It Feels Great To Be A Sloth Investor

Warren Buffett once remarked that successful investing consists of long periods of inactivity, bordering on sloth. That pretty much describes my attitude towards investing coming into the new year. If we are going to have more of the October massacre, then we should at least seek cover and conserve cash. 

The losses from Citigroup and Bank of America were staggering and confirmed that the worst of the financial mess is far from over. Analysing when the good days will arrive seem to be a futile exercise now. In any case, I am less worried about the economic recovery which will definitely happen with so much money being dumped into the system. 

Read the full article here.

Coming To Grips With A Harsh Year In 2009

I wish all readers of Jeflin’s Investment Blog a Happy New Year in 2009.

The past year has been sobering for taxpayers, retail investors and fund managers, what with severe declines in housing, mortgages, banking, stock markets, commodities, retail, automotive, shipping industry, etc. The extreme volatility in 2008 may be over but more of the same challenges await us.

Personally, I have made a new year’s resolution to be a more careful reader of financial reports, and by that, I mean reading with an inquisitive mind. Of course, if a management wants to get creative with their financial statements and the auditors are in a collusive mood (remember, the person who pays the piper calls the tune), our money is fair game for the predators.

Read the full article here.

Haven Trust Bank Close Shop

State regulators closed Haven Trust Bank of Duluth, Ga., and Branch Banking & Trust agreed to assume all the failed bank’s deposits.

Haven Trust, which had $572 million in assets, is the 20th bank to fail this year amid the financial crisis.

BBT of Winston-Salem, N.C., entered into an agreement with the Federal Deposit Insurance Corp. to assume all of Haven Trust’s $515 million in deposits for $112,000.

BB&T also agreed to buy $55 million of Haven Trust’s assets. The FDIC will take control of the rest.

The failed bank’s four branches will reopen as BB&T branches Monday.

Source: Wall Street Journal

Yet another bank bites the dust.  The last bank to be closed in the state was First Georgia Community Bank, Jackson, GA, on December 5, 2008.

Of the 8,500 federally insured banks and thrifts, the FDIC had 117 on its internal list of troubled institutions as of June 30, a five-year high. The agency doesn’t disclose the banks’ names.

Well over half of these 8500 8,500 banks and savings and loans are expected to tap the FDIC’s temporary guarantees to prevent a flight of deposits.

Back in September, I saw only 11 bank failures but the number has doubled in the space of a few months. I am sure there will be more casualties to come in 2009.

This consolidation is a necessary path to embark. Weeding out weak and mismanged players will result in a healthier banking sector.

Citigroup Layoffs 10000 Employees

The tangible effects of recession has hit home. According to the Wall Street Journal, Citigroup will begin distributing 10,000 pink slips to its employees (not only in the United States, but worldwide). The large scale Citigroup layoffs underscore that it is not just Americans who are suffering from large scale job losses.

I am not surprised with these layoffs as troubles rocking the financial sector have not ended yet. After the mortgage mess, financial institutions still need to purge their credit card and auto loans as part of the deleveraging process and it will be a while before we see healthy balance sheets.

The economy is also in a recession with lower consumption and production, so banks can expect lower interest earnings.

For those who are not employees of Citigroup, you may be less perturbed by the retrenchments. However, if you are a Citigroup credit card holder, you have to beware that your credit card interest rate may take a hike.

Up to 20% of Citigroup customers could face a rate hike of up to 3 percentage points. I think it is really poor timing for retailers as these people may just need to use credit cards for gift buying during the upcoming holiday season. Now they could change their mind with the rate hike.

A Ray Of Hope For Stock Investors

Red October, one of the worst month in Wall Street history, ended on a sweet note on Friday as stocks rallied to cap a week of impressive gains. For the week, the Dow Jones was up 10.1%, S&P 500 was up 9.5% and the Nasdaq had gained 9.8%.

There are storm clouds gathering but at the moment, investors are caught up in the euphoria and unmoved by grim economic indicators. Read the full article here.

Flush DBS High Notes 5 Down The Drain

After a prolonged wait for embattled investors who bought into Lehman linked products, their worst fears have been confirmed. While mediation for Hong Kong Lehman minibond investors is currently underway, for those who purchased DBS High Notes 5, they might as well flush them down the drain.

Read the full article here.

Global Stock Markets Pricing In Recession

Stock markets are now entering a period of painful decline as countries around the world face up to the prospect of recession. While interbank lending has eased tentatively as central banks’ measures to inject cash loans to banks unblocked the credit crunch, investors have little time to absorb the good news.

Read the full article here.

Prudence Is The Way To Go

Let us look at the below comic strip:

Don’t you just love CEOs who talk about issuing options to align their interests with shareholders? They conveniently omitted that that they are aligned on the upside but without money committed like shareholders, they have virtually no risk and little downside.

Read the full article here.

Are You Rattled By The Stock Market Crash?

The credit crunch is now the most critical challenge facing the US administrators and central banks around the world. Without loans to lubricate the system, perfectly sound businesses may not be able to meet short-term obligations, and consumers’ reluctance to purchase goods/services will force the economy into seizure with more shutdowns and rising unemployment.

Read the full article here.

Great Depression Is Good For Stock Investors

A dreadful scenario that has been bothering investors is that this recession drags on for years and stocks simply do not go anywhere. For the purpose of discussion, let’s assume that instead of a 1-2 year bounce back, the economy is indeed stagnant or experiences low growth for the next decade, resulting in mediocre returns from the equity markets.

Read the full article here.