Thursday, May 14, 2009

A Brave New World?

A Brave New World

"All our science is just a cookery book, with an orthodox theory of cooking that nobody's allowed to question, and a list of recipes that mustn't be added to except by special permission from the head cook."
- Aldous Huxley, Brave New World, Ch. 16

A quote from Huxley’s A Brave New World seems appropriate at this juncture. Huxley wrote a futuristic book that did so much as to question how modern day trends might evolve into a futuristic world where people are numb and mindless sheep.

Let the Sun Shine In…
A story that drew little to no attention this week deals with the Bloomberg lawsuit in which they filed a motion for summary judgment against the Federal Reserve of New York. The Federal Reserve gave loans to a number of banks during the financial crisis. (1) The Federal Reserve will not make disclosure of the banks who received loans. More importantly, the Federal Reserve refuses to list the collateral it received for the bank loans. I would like to remind readers that the public will be put over the barrel on this one. Not only was Secretary of Treasury Tim Geithner in charge of the Federal Reserve during the loan arrangement, but it is obvious that the Obama Administration must have accepted the role Geithner played. Moreover, we can expect the Federal Judge (an appointee of the Bush Administration) to back the Federal government. However, I wanted to remind readers that the Federal judges receive lifetime appointments for reasons such as this. Should she rule to open the books, there is really nothing the government can do to stop her…except appeal the case to a higher court.

As one manager for PNC told me “Well a good portion of those toxic assets now belong to the Federal Reserve…and they are not our problem any more.” I am sure he had no idea that he was going to be quoted in this blog.

The Recession-proof City
In a visit to Las Vegas nearly 10 years ago, we visited a friend named Steve. He billed Las Vegas as a miracle city. One of the last places in the United States where a person could graduate high school and still earn $100 grand a year. If waitresses upgraded their game with the proper investments in silicone, they too could earn $70,000 to 80,000 as cocktail waitresses. Aside from Las Vegas becoming a Mecca for retirees, it also was the fastest growing city in the U.S. for several years running. This could have been the part where enough eternal optimists got together to cook up CityCenter. (2) This futuristic city built in the middle of a land of rock, sand, and desert demonstrates that business models should always have contingency plans for a worse case scenario. (See bankruptcy) (3) A city and town built on the excesses of a credit-driven economy (in many ways similar to the Roaring 20’s) has a rendezvous with destiny. Quite simply, there are currently not enough U.S. dollars to keep this city floating for any extended period of time. Even the Train Track to Nowhere relies on a state like California and its people who are in the midst of financial abyss. (4)

Still though, it appears that the March and April rallies have pumped a bit of juice into casino stocks. My recommendations are to short all of the casinos including:
MCRI: After one big down day, traders were back piling into this dandy… Looks like a loser to me…
MGM: MGM Mirage, which announced Thursday that it had completed a dilutive $1 billion public stock offering priced at $7 a share, closed down 10.8% to $7.76. MGM originally said it would offer 81 million shares, but instead sold 143 million.
STN…oops they already filed for bankruptcy. (5)

The End Around
I must admit, that I knew of no one who was unemployed at the beginning of the year…now I know of at least a dozen people who have lost their jobs. And I will give anyone associated with the auto industry a pass on this one. Still though, Wall Street shrugged off an increase in unemployment claims, an upward revision in last week’s phony numbers, and another record in continuing unemployment. (6) One would gather that SCC (a short play on consumer discretionary spending) would be a slam dunk here. Yet, the deterioration factor of any and all ultra short funds must be taken into consideration. These are plays that should be held for days not months. Rather, I would like to think that CNK still with negative earnings maybe be a more logical consideration here. Ax Man’s LNY has seen a decent run, and may be in short order as well. Let’s not forget the BBW.

If there is one sacrificial lamb of the car industry, then Chrysler must be it. Chrysler the company receives little to no sympathy from me. However, the workers have made concessions only to learn that at least five of their plants are closing. As Fiat courts the auto maker, one may find it almost amazing that the billions of dollars loaned to them are dead… and the stipulations on executive pay are being circumvented as many of them are signing on as FIAT employees, thus not having to follow any rules regarding compensation.


1 comment:

AX said...

TC, was that out trip to Vegas when blackjack still paid 1.5-1 and Binion's wasn't owned by Harrah's yet? Good times! But I take no credit for LNY, I've never recommended it. BBW 9/09 puts, however, are up 50%.