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Showing posts from July, 2008

The Peter Lynch - Andy Warhol connection

I know I'm not the only one to have noticed a striking resemblance between famed Fidelity fund manager, Peter Lynch, and artist, Andy Warhol.A quick Google search reveals this to be so; it seems quite a few people have commented on the similarity in their looks. So file this post in the "random observation" department, but there is something fun and interesting about this to me. I guess I first noticed how much the two look alike about ten years ago, while reading Lynch's One Up On Wall Street and Andy Warhol and Pat Hackett's Andy Warhol Diaries in close succession.
There was another interesting similarity between Lynch and Warhol that occurred to me over time. Not only did they look alike, but both seemed to be very recognizable public figures and spokesmen for their respective professions.
While Andy Warhol was (and still is) one of the art world's most recognizable figures and an unflinching proponent of the view of art as a business, Peter Lynch was out …

Thomas Donlan on trade, SEC actions

Barron's editorial page editor Thomas G. Donlan has a few things to say about the SEC's latest move to protect financial firms from supposed rumor-mongering and naked short-selling in this week's Barron's editorial commentary.

In, "Swatting an Imaginary Fly", Donlan reminds SEC officials (and Barron's readers) that short-sellers are not to blame for the very real problems facing certain banks and financial companies.

"The SEC also denounced false rumors and undertook to fish through traders' e-mails and phone records in search of rumor-mongers. Its reasoning was simple:

"False rumors can lead to a loss of confidence in our markets. Such loss of confidence can lead to panic selling, which may be further exacerbated by "naked" short-selling. As a result, the prices of securities may artificially and unnecessarily decline well below the price level that would have resulted from the normal price-discovery process. If significant financia…

David Einhorn on FT.com

David Einhorn, founder of Greenlight Capital and author of "Fooling Some of the People All of the Time", speaks with "View from the markets", FT.com's weekly video interview series.

In this three part interview, David offers his view of the recent move by the SEC to curb alleged naked-shorting in a list of 19 financial shares (a move he calls "a rather peculiar action"), the scapegoating of short-sellers for the problems affecting financial companies, the role of ratings agencies and risk management in the financial industry, and investing in distressed debt and shares.

Interestingly, Einhorn refused to provide an update on the status of his past short position in Lehman Brothers. When asked, he did say that his views on the company were well known and that he had nothing new to add at this time.

Is this a sign that Greenlight has decided to cover some or all of its previous short position, or is Einhorn just keeping mum in light of the recent publicity…

Features of the week

Plenty of investment and world news to share this week, with a special focus on banks and derivatives. Let's dive right in to this Friday's, "Features of the week".

1. "Ich bin ein Berliner": Obama-mania grips Europe.

2. Foreclosure activity surges in US (especially in Nevada & California).

3. A look at the US Housing Bill (I guess "GSE bailout bill" didn't have the appropriate ring).

4. Crowd gathers for House Judiciary hearing on Bush "impeachment".

5. Is a UK house price crash in the offing?

6. US and EU expand sanctions against Mugabe government.

Note: Remember what we said on Monday; the Western governments are stepping up their response after Zimbabwe threatened to seize foreign firms supporting Western sanctions. This is about money.

7. India's Sensex drops 502 points after soaring earlier in the week.

8. Jean-Marie Eveillard sees investment opportunity in India and Asia.

9. A recent sharp reversal for the "buy oil, sell…

Marc Faber on Bloomberg

Marc Faber speaks of weakness in the technology sector, a spreading global recession, and issues surrounding Fannie Mae and Freddie Mac in this latest Bloomberg TV interview.

Reiterating certain points made in an earlier interview with CNBC, Marc notes that while Fed governors may not recognize (or face up to) signs of recession, the average person on the street feels the impact of rising prices and weakening business conditions. This slowdown will be felt particularly in technology and industrial commodities.

He also feels that Fannie and Freddie should be split up into separate private enterprises, rather than be bailed out. Echoing points made by Jim Rogers in his recent Bloomberg appearance, Marc notes that a bailout of Fannie and Freddie would amount to a rescue of "people who have made bad investments" at the expense of taxpayers and common citizens.

One last point on the stock market and the overall economic picture. While Marc allows that the possibility for oversold be…

Monday's notes

Last week's wild ride in the financial markets and the political world gave us much to talk about. So as we stumble out of the haze of a Fannie & Freddie-dominated week, let's review what happened and see what's in store for the week ahead.

1. "Bizarre five days that few will forget" - Financial Times.

"It was one of the most remarkable weeks in the history of financial markets. The US banking sector lost a quarter of its stock market value, then registered a 33 per cent gain. Rising oil prices spooked investors, then fell more than 12 per cent. Short-sellers, branded as the villains by politicians, were squeezed as never before."

A concise wrap-up of last week's dizzying action.

2. "Trouble at Fannie Mae and Freddie Mac stirs concern abroad" - NY Times.

"For more than a decade, Fannie Mae and Freddie Mac, the housing giants that make the American mortgage market run, have attracted overseas investors with a simple pitch: the securit…

Features of the week

Kick back, relax, and enjoy our, "Features of the week".

1. Freddie Mac considers major stock sale in bid to avoid rescue plan.

2. Citi's $2.5 billion loss less than feared, while Merrill takes a $9.4 billion writedown.

3. It's an emergency! The SEC's endangered species list.

4. It's good to short. Short sellers have been doing well lately.

5. Jim Bunning's capitalism pitch is in strike zone: Caroline Baum.

6. Pakistani investors smash up Karachi Stock Exchange as stocks slide.

7. Diamonds attract funds as gem prices surge.

8. Super-rich are still spending, says Sotheby's CEO Bill Ruprecht.

9. Export boom fuels factory town's revival.

10. Welcome back US Manufacturing (?)

11. Solar's hot real estate market: a desert land boom.

12. US homeowners cruising Craigslist for cheap heating oil.

13. Andy Grove on "Our Electric Future" (Hat tip: Dow Theory Letters).

14. To hell with $4 gas, drive this: Tesla's wild ride.

15. Bountiful Barrels: a wealth…

Popular sentiment in the blogosphere

One great thing about the blogosphere and the interactive web is that it exposes you to some interesting thoughts and comments from people responding to blog posts, articles, and media clips, all around the world.

All across America, and around the world, it seems people are starting to take more of an interest in where they are getting their information from, and in understanding the agendas driving media companies and news outlets.

Media ownership has become more concentrated and the remaining TV, radio, and print news outlets have become increasingly driven by commercial concerns and a commitment to the bottom-line.

While this focus on profits is to be expected from media-focused corporations (and lauded by their shareholders and directors, at least in the short-term), it tends to bring about an accompanying decline in the quality of news reporting and the variety of news stories offered.

As "hard news" stories and international coverage drop off, and reporting standards …

Fannie and Freddie: an overview

Today's print edition of the Financial Times carried some excellent coverage of the ongoing crisis surrounding Fannie Mae and Freddie Mac.

Since their analysis is far superior to anything I could offer on the subject, I thought we'd take a look at what the FT has to say on the history of the two GSEs, current market sentiment towards the mortgage giants' shares and debt, and the likely outcome of any government "backstop" or bailout plans.

First off, John Authers and Stephanie Kirchsgaessner provide a bit of historical overview on Fannie and Freddie in their piece entitled, "Moral hazard on the road to increasing profits".

Here are a few key excerpts from their article:

"Many US economists, on the right and the left, are today able to say: “I told you so.” Few developments in US financial policy over the past half century have been more controversial than the decision to allow Fannie Mae and Freddie Mac to develop to their great size as private shar…

Fannie plan a "disaster" says Rogers

Well, this is the video I had been waiting for.


Given all that has happened with Fannie Mae (FNM) and Freddie Mac (FRE) over the last week, along with the weekend announcement of a proposed government bailout plan for the two mortgage giants/GSEs, you had to figure that when Monday rolled around, we'd almost certainly get to hear Jim Rogers' view on the matter (as he has been short Fannie and Freddie for some time, and is one of the main go-to contrarian voices for the cable business channels). Never one to disappoint, Rogers was happy to make his opinions on the Fannie/Freddie debacle known in this Monday morning interview with Bloomberg TV.

But first, a brief overview of the US government's latest plan (FT):

" Trading in Fannie Mae and Freddie Mac was volatile on Monday morning after the US government on Sunday night announced that it would seek unlimited authority from Congress to lend money to the troubled mortgage groups and invest in their equity.

The Federal Reser…

Features of the week

We bring you our, "Features of the week".

1. Are Fannie Mae and Freddie Mac insolvent?

2. Fannie and Freddie: The $5 trillion mess.

3. Ted Forstmann says we're in the second inning of the credit crisis.

4. Ron Paul: "Something big is going on".

5. US leads world in substance abuse, says WHO study.

6. Peter Schiff talks with Barron's about the US economy.

7. Fiat's $115,000 Maserati defies US slump, gas costs.

8. Media and tech stars mingle in Sun Valley.

9. Bankers use secret clinics to beat breakdown stigma.

10. US adopts capitalism light for housing bailout: Caroline Baum.

11. UK: Russia "backed Litvenenko murder".

12. US killed 47 Afghan civilians in Sunday airstrike.

13. Stratfor releases its third quarter 2008 global intelligence forecast.

14. Zimbabwe's central banker answers to Mugabe, Bible.

15. Frank Holmes lists top performing commodities of 1999-2007.

16. Consider the effects of inflation on your investments.

17. Brian Hunter speaks with Fortu…

T. Boone Pickens on America's energy

There was a lot of discussion yesterday about the "Pickens Plan" for America's energy future, as noted energy investor T. Boone Pickens launched a media campaign to call attention to his energy plan.

That discussion is still going strong in today's news. So we're going to include some video highlights from Boone's July 8 appearance on CNBC, in which he outlined his plan to supply more of our country's energy needs through wind power, natural gas, and solar energy. To find more videos from that CNBC appearance, see this link.

Now there's another great video with Boone that I wanted to highlight, and it's one that we posted in our May 9 "Features" post.


Here's video of T. Boone Pickens speaking earlier this spring at the Milken Institute Global Conference. This is a great hour-long Bloomberg video clip in which Boone talks with interviewer Brian Sullivan about his business failures and successes, and his thoughts on energy prices and en…

Excess speculation? Onions tell the tale

Are commodity speculators to blame for higher commodities prices and increased volatility in price movements? A study of the now defunct onion futures market may shed more light on this ongoing political debate.

This morning, both the Wall Street Journal and the Financial Times ran articles on the current political witch hunt against commodity speculators. Each paper used the story of the onion futures ban to illustrate how futures markets actually work, while addressing the recurring blame game centered on "evil" commodity speculators.

An excerpt from the WSJ editorial, "The Onion Ringer":

"In 1958, Congress officially banned all futures trading in the fresh onion market. Growers blamed "moneyed interests" at the Chicago Mercantile Exchange for major price movements, which could sink so low that the sack would be worth more than the onions inside, then drive back up during other seasons or even month to month. Championed by a rookie Republican Congres…

Monday's notes

Market news and items of interest to start off the week.

1. OPEC president blames ethanol, weak dollar for oil price rise.

So as far as I can tell, according to OPEC officials and US politicians, everything except supply and demand fundamentals is behind the rise in oil prices.

2. Oil's rapid rise stirs talk of $200 a barrel this year -WSJ.

Excerpt from the Wall St. Journal:

"U.S. benchmark crude prices leapt 3.6% last week, closing before the Independence Day holiday at a record $145.29 a barrel. Roughly halfway through the year, oil prices have soared 50% since Jan. 1 and have doubled since the same time last year. (See related article.)

Few oil watchers are now ready to bet that oil will hit $200 a barrel by New Year's Eve. But nearly all are wary of predicting how and when oil's upward stampede will be reversed."

3. Countdown to $200 oil: $140 oil and speculation - The Oil Drum.

A very good piece from The Oil Drum that breaks down the factors behind oil price inc…

Independence Day cheer

Happy Independence Day to all.

As we in America celebrate the 4th of July, the date commemorating the approval of the Declaration of Independence by the Continental Congress on July 4th, 1776, I thought it would be instructive to take a look at the famed document itself, and the history behind it.

For those who would like to learn more about the signing of the Declaration of Independence, see the Wikipedia link above.

You may also want to read and compare the document's various drafts (first draft, reported draft, engrossed copy) which can all be viewed here at the Online Library of Liberty.

And lastly, some valuable thoughts on the Declaration and its principal writer, Thomas Jefferson. We should also mention Thomas Paine, whose pamphlet, Common Sense, became the widely read rallying cry for American independence from Great Britain.

For more on this, please see the following articles.

"Jefferson on American Liberty" - Gary Galles.

"Thomas Jefferson, Rebel!" - Fr…

Inflation & the fate of paper money

Inflation was one of the key themes in our post on Marc Faber's recent CNBC appearance. I said then that we'd talk a bit more about inflation and money creation later in the week. So let's talk about it now.

Have you ever wondered how the fiat money we use comes into existence? We'll you're about to find out.

Last week, Bear Mountain Bull pointed us to a very revealing passage on central bank money creation from Richard Russell's daily remarks.

Here is an excerpt from those remarks; get ready for some truth.

"If the American people ever realized or understood how the Fed operates and how money is created in the US, there would probably be a ten million man and woman march on Washington and more specifically a march on the Federal Reserve Building. The Fed is a private banking monopoly that has "grabbed hold" of the money-creation of the United States. Who controls a nation's money, controls that nation.

The US needs money to pay for building roa…

Global bear market continues

Leading share indices continue to drift downwards today as worries mount over inflation, the continuing credit crisis, weak corporate profits, and slowing business activity around the globe.

As we write this, the S&P 500 index is sitting at 1277.94, several points away from its March 10 low of 1273.37, the point at which the index's most recent rally began.

A successful test of the March low and a subsequent rally could help keep the benchmark index aloft for a time, though a breakdown through 1273.37 and a close below that level would likely spell trouble for the index and US stocks as a whole.

We see a similar picture in the chart of the MSCI World index. The MSCI World peaked out in November of '07 and, much like the S&P 500, has drifted downwards since in a pattern of lower highs and lower lows.

What's behind the poor performance, year to date, in global share markets? John Authers of the Financial Times shares his view in today's "Short View" colum…