Archive for May, 2009


May 29, 2009

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May 29, 2009

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May 27, 2009

U.S. AAA rating is not in jeopardy, Moody’s says. Despite the rising debt load (did someone say $100T?), America’s diverse and resilient economy, strong government institutions, high per-capita income, and central role in the global economy should allow it to emerge from the crisis “without major impairment.”

Moreover they could shut us down if we’d say differently……(ndM)


May 21, 2009

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May 20, 2009


WASHINGTON—A report on growing disparities in the concentration of U.S. aluminum-can wealth, released Tuesday by the Department of Commerce, revealed that 66 percent of the nation’s recyclable assets are now held by the poorest 1 percent of the population.

According to the sobering report, the disproportionate distribution of soda-can wealth is greater than ever before, and has become one of the worst instances of economic inequality in the nation’s history. Data showed that over-salvaging of cans by a small and elite group of can-horders has created a steadily growing and possibly unbridgeable gap between the rich and the mega-poor.

Enlarge Image Can Wealth 

“Although our nation’s upper middle class actually consumes the most beverages, a staggering percentage of these cans wind up in the hands of a very few,” said economist Cynthia Pierce, who worked as a consultant on the three-year, $14 million government study. “It’s a troubling trend. And as a tiny fraction of the population continues to maintain its stranglehold on redeemable can wealth, it’s a trend that shows no sign of slowing.”

According to Pierce, the study points to a distinct economic advantage for the most can-affluent—those who possess the resources necessary to collect, transport, separate, and accumulate more and more cans than the rest of the population.

“Members of this exclusive group come from exceedingly poor backgrounds and have access to outrageously low levels of education, which makes them much better prepared to reap the benefits of digging around in garbage,” Pierce added.

The report details several key factors involved in the lopsided distribution of container wealth, including aggressive foraging, which leads to higher returns on deposits and a tendency to reinvest can profits in additional redeemables, such as beer. In addition, the report found that those involved in the returnable-gathering industry often minimize financial risk by diversifying between aluminum cans and glass-bottle holdings.

While less than 1 percent of Americans own the domestic rights to a majority of Coca-Cola and Pepsi cans, this same group has also cornered the international market by branching out into such imported container commodities as Fanta and Perrier.

“The typical American spends an average of $65 on beverages for every dollar he or she earns back through redeemable deposits, and the rest of that money goes to the country’s can and bottle barons,” the report stated. “Americans who are at a foraging disadvantage due to over-employment and home ownership therefore have limited access to these discarded commodities, causing the market to unfairly favor those with an exclusively disposables income.”

Perhaps more alarming, the report continued, the can monopoly enjoyed by the poorest 1 percent has been unintentionally buoyed by millions of environment-conscious Americans who leave plastic bags full of recycling in front of their homes, which are in turn preyed upon by enterprising collectors.

“These people were born into a lifestyle, often going back generations, where any can left on the street is seen as their birthright, whether they purchased it or not,” Houston resident Dale Palmer said. “They have the knowledge and ability to get out there and scoop up all the good cans before anyone even knew they were there.”

The vast disparity in can-wealth distribution is difficult to understand for many Americans. Most people, according to the report, cannot relate to the lifestyles of the super-poor, who never have to go to work, pay a mortgage, or struggle to find money for rent.

One canned individual cited in the study is can tycoon Will Dorsey, a 33-year-old Detroit resident who spent his childhood living off the funds collected from his family’s vast can holdings. At the age of 16, Dorsey inherited five carts and dozens of garbage bags overflowing with recyclables when his father passed away unexpectedly one cold December morning.

According to economist and New York Times columnist Paul Krugman, people like Dorsey, who maintain an ultra-poor lifestyle that is vastly different from the rest of the population, are egregiously out of touch with the everyday economic realities of mainstream America.

“Dorsey is one of those select few who come from old can money,” Krugman said. “They’re just hoarding their assets so nobody else can benefit. And then they parade down the street with their carts full of recycling.”

In the wake of the report’s disturbing findings, many citizens claim to feel exploited by those who convert their discarded property into cash or change without sharing the incredible profits.

“It’s not fair,” Chicago native Melissa Arnold said. “Something should be done to even the playing field.”

In an attempt to mitigate the disparities in soda-can wealth distribution, Congress is currently exploring numerous options, including levying an 80 percent tax on the incomes of those possessing 100 or more refundable containers, with the ultimate goal of eliminating all recycling programs by 2010.


May 14, 2009

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May 14, 2009

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May 8, 2009

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May 5, 2009

I feel like I have seen this bad gangster movie before.

In the opening scene, a naive investor buys some bonds, explaining to his staff that they are a sound investment secured by hard assets. Even if the company goes under, the investor explains, bond investors stand to get about 80 percent of their money back.

The next day, a government official calls and offers to buy up the bonds at 33 cents on the dollar, while giving controlling interest in the company to the labor unions. The investor refuses. That night, a man shows up at his home.

“We’re not saying anything bad is going to happen to you,” the tough says, “but the big boss is going to be very disappointed in you if you don’t take the deal. By the way, how’s your little girl? Is she still going to school down on Federal Street?” The investor caves.

The evolution of the Chrysler LLC bankruptcy seemed almost as bad. The Obama administration brokered a deal that gave labor unions a 55 percent equity stake in Chrysler, putting their interests ahead of the secured interests of bondholders.

The bondholder response to the deal was positively creepy.

Politicians were probably offering them a worse deal than they could expect to get in bankruptcy court. Bondholders that have been participating in the government bailout program for banks — and thus are especially susceptible to political pressure — agreed to accept the deal. But many of the independent investors balked.

‘Financial Sacrifices’

The reasoning of the hold-outs was captured in a statement by OppenheimerFunds Inc., which said the government “unfairly asked our fund shareholders to make financial sacrifices greater than those being made by unsecured creditors.”

Stories circulated that the Treasury Department exerted extreme pressure behind the scenes when investors refused to take the deal. Public pressure was exerted as well.

President Barack Obama went to the podium to criticize the recalcitrant investors, and Democratic Representative John Dingell of Michigan pressed the threats even harder: “The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury — firms I label as the ‘vultures’ — will now be dealt with accordingly in court,” Dingell said.

All the government stops were being pulled out to present the United Auto Workers with a sweetheart deal that, incredibly, gives its retiree health-care fund majority ownership of Chrysler.

Yes, those are the same workers who pushed the firm toward bankruptcy in the first place with their extraordinarily generous compensation packages. DaimlerChrysler AG’s average cost to employ a UAW worker in 2006, including benefits, was 1.7 times that of Japanese automakers, according to company estimates.

Expensive to Fire

Firing that worker is expensive, too. The 2007 collective- bargaining agreement required the automakers to pay up to $140,000 in severance to a worker whose position was eliminated and who agreed to leave with no additional benefits.

The spectacle should sicken any fair-minded citizen, especially since organized labor contributed about $68 million to Democrats in the last election cycle.

The sad truth is there is enough data on the government rescue efforts to indicate decisively that OppenheimerFund would have received a much better deal if it was politically well- connected. It’s an especially good idea to have connections in both parties.

For comparison’s sake, consider the treatment of Goldman Sachs Group Inc.

When American International Group Inc. crumbled, threatening Goldman Sachs with huge losses, the government stepped in and made the firm whole. It funneled a whopping $12.9 billion to Goldman Sachs through the AIG bail-out.

Part of Club

Might the government have been so generous because Henry Paulson, Treasury secretary under President George W. Bush, and Robert Rubin, an Obama adviser, are both former Goldman Sachs men?

Maybe it’s just a coincidence, but time after time, it is precisely the politically well-connected players who present so much systemic risk that the government needs to protect them at all costs.

Obama recently conceded to an interviewer that “the only thing less popular than putting money into banks is putting money into the auto industry.” With Democrats riding a winning streak, it’s clearly a political risk he is willing to take.

If this were a Hollywood production, a virtuous politician played by Tom Hanks or Jimmy Stewart would speak out against the bailouts and sweep the corruption out of Washington.

Sadly, in real life, it seems there is nobody in either party ready to stand up and fill that role.

Kevin Hassett


May 4, 2009


Inception Date: Dec 01, 2008   –   Inception Capital: 10,000 $

Net Assets Value (May 01, 2009): 12.495 $   (monthly return -7.31%)

Current gain on Speculative Equity Holdings:   +650 $

Current gain on Core Equity Holdings:   +812 $

Current Loss on Protection Hedges: -3,830 $

Net Income Premium:    +4,751 $

Dividends:   112 $

All time return: 2,495 $ (+24.95%)



Inception Date: Dec 01, 2008   –   Inception Capital: 30,000 euro

Net Assets Value (May 01, 2009): 37,170 euro   (monthly return -3.12%)

Cash                                                             49,780

Market value options sold                              (12,610)

Market value options bought                              0

All time return: 7,170 euro (+23.9%)