Wednesday, 09 September 2009 01:00

News for this day 9 of September, 2009

Buffett Joins Call to End 'Short-Termism' in Markets: But Mr. Buffet, "short-termism" is how Wall Street makes most of its money. How in the hell do you fit long term thinking into quarterly performance reviews and annual bonuses? Mr. Buffet, are you DAFT? Don't you know what is important in life (on Wall Street)??? See Is a Crash Impending? as we wonder exactly what is keeping this market afloat.

Somebody in these stories is wrong. Who do you think it is??? Consumer Credit Plummets by Record $21.6 Billion vs Retail Hiring Study Shows Signs of Growing Confidence in U.S. Recover. On the same front page in Bloomberg - U.S. companies are still reducing the ranks of temporary workers, showing that any rebound in overall employment won’t happen soon, according to William Hester, an analyst at Hussman Econometrics...

...the number of temporary employees with nonfarm payrolls since 1990, according to data compiled by the Labor Department. Increases in the number of temporary jobs in 1991 and 2003 preceded similar recoveries in payrolls, as the chart illustrates.

“Temporary hiring is a reliable leading indicator,” Hester wrote yesterday in a report that featured a similar chart. Last month’s decline in these jobs was “one of the most discouraging data points” in the latest employment report, he added.

The number of temporary workers dropped by 65,000 in August to 1.74 million. The total has fallen each month since January 2008, a month after the current U.S. recession officially started. During the 20-month streak, temporary jobs have declined by 33 percent.

Further losses “would probably push back any recovery in nonfarm payrolls,” Hester wrote. “Temporary hiring will almost surely bottom prior to overall employment.”

Separately, Manpower Inc. said today in a statement that its index of U.S. companies’ hiring plans set a record low for the third straight quarter. The latest reading was based on the outlook for fourth-quarter jobs. Manpower, the world’s second- largest staffing firm, began compiling the gauge in 1962.

Click to enlarge

hiring.jpg

Houston, we have a problem... Moody’s Ruling Is ‘Landmark’ Decision, Einhorn Says. This was basically just a matter of time. I was a little early on my timing, though. See A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton -11/13/2007. Here's Bloomberg's take, which I particularly favor: Judges Punish Wall Street Over Excesses as Regulators Talk About Reforms

As the White House and Congress debate how to regulate financial firms to avoid another economic crisis, judges have assumed the point position in punishing Wall Street for causing the worst recession since the 1930s.

The executive and legislative branches have been discussing reforms such as more regulation of hedge funds and transparency for derivatives as a response to the financial crisis that began a year ago. As that battle with a reluctant Wall Street inches forward about how to prevent another disaster, judges are taking the first steps toward the same goal, punishing executives and issuing rulings with national impact.

Last week, U.S. District Judge Shira Scheindlin threw out a key free-speech defense that credit raters had used for years to thwart investors’ fraud suits, knocking $1.5 billion off the market value of Moody’s Investors Service Inc. and the parent of Standard & Poor’s LLC.

“Judges have lifetime appointments and are freer to act on their conscience than regulators,” said Charles Elson, chair of the University of Delaware’s corporate-governance center. Judges can act more decisively than regulators or politicians because they’re “insulated from the political process,” he said.

Free from the pressures of lobbyists, judges typically refrain from showing emotion or expressing opinions during court proceedings to appear impartial. During sentencings in criminal cases, they sometimes let their hair down about their feelings about the damage Wall Street firms or their executives did.

Here is a most interesting tidbit from the story...

U.S. District Judge Gerald Lynch urged Congress in a recent ruling in Manhattan to revisit a 1995 rule that authorizes the SEC -- but not private parties -- to sue those who aided or abetted a fraud. Under current law, he said he was forced to dismiss a lawsuit in March that was filed by investors seeking to recoup losses from Joseph Collins, a former lawyer for Refco Inc. The futures trader firm went bankrupt after hundreds of millions in hidden debt was found.

“It is perhaps dismaying that participants in a fraudulent scheme who may even have committed criminal acts are not answerable in damages to the victims of the fraud,” Lynch said.

Hmmm... May I recommend those interested pundits read On Disclosure, Honesty, Ethics, and Outright Lies: Who can you trust these days? (basically, one big, continuous "I told you so"). If reporters, investors, regulators and judges are really so bent out of shape when it comes to secrets and hidden liabilities, I strongly suggest you read my blog next week when I start releasing the JP Morgan subscription content (preview it here:Why Doesn't the Media Take a Truly Independent, Unbiased Look at the Big Banks in the US?). Secrets, lies and alibis... So juicy you would think it was a reality TV show! Back to the Bloomberg story, 'cause it gets better...

No Lobbyists

Judges aren’t targeted by lobbyists to influence their rulings the way the other branches of government are. They aren’t paid much either compared with the defendants who come before them. The Chief Justice of the United States makes $223,500 -- about the same as a junior lawyer at a large New York law firm -- and all other U.S. judges make less.

Judges in Ohio and Pennsylvania have taken unprecedented actions to slow or prevent foreclosures by Wall Street banks as the impact of the recession, including loss of jobs, made it impossible for homeowners to make mortgage payments -- sometimes on homes whose values dropped to less than the amount borrowed.

U.S. District Judge Christopher Boyko kicked off the trend of no longer rubber-stamping big banks’ foreclosure requests. In Cleveland in October 2007, he ruled that Deutsche Bank AG couldn’t foreclose on 14 properties because it couldn’t come up with the paperwork to prove it owned the delinquent loans, which had been pooled for a securitization.

On the Hot Seat

More recently, in August, U.S. Bankruptcy Judge Randolph Haines summoned a Wells Fargo & Co. executive to Phoenix so a bankrupt homeowner could cross-examine him about why his bank had taken months to respond to her request to modify her loan.

The homeowner, Bobbi Jean Giguere, wrote the judge after the bank refused to talk with her unless she hired a lawyer, an expense she said she couldn’t afford. She said the bank told her “to abandon her home.”

“I can’t do this mentally, emotionally or financially at the time,” she wrote the judge, according to a court filing. “It is and has been my goal to save the home. But I am getting nowhere with Wells Fargo.”

After the cross-examination, the judge blocked any foreclosure while authorizing a modification of her mortgage.

It is truly refreshing seeing judges in the civil courts "do the right thing". Unfortunately, my personal experience has not seen the same, but it is refreshing nonetheless.

Last modified on Wednesday, 09 September 2009 01:00

2 comments

  • Comment Link Reggie Middleton Friday, 11 September 2009 03:06 posted by Reggie Middleton

    Being short LRN would have provided a short term profit, but this is not a short term focused blog. That stock is very thinly traded which allows for relatively wide swings from relatively small amounts of activity and there is little in their quarterly results that varied significantly from expectations (see [url]http://boombustblog.com/Reggie-Middleton/1137-LRN-Quarterly-Results-Review.html[/url]. They came in about 8% lower on revenues than I expected (but still grew them substantially), but expanded margins greater than expected and profit came in on target for the year. The loss was anticipated both by the street consensus and my research.

    The margin expansion was also a result of spreading costs as a result of synergistic growth, and not cost cutting, as has been done by many companies with negative revenue growth this year.

    Small, young, high growth companies will produce accounting losses as they reinvest proceeds into the company for growth. If one were to trade the short side, I would think a more liquid company would be in order.

    Report
  • Comment Link Leech Wednesday, 09 September 2009 09:51 posted by Leech

    you missed something here .. should have been short LRN

    Report
Login to post comments