Dec 31, 2007

Larry Kudlow on the proposed invasion of Iraq

The shock therapy of decisive war will elevate the stock market by a couple of thousand points.

~ Larry Kudlow, National Review Online, June 26, 2002

Ken Fisher: "Housing sector is already making a comeback" (2007)

Don't buy it. For months now the debate has been over whether America will have a hard landing of soft landing, the answer hinging on how big 2007's housing disaster turns out to be. Well, there won't be any housing disaster. We won't have a landing at all, soft or hard. Right now the U.S. and global economies are both accelerating.

You can see right through the housing crash story by looking at the prices of housing stocks. The market knows what the economic worrywarts do not, which is that the housing sector is already making a comeback. In the last six months housing stocks are up 24%, well ahead of the overall market. If housing were destined to fall apart in 2007 these stocks wouldn't be so strong now.

~ Ken Fisher, "Housing Boom!," Forbes, February 26, 2007 (He recommend Pulte Homes (34, PHM), Toll Brothers (34, TOL), and Beazer Homes (44, BZH).)

Larry Kudlow: "Not even Greenspan can stop the Internet economy" (2000)

This correction will run its course until the middle of the year. Then things will turn up again, because not even Greenspan can stop the Internet economy.

~ Larry Kudlow, The New York Post, February 25, 2000

Steve Leisman on corporate balance sheets

The corporate balance sheet - as I've been pounding the table - remains healthy.

~ Steve Leisman, CNBC, December 31, 2007

Bernie Schaeffer on the VIX as a "smart money" indicator

This year... I personally found new significance for the CBOE Market Volatility Index – as an indicator of the smart money's assessment of the volatility landscape as opposed to the "dumb money fear gauge" it is so widely believed to represent.

~ Bernie Schaeffer, Schaeffer's Monday Morning Outlook, December 31, 2007

Dec 28, 2007

Paul Krugman blaming the credit crunch on lax regulation and adherence to free market ideology

So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.

“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

It’s no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen.

~ Paul Krugman, "Blindly Into the Bubble," The New York Times, December 21, 2007

Comptroller of the Currency John C. Dugan on risky non-traditional mortgage products

Today’s non-traditional mortgage products – interest-only, payment option ARMs, no doc and low-doc, and piggyback mortgages, to name the most prominent examples – are a different species of product, with novel and potentially risky features.

...This dominance is increasingly reflected in the numbers. By some estimates, interest-only products constituted approximately 50 percent of all mortgage originations last year. In the first half of 2005, IOs started to decline in favor of payment-option ARMs, which, according to one source, comprised half of new mortgage originations. And roughly every other mortgage these days is also a “piggyback” or reduced documentation mortgage, which points to another development that concerns us: the trend toward "layering" of multiple risks. There is no doubt that when several risky features are combined in a single loan, the total risk is greater than the sum of the parts.

We can readily understand why these new products have become fixtures in the marketplace in such a short time. One reason is that they have helped sustain loan volume that would otherwise almost certainly be falling, because rising interest rates have brought an end to the refinance boom. More important, lenders have scrambled to find ways to make expensive houses more affordable – although there’s now a concern that the very availability of this new type of financing has done its share to help drive up house prices, which in turn stimulates demand for even more non-traditional financing."

~ John C. Dugan, Comptroller of the Currency, "Remarks by John C. Dugan Before an OCC Credit Risk Conference," Atlanta, Georgia, October 27, 2005

(Appeared in Calculated Risk blog, "Remarks by John C. Dugan," November 9, 2005.)

Paul Krugman blaming the subprime mess on greed and a lack of corporate governance

'What were they smoking?" asks the cover of the current issue of Fortune magazine. Underneath the headline are photos of recently deposed Wall Street titans, captioned with the staggering sums they managed to lose.

The answer, of course, is that they were high on the usual drug - greed. And they were encouraged to make socially destructive decisions by a system of executive compensation that should have been reformed after the Enron and WorldCom scandals, but wasn't.

The point is that the subprime crisis and the credit crunch are, in an important sense, the result of our failure to effectively reform corporate governance after the last set of scandals.

~ Paul Krugman, "Banks Gone Wild," International Herald Tribune, November 23, 2007

Thomas DiLorenzo on Paul Krugman blaming the mortgage mess on the free market

In [Paul] Krugman's article blaming the "subprime" mortgage mess on the free market, he claims that the Comptroller of the Currency should have been regulating the lending business more stringently. If so, this all might have been avoided, he says. As usual, he hasn't the foggiest idea of what he's talking about.

The fact is, the Comptroller of the Currency and the Fed itself have been busy enforcing the "Community Reinvestment Act" of 1977 for the past 30 years, which pressures banks to make uneconomical loans to uncreditworthy borrowers, euphemistically called "sub-prime" borrowers. They're not financial deadbeats, or people who never pay their bills on time. They're just a tiny, tiny bit below "prime" borrowers, in Governmentspeak.

Once again, Krugman gets everything ass backwards: Government regulation of the credit markets is a major CAUSE of the "subprime" mortgage debacle, not the solution. (Of course, the Greenspan Fed itself is the cause of the now-burst housing bubble).

~ Thomas DiLorenzo, "Crazed Keynesianism (and stupid, too)," LewRockwell.com blog post, December 21, 2007

BusinessWeek on the repeal of Glass-Steagall

The implications of the new law [the repeal of Glass-Steagall] are enormous. For instance, like other deregulated businesses, a merger frenzy of potentially unprecedented scale and scope is likely to be unleashed in the financial-services industry. Regulators rightly worry that these new behemoths will be considered too big to fail, encouraging their managements to throw the dice by lending recklessly throughout the global economy. These companies would profit handsomely if the gambles pay off, and taxpayers pick up the tab if they don't -- shades of the 1980s savings-and-loan crisis.

~ BusinessWeek Online, "Goodbye Glass-Steagall, Hello Big Mergers -- and Big Fees?," October 29, 1999

Frederic Mishkin: Housing market "bottoming out" (2007)

We do see some stabilization of demand in the housing market ... there is some indication that the market could be bottoming out.

~ Frederic Mishkin, Federal Reserve Governor, Reuters, April 20, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Henry Paulson: Subprime troubles "largely contained" (2007)

I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained.

~ Henry Paulson, U.S. Treasury Secretary, Reuters, April 20, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Richard Fisher: "Damage from subprime largely contained" (2007)

The damage from the subprime market has been largely contained.

~ Richard Fisher, Dallas Fed President, Dallas News, April 5, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Ben Bernanke: Subprime problems seem "contained" (2007)

At this juncture...the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.

~ Ben Bernanke, Federal Reserve Chairman, AFX News, March 28, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

Janet Yellen: "Waking up less at night" over housing (2007)

I'm waking up less at night than I was [over the slowdown in housing]. So far, there's been remarkably little effect [from housing] on the rest of the economy.

~ Janet Yellen, San Francisco Fed President, MarketWatch, February 21, 2007

(Quote provided by Kevin Depew, "Five Things You Need to Know: Housing Slump Well Contained; Well Contained to Existing Home Sales; Well Contained to Largest Cement Producer in U.S.; Well Contained to Spain; Well Contained to Auto Sales," Minyanville, April 24, 2007)

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James Madison on threats to liberty: gradualism and external enemies

I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.... The means of defense against foreign danger historically have become the instruments of tyranny at home.

~ James Madison

Dec 27, 2007

Lew Rockwell on the assassination of Benazir Bhutto

The horrific assassination of Benazir Bhutto is a massive blow to the empire, since she was the handpicked US replacement for the hated Pervez Musharraf. The US had installed Musharraf as military dictator after kicking out his elected predecessor, Nawaz Sharif (ah yes, global democracy), who was considered insufficiently obedient. The US has spent many billions on Musharraf and his military, but it has only earned the contempt of Pakistanis who don't like being a US colony (and no, one does not have to be pro-terrorist to be opposed to foreign control). What will happen now in Pakistan? Nothing good. At the same time, the US occupations of Iraq and Afghanistan continue to go badly, and Turkey--with US support--is bombing the Kurds in Iraq, the most pro-American part of the population. All over the world, other occupied areas grow restive as well.

Meanwhile, thanks to the Fed, the dollar weakens every day, risking a key pillar of US hegemony. Domestically, housing heads into a 1930s-style crisis, with more of the economy to follow.

This is the way empires end: in blood and economic disaster. The regime will want to do more of the same: inflate and bailout at home, threaten and bomb abroad, which will only worsen everything.

There is only way out: cut spending, cut taxes, stop inflating, end the police state, bring the troops home. Peace and freedom: libertarianism, in other words. How blessed we are, at the very moment of crisis, to have Ron Paul.

Needless to say, only Ron Paul among the candidates has opposed US intervention in Pakistan, and the massive foreign aid to its government.

~ Lew Rockwell, "Ron Paul, Pakistan and the Fed," LewRockwell.com blog post, December 27, 2007

Dec 26, 2007

Murray Rothbard on economic ignorance

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

~ Murray Rothbard, Egalitarianism as a Revolt Against Nature, and Other Essays


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Murray Rothbard on environmentalist hypocrites

My own observation is that most of the bellyachers about the ugliness of our cities and singers of paeans to the unspoiled wilderness stubbornly remain ensconced in these very cities. Why don't they leave? There are, even today, plenty of rural and even wilderness areas for them to live in and enjoy. Why don't they go there and leave those of us who like and enjoy the cities in peace. Furthermore, if they got out, it would help relieve the urban 'overcrowding' which they also complain about.

~ Murray Rothbard, Egalitarianism as a Revolt Against Nature, and Other Essays

Dec 24, 2007

Casey Stengel on making predictions

Never make predictions, especially about the future.

~ Casey Stengel, famed baseball manager

Bernie Schaeffer on 2007 U.S. and global equity fund flows

As of December 19, TrimTabs Investment Research reports that U.S. equity funds had lost $51.1 billion year-to-date, on pace to be the largest annual outflow in industry history. This amounts to about 1% of total equity-fund assets of $5.3 trillion. Mutual-fund players seem to be taking the money overseas, as global equity funds saw inflows of $126.9 billion, equal to 7.5% of the $1.7 trillion in global equity fund assets. Since 2005 in fact, U.S. equity funds have lost $9 billion, even while the S&P 500 has grown from 1,212 at the end of 2004 to 1,485 today.

~ Bernie Schaeffer, Schaeffer's Monday Morning Outlook, December 24, 2007

Dec 23, 2007

Bill Bonner and Lila Rajiva on the outcome of 9/11

The attacks of September 11 produced exactly the results the terrorists desired - the Bush administration panicked, got out the duct tape, and created what Leif Wenar at the University of Sheffield cleverly calls "a false sense of insecurity."

In short, they created panic - even terror - in the American people, which, of course, is precisely the aim of terrorists. In the language of the Marxist terrorists of the late 1960s, their real aim is to radicalize onlookers, moving them to join the cause. That is just what the Bush administration seems to have done. Rather than calmly and quietly proceeding to track down the perpetrators, it blundered right into Iraq and stirred up terrorist ambitions all over the Middle East. Where previously there had been only a handful of fanatics to worry about, now there are thousands of them.

~ Bill Bonner and Lila Rajiva, Mobs, Messiahs, and Markets, p. 57

Henry David Thoreau on the foundation of liberty

Disobedience is the true foundation of liberty. The obedient must be slaves.

~ Henry David Thoreau

Louis Brandeis on threats to liberty

Experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficent...  The greatest dangers to liberty lurk in insidious encroachment by men of zeal -- well-meaning but without understanding.

~ Justice Louis D. Brandeis, 1928

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John Philpot Curran on the price of liberty

Eternal vigilance is the price of liberty.

~ John Philpot Curran

Henry Hazlitt on the broken gold promise

We have forgotten that our currency unit, the dollar, was originally a pledge. It was a solemn pledge by the U.S. Government to pay its bearer on demand 1/20th of an ounce of gold. Our government disdainfully repudiated that pledge in 1933. It made another pledge to pay 1/35th of an ounce, not to our own people but to foreign central banks. That pledge was repudiated in 1971.

~ Henry Hazlitt

Aden sisters on inflation and gold

The overall evidence strongly suggests that tons and tons of money would then flood into the system, further cheapening the currency while interest rates drop to near zero if they have to. That in turn will eventually fuel inflation and gold's long-term bull- market rise.

~ Aden Forecast, edited by Mary Anne and Pam Aden, "For Adens, gold isn't all that glitters;
Commentary: Veteran gold bugs also see short-term stock opportunities
," MarketWatch, December 20, 2007

The Adens currently recommend:

  • 40% Gold and silver physical and ETFs, and gold and silver shares
  • 40% Natural resources, energy & other stocks
  • 20% Cash: Euro, Canadian dollar, Australian, New Zealand and Singapore dollars or currency funds

Anatole France on the hemline indicator

If I should be able to choose one out of all the books published a hundred years after my death, I would take a fashion magazine to see how women were dressing. Their fripperies would tell me more about the society of that future day than all the philosophers and preachers.

~ Anatole France

Gene Epstein sees no recession in 2008

The metaphor of the drug clinic should not give us the impression that everybody in the economy is crashing. The fact of the matter is that retail sales are up, industrial production is holding. Most likely we are not going to suffer a recession in 2008. Most likely it will be a slowdown. There will be some rise in the interest rate. The central banks are indeed in their rehab phase and the economy will likely pull through and start expanding again more rapidly in 2009.

~ Gene Epstein, Barron's Video, December 24, 2007

Gene Epstein on Greenspan the drug dealer

CAN FORMER FEDERAL RESERVE chairman Alan Greenspan be blamed for the current crisis in mortgage debt? The question is like asking whether the recently departed Mafia lord in charge of pushing drugs might be responsible for the fact that a lot of folks got addicted, and eventually overdosed.

Now suppose this same Mafia lord also manages the major methadone clinics and rehab facilities. This is good for his organization, which wants to sell to users whose habits are kept under control. It all makes for a system that runs like a well-oiled machine.

The "drug" in question is money and credit, which the central bank dispenses. And it's the ready availability of money and credit that lures the irrationally exuberant into committing finance capital to unsustainable projects that eventually bring on the sort of crisis we're now in.

~ Gene Epstein, "Study History, Mr. Greenspan," Barron's, December 24, 2007

Dec 21, 2007

John Bogle on the Go-Go Sixties

Q: What was your biggest mistake?

Bogle: When I was 38, I became head of Wellington Management, and I did an extremely unwise merger. I got wrapped up in the excitement of the go-go era, and the go-go era ended. As a result of that stupid decision, I got fired. The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, what that I learned a lot. And if I had not been fired then, there would not have been a Vanguard.

~ John Bogle, "Questions For John Bogle," Fortune, December 24, 2007

Frederic Bastiat on government theft

If you and I can't steal from our neighbors, we don't have the moral right to ask our neighbor -- our government to do the same thing.

~ Frederic Bastiat

(This may be a paraphrase. Ron Paul quoted referred to this quote in an interview with Glenn Beck on December 18, 2007.)

Charles Kettering on change

The world hates change, yet it is the only thing that has brought progress.

~ Charles F. Kettering

Albert Einstein on imagination

Imagination is more important than knowledge.

~ Albert Einstein

On leadership (anonymous)

Unless you're the lead dog, the scenery never changes.

~ Unknown

C.S. Lewis on the tyranny of good intentions

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

~ C.S. Lewis

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Groucho Marx on politics

Politics is the art of looking for trouble, finding it, misdiagnosing it and applying the wrong remedies.

~ Groucho Marx

Jim Cramer on Lloyd Blankfein

Lloyd Blankfein is money in the bank... He's the most underpaid CEO on Wall Street.

~ Jim Cramer, as appeared on CNBC, December 21, 2007

Dec 20, 2007

Neil Cavuto on the Iraq War and early victory (2003)

I want to talk to the French right now. And the Germans. And the Russians. I want to talk to all those who opposed the liberation of Iraq.

I want to show you all the joyous scene in downtown Baghdad today.

People oppressed. Now people free.

People once hopeless. Now hopeful.

People you forgot. But we remembered.

If you had things your way, they'd still be under the thumb of a dictator. And you were fine with that. We were not.

You had no problem telling them, live with it. We had a big problem telling them, get over it.

Look at their faces. See their smiles. Feel their joy. Their freedom. Their fervor. How do you feel now? Still sure going the extra mile for them wasn't worth it? I don't think they'd agree.

While you were debating, they were suffering.

~ Neil Cavuto, "Stomping on Saddam," FOX News, April 9, 2003

Morgan Stanley on MBIA's structured finance disclosure

We are shocked that management withheld this information for as long as it did. This new disclosure completely changes our view of MBIA being a more conservative underwriter relative to Ambac.

~ Ken Zerbe, Yoana Koleva, Morgan Stanley analysts, "MBIA details huge mortgage exposure, shares collapse ", Reuters, December 20, 2007

Dec 19, 2007

Robert Taft on liberty vs. central planning

After the American Revolution and the French Revolution the whole world became convinced that liberty was the key to progress and happiness for the peoples of the world, and this theory was accepted, even in those countries where there was, in fact, no liberty. People left Europe and came to this country, not so much because of the economic conditions as because they sought a liberty which they could not find at home. But gradually this philosophy has been replaced by the idea that happiness can only be conferred upon the people by the grace of an efficient government. Only the government, it is said, has the expert knowledge necessary for the people's welfare; only the government has the power to carry out the grandiose plans so necessary in a complicated world.

~ Senator Robert Taft, A Foreign Policy for Americans (1951)

Robert Taft on liberty and progress

We cannot overestimate the value of this liberty of ideas and liberty of action. It is not that you or I or some industrial genius is free; it is that millions of people are free to work out their own ideas and the country is free to choose between them and adopt those which offer the most progress. I have been through hundreds of industrial plants in the last two or three years, and in every plant I find that the people running that plant feel that they have something in the way of methods or ideas or machinery that no other plant has. I have met men said to be the best machinists in the industry who have built special machines for a particular purpose in which that company is interested.

Thousands of wholly free and independent thinkers are working out these ideas and have the right and ability to try them out without getting the approval of some government bureau. You can imagine the difference between the progress under such a system and one in which the government ran every plant in the country as it runs the post offices today. There would be one idea for a hundred that are now developed. If any plant employee had an idea for progress and wrote to Washington, he probably would get back a letter referring him to Regulation No. 5201 (c), which tells him exactly how this particular thing should be done, and has been done for the past fifty years.

It is clear to me that the great progress made in this country, the tremendous production of our people, the productivity per man of our workmen have grown out of this liberty and the freedom to develop ideas. We have the highest standard of living, because we produce more per person than any other country in the world.

~ Senator Robert Taft, A Foreign Policy for Americans (1951)

Albert Lord unplugged

It’s (margin calls) embarrassing and troublesome to me personally, the bank sold me out. It is not a sign of my disillusionment with the company. In fact, the exact reverse is the case.

Steve (McGarry, Managing Director of Investor Relations), let's go, there's no questions, let's get the f*ck outta here.

~ Albert Lord, CEO Sallie Mae, conference call discussing future of Sallie Mae, December 19, 2007

Robert Taft on foreign policy

An unwise and overambitious foreign policy, and particularly the effort to do more than we are able to do, is the one thing which might in the end destroy our armies and prove a real threat to the liberty of the people of the United States...

~ Senator Robert Taft, A Foreign Policy for Americans (1951)

Gandhi on sin

Hate the Sin; Love the Sinner.

~ Mahatma Gandhi

Mikhail Turovsky on time

When your legs get weaker time starts running faster.

~ Mikhail Turovsky

Mark Twain on skepticism

Believe nothing you hear, and only half of what you see.

~ Mark Twain

Benjamin Franklin on lost time

Lost time is never found again.

~ Benjamin Franklin

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Husayn ibn Ali on dignity

Death with dignity is better than life with humiliation.

~ Husayn ibn Ali

On hypocrisy (anonymous)

Hypocrisy is the tribute that vice pays to virtue.

~ Unknown, possibly French proverb, or authored by François de La Rochefoucauld

Celia Green on committees

The psychology of committees is a special case of the psychology of mobs.

~ Celia Green

Lenin on propaganda

A lie told often enough becomes the truth.

~ Vladimir Lenin

Nouriel Roubini on financial sytem

Non-bank institutions do not have direct access to the Fed and other central banks liquidity support and they are now at risk of a liquidity run as their liabilities are short term while many of their assets are longer term and illiquid; so the risk of something equivalent to a bank run for non-bank financial institutions is now rising. And there is no chance that depository institutions will re-lend to these to these non-banks the funds borrowed by central banks as these banks have severe liquidity problems themselves and they do not trust their non-bank counterparties. So now monetary policy is totally impotent in dealing with the liquidity problems and the risks of runs on liquid liabilities of a large fraction of the financial system.

~ Nouriel Roubini, President, Global EconoMonitor, "Central Banks Are Getting Desperate", December 18, 2007

Stephen Roach on US economy

This recession will be deeper than the shallow contraction earlier in this decade. The dot-com-led downturn was set off by a collapse in business capital spending, which at its peak in 2000 accounted for only 13 percent of the country’s gross domestic product. The current recession is all about the coming capitulation of the American consumer — whose spending now accounts for a record 72 percent of G.D.P.

~ Stephen Roach, Asia Investment Chairman, New York Times, December 16, 2007

Dec 17, 2007

Howard Buffett on conscription

In its abolition of freedom, peacetime conscription overshadows all other collectivism and regimentation. When the American government conscripts a boy to go 10,000 miles to the jungles of Asia without a declaration of war by Congress…. what freedom is safe at home? Surely, the profits of U.S. Steel or your private property are not more sacred than a young man’s right to life.

~ Howard Buffett, "An Opportunity for the Republican Party," New Individualist Review, II, 2 (Summer 1962), p. 12.

Howard Buffett on anti-Communist cover for government spending

In the pattern developed through the war years [World War II] of deficit spending, this administration combination would dress up every spending scheme as vital in their anti-Communist program. Attempts at economy would again be smeared as reactionary efforts to save dollars at the cost of the lives of American boys. Patriots who try to bring about economy would be branded as Stalin lovers. The misery of the people, from continued militarism and inflation, would soon become unbearable. As their anguished protests became vocal, the shackles of regimentation and coercion, so lately thrown off, could be refastened in the name of stopping communism at home.

~ Congressman Howard Buffett, March 18, 1947

Howard Buffett on the Soviet threat

We see no advantage in dodging the facts [that] if this tension with Russia keeps up, the military will probably succeed in imposing permanent conscription, will become the dominant factor in making and directing our foreign policy…. and will insist on the projection of American military power – of course, only as a measure of ‘security’ – into every part of the earth.

~ Congressman Howard Buffett, March 28, 1946

Joseph Stromberg on Howard Buffett

[Howard] Buffett’s consistent defense of classical liberal, free-market, republican, and anti-interventionist positions makes him an interesting, if little remembered, forerunner of today’s libertarianism and anti-Establishment conservatism. He was, as Murray Rothbard later pointed out, the most hard-core of the dwindling handful of Old Right politicians in the early Cold War period. Buffett contributed occasionally to such journals as Human Events, The Freeman, and later, New Individualist Review.

~ Joseph Stromberg, "The Old Cause," Antiwar.com, April 24, 2001

Rod Dubitsky on structured finance

Derivatives, or synthetics are like wearing a seatbelt that allows you to drive faster. The total dollar amount of losses, all these losses you're seeing, are from synthetics. No question, it changed the game dramatically.

~ Rod Dubitsky, Director asset-backed research, Credit Suisse, "Subprime Securities Began as Group of Five", December 17, 2007

Henry Paulson on "temporarily" lifting loan limits on the GSEs

We would be for lifting the limits for Freddie and Fannie on a temporary basis. As I talked to members of Congress, I am hearing less and less resistance to reforming the GSEs.

~ Henry Paulson, Treasury Secretary, Bloomberg TV, December 17, 2007

Jefferson on banking as a threat to liberty

I sincerely believe that banking institutions having the issuing power of money, are more dangerous to liberty than standing armies.

~ Thomas Jefferson

Kevin Duffy on the modern-day protection racket

Politicians are the modern-day equivalent of snake oil salesmen. The Democrats sell the scam that the less fortunate can live at the expense of the productive. The Republicans sell the scam that they will protect the productive from the Democrats. And they both sell the scam that they will protect us from imminent attack by envious freedom-hating fanatics willing and able to cross an ocean just to do us harm.

~ Kevin Duffy, Bearing Asset Management, December 17, 2007

Hillary Clinton on offshore tax havens

Close the loopholes for people who create a mailbox, or a drop, or send one person to sit on the beach in some island paradise and claim that it is their offshore headquarters.

~ Hillary Clinton, Senator, New York, "Clinton's Ties to Burkle Include Funds in Offshore Tax Haven", Bloomberg, December 17, 2007

Bernie Schaeffer: "Market valuation is quite reasonable"

Market valuation is quite reasonable. Per a Bloomberg.com article on December 10, the gap between the earnings yield on the S&P and 10-year note yields is the biggest in 20 years, and speaks to the possibility that stocks are, in fact, very reasonably priced at current levels.

~ Bernie Schaeffer, Schaeffer's Monday Morning Comment, December 17, 2007

Dec 16, 2007

Ron Paul on the Enron bankruptcy

It is a mistake for Congress view to the Enron collapse as a justification for more government regulation. Publicly held corporations already comply with massive amounts of SEC regulations, including the filing of quarterly reports that disclose minute details of assets and liabilities. If these disclosure rules failed to protect Enron investors, will more red tape really solve anything? The more we look to the government to protect us from investment mistakes, the less competition there is for truly independent evaluations of investment risk.

~ Congressman Ron Paul, "Enron, Bankruptcy, and Easy Credit," December 17, 2002

Daniel Greensberg on love and sex

Love is the self-delusion we manufacture to justify the trouble we take to have sex.

~ Daniel S. Greensberg

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Ara Hovnanian on housing

It's hard to tell if the worst is over. I would have hoped for a little bolder move (recent rate cut).

~ Ara Hovnanian, CEO Hovnanian Enterprises, Bloomberg TV, December 15, 2007

James Bianco on Libor

The Libor spread is screaming that there is a big, big stress point in the banking system.

~ James Bianco, Founder Bianco Research, "Why Borrowers May NotBenefit From Rate Cut", Wall Street Journal, December 13, 2007

Michael Feroli on FHLB lending

It is almost like the socialisation of housing finance.

~ Michael Feroli, economist, JP Morgan, Financial Times, December 12, 2007

Ben Bernanke on foreign reserves

Over the past decade a combination of diverse forces has created a global savings glut.

~ Ben Bernanke, Chairman Federal Reserve, Wall Street Journal, December 30, 2006

Lawrence Summers on mortgage crisis

There needs to be a bias towards activism. Policy has been behind the curve for months now. The dangers of doing too little are much greater than the dangers of doing too much in this context.

~ Lawrence Summers, Former Treasury Secretary, "In Capital, Steps Weighed to Fix Mortgage Mess, Wall Street Journal", December 15, 2007

Ian Stannard on term auction facility

This is a drastic action. The central banks want to place a fire-break to stop credit tensions spilling over into the broader markets and becoming the catalyst for a global economic crunch.

~ Ian Stannard, economist, BNP Paribas, "World Bankers Resort to Firebreak", Financial Times, December 16, 2007

Neil MacKinnon on term auction facility

There's a real danger that this may not work. Both the Fed and the ECB have injected a lot of liquidity before, but the banks are hoarding it. We're still seeing all the signs of stress with Libor and the VIX [fear gauge] at very elevated levels. The reason is that people still don't know where the bodies are buried. This may be a Made-in-America credit crisis but the Americans have cleverly exported their sub-prime cancer to pension funds all over the world. The risk now is a recession on both sides of the Atlantic.

~ Neil MacKinnon, strategist at the ECU hedge fund group, "World Bankers Resort to Firebreak", Financial Times, December 16, 2007

Dec 15, 2007

D.R. Horton CEO: "’07 is going to suck"

I don’t want to be too sophisticated here, but ’07 is going to suck, all 12 months of the calendar year.

~ Donald J. Tomnitz, D.R. Horton CEO, speaking at an investor conference in New York, "D.R. Horton CEO: 2007 will ‘suck’," MarketWatch, March 7, 2007

Bear Stearns analysts upgrade New Century (2007)

The potential downside in the stock if the company is forced to sell or liquidate is roughly balanced with the potential upside.

~ Scott Coren and Michael Nannizzi, analysts at Bear Stearns, from a research note, "New Century upgraded at Bear Stearns," MarketWatch, March 1, 2007

(The two analysts lifted their rating on New Century to peer perform from underperform. Shares climbed almost 3% to $15.78 during afternoon trading Thursday. They've still slumped almost 50% so far this year due to signs of a credit crunch in the subprime-mortgage industry.)

Merrill Lynch analyst concerned about liquidity drying up for New Century

Finance companies that go out of business usually do so because of a lack of liquidity.

Investors and warehouse lenders could lose confidence in New Century. New Century's business model is highly reliant on liquidity, so if investor confidence deteriorates and credit facilities are constrained, a liquidity event could ensue.

New Century's accounting issues and deteriorating fundamentals at its lending operation could put it at a steep downward slope, in our view, and we are more concerned that liquidity issues and adverse market reactions could undermine its business model and financial stability even further.

~ Kenneth Bruce, Merrill Lynch analyst, from a note to clients on Feb. 8, "Big banks control fate of subprime lenders," MarketWatch, February 16, 2007

(Merrill Lynch downgraded the stock to a sell.)

Goldman Sachs analysts on Merrill Lynch's 1st quarter results

These results should alleviate most investor concerns that Merrill is overly exposed to deteriorating subprime mortgage markets and challenging CDO/CLO markets.

~ Goldman Sachs analysts, from a Tuesday research report, "Merrill Lynch's profit rises 31%," MarketWatch, July 17, 2007

Merrill Lynch CFO on exposure to subprime loans (2007)

[The company's total exposure to subprime loans] is limited, contained, and appropriately marked. I think the majority of our exposure continues to be now in the highest-credit segment of the market.

As we increase our risk-taking capabilities and increase our focus on trading, you will see and you have seen a general migration in our revenue lines from net interest to principal transactions.

~ Jeff Edwards, chief financial officer, Merrill Lynch, "Merrill Lynch's profit rises 31%," MarketWatch, July 17, 2007

Deutsche Bank analyst Mike Mayo on Merrill Lynch's subprime lending problems

In our view, the quarter showed that Merrill has navigated recent market problems quite well and that the issues of market concern are not a major driver of its earnings.

~ Mike Mayo, Deutsche Bank analyst, "Merrill Lynch's profit rises 31%," MarketWatch, July 17, 2007

(Comments from a recent research report assessing Merrill Lynch's quarterly results.)

George Giles on Michael Vick and animal rights

What was Michael Vick guilty of? He was doing as he wished with his and his associate’s private property. They were having dog fights. Dogs are property in every state of the Union. Animals are not regarded as having any inalienable rights. They belong to their owners who are free to do as they please. Americans have never cared much for dog meat so dogs are not used for nutrition. Dogs are domesticated and inbred wolves. They are owned, and have no rights to own anything in return. Leona Helmsley’s dog did not get its inheritance because of this. It is the proper word; as dog is a thing, property in view of the law, not an individual with any rights. The bible says that God gave man sovereignty over the animal without limitation.

Michael Vick’s property rights were stripped, along with the rest of ours, when legislators and courts have deemed animals to have "rights." What these rights are, like so many things, are to be politically determined by the local DA and their cadre of taxpayer-financed associates. I think dog fighting is stupid and cruel, certainly in poor taste, but it should not be a crime. There are many corporations in America that execute millions of animals every day, horses, cows, pigs, chickens and turkeys as part of their ongoing and legitimate private business activities. Clearly the determination of what is proper and legal is a fungible concept following this reasoning. Meat packers treat animals as property, yet when Michael Vick does it, a serious crime occurs.

~ George Giles

Arnold Schwarzenegger on California's possible $14 billion deficit

What we have to do is fix the budget system. The system itself needs to be fixed, and I think that this is a good year, this coming year, to fix it.

~ Arnold Schwarzenegger, Governor of California, speech made in Long Beach where he was promoting his plan for health care reform, "Schwarzenegger Will 'Declare Fiscal Emergency' In Weeks," NBC11.com, December 14, 2007

(California state spending increased by more than 40 percent since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis.)

Alan Greenspan on the Fed

This is a much tougher monetary-policy environment than anything I experienced.

The notion of core pricing is fading in importance as: One, food prices driven by increased long-term demand for meat and milk rise with the growth of China and other developing countries, and as; Two, global oil supply peaks lower and sooner than had been contemplated earlier.

~ Alan Greenspan, former Federal Reserve Chairman , "How Inflation Hobbles the Fed," The Wall Street Journal, December 15, 2007