phat cat

Do You Believe Borrowing Leads to Prosperity? (Part 2)

Hi James, where and what farms would you recommend to buy?

Lessons from Benjamin Graham, Part 1

This may be the case during the last depression, but what happens if hyperinflation kicks in along with the economic depression this time? investing in bonds and preferred will equally destroy wealth. I'd think investing in actual productive assets, such as commercial or some residential real estate, would be the best hedge against depression and the impending hyperinflation.

btw, I am a believer that the current monetary and fiscal policies will inevitably cause hyperinflation, it's just a matter of time.

The Great Awakening: Boomers, Your Crisis Has Arrived (Part 3 of 3)

Wow, James, another great one!

Many people take for granted that lives always get better, and the next generation will live better and longer. BUT, that's through "American" eyes. Look south of the border, how come after milleniums, many of them are still living in abject poverty?

Then let's look around at countries with longer history. China last reach its peak some 1400 years ago, or the Tang Dynasty, and then it was wars and poverty up until 20 years ago that Chinese started their "new" life, and now they are also taking this "american" way of life for granted and want to live like the "Americans". Other civilizations? They fared even worse, Iraq was the craddle of middle east civilization, and the Americans are still bombing the sheet out of them. The Romans? We can visit their ruins in the poor cousin country of EU. Oh, and the Mayan civilization? Go to a museum.

The British Empire, now that wasn't too long ago, where the sun never sets on its teritories. Now it's becoming an insignificant player. (I surely will get flack on this one, but when was the last time you bought anything British?)

We've seen the best times, welcome to the decline. Once we admit the inevitability of it, it actually isn't too bad.

James, there aren't many hiding places out there, but still a few to consider. War is inevitable (surely you know, as a student of history).

May us all live in an interesting time!

Take a Stand Against Government Spending

James, I don't know how to react. Want to applaud your article but found nothing to be cheerful about. There will be 2 outcomes to all this mess: 1) Things will settle down (like go back to the early 90's settle down, not going back to 2007 settle down) after all the big guns are fired, and 2) Nothing works and we go into a spectacular freefall which human kind has experienced before like the Romans or the Genkis Kan clans.

James, I'd love to hear what would you do IF you are pointed as treasury secretary, head of FDIC AND Fed Reserve Chairman. Please tell us. Maybe together we can avoid a Easter Islandish civilization dissapearance.

Berkshire Hathaway Credit Risk, Index Puts Are Overblown Worries

It's so hard to convince people that backward looking is meaningless. The book "Black Swan" makes a great case that turkeys think they have the best life until the day they are sent to the butcher. There's no "god" of investing, and I think WB will agree that he can make mistakes.

Selling options will prove to be WB's biggest mistake. For someone who's criticized the derivatives market for so long, his massive scale put selling is perplexing. 4.5 billion at-the-money put premium received! Sold at the height of the market when volatility was the lowest! These European style options are always marked to market, margin calls are going to make poor WB sleepless. Not to mention the GS and GE investments he just made. Sorry to see WB in this state so late in his career...

U.S. Economy: There Are No Problems, Only Solutions

The Seductive Lure of Socialism

Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should be just; it must be philanthropic. Nor is it sufficient that the law should guarantee to every citizen the free and inoffensive use of his faculties for physical, intellectual, and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation.

This is the seductive lure of socialism. And I repeat again: These two uses of the law are in direct contradiction to each other. We must choose between them. A citizen cannot at the same time be free and not free.

by Frédéric Bastiat, 1850

U.S. Economy: There Are No Problems, Only Solutions

I was watching the HBO mini-series "John Adams" last night. In espisode 5, while John and Abigail Adams sat under their laundry in the newly built Whitehouse having dinner, John said:

''I pray Heaven to Bestow the best of Blessings on THIS HOUSE and on All that shall hereafter inhabit it. May none but honest and wise men ever rule under the roof"

We had 8 years of dishonest and stupid ruling. I hope Obama proves John Adams right. Anyone knows Obama PLEASE forward James' article to him.

For anyone who have read the brief American history, you'd agree that it's a miracle that US is where it is. We had some amazingly smart, just and honest founding fathers. Looking at the condition right now, it will take another miracle to pull US out of this mess.

Default Risk for Key Financials

These CDS levels are only meaningful if the counterparty who sells it to you are solvent. Just some other levels, UK is at 45, State of Texas is at 78, State of New Jersey is at 135. China is at 119 (they are the largest US treasury holder btw). I saw even US is trading at 30. Who ever is looking to buy CDS on US Treasury is completely nuts, who's guaranteeing the seller?!! While this whole system is breaking down, a lot of things are getting mis-priced. So I really wouldn't pay too much attention to these numbers.

11 Stocks Selling Below Cash

It makes sense to look at companies that are trading below net cash level. Many stocks are trading at mis-priced level--yes it does happen, and if you still believe in efficient market, you'd lost your shirt already. But I agree that the list prepared by the author is misleading. I'd be happy to hear comments on the list of companies I selected above. These maybe good starting points to pick the next winner.

11 Stocks Selling Below Cash

I ran an equity search with the following criterias: US stocks with over 100mm mkt cap, debt/equity ratio less than 20% and cash/mkt cap ratio>1. This list could be a good starting point to further narrow down the names. However, none of the names mentioned in the article showed up:

TRID, ATV, ACTS, HTH, ORBK, GRO, ZAP, KONG, ANAD, SYMX, GILT, ULCM, COWN, MEDQ, ADLR

I have to say I don't know or heard of most of these companies. I hope this is helpful.

The Shallowest Generation

"a sprawling and pedestrian conglomeration of conventional wisdom"

If it's so "pedestrian" and "conventional", we wouldn't be in this mess, or are you proposing that we got into this mess intentionally?

The Shallowest Generation

Reading all the comments, there is clearly people are toeing the party line, blaming each other for what's happening. I believe the facts presented by this article are so clear and convincing, and self evident, there is no question that we are all in this mess together. Although the solution is not clear, it never is!

People who can provide solution to this will be the ones who understand the issues involved. I'd rather have James Quinn to take the lead than the ones who were intimately involved in the creation of this mess.

If we just shift the amount spent on gambling to education, or 1/4 of what's spent on new cars, we chould have a much better educated population who understands the values and right from wrongs. Maybe the obvious solution is short term painful, we have no choice but to take the hit.

The news on US borrowing 1 trillion to finance 2009 budget deficit is exactly what we shouldn't be doing. It's not a solution to borrow more money to solve the problem of over-borrowing. Somebody's going to pay for all this debt someday. We better start saving up for our children and their children, that's if USD is going to still be worth anything then.

The Shallowest Generation

Thank you Perceptions_now for the quote. Ayn Rand's characters are usually black or white, very clear on where they stand on the side of good vs. evil. In today's reality, everyone's sucked into the system, we are all victims and perpetrators at the same time. I would think those executives in Wall Street firms think they are just and fair, with high moral standards and serving the greater good--I don't think Paulson is intentionally creating a doomed system, he's just the product of the system and trying to savage it.

The Shallowest Generation

Times like this makes me want to re-read Ayn Rand's Atlas Shrugged. "Who's John Galt?". We may all need a new enclave to survive this.

James, great article, really makes you think that all these people who live in the world of entitlement (who believes everyone is entitled to 40 inch LCD TVs, new SUVs every 3 years or weekend shopping of trolley full of unnecessary goods) should be supported by the productive sector of people.

But where is this enclave?

Wall Street Bankers: Rewarding Failure

There is another take on this. As most of these financial stocks have plummeted over 60%, some even more, there's a tax consequence to those who are granted stocks. Assume at a tax rate of 35%, if those bankers have not sold their company stocks, they are essentially paying all the bonuses to the IRS. For those unfortunate ones who's stocks drop below that threshold, they are in negative territory. So everyone should just relax as everything works out at the end.