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Showing posts from January, 2010

Morality: lessons from Benjamin Franklin

Thanks to the many interesting articles and links shared by my friends on Twitter, I've come across an interesting post on Benjamin Franklin and his life lessons on virtue and morality. I wanted to share it with you today.

Here's an excerpt from, "Lessons in Manliness: Benjamin Franklin's Pursuit of the Virtuous Life":

"Benjamin Franklin is an American legend. He single handily invented the idea of the “self-made man.” Despite being born into a poor family and only receiving two years of formal schooling, Franklin became a successful printer, scientist, musician, and author. Oh, and in his spare time he helped found a country, and then serve as its diplomat.

The key to Franklin’s success was his drive to constantly improve himself and accomplish his ambitions. In 1726, at the age of 20, Ben Franklin set his loftiest goal: the attainment of moral perfection.

In order to accomplish his goal, Franklin developed and committed himself to a personal improvement progra…

Debating the "Ring of Fire"

Barry Ritholtz had some pointed comments for Bill Gross today.

In his post on Gross' "Ring of Fire" chart, depicting deficit and dept/GDP percentages for a number of economically vulnerable countries, Ritholtz noted that the US' fiscal problems were in part due to the government enacting policies (explicit backstops for the GSEs, etc.) that were suggested by Gross and his cohorts.


As Barry put it: "Essentially, Gross is complaining that (amongst other factors) the government listened to him . . .".

There was some interesting debate in the comments section about whether or not the (government backstopped) trillions in mortgage debt on GSE balance sheets should figure into an equation on US govt. debts/liabilities.

I noticed that David Merkel weighed in on this question, and that he also has a post up at Aleph Blog discussing Gross' chart and unsustainable government debts. You might want to check that out, as David is well-versed in credit markets and able t…

Jim Rogers on Bloomberg: stocks may fall

Jim Rogers joins Bloomberg TV for a lengthy discussion about the economy and the outlook for global stock markets and commodities.

Also up for discussion: the vote on Bernanke's 2nd term as Fed Chairman, and why the world would be better off without central banks. Go get 'em, Jim.

Hat tip to the gang at Business Insider.

Related articles and posts:

1. Ben Bernanke: man of the year? - Finance Trends.

2. Jim Rogers on CNBC, Tech Ticker - Finance Trends.

Barron's Roundtable 2010: quick thoughts

Happened to glance through the first installment of Barron's 2010 Roundtable this past week at the library.

When I say "glance through", I should clarify; I glance through all the parts I don't care about (comments from Abby Cohen, et. al) and carefully read the sections where Marc Faber and Felix Zulauf (and if time allows, Meryl Witmer or Fred Hickey) are talking.

Sometimes I'll stop and read Bill Gross' comments, but I think that has more to do with the fact that you never know what he is going to say these days, and it's interesting to see how his remarks line up with some of his (and PIMCO's) previous sentiments and actions.

Anyway, if you saw the 2009 roundtable report card, you'll notice that everyone's picks for last year were well in the black overall. Compare that to 2008's roundtable results (largely disastrous) and you'll see that roundtable participant greatly benefited from the broad market rally we saw during 2009.

No, I don…

A new form of Glass-Steagall?

As noted on Twitter, FT Alphaville is abuzz today with news of Obama's plan to limit the "size and scope" of large US banks.

Here's an excerpt from the administration's press release:

"“While the financial system is far stronger today than it was a year one year ago, it is still operating under the exact same rules that led to its near collapse,” said President Barack Obama.

“My resolve to reform the system is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see record profits at some of the very firms claiming that they cannot lend more to small business, cannot keep credit card rates low, and cannot refund taxpayers for the bailout. It is exactly this kind of irresponsibility that makes clear reform is necessary.”

The proposal would:

1. Limit the Scope - The President and his economic team will work with Congress to ensure that no bank or financial institution that contains a bank will own, invest i…

Helping Haiti: private charity vs. govt. aid

Reuters update on the situation in post-earthquake Haiti.

If you would like to donate to an effective private charity that will help Haitians in the weeks and months ahead, please see trader Quint Tatro's blog for info on how you can help send needed food and medical supplies through his charity mission to Haiti.

Any recommendations you might have for other reputable private charities (in which the vast majority of donated funds & supplies are directly sent to the people in need) are very welcome. Please post the organization info and links in the comments section.

If you'd like to get a further insight into the problems that have long plagued Haiti, and the effectiveness of private charity versus government "aid", please the Mises blog post, "Helping Haiti", and the articles in our related links section below. Thank you.

Related articles and posts:

1. Countries in contrast: one land, two fates - National Post.

2. Real economic reform for a hurting Haiti - Mi…

What's the true state of state finances?

US states are in rather poor shape, financially speaking, and California's latest debt downgrade has shined a light on this topic once again.

This brings us to today's question: are California's fiscal problems indicative of a larger trend toward deteriorating state finances and budget shortfalls?

I'd like to start out by thanking Gregor Macdonald and the Stocktwits gang for discussing some of these issues in the last Sunday's MacroTwits hour on Stocktwits TV and for sharing some of the links I'll be posting for you here today.

For an opener on why state finances are important, let's get a quick overview from Business Insider:

"Last week we mentioned how states are still grappling with monster budget gaps, and that they'll inevitably resort to slashing spending to remain solvent.

This, of course, will be a drag on GDP, and act counter to any pro-stimulus efforts Uncle Sam will maintain."

They go on to cite (as Gregor did) the recent Rockefeller Ins…

Cali's debt worries as leading indicator

It's often said that California leads the nation in all manner of cultural, political, and economic trends. That's partly why this recent S&P downgrade of California's debt ratings seems so worrisome.

From Reuters, "California debt rating cut as cash crunch looms":

"California's main debt rating was cut on Wednesday by Standard & Poor's, which said the government of the most populous U.S. state could nearly run out of cash in March -- and another rating cut might follow.

The state government's budget gap of nearly $20 billion over the next year and a half leaves it in a precarious situation, requiring tax increases or spending cuts, either of which may slow economic recovery, the agency said in a statement.

"If economic or revenue trends substantially falter, we could lower the state rating during the next six to 12 months," S&P said after cutting the rating on $63.9 billion of California's general obligation debt one notch …

Ron Paul: why the Fed likes independence

Ron Paul's latest "Texas Straight Talk" update deals with Treasury Secretary Tim Geithner's scheme to cover up details of AIG's "backdoor bailout" of large investment banks, and also covers the much-debated issue of the Fed's "independence".



Here's what Congressman Paul had to say about the recent backroom dealings by the Treasury and the Fed, and "Why the Fed Likes Independence":

"This claim that the Fed should have “independence” is a canard. They very much enjoy their comfortable pattern of bailing out friends and devaluing the currency with no oversight and no accountability. Geithner specifically asked officials at AIG not to disclose to the SEC or to the public particulars about this special deal for his friends. We only know these details now because AIG was eventually forthcoming when Congress demanded some answers.

We should be getting this information, and information on all such dealings, straight from the Fed. T…

Fed wants to keep US bailout secrets

Bloomberg has been doing a great job of showcasing the "transparency" of the Federal Reserve over the past year or so, in spite of many attempts by the Fed and bailed out banks to block the news outlet's progress in procuring data on a $2 trillion loan program initiated by the Fed during the 2008 financial panic.

Here's Bloomberg's latest on the Fed's bailout secrets:

"The Federal Reserve will ask a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.

The U.S. Court of Appeals in Manhattan, after hearing arguments in the case today, will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Blo…

Friday: Geithner, China, & sovereign default

Just taking a look this hour at the newly posted Friday links at Abnormal Returns.

They've got the latest on Tim Geithner's troubles in this AIG swaps fiasco, plus coverage of 2009 hedge fund returns, Jim Chanos' views on China, Iceland as an indicator for sovereign defaults, and more.

All topics we're interested in here at Finance Trends, so head on over to AR and have a look at their linkfest. Have a great weekend, and we'll see you soon.

Geithner wants zipped lips on AIG swaps

Tim Geithner and the New York Fed told AIG to limit their swaps disclosure. The saga continues and Bloomberg has the details:

"The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
The New York Fed took over negotiations between AIG and the banks in November 2008 as …

Gold & Cadillacs: a value comparison

Mike Hewitt at Dollar Daze posted an interesting graph not too long ago comparing gold and Cadillacs, or more precisely, the value of gold as measured by its purchasing power of Cadillac cars over time.
I thought back on this great little visual recently while discussing gold's role as a store of value with a friend.

We ruminated briefly on gold's utility as an inflation hedge or preserver of one's purchasing power and I offered the classic example of the more or less constant ability to purchase a fine men's suit with an ounce of gold.

Later, we resumed our discussion by looking over the Dow to gold ratio and the similar S&P 500/gold ratio mentioned in the recent Barron's interview with Kevin Duffy and Bill Laggner.

These are all fine examples of the fact that while gold's purchasing power of real goods or assets may fluctuate during certain periods, its role as a store of value remains constant over time.

Still, I happen to believe that a picture is often wort…

Barron's interview: Kevin Duffy & Bill Laggner

Barron's recently ran an interview with hedge fund managers Kevin Duffy & Bill Laggner of Bearing Asset Management called, "Shorting the Economic Recovery". Here's a lead-in to their discussion:

"PERHAPS ONE OF THE greatest failings in the run-up to the financial meltdown was a lack of perspective -- an inability by many market participants to see the big picture. Not so with Kevin Duffy and Bill Laggner, principals of the Dallas-based hedge fund Bearing Asset Management.

With the help of their proprietary credit-bubble index, developed in 2004, the managers sounded early warnings on housing and credit excesses, and capitalized handsomely on their forecasts by shorting Fannie Mae, Freddie Mac, money-center banks and brokers, builders, mortgage insurers and the like.Students of the Austrian school of economics, which espouses a free-market philosophy that ascribes business-cycle booms and busts to government meddling with interest rates, the pair is solidly in …