My Life & Another Drop In The Markets to Come?

Tuesday, April 14, 2009

I know I haven’t posted in a few days and I am sorry.  Life has been very complicated for the past few weeks and I have not found much time to write.  The kids were on break last week which always changes how and when I work.  And lately, my younger daughter, Carissa is having a hard time with mommy working and when she has a hard time, the whole family is impacted.  Also, I am very preoccupied with a potential exciting business partnership and have been spending most of my in due diligence.  But I have been keeping up on the news - some of which I would like to share.  I am especially concerned about the recovery we are seeing in the stock market and whether it is real or “fake” as some think, please read here.  Are we looking at the first bottom on the market with more to come?  If we look at PE’s of the S&P and believe the concensus of $50 of earnings, what is the right PE mulitple - 14 which would give us and S&P around 700.  Or is the “new” PE multiple more like 6-8, which would put the S&P at 300-400?  I like Thomas AU’s commentary on this and am cautious we might be in for another down leg here.

And for another great insight from William Black on how he thinks this banking crisis will lead to the end of the Obama presidency - because we “have failed bankers giving advise to failed regulators about failed assets - how can it resukt in anything BUT failure.“  So true…what was Obama thinking when he hired his financial team?  Black goes onto say that “the Democrats picked the wrong financial team.“ “Tim Geithner, the current Secretary of the Treasury, and Larry Summers, chairman of the National Economic Council, were important architects of the problems.  Geithner especially represents a failed regulator, having presided over the bailouts of major New York banks.“  “Geithner is flouting the law, in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent. He has introduced the concept of capital insurance, essentially turning the U.S. taxpayer into the sucker who is going to pay for everything. He chose this path because he knew Congress would never authorize a bailout based on crony capitalism.“  He goes further to state that Geithner’s PIPP plan essentially “perpetuates zombie banks by mispricing toxic assets that were mispriced to the borrower and mispriced by the lender, and which only served the unfaithful lending agent.“

Wow, alot to take in….not sure where we are heading, but I don’t think it will be smooth sailing from here.  OK back to focus on my new exciting partnership - I cant share yet.  But I will.

Are You Interested In What The Future of Investing Will Look Like?

Tuesday, March 31, 2009

I just read a great article by Bill Gross on how the future of investing will depend on the future of the global economy.  The global economy will be defined by three things:  deleveraging, deglobalization and re-regulation.  These characteristics will lead to “slowing global growth, a heightened risk aversion, a distrust of conventional investment model portfolios, and a greater emphasis on surviving as opposed to thriving.“  His view is that the bull markets we had become accustomed to are over and that investing in this climate is “no longer child’s play”.  Read here.

The New Toxic Asset Plan

Tuesday, March 24, 2009

Yesterday, we finally got some clarity on the Treasury’s toxic asset plan and the market appeared to like it – but the devil is in the details.  I am going to attempt to simplify it – for my readers as well as for myself!!

So, let’s start with an overview of what has been clogging the credit markets:  the biggest problem has been the legacy (toxic) assets which are complicated parts of home mortgages - many of which have gone bad, and many more of which are likely to go bad in the near future. For simplicty, suppose a bank has $100 million (face value) of these assets on its books.  But due to the increased bad debts associated with these assets and mark to market accounting, the banks have had to mark the assets down to $80 million, and in the process have had to take huge losses (in this case $20 million). Most of the banks would like to get these assets off its books, but claim there is no market for them or in other words that there is a liquidity issue.

In reality it might not be a liquidity issue since there are people out there who might be willing to buy those assets for say $10 million. That, however, would require the bank to write-off an additional $70 million and if it did so, it would be bankrupt. However, let’s just say this bank is in the class that has been deemed “too big to fail.”  So in comes the NEW PLAN.

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Ladies:  Do You Have What It Takes To Be a Leader?

Tuesday, March 17, 2009

Last week, I sat in a crowded room listening to Joanna Barsh, Director at McKinsey & Co talk about “Centered Leadership: How Talented Women Thrive”.  While listening to this very accomplished women, I wondered if this economic crisis would have been any different had there been more women at the table (see FT article which refutes this theory).  I don’t know the answer and I don’t want to turn this into a gender debate but I do wonder why so many women start off after college with just as much drive, intelligence and education as men but only a few ends up reaching the top echelons - in business, education and government.  We never seem to have a majority of women at the top.  Yes, I know there are a few women at the top levels – but are there enough of them to make a difference?  How can we, as mothers and mentors, help more women succeed?  How can we help our daughters succeed? What are the characteristics of successful women leaders?  Can women LEARN how to be more successful?  Joanna Barsh thinks so and spoke to us about the findings of a McKinsey initiative, called the McKinsey Leadership Project.  The initiative was driven in part to learn what “drives and sustains successful women leaders” and to impart this knowledge to young women to help them navigate the sometimes difficult path to leadership.  So what did Mc Kinsey find out in this study?

First, McKinsey found that there were several pre-conditions to successful leadership:  intelligence, desire to lead, communication skills and tolerance for change.  If a person already possessed these skills, McKinsey found that successful women leaders also had five “broad and interrelated” dimensions:  meaning, framing, connecting, engaging and maintaining energy – all of which can be learned.

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Ultimate Blog Party

I am going to the LIVE blog party in NYC next week on March 25 - please let me know if you might want to come.