Mish vs. Schiff Battle Royal
I had wanted to stay as far away from this ruckus as possible, but the amount of bad feelings from both sides is a too much to leave without comment.
In case you do not know, Mish Shedlock runs the great site Global Economic Analysis and is one of the sharpest minds in the business. Peter Schiff is a well regarded and TV popular analyst that runs the Euro Pacific Capital fund. He too is a sharp mind in a world of dull blades. Over the past week there has been bad feelings by fans of both men over a post that Mish ran which looked at Mr. Schiff's investment strategy as a whole, as well as some returns that the Euro Pacific Capital fund has had as of late. Mr. Schiff's response is here.
All I want to say about this is that I have no problem with Mish taking on Macro views held by Schiff. Certainly there were some areas that Schiff was way off on (decoupling was a bad oversight) and others like a stronger dollar may or may not last. Not all of Mish's ideas have come to pass either. Nobody's ever do. What I think was a bit overboard was Mish attacking the returns of Euro Capital based on a few samples he was able to see. I am sure 2008 went very bad if you bet on a weaker dollar and strong overseas markets. In the longer term these may not be bad bets at all.
I love debate and analysis. I love heated debate most of all. But pointing fingers at a short term return rate of any fund seems too far to go. Leave the "look at these terrible numbers" to the readers to find out based upon good analysis. Mr. Schiff is an honorable man that never tried to hide any information. He is also much better than Bill Gross who continues to be obscene with his call for the government to buy all the crap he holds at the taxpayer expense. Let's keep it clean all and keep illuminating what is important. Nuff said.
Gold and Silver Looking Shiny and Pretty
Gold and his little brother Silver really had a nice day today. While the metals are going up strong against the Euro and other currencies, they are still moving a bit slower against a puzzling stronger dollar. All in all today was the consolidation of strength I was looking for last week. I like both metals very much going forward.
On the treasure front, the Odyssey Marine Exploration (OMEX) show continues to be very intriguing. More and more potential targets have popped up. The stock itself now sits at $4, up a buck from where I bought in. Hopefully they will start pulling up some yellow metal and things will go from there. I still like this company very much, and I can even see another profitable side of the business other than just gold treasure hunting: Finding old relics like one of a kind cannons with tons of history attached to them.
Full Disclosure: I own gold miners GG, KGC and I own OMEX stock.
I am still surprised that the same act of the same bad play keeps being performed at the Globe Theater (Shakespeare reference) we call Washington DC. The whole "Bad Bank" idea is just another retread of the Hank Paulson "Super SIV" plan from a while back. Have some entity buy up the bad assets from the banks and presto! The banks are happy again! The same problem keeps coming up: The banks will not sell the assets unless they get a huge premium on their market value, and the entity (thats you and me the taxpayer) cannot be seen as taking too much of a hit by overpaying by too much. A little overpaying is good, a ton is not so great.
The new plan I have seen referred to as the Bad Asset Relief Fund or B.A.R.F. What could be more fitting. It seems these sticking points have caused the B.A.R.F to be bagged because no compromise could be reached. Clusterstock had this Charlie Gasparino CNBC transcript (sorry for the ALL CAPS):
I CAN'T REMEMBER THE TREASURY DEPARTMENT BAILING OUT STEVEN COHEN AND ART SANDBERG. THEY'RE BAILING OUT CITIGROUP AND BANK OF AMERICA AND THE BAILOUT PLAN THEY HAVE ON THE TABLE RIGHT THE NOW, AT LEAST ONE THAT'S BEEN RECENTLY TEED UP IN THE PRESS WHICH IS ESSENTIALLY THIS AGGREGATOR BAD BANK WHERE YOU BUY ALL THE BAD ASSETS BETWEEN $1 and 2 TRILLION. IT'S BEEN LEAKED OUT THEY'RE LOOKING TO DO THIS.
THIS THING, ACCORDING TO SOURCES, TELLING CNBC, THIS THING IS NOW OFFICIALLY BEEN PUT ON HOLD. IT'S HIT A MAJOR SNAG. THEY CAN'T FIGURE OUT EXACTLY HOW TO MAKE IT WORK. IT WAS THE SAME PROBLEM BACK IN SEPTEMBER WHEN WE BROKE THE STORY ABOUT THE T.A.R.P. WHEN THE MARKET WENT UP 500 POINTS BECAUSE IT MAKES GREAT CONCEPTUAL SENSE. IF THE GOVERNMENT CAN COME IN AND BUY UP ALL THE BAD STUFF OFF THE BALANCE SHEETS OF ALL THE BIG BANKS. IF THIS STUFF CAN TRADE UP IT'S WORTH 50 CENTS ON A DOLLAR AND NOT 22 CENTS ON THE DOLLAR, EVERYBODY'S HAPPY.
MAKING THAT THING WORK HAS BEEN PROVEN VERY DIFFICULT.
No doubt everyone would be happy if the 22 cents on the dollar items could fetch 50 cents or more. Everyone except the idiot that bought them that is. More:
THE TREASURY DEPARTMENT, THE FDIC AND THE FEDS RECENTLY, THE LAST COUPLE OF DAYS, HAS BEEN HAVING MEETINGS WITH SENIOR CEOs AT THE MAJOR WALL STREET FIRMS TO PRICE THE STUFF SOLD TO THIS AGGREGATOR BANK. YOU KNOW, THEY'RE MORE CONFUSED NOW THAN EVER BEFORE. THE FEELING I GET, AT LEAST THESE TALKS ARE ONGOING. THERE WAS TALK ABOUT A MEETING THIS WEEKEND WITH ALL THE CEOs TO TRY TO DO THIS THING. I HEARD THAT. THAT IS NOT HAPPENING, AT LEAST AS OF 10 MINUTES AGO. NO MEETING CALLED. NO WAY WALL STREET EXPECTS THAT MEETING TO BE CALLED.THEY CAN'T FIGURE OUT TO MAKE THIS WORK. THE PRICING IS AT ISSUE.IF YOU HOLD THE STUFF, WALL STREET HOLDS IT ON THE BALANCE SHEET, THEY CAN MARK IT TO THEIR MODEL 50 CENTS ON THE DOLLAR. OF THEY SELL IT, THE MARKETS SAYS IT’S 22 CENTS ON THE DOLLAR.
IF THE GOVERNMENT BUYS IT AT 22 CENTS, MOST OF THE BANKS WOULD TAKE MAJOR LOSSES. WE’LL BE BACK TO WHERE WE WERE A COUPLE OF WEEKS AGO. IF THE GOVERNMENT BUYS IT AT 50 CENTS ON THE DOLLAR, THE TAXPAYER COULD BE TAKING IT ON THE CHIN. THAT'S THE PROBLEM WE HAVE HERE. WHILE THEY MAY SHELF THIS AGGREGATOR BANK, THEY MAY COME UP IN WITH SOME OTHER ALTERNATIVE LIKE INSURANCE OR SOME SORT OF GUARANTEES ON THIS STUFF BLANKET ACROSS THE BOARD.
Let me just add that if the banks cannot sell at 22 cents on the dollar without going bust, 50 cents will not do the trick either. My bet is that the hold up on this plan is that the banks want about 70-75 cents on the dollar for assets that can only fetch 20 cents on the open market. If the difference was just 20 vs. 50 cents I think the Treasury would have sealed this deal up in 1 hour. Mark my words, when and if details come out the banks will have been asking for well over 3 times the market price.
At the end of the transcript Mr. Gasparino notes that due to the intractable differences of buying the junk, an insurance plan is being worked on instead. So the Treasury does not want to pay 70 cents for a 20 cent asset as the loss of 50 cents would be too much, but they will consider insuring the assets to 70 cents so that when they are sold they will have to pay the same 50 cents difference? This is what passes as thinking in Washington. This is a distinction without a difference. Those in the negotiations should remember one immutable fact of life: You Can't Polish a Turd.
Friday Night Entertainment
A little fun, a little music, and all will be well.
Say Hello to My Little Friend
Say hi (spelled hai in LOL speak) to this little fellow:
1969 502cid Chevrolet Camaro
There is nothing like the sound of a nasty old fashioned big block muscle engine. Take a listen to this monster; the camshaft is obviously dialed in for a higher RPM band as it is really rasping at idle. Sounds SWEEEEEEETTTTTT!!!:
Songs for the Weekend
A little music to end the week, as always.
I used to love this video when I was younger! Take a look at Duran Duran and "Rio":
With lyrics perfectly in step with our times, listen to Iron Maiden with "Be Quick or be Dead". Especially great "See what's ruling all our lives, see who's pulling strings":
I have always liked this song. Listen and remember Janis Joplin with "Bobby McGee":
Have a good night.