Mar 31, 2011

WSJ cites subprime as US credit markets "heal"

Subprime and other residential mortgage bonds that helped trigger the financial crisis are back in vogue with long-term investors, in the latest sign that American credit markets are healing.

~Wall Street Journal editorial staff, story lede, "Subprime Bonds Return", March 31, 2011

Jim Grant on the transition of the US monetary system and the third Fed mandate

I think the difficulty with monetary policy is the nature of the policy itself. We have, over the years gradually, persistently elided [sp?] from a gold standard to a PhD standard. We have moved from central banking to a species of central planning. What our well-intended scholar, monetary policy mandarins are about is the manipulation of the economy, manipulation of interest rates and now, the manipulation of the stock market. You know, they had two mandates confirmed by Congress and they unilaterally have taken up a third, which is the levitation of stock prices.

~Jim Grant, author, Grant's Interest Rate Observer, CNBC's Kudlow Report, March 31, 2011

Mohamed El-Arian begs to be taxed more, argues income inequality is bad

Bill [Gross] and I – we do not consider ourselves elite. In fact, we’d like to be taxed more. I said this even before the Middle East started: It is not in the interest of any society for income inequality to keep on going up. It is in everybody’s interest to avoid the extremes.

~Mohamed El-Arian, CEO, PIMCO, Bloomberg Television interview, March 31, 2011

Mar 30, 2011

Jack Bogle on commodity investing as speculation

The problem with commodities, gold included, is they’re completely ranked speculation while the ways of delivering stock and bond return are easy. Stocks are riskier but they grow at the rate of our GDP. I think this is gonna be a good decade for that, but I’m worried about the obvious aberrations we’re facing in a political system that doesn’t’ want to respond to current events that gravely affect our nation.

~Jack Bogle, founder, Vanguard, FOX Business interview, March 30, 2011

Jack Bogle on stocks vs. bonds in early 2011

This is a very difficult time to invest because the alternatives to stock are not all that attractive. Money market funds, to be candid, are really kind of a bad joke. With bonds, I worry about rising interest rates; it’s highly likely, but I don’t think anything is a certainty. I would confine my bond position to intermediate term bonds or limited-term bonds. So be careful, but you’ve gotta put the money somewhere or it’s not gonna earn anything

~Jack Bogle, founder, Vanguard, FOX Business interview, March 30, 2011

Jack Bogle, king of the money market fund, on cash as an investment

Cash is a terrible long term investment. It is the one way I know of to guarantee you will earn no return from now to your retirement. Why would anyone want to do that? It’s looked at as a haven, things are disruptive now and I’ll go to cash but I will jump back in when things look good. Well you may get out now, but a good example is Japan. That cash was probably raised at the bottom of the US market and Japanese market even more and people are probably now saying I didn’t get back in quickly enough, but getting in and out, I regret to say, is a loser’s game.

~Jack Bogle, founder, Vanguard, FOX Business interview, March 30, 2011

Vanguard founder Jack Bogle on stocks for the long run

Stay the course. Don’t let these distractions get in the way of an intelligent investment program. There is a long trail between today and the retirement of most people. The whole idea of investing is to build a sum for your retirement and there’s no better way to do that than stocks. They will be good in the long run, but not as good as in the past because dividend yields are so low.

~Jack Bogle, founder, Vanguard, FOX Business interview, March 30, 2011

Mar 29, 2011

Jim Cramer sees sky rockets in flight, greater fool growth stock game delight

When lululemon participated in a retail conference January 12th, the CFO said, and I quote, "With this kind of growth course, it's like trying to ride a rocket ship." Well, when people heard that, man, they just panicked. A rocket ship? Rocket ships crash and burn! So they used this excuse to sell in the weeks that followed and they really nailed the stock.

But when I hear rocket ship, I think of a stock soaring into the stratosphere. And when it comes to this kind of explosive, rocket fuel growth story, you want to buy when it's still early and it's supposedly expensive.

~Jim Cramer, host of Mad Money, CNBC's "Mad Money w/ Jim Cramer", February 7, 2011

Jim Cramer discards traditional stock analysis in favor of momentum investing, once more

[Jim Cramer is standing in a yoga pose wearing tight black yoga pants and gray yoga shirt] Why am I standing here in this ridiculous, or perhaps ridiculously fashionable, yoga get up? It's not just because it flatters my figure. And I'm not doing this yoga pose merely to prove I'm the most limber 64-year-old man on television, soon to be 65.

No! I'm standing here in the Warrior II-pose, well, actually I'm standing in the Captain-pose, embarrassing myself on national TV, albeit basic cable, because I will do ANYTHING to help you overcome your fear of red hot stocks. Stocks that you avoid because they're already up huge, but you really should be buying them because some are poised to go higher still. Stocks like lululemon Atheletica, the yoga-oriented athletic apparel retailer that's become incredibly popular with women, and it's even starting to gain some cachet among men, as you can see from this great looking outfit I'm wearing right now.

And you know what? I'm not the only one who likes lululemon! We know via my favorite paper, the New York Post, that Tim Geithner, THE TREASURY SECRETARY -- who, I should add, has done a bang-up job -- he owns the stock! He bought $1,000 worth back in 2007. Should you invest like Geithner? Do you think Geithner does the Captain?

Should you buy some lululemon even though it made a brand new high today? And it's trading at what most people consider to be nosebleed valuations? Forty-two times, sky high earnings! Or is lululemon stock, like it's exorbitantly priced, $100 yoga outfits.

Yes! Lulu looks expensive by most traditional ways of analyzing stocks but that doesn't mean you should stay away from the darn thing, uh uh. The stock looked expensive when I recommended it back in September, when it was at $43.24 and since then it's given us an 81% gain. It looked expensive when I reiterated my buy call in December at $67.80, and if you bought it then you're up 15%, i-in two months!

Lululemon has had a tremendous run, but we don't care where stocks have come from in Cramerica, we only care about where they're going! As for lulu, I still think this steaming hot stock has room to run and I'll tell you why: lululemon is a growth story. It's a company that's still in its infancy, or at least it's childhood. It definitely hasn't yet reached it's adolescence, very similar to the person who is hosting this show.

~Jim Cramer, host of Mad Money, CNBC's "Mad Money w/ Jim Cramer", February 7, 2011

Mar 27, 2011

Marc Faber on crude oil

I still think in a risk/reward view oil is a very attractive commodity.

If you take a very optimistic view of the world namely a global economic recovery, demand in the Western World will pick up and demand in the Emerging World will continue to rise strongly, so from a very optimistic point of view you should be long oil.

[On the flip side,] if you take the ultra bearish scenario, like I do, where you think everything will collapse, that there will be World War III and collapsing countries in the middle East, then supplies will be curtailed and prices will go up.

~ Marc Faber, "Accumulate gold and Japanese shares, says Marc Faber,"Business Intelligence Middle East, March 25, 2011 (quoting Faber from a recent CNBC interview)

Mar 26, 2011

Commodore Vanderbilt on the nature of financial panics and the dangers of credit

I'll tell you what's the matter-- people undertake to do about four times as much business as they can legitimately undertake... There are a great many worthless railroads started in this country without any means to carry them through. Respectable banking houses in New York, so called, make themselves agents for sale of the bonds of the railroads in question and give a kind of moral guarantee of their genuineness. The bonds soon reach Europe and the markets of their commercial entres, from the character of the endorsers, are soon flooded with them...

When I have some money I buy railroad stock or something else, but I don't buy on credit. I pay for what I get. People who live too much on credit generally get brought up with a round turn in the long run. The Wall street averages ruin many a man there, and is like faro.

~"Commodore" Cornelius Vanderbilt, railroad tycoon, stock speculator and corporate titan, commenting on the Wall Street panic of 1873, as quoted in "The First Tycoon", by TJ Stiles

Mar 25, 2011

Jeremy Siegel on the potential for Fed tightening

There's so many steps to go before we hit [a point where the Fed feels compelled to tighten] and Bernanke is going to give a speech that is going to say, you know, 'Our strength is now showing, we're going to remove some of the accomodation'. It'll first come probably with moving just the discount rate and then finally some moves on the Federal Funds, it's not going to come all of a sudden. 'Cause, despite how bad the inflation numbers were on the PPI and the CPI this week, the Core were almost exactly on target. That is what the Fed is looking at so there is no reason for a precipitous move right now. They just have to keep their eyes open for problems.

~Jeremy Siegel, professor of finance, Wharton School of Business, Bloomberg News interview, March 24, 2011

Jeremy Siegel on stock market valuation in early 2011

 [The stock market's valuation is] very attractive. From two perspectives, first of all on the basis of projected 2011 earnings, we're selling at about 13 on the S&P 500 and in a low interest rate environment, such as we are in, that's really very low for valuations. So, I have no problem on a valuation basis at all with this market, I think it certainly has a way to run. I would just love to see, you know, oil and food come down a little bit so we don't have to launch into a massive tightening which certainly would scare the market.

And that might come into being. You know, there's this whole question of radiation from the Japanese reactors. I remember what happened with the SARS epidemic and the swine flu epidemic, actually those were much scarier in some ways than what's going on in Japan in the sense that that really had the potential of spreading worldwide. We know that really, outside the area right around the reactor, worst case scenarios they're talking about maximum 50 miles, I mean, this is not the type of potential that can really thwart the world economy going forward.

~Jeremy Siegel, professor of finance, Wharton School of Business, Bloomberg News interview, March 24, 2011

UBS chief US equity strategist bullish on stocks in early 2011

If the markets off by about 5% over the last few weeks, if you were optimistic before, if you look at the fact that employment is getting better, manufacturing activity in the US is getting better, the stock market is cheaper now, we were optimistic before, I'd be a buyer at the current level.

~Jonathan Golub, chief US equity strategist, UBS, Bloomberg News interview, March 24, 2011

Jeremy Siegel says the bull market is intact, but Bernanke must be watchful

There's always things for the market to worry about. I start worrying when no one worries. Then we're at a top for the market.

In terms of when the Fed starts raising, history shows that, yes, there is a little tremble, a little correction that comes in, but the early tightening by the Fed does not stop a bull market. It's only the very late tightening when they really have to move against the excesses and the inflation that we really see stocks having trouble.

So, there certainly will be a flutter when Bernanke has to make that shift but my feeling is that won't stop the bull market. Also, one must remember that mild inflation, even 2 to 4%, a little bit above the Fed's target, has actually been a sweet spot for stocks historically. Stocks are real assets, they tend to move with prices, it gives corporations and firms pricing power, so I'm not worried about a mild inflation. I think that's not going to be a problem for stocks. Obviously anything more than that, 5, 6%, the Fed would have to move very aggressively.

~Jeremy Siegel, professor of finance, Wharton School of Business, Bloomberg News interview, March 24, 2011

Jeremy Siegel signals concern about Fed-caused price inflation

These inflation numbers are a bit troublesome. Oil continues to be strong, and it was strong even before we had the Mid East situation. Food, as we know, the biggest rise in 25 years on the Consumer Price Index, they can not ignore this forever and that's why my feeling is, you know Trichet has already said with the ECB, 'Maybe we'll raise in April,' that's certainly too soon for the Fed but I think by autumn, Bernanke's got to put out some words that he is thinking and looking at exiting from this enormously accomodative policy they've been following.

~Jeremy Siegel, professor of finance, Wharton School of Business, Bloomberg News interview, March 24, 2011

Barton Biggs says falling house prices will result in QE3

I don't think [the Fed will be forced to raise rates]. I think Bernanke is obsessed with house prices because he knows how important house prices are for the net worth of the average American, and they're crucial. The fact that house prices are still declining has got to be telling him that QE2 is still not doing what he hoped it was going to do.

So, I think if house prices keep falling there's a good probability that he's not going to end QE2 and there may be a QE3.

~Barton Biggs, managing partner, Traxis Partners, Bloomberg News interview, March 24, 2011

Barton Biggs likes China, EMs, growth tech in early 2011

I think China and a couple of the other emerging Asian markets, Indonesia, probably India, are very appealing. I think in the US, tech stocks, particularly the big capitalization, growth tech stocks, and I differentiate between the big capitalization, mature tech companies and the new generation of growth tech stocks, are very attractive. And I still like the oil service stocks, for example.

I can find plenty of good stocks to buy.

~Barton Biggs, managing partner, Traxis Partners, Bloomberg News interview, March 24, 2011

Barton Biggs shares his optimistic investment philosophy, and some concerns

Look, you can't live your life investing on the probability of black swans and so, yes, I think the economic news is very encouraging. We're moving from a snapback and a recovery into a self-sustaining recovery. The data's been a little soft the last couple of weeks but still I think the economic news is good enough both in the US, Europe, Asia and maybe even in Japan to move markets another 10 or 15% from here.

But, if something awful happens in Bahrain and in Saudi Arabia, all bets are off. And if the Europeans continue to muck up this whole sovereign debt situation, that could be a very disconcerting factor. And look, there's always things to worry about and I'm worried about US house prices and again, the data that came out today shows that US house prices on existing homes are still declining and in fact have declined to a new low and that home sales, in other words of these existing homes, have weakened very significantly in the last month and a half or so.

And that's bad, there's no question about it.

~Barton Biggs, managing partner, Traxis Partners, Bloomberg News interview, March 24, 2011

Barton Biggs says he's loaded up on US equities in early 2011

I bought a 10% position in Japan which is hardly a big deal, but I definitely like the US [equity markets]. I've been there all the way through and, frankly, I cut back a little bit during that pullback but I'm pretty well loaded up now.

~Barton Biggs, managing partner, Traxis Partners, Bloomberg News interview, March 24, 2011

Barton Biggs isn't fazed by a couple of black swans flapping around out there

We've certainly had a number of black swan crises, back-to-back, and that's always very disconcerting. But how do I feel now? I sort of feel that we've got through a couple of them and there's still a couple of black swans flapping around out there, but unless you come up with a dire scenario I think we're going to extend the rally back through the highs of a month ago and hopefully further than that.

~Barton Biggs, managing partner, Traxis Partners, Bloomberg News interview, March 24, 2011

Mar 23, 2011

Warren Buffett on inflation as the natural course of democracy

The dollar in 1930, when I was born, the dollar then now is worth 6 cents. Inflation is sort of the natural course, almost, of a democracy. It's easier for politicians to spend than to tax, that can lead to some inflation. It has in the US over the years. The thing you worry about is the thing that happened in the late '70s and early '80s.

It's easier to start than to stop.

~Warren Buffett, the Oracle of Omaha, CNBC interview, March 23, 2011

Warren Buffett worries about inflation but cites 'idle capacity' bulwark

I don't know much about India, but I do know things that lead to inflation over time. And Chairman Bernanke knows a lot better than I do, I'm not claiming superior knowledge on this in any way, but we are doing things which are inflationary and to some extent the Fed has acknowledged that it wants that. It wasn't so long ago that it said it wanted this 2% per year rule for inflation. And that's really something different than it was historically, to actually peg a rate of inflation as being the goal and I think it's going to be very hard to fine-tune that number.

Once you get inflationary expectations starting to build in, and I think they are building in, once you get that ball rolling it's a hard thing to stop. Now, like I say, the Fed is very conscious of that, but being conscious of it doesn't necessarily mean you control it once it gets going.

We have this idle capacity in the United States, we have lots of unemployment so that would argue against inflation catching hold, but just take a look at what's taking place in food and fuel and metals and everything else and it could lead to inflation.

~Warren Buffett, the Oracle of Omaha, CNBC interview, March 23, 2011

Warren Buffett sees economic recovery, warns against further stimulus

I have enormous respect for Bernanke. I think he played a big part in saving the system a couple years ago. And he knows a lot more economics than I do. But this, sort of, stimulative behavior, I don't think it actually is required now. I think the natural resuscitation capabilities of capitalism are showing themselves and the economy is coming back and I would be very careful about how much medicine I gave it.

~Warren Buffett, the Oracle of Omaha, CNBC interview, March 23, 2011

Warren Buffett says the economy may be tapped out on stimulus

I wrote about it a year, year and a half ago, the time would come when we'd have to be very careful about the medicine we were applying to a sick economy. We've applied that medicine in tremendous dosages to a sick economy and it's had good results. I mean, the economy is coming back and it continues to come back, but the danger of the too much medicine may be the next thing we face. It will be the next thing we face.

~Warren Buffett, the Oracle of Omaha, CNBC interview, March 23, 2011

Warren Buffett spots inflation in early 2011

Inflation is creeping in every place, pretty much.

~Warren Buffett, the Oracle of Omaha, CNBC interview, March 23, 2011

Mar 14, 2011

Ray Dalio calls for a "seismic shift" in international monetary policies

I believe that sometime in the next 18 months, we will probably have a seismic shift, very similar to the Bretton Woods breakup in 1971, in which linked monetary policies and linked exchange-rate policies come undone. The pain of holding them together is going to be terrible, and that's going to create the seismic shift

~Ray Dalio, founder and CIO, Bridgewater Associates, Barron's Magazine interview, March 12, 2011

Mar 10, 2011

CNBC's Sue Herrera weighs in on the 2011 bull market

Do I think it's the end of the bull market? No, I don't, but I do think there's probably more volatility certainly and I think there's a lot more downside to go in terms of percent. Maybe another 5% to go in terms of the downside. Whether that happens in a matter of days of stretches out over a couple of weeks, I think you need to continue to watch Europe. They're not out of the woods and they've got some big issues to resolve before that.

~Sue Herrera, co-anchor, CNBC's "Power Lunch", CNBC interview, March 10, 2011

Ron Insana calls for market correction, bearish on 'commodity complex'

I suspect this market is susceptible to a, we're now down 3%, 3-10% off the highs. I am bearish on gold, I own puts on gold just to put that out there, and I am bearish on the commodity complex generally. But I think the risk-reward still favors stocks over the asset classes people have been dabbling in, or, in the case of Treasury bonds, far too deep in for the last several months.

~Ron Insana, CNBC interview, March 10, 2011

"Bond King" Jeff Gundlach says the muni market is the new subprime

You’ve got a history of low defaults, which is comforting. But that kind of sounds like what subprime sounded like back in 2006. You had a triple-A market that had never traded below par, the fundamentals were getting worse and it was owned for a technical reason. In the case of subprime, it was that triple-A rating that had such good treatment from the bank regulators, and the funds with their prospectuses could buy the triple-A rating and all of that.

And the muni market has never really had defaults and it's always had good recovery rates but the fundamentals are bad and its own for a technical reason, which is the tax benefit! People own it for the tax benefit.

I don't think you need to know what the default rates will be or how low 'low' is, munis are going to go down. There are going to be other shoes to drop. There might be so many that it looks like Imelda Marcos's closet when all of those shoes drop because all the states have to deal with this stuff.

Between here and the end game, lies the valley. And the valley is full of fear. I think the muni market is going to go down by at least, on the long end, something like 15 and 20 percent.

~Jeffrey Gundlach, CEO and "Bond King", DoubleLine Capital, CNBC interview, March 9, 2011 

Mar 8, 2011

BofA CEO Moynihan heralds permanent "peace" dividend

I can't stress enough to you how much of a peace dividend we'll get without mergers. That peace dividend is effectively a permanent dividend.

~Brian Moynihan, CEO, Bank of America, BofA analyst day speech, March 8, 2011

Mar 6, 2011

Warren Buffett as economic dictator

I think if credit cards didn't exist, the economy would be better off.

~Warren Buffett, chairman, Berkshire Hathaway, CNBC interview, March 2, 2011

Warren Buffett says America's best days lie ahead

Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.

We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.

~Warren Buffett, chairman, Berkshire Hathaway, Berkshire Hathaway Annual Letter to the Shareholders, 2010

Dennis Gartman on the commodity boom

This one is different. This is sustainable. We’re coming out of global recession, and we’re going into global strength.

~ Dennis Gartman, economist and editor of The Gartman Letter, a market tracker, "Rising Commodity Prices Spur Governments, Companies to Insulate Themselves,", March 4, 2011

Mar 5, 2011

Sam Zell on US debt and inflation expectations

I don't know who's buying 30-year fixed-rate debt. I don't understand TIPS, which are projecting 30 years of benign inflation. I mean, this is the Tooth Fairy coming back in spades.

~Sam Zell, chairman, Equity Investments, CNBC, March 3, 2011

Sam Zell on Medicare

Medicare is an abyss.

~Sam Zell, chairman, Equity Investments, CNBC, March 3, 2011

Mar 2, 2011

Tony Dwyer on the economy

The economy is a lot stronger than people would like to give it credit for.

~ Tony Dwyer, CNBC, March 1, 2011