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Showing posts from April, 2009

Short view: Obama's first 100 days's John Authers examines President Obama's first 100 days in office, and offers up an economic compare & contrast exercise with the first "first 100 days" , those of FDR's 1932 term. Related articles and posts: 1. FT in-depth: Obama's first 100 days - 2. Obama says he is 'remaking America' - Bloomberg.

Thomas E. Woods interview - Meltdown

Thomas E. Woods Jr., author of Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse , is rapidly becoming one of my favorite authors and economic historians. Today we'll hear Tom's recent interview on the Financial Sense Newshour, in which he talks with host Jim Puplava about the true nature of our current economic crisis. Tom Woods sees the crisis very differently from the media-driven consensus view of a panic fueled by "free market failures". Responding to calls for more government intervention to mend these supposed failures, Woods points out that the financial crisis is actually an outgrowth of past government interventions into the markets and economy. Meltdown places particular emphasis on the artificially low interest rates and easy money policies created by the Federal Reserve under Alan Greenspan, and continued under current Fed chairman Ben Bernanke. Now as the crisis continues,

Monday's market links

Here are some of the stories I'm keeping up with today: 1. Paulson's 'gift' to Ken Lewis delivered at gunpoint: Caroline Baum - Bloomberg. 2. 'Photo op' plane stunt terrorizes NYC, Goldman Sachs evacuated - Clusterstock. 3. Fed suffers unrealized $9 billion loss on Bear Stearns & AIG assets, delivers $35.5 billion in comprehensive earnings in 2008 . - FT Alphaville. 4. Doug Noland interview, "Credit Bubble Crisis", w/ Financial Sense Newshour - FSN. 5. Monday's linkfest: Stockholm syndrome & flu-like symptoms - Abnormal Returns. 6. Bill King on problems w/bank "stress tests" - Big Picture. 7. Life planning: the search for meaning - Financial Philosopher. Good reading, and we'll see you back here tomorrow for an in-depth look at the economic "meltdown" of 2008, along with a free-market view of how we might better deal with such crises in the future, courtesy of Thomas E. Woods. Until then!

Parsing the recent housing data

John Authers examines the recent US housing data in today's "Short View" video clip (click text or chart link to play the video) and finds that an artificial slowdown in foreclosures may explain the "green shoots" that appear in recent data. Meanwhile, Barry Ritholtz takes a look at, "The Elusive Housing 'Fair Value'" , and argues that US housing prices will not only revert down to their historic mean, but will continue straight down through the mean price on the way to becoming undervalued. Click the link to see Barry's full post and his arguments for why this is so. You may also be interested to read The Economist's take on why, "It still looks early for a housing rebound" , which compares American and British housing price data. Hat tip to Abnormal Returns for the two links above. Related articles and posts: 1. House prices finally approaching fair value - Clusterstock. 2. New home sales: 356 thousand SAAR in Mar

Who's going to bail out the FDIC?

What timing. Last night, Bear Mountain Bull highlighted Mish's post on the "woefully underfunded" FDIC , whose declining Deposit Insurance Fund (DIF) ratio has left it "ill prepared" to deal with future bank failures. Here's a chart from Mish's post which illustrates that decline: As outlined in the post above, this declining reserve ratio has (according to some) left the FDIC ill prepared to deal with the likely raft of upcoming bank failures. As you can see from the chart, the reserve ratio was at 0.40 percent as of December 31, 2008, down from an already low 1.01 percent level and below its legally mandated funding level of 1.15 percent . And as Mish points out, these figures don't even take into account the FDIC's temporary boost in bank account coverage to $250,000. So, isn't that a bit of a problem, especially since more bank failures are expected throughout the year? Well, not really, according to In an October 16, 200

Jim Rogers interview at Barron's Online

Haven't had a chance yet to take a good look at this week's Barron's, but I do know that there is a new Jim Rogers interview at Barron's Online, thanks to a post at the Lew Rockwell blog. Here's an excerpt from that piece: " Recently, Rogers talked to by phone from his Singapore home . Q: When you last did a lengthy interview with Barron's magazine a year ago (see " Light Years Ahead of the Crowd ," April 14, 2008) you were lightening up on emerging markets investments. Well, you called that one right. But now that many of those markets have fallen from their highs of recent years, are you more optimistic? A: No. I've sold all emerging markets stock except the ones in China. I bought more Chinese shares in October and November during the panic, but I have not bought China or any other stock markets including the U.S. since then. I'm not buying anything in China right now because the Chinese market ran up maybe 50% since last

US puts conditions on bailout repayments

The Financial Times reports that the US will put conditions on TARP bailout repayments from banks who say they are ready to pay back the government. "Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times. “Our general objective is going to be what is good for the system,” the senior official said. “We want the system to have enough capital.” His comments come as Goldman Sachs , JPMorgan Chase and other relatively strong banks are pressing to be allowed to repay their bail-out funds..." Pretty amazing, isn't it? Some of these banks were strong-armed into taking TARP funds in the first place (so as not to "stigmatize" banks that truly needed the money). Now the government is trying to control the repayment schedule of said funds, or at least give the impression that

William Black: "stress tests are a farce"

Former bank regulator and S&L investigator, William Black tells Bloomberg TV that bank reserves are "grotesquely too small" to cover upcoming losses from credit card loans and that the government's "stress tests" for troubled banks are "a farce". Black says that the so-called "stress tests" do not test bank reserves at all, because they do not test for asset quality or for losses. While citing the leaked expectation that all banks will likely pass the tests, he questions how it is that the banks could be deemed healthy while requiring $2 trillion in taxpayer bailout funds. Related articles and posts: 1. Stress tests are "a complete sham" - Tech Ticker. 2. William Black interview on stress tests - Naked Capitalism. 3. William Black on Bill Moyers Journal -

Jamie Dimon eager to pay back TARP funds

JP Morgan Chase CEO Jamie Dimon is eager to pay back "scarlet letter" TARP funds, saying that his firm has the cash to pay back the government tomorrow. Bloomberg has the story : " JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon , who today reported first-quarter profit that beat analysts’ expectations, said his firm could repay U.S. government rescue funds “tomorrow.” Dimon, calling money received through the Troubled Asset Relief Program “a scarlet letter” and “the TARP baby,” said on a conference call today that the New York-based bank is awaiting guidance from the U.S. Treasury Department. “We could pay it back tomorrow,” he said. The 53-year-old CEO took $25 billion in U.S. government rescue funds last year. He’s fared better than most of his rivals in guiding the company through the financial crisis, taking $33.3 billion in writedowns, losses and credit provisions through the fourth quarter. That compares with $88.3 billion at New York-based Citigroup

What market failure?

The front page of today's print FT reveals a masthead intro for yet another article/editorial on the supposed "market failure" that has brought about the recent global financial panic and a synchronized world recession. Rather than bore you with the details of the entire piece, entitled, "Let us put markets to the service of the good society" , allow me to reproduce one excerpt which purports to show that "market-generated monopolies" have driven out smaller competitors and led to the growth of "too big to fail" firms in banking and retail. The following is the author's description of the modern oligopoly system at work in retail shopping today: "If markets tend to monopoly, creating banks too big to fail, it follows that similar cartels exist elsewhere. Indeed, such “Chicago school” monopolies predominate. In Britain, four supermarkets control more than 70 per cent of food retailing, while in the US, Wal-Mart has eviscerated competi

You are being lied to about pirates

Probably one of the most interesting articles I've seen in the past 24 hours, although this commentary originally appeared on January 5. Given all the news we've seen about pirates this past week, I thought this was rather timely. From The Independent's Johann Hari, "You are being lied to about pirates" , makes the case that while "some are clearly just gangsters", many Somali pirates are simply members of a failed state who are trying to survive and protect their waters from toxic waste dumping and illegal fishing trawlers. Here's an excerpt from the lead-in: "Who imagined that in 2009, the world's governments would be declaring a new War on Pirates? As you read this, the British Royal Navy – backed by the ships of more than two dozen nations, from the US to China – is sailing into Somalian waters to take on men we still picture as parrot-on-the-shoulder pantomime villains. They will soon be fighting Somalian ships and even chasing the pir

Tim Carney on big business and big government

Timothy Carney, author of The Big Ripoff: How Big Business and Big Government Steal Your Money , gives a speech entitled, "Building a Culture of Enterprise in an Age of Bailouts" , at the Heritage Foundation. As Tim notes in the beginning of his talk, the idea that big business and government are sworn enemies is more of a well-promulgated myth than a current reality. In fact, as Tim explains in this video, big business is often an advocate for big government and increased regulation of industry. While the idea that big business "wants more government involvement in industry" was, until very recently, an unbelievable proposition to most casual observers, the recent financial crisis (with its ensuing bailout mania) has revealed how the two can often be closely allied. Hat tip to John Carney for highlighting this recent clip. For those who would like to hear more about the alliance of government and big business, see our past commentary and Robert Higgs' recent i

Gold's place in a new reserve currency

Well, it's a holiday-shortened trading week, but we can still engage our minds with some of the big picture issues taking shape on the world's economic stage. With that in mind, here's a think piece from the FT's Gillian Tett on the gold standard and recent calls for a new reserve currency to take us into the weekend. Excerpt from Tett's article, "In uncertain times, all that glisters is a gold standard" : "...since the world abandoned the gold standard on August 15, 1971 credit creation has spiralled completely out of control. But this four-decade long experiment with fiat currency is not just something of a historical aberration, it argues - but potentially very fragile too. After all, the only thing that ever underpins a fiat currency is a belief that governments are credible. In the past 18 months that belief has been tested to its limits. In coming years it could be shattered, particularly if the current wave of extraordinary policy measures unl

Jim Rogers interview with Channel 4

Here's a very cool interview with investor Jim Rogers, taken from the UK's Channel 4 (of which Luke Johnson, FT writer and entrepreneur, is chairman). This relaxed interview setting provides us with a much needed antidote to some recent TV appearances that have devolved into cable "news" channel shout-a-thons . Thankfully, in this clip we are able to hear Rogers express his thoughts on the markets and the world in full, without interruptions. Hat tip to Mark at Fund My Mutual Fund for bringing this clip to our attention. Related articles and posts: 1. Jim Rogers on CNBC, Fox Business - Finance Trends. 2. Jim Rogers talks to Bloomberg TV - Finance Trends. 3. Jim Rogers on Bloomberg "Night Talk" - Finance Trends.

Marc Faber interview - Bloomberg TV

Marc Faber offers his views on the direction of the US stock market, the outlook for Asian shares, inflation, and the global economy in this latest Bloomberg TV interview . On April 7, Bloomberg filed a story on Marc's view of the current bear-market rally in US shares. The piece notes that Faber sees a likely 10% correction ahead for the S&P 500 , after which US shares may resume their rally into the summer months. " Marc Faber , the investor who recommended buying U.S. stocks before the steepest rally in more than 70 years, said the Standard & Poor’s 500 Index may drop as much as 10 percent before resuming gains. The measure may decline to about 750 and rebound after July, Faber, 63, said in a Bloomberg Television interview in Singapore. Global stock markets are unlikely to fall below their October and November lows, he said. “We need some kind of correction, maybe around 5 to 10 percent, and after that we can maybe rally more into July,” said Faber, the publisher of

Chart of the day: commodities vs. shares

Chart of the day : Dow Jones - AIG commodity index ( ^DJC ) versus the S&P 500 ( ^GSPC ) and the Dow Jones Industrial Average ( ^DJI ), on a two year timeframe. As you can see from the enlarged version of the chart (click chart to expand), all three indices are down by 30-40 percent over the two year period (April 2007 - April 2009). You'll note that while US shares entered their bear market at the end of 2007, commodities to continued to outperform stocks (by a wide margin) up until the summer of 2008, when commodities joined the "liquidation party" which hit most major asset markets worldwide. Both stocks and commodities have taken their fair share of abuse on the downside since. The three indices have staged a bit of a rally off of their early March lows, with ^DJC and ^DJI leading the way in relative performance (now down the least in percentage terms) on this two-year chart. However, if you flip to a one-year timeframe, the stock indices, ^DJI and ^GSPC , are

Geithner's gift to Pimco, BlackRock, et al.

Last week, in our post on the Fortune profile of Bridgewater Associates and its chief, Ray Dalio , I mentioned that we'd be keeping an eye on whether or not Bridgewater would join the rather select group of investors eligible to invest in the Treasury's public-private investment partnership (PPIP). As it turns out, Bridgewater has decided not to invest in the PPIP. Ray Dalio offers his reasons for not joining the plan in this letter to investors , excerpt courtesy of Clusterstock. I'm not sure I understand all the issues at work here, but the gist of the argument seems to be that Dalio sees a clear conflict of interest for the few investment firms eligible to be the "fund managers" that would purchase toxic assets from banks. He also sees a great deal of political risk for investors in the plan, due to perceived collusion among the group: " Then there is the issue about the political risk , which we are more concerned about because there will be such a limit

Jim Rogers on CNBC, Fox Business

Jim Rogers appeared on CNBC recently to speak about the G-20 meeting, investments, and the notion ( myth ) of systemic risk at AIG, GM, et al. Thanks to my friend Dave in NYC for the heads up on this clip. I have to tell you, I watched this CNBC clip right after I saw a YouTube clip of Jim Rogers on Fox Business , and that almost made CNBC and Maria Bartiromo look charming and well-informed by comparison. Talk about painful; I actually felt dumber for having seen this Fox Business segment. This was not due to Jim Rogers, who was amazingly patient in explaining (again and again) why he felt the way that he does about the economy and the US government's panoply of failed rescue policies. Rather, the pain I felt was due to the horribly shrill and moronic teleprompter reader who insisted on shouting her talking points back at Rogers, in a full display of the intellectual dishonesty and willful ignorance which are, sadly, so evident in America today. So, fair warning if you decide

James Altucher: depression proof, 180 proof

James Altucher shares his thoughts on a new "inflation/depression-proof" stock play in this recent video clip . Oh, and reason # 5 of why I like James Altucher: like a true contrarian, the man enjoys a tasty beverage (as opposed to standard-issue coffee in a to-go cup) at 9am while filming odd stock-picking segments on the streets of New York. I too, share a fondness for Bloody Marys, a fact made evident by some rather incriminating college photos which I still have somewhere. No, not that one . Anyway, here are the vitals on Altucher's new inflation play, CEDC . Disclosure : No position in this stock, although I often find James' stock ideas to be rather interesting and uniquely delivered. Also, I'm starting to realize that he and Jim Cramer kind of do the same thing (each in their own unique way), don't they?