Archive for October, 2008

  • CEO Pay at the Nine Government-Owned Banks
    , October 20th, 2008 at 8:36 am

    Here’s the 2007 CEO compensation at the nine banks that have been semi-nationalized:

    Merrill Lynch
    John Thain
    $83,092,713
    Goldman Sachs
    Lloyd Blankfein
    $53,965,418
    Morgan Stanley
    John Mack
    $41,734,815
    J.P. Morgan Chase
    James Dimon
    $28,856,330
    Bank of New York Mellon
    Robert Kelly
    $20,515,810
    State Street
    Ronald Logue
    $19,551,400
    Wells Fargo
    Richard Kovacevich
    $18,510,694
    Citigroup
    Vikram Pandit*
    $3,160,000
    Bank of America
    Kenneth Lewis
    $20,040,000
    Total: $289,427,180
    * Pandit was promoted to CEO in Dec. 2007, 8 months after joining Citigroup.

    This, of course, doesn’t include taxes.

  • Go TED Go
    , October 20th, 2008 at 7:48 am

    The TED spread is down to 327.
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  • More Misery in Earnings
    , October 20th, 2008 at 7:03 am

    If I had to guess, I’d say the economy is in a recession right now. That’s not exactly a brilliant insight. It seems pretty obvious just by looking at equity prices.
    Next week, the government will deliver its first report on Q3 GDP and I’m expecting a dismal number. Or rather, whenever we get the final report on Q3 GDP, I expect a dismal number. The problem with GDP reports is that they’re subject to constant revising, so it takes along time, several years in fact, to find out how well the economy is really doing.
    A better measure is the unemployment rate. This, too, is imperfect, but it’s good at giving us a look at direction. And that direction has been nothing but down recently. The jobless rate reached 4.4% last March and got to 6.1% in September. If the rate gets to 8%, and we’re already nearly halfway there, that would be a 25-year high. I think 8% is very possible.
    We’ll also get a good look at how the economy did in the third-quarter from corporate earnings. This week, one third of the companies in the S&P 500 report. Earnings for the S&P 500 will probably drop about 10% for the third quarter. There’s a lot of guesswork involved but the earnings declines will most likely continue through the first half of 2009.
    The Wall Street Journal notes:

    Top-down estimates of 2009 earnings range anywhere from $87 a share down to $60 a share. An average of a handful of such forecasts is that earnings will fall roughly 10% next year to about $73 a share. Thus, Wall Street’s consensus may be overestimating earnings by at least 25%. Still, that means the S&P is trading at about 13 times forward earnings — also a relative bargain.
    That forecast also assumes earnings will bottom early next year, resulting in at least a 10-quarter earnings decline of 30% from the 2007 peak to their trough. That would roughly match the 1989-91 earnings downturn, which also started with financials, lasted 10 quarters and shaved about 24% off earnings.

    The problem with looking at this market isn’t valuations. Equity prices were never in a bubble. The problem was that fundamentals cracked, and we don’t yet know where bottom is.

  • Minorities and the Housing Market
    , October 20th, 2008 at 3:47 am

    I was doing some research on any connection between the rise of minority homeownership and the crash of the housing market. Personally. I’m skeptical but I’m open to the facts. I guess it’s a hot issue judging by these two quotes.
    Barry Ritholtz:

    The four biggest problem areas for housing (by price decreases) are: Phoenix, Arizona; Las Vegas, Nevada; Miami, Florida, and San Diego, California. Explain exactly how these affluent, non-minority regions were impacted by the Community Reinvesment Act?

    Steve Sailor:

    About half of all mortgages for blacks and Hispanics are subprime, versus roughly one-sixth for whites. Not surprisingly, the biggest home price collapses have occurred in heavily Hispanic cities such as Las Vegas, Miami, Phoenix, and Los Angeles.

    I don’t have anything profound to add, but I thought it was interesting to come across this two quotes within a few minutes of each other.

  • CWS: The Most Accuratest Blog in the World
    , October 17th, 2008 at 3:03 pm

    Zignals did an analysis of the TickerSense Blogger Sentiment Poll. I’m proud say that your humble blogger is, by far, the most accurate prognosticator.
    Well, there’s one small caveat. I made my opinion known in just one of the 19 weeks ( but I was right)!
    Full disclosure: I have zero memory of making that call.

  • Bank of England to Cut Rates
    , October 17th, 2008 at 2:52 pm

    The Bank of England is poised to cut interest rates to their lowest level since ’94.
    That would be 1694.

  • “Who Put This Dick on My Back?”
    , October 17th, 2008 at 2:29 pm


    You gotta love traders. This is also something you can pull out to anyone defending efficient markets.
    (Via: The Danza Tap)

  • Sentences I Never Thought I’d Write
    , October 17th, 2008 at 1:20 pm

    Good news, the VIX is down to 67!

  • A Former Lehmaner Tries to Make Do
    , October 17th, 2008 at 12:56 pm


    (Hat Tip: B-Riz)

  • Debt: The Good and the Bad
    , October 17th, 2008 at 12:33 pm

    Felix comes to the defense of Suze Orman. I think he makes a good case for her. Orman’s advice probably helps more people in more important ways that almost anyone you see on CNBC.
    The only curious thing I would add is that when you get right down to it, how hard is it to say, “don’t buy things you can’t afford?” It’s not really about finances, it’s just basic discipline. Don’t buy stupid stuff you don’t need, and save what you can. Repeat. I guess I shouldn’t be too harsh. For many people, this lesson may come as a revelation.
    Warren Buffett has often said that the biggest problem that consumers have is credit card debt. I think he’s right. I’m afraid to find out how many people have bought pizzas that turned out to cost them $200.
    Speaking about debt. Virginia Postrel has a great column in Forbes decrying the endless hand-wringing of debt-phobes. Yes, debt can be a good thing.

    When credit is cheaper to use and easier to arrange, people do use more of it. Hence those big, scary numbers, which grow along with the economy and the population. Contrary to a common perception, however, the people driving up the totals aren’t primarily the financially strapped. They’re “high-wealth consumers in their prime earning years,” observes Andrew Kish, an economist at the Philadelphia Federal Reserve. Almost half the growth in debt between 1989 and 2004 (the most recent year for which data are available) came from the highest-income 20 percent of American households. (By contrast, the bottom 20 percent held about 3 percent of consumer debt—an increase from 1.9 percent—and accounted for a bare 4.5 percent of the growth.) If the rich are getting richer, it makes sense that they’re also running up more debt. They can reasonably expect to pay it.
    These affluent families also account for half of the outstanding consumer debt. So the $10,000 average that Obama cited isn’t in fact owed by the “typical” family with an average income. That figure is calculated by spreading the much larger debts of the rich over the population as a whole. All by herself, Cindy McCain owed at least $200,000 on two American Express cards, according to her husband’s campaign disclosure documents. That sounds terrifying until you realize that this wealthy woman pays her monthly AmEx bills in full.