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Showing posts from April, 2008

Thomas E. Woods: the 33 Questions

Thomas E. Woods talks with the Mises Institute's Jeffrey Tucker about some of the topics and themes in his book, "33 Questions About American History You're Not Supposed to Ask".I've been meaning to put this clip up for some time, and having watched it again yesterday, I am reminded again of why I so enjoyed this discussion.

There's a little bit of everything here, from discussion of states' rights, the policies that came out of Progressive era, the founding of the Federal Reserve, the Great Depression, deification of certain American historical figures, and more.

I hope you enjoy this clip, and that it opens up some curiousity and interest in some of the topics that are covered here.

Ron Paul on CNN

Ron Paul talks to CNN about his Presidential campaign, the importance of sound money, finding free-market solutions to our national problems, adherence to Constitutional values, and the wisdom of the Founding Fathers in this American Morning interview segment. Paul's comments on the Fed's control over interest rates and monetary policy are especially relevant and timely, as traders and market-watchers await the Fed's decision on interest rates due later today. Thanks to Colleen for sending this clip!

Items of interest

Nassim Taleb, Kevin Phillips, Warren Buffett, and Jeremy Grantham. These are just some of the subjects (and authors) of today's wrap-up of recent news, articles, and interview features.

There's a lot of great stuff here that I couldn't fit into last Friday's "Features" post, and some very recent posts and news items found in the last 24 hours (including news of the Berkshire Hathaway-financed Mars-Wrigley deal). We'll provide a quick summary of each item; the rest is up to you!

1. Mars, Buffett to buy Wrigley for $23 billion. Berkshire Hathaway will help finance Mars' buyout of Wm. Wrigley Jr. Co. at $80 per Wrigley share. Excerpt from the MarketWatch piece:

"Wrigley will become a stand-alone, separate Mars subsidiary, in which Buffett's Berkshire Hathaway (BRKA) (BRKB) will make a minority investment, Mars said.Specifically, Berkshire Hathaway will make a $2.1 billion equity purchase in Wrigley. It will be bought at a discount to the share pri…

Features of the week

Welcome to this Friday's edition of, "Features of the week". Enjoy!

1. US consumer confidence falls to a 26-year low.

2. The SEC fines a trader for spreading false Blackstone deal rumors.

Funny how some individuals are targeted and fined for spreading false rumors, while media outlets seem to get a free pass (and a possible ratings-boost to boot)!

For added perspective, here are some past comments on moving the markets with rumors, and companies blaming short sellers for their demise, from Gary Kaltbaum (via BMB).

Plus, this post on the SEC targetting short-sellers in the Bear Stearns bust, and one blogger's take on bear raids.

3. The Shanghai Composite Index has fallen 50 percent from its peak.

4. Star subprime trader Josh Birnbaum has left Goldman Sachs to start a $1 billion hedge fund.

5. Superstar hedge fund trader Greg Coffey will leave GLG Partners, and forgo $250 million in compensation, to start his own fund.

6. UBS to start freight futures index.

7. Base metals are…

Wave of bank failures expected

The Financial Times has a front page article today (4/23) entitled, "Regulator fears wave of bank failures".

The regulator in question is US Comptroller of the Currency John Dugan, whose office overseas 1,700 national banks and nearly two-thirds of the assets in the nation's commercial banking system.

In an interview with the FT, Mr. Dugan said that bank failures could rise above "historical norms" after a four-year period in which no financial institution under his watch had failed.

""We're going to have some more bank failures that will come back more to historical norms and may go above that with time," he said. "That is a natural consequence of the economy going from historically exceptionally benign credit conditions to something that is more normal to something you would get in a downturn."

Mr Dugan's comments come as US banks report big spikes in reserves for expected losses on consumer and small business loans, reflect…

Government meddling on food prices

In last week's post on rising food prices, we tried to briefly outline some of the factors behind higher commodity prices and growing food shortages.

While I mentioned things like water shortages, loss of arable land, dwindling global stockpiles of grain, and monetary inflation, I seem to have overlooked a major force affecting prices of agricultural commodities: government intervention.

Government Intervention At Work

Now, while I'm no seasoned observer of the farming and agriculture industries, I have learned enough in recent years to know better. If you've ever heard or read about crop subsidies, food import and export tariffs/restrictions, and ethanol mandates, you know that farming is rife with government intervention worldwide.

So, when I read a clutch of articles on this topic (under the World News heading of "Global Food Crisis") in yesterday's (4/21) print edition of the Financial Times, it was no real surprise to see the theme of government interventi…

Bad day for banks

What timing. Hot on the heels of Wilbur Ross' recent comments on expected difficulties for regional banks, came Monday's news of further trouble for US banking sector.

Bank of America and National City figured prominently in Monday's news, as losses from bad loans hurt BoA's first-quarter earnings, and National City sought funds from private equity investors after reporting a first-quarter net loss of $171 million.

More from Bloomberg:

"U.S. stocks fell for the first time in five days after worsening credit losses at Bank of America Corp. and National City Corp. undermined confidence that banks are overcoming the subprime mortgage market's collapse.

Bank of America, the second-largest U.S. bank by assets, retreated after bad loans caused first-quarter profit to trail analysts' estimates. National City tumbled to a 17-year low as Ohio's biggest lender was forced to cut its dividend and sell stock at a 40 percent discount to last week's closing price.…

Features of the week

Credit crisis (a dwindling or growing problem?), banks vs. trading exchanges, Uranium, a commodities bubble or lack thereof, the future of capitalism, plus interviews with Jim Rogers and Henry Kaufman.

All this and more in this Friday's edition of, "Features of the week".

1. Barron's profiles the top 75 hedge funds and their winning strategies.

2. Sell capitalism. Support for free market economies declined in 10 of 18 countries polled by Globespan.

3. Has capitalism failed? As Ron Paul notes, first we must properly define our terms.

4. Bond investors turn bearish amid commodity inflation.

5. 40 years of inflation, 80 years of Dow/Gold. Adrian Ash.

6. The next unsustainable asset bubble: brought to you by the Fed.

7. Rice traders hit by panic as prices surge.

8. Sugar seems to be a currently overlooked commodity.

9. Show me the commodity bubble! Parts one and two. Chris Puplava.

10. Frank Barbera looks at the Uranium sector. Parts one and two.

11. Barron's catches up with …

Waking up to economic reality

John Rubino has posted an insightful new article called, "America, Ex-Distortion", to the DollarCollapse website.

In a nutshell, this piece describes how America is slowly waking up to economic reality, as mainstream observers start to uncover the truth of how government statistics distort the true picture of the nation's economic health.

To illustrate this point, Rubino highlights a recent article adressing this topic by Kevin Phillips in Harper's Magazine. Here's an excerpt from Kevin Phillips' article.

"...since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured.

The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and fina…

On rising food prices

You've probably noticed the recent spate of articles and news stories documenting the rise in global food prices.

If you've been out shopping for food items, or live in a country facing unrest due to these problems, then you've experienced this trend firsthand.

Today we're going to review some previous posts and include a few new items that address this topic. But first, let's look at the trend towards increased news coverage of this topic.


Increased Attention to Rising Food PricesAs you can see from the Google Trends graph, search volume for the query, "food prices", has been appeared pretty stable over the past several years, with a recent rising trend from 2007 into 2008.

What's very notable in this chart is the surge in news reference volume; since the start of 2007, the pattern of occasional upsurges in news on food prices has been replaced with a steadily rising trend in news coverage and reference volume. Note the surge in news items going into…

Jukebox

Willkommen in der jukebox. Leave your requests...

1. OMD - Enola Gay.
2. The Cure - High.
3. Suede - The Wild Ones.
4. Stone Roses - Waterfall.
5. Duffy with Bernard Butler - Rockferry.
6. Primal Scream - Damaged.

Features of the week

The week in review, and the shape of things to come. It's all right here in our, "Features of the week".

1. The smartest men in the room. Whiskey & Gunpowder celebrates the traders who caught the short side of the subprime trade.

2. Subprime losses to total $1 Trillion. Nouriel Roubini called it.

3. Asian inflation begins to sting US shoppers.

4. Ivy League asset allocation excites Wall Street.

5. Follow the money: vast amounts of cash sitting on the sidelines.

6. Tim Wood looks at the stock market from a Dow Theory perspective.

7. Ten questions for Irwin Yamamoto. Kirk Report Q&A.

8. Rice riots signal a top in the rice futures market.

9. Commodities: "Show me the bubble!", writes Chris Puplava.

10. Oil producers struggle with the costs of developing new oil fields.

11. Saudi oil minister Al-Naimi claims there is a current lack of demand for oil, and that Saudi oil supplies are readily available should demand increase.

But even as demand forecasts are reduced, cr…

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore. Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf).

But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry).

"During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly.Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fort…

John Paulson: $3 billion man

In an update to Trader Monthly's recent rundown of Wall Street's top earners in 2007, the Financial Times ran an article focused on the man at the head of that list: hedge fund manager, John Paulson.

Paulson, head of the New York investment fund Paulson & Co., topped the list with an estimated $3 billion in personal earnings during 2007.

This unprecedented level of annual pay was reached at a time when Paulson & Co.'s subprime-shorting strategy led outsized returns in several of its funds, most notably the Paulson Credit Opportunities Fund.

Here's an excerpt from FT's article, "Top hedge fund manager earns $3 billion":

"The 10 best-paid hedge fund managers took home more last year than the combined GDP of Afghanistan and Mongolia as those predicting the global financial meltdown made record profits. Between them, the top 10 individuals earned up to $14bn, according to estimates by the magazine Trader Monthly, John Paulson in New York making $…

Interview w/ Bill Fleckenstein

Financial Sense Newshour recently interviewed William Fleckenstein, investment manager, financial columnist, and author of the new book, Greenspan's Bubbles.

I posted this interview link in our last Features post, but for those who missed it,here it is again. I thought this would be especially useful since, as Tim Iacono and Barry Ritholtz point out, former Fed Chairman Alan Greenspan is currently engaged in a full court press to convince the media and the public that the housing bubble and its aftermath were, "not my fault!".

You'll find plenty of criticism of the Greenspan Fed's policies in Fleckenstein's book, but what I really wanted to key in on was a much bigger point made at the start of Fleckenstein's FSN intervew.

Jumping right in from the intro, FSN host Jim Puplava introduces a little recognized theme for discussion: the Fed as central planner.

"Bill, I want to start out with the concept of central banks that many may not recognize, and th…

The Founding of the Federal Reserve

Last week we spent a lot of time talking about the Federal Reserve, specifically the recent US Treasury-sponsored blueprint that would expand the Fed's regulatory powers and grant the central bank an official mandate to "stabilize markets".

In all the discussion over this recently-proposed framework, I hear very little mention of the fact that a privately-owned, or quasi-public, central bank (the Federal Reserve) is now being cast as a US regulatory agency.

With last week's proposal to reshape the Fed's role with increased oversight of the financial markets, the Federal Reserve is now seen as a lender of last resort to non-bank financial institutions, a regulator of financial markets, and a market stabilizing agent.

Just how did this amazing transformation take place?

To answer that question, I think we first need to look at how and why the Federal Reserve system came about in the first place.



To shed some more light on this topic, here is a video clip of Austrian…

Features of the week

It's been a week for wondering about the future of markets, speaking both in terms of future price direction and the very structure of our "free" capital markets in an age of increased bailouts and government intervention.

Let's review this week just ending and have a look at what may come in the weeks ahead. Please make yourself comfortable and enjoy our, "Features of the week".

1. Those curiously strong Transports. Setting up a coming buy signal?

2. Still trying to make sense of the Paulson plan? More thoughts on Fed oversight.

3. Should the Federal Reserve take on an increased role in our capital markets? Mish on the Fed Uncertainty Principle. Hat tip to Bear Mountain Bull.

4. "The Assault on Free Markets" - Peter Schiff.

5. Why the Fed can't do what it wants to do.

6. As cities revive, America's poor are forced to the periphery.

7. Mobile phones are "more harmful than smoking".

8. Housing slump comes to the Hamptons.

9. Gulf states…

More thoughts on Fed oversight

On Monday we talked about the government's recently proposed plan to further Federal Reserve oversight of the financial markets and create a regulatory superagency to oversee "both investor protection and market stability" (LA Times quote).

I thought we'd follow up on this with some facts, and a bit of commentary from both sides. You'll hear the bright side, and get a view of the downside to this recent proposal. Shall we begin?

We'll start with an overview that lays out the nuts and bolts. Here's the Economist's recent take on the "Paulson plan" to revamp the US system of financial regulation.

"The Treasury plan envisages several phases of reform. Short-term goals include the expansion of the President's Working Group (PWG), now a club for only select large regulators, and the creation of a federal Mortgage Origination Commission.

This would consolidate oversight of a process that has wreaked havoc on balance sheets. It is also seen…