Trade Spat
Research for Online Investors

by John Dalt

9/14/09

The Administration slapped tariffs on imported tires from China on Friday.  This was under a provision in the agreement from the time China joined the World Trade Organization.  The U.S. is allowed to place tariffs on goods to slow China imports so domestic industries can adjust.

China filed a complaint against the U.S. on Sunday over poultry and auto parts.  China lost an appeal on auto parts last month.  They had required 40% Chinese made components for their domestic auto producers.  I am reminded of a poster I saw at an auto parts store.  “Arguing with a parts man is like mud wrestling with a pig.  Sooner or later, you realize they enjoy it.”  U.S. Today has an article on China, U.S. Trade.

A federal judge in New York has thrown out a $33 million settlement between the SEC and Bank of America (BAC).  The settlement was for alleged miss-statements BAC made to shareholders last fall after acquiring Merrill Lynch.  BAC’s November prospectus said, “no large bonuses would be paid to Merrill executives without BofA’s consent.”  There was evidently a side agreement that did allow $3.6 billion in bonuses to be paid as the merger was taking place.  The New York Times has a good article on “Judge Rejects Settlement over Merrill Bonuses.”

Corus Bank of Chicago got the axe Friday night, at an estimated cost to the FDIC of $1.7 billion. Corus is the 90^th bank to close this year. Corus was acquired by MB Financial Bank of Chicago and opened under that name on Saturday. Corus was a sleepy little bank, until they discovered lending on condominium projects. The profits were just too much to pass up, as they concentrated on this market.

Corus had a half billion dollars exposure in Atlanta and over $1 billion in Florida.  Perfect timing, if you are trying to destroy the bank your family built.  Venture, a Tampa Bay website has a cynical story highlighting Corus Banks lending in the area.  Read it here.

To add insult to the injury, Corus saw the trouble coming, so in December 2007 they paid out $20 million in a special one-time dividend.  The stock ownership was concentrated in the owner’s family, so they took a little money out before the proverbial stuff hit the fan.

Two other banks were closed and reopened with new owners this weekend, bringing the years total to 92

Mexico announced that production at the Cantarell Oil field has dropped to approximately 500,000 barrels of oil per day.  Four years ago, Cantarell was producing 2.1 million barrels.  We better find a new supplier.  Canada?  China has bought into the oil sands projects.  Where will the oil go when there is not enough to go around?

Our letter on Friday stirred readers:

“Great Letter!” ---paid up subscriber G.L.

“I do not care about your political views, and will not read them.” ---newsletter subscriber T.S.

I hope you make a lot of money, as your apathy will result in destruction of much wealth.  YOU may want to volunteer to send the treasury money; they needall you have.
---John Dalt

I must say, Friday’s letter may have gone too far when I stated, “You may be part of the problem.”  I struggled with this letter, angry that our political and economic systems have become so corrupted in such a short time.  The time constraints of writing a daily letter do not allow editing and word-smithing to the degree I sometimes require.  I do not intend to paint with broad strokes, but make subtle points that lead us all to evaluate our beliefs.  The two books referenced have been influential in my thinking.  “The Road to Serfdom” by F.A. Hayek is the best couple of hundred pages you will ever read.  Let me know what you think at feedback@galtstock.com

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The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions. It may contain errors and you should not make investment decisions based solely on what you believe you have read here. Do your own research, it is your money. If you lose it, it is your responsibility, not ours or your grandmothers! The editor may or may not have a position in any securities discussed. The editor may have held a position in a security earlier, or in the future.

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