Feb 26, 2013

Bernanke on being labeled a dove

Well maybe in some respects I am, but on the other hand my inflation record is the best of any Federal Reserve chairman in the postwar period -- at least one of the best, about 2 percent average inflation.

~ Fed Chairman Ben Bernanke Senate testimony, Bloomberg, February 26, 2013

Bernanke defends Fed balance sheet expansion, QE

We do not see the potential costs of the increased risk- taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery.  Inflation is currently subdued, and inflation expectations appear well anchored.

~ Fed Chairman Ben Bernanke before the Senate, Bloomberg, February 26, 2013

Feb 20, 2013

Seth Klarman on current market environment

Investing today may well be harder than it has been at any time in our three decades of existence. The Fed's relentless interventions and manipulations have left few purchase targets for Baupost. The underpinnings of our economy and financial system are so precarious that the un-abating risks of collapse dwarf all other factors.

~ Seth Klarman, 2012 Annual letter to partners, 2/17/2013

Feb 18, 2013

Ken Fisher on how stock market negatives are digested and discounted

Negatives continue to abound.  So why do I expect stocks to shine in 2013?  Because I’m not a cow, I’m a bull.  Let me explain: Most negatives you hear about are well known and widely discussed, digested and already priced into stocks.  If it’s widely known, it’s either wrong or will have little impact on stocks.

Fear of Europe?  We’ve fretted over it for three years while stocks rose.  Another Obama term—fully four years of fretting under our belts!  The debt crisis—we will be fretting about that forever.

Markets are designed to price in all widely known factors.  I see little now where the cud hasn’t already been chewed and rechewed.   What’s a cud?  A mass of semidegraded food that is regurgitated.  It’s comfort food for cows and other herd animals.   Following the herd can be dangerous to your financial health.

~ Ken Fisher, Forbes, January 2, 2013

Jim Grant on Japan's bull-market system of the late 1980s

More than a bull market, Japan invented what enthusiasts believed was a perpetual bull-market system.  Japanese companies bought each others’stocks, and Japanese banks bought their clients’ stocks. These “cross holdings,” so the argument went, would never be sold, so the shares that did remain outstanding were all the more valuable. The most expansive element of the bull-market system was that banks were able to count a percentage of their stocks as a contribution to their own capital.  Thus, as the stock market rose, so did the banks' capital and so did their lending capacity.  The more the banks lent, the greater the prosperity in the markets in which the loans were spent.

~ James Grant, The Trouble With Prosperity, p. 155

Feb 12, 2013

Murray Rothbard on war

It is in war that the State really comes into its own: swelling in power, in number, in pride, in absolute dominion over the economy and the society.

~ Murray Rothbard

Herbert Hoover on lessons from the 1920-1921 crisis

Some of you will recollect that following the great boom and slump of 8 years ago, as Secretary of Commerce, I initiated a series of conferences and investigations by representative men into the experiences of that occasion and to make therefrom recommendations for the future. It is worth a moment to examine our conclusions at that time as tested in this present crisis.

The first of the conclusions at that time was that our credit machinery should be strengthened to stand the shock of crash; that the adjustment of interest rates through the Federal Reserve System should retard destructive speculation and support enterprise during the depression.

Our credit machinery has proved itself able to stand shock in the commercial field through the Federal Reserve System, in the industrial field through the bond market and the investment houses, in the farm mortgage field to some extent through the Farm Loan System; and in the installment-buying field through the organization of powerful finance corporations.

But if we examine the strains during the past 6 months we shall find one area of credit which is most inadequately organized and which almost ceased to function under the present stress. This is the provision of a steady flow of capital to the home builder.

From a social point of view this is one of the most vital segments of credit and should be placed in such a definitely mobilized and organized form as would assure its continuous and stable flow. The ownership of homes, the improvement of residential conditions to our people, is the first anchor in social stability and social progress. Here is the greatest field for expanded organization of capital and at the same time stimulation to increased standards of living and social service that lies open to our great loan institutions.

The result of the inability to freely secure capital has been a great diminution in home construction and a large segment of unemployment which could have been avoided had there been a more systematic capital supply organized with the adequacy and efficiency of the other segments of finance. We need right now an especial effort of our loan institutions in all parts of the country to increase the capital available for this purpose as a part of the remedy of the present situation.

~ President Herbert Hoover, speech to the Chamber of Commerce, May 1, 1930

Feb 11, 2013

Ed Butowsky: "Valuations do not scare me"

There's the old line on Wall Street you pay a dear price for consensus and everyone is just plowing money into stocks.  That's what scares me, but the valuations, Maria, do not scare me.  I actually think we have a lot more upside in this market.  A little correction maybe.  A lot more upside over the next 3 to 5 months.

~ Ed Butowsky, Chapwood Capital Investment Management, CNBC interview with Maria Bartiromo, February 5, 2013

David Sowerby: 2013 "will be a productive year for stock investors"

Last year we had two 10% corrections and we're up 16% to 20% in stocks.  Get ready for the same this year, but from point to point it will be a productive year for stock investors again because of all this monetary stimulation and stock valuation.

David Sowerby, CNBC, February 5, 2013

Feb 4, 2013

John Mackey on capitalism and fascism

I am an idealist. I would like the world to improve. I see America in decline. Average income is falling.  Americans now are making less money on an inflation-adjusted basis than were 10 years ago. I’m doing what I can to try to reverse it.

The currency system that we have today is going to crash.  The U.S., Europe and Japan are all basket cases. They are all in deep trouble.

Every politician wants to kick the can down the road. They just hope it collapses when someone else is in office. Fiat money and entitlement cultures are not sustainable. I don’t think these things are capable of reforming themselves without a crash.

If not a crash, then decades of high unemployment and slow growth — or even negative growth like we saw last quarter.

You might end up with Hitlers, and things like that, but there’s also a chance we could rebuild intelligently.

~ "Whole Foods CEO concerned about whole economy", February 1, 2013, CBS Marketwatch