Thursday, 30 Dec 2010 | 1:33 PM ET

States of Pain: Chapter 8 Bankruptcy Bandage?

Posted By: Nicole Lapin

We’ve all seen the deficit numbers. Twenty-five billion for California. Fifteen billion for Illinois. Ten billion dollars for New Jersey.

Gov. Bredesen interview, former HealthAmerica CEO
Courtesy CNBC
Gov. Bredesen interview, former HealthAmerica CEO

Meredith Whitney says we will all feel the states' pain in the spring when federal stimulus money dries up.

Some set the D-Day date for states even earlier, possibly even next month. CEO turned Tennessee Governor Phil Bredesen predicted that , in January, some states would have, "A cliff they’ve got to navigate. There’s going to be some dislocation. You’re going to see some problems."

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  Thursday, 30 Dec 2010 | 12:07 PM ET

Bull & Bear New Years Resolutions

Posted By: Joshua Brown

Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist Joshua Brown ...

Rose | Mueller | Stock4B | Getty Images

Everyone gets stuff wrong, that's the market and that's life. Moreover, people get things right sometimes but for the wrong reasons—that's life as well. The key is not to dwell on who did what right and wrong or the why's and how's. Instead, we want to look at what we can do better on a going forward basis.

So let's make some resolutions together, regardless of what side we're on...

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  Thursday, 30 Dec 2010 | 11:12 AM ET

US Equity Funds Finally Break 33-Week Hex

Posted By: Jeff Cox

The long losing streak for US equity mutual funds is finally over, and it ended pretty much right on cue.

After showing outflows for 33 consecutive weeks, domestic funds finally saw net inflows for the period ended Dec. 21, according to data from the Investment Company Institute. Though the inflow total was a relatively paltry $335 million, any good coach will tell you a win is a win.

Curiously, the data confirming the end of investors fleeing US funds came out shortly after I filed a piece yesterday headlined “US Stock Funds Could Be Back After Sitting Out 2010 Rally .” The main thrust of the piece was that investment pros were looking at US funds to participate in a widely expected 2011 stock market rally though they’d been treated as poison this year.

Investors instead piled money into bond and non-US funds all year. Indeed, US equity funds represented just a fraction of the total $3.94 billion in inflows to mutual funds last week.

Any good coach also will tell you that one win does not a streak make, but at least it’s a start.

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  Thursday, 30 Dec 2010 | 10:44 AM ET

Why Apple Will Be The First Company to Reach a Trillion Dollar Market Cap

Posted By: James Altucher

Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist James Altucher ...

Apple is the dream company we always wished for when we were children. The messiah of companies that we never thought would come to Earth in our lifetimes.

Steve Jobs
Getty Images
Steve Jobs

When I was a kid the only thing I wanted in life was an Apple II+. When I finally got one, (my dad took one from his work and gave it to me for about six months) I did everything a young boy does with his computer.

I programmed \(in BASIC\) the computer to type my name over and over again. I then went to the local computer store and shoplifted Ultima III. My friends and I then copied each others games so we had a whole set of games to play with. I then skipped school incessantly in order to play games all day, my friends and I calling each other throughout the day \(we all skipped school every day\) in order to share the latest secrets we found while hacking our way through Castle Wolfenstein.

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  Thursday, 30 Dec 2010 | 9:08 AM ET

Global Stocks Near Two Year High

Posted By: Ash Bennington

The Rise of Covered Bonds (CNBC via Financial Times) "Banks have sold a record amount of covered bonds this year, as jittery investors backed the ultra-safe forms of debt, in a trend expected to continue in 2011. Worldwide issuance of the bonds has reached $356.5 billion this year – up nearly 20 percent from 2009, according to data from Dealogic. Unlike regular securitisations, where investors have no recourse to the issuing bank, the loans backing covered bonds remain on a bank’s books and are ring-fenced, protecting bondholders even in bankruptcy. Issuance has been heavily dominated by European banks – the format was developed in 18th-century Germany — but countries elsewhere are beginning to alter laws to give investors the protection the bonds require."

PIMCO: Dollar to Remain World's Reserve Currency \(Bloomberg\) "The dollar will keep its reserve status in 2011 because China and Europe aren’t developed enough for their currencies to replace it, said Pacific Investment Management Co., which runs the world’s biggest bond fund. 'Rising powers such as China are not yet ready to absorb the $9 trillion in reserve assets the world holds, particularly because their bond markets are immature,' Anthony Crescenzi, a money manager at Pimco in Newport Beach, California, wrote in a report yesterday. 'Europe, amid all of its financial woes, isn’t even close to ready to take the mantle.'"

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  Wednesday, 29 Dec 2010 | 4:53 PM ET

Rogue Miners, Chinese Gangsters, and Rare Earth Elements

Posted By: Ash Bennington

New Arrest in Ongoing Insider Trading Investigation \(Dealbook\) "Federal authorities charged Winifred Jiau of Fremont, Calif., with conspiracy and securities fraud on Wednesday — the latest arrest in the ever-widening insider trading investigation. Prosecutors say that Ms. Jiau, a 43-year-old consultant for expert-network firm Primary Global Research, leaked confidential information about Marvell Technology Group and Nvidia to two money managers at different hedge funds. Until roughly a year ago, she worked as a contractor at Nvidia, according to a Nvidia spokesman."

Treasuries Rally on Buying by Foreign Central Banks \(Bloomberg\) Apparently, yesterday's weak treasuries auction was only a blip--perhaps the after affect of a blizzard and a holiday hangover:

"Treasuries gained after the government’s $29 billion auction of seven-year notes produced the highest demand from a group of investors including foreign central banks since June 2009. The yield on the benchmark 10-year security dropped the most since the Labor Department’s payrolls report on June 4 as the last U.S. note sale of 2010 spurred buying. Treasuries tumbled yesterday after the $35 billion five-year auction attracted the lowest demand in six months."

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  Wednesday, 29 Dec 2010 | 3:23 PM ET

Another Bank of America Horror Story?

Posted By: Ash Bennington
Bank of America flag
Getty Images
Bank of America flag

Bank of America threatened a Connecticut couple with foreclosure proceedings on their home — scheduled to begin on Christmas Eve — if they didn't agree to a forced sale. The kicker is this: The husband and wife had never missed a payment on their mortgage.

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  Wednesday, 29 Dec 2010 | 1:08 PM ET

Wall Street and Suicide

Posted By: James Altucher, author of "Trade Like Warren Buffett"

Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from hedge fund manager and financial columnist James Altucher ...

Here’s a question: What does Main Street care more about: The stock market? Real estate? Unemployment?

Answer: The stock market.

When Wall Street and the financial system collapsed in October, 2008 a big question was, “Where are the suicides?” Where were the people flinging themselves out of windows onto Wall Street, as supposedly happened in the last Great Crash, in October, 1929. At that time, right after the crash that caused the Great Depression of the 1930s, Will Rogers said, “When Wall Street took that tailspin, you had to stand in line to get a window to drop out of.”

It turns out that the worry was accurate. But the suicides didn’t happen on Wall Street. Most likely they occurred on Main Street.

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  Wednesday, 29 Dec 2010 | 10:42 AM ET

The House That the Housing Bubble Bought

Posted By: Ash Bennington
Photo credit: Google Maps

Is this the house that the housing bubble bought?

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  Wednesday, 29 Dec 2010 | 9:05 AM ET

The Muni CDS Sitdown

Posted By: Joshua Brown|author of "The Reformed Broker"

Various members of the NetNet crew are in and out this vacation and snow-filled week, so we've asked a few friends to fill in. The following is from New York City-based investment advisor Joshua Brown ...

Music: Cue strains of a mournful mandolin.

Exterior: An out-of-the-way red sauce Italian joint in the Arthur Avenue section of the Bronx.

Cut to Interior: The heads of the Five Families hunched over a checkered tablecloth (with attorneys behind them) agreeing to split the municipal bond credit default swaps pie five ways in 2011. "There's more than enough profit here for all of us, boys."


This actually happened, you guys (but probably in a not so Mafia-ish way). My flair for the dramatic notwithstanding, the heads of the biggest Wall Street investment banks did in fact get together for a conversation about standardizing muni CDS contracts. This is happening as a prelude to a coming firestorm of activity for 2011 in the muni bond space.

From theWall Street Journal :

Separately, five large derivatives dealers—Bank of America Corp.'s Bank of America Merrill Lynch, Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co., and Morgan Stanley—met last month in New York to discuss standardizing the paperwork for "muni CDSs" in an effort to attract more buyers and sellers.

The entire muni bond market is under increasing strain heading into the new year. Investors have pulled $9 billion from muni bond funds since Thanksgiving. In the meantime, analyst Meredith Whitney is leading a chorus of bears who are looking for a raft of defaults across the country.

Credit default swaps allow for the hedging of exposure to defaults on bonds. They are used by holders of these bonds as a sort of insurance. They are more notoriously used by hedge funds and high-flying bank traders as a means of speculation. The entire muni bond market is about $2.8 trillion in size — yet there are only $50 billion in outstanding CDS contracts written against it. As holders get nervous and hedge funds come in to the trade betting on drama in the space, more CDS will be written by all the major banks.

The merchant mentality of the banks is always and above all else to give the "cutomers" what they want. And what they want is a more liquid and transparent way to get exposure to the coming pain for states like Illinois and California. This agreement to standardize products is coming just ahead of a massive surge of interest in the products.


Interior: "It's agreed then," said one of the Dons as he raised his glass. "In 2011, we feast together! Salute!"

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