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Links: 2009-01-26

I am out of commission for most of the day, but here are a few articles that I ran across last night and early this morning. I should be posting more later tonight. Cheers. Ed Bad news: we’re back to 1931. Good news: it’s not 1933 yet – Ambrose Evans-Pritchard, Telegraph American exporters in last-ditch attempt to stop Obama raising […]

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Links: 2009-01-25

‘Drug money flowed into banks’ – Fin24 South Africa (This is a must-read article) California’s First Centennial Bank Shut by Regulator – Bloomberg.com (Another FDIC Friday night special) Older workers escaping the ax – MSN Money (Very heartening to see this trend, even if it is for legal reasons alone) Freddie Seeks Up to $35 Billion From U.S.; Fannie May […]

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Did Americans think the US economy had bottomed in 1933?

Marshall Auerback here. Now that Barack Obama has been inaugurated, we should actually look back to 1933 to get a sense of perspective. How did Americans see the economy at the Inauguration of Franklin Roosevelt? The short answer is that Americans were actually anticipating worse to come in 1933, but Roosevelt delivered on his promises? I do not expect the same from Obama.

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Warren Buffett: Don’t expect miracles from Obama

You may have already seen the Warren Buffett interview on Dateline from last Sunday. In it, he gives a sober analysis of what to expect from the new Obama Administration in terms of economic policy. The long and short of it is that we shouldn’t expect a miracle turnaround. The recession will be deep and protracted regardless of how well Barack Obama’s team deals with economic issues.

Below is the video of Buffett. The transcript is linked as a source.

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Dividends are under pressure

Update 08 Mar 2009: Remember this:

Wells Fargo gave anxious investors a pleasant surprise Wednesday, reporting a profit drop that was milder than anticipated and lifting its quarterly dividend by 10 percent.

Wells Fargo’s second-quarter profit fell 22 percent as more customers at the nation’s fifth-largest bank failed to pay back their loans. But it raised its dividend to 34 cents from 31 cents – at a time when many other financial institutions are slashing theirs to preserve capital.

Very foolhardy now that Wells has been forced to cut its dividend to 5 cents even after receiving $25 billion from the federal government. So, I am re-posting this story as a reminder of what lies ahead.

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Why is General Electric paying a dividend of 10%?

General Electric released its earnings report, posting net income in line with analyst estimates. And the world had a big sigh of relief. In posting its earnings, GE CEO Jeffrey Immelt defended his company’s dividend and AAA rating.

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Mea Culpa: I was too bullish on the BofA-Merrill deal

Merrill Lynch is looking like a real dog these days — much more than I realized back in September. As bearish/cautious as I have been on the economy and the financial sector, obviously I was not cautious enough. When the deal got done I had this to say:

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Denmark wants in on the Euro

Danish Prime Minister Fogh Rasmussen is preparing Denmark for admission to the Eurozone. Despite my skepticism about the Euro as a currency, I would say that Denmark is a perfect candidate for entry. The Danish economy is already very well harmonized with “core” Europe of France and Germany. Their business cycle, monetary policy, political economy, and per capita GDP are all similar to France and Germany.

Below is my translation of part of a German-language article from Financial Times Deutschland which discusses the upcoming referendum in Denmark for joining the Euro in which Fogh Rasmussen makes some interesting contrasts between Denmark and the UK.

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Links: 2009-01-22

As I write this, stock markets in the U.S. are in their final hour of a rather poor session. Selling seems to have been brought on by Microsoft’s announcement that it is cutting jobs en masse for the first time ever. If you recall, Fred Hickey, a perma-bear from Barron’s Roundtable, has become bullish on companies like Microsoft (as have I). So, their announcement demonstrates that even the most solid companies are going to stumble in this downturn. I don’t think it is anything to panic about, just a reminder of how far-reaching things are getting.

Below are a few other stories from around the Internet. Others may be found at the news feed.

Enjoy.

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Violence erupts in Iceland

As this deepest of recessions takes hold, an increasing number of countries are seeing outbreaks of civil unrest. First it was Greece. Later, we saw unrest in the Baltics in Riga and Vilnius. Now, Iceland is experiencing the same. These countries are amongst the hardest hit economies. Therefore, we should see these episodes as a harbinger of what is to come unless government can prevent this downturn from deepening.

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TARP dividends are killing bank profits

When the Bush Administration gave banks money under the Troubled Asset Relief Program (TARP), it was not a complete freebie. The government has received preferred shares in many institutions. This shares pay dividends to the government as compensation for the investment. Well, apparently, those dividends are becoming a bit of a problem for banks because they are eating into banks’ much needed capital by siphoning off money to the government.

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Tips for small business owners struggling amidst the credit crisis

This article is from special guest contributor Steve Sildon, Senior Editor for CreditCardAssist.com, where he provides tips and advice for business owners on the strategic use of short-term debt and credit cards for small business financing.

The nation is waiting with bated breath for the proposed bailout assistance and economic stimulus package promised by the new incoming administration. Many small businesses simply cannot afford to wait. Not only are American families struggling to get by each day, small and large businesses alike are struggling mightily to stay afloat with a lingering recession and the most precipitous drop in consumer demand since the Great Depression. In the past, business owners have relied on their lines of credit to help bridge the occasional gap in their short term cash flows caused, for example, by seasonal fluctuations. But these days, small business owners who lack adequate credit histories or have not yet established any credit history at all simply cannot gain access to credit at all. In a more disturbing trend, many well-established, profitable companies with excellent, long-term credit histories have found their credit lines reduced considerably, and in some cases, cut off entirely.

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