carbon

Politics

• Withdraw combat troops from Iraq by 2010
• Problems in the E.U.
  • Eastern, poorer countries need financial assistance vs. Western, wealthier countries who do not want outside assistance
• Health Care
  •  
  • the budget begins paying for investments that would eventually allow Medicare officials to refuse to pay for medical treatment that does not show evidence of improving health. If successful, that change would vastly reduce the government’s long-term budget deficit. It is also likely to bring down private health costs, since insurers typically follow Medicare’s lead.
  • He would also increase premiums charged to Medicare beneficiaries with higher incomes for prescription drug coverage.
  • Would speed the approval of low-cost generic versions of expensive biotechnology drugs by establishing “a new regulatory pathway” at the Food and Drug Administration.
  • Mr. Obama asked Congress to set aside $634 billion in a “reserve fund for health care reform.”
  • Mr. Obama would, for example, require drug companies to give bigger discounts, or rebates, to Medicaid, the health program for low-income people.
  • Mr. Obama said he would save $176 billion over 10 years by cutting Medicare payments to health insurance companies that provide comprehensive care to more than 10 million of the 44 million Medicare beneficiaries.
  • Doctors praised one aspect of Mr. Obama’s budget. He assumes that Congress will protect doctors from cuts in Medicare payments scheduled to occur under current law — cuts of 21 percent in 2010 and about 5 percent in each of the next few years.
  • “We are very pleased,” said Dr. Nancy H. Nielsen, president of the American Medical Association. “All previous budgets assumed cuts in doctor payments.”

Current Events

• George Mason pulls out of Emirates
• Corporate Sponsorships
• Job Market
• Cornell News
  • Convocation Speaker
  • David Plouffe, left, President Barack Obama’s campaign manager, will deliver this year’s convocation address in May.
  • Basketball loses to Harvard 71-70, must win to clinch Ivy Title

• Why Greed is Good?
  • Explain the title
  • Fuels capitalism
    • Wish we could say “Ambition is good”
  • Means of achieving higher utility
  • Disclaimer – we aren’t advocating heartless business
  • Ethics are #1
  • Money is the means by which people achieve their goals; not necessarily about money
  • Like to quote the movie Notorious “Don’t chase the paper, chase the dream”
  • So – if you really want to be a social worker, then I want you to be one
• Finance
  • Recap of the today’s market performance – DJIA, S&P, NASDAQ, Treasuries, biggest movers
    • DJIA – down 250 points, 3.41%
      • 28 of 30 Dow stocks down, Citi & BofA up on press against nationalization
      • Govt could own as much as 40% of equity in Citi – shares at 18 year low
      • Government doesn’t think Citi can pass stress test
      • 10 year Treasury up 28/32 to 99 21/32
      • JP Morgan cut dividend to 5 cents/share from 38 cents/share
    • S&P – down 26 points, 3.47%
    • NASDAQ – down 53 points, 3.71%

•  
  • Obama housing plan – mortgages and foreclosures – $275 billion
  • UBS releasing names of American investors who avoided taxes in Swiss accounts – 52,000 clients
    • U.S. government sued the bank last week to obtain the account identities
    • the accounts held $14.8 billion in assets at the time of the December 2004 report.
    • Switzerland-based UBS, one of the world’s largest financial firms, has agreed to pay a $780 million fine and reveal the names of its U.S. clients with overseas accounts following a lawsuit by the Justice Department.
    • its employees would have to violate Swiss criminal law to comply with the U.S. government’s demand for the identities of 52,000 private account holders, in its first legal response to the demand in a massive U.S. tax-evasion inquiry.
    • Swiss law “strictly prohibits UBS and its employees from disclosing to the [Internal Revenue Service] the account information located in Switzerland.” Instead, the bank said, the U.S. government’s petition, “Simply ignores the existence of Swiss law and sovereignty.”
    • Rippled through the industry?
    • Govt breaching client agreements
    • http://online.wsj.com/article/SB123531487617042081.html?mod=
  • Rick Santelli’s Shout Heard Round the World
    • http://www.cnbc.com/id/29283701
    • Govt is promoting bad behavior
    • Subsidies “the loser’s mortgages”
    • How many of you want to pay for your neighbor’s mortgages
• Politics
  • Automakers
    • GM and Chrysler have taken billions
      • GM has taken $13.4 billion and needs $16.6 to stay afloat
    • Ford zero
    • http://www.nytimes.com/2009/02/18/business/18auto.html?_r=1&scp=1&sq=Automakers%20Seek%20%2414%20Billion&st=cse
    • GM – cutting brands
      • Saab, Hummer, Pontiac, Saturn
    • Union contracts
    • http://www.nytimes.com/2009/02/17/business/economy/17auto.html?scp=1&sq=GM%20Union%20Contract&st=cse
    • $5 Billion annually in health care costs
    • “Its future obligations for retiree health care are estimated at $47 billion, and by next year it is required by its contract to contribute more than $10 billion to the trust set up in 2007”
    • Options for GM
      • Chapter 11 Bankruptcy – continue to operate, restructure debt, huge operating restructuring, Banks/Lawyers are salivating over this one
      • Merger – Chrysler, privately held
        • Sell of more products, synergies and consolidations
      • More govt $ to stay afloat
  • California massive budget crisis
    • http://www.nytimes.com/2009/02/17/us/17cali.html?scp=2&sq=california%20budget%20crisis&st=cse
  • Obama State of the Union Speech on Tuesday night
    • http://www.msnbc.msn.com/id/29332386/
• Current Events/Random
  • ESPN sideline reporter leaving ESPN because can’t fly first class
    • http://newsok.com/stacey-dales-espn-fail-to-make-a-deal/article/3345434
    • “At some point, you have to take a stand at whatever you are doing in life,” Dales said. “That’s not sounding like a feminist. That’s not sounding like a spoiled, rotten kid. That’s making a business decision that affects the quality of your life. That was an important thing for me.”
  • Oscar’s Recap
    • http://movies.aol.com/oscars-academy-awards/nominee-winner
    • Slumdog wins 8 Oscars
  • Convocation Speaker
    • Ideal
      • Banker?
        • Jamie Dimon
      • Athletes?
      • Politicians?
      • Musicians
  • Wash U. at St. Louis banned bottled water
    • http://news-info.wustl.edu/news/page/normal/13554.html