Sunday, September 28, 2014

Vague yet Good but there's Ackman

Hank told me that an analyst by the name of Richard Vague was on Book TV talking about EM08, specifically, on re-structuring the debt so that the economy could get back to spending instead of tightening its belt. I don't know how long C-Span leaves this up, but Here's the link.

While what Vague proposes is much more sensible than the insanity of the Bush2/Obama admins and Bernanke/Yellen Feds, the essential problem is this: it's socialist and utterly, completely unfair. Particularly with what we now know about the massive fraud and non-disclosure (in particular, ninja loans, robo-signing and not disclosing the real state of toxicity on behalf of Merril when then BoA Chair/Pres.CEO Ken Lewis and Merril CEO John Thain held their dog and pony press con announcing the takeover of Merril by BoA which subsequently and justifiably -- led to shareholder litigation).

(I do think his theory of meltdowns being the result of non-governmental debt -- a better way, methinks, of describing it, rather than constantly differentiating and synthesizing between "private and business" -- is interesting and makes sense. I'm going to sit with it a while.)

A much saner and fairer strategy is converting debt to equity. In other words, the bondholders have to take a loss (at least temporarily) or, in the popular parlance, take a haircut. I remembered hearing this the first time from Pershing Square's Bill Ackman on the Charlie Rose Show from April 24, 2009.

Bonds, like equities, are bets. And sometimes, you lose a bet. Plain and simple. But listen to these segments and you'll hear them all concur that the bondholders would rather take money from us to cover their losses. Duh. That frickin' Bill Gross plus Mohammed El-Arian probably got on the horn to Bush 2 and Bernanke as well.

Yet, it is kind of amazing to hear this level of frankness on the Charlie Rose Show. I think that worthless Sorkin is the one who calls out Gross. So maybe he's a little less worthless.

The other notable thing is the ersatz nattering by Sorkin and Kate Kelly, the former the NYT's econ wunderkind -- don't ask me why -- and the hopelessly lost (irrelevant? afterthought?) Kate Kelly of the WSJ. Watch her as the director cuts to her as Ackman schools the audience on why debt to equity makes sense. She looks like a freshman witnessing Wittgenstein.

THIS -- Ackman's lesson -- was THE way to have handled EM08. Not socialism, which both parties have their hands in. By the way, I'm attributing this strategy to Ackman but am aware this is just a bankruptcy re-structuring. Makes sense to me.

Note: I couldn't find the entire segment, but these two parts have Ackman kicking ass. The difference in gravitas between him and the others -- and that includes Nobel Laureate Stiglitz -- is remarkable. Now notice: Sorkin and Kelly? Journalists. Stiglitz? Academician. Ackman? Entrepreneur.

Nothing wrong with the other professions, but after listening to these clips, who do you think has a grip?

He can be controversial, as his recent bouts with Herbalife attest to, but in mere months after the fall of 2008, Ackman had the way out.

Talk about a missed opportunity.