Monthly Archives: November 2011

The Next Bailout

An interesting problem will be facing the Fed in a few months.

http://www.businessinsider.com/economists-ben-bernanke-is-going-to-bail-out-europe-2011-11

If we assume the problems in Spain, Italy and Greece are too big for Europe to bailout, then you would think we are headed for a partial default on those countries bonds.  If that happens, it seems logical that at least one ‘too big to fail’ will be taken down – it seems hard to believe that MF Global is the only financial institution that made a bet on high yield european bonds.

Sounds like maybe Ben is well too aware of this –  and bailing out US Banks again will cause unrest like we have never seen.   His only choice is to try to cloak it as an international initiative.

11/23/11 UPDATE – Looks like the Fed wants to know how much they have to push to save the euro and thus save the banks.

http://www.reuters.com/article/2011/11/22/us-financial-regulation-banks-idUSTRE7AL2FD20111122

Amazon Locker

Yeah, another Amazon post.  But I recently received an email from Amazon announcing Amazon Locker.    Check this out:

http://www.amazon.com/gp/help/customer/display.html/ref=pe_182810_21739980_pe_button/?nodeId=200689010

If you are an Amazon investor – this should excite you as it builds an infrastructure for Amazon to start lowering shipping costs.  Eventually, my guess is for non Amazon Prime members, super saver delivery will only be available for products being delivered to Amazon Locker.  However, they will expand the products available for super saver delivery.  Right now, Amazon has a number of initiatives going on that are resulting in shrinking margins, but if they pull this off this will pull the pressure off margins as it expands to new markets.

The Q Ratio and Market Valuation

Food for thought on an approach to value the stock market.

http://www.advisorperspectives.com/dshort/updates/Q-Ratio-and-Market-Valuation.php

I dont know if I buy into the logic of valuing the market based on the underlying assets of the companies.  This indicator shows a premium since the 1990’s, when the American economy was increasingly becoming a service economy.  One would assume a service economy requires less physical assets than a manufacturing based economy.  One test of the service economy theory would be to look at overall revenue per employee over the last 20 years. However, even if this metric is skewed by the shifting economy, it would be tough to argue the market is cheap at these levels.