There is not perhaps in human affairs anything so unaccountable as the indignity and cruelty with which the far greater part of mankind suffer themselves to be used under pretence of government. For some men falsely persuading themselves that bad governments are advantageous to them, as most conducing to gratify their ambition, avarice, and luxury, set themselves with the utmost art and violence to procure their establishment: and by such men almost the whole world has been trampled underfoot, and subjected to tyranny, for want of understanding by what means and methods they were enslaved. For though mankind take great care and pains to instruct themselves in other arts and sciences, yet very few apply themselves to consider the nature of government, an enquiry so useful and necessary both to magistrate and people. Nay, in most countries the arts of state being altogether directed either to enslave the people, or to keep them under slavery; it is become almost everywhere a crime to reason about matters of government. But if men would bestow a small part of the time and application which they throw away upon curious but useless studies, or endless gaming, in perusing those excellent rules and examples of government which the ancients have left us, they would soon be enabled to discover all such abuses and corruptions as tend to the ruin of public societies. It is therefore very strange that they should think study and knowledge necessary in everything they go about, except in the noblest and most useful of all applications, the art of government.
~ Andrew Fletcher, A Discourse of Government With Relation to Militias (1698)
Oct 31, 2007
Jon Markman on the container shipping industry
Globalization is responsible for a lot of great things: Higher incomes for fast-growing middle classes in Asia, cheaper consumer electronics in the United States, markets for energy in the Middle East, a shorter workweek in Europe and Kentucky Fried Chicken outlets in Kuwait.
But what is responsible for globalization? Is it an improvement in entrepreneurs' ability to finance emerging markets' factories? The liberalization of command-driven economies in formerly despotic countries? A stroke of luck?
I would suggest a lot of the credit can be given to the standardized shipping container -- those 40-foot-long boxes you see on the decks of oceangoing ships, rail-car flatbeds and truck trailers. Without agreement among the world's manufacturing and freight-forwarding giants on the size and shape of a common box, getting iPods and chairs and auto parts from Shanghai to Seattle and Scotland would be crazy-expensive, not to mention a huge hassle.
~ Jon Markman, "Time to Load Up on Container Ship Stocks," MSN Money, May 17, 2007
But what is responsible for globalization? Is it an improvement in entrepreneurs' ability to finance emerging markets' factories? The liberalization of command-driven economies in formerly despotic countries? A stroke of luck?
I would suggest a lot of the credit can be given to the standardized shipping container -- those 40-foot-long boxes you see on the decks of oceangoing ships, rail-car flatbeds and truck trailers. Without agreement among the world's manufacturing and freight-forwarding giants on the size and shape of a common box, getting iPods and chairs and auto parts from Shanghai to Seattle and Scotland would be crazy-expensive, not to mention a huge hassle.
~ Jon Markman, "Time to Load Up on Container Ship Stocks," MSN Money, May 17, 2007
Chinese farmer on corruption
If we have the ability to send a satellite to the moon, why is it so difficult to send all corrupt officials to prison?
~ Wu Mingfa, a farmer from Xichang, China, where the nation's first orbiter launched on Oct. 24, as reported in Time, November 5, 2007
~ Wu Mingfa, a farmer from Xichang, China, where the nation's first orbiter launched on Oct. 24, as reported in Time, November 5, 2007
Oct 30, 2007
Curt Schilling on not being able to sign Roger Clemens
We don't need him.
~ Curt Schilling, Boston Red Sox pitcher, about Roger Clemens, the seven-time Cy Young Award winner who will leave retirement to pitch (for $4.5 million a month) for the New York Yankees (Boston had also courted Clemens), as reported in Time, May 21, 2007
(The Red Sox went on to win the World Series in a sweep of the Colorado Rockies. The Yankees lost in the first round of the playoffs to the Cleveland Indians.)
~ Curt Schilling, Boston Red Sox pitcher, about Roger Clemens, the seven-time Cy Young Award winner who will leave retirement to pitch (for $4.5 million a month) for the New York Yankees (Boston had also courted Clemens), as reported in Time, May 21, 2007
(The Red Sox went on to win the World Series in a sweep of the Colorado Rockies. The Yankees lost in the first round of the playoffs to the Cleveland Indians.)
John Edwards on socialized medicine
I, like all of you, have evolved. It is not enough to do small things.
~ John Edwards, Democratic candidate for President in the 2008 election, on why he would raise taxes to provide health care coverage for all low-income families, as reported in Time, February 19, 2007
~ John Edwards, Democratic candidate for President in the 2008 election, on why he would raise taxes to provide health care coverage for all low-income families, as reported in Time, February 19, 2007
Bernanke on dealing with entitlements
The right time to start is about 10 years ago.
~ Ben Bernanke, Federal Reserve Chairman, warning lawmakers that a failure to deal with the budgetary strains posed by an aging U.S. population could lead to serious economic harm, as reported in Time, February 5, 2007
~ Ben Bernanke, Federal Reserve Chairman, warning lawmakers that a failure to deal with the budgetary strains posed by an aging U.S. population could lead to serious economic harm, as reported in Time, February 5, 2007
Helen Vetter on North Dakota's law banning cohabitation
Boy, I'd like to see the state come and try and split us up.
~ Helen Vetter, 82, who lives out of wedlock with Don Polries, 87, in violation of North Dakota law (six other states ban cohabitation), as reported in Time, March 19, 2007
~ Helen Vetter, 82, who lives out of wedlock with Don Polries, 87, in violation of North Dakota law (six other states ban cohabitation), as reported in Time, March 19, 2007
Markus Amman on Swiss soldiers wandering into his country
It's not like they stormed over here with attack helicopters or something.
~ Markus Amman, Liechtenstein government spokesman, after 170 Swiss soldiers accidentally wandered into his tiny country, as reported in Time, March 19, 2007
~ Markus Amman, Liechtenstein government spokesman, after 170 Swiss soldiers accidentally wandered into his tiny country, as reported in Time, March 19, 2007
Condoleeza Rice on the Iraq War
I would ask the American people to be patient. We have invested a lot. It is worth the sacrifice.
~ Condoleeza Rice, Secretary of State, on the fourth anniversary of the war in Iraq, as reported in Time, April 2, 2007
~ Condoleeza Rice, Secretary of State, on the fourth anniversary of the war in Iraq, as reported in Time, April 2, 2007
Justin Fox on study that spurred minority lending under Clinton
As director of research at the Federal Reserve Bank of Boston, [Boston College management professor Alicia] Munnell co-authored a bombshell 1992 study that concluded that mortgage lenders systematically discriminated against blacks and Hispanics--even when one adjusted for income and creditworthiness.
Munnell's work propelled her into a big job in the Clinton Administration and led to new legislation and regulations aimed at pressuring banks to increase their presence in poor and minority neighborhoods. These new laws had the desired effect: home ownership among minorities, and Americans in general, began to rise steadily--the first such sustained increase since the 1950s. In 1998, 57% of black mortgage applicants were turned down; by 2004 the figure had dropped to 26.8%. For low-income applicants, mortgage denials went from 44.3% in 1998 to a low of 19.8% in 2003.
That was one remarkable result of the surge in subprime mortgage loans to borrowers with iffy credit records. The other remarkable result is that it is ending really badly--in a wave of foreclosures that could, at worst, cost billions, throw millions of people out of their homes and cause a recession.
Federal regulators stood by while this went on, but don't blame Munnell's study or the desire to encourage lending to minorities. "The point of that study was never to say, 'Let's go out and lend to people who aren't going to be able to carry the debt,'" Munnell argues. Sure enough, federally supervised banks and S&Ls and mortgage buyers Fannie Mae and Freddie Mac seem to have avoided big hits.
~ Justin Fox, "Subprime's Silver Lining," Time, April 2, 2007
Munnell's work propelled her into a big job in the Clinton Administration and led to new legislation and regulations aimed at pressuring banks to increase their presence in poor and minority neighborhoods. These new laws had the desired effect: home ownership among minorities, and Americans in general, began to rise steadily--the first such sustained increase since the 1950s. In 1998, 57% of black mortgage applicants were turned down; by 2004 the figure had dropped to 26.8%. For low-income applicants, mortgage denials went from 44.3% in 1998 to a low of 19.8% in 2003.
That was one remarkable result of the surge in subprime mortgage loans to borrowers with iffy credit records. The other remarkable result is that it is ending really badly--in a wave of foreclosures that could, at worst, cost billions, throw millions of people out of their homes and cause a recession.
Federal regulators stood by while this went on, but don't blame Munnell's study or the desire to encourage lending to minorities. "The point of that study was never to say, 'Let's go out and lend to people who aren't going to be able to carry the debt,'" Munnell argues. Sure enough, federally supervised banks and S&Ls and mortgage buyers Fannie Mae and Freddie Mac seem to have avoided big hits.
~ Justin Fox, "Subprime's Silver Lining," Time, April 2, 2007
Angelina Jolie invited to join CFR
Look out, Henry Kissinger, someone else may be hogging all the wattage at the next Council on Foreign Relations meeting. The prestigious foreign-policy organization, with members like Dick Cheney, Condoleezza Rice and Alan Greenspan, has nominated globetrotting actress and tabloid fixation ANGELINA JOLIE for membership. Selection of members is based on their demonstrated interest in world affairs. Jolie, who spent Oscar weekend visiting refugees in Chad for the United Nations and who has adopted a son from Cambodia and a daughter from Ethiopia, clearly fills that bill. Frankly, we can't imagine anyone better to disarm a rogue state.
~ Time, "World's Sexiest Policy Wonk," March 12, 2007
~ Time, "World's Sexiest Policy Wonk," March 12, 2007
Justin Fox on past prophets of doom
We have heard such pronouncements of impending doom before, of course. Howard Ruff's How to Prosper During the Coming Bad Years was a top seller in 1979. Ravi Batra's The Great Depression of 1990 hit No. 1 in 1987. Ruff's book did in fact ring in several very bad years, and there was a recession in 1990. But doom was averted, the economy came roaring back both times, and the lesson learned was that betting against the continued prosperity of the U.S. was a losing strategy.
~ Justin Fox, "The Armageddon Gang," Time, April 9, 2007
~ Justin Fox, "The Armageddon Gang," Time, April 9, 2007
Investors: "Wise men" vs. "wise guys"
Wise men:
- Abelson, Alan
- Bass, Kyle
- Bonner, Bill
- Chanos, Jim
- Deden, Tony
- Faber, Marc
- Farrell, Bob
- Fleckenstein, Bill
- Hickey, Fred
- Grant, Jim
- Grantham, Jeremy
- Greenberg, Herb
- Klarman, Seth
- Pomboy, Stephanie
- Rodriguez, Bob
- Rogers, Jim
- Rogers, John W. Jr.
- Tavakoli, Janet
- Zulauf, Felix
- Acampora, Ralph
- Applegate, Jeff
- Belski, Brian
- Cohen, Abby
- Cramer, Jim
- Dwyer, Tony
- Farrell, Vince
- Fisher, Ken
- Froelich, Bob
- Heebner, Ken
- Hogan, Art
- Kudlow, Larry
- Laffer, Art
- Meyer, Fritz
- Neff, John
- Paulsen, James
- Paulson, Henry
- Riley, Ned
- Salamone, Todd
- Saut, Jeff
- Schaeffer, Bernie
- Siegel, Jeremy
- Sowerby, David
- Stein, Ben
- Trennert, Jason
- Fisher, Philip (1907-2004, profile)
- Graham, Benjamin (1894-1976, profile)
- Neill, Humphrey
- Price, Thomas Rowe Jr. (1898-1983, profile)
- Templeton, John (1912-2008, profile)
- Biggs, Barton
- Buffett, Warren
- Dreman, David
- Gross, Bill
- Kass, Doug
- Miller, Bill
- Russell, Richard
- Shilling, Gary
- Soros, George
- Zell, Sam
Money: "The case for stocks remains strong"
So will the Dow break more records this year? No one really knows. Besides, market timing is a sucker's game. As long as you have a well-diversified portfolio, there's no reason to run from this bull.
~ Money, "Is This Bull Ready to Leave? Despite the signs of a slowing economy, the case for stocks remains strong," July 1, 2007, by Stephen Gandel
~ Money, "Is This Bull Ready to Leave? Despite the signs of a slowing economy, the case for stocks remains strong," July 1, 2007, by Stephen Gandel
Richard Bookstaber on crisis and financial regulation
The natural tendency is to come in after a [financial] incident and regulate. But all that does is increase the complexity of the system and push it more toward the edge.
~ Richard Bookstaber, "Unstable System," Money, July 1, 2007
~ Richard Bookstaber, "Unstable System," Money, July 1, 2007
Oct 29, 2007
Ben Stein: "Subprime mortgage market is a tiny blip"
When the markets go nuts and traders sell short and trigger sell programs, they don't ever just say, "Hey, we're doing this to make a fast buck and profit from fear." They always have some supposedly legitimate, "statesmanlike" reason.
Today, the reason is supposedly terror in the subprime mortgage market. To put this as frankly as possible, this is just nonsense.
Even if subprime delinquencies and defaults are up, they're a tiny portion of total mortgages. Suppose 13 percent of subprime mortgages are in default. Subprime itself is less than 15 percent of total mortgage debt, so that means that roughly 2 percent of mortgage debt is delinquent or in default.
Yes, that's more than it used to be, and is a disaster for the subprime mortgage companies.
But when a mortgage defaults, the lender takes back the house or condo, sells it, and usually recovers about 75 percent of the loan value or more. That means the real loss would be about 25 percent of 2 percent, or 1/2 of 1 percent.
In the context of a market as huge as the nation's mortgage market, that's not a lot. A few companies will go bankrupt, and someone will make a killing buying their bonds and portfolios at a huge discount as they turn out to be worth a lot more than people thought in March 2007. But it won't mean a lot to a roughly $14 trillion economy, of which the subprime mortgage market is a tiny blip.
~ Ben Stein, "The Long and the Short of Down-Market Investing," Yahoo! Finance, March 16, 2007
Today, the reason is supposedly terror in the subprime mortgage market. To put this as frankly as possible, this is just nonsense.
Even if subprime delinquencies and defaults are up, they're a tiny portion of total mortgages. Suppose 13 percent of subprime mortgages are in default. Subprime itself is less than 15 percent of total mortgage debt, so that means that roughly 2 percent of mortgage debt is delinquent or in default.
Yes, that's more than it used to be, and is a disaster for the subprime mortgage companies.
But when a mortgage defaults, the lender takes back the house or condo, sells it, and usually recovers about 75 percent of the loan value or more. That means the real loss would be about 25 percent of 2 percent, or 1/2 of 1 percent.
In the context of a market as huge as the nation's mortgage market, that's not a lot. A few companies will go bankrupt, and someone will make a killing buying their bonds and portfolios at a huge discount as they turn out to be worth a lot more than people thought in March 2007. But it won't mean a lot to a roughly $14 trillion economy, of which the subprime mortgage market is a tiny blip.
~ Ben Stein, "The Long and the Short of Down-Market Investing," Yahoo! Finance, March 16, 2007
Ben Stein: Subprime "tiny in the context of the economy"
I'm not at all worried about the stock market despite the recurrent panic about subprime mortgage problems and resistance to some loans by lenders in private equity deals (which used to be called, appropriately, leveraged buyouts, or LBOs).
Subprime is a small sector of the mortgage market, as I've said before. It might be 15 percent at most. The defaults and delinquencies in this sector might be roughly 15 percent, which makes for a total problem rate of about 2.25 percent of the whole mortgage market.
If all this goes into foreclosure (which is unlikely), it will realize about 60 percent upon liquidation at the very least. That means the real loss might be about .9 percent, or less than 1 percent. That's a large number, but tiny in the context of the economy.
~ Ben Stein, "A View of the Economy from Abroad," Yahoo! Finance, July 5, 2007
Subprime is a small sector of the mortgage market, as I've said before. It might be 15 percent at most. The defaults and delinquencies in this sector might be roughly 15 percent, which makes for a total problem rate of about 2.25 percent of the whole mortgage market.
If all this goes into foreclosure (which is unlikely), it will realize about 60 percent upon liquidation at the very least. That means the real loss might be about .9 percent, or less than 1 percent. That's a large number, but tiny in the context of the economy.
~ Ben Stein, "A View of the Economy from Abroad," Yahoo! Finance, July 5, 2007
Ben Stein: Housing fears overblown
Yes, the housing market has slowed from a spectacular bubble level to a simply pretty good level. Housing sales and starts are now about what they were in 2002, and no one thought we were in a housing depression then.
In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That's not trivial, but it's also not the stuff of which recessions are made.
The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.
Corporate profits set new records every day. Whatever's happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in -- and for no other reason.
~ Ben Stein, "How Speculators Exploit Market Fears," Yahoo! Finance, August 2, 2007
In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That's not trivial, but it's also not the stuff of which recessions are made.
The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.
Corporate profits set new records every day. Whatever's happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in -- and for no other reason.
~ Ben Stein, "How Speculators Exploit Market Fears," Yahoo! Finance, August 2, 2007
Ben Stein: "This is a good time to buy stocks"
To put this as plainly as possible, this is a good time to buy stocks. The evidence is overwhelming and consistent that if you buy when stocks' P/E is below its 15-year moving average, you'll make far more money than you would if you bought at the economic peak, when P/E's are high. So, unless you're out of money to buy with during the recession, you buy. You don't go on margin to buy, and you don't re-mortgage your home to buy. But if you're employed and have money to invest, you buy.
Recessions in the post-World War II world are generally short; they end after about two quarters. Within about 15 months, stocks have moved from their last peak to their next peak. This is an average -- each case varies, but in every case the very long-term investor is better off if he or she keeps on buying through the recession.
~ Ben Stein, "Recession-Proof Your Investment Strategy," Yahoo! Finance, September 13, 2007
Recessions in the post-World War II world are generally short; they end after about two quarters. Within about 15 months, stocks have moved from their last peak to their next peak. This is an average -- each case varies, but in every case the very long-term investor is better off if he or she keeps on buying through the recession.
~ Ben Stein, "Recession-Proof Your Investment Strategy," Yahoo! Finance, September 13, 2007
David Vaughn on re-inventing the wheel
We're trying to re-invent the wheel here, and it's not coming out round.
~ David Vaughn, engineer
~ David Vaughn, engineer
Ben Stein: "Now is the time to buy"
As I write this, the markets are in turmoil. Stocks have fallen considerably since their recent highs. There's growing gloom on Wall Street, and the newspapers are filled with scare stories. The upshot: Now is the time to buy. Not for tomorrow, not for next month, maybe not for next year. But for the long term, it's absolutely time to buy.
I don't see a recession brewing. Or, if one is brewing, it doesn't strike me as a long, strong one.
Given that, if the market is pricing stocks as if there'll be a major recession, and pricing financials as if there'll be a collapse in New York, you might do well to buy broad indexes of stocks and indexes of financials.
The road ahead will be bumpy. Fine -- "mama, that's where the fun is," as Bruce Springsteen sang long ago. But if times are better than Wall Street is betting, you may want to bet against Wall Street. They're in it for a day or an hour -- you're in it for life. And you have an immense advantage: You can take advantage of their panic.
They take plenty of advantage of you, so now it's your turn. Buy and hold.
~ Ben Stein, "No Nightmare on Wall Street," Yahoo! Finance, October 29, 2007
I don't see a recession brewing. Or, if one is brewing, it doesn't strike me as a long, strong one.
Given that, if the market is pricing stocks as if there'll be a major recession, and pricing financials as if there'll be a collapse in New York, you might do well to buy broad indexes of stocks and indexes of financials.
The road ahead will be bumpy. Fine -- "mama, that's where the fun is," as Bruce Springsteen sang long ago. But if times are better than Wall Street is betting, you may want to bet against Wall Street. They're in it for a day or an hour -- you're in it for life. And you have an immense advantage: You can take advantage of their panic.
They take plenty of advantage of you, so now it's your turn. Buy and hold.
~ Ben Stein, "No Nightmare on Wall Street," Yahoo! Finance, October 29, 2007
Bettina Greaves on free trade and world peace
To minimize conflicts in the future we should aim to create a world in which people are free to buy what they want, live and work where they choose, and invest and produce where conditions seem most propitious. There should be unlimited freedom for individuals to trade within and across national borders, widespread international division of labor, and worldwide economic interdependence. Would-be traders should encounter no restrictions or barriers to trade, enacted out of a misguided belief in economic nationalism and the supposed advantages of economic self-sufficiency. Friendships among individuals living in different parts of the world would then be reinforced daily through the benefits they reap from buying and selling with one another. Thus a sound basis for peaceful international relations would be encouraged.
~ Bettina Bien Greaves, The Freeman, September 1979
~ Bettina Bien Greaves, The Freeman, September 1979
George Orwell on truth
During times of universal deceit, telling the truth becomes a revolutionary act.
~ George Orwell
~ George Orwell
Satyajit Das: Credit crisis "still in the middle of the national anthem"
Recently, Michael Panzner interviewed Satyajit Das, a gentleman with 30 years experience in developing and marketing derivatives who has written a 4,200-page reference work on these exotic instruments. Here, Panzner asks Das about the recent credit crisis and where we are in the process of things getting "back to normal:"
"I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the 'third inning'. This is pretty amusing, it seemed, judging from the laughter. So I tried again. 'Second inning?' More laughter. 'First?'
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before the game destined to go into extra innings."
~ Doug Wakefield, President, Best Minds Inc., "TV Reruns or Real Manias," October 8, 2007
"I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the 'third inning'. This is pretty amusing, it seemed, judging from the laughter. So I tried again. 'Second inning?' More laughter. 'First?'
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before the game destined to go into extra innings."
~ Doug Wakefield, President, Best Minds Inc., "TV Reruns or Real Manias," October 8, 2007
Oct 28, 2007
T. Rowe Price: Record 3rd quarter results
The firm's investment advisory results relative to our peers remain strong, with 64% of the T. Rowe Price funds across their share classes surpassing their comparable Lipper averages on a total return basis for the one-year period ending September 30, 2007, at least 73% of the funds surpassing their comparable Lipper averages for the three- and five-year periods ending on the same date, and 81% for the ten-year period. In addition, 82 of the T. Rowe Price stock and bond funds across their share classes, which account for almost 69% of stock and bond fund assets under management, ended the third quarter with an overall rating of four or five stars from Morningstar. These four- and five-star-rated investments represent 67.2% of our rated funds and share classes, compared with 32.5% for the overall industry. We continue to receive strong net cash inflows from our clients, reflecting our favorable portfolio performance.
Looking ahead, despite the recent market turmoil, we remain optimistic about the prospects for stocks over the longer term. We believe that the global economy will continue to grow at a reasonable rate and that the weakness in U.S. housing will continue to work its way through the system. Companies producing stable earnings growth will be afforded higher prices. In our view, this environment should favor our focus on selecting stocks with sound fundamentals and attractive valuations.
T. Rowe Price's strong capital position gives us substantial financial flexibility. In the third quarter, we used our strong cash position to repurchase 2.9 million shares of our common stock. Through the first nine months of the year, we now have expended $256 million to repurchase nearly 5.1 million common shares. T. Rowe Price Group remains debt free and we have cash and corporate investments of $1.7 billion at September 30, 2007.
~ James A.C. Kennedy, Chief Executive Officer and President, T. Rowe Price (TROW), "T. Rowe Price Group Reports Record Quarterly Results," October 23, 2007
Looking ahead, despite the recent market turmoil, we remain optimistic about the prospects for stocks over the longer term. We believe that the global economy will continue to grow at a reasonable rate and that the weakness in U.S. housing will continue to work its way through the system. Companies producing stable earnings growth will be afforded higher prices. In our view, this environment should favor our focus on selecting stocks with sound fundamentals and attractive valuations.
T. Rowe Price's strong capital position gives us substantial financial flexibility. In the third quarter, we used our strong cash position to repurchase 2.9 million shares of our common stock. Through the first nine months of the year, we now have expended $256 million to repurchase nearly 5.1 million common shares. T. Rowe Price Group remains debt free and we have cash and corporate investments of $1.7 billion at September 30, 2007.
~ James A.C. Kennedy, Chief Executive Officer and President, T. Rowe Price (TROW), "T. Rowe Price Group Reports Record Quarterly Results," October 23, 2007
Herbert Spencer on freedom
Every man has freedom to do all that he wills, provided he infringes not the equal freedom of any other man.
~ Herbert Spencer, Social Statics (1851)
~ Herbert Spencer, Social Statics (1851)
Prechter: Investors beware government subsidies
A home may seem to have some investment advantages, but all of them are artificial, having been created by government: (1) you get a tax break, and (2) prices tend to rise through inflation. But any purchase or investment that the government supports artificially will eventually hurt the intended beneficiaries. Thanks to government subsidies and inflation, the housing market grew disproportionately, and now too many people are stuck in homes they cannot afford. Thanks to government subsidies, too many people own gas-guzzing SUVs weighing over 6000 pounds, the size above which the government offered tax breaks, and now they are stuck with exorbitant gasoline costs. Thanks to government subsidies, some people are now investing in corn to make ethanol. Do you think that gambit will end any better?
~ Robert Prechter, The Elliott Wave Theorist, August 26, 2007
~ Robert Prechter, The Elliott Wave Theorist, August 26, 2007
Prechter: "A home is not an investment"
Many people say the "invest" in their homes. But a home is not an investment. It is an item that loses value through deterioration even if no one lives in it. A home is expensive to finance, expensive to maintain and expensive to buy or sell. Ironically, it is also very costly to realize the loss of value on a home. How can it be? Well there are two costs that few consider:
(1) Did you know that if you sell your home at a loss and the bank agrees to cancel your mortgage for less than you owe, your taxes will rise? It's true. The IRS considers forgiven mortgage debt to be a payment to the homeowner, and it's not considered a capital gain but rather is taxed at the ordinary-income rate. But wait; it gets worse. Suppose your income that year was $30,000, so you were in the 15% federal tax bracket. If your bank forgives $70,000 worth of mortgage debt, your "income" suddenly jumps to $100,000, pushing you up into the 28% tax bracket, which for most taxpayers is effectively the 32-35% bracket inclusive of federal and state income taxes. Your average tax rate would be 30% or more, taking into account the Social Security taxes on your labor income. So taxes would consume every last penny of your gross job income.
(2) But wait. Your forgiving bank is hit just as hard. According to The Boston Globe (8/24/07), "Foreclosing on a house and selling it in an auction costs $50,000 on average, in New England, and that amount is on top of the funds the lender needs to pay off the loan itself."
Think about these costs. While you are paying extra taxes on the forgiven loan, the bank must pay all the fees required to dispose of the house on top of taking a loss on its value. These costs combined could amount to a significant portion of the value of the sale! Under such circumstances, can anyone say with a straight face that you owned an "investment?" Even a desired home costs money, but an unwanted home is nothing less than a giant albatross of decay and expense.
~ Robert Prechter, The Elliott Wave Theorist, August 26, 2007
(1) Did you know that if you sell your home at a loss and the bank agrees to cancel your mortgage for less than you owe, your taxes will rise? It's true. The IRS considers forgiven mortgage debt to be a payment to the homeowner, and it's not considered a capital gain but rather is taxed at the ordinary-income rate. But wait; it gets worse. Suppose your income that year was $30,000, so you were in the 15% federal tax bracket. If your bank forgives $70,000 worth of mortgage debt, your "income" suddenly jumps to $100,000, pushing you up into the 28% tax bracket, which for most taxpayers is effectively the 32-35% bracket inclusive of federal and state income taxes. Your average tax rate would be 30% or more, taking into account the Social Security taxes on your labor income. So taxes would consume every last penny of your gross job income.
(2) But wait. Your forgiving bank is hit just as hard. According to The Boston Globe (8/24/07), "Foreclosing on a house and selling it in an auction costs $50,000 on average, in New England, and that amount is on top of the funds the lender needs to pay off the loan itself."
Think about these costs. While you are paying extra taxes on the forgiven loan, the bank must pay all the fees required to dispose of the house on top of taking a loss on its value. These costs combined could amount to a significant portion of the value of the sale! Under such circumstances, can anyone say with a straight face that you owned an "investment?" Even a desired home costs money, but an unwanted home is nothing less than a giant albatross of decay and expense.
~ Robert Prechter, The Elliott Wave Theorist, August 26, 2007
Doug Kass: Half of year-to-date runup in Nasdaq 100 due to Apple, Google, and RIMM
In support of his forebodings, [Doug Kass, the redoubtable bear who runs Seabreeze Partners] cites the Nasdaq 100's spectacular performance so far this year -- last we checked, it had shot up a cool 25%, or some 448 points -- as a startling illustration of how a few exceptionally strong stocks can give the impression of a big bull move. Of that roughly 25%, or nearly 450 points, gained by the Nasdaq 100, a whopping 230 points, or over half the index's rise, has come from just three issues: Apple (135 points), Research In Motion (60 points) and Google (35 points).
No accident that each of that triumphant trio is part of the big, amorphous sector dubbed "tech". For according to that perceptive observer referred to a few paragraphs above, the torrent of dough exiting the financial shares, which for so many years ruled the investment roost but lately have been feeling the effects of the credit chill, has flowed in gobs into techs, which have been largely out of favor for quite a spell.
~ Alan Abelson, "Schizo Market," Barron's, October 29, 2007
No accident that each of that triumphant trio is part of the big, amorphous sector dubbed "tech". For according to that perceptive observer referred to a few paragraphs above, the torrent of dough exiting the financial shares, which for so many years ruled the investment roost but lately have been feeling the effects of the credit chill, has flowed in gobs into techs, which have been largely out of favor for quite a spell.
~ Alan Abelson, "Schizo Market," Barron's, October 29, 2007
Abelson: Heads will roll at Merrill Lynch
What inspires these reflections, tinged as they are with awe, wonder and, of course, envy, is the gathering fuss over Merrill Lynch, precipitated by the fact that the giant brokerage firm-investment bank-whatever, wrote down something like $8 billion worth of CDOs (those pesky collateralized debt obligations that were all the rage when mortgage-securitizing madness reached fever pitch), a heap of subprime paper and dubious leveraged loans.
Even these days when astronomic numbers are the norm, $8 billion is not chopped liver and the disclosure dealt a heavy blow to Merrill's pride (incalculable) and its results (a $2.3 billion loss in the third quarter). What magnified the impact on its shares -- they fell to 61 and change from around 75 at start of the month -- was that a scant few weeks ago, the official word was that the write-down would be mere a $5 billion. Guess they ran out of fingers to count on; it happens, especially when you're totting shrinkages in values carried on your books.
Inevitably, the blame has fallen on Merrill's CEO, Stan O'Neal. Mr. O'Neal has been running the company for five years, and a lot of that time he seemed to be auditioning for the role of Mack the Knife. Any number of heads did roll during his regime, which didn't make him very popular, especially among the brass he cut loose.
However, as it emerges, his real problem was not managing people but rather managing risk. Mr. O'Neal was very aggressive at taking risk, but, alas, proved less than agile at recognizing it. Mesmerized by the vast returns he envisioned for risk, he never took the time to appreciate why it's so widely considered a four-letter word.
At this writing, anyway, Mr. O'Neal is still hanging in there. Whatever happens, we're happy to say, he won't need to pass the cup: He has been, remember, boss of a goliath Wall Street firm, so by definition, has been adequately -- one might even venture, lavishly -- compensated. Last year, he took home a tidy $48 million.
~ Alan Abelson, "Schizo Market," Barron's, October 29, 2007
Even these days when astronomic numbers are the norm, $8 billion is not chopped liver and the disclosure dealt a heavy blow to Merrill's pride (incalculable) and its results (a $2.3 billion loss in the third quarter). What magnified the impact on its shares -- they fell to 61 and change from around 75 at start of the month -- was that a scant few weeks ago, the official word was that the write-down would be mere a $5 billion. Guess they ran out of fingers to count on; it happens, especially when you're totting shrinkages in values carried on your books.
Inevitably, the blame has fallen on Merrill's CEO, Stan O'Neal. Mr. O'Neal has been running the company for five years, and a lot of that time he seemed to be auditioning for the role of Mack the Knife. Any number of heads did roll during his regime, which didn't make him very popular, especially among the brass he cut loose.
However, as it emerges, his real problem was not managing people but rather managing risk. Mr. O'Neal was very aggressive at taking risk, but, alas, proved less than agile at recognizing it. Mesmerized by the vast returns he envisioned for risk, he never took the time to appreciate why it's so widely considered a four-letter word.
At this writing, anyway, Mr. O'Neal is still hanging in there. Whatever happens, we're happy to say, he won't need to pass the cup: He has been, remember, boss of a goliath Wall Street firm, so by definition, has been adequately -- one might even venture, lavishly -- compensated. Last year, he took home a tidy $48 million.
~ Alan Abelson, "Schizo Market," Barron's, October 29, 2007
Barron's: MGIC, Radian Offer a High-Wire Act
[A]t this point, Radian looks like the better bet than MGIC. For one thing Radian has two business lines rather than one. Moreover, MGIC's dollar-loss per claim is going up faster than Radian's. That's because Radian shrewdly capped its loss exposure on its Alt-A mortgages to just 14% of the unpaid principal, while MGIC is paying out on over 27% of Alt-A mortgage losses. What makes that category so lethal is the fact that the size of these generally "no documentation" mortgages is so much larger than subprime mortgages.
~ Barron's, "MGIC, Radian Offer a High-Wire Act," October 29, 2007, by Jonathan R. Laing
~ Barron's, "MGIC, Radian Offer a High-Wire Act," October 29, 2007, by Jonathan R. Laing
BW SmallBiz: Startup capital grows scarce
With lenders spooked by late summer's credit crunch and the housing market continuing its slide, many entrepreneurs, particularly startups, are finding capital harder to come by. Banks have tightened the spigots, and even Small Business Administration 7(a) loans, which often are easier to obtain than other bank loans, may be tougher to land. Declining home values in many parts of the country are limiting the amount of equity that business owners can use as collateral for loans, as well as the amount of credit available to them.
~ BW SmallBiz, "Hungry for Cash: Startup capital grows scarce," October/November 2007
~ BW SmallBiz, "Hungry for Cash: Startup capital grows scarce," October/November 2007
Sam Stovall: Economy averts recession
So there you have it. Even though, in our opinion, the housing slump and sharp rise in oil prices have increased the odds of a recession, S&P Economics believes we will avert economic disaster primarily because of the aggressiveness of the Federal Reserve, with its expected continuing rate-cutting and liquidity infusion efforts. We also believe the weakness in the U.S. dollar will aid U.S. exporters, and the restatement of August's employment data, as well as strength in September's results, will help consumers feel less anxious about their jobs and lessen the effect on consumer confidence.
~ Sam Stovall, chief strategist, Standard & Poor's Equity Research, "How Hard a Hit from Housing?," BusinessWeek, October 23, 2007
~ Sam Stovall, chief strategist, Standard & Poor's Equity Research, "How Hard a Hit from Housing?," BusinessWeek, October 23, 2007
Kevin Duffy on welfare
As Washington said, "Government is not reason; it is not eloquence; it is force." With that in mind, government provided "charity" takes on new meaning:
#1 - To help me, you must first pick someone else's pocket.
#2 - It is easy to be compassionate with other peoples' money.
#3 - Those who willingly participate in this theft can not possibly be trusted.
As H.L. Mencken said, "An election is nothing more than the advanced auction of stolen goods."
~ Kevin Duffy
BusinessWeek: Has the mortgage crisis finally peaked?
A significant rise in jumbo loan rates resulting in a high number of postponed or cancelled sales was a particularly strong disruption to August home sales, according to NAR senior economist Lawrence Yun. On Aug. 15 the 30-year fixed jumbo mortgage rate hit 7.43%, according to data from Bankrate.com.
But now those "temporary" mortgage problems may have subsided. As of today, Bankrate.com reports that the jumbo mortgage rate is down to 6.59%. "Mortgage problems were peaking back in August when many September closings were being negotiated, and that slowed sales notably in higher-priced areas that rely more on jumbo loans," said Yun in a release. "The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling, and more people are applying for safer and conforming FHA mortgage products."
~ BusinessWeek, "Has the Mortgage Crisis Finally Peaked?," October 24, 2007, by Maya Roney
But now those "temporary" mortgage problems may have subsided. As of today, Bankrate.com reports that the jumbo mortgage rate is down to 6.59%. "Mortgage problems were peaking back in August when many September closings were being negotiated, and that slowed sales notably in higher-priced areas that rely more on jumbo loans," said Yun in a release. "The good news is that mortgage availability has markedly improved in recent weeks with interest rates on jumbo loans falling, and more people are applying for safer and conforming FHA mortgage products."
~ BusinessWeek, "Has the Mortgage Crisis Finally Peaked?," October 24, 2007, by Maya Roney
Oct 27, 2007
Rob Bradley on the key to energy sustainability
Capitalist institutions are the key to "energy sustainability." Energy capitalism - not the alarmist, statist notions of "energy security," "energy independence," or "climate stabilization" - should be the North Star of U.S. and world energy policy.
~ Robert L. Bradley, Jr., president, Institute for Energy Research, "2007 Activity Update," August 2007
Kevin Duffy on the government printing press
The lure of easy money begins with the government printing press. First, the central banker buys an asset – typically a government debt instrument – writes a check on itself and deposits it into the banking system. Since the bank never "redeems" the check, this is equivalent to creating money out of thin air. The banker, happy to receive fresh "reserves," loans out all but a sliver. This new money ends up back with the banks, is counted again as reserves, mostly lent out, and so on and so on. Through this process of fractional reserve banking, credit is expanded at a multiple of the initial central bank deposit. Through such a system, the creation of money and credit (the promise to pay money) looks like an upside-down pyramid – essentially a pyramid scheme on top of a counterfeiting operation.
As James Grant has counseled, the inflation process gives a finite pool of capital the illusion of an endless sea of liquidity, in effect "turning all the traffic lights green."
Such a scheme is a concoction of government privilege (or mercantilism), not laissez faire. The so-called "capitalists" are no longer efficient allocators of capital to its most productive uses, but beneficiaries of and cheerleaders for a monetary fraud in which capital is debased, taken for granted, and abused. As long as they remain chummy with their friendly liquidity provider of last resort, they can act recklessly without fear of igniting an economic forest fire – or if they do, without fear of having to bear the costs. And as long as the value of their collateral is constantly inflated, they never feel the need to worry about default.
Liberated from the gold standard straightjacket, the system has few restraints. For starters, the counterfeiter has an incentive not to draw attention to his racket. But the effectiveness of his ongoing propaganda campaign has weakened this deterrent. The real inflationary action, however, is in credit expansion. For example, in the last 6 years, the Federal Reserve has grown its balance sheet less than $300 billion while the nation’s money supply has expanded by $4.3 trillion, or 14 times as much. In other words, the central banker can bait the hook, but lenders and borrowers still have to take the bait.
This new money is never evenly distributed, but instead gets funneled into whatever narrow area happens to capture the public’s fascination. As prices and valuations soar, greater doses of credit are required to keep the game going. Either more marginal borrowers are drawn in at ever more precarious levels or greater leverage must be applied to existing borrowers. This is what ultimately doomed the housing bubble. In the end, nearly anyone who could fog a mirror was getting an invitation to join the party.
The trouble with pyramid schemes is that they’re not designed to go in reverse. Eventually, the number of willing dupes is exhausted. The same people who panicked late to get into the game are just as likely to panic when the music stops. The longer the music plays, the more leveraged and unstable the inverted credit pyramid becomes. As the late economist Hyman Minsky observed, "stability is unstable."
~ Kevin Duffy, Bearing Asset Management, "It's a Mad, Mad, Mad, Mad World," May 22, 2007
As James Grant has counseled, the inflation process gives a finite pool of capital the illusion of an endless sea of liquidity, in effect "turning all the traffic lights green."
Such a scheme is a concoction of government privilege (or mercantilism), not laissez faire. The so-called "capitalists" are no longer efficient allocators of capital to its most productive uses, but beneficiaries of and cheerleaders for a monetary fraud in which capital is debased, taken for granted, and abused. As long as they remain chummy with their friendly liquidity provider of last resort, they can act recklessly without fear of igniting an economic forest fire – or if they do, without fear of having to bear the costs. And as long as the value of their collateral is constantly inflated, they never feel the need to worry about default.
Liberated from the gold standard straightjacket, the system has few restraints. For starters, the counterfeiter has an incentive not to draw attention to his racket. But the effectiveness of his ongoing propaganda campaign has weakened this deterrent. The real inflationary action, however, is in credit expansion. For example, in the last 6 years, the Federal Reserve has grown its balance sheet less than $300 billion while the nation’s money supply has expanded by $4.3 trillion, or 14 times as much. In other words, the central banker can bait the hook, but lenders and borrowers still have to take the bait.
This new money is never evenly distributed, but instead gets funneled into whatever narrow area happens to capture the public’s fascination. As prices and valuations soar, greater doses of credit are required to keep the game going. Either more marginal borrowers are drawn in at ever more precarious levels or greater leverage must be applied to existing borrowers. This is what ultimately doomed the housing bubble. In the end, nearly anyone who could fog a mirror was getting an invitation to join the party.
The trouble with pyramid schemes is that they’re not designed to go in reverse. Eventually, the number of willing dupes is exhausted. The same people who panicked late to get into the game are just as likely to panic when the music stops. The longer the music plays, the more leveraged and unstable the inverted credit pyramid becomes. As the late economist Hyman Minsky observed, "stability is unstable."
~ Kevin Duffy, Bearing Asset Management, "It's a Mad, Mad, Mad, Mad World," May 22, 2007
Washington on government
Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master.
~ George Washington
~ George Washington
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| George Washington (1789-1797) 1938 |
John Swinton on a free press
There is no such thing, at this date of the world's history, in America, as an independent press. You know it and I know it. There is not one of you who dares to write you honest opinions, and if you did, you know before hand that it would never appear in print. I am paid weekly for keeping my honest opinion out of the paper I am connected with. Others of you are paid similar salaries for similar things, and any of you who would be so foolish to write honest opinions would be out on the streets looking for another job. If I allowed my honest opinions to appear in one issue of my paper, before twenty-four hours my occupation would be gone. The business of the journalist is to destroy the truth; to lie outright; to pervert; to vilify; to fawn at the feet of mammon, and to sell his country and his race for his daily bread. You know it and I know it and what folly is this toasting and independent press! We are the tools and vassals of rich men behind the scenes. We are the jumping jacks, they pull the strings and we dance. Our talents, our possibilities and our lives are all the property of other men. We are intelligent prostitutes.
~ John Swinton, former Chief of Staff of The New York Times, while giving a toast before the New York Press Club in 1953
~ John Swinton, former Chief of Staff of The New York Times, while giving a toast before the New York Press Club in 1953
Robert E. Lee on the centralization of power
I consider [the maintenance of the rights and authority reserved to the states and to the people] as the chief source of stability to our political system, whereas the consolidation of the states into one vast republic, sure to be aggressive abroad and despotic at home, will be the certain precursor of that ruin which has overwhelmed all those that have preceded it. I need not refer one so well acquainted as you are with American history, to the State papers of Washington and Jefferson, the representatives of the federal and democratic parties, denouncing consolidation and centralization of power, as tending to the subversion of State Governments, and to despotism.
But I will not weary you with this unprofitable discussion. Unprofitable because the judgment of reason has been displaced by the arbitrament of war, waged for the purpose as avowed of maintaining the union of the states.
~ Robert E. Lee, letter to Lord Acton, December 15, 1866
But I will not weary you with this unprofitable discussion. Unprofitable because the judgment of reason has been displaced by the arbitrament of war, waged for the purpose as avowed of maintaining the union of the states.
~ Robert E. Lee, letter to Lord Acton, December 15, 1866
Lord Acton on the Civil War
Without presuming to decide the purely legal question, on which it seems evident to me from Madison's and Hamilton's papers that the Fathers of the Constitution were not agreed, I saw in State Rights the only availing check upon the absolutism of the sovereign will, and secession filled me with hope, not as the destruction but as the redemption of Democracy. The institutions of your Republic have not exercised on the old world the salutary and liberating influence which ought to have belonged to them, by reason of those defects and abuses of principle which the Confederate Constitution was expressly and wisely calculated to remedy. I believed that the example of that great Reform would have blessed all the races of mankind by establishing true freedom purged of the native dangers and disorders of Republics. Therefore I deemed that you were fighting the battles of our liberty, our progress, and our civilization; and I mourn for the stake which was lost at Richmond more deeply than I rejoice over that which was saved at Waterloo.
~ Lord Acton, letter to Robert E. Lee on November 4, 1866
~ Lord Acton, letter to Robert E. Lee on November 4, 1866
Congressman John Rarick on the Council on Foreign Relations
The CFR dedicated to one-world government, financed by a number of the largest tax-exempt foundations, and wielding such power and influence over our lives in the areas of finance, business, labor, military, education and mass communication media should be familiar to every American concerned with good government and with preserving and defending the U.S. Constitution and our free enterprise system. Yet, the nation's right-to-know machinery, and the news media, usually so aggressive in exposures to inform our people, remain conspicuously silent when it comes to the CFR, its members and their activities. The CFR is the establishment. Not only does it have influence and power in key decision making positions at the highest levels of government to apply pressure from above, but it also finances and uses individuals and groups to bring pressure from below, to justify the high level decisions for converting the U.S. from a sovereign Constitutional Republic into a servile member of a one-world dictatorship.
~ Congressman John Rarick
~ Congressman John Rarick
Lew Rockwell on "natural" disasters
Oddly, and by some strange practice that dates back to, hmmm, the beginning of time, rulers are not to be held responsible for actions that take place on their watch. So the government is not liable. It should be but it isn't. So putting government in charge is always a perfect storm for disaster without responsibility.
~ Llewellyn H. Rockwell Jr., “Land Socialism: Playing With Fire,” October 24, 2007
~ Llewellyn H. Rockwell Jr., “Land Socialism: Playing With Fire,” October 24, 2007
Walter Cronkite on the Rockefeller establishment
The Rockefeller's are the epitome of the nation's permanent establishment: Governments change, economics fluctuate, foreign alliances shift - The Rockefeller's prevail.
~ Walter Cronkite, broadcast journalist, anchorman of The CBS Evening News
~ Walter Cronkite, broadcast journalist, anchorman of The CBS Evening News
Zbigniew Breninski on "a more controlled society"
The technetronic era involves the gradual appearance of a more controlled society. Such a society would be dominated by an elite, unrestrained by traditional values.
~ Zbigniew Breninski, National Security Advisor to President Carter, member of the Council of Foreign Relations
~ Zbigniew Breninski, National Security Advisor to President Carter, member of the Council of Foreign Relations
Carroll Quigley on the Council on Foreign Relations
The Council of Foreign Relations is the American Branch of a society which originated in England and believes national boundaries should be obliterated and one-world rule established.
~ Carroll Quigley, Professor of History at Georgetown University
~ Carroll Quigley, Professor of History at Georgetown University
Chester Ward on elitist groups
The most powerful clique in these elitist groups have one objective in common - they want to bring about the surrender of the sovereignty of the national independence of the United States. A second clique of international members in the CFR comprises the Wall Street international bankers and their key agents. Primarily, they want the world banking monopoly from whatever power ends up in the control of global government.
~ Rear Admiral Chester Ward
~ Rear Admiral Chester Ward
Barry Goldwater on the corridors of power
The Trilateral Commission is international and is intended to be the vehicle for multinational consolidation of the commercial and banking interests by seizing control of the political government of the United States. The Trilateral Commission represents a skillful, coordinated effort to seize control and consolidate the four centers of power - Political, Monetary, Intellectual and Ecclesiastical.
Does it not seem strange to you that these men just happen to be on the Council of Foreign Relations and just happen to be on the Board of Governors of the Federal Reserve, that absolutely controls the money and interest rates of this great country without benefit of Congress? A private owned organization, the Federal Reserve which has absolutely nothing to do with the United States of America.
~ Senator Barry Goldwater, With No Apologies
Does it not seem strange to you that these men just happen to be on the Council of Foreign Relations and just happen to be on the Board of Governors of the Federal Reserve, that absolutely controls the money and interest rates of this great country without benefit of Congress? A private owned organization, the Federal Reserve which has absolutely nothing to do with the United States of America.
~ Senator Barry Goldwater, With No Apologies
Sheldon Richman on resources
Men begin with only their labor and nature-given materials. They have to apply their labor to rearrange the materials in order to produce things of value. That requires ingenuity. And ingenuity is clearly the more important of the two. In fact, it is ingenuity that turns nature-given materials into resources. It was ingenuity that turned worthless underground black gunk into valuable oil. It was ingenuity that turned sand into silicon. Nature, strictly speaking, does not provide resources; it provides materials. A resource is a product of man’s mind; a material stamped with man’s purpose.
As important as ingenuity is to the creation of wealth, it does not exist unconditionally. To think, to discover what they need and how to produce it, men must be free. They can’t create at the point of a gun.
~ Sheldon L. Richman, "Phony Benevolence," The Free Market, October 1989
As important as ingenuity is to the creation of wealth, it does not exist unconditionally. To think, to discover what they need and how to produce it, men must be free. They can’t create at the point of a gun.
~ Sheldon L. Richman, "Phony Benevolence," The Free Market, October 1989
Oct 26, 2007
Erich Zimmermann on resources
Previous to the emergence of man, the earth was replete with fertile soil, with trees and edible fruits, with rivers and waterfalls, with coal beds, oil pools, and mineral deposits; the forces of gravitation, of electro-magnetism, of radio-activity were there; the sun sent forth his life-bringing rays, gathered the clouds, raised the winds; but there were no resources.
~ Erich Zimmermann, World Resources and Industries (1933), p. 3
~ Erich Zimmermann, World Resources and Industries (1933), p. 3
Murray Rothbard on resources
Before the development of the automobile and of modern machinery, the vast pools of petroleum under the earth were totally valueless to man; they were useless, black liquid. With the development of modern technology and industry, they suddenly became useful resources.
~ Murray Rothbard, 1974
Friedrich Hayek on conservationists vs. progress
Industrial development would have been greatly retarded if sixty or eighty years ago the warning of the conservationists about the threatening exhaustion of the supply of coal had been heeded; and the internal combustion engine would never have revolutionized transport if its use had been limited to the then known supplies of oil (during the first few decades of the era of the automobile and the airplane the known resources of oil at the current rate of use would have been exhausted in ten years). Though it is important that on all these matters the opinion of the experts about the physical facts should be heard, the result in most instances would have been very detrimental if they had had the power to enforce their views on policy.
~ Friedrich Hayek, The Constitution of Liberty (1960), p. 369
~ Friedrich Hayek, The Constitution of Liberty (1960), p. 369
A.C. Pigou on resource depletion (1932)
It is the clear duty of Government, which is the trustee for unborn generations as well as for its present citizens, to watch over, and if need be, by legislative enactment to defend, the exhaustible natural resources of the country from rash and reckless despoliation.
~ A. C. Pigou, The Economics of Welfare (1932)
~ A. C. Pigou, The Economics of Welfare (1932)
Sheldon Richman on explaining poverty
Had [foreign aid advocate Mickey Leland] given the issue some thought, he might have discovered that the proper question is not “Why are these people poor?” but rather “Why is anyone rich?” Man was born in poverty; it needs no explanation because it is simply the absence of wealth. What needs to be explained is how anyone ever beat poverty and became prosperous. A certain logic is missing from the simple-minded argument that the rich got that way by robbing the poor.
We needn’t have expected Leland and his colleagues in Congress to discover the truth for themselves. It was readily available to the most casual investigator and has been available for many years.
In the 1830s two Englishmen understood it: standing grief stricken at the grave of a child who had died of starvation, one of them, Richard Cobden, turned to his friend, John Bright, and said, “Come with me. There are in England women and children dying with hunger – hunger made by the laws. Come with me, and we will not rest until we repeal those laws.” In the next decade Cobden and Bright united the efforts of industrialists and laborers in a crusade to repeal the causes of starvation in England: the Corn Laws, which made grain imports artificially expensive. Their success brought a period of unprecedented prosperity to England.
Cobden and Bright understood the source of prosperity. Men begin with only their labor and nature-given materials. They have to apply their labor to rearrange the materials in order to produce things of value. That requires ingenuity. And ingenuity is clearly the more important of the two. In fact, it is ingenuity that turns nature-given materials into resources. It was ingenuity that turned worthless underground black gunk into valuable oil. It was ingenuity that turned sand into silicon. Nature, strictly speaking, does not provide resources; it provides materials. A resource is a product of man’s mind; a material stamped with man’s purpose.
As important as ingenuity is to the creation of wealth, it does not exist unconditionally. To think, to discover what they need and how to produce it, men must be free. They can’t create at the point of a gun.
~ Sheldon L. Richman, "Phony Benevolence," The Free Market, October 1989
We needn’t have expected Leland and his colleagues in Congress to discover the truth for themselves. It was readily available to the most casual investigator and has been available for many years.
In the 1830s two Englishmen understood it: standing grief stricken at the grave of a child who had died of starvation, one of them, Richard Cobden, turned to his friend, John Bright, and said, “Come with me. There are in England women and children dying with hunger – hunger made by the laws. Come with me, and we will not rest until we repeal those laws.” In the next decade Cobden and Bright united the efforts of industrialists and laborers in a crusade to repeal the causes of starvation in England: the Corn Laws, which made grain imports artificially expensive. Their success brought a period of unprecedented prosperity to England.
Cobden and Bright understood the source of prosperity. Men begin with only their labor and nature-given materials. They have to apply their labor to rearrange the materials in order to produce things of value. That requires ingenuity. And ingenuity is clearly the more important of the two. In fact, it is ingenuity that turns nature-given materials into resources. It was ingenuity that turned worthless underground black gunk into valuable oil. It was ingenuity that turned sand into silicon. Nature, strictly speaking, does not provide resources; it provides materials. A resource is a product of man’s mind; a material stamped with man’s purpose.
As important as ingenuity is to the creation of wealth, it does not exist unconditionally. To think, to discover what they need and how to produce it, men must be free. They can’t create at the point of a gun.
~ Sheldon L. Richman, "Phony Benevolence," The Free Market, October 1989
Sheldon Richman on wealth creation
Let’s dispose of an economic point; the government cannot “redistribute” wealth. The word in quotations marks implies that wealth is initially distributed. It is not. In the market there is no common pot from which someone ladles wealth. The incomes we observe result from a long series of voluntary exchanges. In each transaction, two parties decide that what they will get is more valuable than what they will give up. If each did not believe that, no transaction would occur. (The exception, of course, is income derived from government sources.)
Since there is no distribution, it cannot be judged fair or unfair. No one decided how much each person would get. Rather, everyone had opportunities to enter or not enter into transactions, depending on their values and what contribution they could make to the productive process. It makes no sense to call the “distribution” of income unfair if each step in the series of exchanges that brought that outcome was fair, that is, voluntary.
~ Sheldon L. Richman, "Egalitarianism," The Free Market, July 1990
Since there is no distribution, it cannot be judged fair or unfair. No one decided how much each person would get. Rather, everyone had opportunities to enter or not enter into transactions, depending on their values and what contribution they could make to the productive process. It makes no sense to call the “distribution” of income unfair if each step in the series of exchanges that brought that outcome was fair, that is, voluntary.
~ Sheldon L. Richman, "Egalitarianism," The Free Market, July 1990
Sheldon Richman on the welfare statist
It is bad enough that the administrators of the welfare state are moved by a hatred of ability. The greater tragedy is that they poison the minds of the constituency they so desperately need. Instead of the poor learning to admire the productive and aspire to be like them, they are taught by the system that their poverty is caused by others’ affluence. They learn to resent achievement and to prefer seeing the achievers dragged down. That is all the welfare state can bring about.
The welfare statist will cry out that we have responsibility to those less fortunate. We do, but in a sense other than the egalitarian imagines. We have a responsibility to create and maintain a free society so that all may go as far as their abilities and determination will take them.
~ Sheldon L. Richman, "Egalitarianism," The Free Market, July 1990
The welfare statist will cry out that we have responsibility to those less fortunate. We do, but in a sense other than the egalitarian imagines. We have a responsibility to create and maintain a free society so that all may go as far as their abilities and determination will take them.
~ Sheldon L. Richman, "Egalitarianism," The Free Market, July 1990
Teddy Roosevelt on war and peace
No triumph of peace is quite so great as the supreme triumphs of war.
~ Theodore Roosevelt
~ Theodore Roosevelt
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| Theodore Roosevelt 1901-1909 |
Plato on speaking and listening
Wise men speak because they have something to say; fools because they have to say something.
~ Plato (428 BC-348 BC)
~ Plato (428 BC-348 BC)
Plato on politics
Those who are too smart to engage in politics are punished by being governed by those who are dumber.
~ Plato (428 BC-348 BC)
~ Plato (428 BC-348 BC)
Plato on justice
Justice in the life and conduct of the State is possible only as first it resides in the hearts and souls of the citizens.
~ Plato (428 BC-348 BC)
~ Plato (428 BC-348 BC)
Tolstoy on rationalization
To sin is a human business, to justify sins is a devilish business.
~ Leo Nikolaevich Tolstoy
~ Leo Nikolaevich Tolstoy
Goering on bringing the people to war
Why, of course, the people don’t want war. Why should a poor slob on a farm want to risk his life in a war when the best thing he can get out of it is to come back to his farm in one piece? Naturally the common people don't want war; neither in Russia, nor in England, nor in America, nor in Germany. That is understood. But after all, it is the leaders of the country who determine policy, and it is always a simple matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship.
Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.
~ Hermann Goering, at the Nuremburg Trials
(This quote was part of a conversation Gustave Gilbert, a German-speaking intelligence officer and psychologist, held with a dejected Goering in his cell on the evening of April 18, 1946, as the trials were halted for a three-day Easter recess.)
Voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is to tell them they are being attacked, and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same in any country.
~ Hermann Goering, at the Nuremburg Trials
(This quote was part of a conversation Gustave Gilbert, a German-speaking intelligence officer and psychologist, held with a dejected Goering in his cell on the evening of April 18, 1946, as the trials were halted for a three-day Easter recess.)
Schopenhauer on truth
All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
~ Arthur Schopenhauer, (1788 - 1860)
Atlanta Fed study: Why the rise in homeownership?
After three decades of stability, the national rate of homeownership suddenly began rising around 1995. The rush to buy homes fueled an enormous surge in housing construction and home prices. Experts differed on the cause of the increase in homeownership, from 64.2% of households in early 1995 to 69.1% in early 2005. Was it the aging of the population? Or was it an expression of what President George W. Bush calls the "ownership society"?
Neither. Surprising new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by innovations in the mortgage market, in particular the explosion of "piggyback" or "combo" loans that made it possible for people to make small or zero down payments. Young families with little savings flocked to those loans to buy first homes.
Trouble is, lenders aren't making many of those loans anymore because default rates on the smaller, second loans have been extremely high. That means that one of the main props of the housing market has been kicked away. If the homeownership rate drifts back to where it was in 1995, the outlook for housing construction and home prices could turn out even worse than the pessimistic projections.
The Atlanta Fed paper, "Accounting for Changes in the Homeownership Rate," was published in September. Its authors are Matthew Chambers, an economist at Towson University in Maryland; Carlos Garriga, an economist at the Federal Reserve Bank of St. Louis; and Don Schlagenhauf, an economist at Florida State University and a visiting scholar at the Atlanta Fed.
Many analysts have fingered easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy econometric analysis, the authors conclude that the availability of new kinds of mortgages, mainly ones with low down payments, accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31% of the effect.
~ BusinessWeek, "A Troubled 'Ownership Society'," October 22, 2007, by Peter Coy
Neither. Surprising new research published by the Federal Reserve Bank of Atlanta concludes that the bulk of the increase was caused by innovations in the mortgage market, in particular the explosion of "piggyback" or "combo" loans that made it possible for people to make small or zero down payments. Young families with little savings flocked to those loans to buy first homes.
Trouble is, lenders aren't making many of those loans anymore because default rates on the smaller, second loans have been extremely high. That means that one of the main props of the housing market has been kicked away. If the homeownership rate drifts back to where it was in 1995, the outlook for housing construction and home prices could turn out even worse than the pessimistic projections.
The Atlanta Fed paper, "Accounting for Changes in the Homeownership Rate," was published in September. Its authors are Matthew Chambers, an economist at Towson University in Maryland; Carlos Garriga, an economist at the Federal Reserve Bank of St. Louis; and Don Schlagenhauf, an economist at Florida State University and a visiting scholar at the Atlanta Fed.
Many analysts have fingered easy lending as a contributor to the housing boom, but the Atlanta Fed paper may be the first to quantify its effect in a rigorous way. Using math-heavy econometric analysis, the authors conclude that the availability of new kinds of mortgages, mainly ones with low down payments, accounted for 56% to 70% of the decade-long increase in the U.S. homeownership rate, while demographic changes accounted for only 16% to 31% of the effect.
~ BusinessWeek, "A Troubled 'Ownership Society'," October 22, 2007, by Peter Coy
Hitwise: Searches for "housing bubble" hit 2-year low
As of the week ending February 17th 2007, searches for "housing bubble" have reached a two year low, only 4.4% of the searches on the same subject that occurred during the second week of June 2005. A media frenzy around a pending correction occurred that very same week, which demonstrates just how suggestible we are, as well as how short our attention spans can be.
But while the bubble seems not to be a major concern, there is a growing game of chicken between buyers and sellers. In the past, searches for "homes for sale" have outnumbered "homes for rent" by nearly 3 to 1. As of last week that margin was cut nearly in half as online domicile searchers indicated their willingness to at least explore renting pending a drop in home prices.
~ Bill Tancer, general manager of global research, Hitwise, "Will The Housing Bubble Burst in 2007?," Time, February 22, 2007
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