HIDDEN VALUE

Dear Value Seeker,

Last October, Hank Paulson said the Treasury’s capitalization of banks would encourage them to “deploy, not hoard their capital.”

Three months down the line, the verdict is damning.

“Lending drops at big US banks,” reports The Wall Street Journal today.

According to the paper, “Ten of the 13 big beneficiaries of the U.S. Treasury Department’s Troubled Asset Relief Program, or TARP saw their outstanding loan balances decline by a total of about $46 billion, or 1.4%, between the third and fourth quarters of 2008.”

Surprised? You shouldn’t be.

The TARP may have staved off another Lehman Brothers disaster, but was there ever any reason to expect it to prompt higher bank lending?

This from financial blog, Naked Capitalism:

First, there should be less lending, independent of the economic contraction. We know now that TONS

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Dear Value Seeker,

It could almost be comical… if our financial futures were not at stake.

Today, Fed Chairman Ben Bernanke spoke about the economic crisis and the government’s policy response.

After defending the Fed’s policies over the last 18 months, ‘Helicopter Ben’ made it clear that he isn’t about to be upstaged by Obama’s mega stimulus plan.

In my view, however, fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system…

More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets. A continuing barrier to private investment in financial institutions is the large quantity of troubled, hard-to-value assets that remain on institutions’ balance sheets. The presence

Irwin Greenstein, writing for Contarian Profits, says look no further than today’s Wall Street Journal if you want to fully understand why alternative energy will take decades to prosper.

A front page story in the Journal discusses the surge of interest in anticipation of President-elect Obama’s aggressive green agenda. But an inside story reveals that some of the very same people who embrace green are fighting it tooth-and-nail in the name of the environment.

How does this make sense?

Because the hype and greed of the green bubble blocks out the more practical issues of the local politics that can stop a renewable energy project dead in its tracks. The lesson here for investors is that alternative energy is highly politicized and regardless of how much due diligence you apply, a company in your portfolio can sink under litigation costs heaped on by communities and special-interest groups around the country.

While the Journal cites

To show how far emerging markets have fallen, and where they are headed for 2009, look no further than the theory of ‘decoupling’, says Irwin Greenstein, writing for Contrarian Profits.

The idea of decoupling gained prominence in 2006, and achieved superstar status in early 2008, as emerging markets boomed. Advocates of decoupling professed that the rising prices of commodities, which overnight turned many third-world countries into boomtowns, let these long-neglected economies decouple from the G8 and other industrialized nations. By decoupling, they could finally set their own economic destiny.

Well, if there is any economic theory headed for the trash heap it’s decoupling. That’s because, as the markets have proven, young economies are largely dependent on more mature industrialized economies for their financial survival.

Cash, credit and construction fed the so-called Commodity Supercycle, which pushed emerging markets to all-time highs over the past few years. Now that cash, credit and construction are gone,

Dear Value Seeker,

U.S interest rates are now near zero.

Just like doomed Japan during the country’s “lost decade” in the 1990s.

Yesterday, the Fed cut interest rates to a record low range of 0 to 0.25 percent.

America’s central bank says the weak economy will “warrant exceptionally low levels of the federal funds rate for some time.”

[Translation: After sinking the US economy in a sea of credit, the Fed wants to ‘fix’ the problem with even more of the stuff.]

And it left the door open for more “extraordinary” measures to fight the economic enemy du jour: deflation.

Or in Fed speak… “The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.”

At this point, there are no real limitations on what “Helicopter Ben” might do in his crusade to fix the wounded economy.

He

Dear Value Seeker,

The good news is there is only one month left before the end of the year.

But that’s still plenty of time for the crisis that began in the subprime mortgage market to wreak more havoc in 2008.

Especially if today’s carnage is anything to go by.

The Dow has plunged over 400 points at the time of writing. The S&P 500 and the Nasdaq have also been taken to the woodshed.

Oil is back below $50 a barrel. Gold has given up $50 to reach $770 an ounce.

Last week’s bailout-fueled optimism has given way to economic reality.

Today, the US manufacturing index slumped to its lowest level since 1982.

Retailers did manage to tempt bargain hunters out on Black Friday. But once the mega-discounted products had gone, so did much of the shoppers’ enthusiasm.

We’re reminded that the America’s recession is now a year old. The wonks

Dear Friend,

Last night, America voted to put junior Illinois Senator Barack Obama in the White House.

“Change has come to America,” said Obama in last night’s victory speech.

He wants to restore patriotism and rebuild America, “calloused hand by calloused hand.”

According to Bloomberg, “Obama inherits the toughest environment for a new president since Franklin D. Roosevelt.”We don’t doubt it.

The 47-year-old faces a cracked financial system, an economic recession, a raging bear market in stocks and a trillion dollar budget deficit… for starters.

The economy is bigger than the president, says Andrew Gordon in Investor’s Daily Edge. And it is heading “irresistibly down”.

Nowhere is that more apparent than in the labor market.

The economy shed 157,000 non-farming jobs in October. And economists expect a similar rate of job losses in the coming months as the recession deepens.

Generate

Global markets are soaring today on renewed bailout efforts. But Irwin Greenstein says its probably not a good idea to jump back in to these emerging markets just yet. As always, China will be the bellwether for a sustainable recovery. And commodity prices will remain crucial for resource-rich nations.

“I woke up this morning and everything was green - not the trees but the gains on my emerging market portfolio.”

Up, up, up, with the exception of the iShares MSCI Turkey Invest Mkt Index (NYSE:TUR), which was down 5.67%.

Some of the highlights include the HANG SENG INDEX (^HSI) up 12.82%. The RTSI INDEX (RTS.RS) jumped 18.2% after Putin approved nearly $10 billion in bailout loans - most of them going to his billionaire pals who made extremely bad bets on the markets.

The JAKARTA COMPOSITE INDEX (^JKSE) increased 5.41%. The TSEC weighted index

The plummeting price of oil could cause another source of capital to dry up: the Sovereign Wealth Funds (SWFs) of the Persian Gulf. This could be another blow for global credit markets, says Irwin Greenstein. These oil-rich funds fueled with petrodollars invested trillions over the past few years, notably with high-profile infusions of billions in CitiGroup, Carlyle Group, Merrill Lynch and the Nasdaq Stock Market.

Now with oil down more than 50% from near $150 a barrel in July, the Persian Gulf is beginning to suffer from its own credit squeeze.

The bottom line is that world credit markets could suffer, further crippling the economy and the banking industry.

Persian Gulf SWFs control huge amounts of money. The combined funds of the United Arab Emirates (UAE), Saudi Arabia, Kuwait, and Qatar account for more than half the $2.5 trillion total assets of global SWFs.

As of March 2007, the UAE and Saudi Arabia had,

People have an insatiable need to be heard these days, says Irwin Greenstein, writing exclusively for Contrarian Profits. And cyperspace provides the perfect medium. Irwin say there is no better way to cash in on this phenomenon than with Apple, Inc. (Nasdaq:AAPL).

The high-tech market is essentially divided into two sectors: commercial and consumer. One of them provides customers with an enlightened path to the meaning of life, while the other helps companies make money.

As our world becomes more obsessed with self-expression, I’ll stake my money on the meaning-of-life segment.

When it comes to tech, finding the meaning of life takes several paths. The ideal path is one of pure research into religious and ethical questions that help people define their goals, personality and place in the universe.

Then there’s the other path: adults and precocious kids with crib-bound minds afraid to be