Oct 29, 2010

Jeremy Siegel on the effect of fear on stock valuations

When all the fears are gone, stocks are going to be selling at 25x earnings.

~Jeremy Siegel, professor of finance, Wharton School, CNBC "Street Signs", October 19th, 2010

Jeremy Siegel on the extreme undervaluation of equities in late 2010

I'm still a believer because, take a look at the large scope of history, the '80s and the '90s were the greatest bull market the world has ever known and we ended in a bubble. Stocks were overvalued then. One thing we know about stock prices is reversion to the mean, and it's usually with a vengeance, which means if you overshoot on the topside you're gonna subsequently overshoot on the bottom side. And that's what happened in the first decade of this millenium, we went from extremely overvalued to March of 2009 we were extremely undervalued.

I still think we're undervalued. My historical studies say this is really a time to pick up stocks.

~Jeremy Siegel, professor of finance, Wharton School, CNBC "Street Signs", October 19th, 2010

Ned Riley says ignore negative news

The more negative news that comes out, it sounds crazy, the better off I feel because people have not embraced the bull market that, really I think, is only in the second or third inning.

~Ned Riley, CEO, Riley Asset Management, CNBC "Power Lunch", October 11th, 2010

James Paulsen on employment growth as stock market stimulus

I think the best news here in recent weeks is that unemployment claims number breaking below 450. If that's a real number and we find out in the next few weeks that we're going to get several prints below that level I think we're going to move this market to new highs before the year's out.

~James Paulsen, Wells Capital Management, CNBC "Squawk Box", October 29th, 2010

Ken Fisher on volatility and indigestion in the markets

This year's just like most, it's just a little volatile.

We come to this point, particularly off of a bear market bottom, a lot of fear, a lot of backward-looking at all of the terrible things we went through and then we get acrophobia and then we get indigestion and what we've been doing all year long has been indigestion.

We're going to have a good time period ahead, markets just have a hard time believing that because we just went through such a bad time period.

~Ken Fisher, CEO, Fisher Investments, CNBC "Squawk Box", October 19th, 2010

Tony Dwyer on the stimulative nature of low interest rates

We always forget the impact of lower rates: what caused the economic slowdown was when long-term interest rates went from 2 to 4%. Now they're back from 4% to 2.5% and that's incredibly stimulative and that means that earnings are only going to get better from here.

~Tony Dwyer, chief equity strategist, Collins Stewart, CNBC "Market Breakdown", October 25th, 2010

Abby Joseph Cohen on the rarity of double-dips

Our sense is that a double-dip, while it can't be ruled out, is extremely unlikely. First of all, they don't happen that often and the last time one did happen a few decades ago, it was a conscious, policy decision by Paul Volcker to really squeeze inflation out of the system. Our sense is that we're in for a period of slow growth but not another recession. So, double-dip, not the most likely scenario.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, CNBC, September 16th, 2010

Abby Joseph Cohen on the risk averse investor in late 2010

In the S&P500 we think fair value by year end is something on the order of 1200. And, of course, this is a market because investors are so risk averse, of very little confidence, they're not willing to look out as much into the future as much as they normally would. So, we think that when investors finally get to the point that they're willing to price-in the outlook for 2011, prices will move higher still for the S&P500.

By the way, this low confidence level and risk aversion is not seen just in the US equity market, but in developed markets around the world, including Europe.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, CNBC, October 4th, 2010

Abby Joseph Cohen on the stop and go economy

It looks to us as if the economy is growing more slowly than it was at the beginning of the year but we just don't see the preconditions for double-dip. So, our judgment is real GDP growth of about 1.5% for the next several months, followed by re-acceleration.

~Abby Joseph Cohen, president and senior investment strategist of Global Markets Institute, Goldman Sachs, CNBC, October 4th, 2010

Brian Belski on the transitioning secular market

The premise is that stocks lead earnings which lead the economy. I think we're in the process of a transition from a secular bear market in equities to a secular bull market in equities.

~Brian Belski, chief investment strategist, Oppenheimer & Co., CNBC Asia, October 19th, 2010

Oct 28, 2010

Rick Santelli on the noble purpose of the Fed

I'm not going to stand here and tell you I think the Fed ought to be disbanded but I certainly think there's some middle ground between how far they've extended into the gray versus disbanding them. There's got to be something in the middle that makes more sense. I personally think this Fed's heart is in the right place but they're out of control in terms of trying to accomplish what their noble purpose is.

~Rick Santelli, CNBC's Squawk Box, October 28th, 2010

Oct 23, 2010

Independent Senate Candidate Warren Mosler Bets $100M Federal Government Can Not Run Out Of Money

I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need. And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce.

Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.

~Warren Mosler, Connecticut Independent candidate for US Senate, "Senate Candidate Bets Congress $100 Million That the U.S. Government Cannot Run out of Money", BusinessWire.com, October 23rd, 2010

Oct 22, 2010

VP Joe Biden on the $814B stimulus package

It’s the best-run federal program there’s ever been.

~ Joe Biden, US Vice President, Bloomberg.com, October 22nd, 2010

Oct 21, 2010

Fed chief Richard Fisher on why QE1 failed to stimulate an economic recovery

The vexing question is: Why isn’t this liquidity being utilized to hire new workers and reduce unemployment? Why is it that, as pointed out in Alan Greenspan’s op-ed in the Oct. 7 edition of the Financial Times, the share of liquid cash flow allocated to long-term fixed asset investment has fallen to its lowest level in the 58 years for which data are available? If current dramatically high levels of liquidity and low interest rates are not being harnessed to add to payrolls or expand capital expenditures, would driving interest rates further down and adding more liquidity to the system through Fed purchases of Treasury securities induce U.S. businesses and consumers to get on with spending it?

The intrepid theoretical economist would argue in the affirmative, the logic being that there is a tipping point at which the market becomes convinced that money held in reserve earning negligible returns is at risk of being debased through some inflation and, thus, should be spent rather than hoarded. Hence, the appeal of the Fed’s showing a little leg of inflationary permissiveness.

There is some valid theory behind this approach. Yet, my soundings among those who actually do the work of creating sustainable jobs and making productive capital investments―private businesses, big and small―indicate that few are willing to commit to expanding U.S. payrolls or to undertaking significant commitments to expand capital expenditures in the U.S. other than in areas that enhance the productivity of the current workforce. Without exception, all the business leaders I interview cite nonmonetary issues―fiscal policy and regulatory constraints or, worse, uncertainty going forward―and better opportunities for earning a return on investment elsewhere as factors inhibiting their willingness to commit to expansion in the U.S. As the CEO of one medium-size business put it to me shortly before the last FOMC, “Part of it is uncertainty: We just don’t know what the new regulations [sic] like health care are going to cost and what the new rules will be. Part of it is certainty: We know that taxes are eventually going to have to increase to get us out of the fiscal hole Republicans and Democrats alike have dug for us, and we know that regulatory intervention will be getting more intense.” Small wonder that most business leaders I survey, including those at small businesses, remain fixated on driving productivity and lowering costs, budgeting to “get fewer people to wear more hats.” Tax and regulatory uncertainty―combined with a now well-inculcated culture of driving all resources, including labor, to their most productive use at least cost―does not bode well for a rapid diminution of unemployment and the concomitant expansion of demand.

So, it is indeed true that some economic theories would lead one to believe we can shake job creation from the trees if we were to further expand our balance sheet, and/or induce greater final demand if people and businesses with money in their pockets believe the central bank will tolerate inflation somewhat “above” levels consistent with our mandate. Yet, to paraphrase the early 20th century progressive Clarence Day―the once-ubiquitous contributor to my favorite magazine, The New Yorker―“Too many (theorists) begin with a dislike of reality.” The reality of fiscal and regulatory policy inhibiting the transmission mechanism of monetary policy is most definitely present and is vexing to monetary policy makers. It is indisputably a significant factor holding back the economic recovery.

~ Richard Fisher, president and CEO of the Federal Reserve Bank of Dallas, "Rangers, Yankees and Federal Open Market Committee: One Game at a Time", Remarks before the New York Association for Business Economics, New York, NY, October 19th, 2010

Armored Wolf hedgefund director dispels the currency war "myth"

The phrase is used by those who think the world is ruled by an intellectual consensus among the elites, but it’s not that complicated. The idea in a post-Bretton Woods world is variable [currency] exchanges. It’s ludicrous to talk about manipulation.

~ John Brynjolfsson, managing director, Armored Wolf, "Brynjolfsson bets on inflation, sees gold at $2,000", MarketWatch.com, October 21st, 2010

Oct 20, 2010

Bill Miller: Best time to invest since early '80s (2010)

This is the best time to invest since probably the early 1980s.

~ Bill Miller, as appeared on CNBC, October 20, 2010

Oct 17, 2010

Sheldon Richman on the charade of left-right politics

The political establishment, helped by the mass media and intelligentsia, has long played a game in this country. It consists in depicting the competition for power as between two blocs: one hostile to business in the name of social justice, the other friendly to business in the name of “the free market.” Each bloc’s talking points and pet projects are calculated in superficial ways to reinforce its signature theme. Whenever the blocs need to rally their respective bases, they accentuate their surface differences. The “anti-business” bloc accuses its opponents of being, say, Wall Street lackeys, while the “pro-free-enterprise” bloc accuses its opponents of being, say, socialists.

It’s all a sham that serves both side’s interests. The rivals actually want two variations of the same thing: the corporate state, a system of economic privilege that transfers wealth via government from market entrepreneurs, workers, and consumers to well-connected business interests.

~ Sheldon Richman, "The Charade," The Freeman, October 15, 2010

Janet Tavakoli on how Bill Gross's Pimco Total Return Fund benefitted from Fed intervention in 2008

On July 15, 2008, ex - Goldman Sachs banker and then Treasury Secretary Henry ( “ Hank ” ) Paulson asked Congress for the authority to buy stakes in Fannie Mae and Freddie Mac. Paulson asserted: “ If you have a bazooka in your pocket, and people know you have a bazooka, you may never have to take it out. ” In my experience, boasting about a big bazooka just tempts the curious to see how you measure up in exciting circumstances, and the person to do that might be named Mr. Gross. Bill Gross manages the Pimco Total Return Fund, the world’s largest bond fund with large exposures to Fannie Mae and Freddie Mac (and AIG along with a number of investment banks as of September 2008). Gross is a fan of Fed intervention, and his investments reflected it. His fund reportedly gained $1.7 billion after the U.S. government took over Fannie Mae and Freddie Mac on Sept 7, 2008.


Bill Gross’s Pimco Total Return Fund had sold $760 million of default guarantees (as credit default swaps) on AIG, and it would have cost him if AIG went under. 22 Mr. Gross might have thought he had a good idea of how the Fed would behave. Pimco had hired Alan Greenspan as a consultant. I was not surprised when Bill Gross said the Fed intervention was a “ necessary step. ”


Pimco ’ s Bill Gross found there is a limit to the Fed’s largesse, and his Lehman investment lost money. In March, Bear Stearns, the fifth largest investment bank, was deemed too big to fail, but the Fed refused to help Lehman, the fourth largest investment bank. As Jim Rogers predicted, larger investment banks than Bear Stearns had problems, and the Fed had other problems besides investment banks — Fannie, Freddie, and AIG. Pimco’s investments were only partially protected by the Fed. The Total Return Fund’s return slumped, and it will be interesting to see if Gross ends up a net winner or a net loser as the market struggles for balance.

~ Janet M. Tavakoli, Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street, Chapter 10

Oct 6, 2010

Warren Buffett on financial bailouts and moral hazard

The common shareholders did not get bailed out of those institutions, they lost hundreds and hundreds and hundreds of billions. There is no moral hazard in terms of big financial company stockholders.

~ Warren Buffett, "Buffett Compares Wall Street to Church With Raffle," Bloomberg.com, October 5, 2010

Oct 4, 2010

Christopher Manion on the foreign policy split in the Republican Party

Foreign policy is the San Andreas Fault of the GOP, because there is huge money in war, and the bloody trough is bipartisan.

~ Christopher Manion, "A Specter is Haunting the Pentagon," LewRockwell.com Blog, October 4, 2010

Oct 1, 2010

Doug Casey on the difference between Democrats and Republicans

Doug: As you know, I've always distinguished them this way: the Democrats definitely don't believe in economic freedom, but they say they believe in social freedom, while the Republicans definitely don't believe in social freedom, but they say they believe in economic freedom. Neither believes in both – that would make them libertarians.

Q: [Chuckles] So, it's what they lie about that really distinguishes them. Or, more to the point, it's not what they believe, or say they believe, that drives them, but what they don't believe. Not what they value, but what they fear. It's not love but hate that is the guiding principle of American politics.

Doug: Exactly. Like most of what we see in politics, it's completely perverse. The only good thing about the Democratic party is that they're at least consistent: they are collectivists and statists through and through. They are collectivists in what they say, and they are collectivists in what they do. That gives them the appearance of being more honest than the Republicans.

Q: They may be crypto-communists draped in red, white, and blue, but at least they're consistent?

Doug: Yes, but not the Republicans. They say they value freedom and the individual, but their actions lie to those claims, and they give freedom a bad name. It makes you reluctant to use words like "free market," when you have the likes of the hostile and mildly demented McCain, and the bent and clinically stupid Bush claiming those principles for what they do.

Q: Makes me mad. It adds insult to injury that Ronald Reagan got elected on essentially libertarian rhetoric – smaller government, lower taxes, getting the state off the little guy's back, etc., and then signed appropriations bills that saw government grow by huge, then-unprecedented amounts. Many people today think the Reagan years prove that less government is a bad idea!

Doug: Remember what the Reagan team used to say, "If not us, who? And if not now, when?" As it turned out, it wasn't them and it wasn't then. The worst enemies of individual liberty are knaves that claim they're for it but utterly betray it. And incompetents and ineffectual fools who say they're trying to save freedom by increasing the size of the state.

~ Doug Casey, Doug Casey on the Tea Party Movement, Interviewed by Louis James, Editor, International Speculator, LewRockwell.com, October 1, 2010

Jim Cramer: "Bear Stearns is not in trouble" (2008)

Dear Jim: Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? --Peter

Cramer says: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

~ Jim Cramer, CNBC's Mad Money, March 11, 2008