Dec 31, 2007

Larry Kudlow on the proposed invasion of Iraq

The shock therapy of decisive war will elevate the stock market by a couple of thousand points.

~ Larry Kudlow, National Review Online, June 26, 2002

Ken Fisher: "Housing sector is already making a comeback" (2007)

Don't buy it. For months now the debate has been over whether America will have a hard landing of soft landing, the answer hinging on how big 2007's housing disaster turns out to be. Well, there won't be any housing disaster. We won't have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.

You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now.

~ Ken Fisher, "Housing Boom!," Forbes, February 26, 2007 (He recommend Pulte Homes (34, PHM), Toll Brothers (34, TOL), and Beazer Homes (44, BZH).)

Larry Kudlow: "Not even Greenspan can stop the Internet economy" (2000)

This correction will run its course until the middle of the year. Then things will turn up again, because not even Greenspan can stop the Internet economy.

~ Larry Kudlow, The New York Post, February 25, 2000

Steve Leisman on corporate balance sheets

The corporate balance sheet - as I've been pounding the table - remains healthy.

~ Steve Leisman, CNBC, December 31, 2007

Bernie Schaeffer on the VIX as a "smart money" indicator

This year... I personally found new significance for the CBOE Market Volatility Index – as an indicator of the smart money's assessment of the volatility landscape as opposed to the "dumb money fear gauge" it is so widely believed to represent.

~ Bernie Schaeffer, Schaeffer's Monday Morning Outlook, December 31, 2007

Dec 28, 2007

Paul Krugman blaming the credit crunch on lax regulation and adherence to free market ideology

So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.

“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

It’s no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen.

~ Paul Krugman, "Blindly Into the Bubble," The New York Times, December 21, 2007

Comptroller of the Currency John C. Dugan on risky non-traditional mortgage products

Today’s non-traditional mortgage products – interest-only, payment option ARMs, no doc and low-doc, and piggyback mortgages, to name the most prominent examples – are a different species of product, with novel and potentially risky features.

...This dominance is increasingly reflected in the numbers. By some estimates, interest-only products constituted approximately 50 percent of all mortgage originations last year. In the first half of 2005, IOs started to decline in favor of payment-option ARMs, which, according to one source, comprised half of new mortgage originations. And roughly every other mortgage these days is also a “piggyback” or reduced documentation mortgage, which points to another development that concerns us: the trend toward "layering" of multiple risks. There is no doubt that when several risky features are combined in a single loan, the total risk is greater than the sum of the parts.

We can readily understand why these new products have become fixtures in the marketplace in such a short time. One reason is that they have helped sustain loan volume that would otherwise almost certainly be falling, because rising interest rates have brought an end to the refinance boom. More important, lenders have scrambled to find ways to make expensive houses more affordable – although there’s now a concern that the very availability of this new type of financing has done its share to help drive up house prices, which in turn stimulates demand for even more non-traditional financing."

~ John C. Dugan, Comptroller of the Currency, "Remarks by John C. Dugan Before an OCC Credit Risk Conference," Atlanta, Georgia, October 27, 2005

(Appeared in Calculated Risk blog, "Remarks by John C. Dugan," November 9, 2005.)

Paul Krugman blaming the subprime mess on greed and a lack of corporate governance

'What were they smoking?" asks the cover of the current issue of Fortune magazine. Underneath the headline are photos of recently deposed Wall Street titans, captioned with the staggering sums they managed to lose.

The answer, of course, is that they were high on the usual drug - greed. And they were encouraged to make socially destructive decisions by a system of executive compensation that should have been reformed after the Enron and WorldCom scandals, but wasn't.

The point is that the subprime crisis and the credit crunch are, in an important sense, the result of our failure to effectively reform corporate governance after the last set of scandals.

~ Paul Krugman, "Banks Gone Wild," International Herald Tribune, November 23, 2007

Thomas DiLorenzo on Paul Krugman blaming the mortgage mess on the free market

In [Paul] Krugman's article blaming the "subprime" mortgage mess on the free market, he claims that the Comptroller of the Currency should have been regulating the lending business more stringently. If so, this all might have been avoided, he says. As usual, he hasn't the foggiest idea of what he's talking about.

The fact is, the Comptroller of the Currency and the Fed itself have been busy enforcing the "Community Reinvestment Act" of 1977 for the past 30 years, which pressures banks to make uneconomical loans to uncreditworthy borrowers, euphemistically called "sub-prime" borrowers. They're not financial deadbeats, or people who never pay their bills on time. They're just a tiny, tiny bit below "prime" borrowers, in Governmentspeak.

Once again, Krugman gets everything ass backwards: Government regulation of the credit markets is a major CAUSE of the "subprime" mortgage debacle, not the solution. (Of course, the Greenspan Fed itself is the cause of the now-burst housing bubble).

~ Thomas DiLorenzo, "Crazed Keynesianism (and stupid, too)," blog post, December 21, 2007

BusinessWeek on the repeal of Glass-Steagall

The implications of the new law [the repeal of Glass-Steagall] are enormous. For instance, like other deregulated businesses, a merger frenzy of potentially unprecedented scale and scope is likely to be unleashed in the financial-services industry. Regulators rightly worry that these new behemoths will be considered too big to fail, encouraging their managements to throw the dice by lending recklessly throughout the global economy. These companies would profit handsomely if the gambles pay off, and taxpayers pick up the tab if they don't -- shades of the 1980s savings-and-loan crisis.

~ BusinessWeek Online, "Goodbye Glass-Steagall, Hello Big Mergers -- and Big Fees?," October 29, 1999

Frederic Mishkin: Housing market "bottoming out" (2007)

We do see some stabilization of demand in the housing market ... there is some indication that the market could be bottoming out.

~ Frederic Mishkin, Federal Reserve Governor, Reuters, April 20, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Henry Paulson: Subprime troubles "largely contained" (2007)

I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained.

~ Henry Paulson, U.S. Treasury Secretary, Reuters, April 20, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Richard Fisher: "Damage from subprime largely contained" (2007)

The damage from the subprime market has been largely contained.

~ Richard Fisher, Dallas Fed President, Dallas News, April 5, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Ben Bernanke: Subprime problems seem "contained" (2007)

At this juncture...the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.

~ Ben Bernanke, Federal Reserve Chairman, AFX News, March 28, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Janet Yellen: "Waking up less at night" over housing (2007)

I'm waking up less at night than I was [over the slowdown in housing]. So far, there's been remarkably little effect [from housing] on the rest of the economy.

~ Janet Yellen, San Francisco Fed President, MarketWatch, February 21, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

James Madison on threats to liberty: gradualism and external enemies

I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.... The means of defense against foreign danger historically have become the instruments of tyranny at home.

~ James Madison

Dec 27, 2007

Lew Rockwell on the assassination of Benazir Bhutto

The horrific assassination of Benazir Bhutto is a massive blow to the empire, since she was the handpicked US replacement for the hated Pervez Musharraf. The US had installed Musharraf as military dictator after kicking out his elected predecessor, Nawaz Sharif (ah yes, global democracy), who was considered insufficiently obedient. The US has spent many billions on Musharraf and his military, but it has only earned the contempt of Pakistanis who don't like being a US colony (and no, one does not have to be pro-terrorist to be opposed to foreign control). What will happen now in Pakistan? Nothing good. At the same time, the US occupations of Iraq and Afghanistan continue to go badly, and Turkey--with US support--is bombing the Kurds in Iraq, the most pro-American part of the population. All over the world, other occupied areas grow restive as well.

Meanwhile, thanks to the Fed, the dollar weakens every day, risking a key pillar of US hegemony. Domestically, housing heads into a 1930s-style crisis, with more of the economy to follow.

This is the way empires end: in blood and economic disaster. The regime will want to do more of the same: inflate and bailout at home, threaten and bomb abroad, which will only worsen everything.

There is only way out: cut spending, cut taxes, stop inflating, end the police state, bring the troops home. Peace and freedom: libertarianism, in other words. How blessed we are, at the very moment of crisis, to have Ron Paul.

Needless to say, only Ron Paul among the candidates has opposed US intervention in Pakistan, and the massive foreign aid to its government.

~ Lew Rockwell, "Ron Paul, Pakistan and the Fed," blog post, December 27, 2007

Dec 26, 2007

Murray Rothbard on economic ignorance

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

~ Murray Rothbard, Egalitarianism as a Revolt Against Nature, and Other Essays

Murray Rothbard on environmentalist hypocrites

My own observation is that most of the bellyachers about the ugliness of our cities and singers of paeans to the unspoiled wilderness stubbornly remain ensconced in these very cities. Why don't they leave? There are, even today, plenty of rural and even wilderness areas for them to live in and enjoy. Why don't they go there and leave those of us who like and enjoy the cities in peace. Furthermore, if they got out, it would help relieve the urban 'overcrowding' which they also complain about.

~ Murray Rothbard, Egalitarianism as a Revolt Against Nature, and Other Essays

Dec 24, 2007

Casey Stengel on making predictions

Never make predictions, especially about the future.

~ Casey Stengel, famed baseball manager

Bernie Schaeffer on 2007 U.S. and global equity fund flows

As of December 19, TrimTabs Investment Research reports that U.S. equity funds had lost $51.1 billion year-to-date, on pace to be the largest annual outflow in industry history. This amounts to about 1% of total equity-fund assets of $5.3 trillion. Mutual-fund players seem to be taking the money overseas, as global equity funds saw inflows of $126.9 billion, equal to 7.5% of the $1.7 trillion in global equity fund assets. Since 2005 in fact, U.S. equity funds have lost $9 billion, even while the S&P 500 has grown from 1,212 at the end of 2004 to 1,485 today.

~ Bernie Schaeffer, Schaeffer's Monday Morning Outlook, December 24, 2007

Dec 23, 2007

Bill Bonner and Lila Rajiva on the outcome of 9/11

The attacks of September 11 produced exactly the results the terrorists desired - the Bush administration panicked, got out the duct tape, and created what Leif Wenar at the University of Sheffield cleverly calls "a false sense of insecurity."

In short, they created panic - even terror - in the American people, which, of course, is precisely the aim of terrorists. In the language of the Marxist terrorists of the late 1960s, their real aim is to radicalize onlookers, moving them to join the cause. That is just what the Bush administration seems to have done. Rather than calmly and quietly proceeding to track down the perpetrators, it blundered right into Iraq and stirred up terrorist ambitions all over the Middle East. Where previously there had been only a handful of fanatics to worry about, now there are thousands of them.

~ Bill Bonner and Lila Rajiva, Mobs, Messiahs, and Markets, p. 57

Henry David Thoreau on the foundation of liberty

Disobedience is the true foundation of liberty. The obedient must be slaves.

~ Henry David Thoreau

Louis Brandeis on threats to liberty

The greatest dangers to liberty lurk in insidious encroachment by men of zeal -- well-meaning but without understanding.

~ Louis D. Brandeis

John Philpot Curran on the price of liberty

Eternal vigilance is the price of liberty.

~ John Philpot Curran

Henry Hazlitt on the broken gold promise

We have forgotten that our currency unit, the dollar, was originally a pledge. It was a solemn pledge by the U.S. Government to pay its bearer on demand 1/20th of an ounce of gold. Our government disdainfully repudiated that pledge in 1933. It made another pledge to pay 1/35th of an ounce, not to our own people but to foreign central banks. That pledge was repudiated in 1971.

~ Henry Hazlitt

Aden sisters on inflation and gold

The overall evidence strongly suggests that tons and tons of money would then flood into the system, further cheapening the currency while interest rates drop to near zero if they have to. That in turn will eventually fuel inflation and gold's long-term bull- market rise.

~ Aden Forecast, edited by Mary Anne and Pam Aden, "For Adens, gold isn't all that glitters;
Commentary: Veteran gold bugs also see short-term stock opportunities
," MarketWatch, December 20, 2007

The Adens currently recommend:

  • 40% Gold and silver physical and ETFs, and gold and silver shares
  • 40% Natural resources, energy & other stocks
  • 20% Cash: Euro, Canadian dollar, Australian, New Zealand and Singapore dollars or currency funds

Anatole France on the hemline indicator

If I should be able to choose one out of all the books published a hundred years after my death, I would take a fashion magazine to see how women were dressing. Their fripperies would tell me more about the society of that future day than all the philosophers and preachers.

~ Anatole France

Gene Epstein sees no recession in 2008

The metaphor of the drug clinic should not give us the impression that everybody in the economy is crashing. The fact of the matter is that retail sales are up, industrial production is holding. Most likely we are not going to suffer a recession in 2008. Most likely it will be a slowdown. There will be some rise in the interest rate. The central banks are indeed in their rehab phase and the economy will likely pull through and start expanding again more rapidly in 2009.

~ Gene Epstein, Barron's Video, December 24, 2007

Gene Epstein on Greenspan the drug dealer

CAN FORMER FEDERAL RESERVE chairman Alan Greenspan be blamed for the current crisis in mortgage debt? The question is like asking whether the recently departed Mafia lord in charge of pushing drugs might be responsible for the fact that a lot of folks got addicted, and eventually overdosed.

Now suppose this same Mafia lord also manages the major methadone clinics and rehab facilities. This is good for his organization, which wants to sell to users whose habits are kept under control. It all makes for a system that runs like a well-oiled machine.

The "drug" in question is money and credit, which the central bank dispenses. And it's the ready availability of money and credit that lures the irrationally exuberant into committing finance capital to unsustainable projects that eventually bring on the sort of crisis we're now in.

~ Gene Epstein, "Study History, Mr. Greenspan," Barron's, December 24, 2007

Dec 21, 2007

John Bogle on the Go-Go Sixties

Q: What was your biggest mistake?

Bogle: When I was 38, I became head of Wellington Management, and I did an extremely unwise merger. I got wrapped up in the excitement of the go-go era, and the go-go era ended. As a result of that stupid decision, I got fired. The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, what that I learned a lot. And if I had not been fired then, there would not have been a Vanguard.

~ John Bogle, "Questions For John Bogle," Fortune, December 24, 2007

Frederic Bastiat on government theft

If you and I can't steal from our neighbors, we don't have the moral right to ask our neighbor -- our government to do the same thing.

~ Frederic Bastiat

(This may be a paraphrase. Ron Paul quoted referred to this quote in an interview with Glenn Beck on December 18, 2007.)

Charles Kettering on change

The world hates change, yet it is the only thing that has brought progress.

~ Charles F. Kettering

Albert Einstein on imagination

Imagination is more important than knowledge.

~ Albert Einstein

On leadership (anonymous)

Unless you're the lead dog, the scenery never changes.

~ Unknown

C. S. Lewis on "omnipotent moral busybodies"

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

~ C. S. Lewis

Groucho Marx on politics

Politics is the art of looking for trouble, finding it, misdiagnosing it and applying the wrong remedies.

~ Groucho Marx

Jim Cramer on Lloyd Blankfein

Lloyd Blankfein is money in the bank... He's the most underpaid CEO on Wall Street.

~ Jim Cramer, as appeared on CNBC, December 21, 2007

Dec 20, 2007

Neil Cavuto on the Iraq War and early victory (2003)

I want to talk to the French right now. And the Germans. And the Russians. I want to talk to all those who opposed the liberation of Iraq.

I want to show you all the joyous scene in downtown Baghdad today.

People oppressed. Now people free.

People once hopeless. Now hopeful.

People you forgot. But we remembered.

If you had things your way, they'd still be under the thumb of a dictator. And you were fine with that. We were not.

You had no problem telling them, live with it. We had a big problem telling them, get over it.

Look at their faces. See their smiles. Feel their joy. Their freedom. Their fervor. How do you feel now? Still sure going the extra mile for them wasn't worth it? I don't think they'd agree.

While you were debating, they were suffering.

~ Neil Cavuto, "Stomping on Saddam," FOX News, April 9, 2003

Morgan Stanley on MBIA's structured finance disclosure

We are shocked that management withheld this information for as long as it did. This new disclosure completely changes our view of MBIA being a more conservative underwriter relative to Ambac.

~ Ken Zerbe, Yoana Koleva, Morgan Stanley analysts, "MBIA details huge mortgage exposure, shares collapse ", Reuters, December 20, 2007

Dec 19, 2007

Robert Taft on liberty vs. central planning

After the American Revolution and the French Revolution the whole world became convinced that liberty was the key to progress and happiness for the peoples of the world, and this theory was accepted, even in those countries where there was, in fact, no liberty. People left Europe and came to this country, not so much because of the economic conditions as because they sought a liberty which they could not find at home. But gradually this philosophy has been replaced by the idea that happiness can only be conferred upon the people by the grace of an efficient government. Only the government, it is said, has the expert knowledge necessary for the people's welfare; only the government has the power to carry out the grandiose plans so necessary in a complicated world.

~ Senator Robert Taft, A Foreign Policy for Americans (1951)

Robert Taft on liberty and progress

We cannot overestimate the value of this liberty of ideas and liberty of action. It is not that you or I or some industrial genius is free; it is that millions of people are free to work out their own ideas and the country is free to choose between them and adopt those which offer the most progress. I have been through hundreds of industrial plants in the last two or three years, and in every plant I find that the people running that plant feel that they have something in the way of methods or ideas or machinery that no other plant has. I have met men said to be the best machinists in the industry who have built special machines for a particular purpose in which that company is interested.

Thousands of wholly free and independent thinkers are working out these ideas and have the right and ability to try them out without getting the approval of some government bureau. You can imagine the difference between the progress under such a system and one in which the government ran every plant in the country as it runs the post offices today. There would be one idea for a hundred that are now developed. If any plant employee had an idea for progress and wrote to Washington, he probably would get back a letter referring him to Regulation No. 5201 (c), which tells him exactly how this particular thing should be done, and has been done for the past fifty years.

It is clear to me that the great progress made in this country, the tremendous production of our people, the productivity per man of our workmen have grown out of this liberty and the freedom to develop ideas. We have the highest standard of living, because we produce more per person than any other country in the world.

~ Senator Robert Taft, A Foreign Policy for Americans (1951)

Albert Lord unplugged

It’s (margin calls) embarrassing and troublesome to me personally, the bank sold me out. It is not a sign of my disillusionment with the company. In fact, the exact reverse is the case.

Steve (McGarry, Managing Director of Investor Relations), let's go, there's no questions, let's get the f*ck outta here.

~ Albert Lord, CEO Sallie Mae, conference call discussing future of Sallie Mae, December 19, 2007

Robert Taft on foreign policy

An unwise and overambitious foreign policy, and particularly the effort to do more than we are able to do, is the one thing which might in the end destroy our armies and prove a real threat to the liberty of the people of the United States...

~ Senator Robert Taft, A Foreign Policy for Americans (1951)

Gandhi on sin

Hate the Sin; Love the Sinner.

~ Mahatma Gandhi

Mikhail Turovsky on time

When your legs get weaker time starts running faster.

~ Mikhail Turovsky

Mark Twain on skepticism

Believe nothing you hear, and only half of what you see.

~ Mark Twain

Benjamin Franklin on lost time

Lost time is never found again.

~ Benjamin Franklin

Husayn ibn Ali on dignity

Death with dignity is better than life with humiliation.

~ Husayn ibn Ali

On hypocrisy (anonymous)

Hypocrisy is the tribute that vice pays to virtue.

~ Unknown, possibly French proverb, or authored by François de La Rochefoucauld

Celia Green on committees

The psychology of committees is a special case of the psychology of mobs.

~ Celia Green

Lenin on propaganda

A lie told often enough becomes the truth.

~ Vladimir Lenin

Nouriel Roubini on financial sytem

Non-bank institutions do not have direct access to the Fed and other central banks liquidity support and they are now at risk of a liquidity run as their liabilities are short term while many of their assets are longer term and illiquid; so the risk of something equivalent to a bank run for non-bank financial institutions is now rising. And there is no chance that depository institutions will re-lend to these to these non-banks the funds borrowed by central banks as these banks have severe liquidity problems themselves and they do not trust their non-bank counterparties. So now monetary policy is totally impotent in dealing with the liquidity problems and the risks of runs on liquid liabilities of a large fraction of the financial system.

~ Nouriel Roubini, President, Global EconoMonitor, "Central Banks Are Getting Desperate", December 18, 2007

Stephen Roach on US economy

This recession will be deeper than the shallow contraction earlier in this decade. The dot-com-led downturn was set off by a collapse in business capital spending, which at its peak in 2000 accounted for only 13 percent of the country’s gross domestic product. The current recession is all about the coming capitulation of the American consumer — whose spending now accounts for a record 72 percent of G.D.P.

~ Stephen Roach, Asia Investment Chairman, New York Times, December 16, 2007

Dec 17, 2007

Howard Buffett on conscription

In its abolition of freedom, peacetime conscription overshadows all other collectivism and regimentation. When the American government conscripts a boy to go 10,000 miles to the jungles of Asia without a declaration of war by Congress…. what freedom is safe at home? Surely, the profits of U.S. Steel or your private property are not more sacred than a young man’s right to life.

~ Howard Buffett, "An Opportunity for the Republican Party," New Individualist Review, II, 2 (Summer 1962), p. 12.

Howard Buffett on anti-Communist cover for government spending

In the pattern developed through the war years [World War II] of deficit spending, this administration combination would dress up every spending scheme as vital in their anti-Communist program. Attempts at economy would again be smeared as reactionary efforts to save dollars at the cost of the lives of American boys. Patriots who try to bring about economy would be branded as Stalin lovers. The misery of the people, from continued militarism and inflation, would soon become unbearable. As their anguished protests became vocal, the shackles of regimentation and coercion, so lately thrown off, could be refastened in the name of stopping communism at home.

~ Congressman Howard Buffett, March 18, 1947

Howard Buffett on the Soviet threat

We see no advantage in dodging the facts [that] if this tension with Russia keeps up, the military will probably succeed in imposing permanent conscription, will become the dominant factor in making and directing our foreign policy…. and will insist on the projection of American military power – of course, only as a measure of ‘security’ – into every part of the earth.

~ Congressman Howard Buffett, March 28, 1946

Joseph Stromberg on Howard Buffett

[Howard] Buffett’s consistent defense of classical liberal, free-market, republican, and anti-interventionist positions makes him an interesting, if little remembered, forerunner of today’s libertarianism and anti-Establishment conservatism. He was, as Murray Rothbard later pointed out, the most hard-core of the dwindling handful of Old Right politicians in the early Cold War period. Buffett contributed occasionally to such journals as Human Events, The Freeman, and later, New Individualist Review.

~ Joseph Stromberg, "The Old Cause,", April 24, 2001

Rod Dubitsky on structured finance

Derivatives, or synthetics are like wearing a seatbelt that allows you to drive faster. The total dollar amount of losses, all these losses you're seeing, are from synthetics. No question, it changed the game dramatically.

~ Rod Dubitsky, Director asset-backed research, Credit Suisse, "Subprime Securities Began as Group of Five", December 17, 2007

Henry Paulson on "temporarily" lifting loan limits on the GSEs

We would be for lifting the limits for Freddie and Fannie on a temporary basis. As I talked to members of Congress, I am hearing less and less resistance to reforming the GSEs.

~ Henry Paulson, Treasury Secretary, Bloomberg TV, December 17, 2007

Jefferson on banking as a threat to liberty

I sincerely believe that banking institutions having the issuing power of money, are more dangerous to liberty than standing armies.

~ Thomas Jefferson

Kevin Duffy on the modern-day protection racket

Politicians are the modern-day equivalent of snake oil salesmen. The Democrats sell the scam that the less fortunate can live at the expense of the productive. The Republicans sell the scam that they will protect the productive from the Democrats. And they both sell the scam that they will protect us from imminent attack by envious freedom-hating fanatics willing and able to cross an ocean just to do us harm.

~ Kevin Duffy, Bearing Asset Management, December 17, 2007

Hillary Clinton on offshore tax havens

Close the loopholes for people who create a mailbox, or a drop, or send one person to sit on the beach in some island paradise and claim that it is their offshore headquarters.

~ Hillary Clinton, Senator, New York, "Clinton's Ties to Burkle Include Funds in Offshore Tax Haven", Bloomberg, December 17, 2007

Bernie Schaeffer: "Market valuation is quite reasonable"

Market valuation is quite reasonable. Per a article on December 10, the gap between the earnings yield on the S&P and 10-year note yields is the biggest in 20 years, and speaks to the possibility that stocks are, in fact, very reasonably priced at current levels.

~ Bernie Schaeffer, Schaeffer's Monday Morning Comment, December 17, 2007

Dec 16, 2007

Ron Paul on the Enron bankruptcy

It is a mistake for Congress view to the Enron collapse as a justification for more government regulation. Publicly held corporations already comply with massive amounts of SEC regulations, including the filing of quarterly reports that disclose minute details of assets and liabilities. If these disclosure rules failed to protect Enron investors, will more red tape really solve anything? The more we look to the government to protect us from investment mistakes, the less competition there is for truly independent evaluations of investment risk.

~ Congressman Ron Paul, "Enron, Bankruptcy, and Easy Credit," December 17, 2002

Daniel Greensberg on love and sex

Love is the self-delusion we manufacture to justify the trouble we take to have sex.

~ Daniel S. Greensberg

Ara Hovnanian on housing

It's hard to tell if the worst is over. I would have hoped for a little bolder move (recent rate cut).

~ Ara Hovnanian, CEO Hovnanian Enterprises, Bloomberg TV, December 15, 2007

James Bianco on Libor

The Libor spread is screaming that there is a big, big stress point in the banking system.

~ James Bianco, Founder Bianco Research, "Why Borrowers May NotBenefit From Rate Cut", Wall Street Journal, December 13, 2007

Michael Feroli on FHLB lending

It is almost like the socialisation of housing finance.

~ Michael Feroli, economist, JP Morgan, Financial Times, December 12, 2007

Ben Bernanke on foreign reserves

Over the past decade a combination of diverse forces has created a global savings glut.

~ Ben Bernanke, Chairman Federal Reserve, Wall Street Journal, December 30, 2006

Lawrence Summers on mortgage crisis

There needs to be a bias towards activism. Policy has been behind the curve for months now. The dangers of doing too little are much greater than the dangers of doing too much in this context.

~ Lawrence Summers, Former Treasury Secretary, "In Capital, Steps Weighed to Fix Mortgage Mess, Wall Street Journal", December 15, 2007

Ian Stannard on term auction facility

This is a drastic action. The central banks want to place a fire-break to stop credit tensions spilling over into the broader markets and becoming the catalyst for a global economic crunch.

~ Ian Stannard, economist, BNP Paribas, "World Bankers Resort to Firebreak", Financial Times, December 16, 2007

Neil MacKinnon on term auction facility

There's a real danger that this may not work. Both the Fed and the ECB have injected a lot of liquidity before, but the banks are hoarding it. We're still seeing all the signs of stress with Libor and the VIX [fear gauge] at very elevated levels. The reason is that people still don't know where the bodies are buried. This may be a Made-in-America credit crisis but the Americans have cleverly exported their sub-prime cancer to pension funds all over the world. The risk now is a recession on both sides of the Atlantic.

~ Neil MacKinnon, strategist at the ECU hedge fund group, "World Bankers Resort to Firebreak", Financial Times, December 16, 2007

Dec 15, 2007

D.R. Horton CEO: "’07 is going to suck"

I don’t want to be too sophisticated here, but ’07 is going to suck, all 12 months of the calendar year.

~ Donald J. Tomnitz, D.R. Horton CEO, speaking at an investor conference in New York, "D.R. Horton CEO: 2007 will ‘suck’," MarketWatch, March 7, 2007

Bear Stearns analysts upgrade New Century (2007)

The potential downside in the stock if the company is forced to sell or liquidate is roughly balanced with the potential upside.

~ Scott Coren and Michael Nannizzi, analysts at Bear Stearns, from a research note, "New Century upgraded at Bear Stearns," MarketWatch, March 1, 2007

(The two analysts lifted their rating on New Century to peer perform from underperform. Shares climbed almost 3% to $15.78 during afternoon trading Thursday. They've still slumped almost 50% so far this year due to signs of a credit crunch in the subprime-mortgage industry.)

Merrill Lynch analyst concerned about liquidity drying up for New Century

Finance companies that go out of business usually do so because of a lack of liquidity.

Investors and warehouse lenders could lose confidence in New Century. New Century's business model is highly reliant on liquidity, so if investor confidence deteriorates and credit facilities are constrained, a liquidity event could ensue.

New Century's accounting issues and deteriorating fundamentals at its lending operation could put it at a steep downward slope, in our view, and we are more concerned that liquidity issues and adverse market reactions could undermine its business model and financial stability even further.

~ Kenneth Bruce, Merrill Lynch analyst, from a note to clients on Feb. 8, "Big banks control fate of subprime lenders," MarketWatch, February 16, 2007

(Merrill Lynch downgraded the stock to a sell.)

Goldman Sachs analysts on Merrill Lynch's 1st quarter results

These results should alleviate most investor concerns that Merrill is overly exposed to deteriorating subprime mortgage markets and challenging CDO/CLO markets.

~ Goldman Sachs analysts, from a Tuesday research report, "Merrill Lynch's profit rises 31%," MarketWatch, July 17, 2007

Merrill Lynch CFO on exposure to subprime loans (2007)

[The company's total exposure to subprime loans] is limited, contained, and appropriately marked. I think the majority of our exposure continues to be now in the highest-credit segment of the market.

As we increase our risk-taking capabilities and increase our focus on trading, you will see and you have seen a general migration in our revenue lines from net interest to principal transactions.

~ Jeff Edwards, chief financial officer, Merrill Lynch, "Merrill Lynch's profit rises 31%," MarketWatch, July 17, 2007

Deutsche Bank analyst Mike Mayo on Merrill Lynch's subprime lending problems

In our view, the quarter showed that Merrill has navigated recent market problems quite well and that the issues of market concern are not a major driver of its earnings.

~ Mike Mayo, Deutsche Bank analyst, "Merrill Lynch's profit rises 31%," MarketWatch, July 17, 2007

(Comments from a recent research report assessing Merrill Lynch's quarterly results.)

George Giles on Michael Vick and animal rights

What was Michael Vick guilty of? He was doing as he wished with his and his associate’s private property. They were having dog fights. Dogs are property in every state of the Union. Animals are not regarded as having any inalienable rights. They belong to their owners who are free to do as they please. Americans have never cared much for dog meat so dogs are not used for nutrition. Dogs are domesticated and inbred wolves. They are owned, and have no rights to own anything in return. Leona Helmsley’s dog did not get its inheritance because of this. It is the proper word; as dog is a thing, property in view of the law, not an individual with any rights. The bible says that God gave man sovereignty over the animal without limitation.

Michael Vick’s property rights were stripped, along with the rest of ours, when legislators and courts have deemed animals to have "rights." What these rights are, like so many things, are to be politically determined by the local DA and their cadre of taxpayer-financed associates. I think dog fighting is stupid and cruel, certainly in poor taste, but it should not be a crime. There are many corporations in America that execute millions of animals every day, horses, cows, pigs, chickens and turkeys as part of their ongoing and legitimate private business activities. Clearly the determination of what is proper and legal is a fungible concept following this reasoning. Meat packers treat animals as property, yet when Michael Vick does it, a serious crime occurs.

~ George Giles

Arnold Schwarzenegger on California's possible $14 billion deficit

What we have to do is fix the budget system. The system itself needs to be fixed, and I think that this is a good year, this coming year, to fix it.

~ Arnold Schwarzenegger, Governor of California, speech made in Long Beach where he was promoting his plan for health care reform, "Schwarzenegger Will 'Declare Fiscal Emergency' In Weeks,", December 14, 2007

(California state spending increased by more than 40 percent since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis.)

Alan Greenspan on the Fed

This is a much tougher monetary-policy environment than anything I experienced.

The notion of core pricing is fading in importance as: One, food prices driven by increased long-term demand for meat and milk rise with the growth of China and other developing countries, and as; Two, global oil supply peaks lower and sooner than had been contemplated earlier.

~ Alan Greenspan, former Federal Reserve Chairman , "How Inflation Hobbles the Fed," The Wall Street Journal, December 15, 2007

Kevin Duffy on Jim Cramer turning Fed critic

Cramer criticizing the Fed is like a food critic attacking the McDonald’s Happy Meal for not having enough calories.

~ Kevin Duffy, Bearing Asset Management, December 15, 2007

Jim Cramer on the Fed (interview with Ron Paul)

You've given me cover, sir. I always feel like I'm out there by myself criticizing this institution that everybody thinks is like a holy temple, when the reality is these are just men and women like you and me. Except for they're making policy with no checks and balances. I wish you the best, sir, with your campaign. You are changing things with what you are saying.

~ Jim Cramer, interview of Ron Paul on CNBC's Mad Money, December 14, 2007

Republican Party on the war economy and currency debasement (1952)

They claim prosperity but the appearance of economic health is created by war expenditures, waste and extravagance, planned emergencies, and war crises. They have debauched our money by cutting in half the purchasing power of our dollar.

We shall always measure our foreign commitments so that they can be borne without endangering the economic health or sound finances of the United States. Stalin said that 'the moment for the decisive blow' would be when the free nations were isolated and were in a state of 'practical bankruptcy.' We shall not allow ourselves to be isolated and economically strangled, and we shall not let ourselves go bankrupt.

~ From the Republican platform of 1952.

Kevin Duffy on the statist Hillary Clinton and pseudo-capitalist Warren Buffett tag team

Next up: American capitalism's folk hero, Warren Buffett, raising funds for Hillary Clinton. According the WSJ:

"The fund-raising 'Conversation with Warren Buffett' drew over 1,500 people, including a mix of Silicon Valley executives such as John Doerr, a partner at venture-capital firm Kleiner Perkins Caufield & Byers... Tickets ranged from $100 to more than $2,300, drawing in around $1 million, according to the Clinton campaign."
How ludicrous - the country's prominent venture capitalists and its best known and beloved "capitalist" raising funds for a committed welfare statist and socialist. On CNBC, Hillary agreed with Buffett's position to maintain the estate tax because, in her words,

"It's really a tax to prevent us from having inherited wealth generation after generation which would undermine the kind of spirit and meritocracy that the United States stands for."
This is awfully charitable of Hillary and Warren to provide such a vital service to our "free" society. Never mind that Mr. Buffett sells life insurance to these very people attempting to protect their family businesses and family estates from the ravages of the tax man, just so they can keep them intact for their children. Buffett chooses to hand over the vast majority of his $57 billion fortune to charity, so why should he care? Repeal the exemption on charitable giving and you would see him go apoplectic. In 1995, Buffett was quoted on the subject:

"I personally think that society is responsible for a very significant percentage of what I've earned. If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much this talent is going to produce in the wrong kind of soil... I work in a market system that happens to reward what I do very well -- disproportionately well... I do think that when you're treated enormously well by this market system, where in effect the market system showers the ability to buy goods and services on you because of some peculiar talent -- maybe your adenoids are a certain way, so you can sing and everybody will pay you enormous sums to be on television or whatever -- I think society has a big claim on that."
So on the one hand, Buffett realizes the free market maximizes human potential, and on the other supports Big Government, itself the greatest threat to free markets. Some capitalist. Note to Oracle of Omaha: If you feel the need to give back, why not write a few checks to free market think tanks?

~ Kevin Duffy, Bearing Asset Management, "Beam Me Up,", December 14, 2007

Dec 14, 2007

Kevin Duffy on why Warren Buffett supports the estate tax

[Warren] Buffett sells life insurance to... people attempting to protect their family businesses and family estates from the ravages of the tax man, just so they can keep them intact for their children. Buffett chooses to hand over the vast majority of his $57 billion fortune to charity, so why should he care? Repeal the exemption on charitable giving and you would see him go apoplectic.

~ Kevin Duffy, Bearing Asset Management, "Beam Me Up,", December 14, 2007

Kevin Duffy on Jim Cramer

The kiddies love Jim Cramer because he advocates an all-sugar diet, 24/7. In his bizarre world of asymmetric risk, the Fed’s job is to prevent investor losses, no matter the consequences. Quite a free market role model for his adolescent fans.

~ Kevin Duffy, Bearing Asset Management, "Beam Me Up,", December 14, 2007

Mark Twain on profanity

I have found solace in profanity unexcelled even by prayer.

~ Mark Twain

Lysander Spooner on taxation

If the government can take a man's money without his consent, there is no limit to the additional tyranny it may practise upon him; for, with his money, it can hire soldiers to stand over him, keep him in subjection, plunder him at discretion, and kill him if he resists.

~ Lysander Spooner, 1852

Vin Weber on M-LEC

If Paulson succeeds, he'll have a very strong legacy. If not, it means we're headed for a serious economic downturn, and we'll all pay a price.

~ Vin Weber, Policy Chairman for presidential candidate Mitt Romney, "Paulson Finds Bush's Treasury No Career Enhancer Like Goldman", November 21, 2007

Joe Kernan on "most widely predicted recession in history"

This would be the most widely predicted recession in history, and that never happens.

~ Joe Kernan, CNBC, 8:45 am, December 14, 2007

Dec 13, 2007

Any Rand on conservatives poorly defending capitalism

The liberals are constantly asserting that they represent the future – that they are new, progressive, forward-looking, etc. And they denounce the conservatives as old-fashioned representatives of a dead past. The conservatives conceded and thus helped the liberals to propagate one of today’s most grotesque contradictions. Collectivism and dictatorship – the frozen status society – is offered to us in the name of progress, while capitalism – the only free, dynamic, creative society ever devised – is defended in the name of passivity and stagnation.

The plea to preserve tradition as such appeals to the worst elements in men and rejects the best. It appeals to fear, cowardice, conformity, self doubt, and rejects creativeness, originality, independence, self-reliance. It is an outrageous plea to address to human beings anywhere, but the more outrageous here, in America – the country based on the principle that man must stand on his own feet, lead by his own judgment, and move constantly forward as a productive, creative innovator.

Ayn Rand, "Ayn Rand on the GOP," (video) 1961

Kevin Duffy on the Ron Paul revolution

The “Ron Paul revolution” is about much more than Ron Paul. It is about ideas. The basic idea is that freedom works. In fact, it works miracles. It is a precondition to maximizing human potential. Its economic reflection – the free market – creates harmony and abundance. Its prerequisites are individual liberty, voluntary exchange, private property and sound money. The corollary to this idea is that interference doesn’t work. Coercion doesn’t work. Central planning doesn’t work as it subverts the plans of individuals. The result of all of this meddling in the market process is scarcity and chaos. The more the meddling, the worse things will be.

~ Kevin Duffy, December 13, 2007

OFHEO director James Lockhart on GSE reform

There may come a time, I hope we never get to that time, when we may have to relax. I'd hate to relax the capital requirement just because they are losing money. That is not the reason to relax the capital requirement.

There was a lot of pressure on the agency to ease the portfolios (in August) and now we are hearing more and more about the capital. I can tell you in retrospect that we made the exact right decision in August.

It does look like the portfolio limits could come off as early as late February. There is a reasonable chance that may happen. We will be looking at the capital. I told both (Fannie Mae and Freddie Mac chief financial officers) when they put out their financial statements we will start to look at the capital. And we are going to go through a list of what needs to be done.

~ James Lockhart, Director of Office, Federal Housing Enterprise Oversight, Reuters, December 13, 2007

Arnold Wesker on journalism

A journalist is somebody who possesses himself of a fantasy and lures the truth towards it.

~ Arnold Wesker, Journey into Journalism (1977)

Dec 12, 2007

Ken Fisher on progress in central bank management

Errors still happen - like when Greenspan created way too much money in 1999 in fear of potential Y2K problems, flaming the economy. Then, he sucked it back out in 2000 after Y2K wasn't problematic - helping make the 1999 and 2000 boom-bust bigger than otherwise. But mistakes are made less routinely and massively than in the pre-Volcker era. Greenspan's worst mistakes were pretty good compared to the best of earlier decades... My guess is, as central bankers benefit from future improved information flows and accumulated lessons of the past, on average they keep making mistakes but the mistakes are fewer and not as bad.

~ Ken Fisher, The Only Three Questions That Count (2007), p. 267

Alan Skrainka on latest Fed plan to add liquidity

This is a very bullish development for the markets. The main problem in credit markets has not been that rates are too high, but that financial institutions have been unwilling to lend. This added liquidity should relieve some of that pressure.

~ Alan Skrainka, chief market strategist, Edward Jones, "U.S. stocks recover gains after late-session slide; Coordinated actions by central banks designed to add $40 billion in liquidity," MarketWatch, December 12, 2007

(The Fed unveiled a plan Wednesday to add $40 billion in liquidity to the markets, with help from the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank. See full story.)

Henry Ford on failure

Let them fail; let everybody fail! I made my fortune when I had nothing to start with, by myself and my own ideas. Let other people do the same thing. If I lose everything in the collapse of our financial structure, I will start in at the beginning and build it up again.

~ Henry Ford, February 11, 1933

Tiger Tong on Chinese money managers

A prolonged stock market decline will provide a real test for China's fund managers. Most of them are momentum investors who just go with a rising market. A continued fall in the market will pose challenges.

~ Tiger Tong, market analyst, China Knowledge Pte, "China Bulls Get First Sight of Bear as Market Slide Hits Funds," Bloomberg, December 12, 2007

Fred Goodwin on Fed's extraordinary measures

This is shock and awe. The fact that it's coordinated means they have joined together in the war to attack the problem, which is that banks don't trust each other.

~ Fred Goodwin, fixed-income strategist, Lehman Brothers Holdings Inc., Bloomberg, December 12, 2007

Jim Cramer on Bernanke's "dinky 1/4 point rate cut"

I am angry because today the Federal Reserve cost this country an enormous sum of money by giving us a dinky 1/4 point rate cut. The Fed has just done its unwitting best to hasten the possibility of recession - or, if I'm going to be totally honest and a bit more of an ambassador - to turn the possibility into something closer to a certainty.

Today we learned that no matter how bad things get, the good folks running the Fed are going to take a calm, measured approach - even if to be calm at this moment is the height of insanity.

~ Jim Cramer, CNBC's Mad Money, December 11, 2007

Ken Lewis on housing slump

The drag stops in the next few months. It's just about to be over. We're seeing the worst of it.

We do not see a recession. Because that drag stops, you'll see the economy begin to pick up in the third and fourth quarters.

~ Ken Lewis, CEO, Bank of America, "Lewis Says Housing Slump Just About Over," Bloomberg, June 20, 2007

Hillary Clinton on the estate tax

I do not believe the estate tax should be repealed. I think it has been very cleverly designated as a "death tax." It's really a tax to prevent us from having inherited wealth generation after generation which would undermine the kind of spirit and meritocracy that the United States stands for. And there are a lot of economic reasons why it is just not affordable... I will strongly support the maintenance of the estate tax.

~ Hillary Clinton, as appeared on CNBC with Warren Buffett, December 11, 2007

Warren Buffett on the need to keep people employed

If we can keep people employed we will not have the dominoes topple. If the unemployment picked up alot, we could be in for recession.

~ Warren Buffett, as appeared on CNBC with Becky Quick, December 11, 2007

Barry Ritholtz on investors throwing tantrums

It's like a kid who gets a shiny bike instead of a Nintendo Wii. So we had a bit of a hissy fit yesterday.

~ Barry Ritholtz, as appeared on CNBC, December 12, 2007

(Yesterday, the Dow sold off 294 points because the Fed only lowered rates 1/4%.)

Art Hogan on the Fed

There are more tools in the monetary toolbox than we're used to seeing. At a time like this, they might need to get creative.

~ Art Hogan, Chief Market Analyst, Jeffries & Company, Bloomberg, December 12, 2007

Dec 11, 2007

Ron Paul on Ben Bernanke's .25% rate cut

America 's economic difficulties, especially the problems in the housing market, are the direct result of the Federal Reserve's inflationary policies. While prices for gold, oil, and staple commodities continue to rise, the purchasing power of the dollar for all Americans continues to fall.

Inflationary monetary policies created the problems in the economy we are seeing, and these problems will be made worse, not better, by more inflation. And today's action by the Fed is very bad news for American workers and retirees who are about to get hit with yet another jump in prices.

Make no mistake, the problems faced by the American people are not caused by unscrupulous mortgage brokers or the rising price of oil. These are symptoms of an economic disease caused by a spendthrift Congress enabled by loose monetary policy. Too many pundits praise the weak dollar as benefiting exporters, but they fail to see the harm done to thrifty, hard-working Americans.

Rather than continuing to pursue a policy of easy credit and increasing debt, we need to return to a sound monetary system.

~ Congressman Ron Paul, December 11, 2007

Jack LaLanne on sex

I'm feeling great, and I have sex almost every day. Almost on Monday, almost on Tuesday, almost on Wednesday...

~ Jack LaLanne, fitness guru who turned 93 on September 26, 2007

Jeffrey Immelt on GE earnings guidance

What I really want to give investors is a sense is that 10 percent is in the bag. I'm not going to put a happy face on the slowing U.S. consumer. Our businesses that touch housing in the U.S. are going to be challenged.

~ Jeffrey Immelt, CEO, GE Corporation, "GE Says Proft May Rise 10% Next Year", Bloomberg, December 11, 2007

Larry Kudlow: "I wouldn't panic"

I wouldn't panic. Investors should stay in for the long-term. Goldilocks is alive and well.

~ Larry Kudlow, CNBC, December 11, 2007

(The DJIA dropped 294 points to 13,433 on disappointment that the Fed only lowered rates 1/4%. Kudlow's comments came about 40 minutes after the close.)

Ron Insana on the latest Fed rate cut

This is a decidedly wimpy move by the Fed.

~ Ron Insana, CNBC, December 11, 2007

(Just minutes earlier, the Fed lowered the discount rate and fed funds rate by 0.25% each.)

Erin Burnett on the global economic boom trade

This bet on the rest of the world solving everything is getting a little tired.

~ Erin Burnett, CNBC, December 11, 2007

Nietzsche on crowd behavior

Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule.

~ Friedrich Nietzsche

Richard Kovacevich on credit crunch

There's no credit crunch, not when you see people investing billions of dollars into financial institutions. The crunch is that there are buyers who don't think values are low enough yet and sellers who don't want to sell at these levels.

~ Richard Kovacevich, Chairman Wells Fargo, Bloomberg TV, December 11, 2007

Richard Syron on future credit losses

We don't anticipate [the need to raise capital] at this time. If the floor were to fall out, then who knows what would happen.

~Richard Syron, CEO, Freddie Mac, as appeared on CNBC, December 11, 2007

Warren Buffett on recessions

You'll have 7 or 8 recessions in your lifetime. It's the nature of capitalism to have recessions.

~ Warren Buffett, as appeared on CNBC with Becky Quick, December 11, 2007

Dec 10, 2007

A libertarian twist on "It's a Wonderful Life"

In our new movie, our main character is a political operative – let’s call him Sam. He has been a mover and shaker in politics for many years, but he finds himself and his allies in trouble after word leaks out about one of his shady, backroom deals. He and the others are likely to be thrown in jail for a long time.

He returns to his hometown. His cronies see that he is despondent and pray that he can pull himself together and maneuver in such a way as to get them out of trouble. An angel named Frederic, who has not yet earned his wings, is summoned to help Sam. As he is about to jump off a bridge, Frederic arrives and talks to him. Sam describes his troubles and says that he wishes he were never born; Frederic grants him his wish, though Sam does not realize what has just transpired.

He decides to return to town to try to sort things out. He runs into a neighborhood kid whom he had drafted while serving as the head of the local draft board. He is shocked, as this kid had been killed in battle. But the man insists that he was never drafted and is now a successful businessman and community leader. Sam meets his fine wife and children too and is left speechless. He scratches his head and decides to move on; perhaps a good walk will clear his head. Before long though, he is taken aback when he runs into another familiar young man. He was sure this fellow had received a long prison sentence for drug offenses, under the tough mandatory sentencing guidelines he had successfully lobbied for. Yet this guy tells Sam that he never went to jail, is now clean, and is helping to rehabilitate others who are trying to overcome their dependency. Now he is sure that he is losing his mind, but continues on, in a daze. Is someone playing a cruel hoax on him? This is all just too much. He wonders if anything could top what he has just seen. A moment later he runs into his old high school sweetheart who had died many years earlier of cancer. Now he is certain that he has lost his mind. He distinctly recalled her story; she had died after unsuccessfully trying to gain access to a promising experimental cancer treatment. In fact, the man he helped get appointed commissioner at the FDA had declared the treatment illegal. Yet she goes on to tell him that she had in fact used that experimental treatment, was now cured and was working hard to spread the word about this miraculous treatment to other cancer patients. Stunned, he decides to walk to the military base down the road and check in with some buddies there. Maybe they will tell him what is going on and bring him back to his senses. Yet when he comes to his destination, there is no military base there. There is no munitions plant nearby either. He had successfully lobbied for funding for both of these though! What is more, there are all sorts of unfamiliar sights in their place – parks, theaters, historical sites, businesses, and a myriad of other developments. Not only that, as he stops to take it all in, the whole town is unmistakably more prosperous and cohesive than he had remembered it.

By this point, Sam has returned to the bridge and it finally dawns on him that Frederic had indeed granted him his wish and that what he had just seen was the impact of his never having been born! He realizes that he has made life worse for so many in a number of different ways. He is more despondent than ever. He asks Frederic if he has anything to say to him, hoping to hear something, anything uplifting. As much as Frederic would like to do so, he is honor-bound to tell Sam the truth. But what can he say? Suddenly he recalls Clarence’s wise words and decides to paraphrase them, "The State touches so many lives; when it isn’t around, it leaves a whole lot of freedom." That is the last straw and Sam jumps off the bridge, never to be seen again. And Frederic earns his wings!

~ D. Saul Weiner, "It’s a Statist Life,", December 10, 2007

Frederic Bastiat on socialist objections to anti-statists

"… every time we object to a thing being done by government, the socialists conclude that we object to its being done at all. We disapprove of state education. Then the socialists say that we are opposed to any education. We object to a state religion. Then the socialists say that we want no religion at all. We object to a state-enforced equality. Then they say that we are against equality. And so on, and so on. It is as if the socialists were to accuse us of not wanting persons to eat because we do not want the state to raise grain."

Frederic Bastiat, The Law, 1850, from the section titled "A Confusion of Terms"

Bernie Schaeffer: "If the Fed does the right thing, we could see a huge year-end rally"

The backdrop has been fairly rocky on a fundamental basis, but technical levels of support combined with a backdrop of heavy skepticism and a large "short trade" have helped the market stay afloat. For example, ahead of this latest bounce higher, the financial media was wrought with pessimism. In the last two weeks, there have been extremely negative headline articles published in The Financial Times, The Wall Street Journal, Barron's, and Fortune. So unlike the dangerous market days of 2000, the current environment is chugging along fueled by a healthy level of fear. But I maintain – and I can't stress this enough – that the Fed is the real wild card here, and a rate cut is imperative to keep this market on steady footing. If the Fed does the right thing, we could see a huge year-end rally fueled by the covering of massive short and put positions and a buying panic by hedge funds desperate to keep up with the S&P.

~ Bernie Schaeffer, Schaeffer's Monday Morning Outlook, December 10, 2007

Dec 9, 2007

Hot contemporary art market attracts Middle East buyers

The latest destination for the still-high-flying contemporary art market: the Middle East. Paintings, photographs, and sculptures by Iranian and Arab artists hit records this fall at the big auction houses—bringing a total of $12.6 million in a Christie's International sale in Dubai. The top seller: a painting depicting Koranic texts by Egyptian-born Ahmed Moustafa. It went for $657,000, double the pre-auction estimate. At a recent Sotheby's auction in London, a painting of calligraphic Arabic letters by Iranian artist Mohammad Ehsai fetched $217,000—again, twice what experts predicted. Insiders say prices may soon rival those of contemporary Chinese and Indian art, which ring up nine-figure total sales at the two art houses. What's fueling the Mideast art market? Mostly, interest from the newly rich in the artists' home nations, says Sandy Heller, a New York art adviser whose clients include hedge fund manager Steven Cohen of SAC Capital Advisors. "The contemporary art market rises with the luxury goods market," Heller says.

~ BusinessWeek, "A Pretty Penny for Art from the Middle East," December 10, 2007, by Reena Jana

Ron Paul on Wall Street

If [Wall Street] believes in freedom, free markets, and sound money, they'll love me. But if they like creating credit out of thin air, they'll see me as a threat.

~ Congressman Ron Paul, "Ron Paul on the Evil Fed, the IRS, and Saving the Buck," BusinessWeek, December 10, 2007, interview with Maria Bartiromo

Larry Elder on government interference in health care

The reason health care isn't accessible to so many people is because of government interference. For example, a medic in Iraq who attends to fallen soldiers — but is not an M.D. — could not return stateside and open a practice. My aunt worked for over 30 years in a maternity ward. She told me that many times the new interns would say, 'Nurse Maggie, what drug should I use, and what kind of dosage?' Yet laws would prevent my aunt from opening up a pharmacy.

~ Larry Elder, "A Freer Market Can Cut Costs of Health Care," Investor's Business Daily, November 26, 2007

Tim Tebow on winning Heisman Trophy

There were a lot of great players who had great seasons as freshmen and sophomores, so it's an honor to be able to accomplish this. I love being a Gator, and I love Gator Nation.

~Tim Tebow, quarterback, Forida Gators, December 8, 2007

Goldman hoping for large hedge fund launch

The investment giant is trying to raise $4 bil-$6 bil for what would be one of the largest hedge fund launches ever, according to the Financial Times. The new Goldman Sachs (GS) hedge fund will focus on selecting stocks, rather than using a computer-driven strategy tied to big losses at its Global Alpha hedge fund. It rose 3.3% to 216.48.

~ Investor's Business Daily, "Goldman Aims High With New Fund," November 26, 2007

Shopper from Ireland on the strong euro

Everything is half price for us.

~ Ashlee Clifford, 26, of Northern Ireland, shopping at a Circuit City Store in Manhattan, "Shoppers Hit Stores For Early-Bird Deals, But It's Just a Start," Investor's Business Daily, November 26, 2007

(Shoppers from overseas reveled as the dollar, at record lows vs. the euro, made discounts even deeper.)

Mike Schenk on the economy: "A lot can go wrong and we'll still be OK"

We tend to look at fundamentals, but it's not always the fundamentals that push us into recession... We have such a large, diverse, vibrant economy . . . a lot can go wrong and we'll still be OK.

~ Mike Schenk, vice president of economics and statistics at the Credit Union National Association, "Fed, Economists Have Trouble Spotting When Recessions Start," Investor's Business Daily, November 26, 2007

Lakshman Achuthan: Economists not very good at inflection points

[Economists are] very good at extrapolating a trend, which almost by definition will hide a turning point. If you're looking in the rearview mirror, you don't see the curve.

When we compare the leading indicators with how they looked in the previous recession, they still fall short of recessionary readings. [However,] we reserve the right to turn on a dime if the leading indicators turn down or up.

~ Lakshman Achuthan, managing director of the Economic Cycle Research Institute, "Fed, Economists Have Trouble Spotting When Recessions Start," Investor's Business Daily, November 26, 2007

Ben Bernanke: Slow, but positive growth

Economists are extremely bad at predicting turning points, and we don't pretend to be any better. We have not calculated the probability of recession. Our assessment is for positive growth, but positive.

~ Ben Bernanke, Federal Reserve chairman, congressional testimony, November 9, 2007

Alan Greenspan: No recession yet (1990)

At the moment it isn't raining. The economy has not yet slipped into a recession.

~ Alan Greenspan, Federal Reserve chairman, October 2, 1990

(It was later revealed that a recession had actually begun three months earlier, in July.)

Dec 8, 2007

Robert Taft on the military draft

Military conscription is essentially totalitarian. It has been established for the most part in totalitarian countries and their dictators led by Napoleon and Bismarck. It has heretofore been established by aggressor countries.

~ Robert A. Taft

CEO of Dick's Sporting Goods expects business to weather tougher economy

Our business really travels in a narrower band than the economy as a whole. Based on keeping our business focused on that core athlete and outdoor enthusiast, we're not going to see the lows when the economy is a bit more difficult.

~ Ed Stack, CEO, Dick's Sporting Goods, "Dick's Buys California-Based Chick's, Hastening Its Spread West," Investor's Business Daily, December 10, 2007

Sam Stovall: "When the going gets tough..."

When the going gets tough, the tough eat, drink and smoke.

~ Sam Stovall, investment manager, Standard & Poor's

Dec 7, 2007

Robert Toll: "We may witness a faster and stronger recovery than anticipated"

We believe that motivated sellers, excess supply, and low interest rates make now an attractive time to buy a home, but weak consumer confidence continues to buck these positives. Broader concerns about the nation's economy have magnified worries about potential price declines in the housing market.

It's not a matter of if, but a matter of when, this oversupply is absorbed. Then we shall return to better times. I believe those who wanted to buy but didn't will kick themselves for their reticence, but the biggest hurdle for our clients right now is their concern about their ability to sell their old homes. An inability to obtain mortgages does not appear to be a problem for our buyers, but probably is a problem for our buyers' buyers.

This downturn may be our toughest test yet, but I believe our great team is up to the challenge. We still believe the demographics exist to hugely support the housing market. Pent-up demand has to be building. Immigration is at record levels and large amounts of wealth have been created. With interest rates still quite low and very few new lots moving through the approval process, as soon as we remove the fear of dropping home prices, we may witness a faster and stronger recovery than anticipated.

~ Robert I. Toll, chairman and CEO, Toll Brothers, "Toll Brothers Reports 4th Qtr and FY 2007 Results," December 6, 2007

Phil Duffy: Did isolationism cause World War II?

One of the most comprehensive histories of the Nazi era was written by William L. Shirer, a journalist assigned to Germany during the period when the Nazis came to power. The Rise and Fall of the Third Reich covers 1,143 pages, the first 276 of which describe the multiple forces and events that led to the rise of Hitler. American isolationism is not once mentioned in that section of the book.

The next 594 pages describe the beginning of World War II up to the point at which Hitler declared war on the United States as a result of "Adolph Hitler’s reckless promise to Japan …." It was Japan’s attack of Pearl Harbor on December 7, 1941 that brought the United States into World War II. Germany and Italy declared war on the United States four days later.

Following America’s disastrous foray into World War I, there were strong feelings in the United States about remaining outside of the European conflict. The newly formed America First Committee was the most visible and vocal example of that sentiment. Shirer dedicates a single paragraph to the role of American isolationism at the beginning of Chapter 25, "The Turn of the United States." He also mentions the role of Charles Lindbergh as the leading public isolationist in a footnote on Page 827. Otherwise, there are no references to American isolationism in this extensive work about this period. So if William Shirer virtually dismissed the importance of American isolationism in causing World War II, what does he have to say about the real causes of the rise of Adolph Hitler and World War II? Shirer points out that a number of causes and events contributed, including:
  • Economic, political, social and cultural devastation following World War I (especially the Weimar hyperinflation from 1918–1923, the Wall Street-debt-financed boom of the late 1920s, and the Great Depression of the 1930s)
  • A disastrous peace treaty at Versailles, including reparations to the allied powers considered unjust by the German people
  • The bitter struggle between international socialism (the Communists) and national socialism (the Nazis)
  • Failure of other European nations to appropriately defend themselves
  • The "stab in the back" myth that anti-war Germans during World War I had given virtual aid and comfort to the enemy on the home front while the valiant solders fought to defend the Fatherland (the birth and growth of this myth is addressed extensively in Chapter 2, "Birth of the Nazi Party")

In Shirer’s opinion, the ‘stab in the back’ fallacy was a primary cause of the rise of Hitler: "Thus emerged for Hitler, as for so many Germans, a fanatical belief in the legend of the ‘stab in the back’ which, more than anything else, was to undermine the Weimar Republic and pave the way for Hitler’s ultimate triumph." (Page 31)

On January 30, 1933 Hitler was appointed chancellor of a coalition government in Germany. The America First Committee was formed September 4, 1940. Clearly, isolationism in the United States had nothing to do with Hitler’s rise to power.

~ Phil Duffy, "Did Isolationism Cause World War II?,", December 6, 2007

Dec 6, 2007

David Tice on the credit engine shutting down

Structured finance, which has been the key to this credit bubble, has broken down. We believe that confidence in structures, ratings, collateral, issuers, counterparties, etc., has all been lost. Therefore we are in a very precarious position. Credit has driven the economy and has driven markets. Credit has to grow year-over-year in this credit bubble environment in order for the economy to grow. With structured finance having broken down, in our opinion, there is no way that credit will grow year-over-year any longer.

... We are living in very different times than the ones we've experienced over the last 20 years. What has to be recognized, in our opinion, is that it's truly different this time. We see this as being the end of credit expansion.

~ David Tice

Jim Cramer on the Fed's surprise discount rate cut

Everything's changed and it's looking a whole lot better. Now we don't have to worry about putting safety first anymore... With the discount rate cut, opportunity has come back to the market.

~ James Cramer, CNBC's Mad Money, August 17, 2007

Financial World: Fed can always stimulate business (1929)

It may be well again to stress the all-important point that the Federal Reserve has it in its power to change interest rates downward any time it sees fit to do so and thus to stimulate business.

~ Financial World, April 10, 1929

Economists on the housing bubble

The view of most economists, including Fed Chairman Alan Greenspan, is that a national home-price bust is highly unlikely.

~ BusinessWeek, "Entering The New Year With A Head Of Steam," December 26, 2005

Kevin Duffy on financial bubbles

If there is one lesson history teaches about bubbles, it is that a central bank is never in control. It is the investing public's perception of their power that swings wildly, from skepticism at first, to belief, to religious fervor. If and when a central banker pulls away the punchbowl late into the party, he is ridiculed and ultimately mocked as irrelevant. This is typically the blow-off phase as the crowd feels invincible and in control. As the balloon begins to deflate, at some point the monetary planner feels compelled to step in. After an initial burst of enthusiasm, the game is over as the mob realizes the central-bank-as-backstop is a hoax and prices are going down regardless.

~ Kevin Duffy, Bearing Asset Management, Bearing Fund 2005 Annual Report, February 2006

Mark Zandi on the housing recession

This is the most severe housing recession since the post-World War II period. The housing market's most fundamental problem is it is awash in unsold inventory.

Mark Zandi, economist, Moody's, December 6, 2007

Ronald Reagan: "Mr. Gorbachev, tear down this wall" (1987)

In the Communist world, we see failure, technological backwardness, declining standards. . . . Even today, the Soviet Union cannot feed itself... Freedom is the victor... General Secretary Gorbachev . . . come here to this gate. Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall.

~ President Ronald Reagan, speech at the Brandenburg Gate in West Berlin, 1987

Ronald Reagan on the crisis of Marxism-Leninism (1982)

In an ironic sense, Karl Marx was right. We are witnessing today a great revolutionary crisis. . . . But the crisis is happening not in the free, non-Marxist West, but in the home of Marxism-Leninism, the Soviet Union. It is the Soviet Union that runs against the tide of history by denying freedom and human dignity to its citizens. [If the Western alliance remains strong it will produce a] march of freedom and democracy which will leave Marxism-Leninism on the ash-heap of history.

~ President Ronald Reagan, from a speech given to the British Parliament in London, 1982

Ronald Reagan on the "last pages"of communism (1981)

The West won't contain Communism. It will transcend Communism. We will dismiss it as some bizarre chapter in human history whose last pages are even now being written.

~ President Ronald Reagan, 1981

Arthur Schlesinger, Jr. on the aftermath of the Soviet collapse

History has an abiding capacity to outwit our certitudes. No one foresaw these changes.

~ Arthur Schlesinger, Jr.

Lester Thurow on the Soviet economy (1989)

Can economic command significantly . . . accelerate the growth process? The remarkable performance of the Soviet Union suggests that it can. . . . Today the Soviet Union is a country whose economic achievements bear comparison with those of the United States.

~ Lester Thurow, MIT economist and well-known author, 1989

Paul Samuelson on the Soviet model (1985)

What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth. . . . The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth.

~ Paul Samuelson, Massachusetts Institute of Technology, Nobel laureate in economics, Economics, 1985 edition of his widely used textbook

John Kenneth Galbraith: "The Soviet system has made great material progress" (1984)

That the Soviet system has made great material progress in recent years is evident both from the statistics and from the general urban scene. . . . One sees it in the appearance of solid well-being of the people on the streets . . . and the general aspect of restaurants, theaters, and shops. . . . Partly, the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.

~ John Kenneth Galbraith, Harvard economist, 1984

Arthur Schlesinger, Jr. on the possibility of a Soviet collapse (1982)

Those who think the Soviet Union is on the verge of economic and social collapse are kidding themselves.

~ Arthur Schlesinger, Jr., Establishment historian, 1982

Seweryn Bialer on political and social stability in the Soviet Union (1982)

The Soviet Union is not now nor will it be during the next decade in the throes of a true systemic crisis, for it boasts enormous unused reserves of political and social stability.

~ Seweryn Bialer, Sovietologist, Columbia University, Foreign Affairs, 1982

Bob Hope on John F. Kennedy's electoral victory

I must say the Senator's victory in Wisconsin was a triumph for democracy. It proves that a millionaire has just as good a chance as anybody else.

~ Bob Hope

Laura D'Andrea Tyson on Japan's rise and America's decline (1989)

A generation from now, Japan will almost certainly have created its own mechanism for advancing technological frontiers in a range of domains. Now the continuing pace of productivity increase suggests that Japan may indeed be on a growth trajectory different from that of the United States. As Japan ascends, America frets about its decline.

~ Laura D'Andrea Tyson, 1989

Lester Thurow: "We are all going to end up working for the Japanese" (1989)

At the rate things are going, we are all going to end up working for the Japanese.

~ Lester Thurow, MIT economist, 1989

Chip Mason on credit markets

(Chip Mason, chief executive and founder of Legg Mason, one of the world's biggest money managers, said yesterday that the credit markets are in the worst state he has seen in his 47 years in the business.)

It is a very unusual situation. I have not seen anything like this, where nothing is traded.

~Chip Mason, CEO, Legg Mason, Financial Times, December 5, 2007

Dec 5, 2007

Chris Leithner on the role of market strategists

My impression is that "strategists" are very skilled at summarising and expressing current conventional wisdom, i.e., knowing what presently excites the herd. That is, they don't influence mass expectations, and still less do they create them: instead, they reflect them.

Another impression is that strategists' "model" is, deep down and stripped of all its complexities, nothing other than a one-parameter regression. On average since the mid-'20s, the S&P 500 has increased, on average, by x% per year. From the early '80s to the late '90s, it rose by y% per year on average (where y > x). So, as a baseline, strategists will tell us that, during the next year, the S&P will rise by (say) (x+y)/2 percent. Clearly, these means have standard deviations, and so they pad their "predictions" with various fluff ("upside risks," "downside risks," etc.).

But during booms, the crowd expects -- nay, demands -- much better results, and during busts it anticipates worse ones; that is, the crowd tends to extrapolate the immediate past into the indefinite future. Strategists incorporate these expectations into their public utterances. So why do these folks not just keep their jobs, but prosper? Because their job isn't to predict the future: it's to tell people what they want to hear about the future. And why don't smartarses remind strategists of their past utterances? Because members of the general public don't, by and large, like to be reminded about past mistakes, and more generally that their expectations about the future and its actual course are very different things. Besides, directing the strategist back to his past vomit is, in effect, to question today's conventional wisdom (namely that the strategist knows something that the rest of us don't).

A final point: my impression is that strategists aren't remotely troubled by their past utterances because, psychologically, they're simply incapable of feeling sheepish. That psychological attribute tends to limit their supply, and the public's continuous demand for them ensures their price in the market remains high.

Chris Leithner, Leithner & Company Pty Ltd, December 5, 2007

Motley Fool: The bull case for Hardinge

CAPS All-Star tenmiles decided to give Hardinge (HDNG) the thumbs-up just last week, citing a "Market sell-off in Hardinge [that] creates attractive long term value proposition for this maker of computer controlled machines. I own their competitor HURC in the real world which offers a stronger balance sheet, but this one works for CAPS at 10% below book value."

What caused the sell-off? Fellow-All Star M2R2H informs us that the stock was "punished by Wall Street for not meeting expectations even though they had a 35% increase in [sequential] profit."

But perhaps the most informative comment comes from a neighbor. All-Star CAPS player amckane confides: "This company is headquartered near my home village in upstate NY. It is moving much of its business overseas where desperately poor people will work for a fraction of what the locals will work for here. This is also where the business is, as manufacturing facilities are increasingly located in places like China, and, well, China ... did I mention China?"
Yes, you did, amckane -- and thanks very much. So basically, what we have here is a U.S.-owned and operated manufacturer that's not only taking full advantage of the global trend toward outsourcing, but also putting itself "in the face" of potential buyers of its products. Sounds like smart business to me.

And the fact that Hardinge operates in the same sphere of business that's been so kind to Hurco (HURC) -- a Motley Fool Hidden Gems "watch list" stock that's gained more than 50% in the last 12 months -- sounds pretty good, too. Tie all this up with the bow of a single-digit P/E, plus 30% projected annual profits growth, and Hardinge looks too good to be true.

So what's the catch? You know, they say that every investment has at least one thing wrong with it -- and that's true of Hardinge. In this case, the catch is that despite "earning" more than $21 million over the last 12 months, as earnings are calculated under GAAP, the firm generated no free cash flow whatsoever. In fact, it incurred a cash loss of about $0.1 million.

Meaning that while the bull case for Hardinge is pretty obvious, the picture is actually a little fuzzy.

~ Rich Smith, "Contrarian Shopping List," Motley Fool, November 20, 2007

CIBC: Citigroup has the single highest exposure to high LTV mortgage loans

High [loan-to-value] mortgage loans is the greatest risk pool of U.S. consumer loans, and Citigroup has the single highest exposure to it.

~ Analysts at CIBC World Markets, "Citigroup has biggest exposure to riskiest loans: analyst," MarketWatch, December 5, 2007, by John Spence

(The analysts estimated that Citigroup will incur losses on such loans in the range of $4 billion to $6.5 billion in 2008, or between 31% and 51% of its third-quarter 2007 total loss reserve. As a result of higher estimated provision for losses, CIBC cut its 2008 profit estimate for Citigroup by almost 10% to $2.95 a share.)

David Kathman on the dangers of bear funds

Using a bear market fund to try to benefit from the market going down is a fool's game for most people. Even the smart people who spend their career doing that can't time the market right over a long period. ... They're playing a dangerous game, and they're only thinking about how much they can win now, and that kind of thinking doesn't usually pay off.

The average investor probably shouldn't be in these funds and certainly shouldn't be buying them when the market is going down, which is when they get the most attention. They're watching the market go down and are thinking 'If I just had a bear-market fund, I could be picking up big gains here' and that's not what bear-market funds are all about.

David Kathman, mutual fund analyst at Morningstar Inc., "Grizzly discovery;
Once a bear market begins, it's too late for 'bear' funds to help
," MarketWatch, December 4, 2007, by Chuck Jaffe

Dec 4, 2007

FHLB's Alfred Dellibovi on Countrywide Financial

Countrywide is a very professional, very well run organization in my judgment, and I think there will always be a role for them. They're a very professional company that's been given a bumpy road.

~ Alfred Dellibovi, president, Federal Home Loan Bank of New York, as appeared on CNBC, September 5, 2007

Michael Metz: "The worst of the anxieties are over"

I think what we've had really is sort of an hysterical exit from the financial stocks. I think they still go lower - that sector of the market, but I think the worst of the anxieties are over.

~ Michael Metz, Oppenheimer Holdings, Bloomberg Video, December 4, 2007

Bill Laggner on the housing/credit bubble

Watch Angelo Mozilo's tan — if it fades, so does the housing/credit bubble.

Bill Laggner, principal, Bearing Asset Management, "Rita Doesn't Mess With Wall Street (Much)," Fortune, September 26, 2005, by Bethany McLean

Joan McCullough on the Fed and its sycophants

Just sit there a moment and think back over the years on the Street's Greenspan apologists who were cheering this buffoon on, groveling at times and taking every opportunity to argue in defense of his wanton behavior. In short, they performed the public service duty of rationalizing this old coot's BS stories. At the same time, anyone who dared to question the gospel that this bloviator was spewing, was held to ridicule as lunatic fringe.

That miscreant was succeeded by Ben Bernanke, academic beard and tweed jacket included; where's the pipe? As recently as May, he was still touting the subprime mess as "contained." Enough said. Loser.

~ Joan McCullough, East Shore Partners, Morning Comment, December 4, 2007

Bruce Kasman: Jury still out on 1% Fed funds rate in 2002

The fact that the Fed fund rate went down to 1 percent in 2002 was an important part of the latter stages of the housing boom. It wasn't the only thing, and it wasn't necessarily a bad thing. In the end, we're going to look back at what happens next to recognize what the trade-offs were.

~ Bruce Kasman, chief economist at JPMorgan Securities, "Greenspan Has No 'Regrets' as Housing Slump Deepens,", November 23, 2007

Time: "The beginning of the end of the oil era may be upon us"

Among the peakists, war and economic breakdown are favorite themes. They figure that cheap oil is the essential fuel of modern capitalism, which will founder without it. A more hopeful take is that innovation is the essential fuel of modern capitalism and that high oil prices will drive rapid advances in conservation and alternative energy. Either way, the beginning of the end of the oil era may be upon us, well ahead of schedule.

~ Time, "Peak Possibilities," November 21, 2007, by Justin Fox

Matt Simmons on peaking oil production

If we had better data, we could hold a global summit and say, "Gentlemen, it's nobody's fault, but we've peaked." We've got to embrace some conservation practices that are draconian, or we will be at war with each other.

~ Matt Simmons, energy-industry investment banker, "Peak Possibilities," Time, November 21, 2007, by Justin Fox

Otto von Bismarck on the welfare state

That the state should assist its needy citizens to a greater degree than before is not only a Christian and humanitarian duty, of which the state apparatus should be fully conscious: it is also a task to be undertaken for the preservation of the state itself. The goal of this task is to nurture among the unpropertied classes of the population, which are the most numerous as well as least informed, the view that the state is not only a necessary but also a beneficent institution.

~ Otto von Bismarck

Adolf Hitler on gun control

The most foolish mistake we could possibly make would be to allow the subject races to possess arms. History shows that all conquerors who have allowed the subject races to carry arms have prepared their own downfall by so doing. Indeed, I would go so far as to say that the supply of arms to the underdogs is a sine qua non for the overthrow of any sovereignty.

~ Adolf Hitler

Hayek on the link between private property and freedom

What our generation has forgotten is that the system of private property is the most important guarantee of freedom, not only for those who own property, but scarcely less for those who do not. It is only because the control of the means of production is divided among many people acting independently that nobody has complete power over us, that we as individuals can decide what to do with ourselves. If all the means of production were vested in a single hand, whether it be nominally that of "society" as a whole or that of a dictator, whoever exercises this control has complete power over us.

~ Friedrich A. Hayek, The Road to Serfdom

Alexis de Tocqueville on welfare statism

The will of men is not shattered (by the welfare state), but softened, bent, and guided. Men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence. It does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, until each nation is reduced to be nothing better than a flock of timid and industrious animals, of which the government is the shepherd.

~ Alexis de Tocqueville

Frederic Bastiat on legal plunder

But how is... legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime. Then abolish this law without delay, for it is not only an evil itself, but also it is a fertile source for further evils because it invites reprisals.

~ Frederic Bastiat

Ayn Rand on do-gooders

Do not consider Collectivists as "sincere but deluded idealists". The proposal to enslave some men for the sake of others is not an ideal; brutality is not "idealistic," no matter what its purpose. Do not ever say that the desire to "do good" by force is a good motive. Neither power-lust nor stupidity are good motives.

~ Ayn Rand

Thomas Paine on America's neutrality

Not a place upon earth might be so happy as America. Her situation is remote from all the wrangling world and she has nothing to do but trade with them.

~ Thomas Paine

Ayn Rand on the anti-capitalistic mentality

The American businessmen, as a class, have demonstrated the greatest productive genius and the most spectacular achievements ever recorded in the economic history of mankind. What reward did they receive from our culture and its intellectuals? The position of a hated, persecuted minority. The position of a scapegoat for the evils of the bureaucrats.

~ Ayn Rand

Goethe on freedom

None are more hopelessly enslaved than those who falsely believe they are free.

~ Goethe