US benchmark commodity futures hit $49.75 a barrel in New York, while the price of Brent in London fell to $48.45 – prices not recorded since May 2005.
Oil has lost about two-thirds of its value since July’s record high prices, as the economic slowdown around the world has weakened demand.
I feel bad for all the people who pre brought their heating oil on the fear that it would keep going up.
From Jeff Matthews Is Not Making This Up….
So the odds are good that Buffett himself is not breaking a sweat over his own stock’s 40% decline since his late September cavalry-to-the-rescue investment in Goldman Sachs.
After all, who knows more about Berkshire than Warren Buffett?
Still, somebody out there is indeed breaking a sweat about Berkshire, and not just the company’s stock. Credit default swaps in Berkshire—insurance against a default by Berkshire—have been climbing ever since the market began its September swoon, and suddenly spiked in the last few days.
In the end of the world as we know it, even Berkshire is not a safe haven. Although to be fair, people are mostly worried that it is going to lose its AAA rating. Not go bankrupt per say.
Broadway Federal’s story isn’t exceptional. Easily overlooked amid the crisis of big banks today, small-scale financial institutions are, for the most part, holding steady—and sometimes even better than steady. According to FDIC data, the failure rate among big banks (those with assets of $1 billion or more) is seven times greater than among small banks. Moreover, banks with less than $1 billion in assets—what are typically called community banks—are outperforming larger banks on most key measures, such as return on assets, charge-offs for bad loans, and net profit margin.
One reason community banks are doing so well right now is simply that they never became too clever for their own good. When other lenders, including underregulated giants like Ameriquest and Countrywide, started peddling ugly subprime mortgages, community banks stayed away. Banking regulations prevented them from taking on the kind of debt ratios assumed by their competitors, and ties to their customers and community ensured that predatory loans were out of the question. Broadway Federal, for its part, got out of single-family mortgages when they stopped making sense. “A borrower comes and asks, ‘Do you do interest-only, no-down-payment, option ARMs?’ ” recalls Hudson, with a chuckle. “No!” The bank focused instead on expanding its reach to niche borrowers, such as local churches.
This brought to mind something that the Governor of South Carolina said in a recent Wall Street Jouranl editoral called “Don’t Bail Out My State”…
Community bankers tell me that they are now at a competitive disadvantage for being careful about who to lend to, because others that were less disciplined will get a federal bailout.
The Big Mean Scary Guy is gone. Let’s call him Vice-Admiral; he was not an Admiral but he was a vice, and it gives a vague premonition of his stature in this global, multibillion dollar company. The rumor is that Vice-Admiral was told not to get on the plane for the trip he was planning. Click Here to continue reading.
From the Wall Street Journal….
Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM’s physical plant during this period was $128 billion, meaning that a net $182 billion of society’s capital has been pumped into GM over the past decade — a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.
As a society, we have very little to show for this $465 billion. At the end of 1998, GM’s market capitalization was $46 billion and Ford’s was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies’ unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better — for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.
Ouch.
Wall Street hit levels not seen since 2003 on Wednesday, with the Dow Jones industrial average plunging below the 8,000 mark amid a dour economic outlook from the Federal Reserve and worries over the fate of Detroit’s three automakers.
A meaningless number. Posted here only for those who missed it. More interesting is this chart from Calculated Risk comparing the current stock market crash to other historical crashes.
There was a legal ruling last week in California that we’re going to hear a lot more of in this business. Conte v. Wyeth. This case involved metaclopramide, which was sold by Wyeth as Reglan before going off-patent in 1982. The plaintiff had been prescribed the generic version of the drug, was affected by a rare and serious neurological side effect (tardive dyskinesia, familiar to people who’ve worked with CNS drugs) and sued.
But as you can see from the name of the case, this wasn’t a suit against her physician, or against the generic manufacturer. It was a suit against Wyeth, the original producer of the drug, and that’s where things have gotten innovative.
It stuff like this this gives rise to the phrase “First, let’s kill all the lawyers.” But the real problem here is the First District Court of Appeals in San Francisco (is that a shocker or what?). This case should have been laughed out of court.
The airline industry goes bankrupt all the time. But we still have air travel. Why should we assume that bankruptcy means the end of the car industry?
My solution would be for the shareholders to be wiped out. All the secured debt holders to be given equity in proportion to how much money they were owed and all the unsecured to take a hike. After all that is done the Government should take over a portion of the pension obligations seeing as how the government has guaranteed them anyway. After all that is done, you would probably have a car industry that could survive on its own.
The worst possible solution (and the one that will probably happen) will be for the car industry to receive just enough money to keep on being a walking dead man.
(h/t Naked Capitalism)
A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debts, like mortgages and car loans, and about 44 percent more in unsecured debts, like credit cards and medical and utility bills, than filers in 2001.
Their incomes, meanwhile, remained static over those six years, according to the study, which used data from the 2007 Consumer Bankruptcy Project, a joint effort of law professors, sociologists and physicians. Researchers surveyed 2,500 households nationwide that filed for bankruptcy in February and March 2007.
I can’t but help note that in 2005 they change the bankruptcy laws to make it harder for people to get out of their debts. The goal was to force more people to pay what they owed. But the practical effect seems to have made it so that people pile the debt even higher before they declare bankruptcy.
I am not one of those touchy feely poor victim type people. But I never thought that the 2005 law was a good idea. From my perspective, the real problem is that banks were willing to loan people too much money. If you loan people too much money, it does not matter what the law says. You are not going to get repaid.
In Pakistan they protest receiving aid. In Iceland they protest not receiving aid. In the U.S. everyone just becomes a bank …
