Friday, September 19, 2008
SEC Bans Short Selling!
The U.S. Securities and Exchange Commission on Friday banned short-selling in 799 financial companies, "to protect the integrity and quality of the securities market and strengthen investor confidence," according to a statement from the SEC. SEC Chairman Christopher Cox said: "The commission is committed to using every weapon in its arsenal to combat market manipulation." The ban expires Oct. 2.
Thursday, September 18, 2008
Resolution Trust Corp. (RTC) Explained
This is an article from 1992 that I thought did a pretty good job of explaining the RTC (Resolution Trust Corporation), which has received a good deal of attention after an announcement today by Treasury Secretary Hank Paulson sparked a massive rally in the stock market:
In many respects, the sun is setting for the Resolution Trust Corp. (RTC). Its massive task has been to salvage the nation's ailing savings and loan industry, a task it expects to complete by 1996. But for African American-owned businesses, with the capability and desire to compete for the billions in contracting fees, the sun is rising.
Last March, offical clout to ensure that all segments of U.S. business participate in the largest disposition of property and other assets grew. (See "The World's Biggest Fire Sale," June 1991.) The push was given by an impatient Congress and by a new RTC president and CEO. How? The RTC consolidated and expanded its minority outreach program increased cost advantages for minority firms in the bidding process and promulgated new rules to substantially increase the share of minority-awarded business contracts in fields as diverse as accounting and law.
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As of March the RTC had disposed of more than $234.1 billion in assets that belonged the 630 savings and loans. It spent $81.5 billion of the taxpayers' money in the process. This created a bonanza of $1.87 billion in fees awarded in 60,226 service contracts. Though the RTC's authority expires in 1996, between now and then, it is expected to authorize some $15 billion or so in contracting service fees.
These days, minority businesses are in the thick of the action. Nine black companies or joint-venture shares placed among the top 100 RTC contractors receiving fees in excess of $4 million. But minority firms' share of the total was still small as black-owned firms received only $80.2 million in fees of the $1.87 billion total. Black law firms earned only 1% of legal fees generated and Hispani-owned firms took in an even smaller $39.2 million in total fees. Other minority groups trailed further behind.
Why minorities have had a problem getting equal representation is embedded in RTC history. The RTC was created after the passage of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which aimed to stabilize the struggling thrift industry. The RTC was charged with managing thew real estate and securities of insolvent thrifts. From the beginning, Congress felt that minority participation was important enough to write it into law. As passed, FIRREA required RTC to "prescribe regulations to establish and oversee a minority outreach program...to ensure inclusion, to the maximum extent possible, of minorities and women and entities owned by minorities and women." Yet minority firms were left at the starting gate.
During its first two years, with real estate in a tailspin, the main task of RTC official was getting contracts out before the assets they managed depreciated further. The key to private contracts' participation was RTC registry. Once registered, contractors could get "SOSs" or solicitations of services telling them which properties were up for RTC management, disposition or other services. In most instances large, white-owned firms got the largest contracts. Albert V. Casey, current RTC president and CEO says, "We had to get control of the situation. We thought it would be 50 savings and loans at first and that grew to more than 500. Originally we were just going willy-nilly out there, and there wasn't time and there weren't a lot of minorities registered."
That neglect is reflected in the numbers: In June 1990, there were only 500 registered minority- and women-owned firms. By January 1991, 4,320 minority-owned firms out of 40,577 firms were registered. That year, minority-owned companies were awarded only 7.5% of the contracts, worth $12.4 million. Firms owned by white men were awarded 80.2% of the contracts, followed by firms owned by white women, with 12.3%.
Last September, the General Accounting Office (GAO) completed an investigation clearly stating where responsibility lay: "The RTC got off to a slow start in implanting a minority- and women-owned business program for asset management contracting." The GAO found a persistent pattern of understaffing and underfunding of RTC minority efforts. One year ago, the RTC outreach office at its Washington headquarters consisted of a director and one secretary. The GAO also said minority programs at the RTC were "inconsistent."
Others said they were ignored. Minortiy-owned firms complained they were neither notified when contracts were to be let nor were they contracted by larger corporations that were supposed to be cuscontracting with them. Ralph C. Thomas III, the executive director of the National Association of Minority Contractors says this proves, "the old boy network is still alive."
But hat has begun to change. Under fire from Congress, civil rights groups and the Rainbow Coalition, the RTC has consolidated its various minority programs under one roof: the Minority and Women Outreach and Contracting Programs, headed by an African-American Johnnie B. Booker, who was a Housing and Urban Development deputy assistant secretary of Operations and Management for the office of Fair Housing and Equal Opportunity. Since joining the RTC last November, Booker's Staff has expanded from one professional to eight. And it wasn't long before she heard from her constituency. They told her one thing: "'Give us more contracts!' That was the song we heard," she says with a chuckle. "And we're planning to move very aggressively in that direction."
In many respects, the sun is setting for the Resolution Trust Corp. (RTC). Its massive task has been to salvage the nation's ailing savings and loan industry, a task it expects to complete by 1996. But for African American-owned businesses, with the capability and desire to compete for the billions in contracting fees, the sun is rising.
Last March, offical clout to ensure that all segments of U.S. business participate in the largest disposition of property and other assets grew. (See "The World's Biggest Fire Sale," June 1991.) The push was given by an impatient Congress and by a new RTC president and CEO. How? The RTC consolidated and expanded its minority outreach program increased cost advantages for minority firms in the bidding process and promulgated new rules to substantially increase the share of minority-awarded business contracts in fields as diverse as accounting and law.
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As of March the RTC had disposed of more than $234.1 billion in assets that belonged the 630 savings and loans. It spent $81.5 billion of the taxpayers' money in the process. This created a bonanza of $1.87 billion in fees awarded in 60,226 service contracts. Though the RTC's authority expires in 1996, between now and then, it is expected to authorize some $15 billion or so in contracting service fees.
These days, minority businesses are in the thick of the action. Nine black companies or joint-venture shares placed among the top 100 RTC contractors receiving fees in excess of $4 million. But minority firms' share of the total was still small as black-owned firms received only $80.2 million in fees of the $1.87 billion total. Black law firms earned only 1% of legal fees generated and Hispani-owned firms took in an even smaller $39.2 million in total fees. Other minority groups trailed further behind.
Why minorities have had a problem getting equal representation is embedded in RTC history. The RTC was created after the passage of the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which aimed to stabilize the struggling thrift industry. The RTC was charged with managing thew real estate and securities of insolvent thrifts. From the beginning, Congress felt that minority participation was important enough to write it into law. As passed, FIRREA required RTC to "prescribe regulations to establish and oversee a minority outreach program...to ensure inclusion, to the maximum extent possible, of minorities and women and entities owned by minorities and women." Yet minority firms were left at the starting gate.
During its first two years, with real estate in a tailspin, the main task of RTC official was getting contracts out before the assets they managed depreciated further. The key to private contracts' participation was RTC registry. Once registered, contractors could get "SOSs" or solicitations of services telling them which properties were up for RTC management, disposition or other services. In most instances large, white-owned firms got the largest contracts. Albert V. Casey, current RTC president and CEO says, "We had to get control of the situation. We thought it would be 50 savings and loans at first and that grew to more than 500. Originally we were just going willy-nilly out there, and there wasn't time and there weren't a lot of minorities registered."
That neglect is reflected in the numbers: In June 1990, there were only 500 registered minority- and women-owned firms. By January 1991, 4,320 minority-owned firms out of 40,577 firms were registered. That year, minority-owned companies were awarded only 7.5% of the contracts, worth $12.4 million. Firms owned by white men were awarded 80.2% of the contracts, followed by firms owned by white women, with 12.3%.
Last September, the General Accounting Office (GAO) completed an investigation clearly stating where responsibility lay: "The RTC got off to a slow start in implanting a minority- and women-owned business program for asset management contracting." The GAO found a persistent pattern of understaffing and underfunding of RTC minority efforts. One year ago, the RTC outreach office at its Washington headquarters consisted of a director and one secretary. The GAO also said minority programs at the RTC were "inconsistent."
Others said they were ignored. Minortiy-owned firms complained they were neither notified when contracts were to be let nor were they contracted by larger corporations that were supposed to be cuscontracting with them. Ralph C. Thomas III, the executive director of the National Association of Minority Contractors says this proves, "the old boy network is still alive."
But hat has begun to change. Under fire from Congress, civil rights groups and the Rainbow Coalition, the RTC has consolidated its various minority programs under one roof: the Minority and Women Outreach and Contracting Programs, headed by an African-American Johnnie B. Booker, who was a Housing and Urban Development deputy assistant secretary of Operations and Management for the office of Fair Housing and Equal Opportunity. Since joining the RTC last November, Booker's Staff has expanded from one professional to eight. And it wasn't long before she heard from her constituency. They told her one thing: "'Give us more contracts!' That was the song we heard," she says with a chuckle. "And we're planning to move very aggressively in that direction."
Wednesday, September 17, 2008
Shame on you CNBC!
Ok, I am surely going to upset some people with this post, but as someone who watches, trades, analysis, and writes about the stock market as my main sources of income, I would like to inject my thoughts on the subject here, because while I too hate what the media does to get ratings, there is LOTS of cause for concern out there in this market.
First, let me qualify myself as someone who you might want to listen to - My grandfather was a stock broker and an options trader. My dad was a market maker turned private investor who has co-authored two books on swing trading equities. I have been studying the market since I was about 16, and actively trading since I was 18. I am 27 and have yet to have a losing year, including this year. I tutor people on technical anaylsis, record and produce videos teaching people how to read stock charts and giving a day to day update of market activity and stocks to watch, and am the host and moderator of a stock market chat room with 424 members to date. I have surrounded myself with very smart, very seasoned stock traders, between us we probably have about 150 years of real stock trading experience in the trenches, and not a single one of us has ever seen a market the likes of what we have on our hands right now.
We have been calling for the Dow Jones to hit 10,000 since January, and it looks like we're gonna be there sooner than later. The exposure of the major financial institutions to the sub-prime mortgage has huge implications that are still unwinding as we speak. Actually, I did a very funny cartoon on the sub-prime mess if anyone is interested in checking it out
http://www.youtube.com/watch?v=sNupvlgAqas.
That said, I take exactly the opposite stance to you guys in terms of the media - while yes they do fear monger to a certain extent, more often than that they get on and hype a stock, or a sector because they, in essence, are employed by the companies that they are hyping. (CNBC is owned by GE, for example). When people buy stock, that stock price goes up, and they understand that when they get on and hype a stock, many members of the retail investing community will buy that stock blind, driving the price up, which hmakes their bosses happy because they have hundreds of millions of dollars in stock options written into their contracts. As such, I am livid at the irresponsibility of cnbc for telling everyone to "take a long term perspective" and to "buy & hold" while their money goes slowly down the tubes at times like this. Actually, I went on a rant in my market outlook on my website on Monday, after hearing CNBC say that "The bottom was in in the market" about 200 times last week, when anyone with any experience and common sense knew that wasn't the case. Here's an excerpt from my rant, you may get a laugh:
"I have touched on this in the chat room a number of times recently, but it makes me utterly sick to listen to these “experts” and commentators on cnbc that go on TV and pimp whatever stock, commodity or sector that suits their interest at that moment in time, with blatant disregard for the fact that people actually do trust what they say and put their retirement money, or their children’s college money, or whatever, on what they say. Now I am without a doubt an advocate for doing your own research and taking responsibility for your own action, but being in the line of work that I am in, it really upsets me when I make a bad call and members get hurt on it. It does happen, it’s a part of the game, and while we always do our best to put ourselves in the least risky situations possible, in essence every stock trade has an element of chance to it, and everyone has a trade go against them from time to time. However we try our damndest to own up to a mistake, keep on the course, and move on to find the next winning trade. Watching this “oh the bottom is in” (which I must have heard a few dozen times last week), followed by the fear mongering, chicken little “the sky is falling” bs that they throw out there to try and get ratings, without even the slightest acknowledgement of a bad call that might have caused some poor retired couple to have to apply for jobs at the local Wal Mart instead of relaxing on a beach sipping a frozen drink makes me absolutely sick. Shame on you CNBC. That’s all for my rant, thanks for listening. "
So I'll get to the point, because as you can probably gather this is a subject that I'm pretty passionate about and could go on forever. I hate the media and their ulterior motives more than everyone you know, but as a friend and fellow foodie I beg of you to excersize extreme caution in this market, because while yes, this too shall pass, it will get worse before it gets better. If this mess has taught us anything, it should be unequivocally that people need to be more pro-active about their investments, and that "buy & hold", or more accurately "buy & hope", is NOT an investment strategy. Trust me, my business grew about 15 times faster during the bull market than it has in the last year and change, but I do feel a responsibility to call it like I see it, unlike the mainstream media.
I'm not going to go into investment strategies here, but I will say that there are recently added equities called short and ultrashort ETFs (Exchange Traded Funds), that are a great way of playing the market to the downside in an IRA or if you don't have margin to short stocks themselves. I've also mentioned that if anyone here is interested in forming some sort of foodie/investor club here on Fohboh I would be happy to do something like that. That said, be careful, be proactive, and as the old saying goes, prepare for the worst and hope for the best. Have a great night.
Jay
First, let me qualify myself as someone who you might want to listen to - My grandfather was a stock broker and an options trader. My dad was a market maker turned private investor who has co-authored two books on swing trading equities. I have been studying the market since I was about 16, and actively trading since I was 18. I am 27 and have yet to have a losing year, including this year. I tutor people on technical anaylsis, record and produce videos teaching people how to read stock charts and giving a day to day update of market activity and stocks to watch, and am the host and moderator of a stock market chat room with 424 members to date. I have surrounded myself with very smart, very seasoned stock traders, between us we probably have about 150 years of real stock trading experience in the trenches, and not a single one of us has ever seen a market the likes of what we have on our hands right now.
We have been calling for the Dow Jones to hit 10,000 since January, and it looks like we're gonna be there sooner than later. The exposure of the major financial institutions to the sub-prime mortgage has huge implications that are still unwinding as we speak. Actually, I did a very funny cartoon on the sub-prime mess if anyone is interested in checking it out
http://www.youtube.com/watch?v=sNupvlgAqas.
That said, I take exactly the opposite stance to you guys in terms of the media - while yes they do fear monger to a certain extent, more often than that they get on and hype a stock, or a sector because they, in essence, are employed by the companies that they are hyping. (CNBC is owned by GE, for example). When people buy stock, that stock price goes up, and they understand that when they get on and hype a stock, many members of the retail investing community will buy that stock blind, driving the price up, which hmakes their bosses happy because they have hundreds of millions of dollars in stock options written into their contracts. As such, I am livid at the irresponsibility of cnbc for telling everyone to "take a long term perspective" and to "buy & hold" while their money goes slowly down the tubes at times like this. Actually, I went on a rant in my market outlook on my website on Monday, after hearing CNBC say that "The bottom was in in the market" about 200 times last week, when anyone with any experience and common sense knew that wasn't the case. Here's an excerpt from my rant, you may get a laugh:
"I have touched on this in the chat room a number of times recently, but it makes me utterly sick to listen to these “experts” and commentators on cnbc that go on TV and pimp whatever stock, commodity or sector that suits their interest at that moment in time, with blatant disregard for the fact that people actually do trust what they say and put their retirement money, or their children’s college money, or whatever, on what they say. Now I am without a doubt an advocate for doing your own research and taking responsibility for your own action, but being in the line of work that I am in, it really upsets me when I make a bad call and members get hurt on it. It does happen, it’s a part of the game, and while we always do our best to put ourselves in the least risky situations possible, in essence every stock trade has an element of chance to it, and everyone has a trade go against them from time to time. However we try our damndest to own up to a mistake, keep on the course, and move on to find the next winning trade. Watching this “oh the bottom is in” (which I must have heard a few dozen times last week), followed by the fear mongering, chicken little “the sky is falling” bs that they throw out there to try and get ratings, without even the slightest acknowledgement of a bad call that might have caused some poor retired couple to have to apply for jobs at the local Wal Mart instead of relaxing on a beach sipping a frozen drink makes me absolutely sick. Shame on you CNBC. That’s all for my rant, thanks for listening. "
So I'll get to the point, because as you can probably gather this is a subject that I'm pretty passionate about and could go on forever. I hate the media and their ulterior motives more than everyone you know, but as a friend and fellow foodie I beg of you to excersize extreme caution in this market, because while yes, this too shall pass, it will get worse before it gets better. If this mess has taught us anything, it should be unequivocally that people need to be more pro-active about their investments, and that "buy & hold", or more accurately "buy & hope", is NOT an investment strategy. Trust me, my business grew about 15 times faster during the bull market than it has in the last year and change, but I do feel a responsibility to call it like I see it, unlike the mainstream media.
I'm not going to go into investment strategies here, but I will say that there are recently added equities called short and ultrashort ETFs (Exchange Traded Funds), that are a great way of playing the market to the downside in an IRA or if you don't have margin to short stocks themselves. I've also mentioned that if anyone here is interested in forming some sort of foodie/investor club here on Fohboh I would be happy to do something like that. That said, be careful, be proactive, and as the old saying goes, prepare for the worst and hope for the best. Have a great night.
Jay
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