ferguson

Book Review: Street Fighters

Goldman Sachs is certainly a wonderful and profitable firm. How do they (or you) explain the fact that their chief investment spokesperson during 2008, Abby Joseph Cohen, stuck consistently with her published S&P year end target of 1650, while the bosses at GS were betting the other way and making a bundle doing it?

Systemic Risk: The Foxes Are Guarding the Henhouse

The failures of government in the financial meltdown are obvious. The failures of business are even more glaring. Even the failure of investors who blithely counted up their gains when they should have been taking some money off the table bear some responsibility. In a climate of excess, human nature can be deluded into justifying all sorts of unrealistic and even criminal behaviour.

To say that the foxes are now guarding the henhouse is ridiculous. We threw out that government. And business has been thoroughly chastised. Investors have paid dearly. Deliberately criminal and/or deceptive behaviour should be punished. We have proved many times that we can recover from this kind of failure and will do so again.

This System Is Not Worth Saving

Perhaps "Robert" Rubin should have been cited rather than "Paul" Rubin. Wasn't it Robert Rubin who was treasury secretary under Clinton and went on to provide sanction for Citigroup as it ventured into behaviour that proved to be irresponsible, perhaps even reckless?

Incidentally, the delicate balance between freedom and responsibility is written right into the preamble to our constitution which cites both "the general welfare" and "the blessings of liberty" as among the most fundamental goals to which the federal government is dedicated.

Government's New Credit Approach: Does the End Justify the Means?

Peter Schiff's argument only makes sense if one ignores the predatory practices of credit card companies in the pursuit of profit at the expense of responsible lending and borrowing. The rapacious onslaught of commercial forces on the pocketbooks of ordinary Americans has precipitated a catastrophe which, in retrospect, can be seen to have been both inevitable and necessary. The out-of-control consumption machine has been derailed. Perhaps we need to consider a return to living within our means and in harmony with the natural world which we call home. In case anyone doubts the compelling seriousness of the issue, they chould consult the third edition of "Earth From Above," by Yann Arthus Bertrand.

The Wisdom of Half Positions

Great advice for the non-professional investor like me.

Obama Summarizes Economic Policies, Misses Several Key Points

College student thinks Peter Schiff should be president. I agree he should be president of something. Just like George Bush, he should be the permanent president of his college fraternity where the power of the president to do damage to the nation and the world is suitably contained.

'The Age of the Unthinkable' - Why Life May Not Return to Normal

Great food for thought. My take on it is that life will return to normal, but that does not mean it will return to the over-leveraged boom of the last 30 years, since that was clearly not normal. What is normal? What about a fairer distribution of income and a wider base for the wealth of nations?

It's Not a Recession, It's the New Reality

"Reality" is a many headed hydra. The "reality" of human life is that the future is not known with any degree of certainty because we have gained the capacity to change it. The technological revolution of the past 250 years has altered "reality" dramatically, including both extraordinary benefits and extraordinary dangers. The technological revolution of the next 100 is likely to do the same.

The real questions are: 1. whether we have the personal and political courage to act responsibly in dealing with the dangers; 2. whether we have the vision and leadership necessary to create (not just accept) a sustainable "reality;" 3. Whether we have the wisdom and restraint necessary to invest wisely and in the long term interest of life on earth rather than in pursuit of immediate self aggrandizement.

It is of interest that piracy has flowered on the high seas at the same time that it has flowered on Wall Street. I am not speaking particularly about the bankers and financial engineers who have responsible for the housing mortgage fraud, but about the whole culture that has allowed boards of directors, executives and employees to hijack corporate America and divert its productivity from owners (shareholders) to their own benefit.

The question is not whether we spent too much money or borrowed too much. The question is what we borrowed for and what we spent it on. If we had borrowed and spent it on energy efficiency, education and infrastructure, we would be in great shape. Instead we spent it on fat cats, 20,000 square foot houses, $50,000 weddings and $100,000 vacations.

The "new reality" should include a new definition of "The Wealth of Nations."

FASB Watch: Who Should Make the Economic Calls?

I am not an accountant, but my suspicion is that the problem here is more a matter of hysteria than substance. As Jeff Miller reports, we haven't yet heard from FASB as to what the revised standards might be.

The only guidance I have heard is that the revised standards might allow the use of "income generated" as a measure of value in addition to "current sale prices."

This would seem to raise a common sense comparison in a world where hysteria reigns. In the real estate world, appraisals of the value of commercial property may be based on 1. comparable sales; 2. replacement cost; or 3; income generated. I am not a real estate appraiser either, so any correction will be appreciated.

That suggests that there just might be reasonable measures of value othere than current sales prices which, if there is no market, are judged to be close to zero.

Of course assessing "income generated" involves the hard work of actually looking at these collections of "toxic assets," adding up the income they are generating and can be reasonably expected to continue to generate. But that would mean substituting hard work for hysteria which is a lot less fun and doesn't sell well in on Bleeker Street or in Hollywood.

An aversion to substituting hard work for hysteria is perhaps inevitable in the entirely fraudulent financial landscape which has allowed so many of the opportunistic but marginally qualified shell game operators to make millions and spend it on Palm Beach and Oyster Bay lifestyles.

The evidence is in. Arthur Laffer was wrong. "Trickle down" doesn't work. The true wealth of nations lies in providing opportunity, education and health care to the population as a whole.

How AIG Bamboozled the Government

David Merkel for Secretary of the Treasury beginning January 1, 2008 replacing Henry Paulson. It never was a particularly good idea to allow the wolves to guard the henhouse.

GM's Next Last Chance

Teutonic KInight,
OK, now we have the title right, for real credit where credit is due, we need the name of the long forgotten authoer, bless his (or her) soul,

GM's Next Last Chance

Teutonic Knight,

The Bane of Broken Balance Sheets

David,

Great, but very discouraging summary. Question. Has all of this vast expansion of credit and investment bought nothing of value?

What about globalization? If living standards have been raised around the world, is it possible that our vastly expanded productive capacity will eventually find a use?

What about technology? Will the computer revolution, the internet and automated processes in manufacturing raise productivity standards to levels that will make it possible to absorb the losses?

What about the environment? Degredation of the environment probably continues, but at a slower pace and recognition of the need to reverse that trend grows daily. Is it possible that what we are seeing is a world-wide recognition that we need to ratchet down toward a sustainable world?

What about capital? Trillions of dollars have been lost around the world, a few of them mine. Is it possible that we might gradually come around to realize that some things are more important than capital?

Watch This Sector During the Upcoming Bear Market Rally

Altering the mark to market rule should be a subject for accountants, mathematicians and policy makers. Since I am none of the above, I have complete license to make a fool of myself by suggesting a direction.

Here it is. Adjust the basic principle to read something like this.

"The value of an asset on the books which is difficult to assess as a result of infrequent trades shall be no higher than the sum of the original value on the books of the owner and the most recent traded price divided by two."

All better informed pundits can now explain why this is a stupid idea and would not work.

How Obama's Budget Will Affect Commodities

Excellent article. Rich in facts. Avoids bombast.