Links: 2009-05-18

I will be out for most of the day, but plan to return for osting by tomorrow.  Here are the links.

• The Destructive Implications of the Bailout – Understanding Equilibrium – John Hussman

  “One of the features that has enabled the bureaucratic abuse of the public during the past year has been the frantic, if temporary, flight-to-safety by investors. The Treasury has issued an enormous volume of debt into the frightened hands of investors seeking default-free securities. This has allowed the Treasury to finance a massive and largely needless transfer of wealth to bank bondholders so easily over the short-term that the longer-term cost has been almost completely obscured.”

• Fitch Places Nine US Banks on Rating Watch Negative
• U.S. Gasoline Price Rises to $2.3010 a Gallon, Lundberg Says

  “Regular gasoline climbed 24.61 cents in the three weeks ended May 15, according to a survey of 5,000 filling stations nationwide by Trilby Lundberg, an independent gasoline analyst. That’s an average 8.2 cents more a week, the biggest increase on that basis in a year.”

• State Street takes $3.7 billion charge, to sell stock – Reuters

  “State Street Corp said on Monday that it planned to sell stock and bonds to position itself to repay a taxpayer infusion, and took a $3.7 billion after-tax charge as it moved asset-backed commercial paper conduits onto its balance sheet.”

• FT.com – VW suspends talks with Porsche amid feuding

  Volkswagen suspended merger negotiations with Porsche on Sunday in another twist in the power struggle between Europe’s largest carmaker and the debt-ridden sports carmaker that is its biggest shareholder.”

• FT.com – Lloyds plans £4bn share placing

  “Shares in Lloyds Banking Group jumped in opening trade on Monday after the bank announced over the weekend that Sir Victor Blank would step down as chairman before June 2010, in what could be the first move to restoring the bank’s credibility among shareholders after its much-criticised takeover of HBOS.”

• Keep working ‘to avoid dementia’ – BBC News

  “Researchers analysed data from 1,320 dementia patients, including 382 men. They found that for the men, continuing to work late in life helped keep the brain sharp enough to delay dementia taking hold. The study was carried out by the Institute of Psychiatry at King’s College London.”

• Trump on Trump: Testimony Offers Glimpse of How He Values His Empire – WSJ

  My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling,” he told lawyers in the December 2007 deposition…Mr. Trump was asked whether he has ever exaggerated in statements about his properties. “I think everybody does,” he said in the deposition. “Who wouldn’t?” A follow-up question: Does that mean he inflates the value of his properties in general, nonfinancial public statements? “Not beyond reason,” he said in the testimony.

• Diminished Returns – Niall Ferguson, NY Times

  “Financial crises will happen. In the 1340s, a sovereign-debt crisis wiped out the leading Florentine banks of Bardi, Peruzzi and Acciaiuoli. Between December 1719 and December 1720, the price of shares in John Law’s Mississippi Company fell 90 percent. Such crashes can also happen to real estate: in Japan, property prices fell by more than 60 percent during the ’90s. For reasons to do with human psychology and the failure of most educational institutions to teach financial history, we are always more amazed when such things happen than we should be. As a result, 9 times out of 10 we overreact. The usual response is to introduce a raft of new laws and regulations designed to prevent the crisis from repeating itself. “

• Brain’s Organization Switches As Children Become Adults – New Scientist

  Instead of having networks made of brain regions that are distant from each other but functionally linked, most of the tightest connections in a child’s brain are between brain regions that are physically close to each other.

• Accounting Change Helps Federal Home Loan Banks – WSJ.com

  “Several of the 12 regional home-loan banks recorded losses and eliminated dividends in recent quarters because of write-downs on their investments in private-label mortgage securities. Such securities, packaged by Wall Street firms, don’t carry a government guarantee. Now, the home-loan banks are benefiting from new guidance from the Financial Accounting Standards Board, or FASB, on the treatment of securities that companies intend to hold until maturity.”