Archive for October, 2009
3Q09 FUNdamental Facts
- Banks want to pay off their TARP (Troubled Assets Relief Program) IOUs to escape federal pay restrictions, but still profit from taxpayer-funded guarantees on their debts.
- None of the players are talking about the Federal Deposit Insurance Corporation bond-guarantee program which benefits them more than TARP.
- They don’t want federal interference but want the benefits of government liquidity programs.
- These institutions probably save about 2% in annual interest costs by issuing debt under the FDIC-sponsored TLGP (Temporary Liquidity Guarantee Program). For all of the players, this could be $7 billion per year.
- Following are the names of the key players, their TARP IOU and the amount of bonds guaranteed by the FDIC (all in billions) : Citigroup ($50,$27), Bank of America ($45,$44), JP Morgan ($25,$38), Wells Fargo ($25,n/a), Goldman ($10,$29), Morgan Stanley ($10,$24), GE Capital ($0,$37).
Asset Strategies Portfolio Services, Auburn Hills, Michigan provides quarterly market facts. See all services offered at www.assetstrategie.com
Measuring Market Performance at Asset Strategies Portfolio Services
George Vitta, President of Asset Strategies, gives advice on looking at market index performance. “Investors are mislead by the financial press on a daily basis. There is too much focus on the Dow Jones Industrial Average (DJIA) and whether it returns to 10,000 as it recently did, causing us to lose sight of the bigger picture. While the performance of the DJIA continues to be influenced by not only economic and corporate reports, natural disasters, and domestic and foreign political events, this stock index is computed from the daily price change of 30 very select publicly held U.S. companies. Several of the 30 companies are not even part of the U.S. industrial market sector. Further, unlike other stock indexes whose daily performance is based on the change of total market value of each company, the DJIA’s daily performance is based on the change in the price per share of each of the 30 stocks. This means the entire direction and the magnitude of the indexes daily performance can be unduly influenced by one, two, or simply a few stocks.”
A truly meaningful and more accurate approach, which parallels the philosophy of Asset Strategies, is to look at the S & P 500 or Russell 1000 Indices. “First, we believe that the companies represented in either of these indices is a superior representation of our diverse economy”, says George. “Second, we think the method for calculating these indices’ daily performance is more accurate than the DJIA methodology and thus gives a meaningful indication of the U.S. stock market’s daily results. Finally, we hope this critical, yet rational thinking inspires investors to stop and consider what they just heard or read for the benefit of their investment success.”
Asset Strategies Sponsors Midwest Public Risk Fall Conference
The Midwest Public Risk Fall Conference takes place October 8-10 in Branson, MO. Asset Strategies Portfolio Services will sponsor and attend the meeting. For more information go to www.mprisk.org
“Same Old Hope: This Bubble Is Different”
“This time it’s different” are often quoted words following a financial calamity, such as the world has been going through for more than one year. Actually, it’s not different this time, it just feels that way. For a healthy dose of 1) why we should not feel anything is different, 2) why in fact, the financial environment may be worse than the past, 3) why we are bound to repeat past mistakes, and 4) a preview of what today’s mistakes could lead to in the near future, read this article that ran in the New York Times on Septemeber 14. To read the article that George Vitta, President of Asset Strategies Portfolio Services, is referring to please cut and paste the following link to your browser.
www.nytimes.com/2009/09/14/business/economy/14bubble.html?scp=1&sq=same
