"You know what the news is-- in a minute, you're going to hear the rest of the story"- Paul Harvey
You & Us= UBS
UBS announced a first quarter net loss of 11.535 billion. UBS is the old Paine Webber. All I can says is "You" should let "UBS" continue to lose money on their own. I would get the heck out of there to protect "Us" from losing money.
Legg Mason posted a net loss of $255.5 million for the quarter after it took a big charge to a bail-out its money market funds that were exposed to risky mortgage backed securities.
Have you noticed the numerous ads on the radio from the Securities Investor Protection CorporationSIPC lately? I find this odd since I don't ever recall hearing an ad from SIPC in the past. Clearly something is going on that we are not aware of.
SIPC is suppose to cover investor losses in the event a brokerage firm fails. But, SPIC is not the same as the FDIC. Here are the details of what SIPC will cover in the event your brokerage firm goes under;
"Customers of a failed brokerage firm get back all securities (such as stocks and bonds) that already are registered in their name or are in the process of being registered."
This statement isn't very clear since most investors with brokerage accounts have their stocks registered in "Street Name".
Street Name means your name is not actually on the stock or bond certificate. The name that appears on the certificate is that of your broker, and this is referred to as being held "in street name".
This being said, if a brokerage firm fails, technically you own nothing. If your securities are held in Street Name, the name on your stock or bond certificate is actually the brokerage firms.
In the 1970s-1980s investors were insistent on having their stock certificates delivered to them by mail. This was to ensure that the name on the securities was actually the investors name,
Here are the rest of the details of what SIPC will cover;
"After this first step, the firm’s remaining customer assets are then divided on a pro rata basis with funds shared in proportion to the size of claims. If sufficient funds are not available in the firm’s customer accounts to satisfy claims within these limits, the reserve funds of SIPC are used to supplement the distribution, up to a ceiling of $500,000 per customer, including a maximum of $100,000 for cash claims."
Oh, now this is where things get dicey. The maximum your account is insured for is $500,000 per customer. So, if your account is over that amount you are SOL.
In addition, if your money market account value is over $100,000, SIPC will not cover anything over that amount.
Given the number of CDO's, SIV's, and CMO's in money market accounts and on brokerage balance sheets, I would do everything in my power to protect myself.
See the Legg Mason news above.
Bush vs Buffett : What consumers should do with their rebate checks
Bush: "This package will lead to higher consumer spending and increased business investment,"“Americans can spend this money as they see fit: to help meet their monthly bills, cover higher costs at the gas pump, pay for other basic necessities.”
Buffett: "Use the money to pay down your credit card debt. Paying an interest rate of 16-18% doesn't make any sense.
Microsoft- Yahoo
Does anyone other than CNBC or Bloomberg really care what happens?
Rice Shortage
Anyone who went out and bought rice to hoard after the so called shortage was announced is an idiot. The only people who care about a shortage probably have Asian roots.
Another Look at Outsourcing
I was speaking to a client yesterday that said he went to a convenience store to buy gas. He said a guy at another pump put $5.00 of gas in his vehicle, and then went into the store and purchased $20.00 worth of beer and cigarettes.
In a similar note, my wife and I went vulture shopping on Sunday looking at beach condo's that were selling at distressed prices. We went to several resort areas along the beach. Pensacola Beach was laced with trashy people (drunks, tramp stamps-tattoos, cigarettes hanging out of their mouths), and 60 miles east a very different.
If US corporations have to deal day in and day out with people like we saw at Pensacola Beach, or the guy my client saw at the convenient store, I don't blame them for outsourcing. I would do the same thing.
Market Overview
Crude Oil hit a high of $122.49 today. Don't be fooled by the stock markets resistance to higher oil prices. Consumer spending (with the exception of food & energy) is in the tank. No pun intended.
Car dealers (Chrysler & Suzuki) are coming up with guarantee gas gimmicks to get consumers to buy. You know things are bad when they will buy your gas for you.
The current trend for oil looks to be $135-140/ barrel which would put regular unleaded around $4.00 a gallon. Oil prices have not only put the breaks on the economy, but now its shifted down to reverse.
As a result, I believe high energy prices will;
-Slow growth in China and India.
-Interest rates will rise to protect the dollar and fight inflation.
-Travel sector profits will decline (Hotels, cruises, airlines, restaurants).
-Truckers will suffer.
-Food prices will continue to rise.
-Real Estate will remain unaffordable.
And on and on we go.
On Sunday, I stopped by a gas station to fill up and saw "10% Ethanol" on the pump. I think the last time I saw that on a pump was about 15-20 years ago.
Like I have said before, nothing changes in our nation but the names and the faces.
During the Carter years, crude oil rose from $15.85 to $39.50 in 12 months. President Jimmy Carter told US citizens (now called consumers) to turn down their thermostats. The Big Three automakers were told (like today) to make automobiles that met the CAFE fuel economy mandates passed in 1978; by the mid-1980s.
The White House installed solar power panels on the roof . President Reagan had them taken down in 1986.
The bottom-line is we have been here before. Energy problems come and go, but consumers keep making the same mistakes. Real Estate bubbles come and go, but investors keep making the same mistakes. Stock Market bubbles come and go, but investors keep making the same mistakes.
Nothing changes but the names and the faces.
In my opinion the stock market is a very risky game relative to what is going on in the economy.
