John Hussman is one of my must reads, so I am not sure how we can give it any more importance, but we should this week. John touches on a number of subjects today, including why the European Stability Fund being levered up is a bad idea and the ECRI's recession call. But the...
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Last week we discussed Doug Kass’s increasingly constructive stance on the market. Since then the market had a short, but strong, run and some disappointing economic data. His upside was around 10% over 12 months. In my way of looking at things, I thought the potential for negative economic outcomes was higher than Doug, but...
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Desired Dessert tastings in New Orleans, Jeremy Grantham goes on a rant, Rob Arnott chimes in, economic data and more in today's Further Reading.
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A long running theme here at Risk and Return has been the inappropriate levels of risk our financial institutions run and our frustration with the bailing out of institutions because they are “too big to fail.” Whether in truth those institutions were too big to fail or not, the very fact that they are...
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American Public Media’s Paddy Hirsch does a good job of breaking down the deflation and inflation risks we are facing. I think he ends up discussing the likely outcome. Deflation, or at least very low inflation, for the next 2-3 years followed by accelerating inflationary pressures for the next 5-7 years. Inflation from Marketplace...
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I hear repeatedly from our fellow citizens “where is my bailout?” For those who have been wondering the fine journalists at Vanity Fair have found the paperwork so you can begin applying now for, as the application says, “free government cash.” (Click image for Large Version.) Download article as PDF
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Given the carnage in the banking sector overseas it seems pretty hard to justify the idea that people are too optimistic about any financial sector or group overall, but maybe markets still are? Let us forget the specific problems we have been discussing about European financials including them being even more leveraged than here...
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Yves Smith hits a theme I have been harping on, the Federal Reserve, and central banks in general, are making things worse in may ways by destroying the incentive for banks to lend or borrow from one another. She quotes James Bianco of Arbor Research: The Fed’s massive and numerous liquidity facilities are making...
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I am often asked about individual bank stocks, especially JP Morgan. Generally my answer is that Bank of America, JP Morgan and a few others look to be likely survivors, but how profitable they will be I am really unsure. JP Morgan is a special discussion, because I point out a rather astonishing fact,...
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Tyler Cowen states his basic views on the crisis. My response in italics: 1. Glass-Steagall repeal was not a major cause of the financial crisis, nor was government-induced “minority lending.” I agree on the first, the second charge has some validity, but only in terms very different than the typical charge. 2. We...
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Let us look at one of the ways that we are being panicked unnecessarily, and why incidentally we can help many of these financial institutions in the fashion I discussed in my post on a potential alternative plan. In my next post we will discuss ways in which we are not being misled, and...
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I do believe we should be doing something as a nation, through our government, to avoid the not insignificant chance of a total financial meltdown. I have seen several things proposed that I find interesting, and I will get into them and other longer term issues in coming days. I had hoped to address...
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Back in February of 2007 we began to scrub our portfolio’s of all exposure to financials, which wasn’t very high at that point anyway. Needless to say, instant alpha. Of course, the follow on question I get repeatedly, especially those who have been investing with Bill Miller and Legg Mason Capital all the way...
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You may remember the website we discussed back in January. Dale Franks just discovered their program, because they now are on Television. He asks the obvious question: So, should the mortgage companies get off scott-free from facing the results of their poor business decisions when it comes to the loans—loans they shouldn’t have made...
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Heavier hitters than myself are slowly lining up to put out estimates of the total losses from the credit crisis more in line with my thinking. Welcome aboard! Using far more “off the cuff” methods than Nouriel Roubini, the IMF, Jeremy Grantham, John Hussman, UBS, John Paulson or Goldman Sachs, I have been expecting...
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Much of what has been happening over the last year in the credit markets was foreseeable, if not assured. I will admit though, I hadn’t really considered this aspect. A while back MBIA, AMBAC and other monoline insurers backed sleepy municipal bond portfolio’s. Having entered, and then become ensnared, in the broader credit markets,...
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