HAPPEE November 16th

Don't worry :) Be HAPPEE :) This is a Humorous Alex Posting Possibly Exciting Entertainment (HAPPEE).


First, I have discovered a cute animated series on the financial markets/news called Hoofy and Boo. I should warn you that Hoofy is pretty bullish and Boo is bearish on the markets. See http://www.minyanville.com/mvtv. Its a pretty funny series.


Second, thinking of funny .... what would politics be without some humor? On the left side I recommend http://www.amuniversal.com/ups/features/doonesbury/index.htm and http://www.azcentral.com/arizonarepublic/opinions/benson. On the right side I suggest seeing http://townhall.com/funnies and http://www.conservativecartoons.com/archives.php. If you're more in the middle then I suggest http://alexdegaston.blogger.com ;) I'm one of the 99.8% of all people who views themselves as being somewhere in the middle.

Third, this is less humorous but its about an old boss making history. Well actually she's a boss I never personally met. I was only on the contract for a month because I got offered a gig very close to home in Microsoft .NET and they were going to do Java. Well anyway General Dunwood was a 2* general in the Army and commander of the Military Traffic Management Command (MTMC) in the US Army at the Hoffman Building in Alexandria. I was working for Pragmatics Corp. and we were doing a lot of business for MTMC and I was on a contract there before I left to go work for SI International for 5 years. And since then she's now moving up in the world as she's now the first female 4* general in American history. See http://www.washingtontimes.com/news/2008/nov/14/dunwoody-becomes-first-female-4-star-general/



On a more serious note I share the following picture of a Russian dictator meeting with a man who wants to wipe Israel off the map.

I personally think that its inhumane how the Jews in Israel are treating the Palestinians. However I don't think the solution is to wipe out Israel and its not to send children in as suicide bombers to kill Israelis. IMHO the best solution will be to help foster moderate behaviors in both societies. How about the G20 spending money on youth camps for Palestinian/Israeli children to mix for several weeks each summer? They could hold these camps in the mountains of Europe and spend about $500M per year bringing together 100,000 youth of both sides for plenty of opportunities to network. Spend another $50M per year on cellphones and give them unlimited text messaging capability in the local areas of Israel, Gaza and the West Bank. I wonder how much money Vladimir Putin and Mahmoud Ahmadinejad spend on helping build bridges of understanding in the world? Anyone got the numbers?

GM and Ford may be knocked out by Europe

IMHO there is NO hope of saving GM/Ford from bankruptcy. The question now is whether they can file Chapter 11 quickly enough in order to restructure and save as much enterprise value as possible. If not then we'll likely see millions lose their jobs in a Chapter 7 filing.

The suppliers of GM/Ford in Europe are immediately exposed and on their own now. Thus they're going to be demanding payment up front for all the work they're doing for GM/Ford. This means that Ford USA and GM USA are going to have to send a lot of money to Europe NOW or else their investments there will be completely at-risk of total loss. Neither is a good alternative because their stakeholders (i.e. bondholders, shareholders, retirees' pensions/benefits, etc.) depend upon ALL their assets in order to maintain a potentially healthy balance sheet.

In the USA its pretty straight forward that suppliers are ahead of bondholder/shareholders in line to get paid in bankruptcy. The courts know that enterprise value is best-preserved by having the suppliers/dealers continue to operate as normally/smoothly as possible. And since both companies have plenty of bonds right now the suppliers here in the USA aren't nervous YET. However in Europe its not the same, especially when involving foreign companies like GM/Ford.

I hope they file Chapter 11 in time to avoid Chapter 7. A total liquidation of both firms would be very messy and bad for the US economy. At least in Chapter 11 the business could continue running while the reorganization takes place. That's why GM and Ford must file Chapter 11 now.

Waiting for Congress to act is absurd. It'll do nothing to save their European operations. Now if Congress specifically mandates that the money must be sent overseas then it could help their suppliers get there insurance restored or keep the European operations going. But that's unlikely to happen as the Congresscritters would have a horrible time right now explaining a European bailout to the people back home. And letting their European operations collapse will cause their global enterprise values to take a huge hit. And IMHO that would be very bad news for the retirees and employees with lots of seniority because I think they are the ones who will ultimately end up owning the enterprise value of these companies once the shareholders/bondholders' claims are wiped out.

Any thoughts or is my logic flawed? I sincerely wish these companies' stakeholders (especially the retirees/employees) all the best. For an interesting perspective please read http://ml-implode.com/staticnews/2008-11-15_InsurerspullcoverfromGMandFordsuppliers.html

Corona and Yorba Linda Fire

Most of my childhood was spent living in Orange or Norco in Southern California. I remember in 1978 seeing a huge fire engulf much of the mountainside between Corona/Norco and Orange County along the 91 freeway. In 2004 on a visit to California I drove on that freeway and noticed that much of the area that had burned was now filled with houses. I thought "someday they'll burn". Today its on fire. I hope that the firefighters can quickly contain the disaster.

http://news.google.com/news?hl=en&ned=us&ie=UTF-8&ncl=1270817571

AWFUL 1.001

Greetings folks this is the 1st report of "Alex World Finances Unveiled Live" (AWFUL). I'm calling it Volume 1, Number 1. Here's the AWFUL news for you.

The global assets bubble burst (GABB) is creating a situation in America that reminds us of the 1930's or the Gaza strip. Tent cities and shantytowns are popping up in many places across America. See http://tinyurl.com/2008housing for news stories on this. In the meantime there are plenty of housing vacancies around the country.

The inventories of homes owned by banks are at a record high. When a home goes into foreclosure it usually goes up for auction. If the loan(s) on the home are less than the proceeds of the auction than the bank gets paid off. When the home is worth less than the loan(s) then the bank gets the home. And the banks have purposely been keeping too many homes on their books because they are playing accounting games. If they own a house with a 300K mortgage but its worth 200K then if they sell it they'll have to take a 100K hit on their books now. So they hold on in hopes that their balance sheet will be rescued by an upturn in the market. In the meantime for each of these homes there is a family out there that could have a place to live. See http://countrywide-foreclosures.blogspot.com for one BLOG that has been watching one of the nation's largest mortgage institutions history of recent years.

Now what's making matters worse is that in Congress's 700B bailout they included a provision to get rid of mark-to-market accounting requirements. This now lets banks do more mark-to-model accounting and play more accounting games. As a result for the quarter that just ended and for future quarters its really impossible to know which banks are telling the truth and which ones aren't. And I can't risk being too frank on which ones I think are the most dishonest and/or insolvent. That's because President Bush has promised to aggressively prosecute anyone who spreads bad rumors about the banks. All I can do is say "I don't know". But I can tell you what I did with my money. I sold ALL of my bank stocks and I consider the stocks of all the banks to be like playing a roulette wheel. And it looks much of the rest of the investment world has done the same as stocks have tanked over 30% since Congress passed that bailout. However the real suffering is not in the asset price losses. Its being felt by the homeless. Remember them whenever you drive by a REO that's been sitting for a few months because a bank is taking advantage of the new law associated with the 700B bailout.

I will not be investing in bank stocks except for banks who decide to self-impose transparency upon themselves. For starts I expect that any bank holding REO's will count them as zeros for assets and a money drain on operating expenses. I wish that the OCC/OTS/FDIC/FRB/SEC wouldn't let banks count them for any regulatory capital ratio calculations or SEC filings. That way we'll see the inventories clear faster, the pain gets taken/cleared and start facilitating the process of getting families into these homes. The Federal Reserve has been using ample power to increase the money supply and flood the market with credit. Right now there are millions of Americans (myself included) who can get tens of thousands of dollars of credit at zero percent interest to help finance these kind of transactions. Investors will gobble up these homes IF they are auctioned up. And in cases where a home has less utility value in it than the costs of taxes/insurance/repairs/liabilities (i.e. nobody will buy it) then the counties/cities will get the homes for free to help solve their own problems of unemployment and homeless people. With all the natural resources and hungry people to feed, clothe and provide shelter we're going to need plenty of workers in the future.

I know that some greatly fear what could happen to home prices if the banks all dumped their REO inventories. Prices would go down and more people would be "upside down" in their homes. The collapse could accelerate. Well the idea that this dropping would continue indefinitely is all hogwash. The bottom line is that people are willing to pay money to rent a place to live. And any decent housing unit in a livable location will bring in some level of rent. And with the Fed rates at a very low level and certain to stay very low until the market recovers and with trillions in liquidity being pumped out you can be sure that there will be plenty of investors creating a floor on the prices of these properties. Once we reach the floor we'll be in good shape moving forward. However the longer it takes to reach the floor then the harder and longer it'll be to get out. Typically we hit bottoms around the same time the companies in big trouble completely capitulate and finally clean the crap off their books.

Debut

I announce to the people of the world that I've decided to start publicly blogging. In the past I've blogged on private networks. I've run my own http://www.degaston.com website. And I've built hundreds of websites and web-based applications. But this is my first public BLOG using one of the several leading site hosting companies.

I emphasize "first" because I have to be honest about the technological facts. Google just can't match the overall power/functionality of the Microsoft offerings in collaboration/websites and information/computing. Microsoft owns the desktop machines and they are quickly taking over the servers market as IBM, Sun and others are collapsing.

Microsoft Sharepoint is quickly becoming the standard for secure, managed collaboration/information and applications processing. IT professionals everywhere are switching from 2nd-rate vendors like Sun Microsystems (think Java), IBM, Oracle, and Dell to Microsoft for the whole software experience and forward-thinking organizations like Hewlett-Packard for the whole hardware/integration experience. And several solutions are already in place that bring almost everything in office productivity (MOSS) and team productivity (TFS) that are Sharepoint-based. It won't be long until ERP's, CRM's and almost all lasting software is well-integrated with Sharepoint and the Microsoft .NET foundations.

Now its true that I could be proven wrong. If I was always right 100% of the time then I'd be able to easily become a billionaire in the stock market. Therefore I'm just going to make my best guesses as ethically and honest as possible. And if I'm wrong I'll eat humble pie and admit it.