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Business News Update

Click the below link for musings about Bear Stearns, inflation and immigration law reforms.

2 states consider guest-worker programs

* * *
Here's the money passage (as edited and re-written by yours truly):

Lawmakers in Arizona and Colorado are considering creating their own guest-worker programs to attract more immigrant laborers. It's dubious whether states have the authority to adopt such measures, but businesses and state legislators are tired of waiting for Congress to adopt common sense immigration reforms.

Be forewarned that if you decide to read that entire article you'll need to dodge a stream of anti-administration talking points along with the inevitable banalities of the academia blocs. Having said that, however, that article is worth a full perusal. There's lots of interesting info between the lines.

Morals of the story:

1. Reasonable minds can and will differ.
2. Conservative talk radio is a thick cocoon.
3. Pluralistic Republics are not fertile grounds for single-issue politics.

* * *
Inflation

Total consumer inflation was zero in February. That is to say there was no inflation last month. Hopefully that trend will continue, although with the Federal Reserve having jumped the shark it's difficult to be too optimistic on that front.

Over the past year the total consumer inflation rate was 4.0%.

Perspective:

4.0% - total consumer inflation - Feb. 2007 - Feb. 2008
6.4% - total consumer inflation - Feb. 1977 - Feb. 1978

Incidentally, total incomes for all Americans have continued to outpace the inflation rate:

4.9% - growth in total incomes - 1/07 - 1/08
4.3% - total consumer inflation - 1/07 - 1/08

For obvious reasons the chances the national media would have reported to the general public that total incomes still are growing faster than inflation fell somewhere between zero and no f'n chance in hell.

* * *
Bear Stearns

It's tempting to look at Bear Stearns' cratering stock price and to consider it a potential buy target.

Tempting.

Not a good idea, however. In this particular instance that old Wall St. adage about trying to "catch a falling knife" is quite apropos.

FWIW, I've never been a fan of Bear Stearns. Even before the late-1990's insanity took hold, Bear was far too leveraged and far too aggressive for my tastes. Among investment banks I preferred Lehman Bros. Among brokerages/trading houses I preferred Merrill Lynch.

In today's market Citigroup and Washington Mutual are much better options in the financials sector than Bear Stearns.

In 2005 and 2006 Bear Stearns was by far the most aggressive major player in leveraged subprime mortgages. The firm borrowed an astonishing amount of dollars to purchase subprime "CMOs," which were groupings of 100% financing loans made to deadbeat borrowers in high-cost areas who didn't even verify their stated incomes or assets. You didn't need a "crystal ball" to know how that story would play out. Then to make matters worse Bear went ahead and at the very height of the real estate bubble they paid top dollar to acquire one of the most aggressive and leveraged subprime wholesale lenders. In essense they attempted to deal with their blurry hangover by snorting crack.

Having said all that, however, there is a material possibility that someone will purchase Bear in toto. Perhaps a consortium of major banks. Perhaps a collection of private equity players. Perhaps a LBO led by current management and backed up by junk bonds, hedge funds and other money players. There is a huge amount of value in Bear's trading prowess and its book of investment banking clients. Someone will feel compelled to snap that up.


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Comments (4)

Jayson,As I see it... (Below threshold)

Jayson,

As I see it the states don't have the right to create their own guest worker programs. Only the fed. govt. has the ability to control immigration, which is a national issue. I do think more guest worker visas need to be issued. Its up to Congress to do something.

Bill

Hooverville!Welcom... (Below threshold)
John F Not Kerry:

Hooverville!

Welcome back Jayson!

I am morally opposed to a g... (Below threshold)
sam:

I am morally opposed to a guest worker program. If someone is good enough to work in the US and provide productive value, then they should be given permanent residency and, ultimately, citizenship, if they so desire. Anything less is degrading modern-day slavery, where opportunity-seeking foreigners are bound to unethical body shops.

Jayson, regarding Bear Stea... (Below threshold)

Jayson, regarding Bear Stearns:

Their problems are beginning to look like LTCM's in the 90's. Massive leverage and bad timing. I think their overall credit underwriting may well be accurate but the short term exigencies of the market and lack of liquidity will be their end.

I recommend:

http://www.amazon.com/s/ref=nb_ss_gw/104-0912679-6714364?url=search-alias%3Daps&field-keywords=When+Genius+failed&x=13&y=12

This is not the first time the smart guys have been very wrong.




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