Dec 30, 2008

John McCain on the economy (2008)

The fundamentals of our economy are strong.

~ Sen. John McCain, former Republican presidential candidate, Sept. 15, 2008

George W. Bush on bailouts (2008)

I don't think the government ought to be involved in bailing out companies.

~ President George W. Bush, July 15, 2008

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Alan Schwartz on Bear Stearns: No liquidity crisis (2008)

We don't see any pressure on our liquidity, let alone a liquidity crisis.

~ Alan Schwartz, CEO of Bear Stearns, March 12, 2008

John Thain on Merrill Lynch: "We have more capital than we need" (2008)

We have more capital than we need, so we can say to the market that we don't need more injections. We can confirm that we have tackled the problem.

~ John Thain, former CEO, Merrill Lynch, March 16, 2008

Dec 26, 2008

Norman Thomas on the importance of propaganda in bringing about socialism in America

The American people will never knowingly adopt Socialism. But under the name of ‘liberalism’ they will adopt every fragment of the Socialist program, until one day America will be a Socialist nation, without knowing how it happened.

~ Norman Thomas, a one time US presidential candidate

Pat Buchanan on Ronald Reagan protecting the auto industry

Bush may believe he has sinned against free-market principles, but he is following the path of his great free-market predecessor. Ronald Reagan, too, was not prepared to see Japan take down the U.S. auto industry, or steel industry, or computer chip industry, or Harley-Davidson.

Believing Japan was dumping to destroy U.S. companies, Reagan put patriotism before ideology and imposed quotas on Japanese imports. He, too, was castigated by the same commentariat that is berating Bush.

~ Patrick J. Buchanan, "George Bush, Protectionist,", December 26, 2008

Pat Buchanan on the auto bailout

Averting Chapter 11 for GM, which could lead to liquidation of the greatest manufacturing company in U.S. history -- cutting America out of the premier consumer market of the 21st century -- makes sense not only from the standpoint of politics, but economics, as well.

~ Patrick J. Buchanan, "George Bush, Protectionist,", December 26, 2008

George W. Bush on loaning $17 billion to the Big Three auto companies

I've abandoned free-market principles to save the free-market system... to make sure the economy doesn't collapse.

~ President George W. Bush, interview with CNN, December, 2008

Dec 24, 2008

Martin Feldstein on using defense spending to stimulate the economy

The Department of Defense is preparing budget cuts in response to the decline in national income. The DOD budgeteers and their counterparts in the White House Office of Management and Budget apparently reason that a smaller GDP requires belt-tightening by everyone.

That logic is exactly backwards. As President-elect Barack Obama and his economic advisers recognize, countering a deep economic recession requires an increase in government spending to offset the sharp decline in consumer outlays and business investment that is now under way. Without that rise in government spending, the economic downturn would be deeper and longer. Although tax cuts for individuals and businesses can help, government spending will have to do the heavy lifting. That's why the Obama team will propose a package of about $300 billion a year in additional federal government outlays and grants to states and local governments.

~ Martin Feldstein, "Defense Spending Would Be Great Stimulus," The Wall Street Journal, December 23, 2008

Dec 19, 2008

Stephen Jen on the dollar

The dollar's rise is genuine and more deserving than many skeptics have in mind.

~ Stephen Jen, economist, Morgan Stanley, "What's Driving Up the Dollar," BusinessWeek, December 8, 2008

Todd Salamone on the stock market (2008)

We've entered a black hole.

~ Todd Salamone, Schaeffer's Investment Research, "Reading the Market's Signposts," BusinessWeek, November 20, 2008 (December 8 issue)

Dec 17, 2008

Ken Fisher on comparisons to the 1929-1932 bear market and limited downside (2008)

This is not 1929-1932. The fact that people say it's like 1929-1932 is actually bullish. That is, that's regularly trotted out about every third bear market. And, the fact of the matter is, bear markets - I mean we're not in a 1929-1932 world; we're in a very different world. After every bear market there's a bull market. And this is the time - since no one can tell exactly when the bottom will be - this is the time to be thinking longer term about where stocks will be two or three years from now. And the fact is two or three years from now they ought to be pretty good.

There is no doubt, you could see the market down before it goes up. But my point is the bottom of bear markets is a very short time period with a steep "V," and you can't time the bottom of that with any precision. Anybody who thinks he can is an overconfident fool. And the fact is, you gotta be in it to win it. And you might lose it before you win it. But you gotta remember, that the next bull market is huge compared to any downside from here.

~ Ken Fisher, Fisher Investments, "Ken Fisher touts 'road to riches' despite meltdown,", October 10, 2008, interview with Steve Gelsi

(Fisher, 57, who went to Humboldt State University to study forestry and graduated with a degree in economics, said the current credit crisis could be eased considerably with better monetary policy.

The U.S. Federal Reserve under Ben Bernanke should consider dropping its discount rate so it's lower than both the Federal Funds Rate and the rate on Treasurys, he said. Together with a drop in reserve requirements for banks, the measures would help free up lending, he said.)

Paul McCulley: Bernanke won't allow a depression

We are not going to have a depression. Ben Bernanke is not going to allow us to have a depression.

~ Paul McCulley, Pimco, as appeared on CNBC, December 27, 2008

Dec 14, 2008

Arnold Schwarzenegger on economic girly-men

And to those critics who are so pessimistic about our economy, I say don't be economic girly-men!

~ Arnold Schwarzenegger, September 1, 2004

Dec 10, 2008

Jim Chanos bearish on China and infrastructure plays

[Jim] Chanos was excited that afternoon. He had just read a report that China’s electric consumption had dropped 4 percent, despite official government statistics that the Chinese economy was growing at 8 percent. He relished the implications. “I think they’re making up the numbers!” he said. As Wall Street picks up the pieces of the broken financial system, Chanos is already one step ahead. He sees China as the next domino to fall in the global meltdown. In recent months, Chanos has loaded up short positions on the infrastructure companies that have rushed to build China’s new highways, bridges, and tunnels. Now he is waiting for their share prices to tank.

~ Gabriel Sherman, "The Catastrophe Capitalist," New York Magazine, December 7, 2008

Dec 9, 2008

BusinessWeek on billionaire Kirk Kerkorian's ill-fated bets on Ford Motor and Las Vegas

It was to be the culmination of Kirk Kerkorian's drive to become Las Vegas' largest player. But the $9.3 billion CityCenter project, a gangly collection of four hotels, an Elvis-themed Cirque du Soleil show, and 2,700 high-priced condos, has become the billionaire's disaster in the desert. Beset by cost overruns, the MGM Mirage project has helped devastate the value of Kerkorian's 54% stake in the casino giant, at a time when he was pledging his casino shares for a line of credit and placing a big bet on Ford Motor stock.

~ BusinessWeek, "Kerkorian's Other Problem," October 22, 2008 (Nov. 3 issue)

BusinessWeek on hedge fund dumping of leveraged loans

Perhaps nowhere has rapid-fire selling been more pronounced than in the $500 billion market for so-called leveraged loans. In recent years companies sold these securities to finance private equity buyouts, acquisitions, and other corporate deals. But hedge funds, which lined up to buy the loans during the boom, have been off-loading them in recent weeks to meet redemptions and margin calls.

Highland Capital Management, a $38 billion money-management shop that invested heavily in this arena, has been among the most aggressive sellers of leveraged loans. Highland declined to comment.

The sell-off by hedge funds and other investors is depressing loan prices. In recent weeks the value of the typical loan, according to research firm Standard & Poor's LCD, quickly dropped from 85¢ on the dollar to just 66¢, a deeply distressed price usually reserved for companies that are in bankruptcy. (Historically, investors have recovered 70¢ on the dollar when a company defaults.)

Yet few of the companies whose loans are trading near those prices, including utility TXU Energy and credit-card processor First Data, are in such dire straits. "The loan market is a very funny place right now," says David Ford, a founding member of Latigo Partners, a hedge fund that buys distressed investments. "It's not being driven by fundamental forces."

In essence, the market is suggesting that owners of such securities won't get their money back. That unlikely scenario has some market observers scratching their heads. In the event of bankruptcy, investors in leveraged loans are the first to be repaid, outranking other holders of corporate debt and stock. And many companies today have more than enough assets on hand to make their loan investors whole. For example, Tennessee-based Community Health Systems (CYH), whose loans are selling for roughly 75¢ on the dollar, has $9 billion in assets, far more than its $6 billion in loans.

~ BusinessWeek, "The Hedge Fund Contagion," October 22, 2008 (Nov 3. issue)

Richard Kovacevich on bailouts and who should be first in line

Q: If the government is going to buy into banks, why not autos, why not airlines?

A: It's important to invest in the banks because banks are the grease that keeps the real economy moving. If there is no financing available for corporations, for consumers, for municipalities, if that does not exist, then no industry can be successful, right? You've got to have that backbone. And that's what you have to do first. Who else you do it with, or for, is for other people to decide. But I think almost everyone agrees, until you fix the financial system, helping others won't make a difference.

~ Richard Kovacevich, CEO, Wells Fargo, "Wells Fargo's Kovacevich: The Importance of Hitting Bottom," BusinessWeek, October 22, 2008 (Nov. 3 issue), interview with Maria Bartiromo

Richard Kovacevich on Wells Fargo's financial strength

Q: Well Fargo has stayed very strong relative to your competitors. Why?

A: We just didn't make some of the mistakes that others did. We still made some mistakes, and that's very unfortunate. In some cases, we should have known better. In general—and I don't know if I take much pride in this—we're probably the least ugly of the ugly ducks because we did not participate in some of the excesses, particularly related to subprime borrowers and [collateralized debt obligations] and highly leveraged loans.

~ Richard Kovacevich, CEO, Wells Fargo, "Wells Fargo's Kovacevich: The Importance of Hitting Bottom," BusinessWeek, October 22, 2008 (Nov. 3 issue), interview with Maria Bartiromo

Richard Kovacevich (Wells Fargo's CEO) on deleveraging

For those of us who are born capitalists, you know, it's an extraordinary time. However, what's happening is a deleveraging of the financial system. By putting in capital instead of just buying loans, for every dollar you put in, institutions get to lever that 10 to 20 times in terms of the loans they can make. So I think it's very wise to attempt to neutralize to some extent the deleveraging that has gone on and will continue to go on by putting capital in that can then be levered.

~ Richard Kovacevich, CEO, Wells Fargo, "Wells Fargo's Kovacevich: The Importance of Hitting Bottom," BusinessWeek, October 22, 2008 (Nov. 3 issue), interview with Maria Bartiromo

Neel Kashkari on stemming the credit crisis

Over the last 15 months or 18 months of the credit crisis it’s only gotten deeper, it’s only gotten more severe. And I would rather be on our front foot, going after the problem aggressively with new programmes, trying to be creative, trying new things, rather than just sitting back and saying, ‘Let’s just let it happen and see what happens, see if the system collapses.’

~ Neel Kashkari, oversees the US Treasury’s $700 billion financial-rescue plan, "Kashkari defends $700-billion financial rescue plan," Bloomberg, December 8, 2008

Neel Kashkari on managing the TARP

[The government is investing in] very high quality institutions of all sizes.

We're not day traders, and we're not looking for a return tomorrow. Over time, we believe the taxpayers will be protected and have a return on their investment.

~ Neel Kashkari, the director of Treasury's Office of Financial Stability, which oversees the $700 billion financial rescue fund, "U.S. taxpayers will see a return from bailout," AP, December 5, 2008

(The Treasury Department has received preferred stock and warrants to buy additional shares in return for the $150 billion it has invested so far in 52 banks, including Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co Inc. But an Associated Press analysis yesterday showed that the warrants to purchase about 1.2 billion additional shares in those banks have so far lost about one-third of their value.)

Nassim Taleb on deflation and Henry Paulson

I know that we're going to have massive deflation. The overhang of debt, massive deflation. Debt needs to be reduced. And [Henry] Paulson seems to be doing a good job. Particularly that they were part of the cause of what happened. It's quite commendable.

~ Nassim Taleb, "A conversation about economics with Nassim Taleb," Charlie Rose, December 3, 2008

Nassim Taleb on hedge funds

I think the hedge funds that we have today, a lot of them are going to disappear and they deserve to disappear. A lot of them never made a penny for their clients, they're taking a lot of hidden risks - they looked good, but in fact they were hiding a lot of hidden risks. But I think there's a role, hedge funds to finance companies, by mature hedge funds - those will survive. You're going to have, of course, survival of a different class of people from the ones who thrived during the Greenspan-Bernanke era. So you will have hedge funds taking risks... but then... society - the responsible people - is not there to bail them out. They'll take risks, but the class of risks they'll be taking is going to be more on the equity side than on the debt side.

~ Nassim Taleb, "A conversation about economics with Nassim Taleb," Charlie Rose, December 3, 2008

Hiromasa Nakamura on deflation

Deflation, rather than supply, sent yields down in Japan. The same situation will occur in the U.S.

~ Hiromasa Nakamura, a senior investor in Tokyo at Mitsubishi UFJ Trust & Banking Corp., "Obama Bonds to Give Buyers Taste of Japan Lost Decade,", December 8, 2008, by Wes Goodman

Wan-Chong Kung on deflation

Deflation fear is alive and well. The constant parallels being drawn to the Depression era as well as to the Japanese experience leads to the feeling we’re looking at a pretty gloomy period for a long time.

~ Wan-Chong Kung, who helps oversee $76 billion in fixed income as a money manager at FAF Advisors Inc. in Minneapolis, the asset-management arm of U.S. Bancorp, "Obama Bonds to Give Buyers Taste of Japan Lost Decade,", December 8, 2008, by Wes Goodman

Ken Heebner on the credit crunch

A year from now, credit will be available because of the government's actions.

~ Ken Heebner, "Heebner the Contrarian," The Wall Street Journal, December 6, 2008, by Diya Gullapalli

(About 40% of Heebner's $4.3 billion CGM Focus Fund was in financial stocks as of Sept. 30, according to its portfolio report.)

Dec 7, 2008

Mark Cuban on the need for public works

I personally don’t think a stimulus package of checks or rebates to the consumer will work. I believe consumers are so beaten up and fearful of the future that they will put it in the bank. Of course 20 years ago that would have been a good thing, These days banks don’t appear to be lending those deposits. So there is no primary or secondary stimulus impact.

Instead, having the government spend money on public works, which in turn creates jobs, will have a quick and positive economic impact. As much as it pains me to write those words, a drowning economy can’t worry about its form as it tries to get back to the surface. Sometimes you have to win ugly.

Private money is going to stay on the sidelines because we all know that there are unbelievable bargains available out there. Our money is waiting to go to equity and debt where we think we will get outsized returns. If and when those returns happen, money will come back in as new capital investment. Until then, the only liquid investor willing to put non current assets on their balance sheet is the government.

My little idea on where the government should spend money in public works projects?

Parks and Schools.

~ Mark Cuban, "Public Works, The Inauguration, and the next BailOut Scandal," blog maverick, November 28, 2008

Dec 5, 2008

Sean Duffy on auto bailouts, failure, and the ultimate Christmas present

I think I know what I want for Christmas!

I would like GM, Ford, & Chrysler to close for good. No more bailouts and sorry litanies about how important these assholes are to the economy.(They are a huge liability.) My impression of the domestic auto industry is like looking into a black hole. Resources get poured in with no return .... never to be seen or heard from again.

Eliminating the so called domestic auto industry by letting them fail....
Now THAT's a Christmas present!

~ Sean Duffy, December 5, 2008

Joshua Powell on the Skyscraper Index

Economist Mark Lawrence created the Skyscraper Index in 1999. That index showed the correlation between economic crashes and tall buildings. The correlation can be unnerving, especially for those in the architecture profession, such as myself. But the past 100 years show strong evidence for Lawrence – almost every time the tallest building in the world is built, there is an economic crash to follow. 1907 brought the Singer Building and the Panic of 1907, 1931 brought the Empire State Building and the Great Depression, the early 1970s brought the Sears Tower and seventies stagflation, and the late nineties brought the Petronas Towers in Kuala Lumpur and the meltdown in the Asian markets. Today is no different. We have the tallest building in the world going up, the Burj Dubai, at the same time that the economy is coming down. The suggestion is that while city skylines are often seen as a symbol of a city’s prosperity, they are also an implication of depression, each of the highest peaks likely representing a crash.

~ Joshua Powell, "The Dollar and the Tower Get in Bed,", December 5, 2008

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Mark Zandi on the policy response to recession

The only way out is for the government to be extremely aggressive, from the Federal Reserve to economic stimulus to the TARP.

~ Mark Zandi, as appeared on CNBC, December 5, 2008

Dec 4, 2008

Bill Miller on a miserable 2008

When you're underperforming and losing more money than the market in a down market, then that's a much more problematic situation. We've performed far worse than I would've predicted we would.

~ Bill Miller, portfolio manager, Legg Mason Value Trust, ""Bottom's been made" in stocks: Legg Mason's Miller," December 3, 2008

(For the year, Miller's flagship Value Trust (LMVTX) fund was down 59.7 percent as of Tuesday, compared to a 41 percent decline in the reinvested returns of the S&P 500 index, according to Lipper Inc., a unit of Thomson Reuters.

Performance over the year-to-date, one-, three- and five-year periods for Value Trust put it at the bottom of the barrel among its peers, Lipper data shows.)

Dec 3, 2008

Johnny Kramer on the persecution of Plaxico Burress for shooting himself in the leg

To summarize, [Plaxico] Burress is being prosecuted not for damaging another person's body or property, for which that person has filed a complaint, seeking restitution and/or damages; he's being prosecuted for not having a permission slip from the State to carry his own property. And the people who helped him get medical treatment are being threatened for not turning Burress in to the State for not having a permission slip and because the piece of his property, for which he didn't have a permission slip, involved in the victimless incident happened to be a gun; and for not cooperating with the State, once the non-crime came to its attention, in helping it gather evidence to prosecute Burress for the non-crime, and possibly to prosecute them for their involvement in the non-crime too.

The despicable treatment by the State of Burress, and the equally despicable threatening of those who went out of their way to help him with his accidental injury, is another example of the State's hegemonic relationship with the people it "serves," as Butler Shaffer has quipped, "the way a cannibal 'serves' his neighbor."

In a free society, Burress would be responsible for paying his hospital bill and for any damage to the nightclub, after which he could put the whole unpleasant accident behind him and get on with his life.

Instead, the State is going to ruin Burress' career and life, and cause unspeakable anguish for his loved ones, by locking him in a cage inside a socialist hellhole for a "crime" that hurt no one except for himself – and even that, just barely. The only victim in this "crime" is Burress.

~ Johnny Kramer, "The Persecution of Plaxico Burress,", December 3, 2008

Sheldon Richman on national pride

There certainly are things about America to love. The philosophy expressed in the Declaration of Independence tops the list. The abolitionist movement is another example. Any dedication to liberty and resistance to tyranny are worthy of admiration.

But for that very reason, so much about “America” deserves not love or pride but contempt. From the start, people in power have sought to nullify the ideals that distinguished America from other countries. The record of U.S. interventionist foreign policy, which has required coercion of the American people and others, is a record of shame. American presidents have supported and even installed dictators to advance the U.S. government’s imperial agenda. Their military policy has regarded civilian lives as expendable in the pursuit of an international regime amenable to the American ruling elite’s mercantile interests. Of course, that was justified as spreading freedom and democracy, a charade that fooled far more Americans than foreigners.

Domestically, freedom and free enterprise have taken back seats to other objectives, such as economic stability or national security. Capitalism in practice has meant a system of mercantilist privilege for wealthy interests, with harmful consequences at home and abroad. That is not something to be proud of. It is something to be condemned.

~ Sheldon Richman, "How Can You Love a Country?," Freedom Daily, December 3, 2008

Sheldon Richman on conservatives and nationalism

Worship of the nation and its government is in fact inconsistent with America’s founding ideals. Thomas Jefferson said the appropriate attitude of a free people toward the government is “jealousy” not “confidence,” much less adoration. He spoke of the need to keep it caged. He was right, but if he were around today, conservatives might accuse him of not loving his country. Stripped of its incidental characteristics, government is nothing but physical force. So government, even under the best of circumstances, must always be eyed with suspicion. No Jeffersonian can be comfortable with government activism in foreign affairs. Appeals to security are to be met with high skepticism, for it’s too easy a cover for political intrigue.

That conservatives relish almost any foreign activism shows how un-Jeffersonian they are. They are nationalists and state-worshipers. For them, to love America is to love the government (at least if it is run by one of their own) because it is the government that embodies the nation and the nation is great and deserving of reverence.

~ Sheldon Richman, "How Can You Love a Country?," Freedom Daily, December 3, 2008

Dec 2, 2008

Benjamin Franklin on virtue and freedom

Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters.

~ Benjamin Franklin

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Benjamin Franklin

Alexis de Tocqueville on individual rights

It is therefore most especially in the present democratic times that the true friends of the liberty and the greatness of man ought constantly to be on the alert, to prevent the power of government from lightly sacrificing the private rights of individuals to the general execution of its designs. At such times, no citizen is so obscure that it is not very dangerous to allow him to be oppressed; no private rights are so unimportant that they can be surrendered with impunity to the caprices of a government.

~ Alexis de Tocqueville, Democracy in America (1835)

Ron Paul on capitalism

Capitalism is not a system, but rather the result of free individuals taking economic actions without interference by government. A true capitalist economy is neither planned by bureaucrats nor steered by regulators.

~ Ron Paul

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