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

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

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

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

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