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• The FDR Solution: Flashback to the '30s

  Posted Sep 22 2008, 01:51 AM by Jon Markman
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  Filed under: investing, Investment Banking, subprime, Jon Markman
  Money Blog: Top Stocks Blog - MSN Money

  

  Watching Treasury Secretary Henry Paulson make the rounds of Sunday morning television shows to make his case for applying a trillion dollars' worth of CPR to the U.S. banking system, I was struck by the prosaic quality of his argument. You sure didn’t have the sense that he thought this was any big deal.  I mean, it was almost the same tone as you’d hear on a recorded message of the day’s surf forecasts.  Wake me when we’ve spent all our money.  
  
  The humdrum quality of technocrats like the former Goldman Sachs chief makes me wistful for the days of Franklin Delano Roosevelt. Now there was a guy who was mad as hell about the state of the banking system, and wasn’t going to take it anymore. And could he ever deliver a speech.
  
  FDR’s Inaugural Address in 1933 – in which he excoriated bankers for their greed, selfishness and incompetence -- was his most famous, and you may be amazed to discover how relevant it sounds today. "There must be an end to speculation with other people's money!" he said.   Read More...

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• Should GE fire its CEO?

  Posted Jun 24 2008, 01:05 AM by Charley Blaine
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  Filed under: investing, subprime, GE
  Money Blog: Top Stocks Blog - MSN Money

  

  If you're a GE shareholder, you've probably been pondering the idea since April 11, when the company shocked investors around the world by reporting a first-quarter profit decline that absolutely no one expected.

  Since then, there's been chatter in blogs (See this from George Yared) and message boards about whether Immelt's tenure should end. Some posts are on MSN Money.

  The New York Times noted on Sunday that Wall Street seems to have fallen out of love with GE. Douglas McIntyre, a Top Stocks partner blogger, says the company is in need of a major change in direction. "It's a dog of a stock," he wrote this week.   Read More...

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• A very high cost for big mistakes

  Posted Mar 16 2008, 07:37 PM by Charley Blaine
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  Filed under: investing, M & A, Bear Stearns, banking, subprime, Federal Reserve, interest rates
  Money Blog: Top Stocks Blog - MSN Money

  

  The proposed sale of Bear Stearns on Sunday to JPMorgan Chase for $2 a share, or $236 million, will keep litigation lawyers busy for years as enraged shareholders seek to recover anything from the disaster.

  The losses from Bear Stearns' demise are shocking, so shocking that Asian and Australian stocks tumbled on the news. The dollar was fallling. Crude oil jumped over $111 a barrel, and European shares were expected to open lower as was the U.S. stock market.

  From a peak price of $171.52 in January 2007, Bear Stearns managed to lose 98.8% of its peak market value of $20.2 billion in less than 15 months, all because the company bet everything that the housing market and the markets for securities backed by subprime mortgages wouldn't break. It did   Read More...

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• Schwab responds to money market fund column

  Posted Jan 16 2008, 03:50 PM by Jon Markman
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  Filed under: investing, subprime, Jon Markman
  Money Blog: Top Stocks Blog - MSN Money

  

  During times of great volatility in the stock market, a lot of people will turn to high-yielding money market funds to stash their funds. Yet late last month, I wrote a column – “Your safe money might not be so safe”  -- observing that in some cases, money market funds might not be so worry-free themselves.

  I highlighted one money market fund at brokerage Charles Schwab --  Schwab Value Advantage Money Fund -- as an example of the type of fund that has in the past obtained a significant amount of its yield from investments in commercial paper issued by troubled banks’ structured investment vehicles.

  Schwab spokesperson Sarah Bulgatz disagreed with my assessment of the fund. Here is her response:

   “It is a mistake to imply that all structured investment vehicles (SIVs) have subprime mortgage exposure. In Schwab's case, our money market funds have no direct investment in subprime mortgages or collateralized debt obligations.  We do hold a small percentage of highly-rated SIVs, but these SIVs themselves have very limited exposure to subprime. As of January 2008, Schwab’s taxable, non-government money market funds have less than 3.7% of their funds invested in SIVs, and these SIVs themselves have on average less than 1% of their investments in subprime. That translates into less than 0.04% of Schwab’s money market portfolios indirectly exposed to subprime. Since our money market funds are all managed similarly, the percentage of SIV holdings within each fund are close to the average. To say, as the column does, that "If you … keep cash in the Schwab Value Advantage Money Fund you have had a sub-prime time bomb ticking away in your brokerage account," is simply not true.   Read More...

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