Journalist lauds Hugo Chavez's economic miracle (2013)

[Hugo] Chavez became the bugaboo of American politics because his full-throated advocacy of socialism and redistributionism at once represented a fundamental critique of neoliberal economics, and also delivered some indisputably positive results. Indeed, as shown by some of the most significant indicators, Chavez racked up an economic record that a legacy-obsessed American president could only dream of achieving.

~ David Sirota, "Hugo Chavez's economic miracle: The Venezuelan leader was often marginalized as a radical. But his brand of socialism achieved real economic gains," Salon.com, March 6, 2013

Alan Greenspan on the real reason the stock market has risen since 2009

There is an alternate explanation for the rise in the stock market, particularly since early 2009 and that is the  extraordinary increase in productivity in non-financial corporations. Not only labor productivity but productivity in energy, in the use of materials, and a number of other things. And if you construct that into a profit margin indicator, it directly causes a major rise in profit margins, a major rise in earnings, which we've seen. But, because of the so-called equity premium, the price people have to pay for stocks, or, I should say, that issuers have to pay for stocks, in order to get money relative to bonds, that is at the highest level in 50 years.

So, you have earnings pushing up against the structure of a very immobile equity premium and algebraically, the relationship of those two, is the stock price.

~Alan Greenspan, former chairman, Federal Reserve, CNBC interview, June 30, 2011

Alan Abelson builds the skeptic's case against China

In a kind of backhanded recognition of the country's status as a growing economic colossus is the fear, voiced occasionally by market mavens, that should the perpetual China boom go bust, the result would be widespread havoc. As it is, of course, Corporate America and investors here are wild about China.

All of this is a prelude to recommending a piece on China by Ian Johnson in the Sept. 30 issue of the New York Review of Books. Johnson, now based in Beijing, is a former Wall Street Journal writer and bureau chief (we never met him), who has collected a number of awards, including a Pulitzer. His take on China is not only informed but extraordinarily revelatory and compelling.

Early on, he points to "the spectacular misperceptions about China, a key one being that the government has been privatizing the economy." Actually, he says, what it has been doing is turning state-owned enterprises into shareholder-owned companies but—and this is rather a big but—with the government holding a controlling stake. And, he adds, "even today, almost all Chinese companies of any size and importance remain in government hands."

Throughout the '90s and into this decade, he recounts, prospectuses for IPOs of Chinese companies written by Western lawyers fudged the fact that the Communist Party's Organization Department, rather than the company, would remain in control of all personnel decisions. The ability to hire and fire is scarcely trivial. And major Chinese companies, Ian relates, have Party secretaries who manage them in conjunction with the CEO.

China has changed and for the better in many ways, Ian feels, such as largely withdrawing from what he dubs the "personal lives of Chinese citizens," permitting them to "pursue their own ambitions and goals as long as they avoid the high crime of directly challenging the party."

For all the economic growth achieved by what Ian calls China's "conventional mercantilist policies" in the past 30 years, he's skeptical those policies will continue to work in the future. What's badly lacking, in his opinion, is a "more open economic and social system that can foster innovation and creativity." One badly needed reform on this score, he argues, would be to pry loose the Party's iron grip on businesses. But don't hold your breath waiting for that to happen.

The tight ties in China between politics and economics have "created giant state-owned companies that have had spectacular success on foreign stock markets." Those big companies, he goes on, are giants, but merely because of their size. Essentially, they're little more than partially privatized quasi monopolies, not very nimble or inventive or even influential in global markets, except "when trying to buy natural resources."

Ian bemoans the fact that after Tiananmen, the Chinese government "channeled huge sums into better dorms for students, housing for teachers, labs for scientists and junkets for administrators" to little avail. This may have satisfied material demands and lured foreign universities hoping to set up programs in China. But it hasn't produced a bumper crop of "creative and innovative" students that Chinese companies can draw on.

"Even among China's elite universities," Ian claims, the academic level, in most cases, is on a par with one of our "mediocre community colleges."

While economic reform hasn't quite come to a halt, says Ian, the state sector is regaining lost ground in part because of Beijing's policy of "recentralizing control." The powers that be lack any impetus to reform. That would suggest that an awful lot of folks, businessmen and investors alike, in our blessed land who can't wait to get a piece of the Chinese miracle might wake up one day more than a little disappointed.

~Alan Abelson, Barron's magazine, "The Bad News Bulls", September 25th, 2010

Philip Fisher on faulty investment community appraisals of market conditions

Ridiculous as it may seem to us today, in the period from 1927 to 1929, the majority of the financial community actually believed we were in a "new era." For years earnings of most U.S. companies had been growing with monotonous regularity. Not only had serious business depressions become a thing of the past but a great engineer and businessman, Herbert Hoover, had been elected President. His competence was expected to assure even greater prosperity from then on. In such circumstances it seemed to many that it had become virtually impossible to lose by owning stocks. And many who wanted to cash in as much as possible on this sure thing bought on margin to obtain more shares than they could otherwise afford. We all know what happened when reality shattered this particular appraisal. The agony of the Great Depression and the bear market of 1929 to 1932 will be long remembered.

~ Philip Fisher, stock legend, "Still More About the Fourth Dimension", Common Stocks and Uncommon Profits, 1958

Jim Cramer on investing in the "New World" (2000)

You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now. OK. Here goes. Write them down -- no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus, InfoSpace.com, Inktomi, Mercury Interactive, Sonera, VeriSign, and Veritas Software.

You have to throw out all of the matrices and formulas and texts that existed before the Web. You have to throw them away because they can't make money for you anymore, and that is all that matters. We don't use price-to-earnings multiples anymore at Cramer Berkowitz. If we talk about price-to-book, we have already gone astray

So, if you can't own the retailers, and you can't own transports, and you can't own banks and brokers and financials and you can't own commodity makers and you can't own the newspapers, and you can't own the machinery stocks, what can you own? A-ha, that just leaves us with tech. That's why we keep coming back to it. That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now.

~Jim Cramer, former hedge fund manager and host of CNBC's Mad Money, "The Winners of the New World", speech delivered February 29, 2000.

(Note: some analysis of this speech and the later results of Cramer's picks available at Credit Bubble Stocks.)

Ed Yardeni: "Greatest global boom of all time" (2006)

I don't think the economy's "landing." I think the economy's doing great.

It's better than Goldilocks quite honestly. This is the greatest global boom of all time.

~ Ed Yardeni, Oak Investments, as appeared on CNBC, October 18, 2006

Clyde Prestowitz on the Japanese miracle (1988)

The power behind the Japanese juggernaut is much greater than most Americans suspect, and the juggernaut cannot stop of its own volition, for Japan has created a kind of automatic wealth machine, perhaps the first since King Midas.

~ Clyde Prestowitz, Jr., Trading Places (1988)