Nov 29, 2008

Mary Shafer on security

Insisting on perfect safety is for people who don't have the balls to live in the real world.

~ Mary Shafer

Madonna on ambition

I'm tough, I'm ambitious, and I know exactly what I want. If that makes me a bitch, okay.

~ Madonna

Nov 28, 2008

Dr. Johnson on learning the truth

In order that all men might be taught to speak truth, it is necessary that all likewise should learn to hear it.

~ Samuel Johnson (1709-1784)

Nov 25, 2008

Marc Faber on propping up failed enterprises

To support ailing enterprises and companies that have proven to have committed huge errors is like if you have a criminal and you support him rather than to put him in jail.

~ Marc Faber, Bloomberg TV, November 25, 2008

Jim Rogers on how the financial system needs to allow failure

Greenspan refused to let people fail. And so we've had no failure in the financial community and now we've spent trillions of dollars bailing out Wall Street for their mistakes and that's damaging the whole economy - 300 million Americans to bail out a million people and their failures. This is not good for America. We're damaging the system. We're weakening the system dramatically.

Why are we bailing out Citibank? Why are 300 million Americans having to pay for Citibank's mistakes? The way the system is supposed to work... People fail, and then the competent people take over the assets from the failed people and you start again from a new, stronger base. What we're doing this time is they're taking the assets from the competent people, giving them to the incompetent people, and saying, "Ok, now you can compete with the competent people." So everybody's weakened. The whole nation is weakened. The whole economy's weakened. That's not the way it's supposed to work.

There are many banks, many brokers, many homeowners, many citizens who've been sitting there, doing what they were supposed to do, minding their manners, not getting extended, waiting for this to happen, knowing that someday all of this foolishness is going to wind up as a disaster. Now, instead of being rewarded, they're being punished. All these homeowners who did nothing wrong are now having to pay for the people who did crazy things like buying four homes with no job. This is weakening America dramatically.

~ Jim Rogers, Bloomberg TV, November 24, 2008

Stephanie Pomboy on how the TARP is encouraging the banks to drag their feet on deleveraging

Proving our long-standing conviction that the only thing more certain than death and taxes is that policymakers will always succeed in making a bad situation worse, Hank’s big TARP tease has put the banking sector 2 months behind its nonbank peers in the process of balance sheet repair. While hedge funds and other nonbank financial institutions have been frantically selling assets and taking down leverage, the banks have sat tight. The promise that the toxic paper boring holes in their balance sheets would shortly be expunged had mooted the need to sell. To wit, bank holdings of MBS hit a new record high last week.

The upshot is that while hedge fund deleveraging is nearly complete, as implied by the massive reduction in total spec positions in any number of markets (like currencies), banks haven’t even begun.

~ Stephanie Pomboy, "Send in the Clowns," MacroMavens, November 20, 2008

Report from Iron Mountain and stabilizing society

The war system not only has been essential to the existence of nations as independent political entities, but has been equally indispensable to their stable political structure. Without it, no government has ever been able to obtain acquiesance in its "legitimacy," or right to rule its society. The possibility of war provides the sense of external necessity without which no government can long remain in power. The historical record reveals one instance after another where the failure of a regime to maintain the credibility of a war threat led to its dissolution, by the forces of private interest, of reactions to social injustice, or of other disintegrative elements. The organization of society for the possibility of war is its principal political stabilizer. ... It has enabled societies to maintain necessary class distinctions, and it has insured the subordination of the citizens to the state by virtue of the residual war powers inherent in the concept of nationhood.

~ Leonard Lewin, editor, Report from Iron Mountain, as quoted by G. Edward Griffin, The Creature from Jekyll Island, page 517. Griffin has this to say about the origins of the report - "Although the origin of the report is highly debated, the document itself hints that it was commissioned by the Department of Defense under Defense Secretary Robert McNamara and was produced by the Hudson Institute located at the base of Iron Mountain in Croton-on-Hudson, New York. The Hudson Institute was founded and directed by Herman Kahn, formerly of the Rand Corporation. Both McNamara and Kahn were members of the CFR."

Alan Greenspan on the cause of the Great Depression

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us. ... The "Fed" succeeded: it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market - triggering a fantastic speculative boom. ... As a result, the American economy collapsed.

~ Alan Greenspan as quoted by G. Edward Griffin, The Creature from Jekyll Island, page 474

The Club of Rome on pollution and global warming

In searching for a new enemy to unite us, we came up with the idea that pollution, the threat of global warming, water shortages, famine and the like would fit the bill. ... All these dangers are caused by human intervention. ... The real enemy, then, is humanity itself.

~ Alexander King and Bertron Schnieder, The First Global Revolution, a Report by the Council of the Club of Rome, as quoted by G. Edward Griffin, page 528

Ron Paul and Lewis Lehrman on the Progressive Era

After 1896 and 1900, then, America entered a progressive and predominately Republican era. Compulsory cartelization in the name of "progressivism" began to invade every aspect of American economic life. The railroads had begun the parade with the formation of the ICC in the 1880s, but now field after field was being centralized and cartelized in the name of "efficiency," "stability," "progress," and the general welfare. ... In particular, various big business groups, led by the J.P. Morgan interests, often gathered in the National Civic Federation and other think tanks and pressure organizations, saw that the voluntary cartels and the industrial movements of the late 1890s had failed to achieve monopoly prices in industry. Therefore, they decided to turn to governments, state and federal, to curb the wins of competition and to establish forms of compulsory cartels, in the name, of course, of "curbing big business monopoly" and advancing the general welfare.

~ Ron Paul and Lewis Lehrman, as quoted in G. Edward Griffin, The Creature of Jekyll Island, page 434

John D. Rockefeller on competition

Competition is sin.

~ John D. Rockefeller, as quoted by G. Edward Griffin in The Creature from Jekyll Island, page 434

Andrew Jackson in vetoing the charter for the Second Bank of the United States

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society - the farmers, mechanics, and laborers - who have neither the time nor the means of securing life favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. It's evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its reigns, shower its favor alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me (the act chartering the Second Bank of the United States) there seems to be a wide and unnecessary departure from these just principles.

~ Andrew Jackson, as quoted in G. Edward Griffin, The Creature from Jekyll Island, page 350

Thomas Jefferson on banking and paper money

Although all the nations of Europe have tried and trodden every path of force and folly in a fruitless quest of the same object, yet we still expect to find in juggling tricks and banking dreams, that money can be made out of nothing, and in sufficient quantity to meet the expense of heavy war.

~ Thomas Jefferson, as quoted in G. Edward Griffin, The Creature from Jekyll Island, page 338

Alexander Hamilton on Fiat Money

To emit an unfunded paper as the sign of value ought not to continue a formal part of the constitution, nor ever hereafter to be employed; being, in its nature, repugnant with abuses and libel to be made the engine of imposition and fraud.

~ Alexander Hamilton, as quoted in G. Edward Griffin, The Creature from Jekyll Island, page 316

Nov 24, 2008

Paul Kasriel on the Troubled Asset Relief Program (TARP)

There is a lack of transparency here and, given that the Fed is taking on a huge amount of credit risk now, it would seem to me as a taxpayer there should be more transparency.

~ Paul Kasriel, chief economist, Northern Trust, "U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit ," Bloomberg.com, November 24, 2008

Ben Bernanke on the Troubled Asset Relief Program (TARP)

Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting. We think that’s counterproductive.

~ Ben Bernanke, Federal Reserve chairman, talking before the House Financial Services Committee, November 18, 2008

(Quote sited in "U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit ," Bloomberg.com, November 24, 2008.)

Nov 23, 2008

John Maynard Keynes on economic stimulus

If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is.

~ John Maynard Keynes, The General Theory of Employment, Interest and Money (1936), p. 129

Nov 22, 2008

Rich Tucker on auto industry subsidies

Washington wouldn’t be the first capitol to pour taxpayer capital into the automotive business. In the 1970s and ’80s, the British government took an ownership stake in British Leyland. Before all was said and done, the government had spent $16.5 billion in inflation-adjusted money on the company, which ended up folding, anyway.

“I’m not telling the U.S. what to do, but the lessons of the British experience is don’t throw good money after bad,” Leon Brittan, an aide to former Prime Minister Margaret Thatcher, told The New York Times. “British Leyland carried on for a few more years, but they’re not there now, are they?”

Under government ownership, British cars were notoriously bad. We could expect the same thing here, once members of Congress are acting as automotive engineers. If you thought federal regulations hampered car makers, wait until the government’s in the room during the design process.

~ Rich Tucker, "Driven to Destruction," Townhall.com, November 21, 2008

Nov 20, 2008

Charles Gasparino on the securities industry

This is the most regulated industry in the world and it's leading our country to ruin.

~ Charles Gasparino, CNBC, November 20, 2008

Kevin Duffy on the lesson of the collapses of Fannie Mae and Freddie Mac

Isn't it that business and politics don't mix? You'll always have the schemers and dreamers. The dreamers promoted "home ownership" for the less fortunate and built political careers in the process, while the schemers - political capitalists like Angelo Mozilo - figured out how to game the system... until it fell in on them. And the media dreamers looked the other way.

~ Kevin Duffy, Bearing Asset Management, November 20, 2008

Nov 18, 2008

Robert Prechter on credit expansion

Conventional economists excuse and praise this system [today's monetary system] under the erroneous belief that expanding money and credit promotes economic growth, which is terribly false. It appears to do so for a while, but in the long run the swollen mass of debt collapses under its own weight, which is deflation, and destroys the economy. Only the Austrian school understands this fact.

~ Robert Prechter, Conquer the Crash, p. 105

Nov 17, 2008

Kevin Duffy on bubbles

The conditions for a bubble are in the eye of beholder, I suppose, but here are the four I look for:
  1. Parabolic rise in prices and/or related metrics
  2. Valuations that detach from underlying fundamentals
  3. Broad public participation (subjective and can vary from a narrow company- or industry-specific bubble to a full-blown mania)
  4. Rationalizations for the boom and/or high valuations continuing (“it’s different this time”)

The bubble can manifest itself in price (e.g., tech, Internet and growth stocks in 2000) or earnings (e.g., homebuilding stocks in 2005, credit-related stocks in 2007, commodity-related stocks in 2008). One should also see signs that economic actors are changing their behavior (e.g., demand destruction, college students flocking to an industry, families melting down their silverware, criminals stealing D-RAM chips, etc.). The ultimate test of a bubble is after the fact: in real terms all of the gains of the bubble period are wiped out.

~ Kevin Duffy, Bearing Asset Management, November 17, 2008

Ron Paul on freedom's last line of defense

In the final analysis, the last line of defense in support of freedom and the Constitution consists of the people themselves. If the people want to be free, if they want to lift themselves out from underneath a state apparatus that threatens their liberties, squanders their resources on needless wars, destroys the value of their dollar, and spews forth endless propaganda about how indispensable it is and how lost we would all be without it, there is no force that can stop them.

~ Ron Paul, The Revolution: A Manifesto (2008)

Nov 16, 2008

Herbert Hoover jawboning business to keep people employed and factories running

Gentlemen, when you go back home to your factories and your offices, here's what I want you to do. I want you to keep all your workers. Don't lay any off! I want you to keep your factories going. Don't shut any down! I want you to invest more, spend more, even borrow more if you have to. Just don't do any cutting. So we can keep this economy going.

~ President Herbert Hoover, shortly after the '29 crash

(Quote sited by Martin D. Weiss, "Why Washington Cannot Prevent Depression," Money and Markets, November 10, 2008.)

Nov 14, 2008

Kevin Duffy on hedge funds

Like weapons and derivatives, there is nothing inherently evil about hedge funds, just sometimes the people who operate them. We have been highly critical of most of the professionals in the investment industry, largely because they've been full of themselves, overcompensated, unprepared for tough times, and pine for government intervention at the first sight of negative news.

~ Kevin Duffy, Bearing Asset Management, November 14, 2008

Nov 12, 2008

Henry Paulson on TARP changes

Since announcing the injection of capital into big banks we have been examining a wide range of ideas that can further strengthen the financial system and get lending going again to support the broader economy. And to adequately reform our system, we must make sure we fully understand the nature of the problem which will not be possible until we are confident it is behind us.

~"Paulson Shifts Focus of Rescue to Consumer Lending", Bloomberg, November 12, 2008

Mark Hulbert on how the doomsayers got it wrong in 2008

Sometimes you can't win for losing.

Just ask Harry Schultz. Or Howard Ruff. Or Jim Dines.

All three advisers, each of whom has been editing an investment newsletter at least since the 1970s, have built their investment careers by questioning conventional wisdom's trust in the soundness of the financial system. Not surprisingly, all three have been vociferous champions of gold and other precious metals.

You'd think that they would have cleaned up over the last year, since the disintegration of the financial system in recent months is almost exactly what they have been warning us about for decades.

But you'd be wrong.

Of the 181 newsletters on the Hulbert Financial Digest's monitored list, these three advisers' newsletters are in 173rd, 175th, and 176th places for year-to-date performances through October 31, with losses ranging from minus 64.9% to minus 70.0%.

~ Mark Hulbert, "Getting it right and still losing," MarketWatch, November 12, 2008

Nov 10, 2008

Ken Fisher on solving the credit crunch (he failed to see coming)

The Fed has several powerful tools that it hasn't used. When banks fail, by definition they had inadequate reserves. So when you have a bunch of banks failing, you drop reserve requirements.

The other thing you do [is] manipulate, planfully, the spread between the discount rate, the Fed funds rate, and the T-bill rate…The way to end the liquidity crisis is to drop the discount rate relative to the Fed fund rate, which then motivates banks which are troubled to go to the discount window, plead baby shoes, get cheap money at the discount window, and then turn their rear ends around and lend it out at the Fed fund market rate because it’s free money. You borrow at the discount window cheap, you lend it to the safest bank you know, and now that bank has excess reserves, and they lend it out. The way the Fed has always unlocked liquidity freezes is to increase the spread between the discount rate and the fund rate. If you want to get more extreme, drop the discount rate below the T-bill rate, and now you have a riskless transaction.

~ Ken Fisher, "Catching Up With: Ken Fisher," Investment Adviser, November 1, 2008, by James J. Green

Ken Fisher on the credit crunch

The notion of interbank lending process simply freezing up—no one saw it coming; we didn’t see it coming.

~ Ken Fisher, "Catching Up With: Ken Fisher," Investment Adviser, November 1, 2008, by James J. Green

Nov 8, 2008

Murray Rothbard on the source of the business cycle and how to end a depression

So now we see, at last, that the business cycle is brought about, not by any mysterious failings of the free market economy, but quite the opposite: By systematic intervention by government in the market process. Government intervention brings about bank expansion and inflation, and, when the inflation comes to an end, the subsequent depression-adjustment comes into play... what the government should do, according to the Misesian analysis of the depression, is absolutely nothing. It should, from the point of view of economic health and ending the depression as quickly as possible, maintain a strict hands off, "laissez-faire" policy. Anything it does will delay and obstruct the adjustment process of the market; the less it does, the more rapidly will the market adjustment process do its work, and sound economic recovery ensue. The Misesian prescription is thus the exact opposite of the Keynesian: It is for the government to keep absolute hands off the economy and to confine itself to stopping its own inflation and to cutting its own budget.


~ Murray Rothbard, "Economic Depressions: Their Cause and Cure," 1969

Ludwig von Mises on the futlitily of attempting to emerge from an economic crisis through interventionist measures

The appearance of periodically recurring economic crises is the necessary consequence of repeatedly renewed attempts to reduce the "natural" rates of interest on the market by means of banking policy. The crises will never disappear so long as men have not learned to avoid such pump-priming, because an artificially stimulated boom must inevitably lead to crisis and depression... All attempts to emerge from the crisis by new interventionist measures are completely misguided. There is only one way out of the crisis: Forgo every attempt to prevent the impact of market prices on production. Give up the pursuit of policies which seek to establish interest rates, wage rates and commodity prices different from those the market indicates.

~ Ludwig von Mises, The Causes of the Economic Crisis (1931)

Heritage Auction Galleries: Aluminum was once a precious metal

Until the late 1880s and early 1890s when a new chemical isolation process was discovered, aluminum was considered among the most precious of metals, far rarer and much more coveted than gold. It is difficult today to find adequate words to express how elusive pure aluminum was at the time this coin was struck. We have mentioned elsewhere in this catalog the story of how when the Emperor Napoleon served an imperial dinner of elaborate scale, he reserved the aluminum tableware for the most revered guests, reserving the gold service for those of lower estate. Until the early 1880s, aluminum was sold in troy-ounce quantities, and domestic yearly production was in the range of 1,000 to 3,000 troy ounces, according to the U.S. Geological Survey.

~ Heritage Auction Galleries, September 20, 2008

Nov 5, 2008

Emma Goldman on the right to vote

If voting changed anything, they'd make it illegal.

~ Emma Goldman

Nov 3, 2008

Laurence Fink: "We are trading liquidity for illiquidity" (2007)

Probably the greatest issue that's confronting the world's investors is we are trading liquidity for illiquidity.

~ Laurence D. Fink, CEO, BlackRock, FT.com, April 26, 2007

Nov 2, 2008

Ed Yardeni: "Greatest global boom of all time" (2006)

I don't think the economy's "landing." I think the economy's doing great.

It's better than Goldilocks quite honestly. This is the greatest global boom of all time.

~ Ed Yardeni, Oak Investments, as appeared on CNBC, October 18, 2006

Art Laffer: "It's a beautiful economy" (2006)

It's a beautiful economy. The conditions look very good for a long-term prosperity.

Art Laffer, as appeared on CNBC, November 15, 2006

Jason Trennert: Nervousness is "good news from a contrarian standpoint" (2006)

I think we have more room to run and that's because the Street is still a little nervous. Last month short interest hit an all-time high. That's good news from a contrarian standpoint.

Jason Trennert, as appeared on CNBC, October 17, 2006

Abby Joseph Cohen: Economic slowdown good for investors (2006)

Our feeling is that the economy is slowing and this is good news for investors. We think that profit growth over the next 12 months will be robust enough to justify a 10% rise in prices.

~ Abby Joseph Cohen, as appeared on CNBC, October 17, 2006