Aug 30, 2011

France bans short selling

Investors wanted to test French resistance. This is our response, as always very determined, and it will be so for all those who want to put us to the test.

"Jean-Pierre Jouyet, Head of the AMF (French Securities Regulator), August 23, 2011

Aug 29, 2011

Seth Klarman on lessons learned from the 2008 crisis

Most of us learned about the Great Depression from our parents or grandparents who developed a “Depressionmentality,” by which for decades people shunned leverage, embraced thrift, and thought twice before quitting their secure jobs to join risky ventures. By bailing out the economy rather than allowing the pain of the economic and market collapses to be felt, the government has endowed our generation with a “really-bad-couple-of-weeks-mentality”: no lasting lessons are learned; the government endlessly intervenes in the economy, and, ironically, the first thing to strongly rebound from the 2008 collapse isn’t jobs or economic activity but speculation.

Benjamin Graham’s margin-of-safety concept – to invest at a sufficient discount so that even bad luck or the vicissitudes of the business cycle won’t derail an investment – is applicable to the economy as a whole. Bridges intended for ten-ton trucks are overbuilt by engineers to hold vehicles of 30 tons. Responsible investors assume their best judgments will sometimes go awry and insist on bargain purchases that allow room for error. Likewise, an economy built with no margin of safety will eventually implode. Governments that run huge deficits, promise entitlements that will be next-to impossible to deliver, and depend on the beneficence of foreigners to stay afloat inevitably must collapse – perhaps not imminently but eventually, as Greece and Ireland have recently discovered.

It is clear, both in the financial markets and in government policy, that no long-term lessons have been drawn from the events of 2008. A friend recently posited that adversity is valuable not for what it teaches but for what it reveals. The current episode of financial adversity reveals some unpleasant truths about the character and will of our country and its leaders, and offers an unpleasant picture of the future that awaits, unless we quickly find a way to change course.

~Seth Klarman, founder, Baupost Group, investor letter, 2010

Aug 27, 2011

Gus Faucher (Moody's economist) on a possible double-dip recession

If there is another recession, I think it wouldn't be as severe and it would also be shorter. And the reason for that is a lot of the imbalances that drove the previous recession have been corrected.

~ Gus Faucher, senior economist at Moody's Analytics, "2 Ways the Next Recession Will Be Different," Yahoo! Finance, August 24, 2011

Gene Epstein on the odds of recession

I would put the danger of recession at 30% - bad enough, but it still means 70% against. A 30% risk is also still the reading on the Credit Suisse model, reported over the past two weeks, about the chances of recession over the next six months.

~ Gene Epstein, "Rejecting the R-Word," Barron's, August 29, 2011

Aug 25, 2011

Warren Buffett on his $5B investment in BAC

Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it. I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them.

~Warren Buffett, chairman and CEO, Berkshire Hathaway, August 25, 2011

(Under the terms of the deal, Berkshire will get 50,000 preferred shares that carry a dividend of 6% a year and are redeemable at a 5% premium, along with warrants to purchase 700 million Bank of America shares at an exercise price of $7.14 each. The warrants may be exercised in whole or in part in the 10 years following the closing of the deal.)

BAC CEO on Warren Buffett's $5B investment

I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.

~Brian Moynihan, CEO, Bank of America, August 25, 2011

Aug 23, 2011

Alan Greenspan on how he used 'Fedspeak' in Congressional hearings

I would engage in some form of "syntax destruction", which sounded as though I were answering the question but in fact, had not.

~Alan Greenspan, former chairman, Federal Reserve, CBS "60 Minutes" interview, September 16, 2007

Aug 18, 2011

Chavez emptying Bank of England vault

We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home. It’s a healthy decision.

If there isn’t enough room to store the gold in the central bank vaults I can lend you the basement of the Miraflores presidential palace.



~Venezuelan President Hugo Chavez, "Chavez emptying Bank of England vault", Bloomberg, August 17, 2011

Jack Ablin on economic life without the Fed

Every time the economy got the sniffles, we had the Federal Reserve standing by with tissues. This time around, I think the box is empty, and we're going to have to go through this alone. I think we can do it. It's just not something we're accustomed to.

~ Jack Ablin, chief investment officer at Harris Private Bank, "Here we go again: Stocks plunge on economic fear," Associated Press, August 18, 2011

Leon Cooperman: "ZIRP will work"

Ultimately, the policy of zero percent interest rates by the Fed will work.

We're overweight energy and the economy is slower, but we are not going into a recession.

~ Leon Cooperman, as appeared on CNBC, August 18, 2011

Aug 17, 2011

Peter Thiel on the advantage in dreaming the impossible

There are quite a lot of people who think it's not possible. That's a good thing. We don't need to really worry about those people very much, because since they don't think it's possible they won't take us very seriously. And they will not actually try to stop us until it's too late.

~ Peter Thiel, co-founder, PayPal, Seasteading Institute Conference, 2009

Bill Laggner on sovereign debt

The market is saying, get together and impair the stock and bondholders and come up with a restructuring that makes sense. But the pain would be so extreme, mainly for the bankers, that they don't want to do it and the political class doesn't want to make them do it.

"Europe didn't dodge judgement day", Fortune.com, June 30, 2011

Bill Laggner on US downgrade

We're the best house in a bad neighborhood, even though nobody has walked inside to notice the small grease fire in the kitchen.

"US downgrade a crossroads for S&P", Fortune.com, August 6, 2011

Aug 16, 2011

Wall Street analysts suddenly worried about bubbles-- in gold

[Speculative demand from investors has pushed the gold market into a] bubble that is poised to burst. We have seen the economic damage [of past bubbles and] feel compelled to ring the warning bells. There could be substantial risk to gold once the fear that the world is coming to an end subsides. We are worried about the downward risk.

~Dean Junkans, analyst, Wells Fargo, research report, August 15, 2011

Heroic Hugh Hendry on politicians vs. hedge fund managers

The reality is that global macro managers like myself have been thinking about these issues and have been articulating our great fears not for 10 weeks, but for 10 years. And therefore, I'd say to the politicians, we're smarter. We actually know what their next step is before they know it.

~Hugh Hendry, CIO, Eclectica Asset Management, GAIM International conference, June 2010

Aug 15, 2011

Moody's macroeconomist says "confidence is key"

The economy could go either way, and at these kinds of turning points, confidence is key. It’s the administration’s hope that if the president is out there, talking up the economy, it will prevent a downturn.

~Gus Faucher, director of macroeconomics, Moody’s Analytics, Bloomberg.com, August 15, 2011

Obama says Congress causes unemployment

There is no shortage of ideas to put people to work right now. What is needed is action on the part of Congress.

~Barack Obama, president, United States of America, speech given at Cannon Falls, Minnesota, August 15, 2011

Aug 12, 2011

Warren Buffett on the rating of the dollar vs. US Treasuries

U.S. Treasuries are still triple-A in that there is no question that we will repay the interest and the principal. Every contract will be repaid. So our bonds are triple-A. Our currency, the dollar, is not triple-A. Our bonds are.

~Warren Buffett, the Oracle of Omaha, Fortune, "Buffet: The lower stocks go, the more I buy", August 11, 2011

Aug 11, 2011

Peter Yastrow: "Fed is not Houdini"

The people at the Fed are not Harry Houdini. All they can do is buy time.

~ Peter Yastrow, market strategist, MF Global Ltd., August 11, 2011, as appeared on CNBC's Squawk Box

Aug 10, 2011

Jamie Dimon on US fiscal discipline and policy coordination

The United States needs to show fiscal discipline. We need to show it for ourselves, not because of China, not because of S&P. I’m hopeful we can show that soon.

I want to see America grow again. We need a little bit of coherent, consistent, coordinated policy.

If you know me at all, I am not suited for politics. Anyone who runs a company and gets out in the field would say the same things I do.

~Jamie Dimon, CEO, JP Morgan, CNBC, August 10, 2011

Jamie Dimon says JPM has manageable exposure to Euro banks

We’ve been in Europe for hundreds of years. We have manageable exposures to all the banks. We’re not going to cut and run.

~Jamie Dimon, CEO, JP Morgan, CNBC, August 10, 2011

Jamie Dimon on Meredith Whitney's muni bond armageddon call

I love Meredith and all that but, honestly, most of that stuff is hogwash.

~Jamie Dimon, CEO, JP Morgan, CNBC, August 10, 2011

Aug 9, 2011

Barton Biggs bails out in August 2011

I've taken some risk off, and I hate to do it, I think it's probably the wrong thing to be doing, but I'm a fiduciary to a certain extent, and I've got to protect my capital.

I don't understand now what's going on. I suspect that we're now into a high-frequency trading, momentum-driven cascading downturn. And I want to get out of the way of it.

~Barton Biggs, managing partner and co-founder, Traxis Partners, Bloomberg TV, August 8, 2011

Aug 8, 2011

JPMorgan economist says Fed can boost confidence, not the economy

Those steps are all about bolstering confidence. It wouldn’t do tons to alter economic and financial conditions, but the perception that the Fed will act and do something is reassuring.

~ Michael Feroli, chief U.S. economist and former Fed economist, JPMorgan Chase in New York, Bloomberg.com, August 8, 2011

Alan Greenspan on why US Treasury Bonds are still safe

This is not an issue of credit rating. The United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default.

~ Alan Greenspan, "the Maestro" and former chairman, Federal Reserve, MSNBC's Meet the Press, August 7, 2011

Aug 6, 2011

Bill Laggner on the S&P downgrade of US treasuries

We're the best house in a bad neighborhood, even though nobody has walked inside to notice the small grease fire in the kitchen.

"US downgrade a crossroad for S&P", Fortune.com, August 6, 2011

Warren Buffett says US debt deserves "quadruple A" rating

[The U.S., which was cut Aug. 5 to AA+ from AAA at S&P, merits a] quadruple A [rating].

~Warren Buffett, chairman, Berkshire Hathaway, Bloomberg TV, August 5, 2011

Warren Buffett has "confidence" in no double dip in 2011

Financial markets create their own dynamics, but I don’t think we’re facing a double dip recession. Clearly what stock markets do have is an effect on confidence, and this selloff can create a lack of confidence.

~Warren Buffett, chairman, Berkshire Hathaway, Bloomberg TV, August 5, 2011

Bearing on shorting Goldman Sachs

Goldman is nothing more than a glorified hedge fund taking massive bets with taxpayer subsidies. As more market participants realize this conflict of interest the business should contract rapidly.

"Bearing on shorting Goldman Sachs", Business Insider, Augest 20, 2010

Aug 5, 2011

HSBC economist looking for growth in second half of 2011

Our economists are not forecasting a recession and, indeed, are looking for U.S. growth to accelerate in the second half. Investors should look to raise equity risk gradually over the summer.

~Garry Evans, global head of equity strategy, HSBC in Hong Kong, "Strategists Sticking With 17% S&P 500 Rally by Year-End on Rising Profits", Bloomberg.com, August 5, 2011

UBS economist says don't overreact, market resilient

I’m reluctant to overreact to some shorter-term weakness, no matter how real it is, because the market has proven to be unbelievably resilient. If you would have been acting that way for the last two years, you would have gotten killed by this market.

~Jonathan Golub, chief U.S. market strategist, UBS in New York, "Strategists Sticking With 17% S&P 500 Rally by Year-End on Rising Profits", Bloomberg.com, August 5, 2011

Tech investor Marc Andressen is an elitist

Any time you stand in line at the D.M.V. and look around, you’re like, Oh, my God, I wish all these people were replaced by computer drivers. Ten to 20 years out, driving your car will be viewed as equivalently immoral as smoking cigarettes around other people is today.

~Marc Andreessen, venture capitalist, New York Times interview, July 7, 2011

Aug 4, 2011

Barton Biggs is kept up all night worrying about nuclear explosions on Long Island

Yeah, sure, I'm worried about a double-dip. But I'm worried about a nuclear explosion on Long Island, too. You know, there's all kinds of things to be worried about.

~Barton Biggs, founder, Traxis Partners, Bloomberg TV, August 4, 2011

Barton Biggs on buying opportunities

I see all kinds of buying opportunities. The problem is, I already own part of them.

After getting banged in the face yesterday I'm not too inclined to step in there again... yet.

~Barton Biggs, founder, Traxis Partners, Bloomberg TV, August 4, 2011

(The anchorwoman reported prior to asking Barton Biggs about buying opportunities that he was 50% net long going into the August 4th meltdown and he said he wished he had been about 10-20% net long instead.)

Barton Biggs on saving the euro

It's clear that the Europeans didn't put together a big enough package to solve the problem and now, since they didn't do that, they're going to have to do a much bigger package and maybe even do fiscalization [sic]  of Europe to save the euro.

~Barton Biggs, founder, Traxis Partners, Bloomberg TV, August 4, 2011

Barton Biggs on the reason for the big August selloff

There's no question that the original reason was the lack of confidence in the authorities, in other words, the politicians and their ability to deal with this thing. The Europeans did not do a big enough package to solve their sovereign debt issue  and we have had this and we [the US] had this really half-assed compromise where we didn't really deal with the entitlements issue. So, there's been a loss of confidence but I am astounded at how severe the reaction has been.

~Barton Biggs, founder, Traxis Partners, Bloomberg TV, August 4, 2011

Aug 2, 2011

Birinyi still bullish after market swoon

It’s like all these times when you second-guess yourself, and you probably wake up a little earlier than you’re used to, and maybe you put an extra finger of scotch in the glass. It’s probably a good idea to have a gut check once in a while, because it makes you review and rethink your process. Our view is that this is still a market of some duration.

~Laszlo Birinyi, president, Birinyi Associates, Bloomberg.com, August 2, 2011

BNP Paribas CEO comments on quarter and EU

This is exactly (Net income 2.13 billion euros vs 2.11 billion euros a year ago) the conservative and sound provisioning that you would expect BNP Paribas to provide for.

Everyone who bets against Greece or against the euro zone, I hope they lose.

BNP Paribas CEO Baudouin Prot, Bloomberg TV, August 2, 2011