Feb 29, 2008

Ludwig von Mises on alcohol and drug prohibition

It is an established fact that alcoholism, cocainism, and morphinism are deadly enemies of life, of health, and of the capacity for work and enjoyment; and a utilitarian must therefore consider them as vices. But this is far from demonstrating that the authorities must interpose to suppress these vices by commercial prohibitions, nor is it by any means evident that such intervention on the part of the government is really capable of suppressing them or that, even if this end could be attained, it might not therewith open up a Pandora's box of other dangers, no less mischievous than alcoholism and morphinism.

~ Ludwig von Mises, Liberalism (1927)

Bill Laggner on subprime securities

Without the accounting it becomes a confidence game.

~ "Navigating Subprime Securities," Fortune, August 23, 2007

Feb 28, 2008

Thomas Jefferson on banking

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and the corporations that will grow up around (the banks) will deprive the people of all property until their children wake-up homeless on the continent their fathers had conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

~ Thomas Jefferson

Henry Paulson on bailouts

"I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street." The secretary added one caveat: "It would be imprudent not to have contingency plans, but we are so far away from seeing something that would have me calling for a bailout that I don't see it."

~ Henry Paulson, Treasury Secretary, "Paulson Dismisses Mortgage Rescue Plan," The Wall Street Journal, February 28, 2008

Doug Wakefield on the fate of current financial bubbles (2007)

Our parabolic spikes, of late, are nothing more than the effect of the unsustainable inflationary policies of central banks coupled with man's innate inclination to go with the crowd in hopes that he will win. What matters, then, is this: If history proves that all bubbles eventually implode, this should properly motivate us to search for the end of our current trend.

Doug Wakefield, Best Minds Inc., October 17, 2007

Feb 27, 2008

Gandhi on gun control

Among the many misdeeds of the British rule in India, history will look upon the act of depriving a whole nation of arms, as the blackest.

~ Mahatma Gandhi, My Experiments with Truth (1927)

Investor's Business Daily on John T. Flynn's book, "The Roosevelt Myth"

Flynn's book is a careful account of Roosevelt's presidency. Flynn was no businessman, no Republican shill. He was a respected, old-line liberal journalist who made his name with a series of books attacking big business. That's what makes his indictment of Roosevelt all the more notable.

~ Investor's Business Daily

New York Times on the income tax amendment

In substance, the court holds that the Sixteenth Amendment did not empower the Federal Government to levy a new tax.

~ The New York Times, January 25, 1916

Goethe on freedom and slavery

None are more hopelessly enslaved than those who falsely believe they are free.

~ Johann Wolfgang von Goethe

Supreme Court Chief Justice on taxation

The power to tax is the power to destroy.

~ John Marshall, Supreme Court Chief Justice

Songs

Egalitarianism:

Government:

Taxation:

Victimology:

War:

Personal favorites

Mark Twain on taxation

The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.

~ Mark Twain

Woodrow Wilson on the creation of the Federal Reserve on his watch

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.

We are no longer a government by free opinion, no longer a government by conviction and the voice of the majority, but a government by the opinion and duress of a small group of dominant men.

~ Woodrow Wilson

Mayer Rothschild on the power of central banking

Give me control of a nation's money supply, and I care not who makes its laws.

~ Mayer Rothschild, private banker

Mish on the ratings agencies reaffirming AAA ratings for Ambac and MBIA

In a widely expected move, the S&P proved they have an iron stomach for gall and/or a nose that cannot distinguish horse hockey from a rose. Today the S&P Affirmed The AAA Rating Of Insurers MBIA, Ambac Ratings.

Standard & Poor's reaffirmed the Triple A rating on the two biggest bond insurers, MBIA and Ambac Financial Group, sparking a rally by both stocks and the market in general. S&P ended its downgrade review for MBIA's (MBI) Triple A rating, citing success by the largest U.S. bond insurer in raising new capital.

The action reflects the company's ability to successfully access $2.6 billion in extra capital that can be used to pay claims, S&P said in a statement. The outlook is negative, indicating a rating cut may still be likely over the next two years.

The "AAA" ratings of Ambac (ABK) were affirmed but remain on review for downgrade. A group of banks has largely finalized a deal to recapitalize Ambac and is now trying to sell the plan to the rating agencies to save Ambac's triple-A rating, CNBC has learned.

S&P's affirming of Ambac doesn't take into account the recapitalization plan, but the review will continue until details of the plan are clearer.

A tentative structure for up to $3 billion in capital for Ambac has been agreed to by the consortium, which includes Citigroup (C)and Wachovia (WB). The banks are trying to save Ambac, as well as other bond insurers, because a ratings downgrade could force the banks to write down billions more of their own debt.
Citing ability to raise $3 billion in capital (a deal that is not even finalized), and in the face of monolines holding $70-$150 billion of worthless CDOs, the S&P held its nose and confirmed horse hockey smells like a rose.

~ Mike "Mish" Shedlock, "S&P Sniffs Horse Hockey, Calls It a Rose," Mish's Global Economic Trend Analysis, February 25, 2008

Minyanville on what happens when the monoline insurers can't pay claims

A hurricane comes through your town and levels your house. A few weeks later, you receive a letter from your insurance company telling you that unless you buy some of its stock, it won’t be able to pay your insurance claim. What do you do?

As far fetched as this question may feel, this is, in principle, what’s behind the bailout of the monoline insurance companies. Unless their biggest CDS counterparties step up with more capital, the insurance companies won’t be able to make good on their CDS and the banks will be forced to take write-downs.

~ Minyanville.com, "Insurers' Day of Reckoning," February 25, 2008

Videos/Documentaries

Credit bubble:

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Federal Reserve:

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Humor:

Libertarianism:

Political correctness:

Political hypocrisy:

Ron Paul:

Feb 26, 2008

Gazprom planning to build 1,300-foot tower in St. Petersberg

Built by Peter the Great as Russia's gateway to the West, St. Petersburg is known for its baroque and neoclassical architecture. So a 1,300-foot tower planned by Russia's energy giant Gazprom that exceeds zoning laws has critics aghast - and Unesco threatening to yank the city's World Heritage designation. But Gazprom is St. Pete's largest taxpayer, and the city is helping finance the project, which a Gazprom spokesperson says represents the "ambition of new Russia." The smart rubles are on the tower's getting built.

~ "Nyet in My Backyard," Fortune, March 3, 2008, by Eugenia Levenson

(Tapei 101 has held the title as "World's Tallest Building" since 2004 with a roof height of 1,474 feet.)

David Gelertner on feminism neutering the English language

How can I teach my students to write decently when the English language has become a wholly-owned subsidiary of the Academic-Industrial Complex? Our language used to belong to all its speakers and readers and writers. But in the 1970s and '80s, arrogant ideologues began recasting English into heavy artillery to defend the borders of the New Feminist state. In consequence we have all got used to sentences where puffed-up words like "chairperson" and "humankind" strut and preen, where he-or-she's keep bashing into surrounding phrases like bumper cars and related deformities blossom like blisters; they are all markers of an epoch-making victory of propaganda over common sense.

We have allowed ideologues to pocket a priceless property and walk away with it. Today, as college students and full-fledged young English teachers emerge from the feminist incubator in which they have spent their whole lives, this victory of brainless ideology is on the brink of becoming institutionalized. If we mean to put things right, we can't wait much longer.

Our ability to write and read good, clear English connects us to one another and to our common past. The prime rule of writing is to keep it simple, concrete, concise. Shakespeare's most perfect phrases are miraculously simple and terse. ("Thou art the thing itself." "A plague o' both your houses." "Can one desire too much of a good thing?") The young Jane Austen is praised by her descendants for having written "pure simple English." Meanwhile, in everyday prose, a word with useless syllables or a sentence with useless words is a house fancied-up with fake dormers and chimneys. It is ugly and boring and cheap, and impossible to take seriously.

But our problem goes deeper than a few silly words and many tedious sentences. How can I (how can any teacher) get students to take the prime rule seriously when virtually the whole educational establishment teaches the opposite? When students have been ordered since first grade to put "he or she" in spots where "he" would mean exactly the same thing, and "firefighter" where "fireman" would mean exactly the same thing? How can we then tell them, "Make every word, every syllable count!" They may be ignorant but they're not stupid. The well-aimed torpedo of Feminist English has sunk the whole process of teaching students to write. The small minority of born writers will always get by, inventing their own rules as they go. But we used to expect every educated citizen to write decently--and that goal is out the window.

~ David Gelertner, "Feminism and the English Language," The Weekly Standard, February 25, 2008

Ludwig von Mises on capitalism

The capitalist system of production is an economic democracy in which every penny gives a right to vote. The consumers are the sovereign people. The capitalists, the entrepreneurs, and the farmers are the peoples mandatories.

~ Ludwig von Mises, Bureaucracy

Lew Rockwell on how the anti-communist movement undermined the limited government plank of the Republican Party

Murray Rothbard used to tell the story of speaking to conservative and Republican audiences in the late 1950s and early 1960s. There would be large groups gathered for various talks on economics and politics. He would give a lecture on the problem of price controls, or protectionism, or high taxes. People really liked what he had to say. They would clap, and learn from his lecture.

Then he would sit down. At some point in the course of the conference, the appointed anti-communist speaker would rise to the podium. He would decry the evil of Russia and its atheistic system of government. He would call for beefing up nuclear weapons and hint darkly of the necessity of war. He would end with an apocalyptic statement about the need for everyone to completely dedicate themselves to eradicating the communists by any means necessary. No talk of limiting or cutting government; quite the opposite.

So how would these people, who clapped for Murray, respond to the warmonger? Insanely, wildly, uncontrollably. They would stand and scream and yell and cheer, getting up on their chairs and putting their hands together high in the air. The applause would go on for five minutes and more, and the speaker would be later mauled for autographs. His books would sell wildly.

Meanwhile, poor Murray would stand there in alarm. How could these same people cheer both a call for liberty and a call for empire, and, most notably, give their hearts over to the maniacal nationalist while being merely polite to a call for the same liberty that had led this party to oppose FDR's domestic and foreign-policy? It was experiences like these that led him to write the most important dissection of the Republican party ever to appear: The Betrayal of the American Right. It is here that Murray engages in a deep, soul-searching look at his own role in red-baiting in the 1950s. He had hoped to use the anti-communist movement to educate people about the need for freedom.

"It is clear that libertarians and Old Rightists, including myself, had made a great mistake in endorsing domestic red-baiting, a red-baiting that proved to be the major entering wedge for the complete transformation of the original right wing," writes Murray. Instead of supporting freedom, the anti-communist movement ended up acculturating Republicans to the imperial mindset. The moral priority of crushing a foreign government trumped every other issue.

At the same time, the libertarianism of the GOP's domestic agenda was supplanted by a belief that "big government and domestic statism were perfectly acceptable, provided that they were steeped in some sort of Burkean tradition and enjoyed a Christian framework." Fiery individualism and radicalism were replaced by a longing for a static, controlling elite of the European sort. Liberty was washed away.

~ Lew Rockwell, "Triumph of the Red-State Fascists," LewRockwell.com, February 26, 2008

Mark Twain on elitists who run the world

Sometimes I wonder whether the world is being run by smart people who are putting us on... or by imbeciles who really mean it.

~ Mark Twain

Feb 25, 2008

Mark Twain on breeding

Good breeding consists in concealing how much we think of ourselves and how little we think of the other person.

~Mark Twain, Mark Twain's Notebook (1898)

Feb 23, 2008

Justin Raimondo on Murray Rothbard's concerns about "conservative" foreign policy

Rothbard realized that, irrespective of the rhetoric about the "free market" and "individual liberty" that came out of the mouths of conservatives, objectively the result of their policies – specifically, their foreign policy of relentless aggression and confrontation with the Soviet Union – would lead to the exact opposite of their stated intentions. He saw that, as long as we were leading a global crusade, and pouring billions down the "anti-Communist" rat-hole, building up a huge military apparatus and national security bureaucracy – complete with an arsenal of nuclear weapons that could destroy the world several times over – our liberties, indeed our very lives, would be threatened with extinction.

~ Justin Raimondo, "The Year of the Insurgents," Anti-war.com, February 22, 2008

Feb 22, 2008

Aldous Huxley on denial

Facts do not cease to exist because they are ignored.

~ Aldous Huxley

Motley Fool on the futility of market timing

An aside to all of this optimism
It should be noted that stocks dropped substantially in 2000 leading up to the recession -- just as they've dropped of late. Those examples, however, just go to show how the stock market does not move in lockstep with economic realties. Instead, it's an imperfect prediction machine with millions of analysts, institutions, and individuals trying to incorporate the information they know into daily trading decisions.

All that dynamism makes the market impossible to time, and if you're only starting to worry about recession as we may or may not be entering one, you are way late to the game. To get ahead of the curve, you should start thinking about buying and holding for the long term.
Don't just take our word for it, though. There's also brand-new research from IESE Business School professor Javier Estrada.

Javier who?
Mr. Estrada's recent paper "Black Swans and Market Timing: How Not to Generate Alpha" is one of the most persuasive cases I've read for a disciplined buy-to-hold investment philosophy.

Estrada studied 15 major global stock markets for periods ranging from 31 to 79 years, with the full data encompassing more than 160,000 trading days. What he found is "less than 0.1% of the days considered" actually matter to long-term returns, which means that "the odds against successful market timing are staggering."

So ... don't try to time the bottom
Now, this is a dangerous article to go on record with. If the market does tank this year, I'm going to get plenty of profanity-laced emails telling me that I'm "the real fool now" (seriously, you'd think people would be over that joke by now).

But even if we lose money this year (yes, I'm staying invested myself), we're all going to make a lot more money down the line not by trying in vain to time the market but by adding new money to great companies on a regular basis.

That way, rather than run from the lows, we'll double-down on them ... and supercharge our returns in the process.

~ Tim Hanson, "Will You Cash Out Before the Market Crashes?," The Motley Fool, February 15, 2008

H.L. Mencken on liberty, security, and the police state

What the common man longs for in this world, before and above all his other longings, is the simplest and most ignominious sort of peace: the peace of a trusty in a well-managed penitentiary. He is willing to sacrifice everything else to it. He puts it above his dignity and he puts it above his pride. Above all, he puts it above his liberty. The fact, perhaps, explains his veneration for policemen, in all the forms they take--his belief that there is a mysterious sanctity in law, however absurd it may be in fact.

A policeman is a charlatan who offers, in return for obedience, to protect him (a) from his superiors, (b) from his equals, and (c) from himself. This last service, under democracy, is commonly the most esteemed of them all. In the United States, at least theoretically, it is the only thing that keeps ice-wagon drivers, Y.M.C.A. secretaries, insurance collectors and other such human camels from smoking opium, ruining themselves in the night clubs, and going to Palm Beach with Follies girls...Here, though the common man is deceived, he starts from a sound premise: to wit, that liberty is something too hot for his hands---or, as Nietzsche put it, too cold for his spine.

~ H.L. Mencken, Notes on Democracy (1920)

Feb 21, 2008

H.L. Mencken on the crowd and free speech

All appeals to any intrinsic love of free speech are futile. There is no such passion in the people. It is only an aristocracy that is ever tolerant. The masses are invariably cocksure, suspicious, furious, and tyrannical. This, in fact, is the central objection to democracy: that it hinders progress by penalizing innovation and non-conformity.

~ H.L. Mencken, Letters of H.L. Mencken (1961), p. 109

Feb 20, 2008

James Madison on democracy

A common passion or interest will, in almost every case, be felt by a majority of the whole; a communication and concert result from the form of government itself; and there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual. Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths.

~ James Madison, Federalist No. 10, November 22, 1787

Alan Greenspan on the housing bubble

I would tell audiences that we were facing not a bubble but a froth - lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy.

~ Alan Greenspan, The Age of Turbulence (2007)

Feb 19, 2008

Joan McCullough on the credit bubble

If it were not for an unrealistically stretched-out car payment schedule (unrealistic in terms of balance outstanding vs. depreciation of the underlying asset) would a $50k per annum couple even be thinking about a $16k car? Not on your life. Come to think of it, if enough $50k per annum families said "no way, Jose" to a $16k used car, what do you think would happen to the price, eh? Right. If that zero-down, option payment, 80/20 mortgage were not available, do you think Joe Schmo would have signed on the dotted line for 6x his gross income for 4 walls and a roof? Right. But given the terms, Joe was a glorified renter and had nothin' to lose. So he took a shot. Unfortunately, Joe crapped out early in the game. Sayonara, Joe.

The point here is that the credit gimmicks that entrapped so many Americans simultaneously supported prices bubbles. And the insidiousness of this credit-gimmick tack is underscored by the fact that nobody complained about the price of a new car being equal to or a multiple of one's yearly income. Or that home, even a starter home, had run up to a frightening multiple of same. As long as the monthly nut was kept palatable and the credit spigot in the permanent "on" position, all was well on Main St., USA.

How do we stop the madness then? The answer is to break the back of the bubble once and for all by taking away the props and letting the market price the assets accordingly. Given the tightening of loan standards and the actions being taken by the credit card issuers, the process has already begun. What's troublesome, though, is that the government is interfering. Why are they hell-bent on throwing good money (ours) after bad?

Because they are serial MANIPULATORS. While the price of homes, for example, has been escalating out of control, they turned a blind eye to the credit abuses that were rampant on their watch with a view towards allowing the game to continue.

~ Joan McCullough, East Shore Partners, Morning Comment, February 19, 2008

Goethe on acting as one thinks

To think is easy. To act is difficult. To act as one thinks is the most difficult of all.

~ Johann Wolfgang von Goethe

Mike Whitney on laying blame for the credit crunch

We don't blame Bernanke. He's been remarkably straightforward from the very beginning and deserves credit. He's simply left with the thankless task of mopping up the ocean of red ink left behind by Greenspan. It's not his fault. He should be applauded for dispelling the decades-long illusion that a nation can borrow its way to prosperity or that chronic indebtedness is the same as real wealth. It's not; and the bill has finally come due.

Of course, now that the low-interest speculative orgy is over; there's bound to be a painful unwind of hyper-inflated assets, falling home prices, tumbling stock markets, increased unemployment, and a generalized credit-contraction throughout the real economy. Ouch. Who said it was going to be easy?

~ Mike Whitney, "Bernanke's State of the Economy Speech: ‘You Are All Dead Ducks’," LewRockwell.com, February 19, 2008

Kevin Duffy on reforming the voting process

We should divide the country into those who support the state (net tax payers) and those of live off of the state (net tax eaters). The latter group would automatically include politicians, bureaucrats, lobbyists, lawyers, public school teachers, etc. and should be denied the vote. Somehow, I would imagine the presidential debates would be quite different.

~ Kevin Duffy, Bearing Asset Management, February 18, 2008

Feb 18, 2008

The Federal Reserve on its role as inflation fighter

One of the most important jobs of the Federal Reserve is to keep our economy healthy. It does this by managing the nation’s system of money and credit—in other words, conducting monetary policy.

Experience has shown us that the economy performs well when inflation is low. When inflation is low—and is expected to remain low—interest rates are usually low as well. Such an environment fosters low unemployment and allows the economy to achieve its growth potential. Free from the disruptive effects of high and variable inflation, consumers and producers make economic decisions with confidence and wisdom.

The ability to maintain a low inflation rate is a long-term measure of the Fed’s success. To achieve this, the Fed sets a variety of intermediate targets, including monetary aggregates, reserve aggregates and interest rates, to gauge the impact of its policies on the economy.

The actions that the Fed takes today influence the economy and the inflation rate for some time to come. Consequently, policymakers must be forward-looking and must take pre-emptive action to head off inflation before it gathers momentum.

~ Federal Reserve website (frb.org), "In Plain English: Making Sense of the Federal Reserve"

(Graph of Consumer Price Index: 1800-2007)

Ben Bernanke on the Fed's role in causing the Great Depression

I would like to say to Milton [Friedman] and Anna [J. Schwartz]: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.

~ Ben Bernanke, "On Milton Friedman's Ninetieth Birthday," At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois, November 8, 2002

Holman W. Jenkins, Jr. on the Carolina Katz Reid study of low-income homeowership from 1977-1993

A home financed by a mortgage is not just an asset. It's also a liability. We owe thanks to Carolina Katz Reid, then a graduate student at University of Washington, for a 2004 study of what she dubbed the "low income homeownership boom." She considered a simple question -- "whether or not low-income households benefit from owning a home." Her discoveries are bracing:
Of low-income households from a nationally representative sample who became homeowners between 1977 and 1993, fully 36% returned to renting in two years, and 53% in five years. Suggesting their sojourn among the homeowning was not a happy one, few returned to homeownership in later years.
Bottom line: Homeownership likely has had an exceedingly poor payoff for millions of low-income purchasers, perhaps even blighting the prospects of what might otherwise be upwardly mobile families.

~ Holman W. Jenkins, Jr., "Payback," The Wall Street Journal, August 22, 2007

Holman W. Jenkins, Jr. on the drive towards homeownership

Everybody talks about moral hazard. A wisp of memory came to mind last week. Then-Fannie Mae chief Franklin Raines visited The Journal years ago and entertained himself by mocking editorial writers who assume that establishing that a policy is economically inefficient is enough to establish that it's unwise.

He yukked it up quite a bit, in fact, noting that voters are perfectly entitled to assert values other than those of the market, namely that homeownership is a social blessing and should be encouraged with subsidies. And so we've done with tax subsidies, lending subsidies and a concerted set of policies by Bill Clinton's HUD to move low-income people out of rental units and into homes they own. His goal, which was achieved, was to lift the homeownership rate from 64.2% to 67.5% of households.

~ Holman W. Jenkins, Jr., "Payback," The Wall Street Journal, August 22, 2007

Ludwig von Mises on fiat money

Government is the only agency which can take a useful commodity like paper, slap some ink on it, and make it totally worthless.

~ Ludwig von Mises

Gandhi on the long battle to bring about change

First they ignore you, then they laugh at you, then they fight you, then you win.

~ Mahatma Gandhi

Feb 17, 2008

Ken Fisher on the credit crunch: Like 1930 or 1998?

The worrywarts seek a parallel to today's market and think they see it in 1930: credit crunch, rising unemployment, financial institutions in trouble. So we must be in for a ferocious bear market. I seek a parallel and find it only ten years ago. And that makes me bullish.

Early 1998 saw financial crises eerily similar to today's and a lot of hand-wringing about institutions collapsing and setting off a domino chain of other collapses. But guess what? The S&P 500 was up 28% that year.

~ Ken Fisher, "1998 Redux," Forbes, February 25, 2008

Ken Fisher on the outlook for 2008

Let me make you a solemn promise for 2008. This year, and for the rest of your life, the U.S. market and economy won't head markedly one way while the foreign world collectively goes the other. We're too intertwined globally. Since the foreign economy is twice America's size, and is strong, America should do well in 2008--better, at any rate, than people expect.

~ Ken Fisher, "We're Too Gloomy," Forbes, January 28, 2008

Ken Fisher: Bullish on AIG

Giant insurer AIG (57, AIG) is lower than it was one, three, five or even eight years ago--back when it sold for 40 times earnings. Now it is just 8 times earnings and 1.2 times annual revenue. But with an exceptionally strong presence in insurance and broader finance and slow but steady growth, it will enjoy a good run in the stock market in 2008.

~ Ken Fisher, "We're Too Gloomy," Forbes, January 28, 2008

Ken Fisher on a "New Era" of above-average returns for stocks

At first post-2002 bulls were dismissed by academics and Wall Street sourpusses as not with it. Well, those who uttered the bearish New Era babble were the ones who weren't with it and should be relegated to the Siberia of commentators. But note that five years of above-average returns haven't yet generated any groundswell of thinking that we're now in some New Era of above-average returns.

That's bullish! It means sentiment hasn't turned euphoric, as it did in the late 1990s. Thus, there's room for more of a bull market ahead. I want to be the first to say we definitely are in a New Era of above-average returns. I'll keep buying stocks until we hear multiple pundits say we are entering a new period of high returns. That will be a time to sell.

When will this happen, that the consensus will turn almost uniformly bullish? I don't know, but I doubt it will be before 2009 starts. Hence, I'm expecting another above-average year ahead, an easy one.

~ Ken Fisher, "Another New Era," Forbes, December 10, 2007

Jim Grant on where he invests his own money

How am I investing my own untold wealth? In a confection of long-short equity hedge funds (no bonds), in gold and in Japanese stocks, chronically cheap but cheaper than ever in 2008.

~ Jim Grant, "Valedictory," Forbes, February 25, 2008

Warren Buffett on gold

It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

~ Warren Buffett, speech given at Harvard, 1998

Jon Markman will eat his column if Citigroup or JPMorgan Chase turn around by the end of the year

If Citigroup or JPMorgan Chase beat any of the above-mentioned defensive stocks this year (JNJ, MO, MRK, MCD, HON, UTX, MMM) in a freakish turnaround, I will eat this column on a live webcast at noon Wednesday, Dec. 31, 2008.

~ Jon Markman, "10 market predictions for a glum '08," MSN.Money, January 4, 2008

XL Capital Assurance on the beneficial role of the bond insurers in the CDO market (2002)

Monoline insurers not only benefit the investors and sponsors of CDOs but are often the key to the successful execution of innovative transactions... Monoline insurers have the resources, expertise, and financial wherewithal to understand underlying assets, conduct due diligence, provide feedback to the structuring institutions, interact with rating agencies and work for long periods on newer and more innovative transaction structures.

~ Iftikhar Hyder, XL Capital Assurance Inc., "Collateralised Debt Obligations and the Role of Monoline Insurers," September 24, 2002

XL Capital Assurance on the importance of diversification to the performance of CDOs

Although CDOs are now 14 or so years old, structural innovation continues unabated and more innovation usually translates into more involvement by the monoline insurers. While it is important to have a strong structure, perhaps nothing helps a CDO transaction, or a portfolio of CDO investments, more than diversification. The best of managers cannot consistently beat the market or avoid defaults. Many CDO investors know that concentrations are little more than expensive wagers. If there is one lesson to be learnt from the performance of CDOs of various cohorts and types, it is this: Diversify.

This lesson has not been lost on the monolines.

~ Iftikhar Hyder, XL Capital Assurance Inc., "Collateralised Debt Obligations and the Role of Monoline Insurers," September 24, 2002

Jon Markman on the prospect of the bond insurers losing their AAA credit rating

[T]he consequences of a downgrade of the monoline insurers if they were still responsible for guaranteeing muni debt would be too catastrophic to even contemplate... the monolines basically rent out their AAA rating to municipalities in exchange for insurance premiums. So a downgrade of the monolines' ratings would in turn mean a downgrade of the munis. Due to contract covenants that require munis to hold high ratings, a downgrade would in a great many cases require cities and states to buy back much of their trillions of dollars of debt from buyers -- which would be impossible -- and force them into bankruptcy or into enormous tax increases to pay for higher interest rates.

~ Jon Markman, "Buffett's an opportunitst, not a hero," MSN.Money, February 15, 2008

Lew Rockwell on the political response to recession

Among businesspeople, bankers, and investors, there is a growing fear that the economy is headed towards recession or already in one. But that alone is not the source of worry. After all, an economy if left alone to function in freedom can recover. The real problem has to do with the political response. There is every indication that no matter who comes to be in charge in November, we face a future of massive spending, inflating, and regulating.

And here is the real danger. One only needs to look at such preposterous measures as the "stimulus package" that congress passed to much fanfare. Dumping money into consumers' hands, drawn from wherever they can get it, is the only means these guys can dream up to shore up prosperity. That only proves that they don't know what brings about prosperity in the first place, which is not congress but free enterprise.

Economist Robert Higgs compares a "stimulus package" to getting water out of the deep end of the swimming pool and dumping in the shallow end – all with the expectation that the water level will rise. As he emphasizes, economists should never tire of asking where the money for stimulus is going to come from. Mankind has yet to invent a machine to create it out of nothing: it's either taxing, inflating, or going into debt that has to be paid later (and crowds out capital creation now). There is no other way.

~ Lew Rockwell, "The Frightful Face of Stimulus," LewRockwell.com, February 15, 2008

Feb 16, 2008

Hillary Clinton: "I would not have started this war"

If I had been president in October of 2002, I would not have started this war.

If we in Congress don't end this war before January 2009, as president I will.

~ Senator Hillary Clinton, New York Democrat, who announced late last month she is seeking the 2008 Democratic presidential nomination, "Clinton: I will end Iraq war," CNN.com, February 2, 2007

Feb 15, 2008

James Bovard on the abundance of laws

America needs fewer laws, not more prisons.

~ James Bovard

Ernest Hemingway on war

War is no longer made by simply analyzed economic forces if it ever was. War is made or planned now by individual men, demagogues and dictators who play on the patriotism of their people to mislead them into a belief in the great fallacy of war when all their vaunted reforms have failed to satisfy the people they misrule. And we in America should see that no man is ever given, no matter how gradually or how noble and excellent the man, the power to put this country into a war which is now being prepared and brought closer each day with all the pre-meditation of a long planned murder. For when you give power to an executive you do not know who will be filling that position when the time of crisis comes.

~ Ernest Hemingway, “Notes on the Next War," 1935

John McCain on the Iraq War

In Iraq our national security interests and our national values converge. Iraq is truly the test of a generation, for America and for our role in the world. Faced with similar challenges, previous generations of Americans have passed such tests with honor. It is now our turn to demonstrate that our power, ennobled by our principles, is the greatest force for good on earth today. Iraq's transformation into a secure democracy and a force for freedom in the greater Middle East is the calling of our age. We can succeed.

~ Senator John McCain, JohnMcCain.com

Henry Hazlitt on government theft

Government has nothing to give to anybody that it doesn’t first take from somebody else.

~ Henry Hazlitt

Andrew Jackson on courage

One man with courage makes a majority.

~ Andrew Jackson

Andrew Jackson on mercantilism

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes.

~ Andrew Jackson

Feb 14, 2008

Ludwig von Mises on who people blame for the boom-to-bust cycle

The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse.

~ Ludwig von Mises, Human Action, p. 576

Feb 13, 2008

Lila Rajiva on the Bush stimulus bill

After a wild orgy of spending, rate-cutting, war-’n-waste, what’s the responsible thing to do?

Why, more of the same!

Yep. Seems what the American people need is more stimulation…not less.

And to think all along, we’ve been laboring under the delusion that the population was already as overstimulated as a cage of parakeets on speed. We thought they needed haldol, not stimulation. There was too much lending… too much spending… too many houses… too many mortgages… too much debt… too much speculation… too much war… too much waste… too much consumption… too many deals…too many Goldman Sachs bankers on the fed payroll… too many orange alerts…too much patting down at airports… too much fear-mongering…too many Trump mansions…too much celebrity blather…too many Brittany Spears court appearances…

But now we know better.

There weren’t enough.

~ Lila Rajiva, "Goldman Sachs Watch: Bush's $168 Billion Morning-After Pill," LilaRajiva.com, February 9, 2008

Ken Fisher on the credit crunch

This is actually just silly stuff. I just disagree with the other two gentlemen (Marc Faber, Jimmy Rogers) The fact of the matter is, normally, when you have a credit crunch, credit spreads widen very markedly before you ever get a ripple over to either the stock market or the broad economy.

If you take, for example, the year 2000, you've had credit spreads not rise by a few tens of basis points, but by four full percent in a year.

The fact is, this is just all minor volatility in a trend going nowhere, and is tiny compared to the forces that want to push things toward happier and better times right now. And this is all just fears of much ado about nothing, which, over time, will fade.

~ "Subprime Shockwaves," Bloomberg, July 26, 2007

Roger Clemens on steroid use allegations by Andy Pettitte

Once again, Mr. Congressman, I think he (Andy Pettitte) misremembers the conversation that we had. Andy and I's relationship was close enough to know that if I would have known that he had done HGH, which I now know, if he was knowingly knowing that I had taken HGH, we would have talked about the subject. He'd have come to me to ask me about the effects of it.

~ Roger Clemens, testimony before the House Oversight Committee on his alleged steroid use, February 13, 2008

Walter Lippmann on war propaganda

We must remember that in time of war what is said on the enemy’s side of the front is always propaganda and what is said on our side of the front is truth and righteousness, the cause of humanity and a crusade for peace. Is it necessary for us the height of our power to stoop to such self-deceiving nonsense?

~ Walter Lippmann, former advisor to Woodrow Wilson

Feb 12, 2008

Pimco bullish on bank debt

The fact that the banking sector has attracted fresh capital in the last couple of months is huge. We've been playing defense for the better part of two years, and the question we've been asking ourselves is when to go on offense. In the banking sector, we've started to do that.

~ Mark Kiesel, Executive vice president, Pimco, "Pimco Shows Alwaleed Isn't Only One in Love With Citi," Bloomberg, February 13, 2008

Feb 11, 2008

Lowell Ponte comes to his senses about climate change and media fearmongering

But the Leftist press continues to quote bug and flower scientists about global warming - including doomsayers who three decades ago were predicting a fast-approaching, planet-freezing ice age. (I should know, being author of the 1976 Prentice-Hall bestselling climate book The Cooling.)

As you probably recognized, all such Leftist doomsaying - hothouse or ice age, wet or dry, population explosion or drastic decline - calls for the same remedy. We must have bigger government, more political regulation and control, higher taxes, and permit less individual and private sector liberty if we are to survive whatever is this year's fashionable danger.

~ Lowell Ponte, "Prophets of Doom," FrontPageMagazine.com, August 22, 2002

Lowell Ponte on global cooling (1976)

We simply cannot afford to gamble... by ignoring it. We cannot risk inaction. Those scientists who say we are merely entering a period of climatic instability are acting irresponsibly. The indications that our climate can soon change for the worse are too strong to be reasonably ignored.

~ Lowell Ponte, The Cooling (1976), p. 237

Paul Ehrlich on overpopulation (1968)

The operation will demand many apparently brutal and heartless decisions. The pain may be intense. But the disease is so far advanced that only with radical surgery does the patient have a chance of survival.

~ Paul Ehrlich, The Population Bomb (1968)

Wall Street shareholders suffer losses partners never imagined

Shareholders share in the downside and not necessarily in the upside, that's the whole story. It's OPM: Other People's Money.

~ John Gutfreund, Former CEO Salomon Brothers, "Wall street shareholders suffer losses partners never imagined", Bloomberg, February 11, 2008

Ayn Rand on government threat to individual rights

Potentially, a government is the most dangerous threat to man's rights; it holds a legal monopoly on the use of physical force against legally disarmed victims. When unlimited and unrestricted by individual rights, a government is man's deadliest enemy. It is not as protection against private actions, but against governmental actions that the Bill of Rights was written.

~ Ayn Rand, The Virtue of Selfishness (1964)

Gandhi on the difference between the individual and the state

The individual has a soul, but as the state is a soulless machine, it can never be weaned from violence to which it owes its very existence.

~ Mahatma Gandhi

Sean Duffy on the gentle art of persuasion

You can lead a horse to water…. but it's better to just throw him in!

~ Sean Duffy

Feb 10, 2008

Sean Duffy on the maladies of the U.S. electorate

Unfortunately well over 85% of the population are quite brain dead and suffer from the following maladies...
  • Geographis Noncomprehendus (no clue of geography…. or history)
  • Economus Nonsensicas (idea that the Fed will bail them out and that the government can protect jobs, protect the environment, and improve the economy)
  • Foxus Gullibus (believing everything that Fox, CNN, MSNBC, and all the other main stream media conglomerates spout out)

The above conditions lead to the final condition which will surely bring down any Republic…

  • Electile Disfunction (inability to make a rational choice during a particularly stressful time… even when the choice is OBVIOUS. (see http://www.ronpaul2008.com/) )

~ Sean Duffy, February 10, 2008

Feb 9, 2008

Thomas Jefferson on taxes and the confiscatory state

We must make our election between economy and liberty, or profusion and servitude. If we run into such debts, as that we must be taxed in our meat and in our drink, in our necessities and our comforts, in our labors and in our amusements, for our callings and our creeds, as the people of England are, our people, like them, must come to labor sixteen hours in the twenty-four, give the earning of fifteen of these to the government for their debts an daily expenses; and the sixteenth being insufficient to afford us bread, we must live, as they do now, on oatmeal and potatoes; have no time to think, no means of calling the mismanagers to account; but be glad to obtain subsistence . . . this example leads us to the salutary lesson, that private fortunes are destroyed by public as well as private extravagance. And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for a second; that second for a third; and so on, till the bulk of the society is reduced to the mere automatons of misery, to have no sensiblities left but sinning and suffering.

~ Thomas Jefferson, The Constitutional Thought of Thomas Jefferson, David N. Mayer, pps. 361-362.

Feb 8, 2008

Queen Christina of Sweden on knaves and fools

Fools are to be more feared than knaves.

~ Queen Christina of Sweden, c. 1650

Ann Coulter on the 2008 election

If Hillary is elected president, we'll have a four-year disaster, with Republicans ferociously opposing her, followed by Republicans zooming back into power, as we did in 1980 and 1994, and 2000. If McCain is elected president, we'll have a four-year disaster, with the Republicans in Congress co-opted by "our" president, followed by 30 years of Democratic rule. There's your choice, America.

~ Ann Coulter, February 8, 2008

David Ellison on massive financial fund inflows

Everyone is afraid to miss the party. They don't want to miss out on the bottom of these stocks.

~ "Financial Funds Get $2.8 Billion of Inflows, Most in Four Years", Bloomberg, February 8, 2008

Mencken on democracy

Democracy is the theory that the common people know what they want, and deserve to get it good and hard.

~ H.L. Mencken

G. K. Chesterton on politics

The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected.

~ G. K. Chesterton

Feb 6, 2008

Marc Faber on recent bubbles

When the Nasdaq began to decline in 2000, most market observers - and especially the apostles of the "new economy" concept- remained convinced that there would be only a brief correction. When US housing stocks began to turn down in 2005, the view was that the US housing sector remained fundamentally sound. Not surprisingly, hardly anyone envisioned the problems in the sub-prime lending industry, with the exception of - among a few others - my friends at Bearing Asset Management. Real problems among the sub-prime lenders emerged in the Fall of 2006. But - aside from Jim Grant and Doug Noland, and my friends at Bearing Asset Management - hardly anyone became concerned about the CDO market.

~ Marc Faber, Publisher, The Gloom, Boom and Doom Report, "Capital Markets Becoming Less Hospitable," August 2007

Warren Buffett on the credit crunch

I wouldn't quite call it a credit crunch. Money is available and it's really quite cheap.

~ "Buffett Sees No Credit Crunch, Forecasts Lower Dollar," Bloomberg, February 6, 2008

Bernanke closely monitoring bond insurers

Given the adverse effects that problems of financial guarantors can have on financial markets and the economy, we are closely monitoring developments. In addition, we are closely monitoring the potential effect of downgrades of financial guarantors on bank holding companies, state member banks, and other institutions supervised by the Federal Reserve. We believe we have the appropriate tools to assess exposures to bond insurers of the banks that we supervise.

~ Fed Chairman Ben Bernanke, "Fed Closely Monitoring Bond Insurers," Bloomberg, February 6, 2008

Milton Friedman on the libertarian movement

I think the libertarian movement is doing fine. I think that REASON magazine has been remarkably good; it has been very effective. It takes many kinds of people to make a movement. And one of the most important things are publications. In any activity you have manufacturers, wholesalers, and retailers; and all three are essential and necessary. There are only a relatively small number of manufacturers of ideas. But there can be a very large number of wholesalers and retailers.

As I look around me I'm impressed by the fact that there's increasing attention paid to libertarian ideas. If you look at the picture now, compared with 30 years ago, there's no comparison. Now you've got much more. As far as journals are concerned, then we had the Foundation for Economic Education's Freeman; for a while we had the New Individualist Review in Chicago, but that was about it. Bill Buckley established National Review, which is in a different corner.

But look at the situation today. You have REASON magazine, you have Liberty magazine. You've got all of this stuff that spouts out from the Cato Institute and the Competitive Enterprise Institute and a half dozen other think tanks. In fact, I think there are too damn many think tanks now.

~ Milton Friedman, "Best of Both Worlds," Reason, June 1995

Milton Friedman on foreign policy

I don't believe that the libertarian philosophy dictates a foreign policy. In particular I don't think you can derive isolationism from libertarianism. I'm anti-interventionist, but I'm not an isolationist. I don't believe we ought to go without armaments. I'm sure we spend more money on armaments than we need to; that's a different question.

I don't believe that you can derive from libertarian views the notion that a nation has to bare itself to the outside without defense, or that a strong volunteer force would arise and defend the nation.

~ Milton Friedman, "Best of Both Worlds," Reason, June 1995

Milton Friedman on Murry Rothbard

Rothbard was a very different character. I had some contact with Murray early on, but very little contact with him overall. That's primarily because I deliberately kept from getting involved in the Libertarian Party affairs; partly because I always thought Murray, like Rand, was a cult builder, and a dogmatist. Partly because whenever he's had the chance he's been nasty to me and my work. I don't mind that but I didn't have to mix with him. And so there is no ideological reason why I kept separate from him, really a personal reason.

The difference between me and people like Murray Rothbard is that, though I want to know what my ideal is, I think I also have to be willing to discuss changes that are less than ideal so long as they point me in that direction. So while I'd like to abolish the Fed, I've written many pages on how the Fed, if it does exist, should be run.

Murray used to berate me for my stand on education vouchers. I would like to see the government out of the education business entirely. In that area, I have become more extreme, not because of any change of philosophy, but because of a change in my knowledge of the factual situation and history.

~ Milton Friedman, "Best of Both Worlds," Reason, June 1995

Milton Friedman on public policy

Throughout my career, I spent most of my time on technical economics. This policy stuff has been a strict avocation. If you really want to engage in policy activity, don't make that your vocation. Make it your avocation. Get a job. Get a secure base of income. Otherwise, you're going to get corrupted and destroyed. How are you going to get support? You're only going to get support from people who are ideologically motivated. And you're not going to be as free as you think you're going to be.

One of the most important things in my career is that I always had a major vocation which was not policy. I don't regard what I've done in the field of monetary policy as on the same level as what I've done about trying to get rid of the draft or legalizing drugs. One is a technical byproduct of scientific work, and so that's the only sense in which my vocation has affected my policy. But by having a good firm position in the academic world, I was perfectly free to be my own person in the world of policy. I didn't have to worry about losing my job. I didn't have to worry about being persecuted.

I think you'll make a mistake if you're going to spend your life as a policy wonk. I've seen some of my students who have done this. And some of them are fine, and some of them, especially those who have gone to Washington and stayed, are not.

~ Milton Friedman, "Best of Both Worlds," Reason, June 1995

Feb 5, 2008

Brink Lindsey on preventive war and the Iraq War (2003)

So on the general question of preventive war -- whether to make war now in order to avoid a worse war later -- my position is: It depends on the circumstances. The decision whether to go to war should turn on a pragmatic assessment of relative risks. Sometimes the balance will tilt in favor of action, sometimes not. In the particular case of Iraq in 2002, I believe the balance tilts strongly toward action.

Accordingly, it seems to me that a no-exceptions policy against preventive war rests ultimately on an untenable assumption: that unrousable passivity on the part of the greatest and most powerful country that ever existed will somehow yield the most favorable achievable conditions in the world -- that, in an intricately interconnected world, leaving everything outside our physical borders to the wolves will ensure that everything turns out for the best.

I don't buy it. Hostile regimes bent on relentless expansion and pursuing weapons of mass destruction are a threat to global security. Hostile regimes that could put weapons of mass destruction into the hands of terrorists are a direct threat to the lives of Americans. If regimes fitting either of these descriptions don't change their ways, military action against them should be an option.

Brink Lindsey, senior fellow at the Cato Institute, "Should We Invade Iraq?," Reason, January 2003

Sallie Mae gets commitment for $31 billion in credit

We view this as a very positive step on the road to recovery.

~ Mark Giambrone, Portfolio Manager, Barrow, Hanley, Mewhinney & Strauss, "Sallie Mae Gets Commitment for $31 Billion in Credit", Bloomberg TV, January 28, 2008

Jay Leno on action stars endorsing presidential candidates

Have you noticed all these action stars are now endorsing candidates? Like Mike Huckabee has Chuck Norris; Sylvester Stallone and Arnold Schwarzenegger came out for John McCain; and today, Hillary Clinton picked up Janet Reno.

~ Jay Leno, The Tonight Show, January 4, 2008

Michael Bolser on Fed intervention

The Federal Reserve is directly involved in manipulating the stock market. Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way. The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board and dampening the otherwise harmful effects of inflation.

A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting.

Without this recession, we would be on quick trip to hyper-inflation and the Fed wants to prevent this.

~ Michael Bolser, Founder, Interventionalanalysis.com, "Expect Fed to lower Dow to 8,000", Worldnet Daily, February 5, 2008

Feb 4, 2008

Daniel Mudd on Fannie Mae underwriting

Fannie Mae, the largest source of money for U.S. home loans, would avoid taking on excessive risk under a government plan allowing it to buy home loans as high as $729,500. It’s wrong to say there is a magic line between $417,000 and $418,000, one part is not risky, one part is risky. We will follow the same risk policy, the same underwriting criteria, the same conservative philosophy.

~ Daniel Mudd, CEO Fannie Mae, Bloomberg, January 29, 2008

Jim Cramer: Buy stocks and "accept that they're overvalued"

You should be buying things and accept that they're overvalued, but accept that they're going to keep going higher. I know that sounds irresponsible, but that's how you make the money. Right now up is down, left is right, peace is war, all that 1984 stuff. But don't laugh, 'cause this could very well mean the difference between closing out the year on a high note and getting crushed. All these things are driving the pros batty and making tons for amateurs, and it's not over yet.

So what should you do now? Stop trying to out think it. Stop trying to be smarter than the market. Forget what you used to know; it's not working right now. The bottom line: you have to recognize, like we do in Cramerica, that there are bull markets - oil, tech, alternative energy, fertilzer, ag. You gotta play 'em. So go buy some Transocean, go buy some Deere, go buy some Baidu. Just go do it - it's ok. Go buy some Google. Buy a little. Stop worrying that everything's too expensive at the moment. Welcome the rate cut, take a little off after it goes up, and thank me later.

~ Jim Cramer, CNBC's "Mad Money," October 31, 2007

(This was taken from "Jim Cramer Flips, Flops, and Gloats," DonHarrold.net, November 18, 2007.)

(On October 31, 2007 the DJIA was +138 to 13,930. RIG closed at 119.37, DE at 77.45 (after 2-for-1 split), BIDU at 382.49, and GOOG at 707.00.)

Kevin Duffy on the 2008 election

This presidential election is mainly about who's name will be placed on the Hindenberg.

~ Kevin Duffy, Bearing Asset Management, January 4, 2008

Bob Unger on the American dictatorship

America is already a dictatorship. You do not need to kill sheep to keep them in the herd. The American Sheople are brain washed robots thanks to the Propaganda Triumvirate of dumbed down schools, cesspool culture and controlled media, with its lies of omission and misleading commission.

~ Bob Unger, February 4, 2008

Bob Unger on procrastination

Those who sit on the fence wind up with a spike in their backside.

~ Bob Unger, February 4, 2008

Bob Unger on extremism vs. moderation

I am an extremist. I want extremely honest business associates and an extremely faithful wife. Moderates want moderately honest business associates and moderately adulteress wives.

~ Bob Unger, February 4, 2008

Bob Unger on searching for the truth

None of us know all the answers. Most of us don't even know the questions.

~ Bob Unger , February 4, 2008

Jeremy Siegel gives Bernanke's policy the "thumbs up"

Is [Ben] Bernanke right in moving so precipitously? Or is he caving into to political pressures to stimulate the economy in an election year and to popular desire to keep stocks out of a bear market?

At this point I'm going to give Bernanke's policy the "thumbs up." But I have my eyes on the foreign exchange and commodity markets. If the dollar tanks or commodity prices surge, then all bets are off, and Bernanke will have to put an end to these cuts and may have to actually increase rates. But if commodity prices don't rise and a recession is avoided, this new aggressive policy may well change the way central banks steer the economy.

~ Jeremy Siegel, "Bernanke's Fed," Yahoo! Finance, February 1, 2008

Jim Cramer: The bears "just got it wrong" (2007)

Now the bears are going to come on TV. They're going to say the [rate] cut's terrible for inflation. It's going to cause the dollar to come down. It's going to cause oil to spike. That the Fed doesn't know what it's doing. I need you to know that these are people who just got it wrong. They got it really, really wrong. They didn't think the Fed could change on a dime, they didn't think that there could be rate cuts. They just got it wrong. We are not done going higher.

If you remember at the beginning of the year, I predicted to you that the Dow would go to 14,500 by year-end because we would have two rate cuts. Now a 50 basis point cut should count as two cuts. This takes us off the detour and puts us back on the road to 14,500.

Now the Fed is on the team. They're with the good guys.

The bottom line: As of today, the whole face of the market has changed with these cuts. The time to be worried has come and gone. Because finally the Fed is facing the right direction and making the right moves. Ladies and gentlemen, the bull is back.

~ Jim Cramer, CNBC's "Mad Money," September 19, 2007

(The DJIA closed at 13,816 +76.)

Jim Cramer: Economy is "fantastic" (2007)

Chris Matthews: Cramer, are we going to have a good economy next year for the election?

Jim Cramer: Fantastic, fantastic economy. We're going to have lower interest rates, very low inflation, great employment, and fantastic profits. Chris, it is a great time and the stock market's telling you that. It makes new highs nearly every week.

~ Jim Cramer, Chris Matthews Show, February 25, 2007

(The DJIA closed Friday at 12,647 -39.)

Fritz Meyer on Goldman Sachs

All I can say is that I'd never short Goldman.

~ Fritz Meyer, CNBC, February 4, 2008

Gerald P. O'Driscoll Jr. on the Greenspan Doctrine

The new moral hazard in financial markets has its source in what can be best described as the Greenspan Doctrine. It was clearly enunciated by Greenspan in his December 19, 2002, speech, in which he made an asymmetric argument leading to an asymmetric monetary policy. He argued that asset bubbles cannot be detected and monetary policy ought not in any case to be used to offset them. The collapse of bubbles can be detected, however, and monetary policy ought to be used to offset the fallout.

Two months earlier Ben Bernanke had made a similar argument. He endorsed the Greenspan Doctrine, arguing against the use of monetary policy to prevent asset bubbles: "First, the Fed cannot reliably identify bubbles in asset prices. Second, even if it could identify bubbles, monetary policy is far too blunt a tool for effective use against them." Since Bernanke is now Fed chairman, it is reasonable for market participants to assume that the Greenspan Doctrine still governs current Fed policy.

~ Gerald P. O'Driscoll Jr., "Subprime Monetary Policy," The Freeman, November 2007

Feb 3, 2008

James Madison on laws

It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.

~ James Madison

Dave Barry on our common enemy

As Americans we must always remember that we all have a common enemy, an enemy that is dangerous, powerful, and relentless. I refer, of course, to the federal government.

~ Dave Barry

Edward Abbey on patriotism

A patriot must always be ready to defend his country against his government.

~ Edward Abbey

C.S. Lewis on the tyranny of good intentions

Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.

~ C.S. Lewis

Frederic Bastiat on law vs. morality

When law and morality contradict each other the citizen has the cruel alternative of either losing his sense of morality or losing his respect for the law.

~ Frederic Bastiat

John Dillon on the role of constitutions and laws

Constitutions are made to restrain Government. Laws are made to restrain Persons.

~ John Dillon, Notes on Historical Evidence in Relation to Adverse Theories of the Origin and Nature of the Government of the United States of America (1871)

Horatio Seymour on democracy and the Constitution

The merit of our Constitution is not that it promotes democracy, but checks it.

~ Horatio Seymour

Lord Acton on ends and means

Liberty is not a means to a political end. It is itself the highest political end.

~Lord Acton

Justice Brandeis: Beware well-meaning men of zeal

Experience should teach us to be most on our guard to protect liberty when the government's purposes are beneficent . . . The greatest dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.

~ Justice Brandeis (1928)

Jefferson on fear

When the government fears the People, that is Liberty. When the People fear the Government, that is tyranny.

~ Thomas Jefferson

Frederick Douglass on tryanny

The limitation of tyrants is the endurance of those they oppose.

~ Frederick Douglass

Voltaire on man's ability to rationalize

The human brain is a complex organ with the wonderful power of enabling man to find reasons for continuing to believe whatever it is that he wants to believe.

 ~ Voltaire

Pericles on politics

Just because you do not take an interest in politics doesn't mean politics won't take an interest in you.

~ Pericles (430 BC)

Barry Goldwater on limited government

I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution, or that have failed in their purpose, or that impose on the people an unwarranted financial burden. I will not attempt to discover whether legislation is 'needed' before I have first determined whether it is constitutionally permissible. And if I should later be attacked for neglecting my constituents' interests, I shall reply that I was informed their main interest is liberty and that in that cause I am doing the very best I can.

~ Arizona Republican Sen. Barry Goldwater, The Conscience of a Conservative

Ayn Rand on government making criminals out of innocent men

There is no way to rule innocent men. The only power government has is the power to crack down on criminals. Well, when there aren't enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.

~ Ayn Rand, Atlas Shrugged (1957)

Alvaro Vargas Llosa on Fed mistakes in the 1920s and 1930s

As economist Murray Rothbard showed in his book America's Great Depression, in the 1920s the Federal Reserve pumped up the money supply, expanding credit by more than 60 percent. Because the economy was very productive, this monetary expansion did not show up in the regular inflation figures. But, as is always the case with inflation, many resources went to the wrong kind of investments--until the crisis hit. The late Milton Friedman showed how the Fed made things worse by not providing the system with enough liquidity once the Depression was obvious.

~ Alvaro Vargas Llosa, "Fed Up," The New Republic, November 28, 2007

(editor's note: As Frank Shostak shows, the Fed expanded its balance sheet rapidly during the early 1930s, despite Friedman's claim. However, overall money supply contracted due to falling bank lending.)

Feb 1, 2008

Timothy Egan on Angelo Mozilo "touting the great American housing miracle"

You may have seen Mozilo with Jim Cramer or Maria Bartiromo on television, touting the great American housing miracle. It was all good, all up, up, up. Flip and roll. No man with without a mortgage. Mozilo said every American who wanted to buy a home should be able to do so, and Countrywide made it nearly as easy to get a mortgage as ordering fries at the takeout window.

~ Timothy Egan, "The Pools of Riverside County," The New York Times, February 1, 2008