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Today's News and Commentary
Monday, September 08, 2008
MARKET COMMENTARY
September 8, 2008 - Market Overview
We have gone from Merger Monday to “Bank Failure Monday” as Silver State Bank (SSBX) was shuttered by FDIC last Friday.
This week’s “Bank Failure Monday” is Silver State Bank (SSBX), a Nevada Bank. SSBX had $2 billion in assets with major overexposures to C&D Loans at 689.7% of risk based capital and to CRE Loans at 883.6% of risk based capital. The loans were 82.9% disbursed, so collections were drying out quickly. Pay attention to these numbers, as they will become a key reason for the cascade of bank...
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INTERNATIONAL
U.S. investors these days are convinced that stocks, and foreign stocks in particular, are never going to recover. So they are hiding under the bed instead of looking for investment opportunities.
The negativism on foreign stocks is based on a mis-perception of currency trends. Sure, the lower dollar valuation has encouraged U.S. exports and discouraged U.S. imports. That means our recovery will take place ahead of that of some other countries'.
But the irony is that a relatively modest growth rate in the U.S. is...
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ENERGY
Hurricane Ike is now barreling towards the gulf as a much stronger storm than Gustav. The constantly updating forecast track of this category 4 storm is now pointed at western Louisiana and east Texas. That target has changed numerous times since the first track had Ike moving up the eastern seaboard rather than entering the gulf. The storm is due to enter the gulf early Wednesday and that is when the forecast track will become more accurate.
The sudden change in the track since Friday had traders buying crude futures at the open on Sunday night. The majority of oil and gas...
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DIVIDEND
We have a Canadian energy royalty trust in the Dividend Portfolio whose dividend has never let us down. (There was also one in the now-closed Low-Priced Stocks Portfolio with a similarly dependable payout). There's another kind of income security from Canada called an income trust, or business trust, that dividend investors might want to consider. They're similar to energy royalty trusts in that they avoid corporate income taxes by paying out most profits to shareholders. However, unlike energy trusts, which own energy reserves, income trusts operate regular businesses — machinery,...
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HEDGEFUND
Hank Paulson, America’s treasury secretary, has learned that the trouble with having a bazooka in your pocket is that you may have to use it. He used the bazooka analogy to describe the massive fire-power the Treasury could deploy, if necessary, in support of Fannie Mae (Ticker: FNM) and Freddie Mac (Ticker: FRE), America’s beleaguered mortgage giants, thanks to a new law signed in July.
Yesterday, Mr. Paulson used that bazooka. Six months after the Bear Stearns debacle, and two months after America’s Treasury unveiled unprecedented steps to support the mortgage market...
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