Dec 31, 2010

Howard Davidowitz on the "wealth effect" of capital markets in 2010 on retail sales

About thirty percent of America did much better [financially in 2010] because of the performance of capital markets, so I knew there was going to be a comeback. I don't think it's indicative of anything going forward because I think if you look at our fiscal and monetary policy, we went $2 trillion in the hole last year. Two, trillion. Two TRILLION! To produce this. And unemployment, went up! ... to 9.8, and we spent two trillion.

They're printing money, we're going bananas! We've got 2.6 trillion on the [Fed] balance sheet, he's got government securities and the mortgage-backed securities. If interest rates go up a point he's bankrupt. Everything he bought is going to be underwater. All his mortgage-backed securities are underwater. The whole country is underwater. We're going nowhere.

~Howard Davidowitz, chairman, Davidowitz and Associates, Bloomberg.com interview, December 31st, 2010

Howard Davidowitz sees continued problems for CRE and community banks in the US

In the end, what do you do with the retail space? This is going to be a huge question for retailers in the next ten years. That's why Wal-Mart is starting to build smaller stores. That's why Wal-Mart is building more overseas than they're building here.

[Commercial real estate landlords] already have occupancy problems, rent problems and everything else right now. I don't think commercial real estate problems are fixed by any means. That's why we're going to close hundreds of community banks going forward.

~Howard Davidowitz, chairman, Davidowitz and Associates, Bloomberg.com interview, December 31st, 2010

Howard Davidowitz on the coming transformation of the American retail marketplace

With the explosion of online sales, what happens to all of these retail malls and the tons of shopping centers that are marginal? I think there are huge questions going forward about size of stores, location of stores, distribution facilities. Huge changes are going to be taking place in the next five years as people continue to shop online.

~Howard Davidowitz, chairman, Davidowitz and Associates, Bloomberg.com interview, December 31st, 2010

Dec 28, 2010

Epitaph For 2010?

Once left for dead, shares of bailed-out American International Group Inc. have defied critics and rallied to become one of the market's top performers in 2010.

On Tuesday, AIG's publicly traded shares closed 45 cents lower at $58.93, capping a nearly 97% gain in the year to date and over 42% in December alone. The insurer is the fourth-best performer in the S&P 500 index this year.

~The Wall Street Journal, "AIG Stock's Unlikely Comeback", December 28th, 2010

Fred C. Koch on the value of failure

I hope your first deal is a loser, otherwise you will think you're a lot smarter than you are.

~ Fred C. Koch, founder, Koch Industries, to his son Charles G. Koch upon joining the family business, as quoted in "The Science of Success", 2007, pg. 10

Will Durant on history serving as a determinant of the present economic and social structure

In the end nothing is lost, for good or evil every event has effects forever.

~Will Durant, historian, "Our Oriental Heritage," 1935, pg. 264

Will Durant on the permanence of bad ideas

There is hardly an absurdity of the past that cannot be found flourishing somewhere in the present.

~Will Durant, historian, "Our Oriental Heritage," 1935, pg. 244

Will Durant on the fragility of civilization

Civilization is an occasional and temporary interruption of the jungle.

~Will Durant, historian, "Our Oriental Heritage," 1935, pg. 226

Dec 19, 2010

Mark Thornton on the tech bubble (2000)

Dear Investors Business Daily:

In "Are Boom- Bust Cycles Gone Forever?" (08-23-00, p. A10) a strong case is made that the business cycle is dying, if not dead. Once again the "new economy" mantra of technology, globalization and government management of the economy has raised its ugly head.

The same mantra was common in the U.S. during the 1960s when Keynesian "counter- cyclical fiscal policy" was in charge of the business cycle while American high tech companies expanded around the globe. Then came the stagflation of the 1970s. The Japanese boom of the 1980s was said to be due to its "managed economy" that allowed Japanese industry to dominate world markets. The Japanese bust of the 1990s followed. And who can forget the "Roaring 20s" when America's new technology (radios, cars, planes, refrigerators, motion pictures, etc.) had the world in awe. Economist Irving Fisher declared a "permanent prosperity" right before the stock market crash of 1929 and the Great Depression.

Technology cannot kill the business cycle. In fact, technology is the mechanism that traps capital in unsustainable and premature investment projects. Entrepreneurs are lured by artificially low or stable interest rates during the "boom" phase of the business cycle only to see their plans go bust as interest rates and inflation increase.

Clearly FED chief Alan Greenspan understands that monetary instability is the key to the cycle and he has recently stated his knowledge of the Austrian business cycle theory to Congress. But knowing the problem and solving it are two different things. Knowledge of economic theory does not allow bureaucrats to solve the problems of government inefficiency, taxation, business regulation and price controls.

The business cycle will not die until money and credit are purely market-based institutions, rather than government bureaucracies that supply, control, and regulate. While such a radical change of institutions is an unlikely event in the near future, requiems for the death of the business cycle might serve as a good forecast for what is.

~ Mark Thornton, letter-to-the-editor sent to IBD, never published, August, 2010

Ludwig von Mises on economic forecasting

Economics can predict the effects to be expected from resorting to definite measures of economic policies. It can answer the question whether a definite policy is able to attain the ends aimed at and, if the answer is in the negative, what its real effects will be. But, of course, this prediction can be only "qualitative." It cannot be "quantitative" as there are no constant relations between the factors and effects concerned. The practical value of economics is to be seen in this neatly circumscribed power of predicting the outcome of definite measures.

Dec 18, 2010

Doug Casey on providential lessons and contrary indicators

At any rate, the day Elmer came in happened to be the day that gold hit its absolute bottom for that cycle — $103.50, if I recall correctly — and also happened to be the very same day there were big riots in Soweto that made headlines in the U.S.

So, Elmer gets hit with these two things at the same time, calls me back up and says he wants to cancel his order. I said: "Elmer, this isn't Woolworth's. You can't really take the merchandise back." But rather than paying me for what he ordered, he hung up the phone on me.

Having entered the orders for the stocks the previous day, I had to ask myself what I would do about it. It was something of a revelation to me — it was clear that I was dealing with a typical member of the public, a representative of their mindset. I figured he must be the perfect contrary indicator. In today's terms, I had to ask myself if I was just talking the talk, or if I was willing to walk the walk.

I have no idea what happened to him after he hung up on me, but I thank him for appearing at the right time. Elmer was completely ignorant of economics and the markets, but he nonetheless taught me a more valuable lesson than any teacher in four years of college.

~Doug Casey, international investor, Casey Research, "Education of a Speculator", LewRockwell.com, May 27, 2010

Max Stirner on the operating logic of the world's power elite

He who has the might, has-- right; if you have not the former, neither have you the latter. Is this wisdom so hard to attain? Just look at the mighty and their doings!

~Max Stirner, German philosopher, The Ego and His Own, pg. 193, 1845

Dec 17, 2010

USA Today reader demonstrates the wisdom of the experts

You dirt bags in Wall Street took me in the tech bubble and the housing bubble and left me with useless pieces of paper. From now on I invest in the local Indian casino, at least they will feed me after they clean me out.

~"doctor pangloss", commenter and voice of America on the article "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

David Bianco says emerging markets will drive US stock market in 2011

About 40% of the S&P 500's revenue comes from abroad, where many countries are growing at a faster clip than the U.S. The S&P has a lot of powerful indirect exposures to the world economy, via emerging market and commodity demand. Commodity prices are very important to the energy, industrial and material companies. Business spending also has a lot of connections to global growth. And that's what drives S&P earnings.

David Bianco, chief US equity strategist, Bank of America Merrill Lynch "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

Richard Burnstein says don't fight the Fed in 2011 (or even 2012)

We can argue to great length as to whether all this monetary and fiscal policy is good for the long-term health of the U.S. economy. But it's hard to fight the fact that in the next 12 to 18 to 24 months, this is going to put the wind in the sails of the U.S. economy.

Richard Burnstein, CEO and CIO, Richard Burnstein Advisors, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

Richard Bernstein says investors are in "denial" about bull market

Markets go through four phases. The first phase is a period of denial, where people say, it can't happen (stocks rising despite risks), it won't happen, and if it's happening it can't continue. That's where we are in the U.S. The second phase is acceptance, like OK, I should probably be (buying stocks). The third is what I call the brave new world, things are never going to change, everything is wonderful. The fourth phase is the bear market.

In the U.S. we're in phase one. The fact that the stock market is up more than 80% from its trough, and people refuse to believe that there's actually a bull market underway, reflects that we are in the denial phase.

~Richard Bernstein, CEO and CIO, Richard Burnstein Advisors, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

David Bianco says plays the EM in 2011, but do it through the S&P so he can make money

When we talk to clients and we look at portfolios that are largely cash, Treasuries, municipal bonds and gold, we point out that that's just not a balanced portfolio. It's a portfolio with its own kind of risks, and a portfolio that, over time, is not going to keep up with your wants and desires for funding your long-term financial needs.

Within the S&P 500, our advice is to stick with strength in 2011. And strength in the world is the emerging economies. But we want to point out that there are lots of plays on emerging economy growth within the S&P 500, particularly the technology, energy, industrial and materials sectors.

~David Bianco, chief US equity strategist, Bank of America Merrill Lynch, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

BlackRock's Bob Doll says confidence begets confidence and the only way is up in 2011

We've been through a period of very low confidence: consumer confidence, CEO confidence. And there's nothing like a slightly better economy, a slightly better stock market to argue that confidence will beget more confidence. CEOs are never more confident than when their stock price is going up.

They will be more willing to do some positive things with the $2 trillion-plus in excess cash sitting on their balance sheets: raise their dividend; buy back their stock; engage in M&A; re-invest in their business; hire a worker or two; or maybe put up a new plant. I think that's what's in front of us.

~Bob Doll, chief equity strategist, BlackRock, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

Bob Doll says the risks are to the upside in 2011

First, why are individuals shunning stocks? We cut them in half in 2000. We cut them in half again from 2007-2009. They're scared. That's to be expected. You have to ask, OK, what are the alternatives? And where have they been putting their money? We all know they've been selling stocks and buying bonds. You look at the big gap that's opened up in the valuation of stocks vs. bonds, and you've got to believe, unless the world is going to end and we are going to have a depression, that the gap is going to close.

We all know that the public tends to buy after things are moving up. So maybe what we've seen in the last few weeks is the beginning of the reversal.

The difference is, in 2010 the risks were more to the downside. In 2011, in my view, the risk is more to the upside. So if we're wrong, I think our forecast is too low.

~Bob Doll, chief equity strategist, BlackRock, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

Abby Joseph Cohen still can't see double-dip, targets 12-mo S&P 1450

One can certainly understand why investors are so concerned. We have gone through an extraordinary experience between the credit crisis, very severe recession and extremely volatile markets.

But now that we're seeing that the U.S. economy has some traction, and the likelihood of a double-dip recession is remote, it's time to look again, not just at so-called risky securities like stocks, but to do the really hard work on valuation. Because a security that seems safe, if it is priced too high, is not safe.

I would put quite a few bonds in that category. To be buying a bond at record low yields makes one think that there is now risk there. Investors have to recognize that there may be risk in the so-called safe securities, but there's also the opportunity cost of not participating in some other securities.

When the economy does better, things like stocks and commodities tend to rise in price. U.S. equities are now trading between 13 and 14 times earnings, and that is significantly below the historical average. That suggests that there's good value there. Our 12-month market forecast for the S&P is 1450.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

David Bianco says go buy some stocks for 2011

We're broadly bullish on U.S. equities. It's important for investors to get back into the asset class. Go buy mutual funds. Go buy index funds.

~David Bianco, chief US equity strategist, Bank of America Merrill Lynch, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

BlackRock's Bob Doll says economic recovery clears the way for stocks in 2011

If you don't believe in a depression, and I don't, stocks will go up and bonds will go down in the next few years.

~ Bob Doll, chief equity strategist, BlackRock, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

Dec 16, 2010

Ludwig von Mises on the government's attempt to eliminate vices

It is an established fact that alcoholism, cocainism, and morphinism are deadly enemies of life, of health, and of the capacity for work and enjoyment; and a utilitarian must therefore consider them as vices. But this is far from demonstrating that the authorities must interpose to suppress these vices by commercial prohibitions, nor is it by any means evident that such intervention on the part of the government is really capable of suppressing them or that, even if this end could be attained, it might not therewith open up a Pandora's box of other dangers, no less mischievous than alcoholism and morphinism.

~ Ludwig von Mises, Liberalism

Dec 12, 2010

Ron Paul on the Federal Reserve

Today, there is no principled opposition to the corporate bailouts and the Fed’s trillions of dollars of new credit and the takeover of insurance, mortgages, medical care, banks and the auto industry. The arguments have only been over amounts, financial vehicles, and which political group gets to wield the economic power. If there is no moral argument against the economic takeover of America, there will be no resistance to the dictator who rules over our lives with an iron fist.

"The Fed? Ron Pauls not a fan", New York Times, December 12, 2010

Dec 11, 2010

Kevin Duffy on having successful CEOs run government agencies

Even if you put the brightest people in charge of government agencies they will fail. Companies serve customers peacefully and voluntarily; their decisions are rationally guided by the price system, making sure resources aren’t wasted. If they lose money for long they close their doors. Government bureaucrats, on the other hand, serve their customers through coercion (taxes). Their decisions are guided by votes and special interest bribes. They spend other peoples’ money, have no price system to guide them, have a limited feedback system (elections with no real choice every 2 years), and are essentially flying blind.

~ Kevin Duffy, December 10, 2010

Dec 8, 2010

50 Cent on the decline of America

America was once a country of great realists and pragmatists. This came from the harshness of the environment, the many dangers of frontier life. We had to become keen observers of everything going on around us to survive. In the nineteenth century, such a way of looking at the world led to innumerable inventions, the accumulation of wealth, and the emergence of our country as a great power. But with this growing power, the environment no longer pressed upon us so violently, and our character began to change.

Reality came to be seen as something to avoid. Secretly and slowly we developed a taste for escape- from our problems, from work, from the harshness of life Our culture began to manufacture endless fantasies for us to consume. And fed on such illusions, we became easier to deceive, since we no longer had a mental barometer for distinguishing fact from fiction.

This is a dynamic that has repeated itself throughout history. Ancient Rome began as a small city state. Its citizens were tough and stoic. They were famous for their pragmatism. But as they moved from being a republic to an empire and their power expanded, everything reversed itself. Their citizens' minds hungered for newer and newer forms of escape. They lost all sense of proportion - petty political battles consumed their attention more than much larger dangers on the outskirts of the empire. The empire fell well before the invasion of the barbarians. It collapsed from the collective softness of its citizens' minds and the turning of their back on reality.

"The 50th Law", 50 Cent and Robert Greene

Todd Harrision on the stimulus drug

I've also been too cautious in the past few months as I've waited for the other side of the storm to arrive. I'm quite certain the imbalances are cumulative still; the longer we take drugs that mask symptoms rather than medicine that cures the disease, the more profoundly painful the eventual comeuppance will be.

[...]

At the end of the day, we must ask ourselves an honest question: If the capital markets need an IV drip from the government to stay afloat — or if the financial industry remains one FASB 187 accounting change away from technical insolvency — how will that dormant toxicity and ever-expanding largesse manifest as we edge ahead?

~ Todd Harrison,"Conventional Wisdom: Financial Crisis is Over," MarketWatch, December 1, 2010

Andrew Mellon on the 1929 Crash (1930)

There is nothing in the situation to be disturbed about.

~ Secretary of the Treasury Andrew Mellon, February 1930

Bernard Baruch on the 1929 Crash (1929)

The financial storm has definitely passed.

~ Bernard Baruch in a cablegram to Winston Churchill, Nov. 15, 1929.

George W. Bush on the Iraq War (2003)

Mission accomplished!

~ President George W. Bush regarding the Iraq War, May 1, 2003

John Maynard Keynes: "no more crashes in our time" (1927)

We will not have any more crashes in our time.

~ John Maynard Keynes, 1927

President Herbert Hoover on the 1929 Crash (1930)

While the crash only took place six months ago, I am convinced we have now passed the worst, and with continued unity of effort, we shall rapidly recover.

~ President Herbert Hoover, May 1, 1930

Dec 6, 2010

Jim Sinclair on OTC dervatives

The securitized debt OTC derivative market is seizing up. It is not seizing up, it is dying. This mountain is a two trillion dollar scam. It was known in 2008, but nothing was done about it. Now litigation is going to set the victims free. What the first OTC derivative crisis did not do to the international investment banks, litigation will. Here comes the final act in the OTC derivative crime against humanity.

Jim Sinclair on OTC derivatives, www.JSMineset.com, October 19, 2010

Christian Science Monitor on the Titanic (1912)

"Passengers Safely Moved and Steamer Titanic Taken in Tow."

~ Christian Science Monitor headline, April 15, 1912

Dec 1, 2010

Jim Chanos on the China property bubble

Dubai, at the peak of its building boom, had 240 square meters of property under development for every $1 million in national GDP. In urban China today that ratio is four times as high. We've seen this movie before. It was Dubai a couple of years ago, Thailand and Indonesia during the Asian crisis of the late '90s, and Tokyo in 1989. This movie has a bad ending.

~ Jim Chanos, "Chanos vs. China," Fortune, December 6, 2010

Nov 30, 2010

Former totalitarian expresses the sentiment undoubtedly shared by his compatriots

You know, I know something about totalitarianism. I have been a totalitarian ruler. And I have to admit, it was a great job while it lasted.

~Eduard Shevardnadze, former foreign minister of the USSR, as quoted in a conversation with David Rothkopf in "Superclass: The Global Power Elite and the World They Are Making"

Nov 29, 2010

George W. Bush encouraging consumers to spend after 9/11

Do your business around the country. Fly and enjoy America’s great destination spots. Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed.

~ President George W. Bush, September 22, 2001

Rudy Giuliani encouraging consumers to spend after 9/11

Come here and spend money, just spend a little money. Go to a store, do your Christmas or holiday shopping now, this weekend. … buy your birthday gifts for the next three or four months. We’re the best shoppers in the world.

~ New York City Mayor Rudy Giuliani, September 21, 2001

Nov 28, 2010

Paul Krugman on Milton Friedman's inflationary advice

Mr. Bernanke and his colleagues seem stunned to find themselves in the cross hairs. They thought they were acting in the spirit of none other than Milton Friedman, who blamed the Fed for not acting more forcefully during the Great Depression — and who, in 1998, called on the Bank of Japan to “buy government bonds on the open market,” exactly what the Fed is now doing.

~ Paul Krugman, "Axis of Depression," The Opinion Pages, The New York Times, November 18, 2010

Nov 22, 2010

Adrian Day on the commodity "super-cycle" (2010)

China is at the takeoff phase.

[...]

China being twenty percent of the world’s population is probably going to take longer than the ['super-cycles'] of Japan and Korea, which were both 10 years. The good news for commodity investors is that once China matures and [its] demand for resources plateaus, behind [it] you’ve got India.

[...]

Supply simply cannot keep up with demand.

[...]

I have no doubt that at some point over the next five or ten years we are going to have one or two or three vicious corrections. [citing the nearly $100 oil price plunge in 2008 and 2009 as an example] [But] if you really understand the long-term fundamentals, then you just need to stick with it and ride out those corrections.

~ Adrian Day, "'Just Stick With It': Commodity 'Super-Cycle' Will Last Decades, Day Says," Yahoo! Finance tech/ticker, November 22, 2010

Friedrich Wilhelm Nietzsche on the state and its lies

The state lies in all the tongues of good and evil, and whatever it says is lies, and whatever it has, it has stolen, everything it is, is false, it bites with stolen teeth, and it bites often, it is false down to its bowels.

~ Friedrich Wilhelm Nietzsche, Also Sprach Zarathustra [1896]

Nov 19, 2010

Bruce Charlton on mass media addiction

Americans are addicted to mass media, if they don't get the fix they lose connection, feel dead, will drift without purpose. If people withdraw from it or removed from media they experience rebound effects. Rebound effects are the opposite of stimuli: if the media generate excitement then people who have withdrawn from media will be bored, if the media provide conversation topics then withdrawn people will not have anything to discuss, if the media frame leisure then they will have nothing to do.

Habituation is a basic principle-repeated stimuli cease to command attention. So the media must generate novelty - novelty is imperative. This leads to endemic dishonesty - truth must continually be sacrificed to novelty. This leads to endemic ugliness-beauty must continually be sacrificed to novelty. This leads to moral corruption-virtue must continually be sacrificed to novelty.

It is obvious why society is undergoing progressive corruption and how far we are away from a good society - so far that we have lost the ability (an ability common to all previous societies) of even conceptualising the nature of things, of the human condition.

~ Bruce Charlton, "Mass Media Addiction, Habituation, Tolerance - Here, Now," November 19, 2010

Nov 17, 2010

Joseph Goebbels on propaganda

The most brilliant propagandist technique will yield no success unless one fundamental principle is borne in mind constantly... it must confine itself to a few points and repeat them over and over.

~ Joseph Goebbels, Reich Minister of Propaganda in Nazi Germany from 1933-1945

Nov 16, 2010

Michael Steinhardt on when to sell GM IPO

As quickly as I can. I don't think one should be a long-term holder in government securities, particularly government equity securities.

"Michael Steinhardt on GM IPO", CNBC, November 16, 2010

Nov 12, 2010

Doug Casey on gold

I have to say again that the fundamentals behind this trend for gold are very, very strong. It's going to continue upwards. And although we're moving towards a Mania Phase, it's nothing near a mania today.

[...]

Consider the alternatives – they're quite unattractive. Another old market rule, since I'm quoting old market rules, is: Don't fight the Fed. And never since the Fed was created has there been a more clear signal from the Fed. People have made fun of Bernanke for saying he would drop hundred-dollar bills from helicopters, but that is in essence what he's doing – but with a lot more hundred-dollar bills than you could fit in a helicopter, or even a squadron of helicopters.

You don't want to fight the Fed: buy gold.

[...]

To use poker jargon, Bernanke has made an all-in bet that's going to be inflationary. So I'm inclined to make an all-in bet myself, on gold and gold stocks.

[...]

Hundreds of billions in new liquidity at the stroke of a pen – of course it will impact the stock market, and you don't want to fight the Fed.

~ Doug Casey, "Doug Casey on Gold’s New High, the Fed, and the Greater Depression,"

Kevin Duffy on the end of QE2

After today’s wild run-ups and reversals in commodities at the tail end of the QE2 bubble, tomorrow could be a bloodbath. With the 30-year T-bond collapsing, commodities flying, and European sovereign debt problems reemerging, the world’s central bankers have lost control. Worse, sentiment measures show frightening levels of bullishness, with QE2 providing the hook for both bulls and bears.

~ Kevin Duffy, Bearing Asset Management, November 9, 2010

Nov 11, 2010

Fred Hickey on short selling in the current market

I learned that you can't make money shorting in this market currently. As stocks careen higher, the gap between fundamentals and valuations will widen, providing opportunities to short in the future. In the meantime, I'll try my best not to get sucked in.

[...]

What is worth mentioning is that this market is currently near-impossible to short.

~ Fred Hickey, "The Smartest Dumb People in the World," The High-Tech Strategist, November 5, 2010

Bethany McLean on the anti-Fed movement

The thought process behind the anger at the Fed isn't uniform. If Dante had nine circles of hell, then the Fed has three circles of doubters. The first circle is critical of the Fed's current policies. The second circle thinks that the Fed has been a menace for a long time. The third circle wants to seriously curtail or even get rid of the Fed.

[...]

Murray Rothbard, the controversial libertarian economist who many consider the intellectual father of the anti-Fed movement, wrote in 1994 ("The Case Against the Fed") that if the Fed were to be abolished, then "the banks would, at last, be on their own, each bank responsible for its own actions. There would be no lender of last resort, no taxpayer bailout [italics mine]."

~ Bethany McLean, "Fed-Bashing Three Ways," Slate.com, November 9, 2010

Ned Riley says he's no permabull

I don't sell into the rally, Larry. You've known me for the last few years, I've been bullish as heck on the market, I continue to be so. The market's moving, I only think it's in the third or fourth inning of this bull market. Lookit, we've had a ten year bear market, the S&P has almost doubled earnings and the market is still down 20%. I think this is the beginning of a big bull market and as long as the skeptics stay out there, I'm very happy.

When people start saying that equities are the best long-term investment for your portfolio, I'm gonna run for the hills.

~ Ned Riley, Riley Asset Management, CNBC's "The Kudlow Report", November 4th, 2010

Ned Riley says the cold housing market is a big problem for the economy

One of the biggest problems we've got is that we can flood the system with money but the banks don't turn around and lend it where it's needed. The housing industry is still on its back. If you try to get a refinancing of a mortgage, it takes you four to six weeks minimum just to get them to look through your applications.

The banks are still parsimonious in handing out any money toward the housing market. A purist, somebody that has high credit ratings and everything else, can't get an equity line of credit for about two months. So, Bernanke's nice to give us all this money, but the banks have pressure, big pressure, because the lending offices aren't giving the money away.

~Ned Riley, Riley Asset Management, CNBC's "The Kudlow Report", November 4th, 2010

Art Hogan on GDP growth in 2011

The great news is we've figured out how to make money in a slow-growth economy, we're going to see that in 2011 as we'll probably see a 3, 3.5% GDP growth rate.

~Art Hogan, director of global equities, Jefferies, CNBC, November 9th, 2010

Ron Insana sees upside surprise in financial markets going into 2011

The market going forward is probably going to surprise people on the upside.

~Ron Insana, CNBC, November 8th, 2010

Tony Dwyer sees strong economic activity throughout 2011

Where macro guys and economists such as myself get it wrong is we've become economically euphoric as rates are going up, but that's the restricter. When rates are coming down that's the stimulant.  From the April high they've gone from 4 to 2.4%, that is hugely stimulative. So, in our view, you're going to have much better than expected economic activity over the course of the next three to four quarters and that's going to further increase earnings growth which will ultimately end up in a stock-friendly way.

~Tony Dwyer, chief equity strategist, Collins Stewart, CNBC "Market Breakdown", November 8th, 2010

Brian Belski on synchronized global growth

If you go back and look at fundamentals and what's driving the growth in the economy over the next five years, we really do believe it's going to be those technology companies, and those industrial companies, that benefit from what we like to call "synchronized global growth" which we're in a global world now.

~Brian Belski, chief investment strategist, Oppenheimer Asset Management, CNBC, November 2nd, 2010

Jim Cramer roots for Ben Bernanke, the earnest underdog

Ben Bernanke is doing a great job. He's not only taking on Washington, he's taking on the world! In the name of trying to get this economy moving again, in the name of trying to get people hired. That's a lot more than anyone else is doing. It's time to applaud the man and castigate those rich people who offer nothing for those who are down and out and just trying to get by. They should all be ashamed!

~Jim Cramer, CNBC's Mad Money with Jim Cramer, November 9th, 2010

Jim Cramer says the market isn't fooled by negative sentiment and neither should you be

I call this whole process "selective negativity." We get a change in employment figures and we're told that Irish bonds are now the thing. We get a prospective bidding war for BJ's and we're told to focus on the currency wars. Yeah! That's the new thing to worry about.

The bottom line, here's what really matters: the market itself isn't focused on the new negatives. It's focused on what's truly important, not faddishly important, which means the employment claims and the buyouts, not the bogus, blown-out-of-proportion, doom-and-gloom stories that the media's addicted to, including now the G20.

The market isn't fooled, which is why it spent the rest of the day rallying from the ugly open. You shouldn't be fooled, either.

~Jim Cramer, CNBC's Mad Money with Jim Cramer, November 10th, 2010

Jim Cramer makes a "contrarian" call for investors to pile into bank stocks

Now can you imagine what would happen if one of the myriad bearish analysts upgrades? You wanna be out of the group then?

Wow, I just said something pretty inconceivable. I said that you should fear missing a move in the banks. Now that's a breath of fresh air!

~Jim Cramer, CNBC's Mad Money with Jim Cramer, November 10th, 2010

Jim Cramer says the fear is all priced in in bank stocks

Can you believe this move in the bank stocks? I think it's totally related to the job creation we're beginning to see. I think we're all mesmerized by mortgage-morass stories, foreclosure stories, now FDIC-fee stories that we're missing the forest for the trees.

Think of it: this morning there was a big story about the shocking FDIC-fees for the big banks, "shocking." There was nothing shocking about it at all. We all know about that, it's been written about forever. Right next to the story though about the FDIC-fees was an article about how the big banks are making tens of millions of dollars trading each day. You know what? That's real money. They can pay the FDIC bill and a lot more.

The mortgage morass? Jobs cure the morass. I'm sick of hearing about weaker pricing and more foreclosures, they're totally in the cards of the banks, the reserves have been taken.

~Jim Cramer, CNBC's Mad Money with Jim Cramer, November 10th, 2010

Kevin Duffy on the world's military expenditures

Official statistics say the U.S. accounts for 42% of the world's military expenditures and these are surely understated. In addition, we are blessed with huge geographical advantages - being buffered by the world's two largest oceans, and a massive nuclear arsenal. We outspend our neighbors to the north on defense by 32 times and those to the south by 121 times.

So why the need to support an empire that bankrupts us financially and morally, requires surrendering our freedoms, and makes us less secure? Threats like Iraq whose military spending is less than Oman's? Or Iran whose military is half the size of Turkey's?

H.L. Mencken got it right, "The whole aim of practical politics is to keep the populace alarmed – and thus clamorous to be led to safety – by menacing it with an endless series of hobgoblins, all of them imaginary."

~ Kevin Duffy, November 11, 2010 (Veteran's Day)

Nov 10, 2010

Frederic Bastiat on intervention

Once we start from this idea, accepted by all our political theorists [that] "The motive force of society is the government"; once men consider themselves as sentient, but passive, incapable of improving themselves morally or materially by their own intelligence and energy, and reduced to expecting everything from the law; in a word, when they admit that their relation to the state is that of a flock of sheep to the shepherd, it is clear that the responsibility of the government is immense. Good and evil, virtue and vice, equality and inequality, wealth and poverty, all proceed from it. It is entrusted with everything, it undertakes everything, it does everything; hence, it is responsible for everything.

Frédéric Bastiat, “The Law”, 1850

Economist sees job recovery in 2011 thanks to QE2

The labor market is what really turns it. We will see a slow and steady improvement in job growth. In the next six to nine months, we won’t be talking about a jobless recovery anymore.

~Joel Naroff, president of Naroff Economic Advisors, Bloomberg.com, November 10th, 2010

Economist sees a brighter future thanks to QE2

The air has been cleared. The impediments to growth, uncertainty about change in Washington and will the Fed go or not, those have gone to the wayside and people’s animal spirits can start to revive.

~Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, Bloomberg.com, November 10th, 2010

Michael Aronstein on the reality of QE for savers and borrowers

In effect what the Fed is doing is guaranteeing that if you're a saver and desire safe assets you get no return. [Retirees] better have an awful lot of money if they want to live off of interest. So, it's forcing people, worldwide, to take risk, to take all kinds of risks that they're probably not all that comfortable taking and in effect it's a wealth transference from people who are natural creditors, people who have accumulated savings, to people who can use them, people who are natural borrowers.

~Michael Aronstein, president of Marketfield Asset Management, Bloomberg Television's "Surveillance Midday", November 9th, 2010

Robert Albertson on the Fed as the only adult in Washington

I really respect the Fed because they really are the only adult in Washington, trying to do the right thing but, my simple view has always been monetary policy is a great brake; it's not such a good accelerator and fiscal policy is the great accelerator. We haven't done much good with fiscal lately so hopefully the animal spirits of America take over.

~Robert Albertson, head of investment strategy at Sandler O'Neill & Partners LP, Bloomberg Television's "Surveillance Midday", November 9th, 2010

Nov 5, 2010

Billionaire Ken Fisher sees 16% S&P 500 rally after elections

Markets don’t like big sweeping actions. Right now, every politician is chirping and burping and carrying on. It’s been in the interest of the Republicans running for office to talk down the economy. That goes away immediately after the election. Come June, you’ll see how quiet the political landscape will be -- very little legislation and a lot of baby kissing.

~Ken Fisher, Fisher Investments, Bloomberg.com, November 3rd, 2010

Mark Haines on George W. Bush's comment that "TARP saved the economy"

Way to stick up for what you did. Because I believe you were right.

~ Mark Haines, CNBC, 10:55 AM Eastern time, November 5, 2010

Nov 3, 2010

A hedge fund manager describes the incentives of Ben Bernanke as he embarks on QE2

Imagine a large hot-air balloon carrying a bunch of people with a gigantic hole in it.

The person in charge of flying the balloon could:

a) Land, fix the hole, then take off again, or
b) Keep firing the gas cannister thereby keeping the balloon in the air as long as possible before the gas runs out and the balloon suffers a catastrophic crash.

Now imagine the person in charge of the gas cannister:
a) Is responsible for the hole in the balloon and will be found out if the balloon lands.
b) Has a parachute
c) Gets money for every second the balloon stays in the air.

~"CP", hedge fund manager and author of CreditBubbleStocks.com, November 3rd, 2010

Nov 2, 2010

Steve Jobs on "how to live before you die"

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma, which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important: Have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

~ Steve Jobs, Commencement speech given at Stanford University, "How to Live Before You Die," June, 2005

Rick Santelli on the 2010 mid-term elections

This election is not a referendum on policy, it's a restraining order.

~ Rick Santelli, as appeared on CNBC discussing Tea Party movement, November 2, 2010

Oct 29, 2010

Jeremy Siegel on the effect of fear on stock valuations

When all the fears are gone, stocks are going to be selling at 25x earnings.

~Jeremy Siegel, professor of finance, Wharton School, CNBC "Street Signs", October 19th, 2010

Jeremy Siegel on the extreme undervaluation of equities in late 2010

I'm still a believer because, take a look at the large scope of history, the '80s and the '90s were the greatest bull market the world has ever known and we ended in a bubble. Stocks were overvalued then. One thing we know about stock prices is reversion to the mean, and it's usually with a vengeance, which means if you overshoot on the topside you're gonna subsequently overshoot on the bottom side. And that's what happened in the first decade of this millenium, we went from extremely overvalued to March of 2009 we were extremely undervalued.

I still think we're undervalued. My historical studies say this is really a time to pick up stocks.

~Jeremy Siegel, professor of finance, Wharton School, CNBC "Street Signs", October 19th, 2010

Ned Riley says ignore negative news

The more negative news that comes out, it sounds crazy, the better off I feel because people have not embraced the bull market that, really I think, is only in the second or third inning.

~Ned Riley, CEO, Riley Asset Management, CNBC "Power Lunch", October 11th, 2010

James Paulsen on employment growth as stock market stimulus

I think the best news here in recent weeks is that unemployment claims number breaking below 450. If that's a real number and we find out in the next few weeks that we're going to get several prints below that level I think we're going to move this market to new highs before the year's out.

~James Paulsen, Wells Capital Management, CNBC "Squawk Box", October 29th, 2010

Ken Fisher on volatility and indigestion in the markets

This year's just like most, it's just a little volatile.

We come to this point, particularly off of a bear market bottom, a lot of fear, a lot of backward-looking at all of the terrible things we went through and then we get acrophobia and then we get indigestion and what we've been doing all year long has been indigestion.

We're going to have a good time period ahead, markets just have a hard time believing that because we just went through such a bad time period.

~Ken Fisher, CEO, Fisher Investments, CNBC "Squawk Box", October 19th, 2010

Tony Dwyer on the stimulative nature of low interest rates

We always forget the impact of lower rates: what caused the economic slowdown was when long-term interest rates went from 2 to 4%. Now they're back from 4% to 2.5% and that's incredibly stimulative and that means that earnings are only going to get better from here.

~Tony Dwyer, chief equity strategist, Collins Stewart, CNBC "Market Breakdown", October 25th, 2010

Abby Joseph Cohen on the rarity of double-dips

Our sense is that a double-dip, while it can't be ruled out, is extremely unlikely. First of all, they don't happen that often and the last time one did happen a few decades ago, it was a conscious, policy decision by Paul Volcker to really squeeze inflation out of the system. Our sense is that we're in for a period of slow growth but not another recession. So, double-dip, not the most likely scenario.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, CNBC, September 16th, 2010

Abby Joseph Cohen on the risk averse investor in late 2010

In the S&P500 we think fair value by year end is something on the order of 1200. And, of course, this is a market because investors are so risk averse, of very little confidence, they're not willing to look out as much into the future as much as they normally would. So, we think that when investors finally get to the point that they're willing to price-in the outlook for 2011, prices will move higher still for the S&P500.

By the way, this low confidence level and risk aversion is not seen just in the US equity market, but in developed markets around the world, including Europe.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, CNBC, October 4th, 2010

Abby Joseph Cohen on the stop and go economy

It looks to us as if the economy is growing more slowly than it was at the beginning of the year but we just don't see the preconditions for double-dip. So, our judgment is real GDP growth of about 1.5% for the next several months, followed by re-acceleration.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, CNBC, October 4th, 2010

Brian Belski on the transitioning secular market

The premise is that stocks lead earnings which lead the economy. I think we're in the process of a transition from a secular bear market in equities to a secular bull market in equities.

~Brian Belski, chief investment strategist, Oppenheimer & Co., CNBC Asia, October 19th, 2010

Oct 28, 2010

Rick Santelli on the noble purpose of the Fed

I'm not going to stand here and tell you I think the Fed ought to be disbanded but I certainly think there's some middle ground between how far they've extended into the gray versus disbanding them. There's got to be something in the middle that makes more sense. I personally think this Fed's heart is in the right place but they're out of control in terms of trying to accomplish what their noble purpose is.

~Rick Santelli, CNBC's Squawk Box, October 28th, 2010

Oct 23, 2010

Independent Senate Candidate Warren Mosler Bets $100M Federal Government Can Not Run Out Of Money

I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need. And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce.

Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.

~Warren Mosler, Connecticut Independent candidate for US Senate, "Senate Candidate Bets Congress $100 Million That the U.S. Government Cannot Run out of Money", BusinessWire.com, October 23rd, 2010

Oct 22, 2010

VP Joe Biden on the $814B stimulus package

It’s the best-run federal program there’s ever been.

~ Joe Biden, US Vice President, Bloomberg.com, October 22nd, 2010

Oct 21, 2010

Fed chief Richard Fisher on why QE1 failed to stimulate an economic recovery

The vexing question is: Why isn’t this liquidity being utilized to hire new workers and reduce unemployment? Why is it that, as pointed out in Alan Greenspan’s op-ed in the Oct. 7 edition of the Financial Times, the share of liquid cash flow allocated to long-term fixed asset investment has fallen to its lowest level in the 58 years for which data are available? If current dramatically high levels of liquidity and low interest rates are not being harnessed to add to payrolls or expand capital expenditures, would driving interest rates further down and adding more liquidity to the system through Fed purchases of Treasury securities induce U.S. businesses and consumers to get on with spending it?

The intrepid theoretical economist would argue in the affirmative, the logic being that there is a tipping point at which the market becomes convinced that money held in reserve earning negligible returns is at risk of being debased through some inflation and, thus, should be spent rather than hoarded. Hence, the appeal of the Fed’s showing a little leg of inflationary permissiveness.

There is some valid theory behind this approach. Yet, my soundings among those who actually do the work of creating sustainable jobs and making productive capital investments―private businesses, big and small―indicate that few are willing to commit to expanding U.S. payrolls or to undertaking significant commitments to expand capital expenditures in the U.S. other than in areas that enhance the productivity of the current workforce. Without exception, all the business leaders I interview cite nonmonetary issues―fiscal policy and regulatory constraints or, worse, uncertainty going forward―and better opportunities for earning a return on investment elsewhere as factors inhibiting their willingness to commit to expansion in the U.S. As the CEO of one medium-size business put it to me shortly before the last FOMC, “Part of it is uncertainty: We just don’t know what the new regulations [sic] like health care are going to cost and what the new rules will be. Part of it is certainty: We know that taxes are eventually going to have to increase to get us out of the fiscal hole Republicans and Democrats alike have dug for us, and we know that regulatory intervention will be getting more intense.” Small wonder that most business leaders I survey, including those at small businesses, remain fixated on driving productivity and lowering costs, budgeting to “get fewer people to wear more hats.” Tax and regulatory uncertainty―combined with a now well-inculcated culture of driving all resources, including labor, to their most productive use at least cost―does not bode well for a rapid diminution of unemployment and the concomitant expansion of demand.

So, it is indeed true that some economic theories would lead one to believe we can shake job creation from the trees if we were to further expand our balance sheet, and/or induce greater final demand if people and businesses with money in their pockets believe the central bank will tolerate inflation somewhat “above” levels consistent with our mandate. Yet, to paraphrase the early 20th century progressive Clarence Day―the once-ubiquitous contributor to my favorite magazine, The New Yorker―“Too many (theorists) begin with a dislike of reality.” The reality of fiscal and regulatory policy inhibiting the transmission mechanism of monetary policy is most definitely present and is vexing to monetary policy makers. It is indisputably a significant factor holding back the economic recovery.


~ Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, "Rangers, Yankees and Federal Open Market Committee: One Game at a Time", Remarks before the New York Association for Business Economics, New York, NY, October 19th, 2010

Armored Wolf hedgefund director dispels the currency war "myth"

The phrase is used by those who think the world is ruled by an intellectual consensus among the elites, but it’s not that complicated. The idea in a post-Bretton Woods world is variable [currency] exchanges. It’s ludicrous to talk about manipulation.

~ John Brynjolfsson, managing director, Armored Wolf, "Brynjolfsson bets on inflation, sees gold at $2,000", MarketWatch.com, October 21st, 2010

Oct 20, 2010

Bill Miller: Best time to invest since early '80s (2010)

This is the best time to invest since probably the early 1980s.

~ Bill Miller, as appeared on CNBC, October 20, 2010

Oct 17, 2010

Sheldon Richman on the charade of left-right politics

The political establishment, helped by the mass media and intelligentsia, has long played a game in this country. It consists in depicting the competition for power as between two blocs: one hostile to business in the name of social justice, the other friendly to business in the name of “the free market.” Each bloc’s talking points and pet projects are calculated in superficial ways to reinforce its signature theme. Whenever the blocs need to rally their respective bases, they accentuate their surface differences. The “anti-business” bloc accuses its opponents of being, say, Wall Street lackeys, while the “pro-free-enterprise” bloc accuses its opponents of being, say, socialists.

It’s all a sham that serves both side’s interests. The rivals actually want two variations of the same thing: the corporate state, a system of economic privilege that transfers wealth via government from market entrepreneurs, workers, and consumers to well-connected business interests.

~ Sheldon Richman, "The Charade," The Freeman, October 15, 2010

Janet Tavakoli on how Bill Gross's Pimco Total Return Fund benefitted from Fed intervention in 2008

On July 15, 2008, ex - Goldman Sachs banker and then Treasury Secretary Henry ( “ Hank ” ) Paulson asked Congress for the authority to buy stakes in Fannie Mae and Freddie Mac. Paulson asserted: “ If you have a bazooka in your pocket, and people know you have a bazooka, you may never have to take it out. ” In my experience, boasting about a big bazooka just tempts the curious to see how you measure up in exciting circumstances, and the person to do that might be named Mr. Gross. Bill Gross manages the Pimco Total Return Fund, the world’s largest bond fund with large exposures to Fannie Mae and Freddie Mac (and AIG along with a number of investment banks as of September 2008). Gross is a fan of Fed intervention, and his investments reflected it. His fund reportedly gained $1.7 billion after the U.S. government took over Fannie Mae and Freddie Mac on Sept 7, 2008.

[...]

Bill Gross’s Pimco Total Return Fund had sold $760 million of default guarantees (as credit default swaps) on AIG, and it would have cost him if AIG went under. 22 Mr. Gross might have thought he had a good idea of how the Fed would behave. Pimco had hired Alan Greenspan as a consultant. I was not surprised when Bill Gross said the Fed intervention was a “ necessary step. ”

[...]

Pimco ’ s Bill Gross found there is a limit to the Fed’s largesse, and his Lehman investment lost money. In March, Bear Stearns, the fifth largest investment bank, was deemed too big to fail, but the Fed refused to help Lehman, the fourth largest investment bank. As Jim Rogers predicted, larger investment banks than Bear Stearns had problems, and the Fed had other problems besides investment banks — Fannie, Freddie, and AIG. Pimco’s investments were only partially protected by the Fed. The Total Return Fund’s return slumped, and it will be interesting to see if Gross ends up a net winner or a net loser as the market struggles for balance.

~ Janet M. Tavakoli, Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street, Chapter 10

Oct 6, 2010

Warren Buffett on financial bailouts and moral hazard

The common shareholders did not get bailed out of those institutions, they lost hundreds and hundreds and hundreds of billions. There is no moral hazard in terms of big financial company stockholders.

~ Warren Buffett, "Buffett Compares Wall Street to Church With Raffle," Bloomberg.com, October 5, 2010

Oct 4, 2010

Christopher Manion on the foreign policy split in the Republican Party

Foreign policy is the San Andreas Fault of the GOP, because there is huge money in war, and the bloody trough is bipartisan.

~ Christopher Manion, "A Specter is Haunting the Pentagon," LewRockwell.com Blog, October 4, 2010

Oct 1, 2010

Doug Casey on the difference between Democrats and Republicans

Doug: As you know, I've always distinguished them this way: the Democrats definitely don't believe in economic freedom, but they say they believe in social freedom, while the Republicans definitely don't believe in social freedom, but they say they believe in economic freedom. Neither believes in both – that would make them libertarians.

Q: [Chuckles] So, it's what they lie about that really distinguishes them. Or, more to the point, it's not what they believe, or say they believe, that drives them, but what they don't believe. Not what they value, but what they fear. It's not love but hate that is the guiding principle of American politics.

Doug: Exactly. Like most of what we see in politics, it's completely perverse. The only good thing about the Democratic party is that they're at least consistent: they are collectivists and statists through and through. They are collectivists in what they say, and they are collectivists in what they do. That gives them the appearance of being more honest than the Republicans.

Q: They may be crypto-communists draped in red, white, and blue, but at least they're consistent?

Doug: Yes, but not the Republicans. They say they value freedom and the individual, but their actions lie to those claims, and they give freedom a bad name. It makes you reluctant to use words like "free market," when you have the likes of the hostile and mildly demented McCain, and the bent and clinically stupid Bush claiming those principles for what they do.

Q: Makes me mad. It adds insult to injury that Ronald Reagan got elected on essentially libertarian rhetoric – smaller government, lower taxes, getting the state off the little guy's back, etc., and then signed appropriations bills that saw government grow by huge, then-unprecedented amounts. Many people today think the Reagan years prove that less government is a bad idea!

Doug: Remember what the Reagan team used to say, "If not us, who? And if not now, when?" As it turned out, it wasn't them and it wasn't then. The worst enemies of individual liberty are knaves that claim they're for it but utterly betray it. And incompetents and ineffectual fools who say they're trying to save freedom by increasing the size of the state.

~ Doug Casey, Doug Casey on the Tea Party Movement, Interviewed by Louis James, Editor, International Speculator, LewRockwell.com, October 1, 2010

Jim Cramer: "Bear Stearns is not in trouble" (2008)

Dear Jim: Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? --Peter

Cramer says: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

~ Jim Cramer, CNBC's Mad Money, March 11, 2008

Sep 29, 2010

Ken Fisher nays the naysayers on the state of the world economy

We can quibble about details, but right now, we’ve got the world snarky, skeptical, pessimistic, which is normal a year and a half after the bottom of a big bear market. It’s what we always get.

~Ken Fisher, CEO, Fisher Investments, Inc., Bloomberg.com, September 29th, 2010

(Fisher said in October 2008 that U.S. stocks were close to the bottom. The S&P 500 fell about 30 percent from October 2008 to a 12-year low in March 2009.)

Ken Fisher misses the credit picture in 2007

Skepticism and pessimism are normal sentiments for investors 18 months after the bottom of a bear market, according to Fisher, who said in July 2007 that the global credit crunch was “just all minor volatility” and “just fears of much ado about nothing.”

~Ken Fisher, CEO, Fisher Investments, Inc., Bloomberg.com, September 29th, 2010

Ken Fisher on the idiocy of the "New Normal" PIMCO-brigade

We are chimpanzees with no memory.

The next 10 years are going to be just as good as the 1990s. The problems in this current environment we think are so different, and so new and so unique. It’s the same stupid old normal we’ve always had. We’ve got a great future.

~Ken Fisher, CEO, Fisher Investments, Inc., Bloomberg.com, September 29th, 2010

Sep 27, 2010

Congresswoman Eddie Bernice Johnson on legislation to expand the CRA

The 30th Congressional District of Texas, like many communities, is diverse and its residents should not be denied bank loans because of where they live. The Community Reinvestment Act (CRA) came into existence to protect people from housing discrimination. President Jimmy Carter signed the CRA in 1977 to establish a system to monitor and rate whether banks and thrifts meet a variety of needs that include: financing for rental housing, home mortgages, small business startup and expansion costs. The CRA encourages prime lending by offering banks incentives for its foreclosure prevention efforts, counseling loan recipients, modifying loans and investing in finance loan modification. The CRA also penalizes banks through reduced CRA ratings that result when a bank is caught practicing discriminatory loan practices – not lending to all of their qualified customers. Presently, the CRA only applies to banks and thrifts (thrifts are depository institutions like savings banks and savings and loan associations), however the CRA does not apply to other financial institutions that lend money like bank affiliates, independent mortgage companies and credit unions.

To solve this issue, I introduced the H.R. 1479, the Community Reinvestment Modernization Act. My legislation strengthens the existing CRA by expanding it to all institutions. I believe the CRA Modernization Act will help restore integrity to and trust of our financial system. The legislation will also strengthen the accountability of banks, address racial disparities in lending, penalize banks that engage in predatory and abusive lending practices and require federal regulatory agencies to hold more public hearings and meetings when banks merge.

~ Congresswoman Eddie Bernice Johnson (D-TX), Summer 2010 News and Views

Sep 25, 2010

Alan Abelson builds the skeptic's case against China

In a kind of backhanded recognition of the country's status as a growing economic colossus is the fear, voiced occasionally by market mavens, that should the perpetual China boom go bust, the result would be widespread havoc. As it is, of course, Corporate America and investors here are wild about China.

All of this is a prelude to recommending a piece on China by Ian Johnson in the Sept. 30 issue of the New York Review of Books. Johnson, now based in Beijing, is a former Wall Street Journal writer and bureau chief (we never met him), who has collected a number of awards, including a Pulitzer. His take on China is not only informed but extraordinarily revelatory and compelling.

Early on, he points to "the spectacular misperceptions about China, a key one being that the government has been privatizing the economy." Actually, he says, what it has been doing is turning state-owned enterprises into shareholder-owned companies but—and this is rather a big but—with the government holding a controlling stake. And, he adds, "even today, almost all Chinese companies of any size and importance remain in government hands."

Throughout the '90s and into this decade, he recounts, prospectuses for IPOs of Chinese companies written by Western lawyers fudged the fact that the Communist Party's Organization Department, rather than the company, would remain in control of all personnel decisions. The ability to hire and fire is scarcely trivial. And major Chinese companies, Ian relates, have Party secretaries who manage them in conjunction with the CEO.

China has changed and for the better in many ways, Ian feels, such as largely withdrawing from what he dubs the "personal lives of Chinese citizens," permitting them to "pursue their own ambitions and goals as long as they avoid the high crime of directly challenging the party."

For all the economic growth achieved by what Ian calls China's "conventional mercantilist policies" in the past 30 years, he's skeptical those policies will continue to work in the future. What's badly lacking, in his opinion, is a "more open economic and social system that can foster innovation and creativity." One badly needed reform on this score, he argues, would be to pry loose the Party's iron grip on businesses. But don't hold your breath waiting for that to happen.

The tight ties in China between politics and economics have "created giant state-owned companies that have had spectacular success on foreign stock markets." Those big companies, he goes on, are giants, but merely because of their size. Essentially, they're little more than partially privatized quasi monopolies, not very nimble or inventive or even influential in global markets, except "when trying to buy natural resources."

Ian bemoans the fact that after Tiananmen, the Chinese government "channeled huge sums into better dorms for students, housing for teachers, labs for scientists and junkets for administrators" to little avail. This may have satisfied material demands and lured foreign universities hoping to set up programs in China. But it hasn't produced a bumper crop of "creative and innovative" students that Chinese companies can draw on.

"Even among China's elite universities," Ian claims, the academic level, in most cases, is on a par with one of our "mediocre community colleges."

While economic reform hasn't quite come to a halt, says Ian, the state sector is regaining lost ground in part because of Beijing's policy of "recentralizing control." The powers that be lack any impetus to reform. That would suggest that an awful lot of folks, businessmen and investors alike, in our blessed land who can't wait to get a piece of the Chinese miracle might wake up one day more than a little disappointed.

~Alan Abelson, Barron's magazine, "The Bad News Bulls", September 25th, 2010

Alan Abelson builds the skeptic's case against economic recovery

That the market is on a roll is undeniable (and who but a cockeyed grizzly would want to deny it). But what's providing the biggest lift is the prevailing investor tendency to respond like gangbusters to even a glimmer of good news and to ignore bad news no matter how telling. Take the response to the latest data on housing.

First came the disclosure that existing home sales were up 7.6% in August—immediately seized upon as evidence that housing was on the mend, supposedly a harbinger of an accelerated recovery and reason enough to take the plunge into equities. But it ain't necessarily so.

As Mark Hanson, of Hanson Advisors, is quick to point out, while last month's sales were better than economists' forecasts (most of whom never saw the housing crash coming), they were down 19% from sales in August '09, and inventory edged up to 11.6 months. That awesome pile of unsold homes all by itself is going to be exceedingly tough to unload.

Moreover, Mark warns that you better be prepared from here on for the full impact of the end of government stimulus, including some pretty irresistible tax breaks, which helped goose demand this year. The absence of such artificial resuscitation is likely to translate into extremely disappointing year-to-year comparisons, including more than a few months of double-digit declines in existing home sales. He also sees the heavy mass of foreclosures and so-called short sales "pushing median and average prices lower, quickly."

As for new home sales in August, they were flat at a pitiable annual rate of 0.288 million units, just a sneeze above May's all-time low of 0.282 million. As a matter of fact, Mark says August sales were the smallest for the month ever. And he notes that foreclosure starts and actual foreclosures were close to 300% of overall new home sales, which stacks up as "a huge obstacle to builder sales" as we head into the slow season for housing.

Again, maybe we're missing something, but a decent recovery without a revival in housing strikes us as a BLT on toast without bacon. It just isn't going to happen. But investors at the moment apparently couldn't care less.

~Alan Abelson, Barron's magazine, "The Bad News Bulls", September 25th, 2010

Sep 24, 2010

David Tepper forecasts the S&P500 heading into Q4 2010

It's not as easy in the near-term, because, what we talked about before is, you know, the economy, I'm not sure which way it is right now. I think it's getting better. I'm not absolutely sure. And if it's not getting better, the market can go down a little bit.

What does that mean, can it go down to 1100? Sure it can. Can it go down to 1000? No. I don't believe that. I mean, it can but if it does we're going to be 100% equities. Well, 90% equities, I do like to have some cash around.

~ David Tepper, president and founder, Appaloosa Management, CNBC's Squawk Box, September 24th, 2010

David Tepper on comparisons between Japan and the US

No, we're not Japan.

We're not Japan because, what's your mortgage rate? Five and change. So, if it's 4%, you save money, right? Do you spend some of that money you will save? Damn, that will work!

Okay, the Fed can buy mortgages. They can make it work. We're not at zero, are we, on mortgages? No. So, we can go to 1%, 1.5%, 2%-- on that way, you're buying stuff.

~ David Tepper, president and founder, Appaloosa Management, CNBC's Squawk Box, September 24th, 2010

David Tepper says don't fight the Fed

[The Fed] said they want economic growth, and not only do we not care if there's inflation, but we want a little more inflation. Have they ever said that before? No. They said they want the market up, so what am I going to say, "No, Fed, I disagree with you, I don't want to be long"?

Right now, what's going to happen? Two things are happening, it's that easy sometimes. Either the economy is going to get better by itself in the next three months, and what assets are going to do well? Stocks will do well, bonds won't do well, gold won't do so well. Or, the economy is not going to pick up in the next three months and the Fed's going to come in with QE, right? Then, what's going to do well?

Everything... in the near term.

So, let's see, what I got is two different situations. One, the economy gets better by itself. Stocks are better, bonds are worse, gold is worse, if you want to talk about those three assets. The other situation is, the Fed comes in with money. Now, up until the point the Fed comes in with money the stock market can go down a little bit-- but not that much! Because I got a put. Ya gotta love a put, especially when the government is issuing it.

So, I can't go down that much. It doesn't mean I go up until that point, but after that it means I go up, so what do I do? I gotta buy! I can't take the chance of not being a little bit longer now.

It's that easy. That's how easy it is.

~ David Tepper, president and founder, Appaloosa Management, CNBC's Squawk Box, September 24th, 2010

David Tepper on the risks of herd leadership

For better or for worse, we're a herd leader. We're at the head of the pack. We're one of the first-movers.

First-movers are interesting: you get to the good grass first, or sometimes the lion eats ya.

~ David Tepper, president and founder, Appaloosa Management, CNBC's Squawk Box, September 24th, 2010

David Tepper on how easy it is to invest alongside government bailouts

It was easy. It was real easy. The government told you what they were gonna do. Basically, the government put out a white paper, I can't remember the exact date, in March, a Treasury paper. You can't put out a paper and say you're going to buy securities, and not buy them. Even the government has to be subject to the laws.

They told me they were going to buy Bank of America at a six-handle, they told me they were going to buy other stocks. Nobody believed them and the market kept going down-- they actually did. So what we did is we didn't just buy stocks, we bought bonds and preferred at twelve cents on the dollar, fifteen cents on the dollar, twenty cents on the dollar. Then, you know, stuff went up.

You have to believe the government's not above the law. Now, at that point and time, people were confused, they thought that... I don't know what they thought. They thought that this was, habeas corpus in the Civil War? It wasn't that bad.

You can't put things in writing and say you're going to buy at a price, and then not do it. That's securities law fraud.

~ David Tepper, president and founder, Appaloosa Management, CNBC's Squawk Box, September 24th, 2010

Sep 16, 2010

Ludwig von Mises on economics and war

It is certainly true that our age is full of conflicts which generate war. However, these conflicts do not spring from the operation of the unhampered market society. It may be permissible to call them economic conflicts because they concern that sphere of human life which is, in common speech, known as the sphere of economic activities. But it is a serious blunder to infer from this appellation that the source of these conflicts are conditions which develop within the frame of a market society. It is not capitalism that produces them, but precisely the anticapitalistic policies designed to check the functioning of capitalism. They are an outgrowth of the various governments' interference with business, of trade and migration barriers and discrimination against foreign labor, foreign products, and foreign capital.

~ Ludwig von Mises, Human Action [1949]

Sep 13, 2010

Fabius Maximus on the left-right political spectrum

Today we get to choose a political party like cattle at the Chicago stockyards get to choose a chute. The cattle (being smarter than us) don't bother with party identification. They don't cheer the “left-side” pen, or admire the virtue of its prisoners, the beauty of its fence, the wisdom of their keepers, or the free food. Those in the “right-side” pen don't wear logos or trumpet their superior intelligence over those in the other pen.

~ Fabius Maximus, "Which Political Party Will Best Protect Our Liberties?," LewRockwell.com, September 13, 2010

Sep 10, 2010

Norway invests in Greek debt

One could say we are investing for infinity. It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.

"Norway buys Greek debt as wealth fund sees no default", Bloomberg, September 9, 2010

Sep 9, 2010

Henry Morgenthau on the failure of New Deal Spending in 1939

We have tried spending money. We are spending more than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. ... I say after eight years of this administration we have just as much unemployment as when we started ... and an enormous debt to boot!

~ FDR's secretary of Treasury and close friend, Henry Morgenthau, who served from 1934 to 1945, writing in 1939

Sep 8, 2010

Ludwig Von Mises on higher living standards (message to Ayn Rand)

You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the efforts of men who are better than you.

~ Ludwig Von Mises to Ayn Rand

Jens O. Parssons on the role of inflation in stock market investing

Attempting to make profits from the stock market, or even to make sense of it, without completely understanding the universal determinant of inflation was like being at sea among uncharted rocks and shoals without so much as a tide table.

~Jens O. Parssons, Dying of Money: Lessons of the Great German and American Inflations, 1974

Sep 7, 2010

The Obama Administration on the "Summer of Recovery" of 2010

As the summer heats up, it is becoming clear that it could quite possibly be the most active season yet when it comes to recovering our economy. There are Recovery Act-funded projects breaking ground across the country that are creating quality jobs for Americans and economic growth for businesses, large and small.

This summer is sure to be a Summer of Economic Recovery.

~Ron Sims, Deputy Secretary of Housing and Urban Development, WhiteHouse.gov blog, A Summer of Recovery, June 17, 2010

Irving Fisher admits socialist sympathies to Yale Socialist Club, 1941

I believe [William Graham Sumner] was one of the greatest professors we ever had at Yale, but I have drawn far away from his point of view, that of the old laissez faire doctrine.

I remember he said in his classroom: "Gentlemen, the time is coming when there will be two great classes, Socialists, and Anarchists. The Anarchists want the government to be nothing, and the Socialists want government to be everything. There can be no greater contrast. Well, the time will come when there will be only these two great parties, the Anarchists representing the laissez faire doctrine and the Socialists representing the extreme view on the other side, and when that time comes I am an Anarchist."

That amused his class very much, for he was as far from a revolutionary as you could expect. But I would like to say that if that time comes when there are two great parties, Anarchists and Socialists, then I am a Socialist.

~ Irving Fisher, in a speech to the Yale Socialist Club in 1941, as quoted in the biography My Father, Irving Fisher, p. 44

Sep 1, 2010

Barton Biggs diving headfirst into stocks after 56% rise

This is not a time where you want to be underinvested. The odds of a significant slowdown are one in five, pretty remote.

~ Barton Biggs, managing partner, Traxis Partners, "Biggs Recommends Stocks Given Odds Economy Will Avoid Recession", Bloomberg.com, September 1st, 2010

James Altucher on bullish Q2 2010 GDP growth

It was positive. Certainly 1.6% growth is better than negative growth. We've now had 4 quarters in a row of positive GDP growth. Clearly we are not in a recession. Are we heading for a double-dip? I doubt it.

~ James Altucher, partner, Baytree Capital, "Seven Reasons Why There Is No Double Dip," SeekingAlpha.com, September 1st, 2010

Aug 30, 2010

Robert Taft on the New Dealers

[The New Dealers] are willing to sacrifice individual freedom in order supposedly to improve the condition of the poor and increase their material welfare. But in this purpopse the policy has completely failed. There are more than 10,000,000 people unemployed today, and the largest relief expense this year, 10 years after the depression, than any in the history of the United States. Farm prices are lower than they have been for 6 years. Businessmen are discouraged and indignant. Deposits have piled up in the banks because rich and poor alike are afraid to put their time or money into private enterprise, because they fear that Government regulation will prevent success and Government taxation will take whatever profit there might be. The New Deal policy is the only one which has ever plunged us into a second depression before we were out of the first. If any policy leads backward and not forward, it is the policy of spending billions of borrowed money and piling up a tremendous debt for future generations to pay. A policy which leads inevitably to the bankruptcy and inflation of the currency will not only make the poor people poorer, but it is likely to force a socialism which will utterly deprive them of individual freedom.

~ Senator Robert Taft, late 1930s, from a series of radio debates with Rep. T.V. Smith

Aug 27, 2010

David Stockman on Bill Gross, Pimco, crony capitalism, and gaming the drive to homeownership

Some raids on the US Treasury by America's crony capitalists are so egregious as to provoke a rant -- even if you aren't Rick Santelli. One such rant-worthy provocation is Pimco latest scheme to loot Uncle Sam's depleted exchequer.

According to Bill Gross, who heads what appears to be the firm's squad of public policy front runners, the American economy can be saved only through "full nationalization" of the mortgage finance system and a massive "jubilee" of debt forgiveness for millions of underwater homeowners. If nothing else, these blatantly self-serving recommendations demonstrate that Matt Taibbi was slightly off the mark in his famed Rolling Stone diatribe. It turns out that the real vampire squid wrapped around the face of the American taxpayer isn't Goldman Sachs (GS) after all. Instead, it's surely the Pacific Investment Management Co.

As overlord of the fixed-income finance market, the latter generates billions annually in effort-free profits from its trove of essentially riskless US Treasury securities and federally guaranteed housing paper. Now Pimco wants to swell Uncle Sam's supply of this no-brainer paper even further -- adding upward of $2 trillion per year of what would be "government-issue" mortgages on top of the existing $1.5 trillion in general fund deficits.

This final transformation of American taxpayers into indentured servants of HIDC (the Housing Investment & Debt Complex) has been underway for a long time, and is now unstoppable because all principled political opposition to Pimco-style crony capitalism has been extinguished. Indeed, the magnitude of the burden already created is staggering. Before Richard Nixon initiated the era of Republican "me-too" Big Government in the early 1970s -- including his massive expansion of subsidized housing programs -- there was about $475 billion of real estate mortgage debt outstanding, representing a little more than 47% of GDP.

Had sound risk management and financial rectitude, as it had come to be defined under the relatively relaxed standards of post-war America, remained in tact, mortgage debt today would be about $7 trillion at the pre-Nixon GDP ratio. In fact, at $14 trillion or 100% of GDP the current figure is double that, implying that American real estate owners have been induced to shoulder an incremental mortgage burden that amounts to nearly half the nation's current economic output.

There's no mystery as to how America got hooked on this 40-year mortgage debt binge. At the heart of the matter is the statist Big Lie trumpeting the alleged public welfare benefits of the home-ownership society and subsidized real estate finance. Once the conservative party embraced this alluring but dangerously destructive idea, the cronies of capitalism have had a field day conducting a Washington bidding war between the two parties which is now in its fifth decade

During this time span all of the congregates of the HIDC lobby -- homebuilders, mortgage bankers, real estate brokers, Wall Street securitizers, property appraisers and lawyers, landscapers and land speculators, home improvement retailers and the rest -- have gotten their fill at the Federal trough. But the most senseless gift -- the extra-fat risk-free spread on Freddie and Fannie paper -- went to the great enablers of the mortgage debt boom, that is, the mega-funds like Pimco, which did little more than hang out an "open to buy" shingle as billions poured in year after year. Sadly, there isn't a shred of evidence that all of this largese serves any legitimate public purpose whatsoever, and plenty of evidence that the HIDC boom has been deeply destructive. But the intellectual cobwebs spun by the housing cronies so obfuscate these truths that the only way to grasp them is through an examination of the contra-factual -- a postulated world without Freddie/Fannie/FHA and the $100 billion annual tax subsidy on mortgage interest.

In that world, households would be tax-indifferent as to whether they acquired shelter services through renting or owning, and appropriately so. There's simply no evidence that home ownership produces any externality or "public good," such as making people better citizens, causing them to work harder or aspire higher, turning them into better neighbors, or even growing hair on their chests. Housing is a commodity like furniture and automobiles, and inducing citizens to buy more of it is no business of the state.

~ David Stockman, "How Pimco Is Holding American Homeowners Hostage," Minyanville.com, August 27, 2010