Mar 15, 2015

Jim Cramer on how it's different this time than 2007-2008

So, considering all of those negatives, how come I'm not yelling "fire?" How come I’m not revisiting 2007 and 2008?  One simple reason: we do not have systematic risk. We aren't about to fall apart at the seams. Our banking system is well capitalized, perhaps the best it’s ever been. The consumer is healthiest than any time in my lifetime, thanks to a strong job market, lower energy prices, and an aversion to debt because of the Great Recession.

[...]

It was unnatural that we kept climbing with nary a reversal for so long. This selloff is a normal correction based on legitimate worries that could impact a big swath of the market. We’ve had these kinds of downdrafts all the time, but the bottom line is, if I were the kind of guy that shouts “fire” in a crowded theater with every reversal like this then this show wouldn’t be worth watching. It certainly wouldn’t be on for ten years. Instead I have three simple, but painful words for this particular moment: stay the course. You see we’ll get through this one. And after ten years, I think it’s safe to say, we always do.

~ Jim Cramer, CNBC's Mad Money, March 10, 2015

Feb 25, 2015

John Rubino on negative interest rates

Interest rates are the price of money, and as such they tell investors, entrepreneurs and consumers what to do. Low interest rates generally say “buy, build, consume, take risks” while high rates say “save, sell, conserve, wait.” But zero or negative rates? Are they just an extreme version of low rates or is there a qualitative difference? Everyone has a theory about this but in the absence of historical precedent, we’ll have to wait and see.

~ John Rubino, "Lowest Interest Rates EVER," DollarCollapse.com, February 24, 2015

Feb 24, 2015

Ron Kruszewski: "Inflation would be welcome"

Today, inflation would be welcome and it's nowhere in sight.

~ Ron Kruszewski, CEO of Stifel Financial, as appeared on CNBC, February 24, 2015

Feb 22, 2015

Guido Hülsmann on how money printing is not the source of wealth

The classical economists had rejected the notion that overall monetary spending — in current jargon: aggregate demand — is a driving force of economic growth. The true causes of the wealth of nations are non-monetary factors such as the division of labor and the accumulation of capital through savings. Money comes into play as an intermediary of exchange and as a store of value. Money prices are also fundamental for business accounting and economic calculation. But money delivers all these benefits irrespective of its quantity. A small money stock provides them just as well as a bigger one. It is therefore not possible to pull a society out of poverty, or to make it more affluent, by increasing the money stock. By contrast, such objectives can be achieved through technological progress, through increased frugality, and through a greater division of labor. They can be achieved through the liberalization of trade and the encouragement of savings.

~ Jörg Guido Hülsmann, "Why the Austrian Understanding of Money and Banks Is So Important," Mises.org, February 18, 2015

Feb 2, 2015

Will Durant on the importance of trade

The crossroads of trade are the meeting place of ideas, the attrition ground of rival customs and beliefs; diversities beget conflict, comparison, thought; superstitions cancel one another, and reason begins.

~ Will Durant, The Life of Greece, Volume II of The Story of Civilization

Jan 16, 2015

Bruce Krasting on central bank omiscience and the abandoment of the euro peg by the Swiss National Bank


The entire world has signed onto the notion that Central Banks are all powerful. We now have evidence that they are not. Anyone who continues to believes in the All Powerful CB after today is a fool.

~ Bruce Krasting, "End of CB Power - SNB Folds," BruceKrasting.com, January 15, 2015

Jan 15, 2015

Jim Grant recommends 3-year call options on the Swiss franc

We venture that the SNB will sooner or later be forced to permit the franc to appreciate and thus to enrich the holders of low-priced, three-year call options on the Swiss/euro exchange rate. It's a long shot, to be sure--the options are cheap for a reason--but we judge that the prospective reward is worth the obvious risk.

~ Jim Grant, September 14, 2014

(Today the Swiss National Bank announced it will no longer defend the euro by inflating its own currency, sending the Swiss franc up 19% and 20% against the U.S. dollar and euro respectively.  The Swissie effectively retraced 63% of its 3 1/2 year bear market against the dollar... in one day.)