Today's TV Segment May 16, 2011

Singapore's Newest Citizen...

"This pisses me off" tweets Mark Cuban on Singapore's newest citizen and Facebook cofounder Eduardo Saverin's renouncing of his U.S. citizenship... Yep, he was born in Brazil, came to the U.S., became a citizen, went to Harvard, almost got totally screwed by Zuckerberg, and is dodging $600 million in taxes to take his profits in Singapore where there's no capital gains tax...

Mr. Cuban and God knows how many million Americans are mad as hell at youngMr. Saverin... How could he, after this country has been so good to him, turn his back on us, not pay his fair share, yada, yada, yada????

Hmm... Hmm... (this is me thinking how to best say what I'm thinking).... Hmm... Okay: $600 million not going to the U.S. Government... Hmm... Saverin moving to Singapore, #2 on the Economic Freedom Index (I'm predicting that, now that Hong Kong has a minimum wage and some new regs, a #1 rank is in Singapore's future)... $600 million not going to the U.S. Government, who sits at #10 (I think) on the E.F. Index... The U.S. Government; who's burning a $trillion+ (budget deficit), third year running... The U.S. Government, who's lost $billions on crony green energy investments... The U.S. Government, who vows to, in our President's own words, "spread the wealth"... The U.S. Government who, in 3 years, has added $5 trillion to its debt burden...

Let's say you're a parent, a very bright, talented parent who just sold a business for $you-pick-the-number... Insert your kids name in the "U.S. Government" spots above (change the numbers to make it more real for you)... Would you? Would you hand your boy Sam, who blows money like a drunken U.S. politician, 15% of your huge gain? Would you? Seriously? Think about it; who's going to do the most good with all that money, you (the one who earned it), or your profligate boy Sam? Wouldn't it be a good lesson for Sam to see what he would've gained, had he a brain?

Read my praises of Singapore here...

Market Commentary May 14, 2012 (audio)

Click here for today's commentary

The Fat Can Eat No Lean - or - Too Much Pain to Pass Up

Housing prices, we'd agree, got way ahead of themselves in the mid '00s. The problem, we 'should' agree, was easy money - i.e., an over-abundance of capital and an under-abundance of prudence on the part of consumers, lenders and policymakers. Easy mortgages made big-shot bidders out of little-shot consumers, leading to fat housing prices, fat realtors and fat cat bankers.

I read a way overdone article this morning in the Times on the plight of the college student. The stats on student indebtedness are staggering. But you know the story. And, when you stop and think about it, you know the problem; it's very much like housing. Politicians promised a post-secondary education in every pot. The floodgates opened - easy cash galore! Jobless students levered up against the promises of a college degree. The result; fat colleges, and fat staff living on fat salaries. Once again; easy money.

Here's how this one plays out as the bubble bursts:

1. The job market stiffens, students feel stooged.
2. Subsidies wane, tuition spikes (the fat can eat no lean).
(1 and 2 represent the current state of affairs, 3+ is where it's headed).
3. Lending gets lean.
4. Kids (parents) get stingy.
5. Colleges compete.
6. Staff gets skinny.
7. Tuition peaks.
8. Things start making sense.

At least that's what should play out, if government steps out of the way. On second thought, scratch all that. There's too much pain (opportunity) for politicians to pass up. We should therefore expect:

1. Same as above.
2. " " "
3. Hard working taxpayer gets saddled with Sally Student's debt.
4. Ugh... stay tuned.

The Unseen Risk...

So does Jamie Dimon have egg on his face or what? Barney Frank, and every other Dodd Frank supporter, jumped all over JP Morgan

$billions to the wind...

Jamie Dimon's on the hot seat over some $2 billion in recent losses on derivatives... Fueling the fire for those pushing for yet more regulation of the financial industry...

We're talking JP Morgan; the firm that had the wherewithal to take over Bear Stearns and Washington Mutual (with a little help from the Fed) during the 2008 credit crisis... The firm that has earned over $4 billion a quarter over the past couple of years... The firm with $2.3 trillion in assets and $190 billion in shareholder equity for crying out loud...

Now wouldn't ya think a firm with the ability to generate some $19 billion in earnings in a given year (last year) is taking on a little risk here and there? Indeed, without that four-letter-word, could a firm even begin to generate that kind of cash? But, alas, we're talking a big, systemically important bank... What's to keep it from making similar mistakes going forward, that, cumulatively, could indeed threaten the system, once again? Don't we therefore need to regulate away that sort of behavior? Well, NO... For there is yet another four-letter concept that offers all the incentive a big bank needs to better calculate its bets going forward... It's something we call LOSS... Believe me, nothing inspires prudence like suffering a loss every now and again... Regulation, on the other hand, rather than protecting the system, inspires lobbying, cronyism and, sadly, corruption...

That said, there is this other firm that I'm thinking we do indeed need to clamp down on - big time.. This one's upside-down by $16 trillion and burning another $1.5 trillion a year (talk about systemic relevance!)... Yet, puzzlingly, its top execs were quoted [yesterday] as saying things like: "The enormous loss JPMorgan announced today is just the latest evidence that what banks call 'hedges' are often risky bets that so-called 'too big to fail' banks have no business making." Those would be the comments of none other than Senator Carl Levin...

I'm thinking the good Senator ought to concern himself with the billions he and his team are throwing to the wind, or the sun [as it were], on "risky bets", like Solyndra, and let Mr. Dimon deal with JP Morgan...

Good Time Charlie's got the blues...