Dec 29, 2014

Jeff Berwick on anarchy vs. slavery

All the word "anarchy" means is no rulers.  So, if you say you are not an anarchist it means you do not want a ruler.  If you want a ruler you are a slave.  I'm surprised how many people are comfortable publicly identifying themselves as slaves.

~ Jeff Berwick

Dec 8, 2014

Christine Lagarde on the impact of sharply lower energy prices on the global economy

There will be winners and losers, but on a net-net basis, it’s good news for the global economy.

~ IMF Managing Director Christine Lagarde at The Wall Street Journal CEO Council annual meeting, week of December 1-5, 2014

(The IMF attributes roughly 80% of the fall in oil prices to supply-side causes, such as fuel-efficiency standards and decisions by the Organization of the Petroleum Exporting Countries, and only 20% to declining demand from slowing growth.)

Nov 28, 2014

Tom Bodett on experience

In school, you're taught a lesson and then given a test.  In life, you're given a test that teaches you a lesson.

~ Tom Bodett, humorist

Nov 15, 2014

John T. Flynn on Eisenhower's phoney war on communism

No one accuses [President Eisenhower] of being a Red or even a socialist.  On the contrary, the one great remaining dream of his life seems to be to lead a host against the Red legions all over the world - as if Communism, which is a social disease, could be whipped by armies.  The President does not seem to realize that militarism is a social disease and that it was the effort of the old Germany and France and Italy to bolster their economic systems by militarism supported by government debt that brought all these countries to the brink of bankruptcy in 1914, and then into war to escape the insoluble problems they had created by their folly.  He does not seem to know that militarism bankrupted Germany, France, and Italy twice in fifty years.

~ John T. Flynn, "Our Phoney War on Communism," The American Mercury, February 1954

Nov 9, 2014

Dylan Grice on the paradox of risk management and risk managers

In the broadest sense possible, the greatest and most fundamental risk is the risk of not knowing what you're doing.  To the extent these "risk models" trick "risk managers" into thinking they do, they are dangerous because they blind users to the true nature of risk.  The paradoxical outcome is that such risk managers are making the financial world much riskier than it would otherwise be.

~ Dylan Grice, "The Language of Inflation," Edelweiss Journal, November 4, 2013

Nov 5, 2014

Gnanasekar Thiagarajan: "You can’t be too bearish on gold"

You can’t be too bearish on gold.

~ Gnanasekar Thiagarajan, director of Mumbai-based Commtrendz Research, "Cooling Chinese Demand for Gold Adds to Metal’s Gloomy Global Outlook," WSJ, November 4, 2014

Adam Klopfenstein: "I don't see why anyone should buy gold"

When equities are going up and making new highs on the year, I don't see why anyone should buy gold.

~ Adam Klopfenstein, senior market strategist, Archer Financial Services in Chicago, "Gold Plunges to 4-Year Low," WSJ, October 4, 2014

David Seaburg: "Very hard to make a fundamental case to be long gold"

Long-term I think it's very hard to make a clear fundamental case on why you should be long gold.  I don't think fundamentally the backdrop is that strong.  You've got weak demand coming out of India, China.  You've got the dollar; it's been in one direction straight up.  You've got deflationary fears on the horizon.

~ David Seaburg, head of equity sales trading at Cowen and Co., Talking Numbers, November 5, 2014

Nov 3, 2014

Thomas Sowell on the cause of great tragedies of history

Few of the great tragedies of history were created by the village idiot, and many by the village genius.

~ Thomas Sowell

Oct 8, 2014

John Stuart Mill on the hidden tax of inflation

All holders of currency lose, by the depreciation of its value, its exact equivalent of what the issuer gains.  A tax is virtually levied on them for his benefit.

~ John Stuart Mill

Oct 6, 2014

Cowen & Co. trader: "I don't see a scenario where we fall off the face of the earth" (2014)

I think that we are setting up currently for a really, really good buying opportunity into a year-end push...  A lot of the negativity has been talked about.  We've seen it all, right?  We know what's going on.  The Fed's not going to screw this up when it comes to interest rates and it comes to really walking away from that.  We've got the ECB onboard as well.  I just don't see a scenario where, over the next let's say 6 to 12 months, we're going to fall off the face of the earth.

~ David Seaburg, head of equity sales trading at Cowen and Co., "Why this selloff is different," Talking Numbers, October 3, 2014

Sep 28, 2014

Todd Salamone: Sentiment suggests only modest pullbacks

The sentiment backdrop continues to suggest that if pullbacks occur, they will be modest.

~ Todd Salamone, "Monday Morning Outlook," September 20, 2014

Sep 23, 2014

Horace Walpole on the comedy and tragedy of life

… this world is a comedy to those who think, a tragedy to those who feel.

~ Horace Walpole (1717-1797)

Sep 17, 2014

Jim Cramer on Janet Yellen: "The Fed wants the common person to make money."

As I listened, I heard a woman who was simply saying, look, the Great Recession is still with us psychologically. We aren't back to normal, because the downturn so scarred people that they aren't behaving as we would hope.  It's clear to me she's worried that the psyche of the country is too fragile...  The trick with the Yellen regime, like the trick with the Ben Bernanke regime before her is to remember that they speak for the common person.  The Fed wants the common person to make money.

~ Jim Cramer, CNBC, September 17, 2014

(Cramer commented on Yellen's press conference remarks after the FOMC meeting.)

Sep 13, 2014

Barron's reporter on risk of the Fed tightening too quickly

IN THE 1970S, high inflation wasn't just imagined -- it was very real. Today, however, those clamoring for rate hikes seek to head off potential threats -- of higher inflation, asset bubbles, and the like -- and ensure that U.S. growth continues to accelerate. In fact, inflation expectations in the U.S. have been falling recently, not rising. The risk becomes that the U.S. ends up repeating the '70s in reverse. Remember, in that decade, rates weren't hiked enough, causing inflation to reignite quickly, which never solved anything. Today, tighter policy could mean the economy never reaches escape velocity, instead remaining mired at 2% growth. And that's a mistake we don't want to make.

~ Ben Levisohn, "The '70s in Reverse," Barron's, September 15, 2014

Charles Munger on knowing the limits of your knowledge and competence

People chronically misappraise the limits of their own knowledge; that’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant.

~ Charles Munger, "Charles Munger: Secret's of Buffett's Success?," The Wall Street Journal, September 12, 2014

Sep 6, 2014

Nassim Taleb on the role of ambition in success (and failure)

Ambition accounts for 50% of success. And 100% of (big) failures.

~ Nassim Taleb, posted on Facebook, August 17, 2014

Sep 4, 2014

JPMorgan strategist David Lebovitz dismisses bullish investor sentiment as a concern

Q: What about sentiment?  The I.I. Report [Investors Intelligence], which people monitor, shows that bearishness is now at a 27 year low...  Are people getting too optimistic, too exuberant over this rally?

A: I think people are getting complacent, but we've seen a strong of no bad news for the most part.  People are comfortable with the Ukraine.  They're comfortable with what's going on the Middle East.  So I expect that there will be something which catches us all by surprise at some point, but generally speaking things are pretty good.

~ David Lebovitz, global market strategist, JPMorgan Asset Management, as appeared on CNBC, September 4, 2014

(Lebovitz has been in the investment business all of 6 years, landing his first job in July, 2008.)

Aug 28, 2014

George Orwell on politics

In our age there is no such thing as "keeping out of politics." All issues are political issues, and politics itself is a mass of lies, evasions, folly, hatred and schizophrenia.

~ George Orwell

Dennis Gartman: Stocks melting up, think like a 4-year old

We are in fact melting up.  We just continue to make new highs and the odds are we will continue to make new highs...  It's still a bull market...  Sometimes thinking like a 4-year old, looking to see what the general trend is, is the best way of trading, the best way of investing.  Sometimes we make it just far too complicated and get in our own way.

~ Dennis Gartman, "More Melt-Up for Equities - Dennis Gartman," Kitco News, August 28, 2014

Aug 18, 2014

Aaron Task on the absence of irrational exuberance (2014)

I don't see much of any signs of irrational exuberance.  We've got the Shiller piece.  We're here talking about things people are worried about.  Who is out there banging the table saying, "you've gotta own stocks, they're fantastic, they're great, buy 'em here?"  Everyone thinks the wheels are about to come off the bus.  So until we get to a place where everyone says you can't lose in the stock market, then call me and talk about irrational exuberance.

~ Aaron Task, Yahoo Finance interview, August 18, 2014

Aug 14, 2014

Paul Schatz: Bull market climbing a wall of worry, on the verge of an "amazing glorious run"

In my 25 year career I've never seen a bull market more disavowed, more hated than this one.  People rationalize why the Dow should not be close to 17,000.  And until the masses stop worrying about why the Dow should be at any given point... this is how a bull market climbs a wall of worry.  Until the average person stops saying "it shouldn't be" and says "it should be," the bull market's gonna live on, much like happened in 2000 where the last couple of years everyone said "it shouldn't be here, it shouldn't be here."  And the final run up into the 2000 peak was this glorious run, albeit in very few sectors.  I don't think we're there yet.  I think before this bull market ends, you're gonna have an amazing glorious run in a narrow group of stocks and sectors and that's going to be the final straw that breaks the camel's back.

Paul Schatz, president, Heritage Capital, interview on Yahoo Finance, August 14, 2014

Aug 12, 2014

Peter Schiff bullish on non-U.S. equities

I talk about gold because hardly anybody else does. I do believe gold should be owned but I don't think it should be owned exclusively.  I think people should have most of their money in equities. I just have a problem in the U.S. market because of the massive economic collapse I see in our future, and because our markets are overvalued.

~ Peter Schiff, "'Perma-bear' Schiff's funds have been on a roll," as appeared on CNBC, August 12, 2014

Aug 10, 2014

Michael Belkin on the speculative bubble

I don't think people are really contemplating what they're doing in the stock market.  I do a Google Trends word search, tells you the number of times people look for a term.  And when you do that on the term "speculative bubble" it doesn't even register in July - zero.  Hardly anything in the headlines of news stories.  So nobody's even thinking... they're not calling this - which I consider to be the biggest speculative bubble of my career - beyond 2000, beyond 2007.  This is the everything bubble: junk bonds, stocks, tech stocks, you name it.  Everybody is in here for one reason and one reason only: because interest rates are low.  That's the definition of a speculative bubble.  It's created by phony interest rates.

~ Michael Belkin, August 9, 2014, interview with Eric King on King World News

Aug 4, 2014

Dennis Gartman buys the dip

This is not a weak economy, it's a pleasantly strong economy.  This is a nicely strengthening economy.  This is a very well demeanored economy.  It's not an excited one.  It's one that's doing quietly better...  Let's all be calm and not be panicked at this point.  I turned from being quite bullish of stocks to being neutral early last week and I have to tell you, I never thought we'd see the market fall several hundred Dow points in the course of three or four days.  I got very lucky, and I'm going to turn back to being bullish again.

~ Dennis Gartman, as appeared on CNBC, August 4, 2014

Aug 2, 2014

Jonathan Golub: "The economic environment remains healthy; stocks should rebound" (2014)

The economic environment remains healthy. As such, volatility should decline and stocks should rebound.

~ Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, "Despite sharp selloff, too early to worry about a correction," Reuters, August 2, 2014

Jul 31, 2014

Bill Ackman on the price drop in Valeant Pharmaceuticals

At this price, it's a gift to investors.

~ Bill Ackman, as appeared on CNBC, July 31, 2014

(Valeant stock was trading at about $120, down from previous close of $125.83.  VRX was selling off after release of Q2 earnings.)

Jul 28, 2014

Dennis Gartman: Pay no attention to Faber's crash predictions

Listening to Marc Faber call for a 20 or 30 percent crash makes absolutely no sense, but he's been predicting it for years.

~ Dennis Gartman, as appeared on CNBC's Fast Money, July 28, 2014

Jul 20, 2014

Jim Paulsen: "Confidence is still too low" for a recession

The U.S. has a large “confidence gap.” Most confidence measures are still only average by postwar standards. In our view, confidence is typically the central catalyst for a recession. When economic players become confident they engage in the type of excessive behaviors which necessitate a recession. It takes confidence to over-spend, over-borrow, over-lend, over-build, over-hire, over-tighten (the Fed), or over-invest (in risky assets). None of these behaviors are yet evident because confidence is still too low.

~ Jim Paulsen, Wells Capital Management, "Economic and Market Perspective," July 10, 2014

Jul 13, 2014

Arkansas Teacher Retirement System executive director on Pershing Square's 25% return in the first half

When you are with the best of the best, there is no being excited about these numbers.  It just confirms what you already knew. Brilliant people will make you money over time.

~ George Hopkins, executive director at Arkansas Teacher Retirement System, an investor in Pershing Square, "Ackman's hedge fund Pershing Square surges 25% in first half," Reuters, July 3, 2014

Jul 12, 2014

Bethany McLean on bank capital levels

Capital isn’t this pile of money sitting somewhere, it’s an accounting construct.  And if you don’t have the accounting right then the capital is just an illusion anyway so I am a little weary of this notion that has taken hold…that if we have enough capital we’re safe come hell or high-water, I don’t buy it.

~ Bethany McLean, "Bank capital is an illusion: Bethany McLean," Daily Ticker, April 29, 2014

(McLean thinks we’re much better off than we were in 2008 and that though there might be another crisis, it won’t be in the banking sector.)

Jul 9, 2014

Joseph Stiglitz on how asset inflation does not translate into real economic growth

There very strong stock market prices are, in a sense, a symptom of the weak economy, not a symptom that we are about to have a strong recovery to our real economy.

~ Joseph Stiglitz, as appeared on CNBC, July 7, 2014

Jul 7, 2014

John Rogers on investing and opportunity

Long-term investment success is not about making little decisions.  It's the big decisions that matter.  These big decisions in periods of hyperoptimism or pessimism (like now) are what separate outstanding investment managers from the pack.  No player ever made it to the Baseball Hall of Fame for his distinguished bunting record.  Now is the time to swing for the fences, not recklessly or nervously, but in a studied, calm and controlled manner.

I will submit that there is a bit of luck involved here.  But as the chemist Louis Pasteur once said, "Chance favors only the prepared mind."  An investment manager's big decisions are not a coin toss; they come from years of relentless reading, studying those who have excelled and those who have fallen short, dissecting one's own successes and failures, networking with those who can shed new light on a stock or industry and teasing out contrarian points of view.

~ John W. Rogers Jr., "Swing For The Fences," Forbes, May 25, 2009

Jul 3, 2014

Jim Cramer on Janet Yellen looking out for the little guy

She's pro-Main Street!  The Fed hasn't been pro-Main Street in a long time.

~ Jim Cramer, CNBC, July 3, 2014

Jun 24, 2014

Brian Belski: Bull market has another 10 years to run

We’ve been on record since the 4th quarter of 2008 saying that U.S. stocks were entering a 15 to 20 year bull secular bull market. While people have come around to being more bullish I don’t think people believe we have another 10 years left.

There remains a tremendous amount of fear with respect to my industry [financials].  Investors don’t trust us, regulators are tough. All of that will normalize over the next several years. That is excessively bullish for the market.

~ Brian Belski, GMO Capital Markets, "Bull markets don’t die of old age, why Dow 44,000 is coming," interview with Jeff Macke on Yahoo!Finance, June 24, 2014

Wilbur Ross on the sovereign debt bubble

I've felt for some time that the ultimate bubble, when we look back a few years from now, is going to be sovereign debt, both U.S. and other, because it's way below any sort of reversion to the mean of interest rates.  If you look at where the U.S. 10-year had averaged over the 10 preceding years, it's around 4 percent. If it reverts back to that level at some point there will be terrible losses in the long-term Treasury market and those will probably be accentuated in other areas of fixed income.

~ Wilbur Ross, as appeared on CNBC, "Sovereign debt the 'ultimate bubble': Wilbur Ross," June 23, 2014

Jun 19, 2014

Larry Fink: "The stock market is trading on fundamentals"

The stock market is trading on fundamentals. You’ve had rising earnings. Whether it’s top line or bottom line, you are seeing better earnings across the board.

~ Larry Fink, BlackRock CEO, CNBC interview, June 19, 2014

Jun 14, 2014

Bethany McLean on mathematical modeling

Goldman also shook my faith in numbers, and I mean that in a good way. Numbers, especially in a beautifully put together presentation, masquerade as TRUTH. A discounted cash flow analysis seems oh-so-scientific. But many numbers are nothing more than the wobbly assumptions that go into them. There is nothing that will make you understand this better than having a vice president tell you to change the discount rate in that discounted cash flow analysis because he wants to see a different result. “Garbage in, garbage out,” I heard at Goldman. So true.

~ Bethany McLean, "My Goldman Sachs Post-Traumatic Stress Disorder (And Why I'm Grateful)," February 19, 2014

Bethany McLean on making excuses

[A]t the end of the day, no one actually cares why you got it wrong. All that matters is that it’s wrong. And if you don’t think in terms of excuses, you’re less likely to make a mistake in the first place.

~ Bethany McLean, "My Goldman Sachs Post-Traumatic Stress Disorder (And Why I'm Grateful)," February 19, 2014

Ice Cube on private charity vs. government welfare

I'm not really into the political game.  As far as paying politicians and stuff like that, I'm into "You do your job and I'll do mine."  Politicians not going to do more with my money than I Can to help whatever cause or whatever situation I want to help.

~ Ice Cube, "10 Questions," Time, June 23, 2014

Jun 8, 2014

BoJ governor Haruhiko Kuroda: "We have just put on better tires"

We have sharply increased the power of our engine through our quantitative easing program, and we have just put on better tires to make the most of this engine."

~ Haruhiko Kuroda, Bank of Japan government, news conference announcing further easing, February 18, 2014

May 29, 2014

Jeffrey Saut: Not worried that 1st Quarter GDP growth was revised down to -1%

The headline figure was weaker than expected, but it was mainly due to slower inventory growth, which bodes well for future growth, future orders, new orders.  [Unless a decline materializes this week, the S&P 500 is] probably not going to come back below [the] 1,890 – 1,900 [level], which is where the near-term support is.

~ Jeffrey Saut, chief investment strategist at Raymond James Financial, "S&P 500 sets another record closing high on growth bets," Reuters, May 29, 2014

(The S&P 500 gained 10.25 points or 0.54 percent, to 1,920.03 - a record close and a lifetime intraday high.)

May 28, 2014

Michael Santoli on the stock market's warning signs

Risk taking is filtering into other parts of the investment world.  I know people present these things as kind of warning signs.  Eventually they become warning signs when they become pervasive, when they get extreme.  But right now I'm looking at it as the kinds of things that occur when markets are at an all-time high, when they've been going up mostly for five years...  I don't think it's a key problem yet.

~ Michael Santoli, "The bull market is acting like... a bull market," The Daily Ticker, May 28, 2014

May 8, 2014

Value manager Bob Goldfarb does not see a repeat of the 1930s thanks to Bernanke

I do not believe we are going to revisit the 1930s. Bernanke is a student of the '30s and his policy responses are a reflection of his deep knowledge of the '30s.  So I do not think we are going to see a replay of the 1930s.

~ Bob Goldfarb, Lead Manager of Sequoia Fund, Ruane, Cunniff & Goldfarb Investor Day, St. Regis Hotel, New York City, May 17, 2013

May 5, 2014

William White on the global central banking experiment

The honest truth is no one has ever seen anything like this.  Not even during the Great Depression in the Thirties has monetary policy been this loose.  And if you look at the details of what these central banks are doing, it's all very experimental.  They are making it up as they go along.  I am very worried about any kind of policies that have that nature...  Plus, the Fed has moved to a completely different motivation.  From the attempt to get the markets going again, they suddenly and explicitly started to inflate asset prices again.  The aim is to make people feel richer, make them spend more, and have it all trickle down to get the economy going again.  Frankly, I don't think it works, and I think this is extremely dangerous.

I see speculative bubbles like in 2007.  It all looks and feels like 2007.  And frankly, I think it's worse than 2007, because then, it was the problem of the developed economies.  But in the past five years, all the emerging economies have imported our ultra-low policy rates and have seen their debt levels rise.  The emerging economies have morphed from being a part of the solution to being a part of the problem.

I've met so many people who are in the markets, thinking they are absolutely brilliantly smart, thinking they can get out in the right time.  The problem is, they all think that.  And when everyone races for the exit at the same time, we will have big problems.

~ William White, former chief economist for Bank of International Settlements, speech given in Switzerland, April 2014

Apr 28, 2014

Jonathan Golub on why the bull market will continue despite weak economic growth

No two recessions are the same, but they tend to follow a similar pattern. Typically, an accelerating economy burns through existing spare capacity. This leads to inflationary pressure, which forces the Fed to act. As markets anticipate rate hikes, the yield curve inverts. Growth slows and, more often than not, the economy rolls over, taking the market with it.

The current economic rebound is the slowest of the post-war period. Growth is being held back by a modest housing recovery and weak business confidence. As a result, abundant spare capacity exists, which prolongs the length of the cycle.

~ Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, "Bull market won't die until a recession hits: RBC,", April 28, 2014

Apr 14, 2014

RBC strategist Jonathan Golub thinks momentum stock bust is contained

I think the selloff is probably over.  If you look at the economically sensitive stuff in the market, it's not really selling off. It's tech. It's bio-tech, [which makes up about 10 percent of the market].  The other 85 to 90 percent is in perfectly fine shape.

~ Jonathan Golub, chief U.S. market strategist at RBC Capital, as appeared on CNBC, April 14, 2014

Apr 13, 2014

Ken Fisher remains bullish because "We're stil straddling skepticism and optimism"

Running out of steam is best seen via legendary investor John Templeton’s four-phase quote: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” Upon reaching euphoria bull markets lack energy to propel them further. Bulls climb the legendary “Wall of Worry,” and when all worries wane to well-worn whitewashing, you’re out of steam.


So I wait, watch and remain bullish, noting we’re still, in Templeton’s parlance, straddling skepticism and optimism, and, hence, abundant force propels this bull on. Without a wall we’re maybe halfway through.

~ Ken Fisher, "Only Two Things Can Stop The Bull Market," Forbes, March 26, 2014 (online version), April 14, 2014 (print version)

MarketWatch columnist: "The main causes of a genuine bear market are not on the horizon"

Now other sectors fueled by speculative fever and cheap money — biotech, post-IPO social network companies and high-momentum stocks — are getting their comeuppance. But the broader stock market has a long way to go before it’s even in a decent correction.
Plenty of things can cause that, including weak first-quarter earnings, poor economic reports, and the fact that we’re entering two of the worst quarters for stocks in the four-year presidential election cycle.
But the main causes of a genuine bear market — impending recession or deflation, ultra-high stock price-to-earnings ratios or rapidly rising interest rates — are not on the horizon.
So unless you’ve borrowed to the hilt to buy Twitter or the biotech ETF, you should stay invested and not lose a minute’s sleep. As far as market shocks go, this looks like a mild tremor, not the big earthquake everybody fears.

~ Howard R. Gold, "Don’t let these stock market gyrations scare you; Opinion: It’s likely that we’ve seen the end of recent declines,", April 13, 2014

Apr 12, 2014

Walter Block on how the truth about Friedman, Reagan, and the Great Depression is distorted by language

Walter: Well, we spoke of being free to choose earlier; that’s of course the title of a famous book by Milton Friedman, an economist highly regarded by most free-market type people. I must say a word or two about Milton Friedman.

Q: Okay, shoot. Metaphorically; no sectarian violence allowed.

Walter: Murray Rothbard used to say that mainstream economists specialize in what they are bad in. If you look at Milton Friedman’s work, you can see that he’s very good on free trade, minimum wage, rent control, occupational licensure, and other topics…

Q: But he was a monetary interventionist.

Walter: Yes, he was a monetary interventionist – and that was his main thing, apart from educational vouchers, which are also a horrible idea. If someone says “monetarist,” who will most people come up with by association? Milton Friedman. He was just horrible on this; he favored fractional reserve banking, he favored the Fed, all sorts of government monetary and tax intervention, and he had the audacity to name his book Free to Choose. But when people were free to choose, what did they choose? Gold. He’s a disgrace!

Q: Don’t hold back, Walter – tell us what you really think.

Walter: [Chuckles] Well, I don’t mind disagreement. We have to have Krugmans and Keyneses – but the problem is that everyone thinks Friedman was a champion of free enterprise, and people will come to you, and me, and Doug, and tell us were wrong because “even Milton Friedman concedes…”

Q: It’s like the problem arising from Ronald Reagan using libertarian rhetoric to get elected, and then overseeing the biggest acceleration of growth in government ever seen until that time. That had typical results of too much regulation and government spending, and people think that the Reagan years showed that free enterprise doesn’t work. Just as people are taught that the Great Depression proves that “unbridled laissez-faire capitalism” doesn’t work – when, in fact, the Depression was the result of government intervention into the economy.

Walter: Precisely.

~ Walter Block, "Walter Block: Doug Casey is an Optimist,", April 13, 2013

Apr 6, 2014

Manoj Narang on lumping high-frequency traders in with Wall Street

Basically, what we don't like is that, rightly or wrongly, the public view of the financial industry has really plummeted since the financial crisis. I think much of that is well-deserved but the problem with that is there's been very little differentiation between good actors and bad actors in the industry. And what I don't like - and what I tend to take personally - is being lumped in with people who had something to do with the financial crisis. Nobody ever heard of high-frequency trading, nobody ever cared about high-frequency trading before the financial crisis, and because the financial crisis happened to coincide with when people first heard of high-frequency trading, I think those things got conflated, even though they have nothing to do with each other whatsoever.

~ Manoj Narang, "In the Worx: What Manoj Narang thinks about regulation, Europe, volatility and a lot more," Automated Trader Magazine, April 1, 2013

Apr 5, 2014

Mark Cuban on the risks of high-frequency trading

CNBC: [Michael] Lewis maintains that high frequency traders are front running smaller investors in his words, legal front running is how he puts it.
Cuban: Yeah, they are. I mean, there's no question about it. You know, they know if you go to the store every day to get a snickers bar, well, if i run to the store first, get a little bit of a discount and sell you your snickers bar, you know, they're going to make a little bit of money. especially if they do it millions of times. it's almost like taking advantage of a regulation that's not quite right. it's what they do. and they've been doing it for a long time. and it's reality. but i don't think that's even the greatest risk of high frequency trading. that's just part of the deal.
CNBC: What is the greatest risk then?
Cuban: The greatest risk is that, A) there's no such thing as buck-free software.  All this is software-driven. It's actually even going to processor driven.  And because of -- because there's no such thing as bug-free software, when you have fat finger bugs, you don't know what's going to happen to the market. So there are structural risks, trading risks, and I think that plus the fact that when you have algorithms trying to figure out routes and how to get ahead of orders.  It's not like there's just one player jumping in front of all these orders. you've got all these different algorithm traders, it's not about small investor or any investor giving up some amount of money to somebody who jumped in front of them, the risk is all these different high frequency traders playing a game with their algorithms to get in front and make that trade. Because we don't know the in factorial all the ways they may interact and the negative consequences that occur as a result, that introduces a market risk. That market risk has an unquantifiable cost.  We saw it in one instance with the flash crash.  We see it every day with little mini-flash crashes. We've seen some -- it's gotten a little bit better with the circuit breakers per stock, but we just don't know.   And that's even without the possibility of a malicious algorithm being intentionally introduced into the mix.  There are so many things that can go wrong as all the different high frequency traders jockey to get in front of that order. That to me is the biggest problem.  I think as a result you'll see people not staying with their positions as long because they're not quite sure what's going to happen with the market.  When you see something start to go bad in the market, they don't trust the system to say, you know what, somebody will jump in there and pick up the trades.  For all they know the chair might be pulled out and the whole market could fall even further.  And then we have such strong correlations between different markets and different types of equities and financial devices that even though there are circuit breakers involved, one trade down, limit down, might lead to something happening in another, might lead to something happening in another equity might lead to something happening in a full market and who knows how far down that can cascade.  All those things introduce risk.  All those things take a lot of money to try to understand and combat.  Because of that that's a cost...
~ Mark Cuban, as appeared on CNBC, March 31, 2014

Apr 3, 2014

Ed Yardeni and China's expected soft landing

The Chinese are doing everything to keep their economy growing.  Maybe it's a soft landing, but it's certainly not a hard landing over there.

~ Ed Yardeni, as appeared on CNBC, April 3, 2014

Apr 2, 2014

H.L. Mencken on free speech

I believe there is a limit beyond which free speech cannot go, but it's a limit that's very seldom mentioned. It's the point where free speech begins to collide with the right to privacy. I don't think there are any other conditions to free speech. I've got a right to say and believe anything I please, but I haven't got a right to press it on anybody else. [...] Nobody's got a right to be a nuisance to his neighbors

~ Henry Louis Mencken (1880-1956) in 1948 interview with Donald H. Kirkley for the Library of Congress

Murray Rothbard on libertarianism

There are libertarians who are indeed hedonists and devotees of alternative lifestyles, and that there are also libertarians who are firm adherents of “bourgeois” conventional or religious morality. There are libertarian libertines and there are libertarians who cleave firmly to the disciplines of natural or religious law. There are other libertarians who have no moral theory at all apart from the imperative of non-violation of rights. That is because libertarianism per se has no general or personal moral theory.

Libertarianism does not offer a way of life; it offers liberty, so that each person is free to adopt and act upon his own values and moral principles. Libertarians agree with Lord Acton that “liberty is the highest political end” – not necessarily the highest end on everyone’s personal scale of values.

~ Murray Rothbard

Lew Rockwell on libertarianism

Libertarianism is concerned with the use of violence in society. That is all. It is not anything else. It is not feminism. It is not egalitarianism (except in a functional sense: everyone equally lacks the authority to aggress against anyone else). It has nothing to say about aesthetics. It has nothing to say about religion or race or nationality or sexual orientation. It has nothing to do with left-wing campaigns against “white privilege,” unless that privilege is state-supplied.  Let me repeat: the only “privilege” that matters to a libertarian qua libertarian is the kind that comes from the barrel of the state’s gun. Disagree with this statement if you like, but in that case you will have to substitute some word other than libertarian to describe your philosophy.

~ Lew Rockwell, "What Libertarianism Is, And Isn't,", March 31, 2014

H.L. Mencken on President Warren G. Harding's writing style

He writes the worst English that I have ever encountered. It reminds me of a string of wet sponges; it reminds me of tattered washing on the line; it reminds me of stale bean soup, of college yells, of dogs barking idiotically through endless nights. It is so bad that a sort of grandeur creeps into it. It drags itself out of the dark abysm of pish, and crawls insanely up the topmost pinnacle of posh. It is rumble and bumble. It is flap and doodle. It is balder and dash.

~ H.L. Mencken

Mar 21, 2014

John Templeton on the limits of computer models in the investment process

Despite the development of neural networks, expert systems, and other forms of exotic anthromorphic computer systems, it is unlikely that the component of human wisdom will be replaced in the investment process. Machines can be used to process hard data, but not human qualities such as greed, fear, or creativity. If we reflect on the fact that companies are really groups of people who manage assets and work with each other to create wealth; that they are intimately affected by other complex groups, politicians, local citizens, belligerent militarists, and so on; then it is clear that machines cannot adequately capture the complexity of these human conditions.

~ John Templeton, Looking Forward: The Next Forty Years, 1993, pp. 8-9

Mar 19, 2014

Michael Mauboussin on the roles of luck and skill in determing success

In a probabilistic environment, you are better served by focusing on the process by which you make a decision than on the outcome.  Blackjack is a game of chance.  That means you will do best by following a rule that reflects the real probability of being dealt the right cards: don’t hit when you’ve been dealt a seventeen or more.  But it’s crucial to bear in mind that because of the substantial role that luck plays in this process, good decisions don’t ensure attractive outcomes.  If you make a good decision and suffer a poor outcome, pick yourself up, dust yourself off, and get ready to do it again.

When evaluating other people’s decisions, you are again better served by looking at their decision-making process rather than on the outcome.  There are plenty of people who succeed largely by chance.  More often than not, they are completely unaware of how they did it.  But they almost always get their comeuppance when fortune stops smiling on them.  Likewise, skillful people who have suffered a period of poor outcomes are often a good bet, since luck evens out over time.

~ Michael J. Mauboussin, Think Twice: Harnessing the Power of Counterintuition, 2009

Mar 18, 2014

Alexis de Tocqueville on the state of education in America in 1831

It is not only the fortunes of men which are equal in America; even their requirements partake in some degree of the same uniformity. I do not believe that there is a country in the world where, in proportion to the population, there are so few uninstructed and at the same time so few learned individuals. Primary instruction is within the reach of everybody; superior instruction is scarcely to be obtained by any. This is not surprising; it is in fact the necessary consequence of what we have advanced above. Almost all the Americans are in easy circumstances, and can therefore obtain the first elements of human knowledge.

~ Alexis de Tocqueville, Democracy in America, Chapter 3, The Social Condition of the Anglo-Americans

(This entire chapter is worth reading. To put this in perspective, remember that De Tocqueville wrote this in 1831 before Horace Mann began the destruction of education in the private sector starting in Massachusetts... see Sheldon Richman, "Separating School and State.")

Mar 16, 2014

Jeremy Grantham: "There’s probably quite a bit left in this rally"

Bubbles don’t usually stop until sensible investors, value investors, and prudent investors have been hung out to dry.  That hasn’t happened yet, so there’s probably quite a bit left in this rally.
~ Jeremy Grantham, Barron's, March 17, 2014

Mar 15, 2014

Santa Clara University basketball coach on recruiting Canadian high school senior Steve Nash

After seeing him I was nervous as hell just hoping that no one else would see him.  It didn’t take a Nobel Prize winner to figure out this guy’s pretty good. It was just a case of hoping that none of the big names came around.

~ Santa Clara head coach Dick Davey, 1992

(“You’ve got to be the worst defensive player I’ve ever seen,” he told Steve and his family as they all walked out of an arena in Vancouver together after a game.)

Mar 14, 2014

Warren Buffett on the value of macro forecasting

Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important.

~ Warren Buffett, "Why I Like to Think of Stocks Like Farms," Fortune, March 17, 2014

Mar 12, 2014

Morgan Stanley strategist Adam Parker: "I don't think 15.5 times earnings for the S&P 500 is in bubble territory"

I think we all romanticize that we're going to sniff out the bubble the day before everyone else and get rich and famous for it, but at the end of the day I don't think 15.5 times earnings for the S&P 500 is in bubble territory. 

I think that there's been some real changes to the market because of the quantitative easing.  And the number one important thing is that basically companies have all pushed out their financial obligations for 2 or 3 years so the balance sheets are in great shape and the risk of bankruptcy is very low.  That's been a big change over the last few years.

If we're about to head into a bubble, then you'll want to be long for a while.  I think everyone wants to call in and talk about it. If you want to call the top of the cycle, two things would be in place. One is hubris. And the other is debt. Hubris meaning some form of management arrogance gone awry. ... I don't think we're very frothy on that point.

~ Adam Parker, Morgan Stanley market strategist, as appeared on CNBC's Squawk on the Street, March 11, 2014

Mar 8, 2014

Barton Biggs on bull markets and sex

A bull market is a lot like sex.  It feels best just before it ends.

~ Barton Biggs

Feb 25, 2014

John Adams on debt

There are two ways to conquer and enslave a country. One is by the sword. The other is by debt.

~ John Adams (1735-1826)

Feb 23, 2014

Nassim Taleb on Platonicity

Medieval man was a cog in a wheel he did not understand; modern man is a cog in a complicated system he thinks he understands.

~ Nassim Taleb, The Bed of Procrustes, p. 57

Nassim Taleb on error's relationship to fragility and robustness

For the robust, an error is information; for the fragile, an error is an error.

~ Nassim Taleb, The Bed of Procrustes, p. 72

Feb 21, 2014

Gustave de Molinari on defense

Political economy has disapproved equally of monopoly and communism in the various branches of human activity, wherever it has found them. Is it not then strange and unreasonable that it accepts them in the industry of security?

~ Gustave de Molinari (1849)

Feb 20, 2014

Friedrich Hayek on the role of official myths in totalitarian systems

[I]n the disciplines dealing directly with human affairs and therefore most immediately affecting political views, such as history, law, or economics, the disinterested search for truth cannot be allowed In a totalitarian system, and the vindication of the official views becomes the sole object...  These disciplines have, indeed, in all totalitarian countries become the most fertile factories of the official myths  which the rulers use to guide the minds and wills of their subjects.  It is not surprising that in these spheres even the pretense that they search for truth is abandoned...

~ "The Road to Serfdom," Chapter 11, “The End of Truth,” p. 161

Feb 17, 2014

Paul Volcker on Harvard University and Great Society elitism

INTERVIEWER: You said Keynesianism was almost a religion at Harvard when you were there?

PAUL VOLCKER: They did have other people there, you know. John Williams was the other macroeconomist there, certainly financial-side, and he was a very skeptical practitioner. He didn't spend all his time professing, and he advised the Federal Reserve back in New York at great lengths. I can't say everybody was Keynesian, but the younger school certainly was. It was Paul Samuelson, Jim Tobin, and all of them had grown up in the Keynesian climate. I didn't know them all, but they were all circulating. They were the bright young stars of Harvard at the time.

INTERVIEWER: When did you begin to have doubts? How early did you begin to become skeptical about things?

PAUL VOLCKER: I was already skeptical. I guess I'm skeptical about everything. I've gotten worse in my old age, but I was a little bit turned off by the precision and certainty that these people attached to the doctrine. The analytic framework was very convincing, but this feeling they had, that they could press the right buttons and manage the economy pretty exactly, for some reason it turned me off. I was very skeptical that they were not overselling the precision of this theory and the precision [with] which they could run policy.

INTERVIEWER: Was that a gut instinct, or was that something you picked up?

PAUL VOLCKER: It must have been a gut instinct. I don't know why, but I was just a little bit turned off by the sense of certainty that they had.

INTERVIEWER: You actually talked about the administrations of Kennedy and Johnson, and you used the word "hubris" in that context. Would you say that that kind of attitude reached a peak?

PAUL VOLCKER: Yes,. There's no question in terms of its policy application that that approach reached its peak in the Kennedy-Johnson years, when in the Harvard years it was still intellectual concept. It really hadn't permeated fully the political decision-making [process]. It hadn't reached its apogee, which it certainly reached in the Kennedy-Johnson days, and they felt they'd solved the problem in the business cycle. They'd solved a problem with macroeconomics; it was time to turn to other microeconomic things, [and] it was time to turn to welfare questions, because they'd solved the problem. I'm not exaggerating very much when I say that. They had a very long period of economic advancement, and things were going pretty smoothly. Productivity was high, and unemployment was low.

~ Paul Volcker, Commanding Heights interview (PBS), September 26, 2000

Paul Volcker on changing political winds on inflation

I was in the Federal Reserve, Treasury, a conservative guy who's always against inflation. The general tenor of the times was inflation was the least of evils, if it's an evil at all. What changed drastically in the 1980s and running through today is the presumption that inflation is bad [and that] the primary job of a central bank is to prevent inflation. That's taken for granted. The great ideology these days is that the central banks ought to be independent; they ought to have an inflation target, and an inflation target ought to be close to zero. That's a very different environment then the '50s and '60s and into the '70s.

~ Paul Volcker, Commanding Heights interview (PBS), September 26, 2000

Feb 3, 2014

Paul Richards: "Trust the Fed"

Yeah, the markets did not get off to the kind of start we wanted.  But trust the Fed.  They would not be tapering if the economy was weakening. They know how to run the economy.  When we get to Fridays employment report, things will look a lot better.

~ Paul Richards, UBS Managing Director, as appeared on CNBC, February 3, 2014

(This quote is a paraphrase.)

Jan 30, 2014

Mark Zandi expects much stronger economic growth

The U.S. economy is set to experience much stronger growth as the middle of the decade approaches. Businesses are highly profitable and very competitive, households have reduced debt and are saving more, and the banking system is well-capitalized and liquid.  The job market is headed in right direction. Broadly speaking the economy is performing steadily better.

~ Mark Zandi, chief economist, Moody's Analytics, "The economy is only going to get stronger: Mark Zandi," The Daily Ticker (Yahoo!Finance), January 30, 2014

(Zandi has a bullish outlook on the U.S. economy: he's forecasting 3% GDP growth this year and 4% growth in 2015.  He says better economic growth will also lead to more jobs. He estimates that 3 million new workers will be hired in 2015, up from 2.25 million in 2013 and 2012. That would mean the economy returns to full employment (a federal jobless rate of 5.5% to 6%) by 2016.)

Jan 29, 2014

Jim Cramer on emerging market jitters

This is what happens and you have to ride it through.

~ Jim Cramer, CNBC, January 29, 2014, 8:54 AM ET

(S&P 500 futures 12 points below fair value as Turkish lira lost initial 3% gains from its central bank rate hike to 12% from 7 3/4%.)

Jeremy Siegel: "There is no bubble here" (2014)

Are we getting too pricey?

(He shows a chart showing the S&P 500”s median PE (for 1954 to 2014) is 16.5.  The latest PE is 17.2.)

There is no bubble here.  All these people that talk about bubbles believe an asset class is in a bubble, if the price is going up and they don’t own it.
(That gets a laugh from the crowd.)

~ Jeremy Siegel, dubbed the “Wizard of Wharton,” delivered a keynote speech at’s Inside ETFs conference in Hollywood, Fla., at about 5 p.m. Eastern on January 28, 2014

Jan 28, 2014

John Templeton on humility and knowledge

If we become increasingly humble about how little we know, we may be more eager to search.

~ John Templeton

Jan 25, 2014

Ben Bernanke: Stock market is fairly valued

[T]he markets currently seem to be broadly within the metrics of market valuation- valuation seems to be broadly within historical ranges. The financial system is strong. The key financial institutions are well-capitalized.

~ Federal Reserve Board Chairman Ben S. Bernanke, January 16, 2014, Brookings Institute speech

Jan 22, 2014

Carl Icahn: "Apple is a no-brainer"

I think Apple is a no-brainer.  You don't need to be a genius in technology to understand [that it's trading at 9 times 2014 earnings.]

~ Carl Icahn, CNBC, January 22, 2014

(Icahn owns roughly 1% of Apple's shares and wants them to buy back $150 billion in stock.)

Frank Veneroso on bubble in focusing on operating profits

The market looks only at the operating profits fiction. Last April in preparing a power point for a Ford Foundation Levy Institute conference I asked an assistant to go to the Bloomberg and get me the data on S&P operating profits and S&P reported GAAP profits. She came back and told me she could only find one series. I berated her and told her to contact the Help Desk. She came back and told me the Help Desk could only find one series. I got on the phone with the Help Desk. She was right; they had no notion of S&P GAAP profits. I sent them the data from the S&P web site. They were perplexed. Eventually all six Bloomberg technicians were on the phone with me saying they would find the GAAP series. Two months later they called me and said Bloomberg does not have on its pages the GAAP series.

The message from this story is not that Bloomberg was somehow deficient. It is that years and years had passed and none of the endless Bloomberg subscribers – basically the whole world of market professionals – ever called and drew this to their attention, as I had.

So, operating profits are a fiction, and literally everyone in today’s financial markets ignore generally accepted accounting principles and live and breathe this fiction.

As long as that is the market’s convention its participants can engage in another absurd and dangerous bubble. But some how, some way, reality will eventually surface – as it always does – and such market foolishness will end badly – as it always does.

~ Frank Veneroso, "More on the Unreality of U.S. Corporate Profits," RCM, January 21, 2014

Jim Cramer on the next Berkshire Hathaway (2007)

I think every portfolio has to take the risk/reward here of finding the next Buffett.

A selloff in a healthy environment, where inflation is under control and interest rates are stable ... is a great opportunity to pick up leadership names like a Sears or a Brookfield or a Goldman.  These are asset managements -- that's why I like them. They aggressively manage their assets, and that's what you should be buying.

Eddie Lampert is a terrific investor, and he's the brains behind Sears. ... I am urging patience. I don't want people to quit Sears.

~ Jim Cramer, June 21, 2007

(On TV's Wall Street Confidential Web video Thursday, he nominated Brookfield Asset Management (BAM) as an international Berkshire Hathaway; Sears (SHLD) is a domestic Berkshire Hathaway, he said.)

Jim Chanos on stock buybacks

Corporate CEOs, with their massive share-buyback programs are in effect investing in the stock market rather than in expanding business opportunities at their companies.  Either they expect higher returns from the market, or lower returns in their business, or some combination of both. Given their questionable track record in timing the market, this may be a cause for concern.

~ Jim Chanos, "Does IBM Love or Hate Itself? Stock Buybacks Make Firms Look Attractive, but Also Deprive Them of Capital for Real Investment," WSJ, January 22, 2014

Jan 20, 2014

Bill Gates on "these Google guys" (2003)

These Google guys (co-founders Larry Page and Sergey Brin), they want to be billionaires and rock stars and go to conferences and all that. Let us see if they still want to run the business in two to three years.

~ Bill Gates, World Economic Forum in Davos, January 2003

(As recalled by DealBook's Andrew Ross Sorkin before the 2013 forum)

Jan 18, 2014

Marc Faber on the Fed: "They are going to bankrupt the world"

Nobody could have a more negative view of the Federal Reserve than I.  It is run by a disastrous group of academics, who have no clue about what is happening in the real world.  They believe money-printing can create jobs.  They are going to bankrupt the world.

~ Marc Faber, Barron's Roundtable, January 13, 2014

Jan 16, 2014

Bernanke says QE effect, poses no risk of financial instability

We don’t think that financial stability concerns should at this point detract from the need for monetary policy accommodation which we are continuing to provide. Of all the concerns raised about bond buying by the Fed, the risk it could prompt financial instability is the only one I find personally credible. Currently, asset prices are broadly in line with historical norms. Those who have been saying for the last five years that we’re just on the brink of hyperinflation, I think I would just point them to this morning’s CPI number and suggest that inflation is not really a significant risk of this policy. The Fed is extraordinarily sensitive to risks of financial market instability. (Referring to bond purchases by the Fed), It was at least somewhat effective, and given that we were at the limits of what conventional monetary policy could do, we felt that we needed to take additional steps. I’m not yet ready to conclude that very low interest rates are going to be a permanent condition.

~ Ben Bernanke, "Bernanke Says QE Effective While Posing No Immediate Bubble Risk", Bloomberg, January 16, 2014

Jan 15, 2014

Nouriel Roubini: no economic recovery yet

I'll be the first to call a recovery, but I just don't see it yet, and it's getting uglier.

~ Nouriel Roubini, January 2009, World Economic Forum, Davos, Switzerland

Jan 12, 2014

Cicero on treason

A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murder is less to fear. The traitor is the plague.

~ Cicero 56 BC

Jan 7, 2014

Morgan Stanley's Adam Parker: "no worries"

The only thing people are worried about is that no one is worried about anything. That isn’t a real worry.

~ Adam Parker, Morgan Stanley’s market strategist, 2014 outlook report (as quoted by Michael Santoli, "Investors grow confident — or is it overconfident? — as stocks hit record highs," Yahoo!Finance, January 6, 2014)

Time magazine: "The great gold bust" (1976)

To hoarders and speculators, gold has had about as much luster as a rusty tin can.  In the 19 months since gold purchases became legal for U.S. citizens, the price has fallen more than 40% from its peak of $198 an ounce.  In three chaotic days of trading last week, gold fell $14 on the London market, reaching a 31-month low of $105.50 an ounce.  Though the price recovered to $111 by week's end, that is still a dismal figure for goldbugs, who not long ago were forecasting prices of $300 or more.

~ Time, "The Great Gold Bust," August 1976