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Thanksgiving Reading
Tweet Share on Facebook November 26, 2008 CommentSettle in after some turkey with a few good reads:
For the libertarian in your life, McSweeney's updates Ayn Rand for the current financial crisis.
The New Yorker on Ben Bernanke's radicalness.
The WSJ on Tim Geithner: Secretary of Bailouts.
Brad Setser on troubles for sovereign wealth funds.
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AIG: $1 Salary For CEO
Tweet Share on Facebook November 25, 2008 Comment (2)Looks like AIG's perk-filled glory days are officially over starting with CEO Edward Liddy, who is following a time-honored tradition at troubled companies by slashing his salary to a buck.
Via the WSJ:
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Dick's Sporting Goods: Cheap Coupons, Cheap Stock
Tweet Share on Facebook November 25, 2008 Comment (2)Dick's Sporting Goods today shows off a sign of the times. Ahead of what could be the worst holiday sales season in a decade for American retailers, it's offering up coupons for 20 percent off select merchandise on its Web site alongside other deals to entice an increasingly thrifty consumer.
That's good news for shoppers, but bad news for investors who fell in love with the company over the past several years.
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Citigroup: 4 Bailout Questions
Tweet Share on Facebook November 24, 2008 Comment (2)The government's decision to prop up Citigroup opens a new chapter in the ongoing financial crisis. This latest rescue, larger by far than the bailouts of Bear Stearns or American International Group, sets the newest precedent for how far the government will go in its continuing efforts to keep the financial sector afloat.
The basics:
Citi is on the hook for the first $29 billion in losses. After that, the dominos fall like this: The Treasury will be responsible for 90 percent of the next $5 billion in losses. Then, the FDIC will handle 90 percent of the next $10 billion. Lastly, the Fed takes 90 percent of losses beyond that. -
Geithner Gets It
Tweet Share on Facebook November 21, 2008 CommentMSNBC says New York Federal Reserve President Tim Geithner will be named Treasury Secretary on Monday.
Here's some background on him:
A quick rundown from the NYT.
His recent speeches are here, here and here.
The largest knock against Geithner is the Fed's decision to let Lehman Bros. fail, but he's among the more credible and connected candidates out there and the only one with first-hand experience in the trenches of the current credit crisis.
Markets are rallying on the news at least for today, so if nothing else Wall Street seems happy with the pick.
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Financial Crisis: Terms You Need to Know
Tweet Share on Facebook November 21, 2008 CommentThe Associated Press offers a handy guide to some often-mentioned economic and market terms.
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Warren Buffett: Unemployment Heading "To New Heights"
Tweet Share on Facebook November 21, 2008 Comment (6)Fox Business scored an interview with Warren Buffett today, and issues some excerpts ahead of time. (The interview airs at 4 p.m. ET):
On Unemployment:
“There are going to be more people unemployed…but I'm not worried about how we come out in the end. I mean, I'm not worried about five years from now. Five months from now, can be very painful…it will be considerably higher…It will happen eventually [surpassing 8%], and we will go on to new heights, but it will not turn around by mid-year next year.”
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Friday Fed Foto Fun
Tweet Share on Facebook November 21, 2008 CommentOur sexiest Treasury Department overlord, Neel Kashkari, can play many roles (via the FT). (Older: Gawker finds his high school yearbook...)
Also, is this the signal the financial crisis has jumped the shark? LOLFed.
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Investors: Poorer Everywhere
Tweet Share on Facebook November 21, 2008 CommentWith the S&P 500 at an 11-year low after yesterday's rout, Merrill Lynch surveys the damage.
World equity market capitalization has lost more than $35 trillion from the market top -- an amount equivalent to the entire spending of the U.S. consumer during 2004-2007.
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Auto Bailout Tide Turns
Tweet Share on Facebook November 20, 2008 Comment (4)It is not hard to understand that the producing and consuming of automobiles might properly seem the purpose of life to the General Motors management, or that it might seem so to other men and women deeply committed economically or emotionally to this pursuit. If they so regard it, they should be commended rather than criticized for this remarkable identification of philosophy with daily duty. It is harder to understand, however, why the production and consumption of automobiles should be the purpose of life for this country.
Jane Jacobs, The Death and Life of Great American Cities, 1961.
We've reached an important moment in the current economic crisis. If a bailout for the auto sector is truly dead until the Big 3 come up with a plan for the government's cash, it will be because this is the week America finally decided against throwing more cash into even our most iconic industries.
Watching this debate last night between the NYT's Andrew Ross Sorkin debating David Cole from the Center for Automotive Research on Charlie Rose sums up the sentiment: Drastic change, not extra help, is what's needed in Detroit.
Mitt Romney's Op-Ed this week struck the same note:
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
Our own Rick Newman, who smartly backs bankruptcy, sees a tide that began turning against American automakers decades ago:
They alienated millions of customers. You have to try hard to give up 30 percentage points of market share, which is what the domestic automakers have done since 1970. The downfall began with the introduction of cheap cars like the Ford Pinto and Chevrolet Vega, meant to battle thrifty imports. Those cars and numerous follow-ons now wear badges of horror identifying them as some of the worst cars in history—with millions of owners to bear witness.
There's an important point here: Willingness to support teetering industries may be faltering, despite obvious ongoing threats to the economy and markets (stocks are down hard again today). I'm not saying unqualified bailouts are a good answer, but as the likes of Citigroup continue to stumble, any marked change in public sentiment that threatens to shut off the tap should be watched closely.
