Geithner for Treasury: Thank you Obama!

It seems that Obama is picking a real titan of global finance for Treasury.

President-elect Barack Obama intends to name Timothy Geithner, president of the New York Federal Reserve, as his treasury secretary to confront the nation's intense economic turmoil, senior Democratic officials said Friday. The stock market soared on the news.

The market cheered its encouragement to the tune of 494 points on the Dow. I think this might be one of Obama's best picks for any cabinet post. It is the most important one as well with the problems we are facing now. I think this guy could be one of the best guys at the helm of the bailout money and our economy going forward. He is a tried-and-true "world crisis warrior" as well helping in the South Korea and Brazil debt crisis's before he helped out with our crisis.

Also I am getting pretty tired of the long, slow dance that Hillary is doing to get the State job. Just announce the damn thing and get it over with. Either that or give the job to someone else. He can't mess around getting his team into place. He needs to hit the ground running as fast as possible.

Unlike Geithner's reported selection, the Clinton saga was proving to be one of the longest-running and more public of the secrecy-shrouded search for an Obama Cabinet.

A week ago, the New York senator flew unannounced to Chicago to meet with the president-elect. That gave way to days of negotiations in which her husband, former President Bill Clinton, agreed to disclose the names of donors to his library and charitable foundation in anticipation of the close scrutiny her nomination would be sure to face.

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GE Facing some Hard Times

I was wondering if GE at $12.84 was a good buy and I came across this article and took some pause. It seems that their GE Capital arm might pull the rest of their fairly profitable businesses underwater.

GE is a bank disguised as an industrial conglomerate. GE Capital is a division of GE, which truly dominates the results of this company. GE Capital has three subdivisions (GE Commercial Finance, GE Money, and GE Consumer Finance). In 2003, GE Capital generated $5.9 billion of GE�s $17 billion of profits, or 35%. By 2007, GE Capital was generating $12.2 billion of their $29 billion of profits, or 42%. Being a bank during the boom years of 2004 to 2007 did wonders for GE�s bottom line. Being a bank now is a rocky path to destruction.

This part seems pretty scary too judging from the amount of insane debt that they have on their books.

GE has $43 billion of long-term debt maturing by June 30, 2009, with another $38 billion due by December 31, 2009. The terms for refinancing this debt will be much worse than the previous terms.

Will they be able to pay the new interest expenses on this debt? Also what happens if they get put on the Credit Watch list by Moody's or one of those other ratings agencies? If GE should lose their AAA credit rating then they are a dead duck. I wonder what the debt covenants and capital requirements due to a ratings cut is on that debt?

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Japanese Schoolgirl Signed to Major League Contract

Women are breaking the glass ceiling everywhere. First Sarah Palin now Eri Yoshida was signed by the Kobe 9 Cruise of an independent Japanese baseball league.

Yoshida, a right-hander who is 5 feet and 114 pounds, throws a sidearm knuckleball and wants to emulate Boston Red Sox knuckleballer Tim Wakefield.

Yoshida threw a hitless inning against male batters during a tryout this month and was among 33 players picked in the draft.

A sidearm knuckleball sounds like a pretty scary pitch to hit as well. This is a perfect pitch for a 5 foot tall, 16 year girl because you don't need to overpower anyone with a knuckler. She can throw it at like 40 miles per hour and guys will fall out of their shoes swinging at it. If she can pick up a slider or a fastball (or any kind of consistent change of pace pitch) then she would be a scary reliever. She's cute as a bugs ear too.

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These Automakers have some Stones!

You have to hand it to these automakers when they are begging for money.

In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren't extended.

He said he couldn't say precisely, but that the company now was burning through "$5 billion each month."

Still, with the $25 billion emergency package, "We think we have a good shot to make it through this," Wagoner said. He said he anticipated that, if the package is approved, GM would qualify for about $10 billion to $12 billion of the money.

They are burning through $5 billion per month? Then that means this bailout will only keep them afloat until May of next year. So they have about a quarter and a half to turn things around or they will be back in Congress with their begging bowl out by Memorial Day. I think GM needs to go into Chapter 11 and hopefully emerge stronger and more able to compete like UAL did. Union concessions is the only thing that will save them now but no one seems to be talking about that.

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The Author of Liars Poker On the Economic Crisis

Now this is some very good journalism on how this economic mess started and some of the people that were involved and actually made money from it. I hope this Michael Lewis guy writes more books because this was an outstanding article. This part is especially prescient:

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.�s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.�s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

Any business owner that leveraged his company 35 to 1 would be seen as a lunatic and would have his credit lines pulled. These investment banks did this as a way to inflate their massive bonus structures. Too bad they did it with other people's money.

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The Youth Vote Won it for Obama

I have damned the youth vote for years. But I finally got a chance to look at the election numbers and how things were broken down and I think the youth may have strait up won the election for Obama.

Between 22 and 24 million young Americans ages 18�29 voted, resulting in an estimated youth voter turnout (the percentage of eligible voters who actually cast a vote) of between 49.3 and 54.5 percent, according to an exit poll analysis released Nov. 4 by CIRCLE, a nonpartisan research center at Tufts University. This is an increase of 1 to 6 percentage points over the estimated youth turnout in 2004, and an increase of between 8 and 13 percentage points over the turnout in the 2000 election. The all-time highest youth turnout was 55.4 percent in 1972, the first year that 18-year-olds could vote in a presidential election.

And 66% of that turnout was for Obama. That means that 14.52 million young voters picked Obama over McCain. Obama won the popular vote by 7.2 million. So you can say that all the Text messaging the VP candidate, the YouTube debates, and college outreach by the Obama campaign swayed this fickle of all voters his way.

It will be very interesting to see what this "what have you done for me lately" generation does when Obama fails to deliver his change message due to the bad economy. Hopefully they can stay with him through this difficult period because this generation has just elected their first President.

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Yang is Out at Yahoo

At last it might even be safe to own the stock again.

Yahoo Inc. co-founder Jerry Yang is stepping down as chief executive, ending a rocky reign marked by his refusal to sell the Internet company to Microsoft Corp. for $47.5 billion -- more than triple Yahoo's current market value.

Too bad there is currently a slowdown in online advertising spending but I think MSFT may come sniffing around the carcass now that they have an "Under New Management" sign up. Too bad they will probably get quite a discount on their new offer. You can forget $31 a share but maybe they could get $15-20 a share.

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Car Company Bailout May Not be a Sure Thing

It seems that the government might not be so quick to bailout these poorly run businesses after all.

Behind the logjam is a troubling reality for the car companies: Bailout fatigue has set in at the White House and on Capitol Hill, where many in both parties have spent the past few weeks being berated by constituents for agreeing to the $700 billion Wall Street rescue.

I still think any bailout needs to come with an automatic renegotiation of UAW contracts so salaries can be set at competitive rates with Japanese automakers. Anything else will just result in another bailout when the automakers blow this $25 billion in a couple of quarters.

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Gadget Users Hardly Use Tech Support

I was kind of surprised by the numbers from this recent survey.

However, for all the talk about online communities, the Pew survey showed only about 2 percent of people solved their technology problem online.

About 38 percent of respondents called customer service, 28 percent fixed the problem themselves and 15 percent got help from friends or relatives.

The rest � about 15 percent � gave up.

15% is a pretty high percentage that just threw the thing in a box and forgot about the problem. I would be willing to bet you that those people might never use a product from a company that they gave up on again.

I can also tell you that the 38% that called customer service probably dreaded the experience. I think the outsourcing of tech help has gone a long way toward making these numbers so low. Most gadget owners figure that they could fix the problem themselves or get a tech savvy person to do it rather then talk to some guy named "James" from Mumbai.

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The Myanmar Junta Has a Friend in Beijing

It seems that the Chinese are going to step in and back up the Junta in their slow response to their crisis.

Other countries must show ``due respect'' to Myanmar, said Wang Baodong, a spokesman for the Chinese Embassy in Washington, at a briefing yesterday. ``Myanmar is a sovereign country. In the end, rescue and relief work will have to rely on the Myanmar government and people.''

That "due respect" is going to doom 100,000 or more people to death by starvation and disease. The Chinese don't want to jeopardize that natural gas coming in from the Junta. And they accuse the US of looking at the dollars and cents over lives? This looks like just another case of the world watching while people are dying by the thousands.

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Petrobras Tries to Corner the Deepwater Rig Market

Well they are pretty close to it since they are hiring 80% of the 21 of the rigs that can drill in 9,800 feet of water.

Petrobras, as the Rio de Janeiro-based company is known, is hiring rigs that can drill in at least 3,000 meters (9,800 feet) of water, Chief Executive Officer Jose Sergio Gabrielli said in an interview last week. The world has 21 such vessels, according to Rigzone.com, which tracks the offshore drilling industry.

The day rates on these things are outrageous as well. They are going for $600K a day and Petrobras is driving the prices up to get at that Tupi discovery. Some people are saying that the Tupi discovery with its 12-30 billion barrels of oil may be as big or bigger than the 18.75 billion barrels in the Gulf of Mexico.

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McCain is Right on Talking to Iran

I think it is Obama who is "naive and irresponsible" when he believes that he can jawbone Iran without preconditions.

McCain rejected the naive comment, saying Obama should have known better, and added: "Talking, not even with soaring rhetoric, in unconditional meetings with the man who calls Israel 'a stinking corpse,' and arms terrorists who kill Americans, will not convince Iran to give up its nuclear program. It is reckless. It is reckless to suggest that unconditional neetings will advance our interests."

The trick that Obama needs to learn is you have to have a "stern public face to Iran" while acting behind the scenes through covert back channels. He should know that you give legitimacy a regime that wants to destroy our ally by meeting them with your public face and with no preconditions. It also ties the hands of your back channel people and freezes out other nations that have better standing with the rogue regime.

Also with any meeting that goes badly you have the potential to look weak when only strength is respected. Obama just needs to adjust the preconditions and state them clearly through the back channel. If Iran turns down the "destroy Israel" language and then proves that the nuclear program is peaceful then we will sit down and hash out a deal together. This is the Khadaffi method. Or the US could simply wait for the Mullahs to die of old age (or be ousted) and then we sit down and hash out a deal with the future leaders of Iran in a decade or so. This is the Arafat method.

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Blackstone Group says "Signs of Recovery" in economy

Hmm, it seems that the huge buyout firm is starting to think the economy is on the mend.

``Markets have stabilized and we have seen signs of recovery,'' Schwarzman said today on a conference call with investors. ``We don't think we're completely through it, but we're seeing signs of improvement.''

Hmm, I think the Bear Stearns bailout may have been the height of the crisis. Things were on the edge of a cliff at that time and could easily fall either way. It was either backwards into the grass or forward into the ravine. The FED was there to stabilize the markets and may get some broad new powers out of the deal. We see now that inflation at a low point and even an modest expansion of consumer spending. If oil drops back down then the recovery might be truly on the way. I guess the Dems will have to go back to the Iraq War as their tent pole issue since the economy may be right on track by October.

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Yahoo Rebuffs Ichans Offer

I think the execs at Yahoo are living in a dream world rebuffing another offer to sell.

``The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft,'' said Icahn, 72. ``I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.''

It looks like they might go to either a proxy fight or maybe Microsoft will come back with a raised offer. I do think that the "vote no" campaign will go a long way to either ousting their board or booting Yang though.

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Farm Bill May Hit Ethanol Producers

I was looking at the new Farm Bill passed by the Senate and this part was interesting.

_Increase loan rates for sugar producers.

_Urge the government to buy surplus sugar and sell it to ethanol producers for use in a mixture with corn.

_Cut a per-gallon ethanol tax credit for refiners from 51 cents to 45 cents. The credit supports the blending of fuel with the corn-based additive. More money would go to cellulosic ethanol, made from plant matter.

I wonder how this change will affect corn and sugar prices. Much of the high price of corn is due to its use as fuel for ethanol. Also I wonder if sugar prices will rise now that it might be used to fuel cars and not just to make Americans fat. That 3rd thing may be a terrible blow to some of the ethanol refiners that are right on the bubble as well. I think you might see some consolidation and bankruptcies in that industry in the near future.

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