Larry G

John Hussman: Applying Ockham's Razor to the Current Crisis

Providing capital to the banks was only HALF the solution to the problem. What good is it if you give money to banks and they horde it.

The other HALF that was forgotten was MARKET-MARKET accounting. Put yourself in the banks shoes. Why in the world would you loan out capital when you may need to market your assets down and need the very capital you just loaned out? You wouldn't and neither will the banks.

Moreover, if its hard enough to know whats on your books there is no way in the world your going to trust whats on another banks books. Hence, no lending.

If we had MARKET-MARKET accounting in the early 90's with the S & L
crisis not a single bank would have survived.How much capital has to be destroyed before someone somewhere realizes to either take a time out or eliminate MARKET-MARKET.

Is Buffett Really Losing His Touch?

Geez! How long are we going to be hearing this nonsense that Buffet has lost it. The guy has been investing successfully for 50 years.

He writes a piece in the new york times that if your a long term investor now is the time to buy. What's the reaction? Yawns and skepticism.

Ahh to be fearful when others are greedy and greedy when others are fearful is a very difficult strategy to implement.Why? Because your going against the crowd.Look at the reaction to the NYT piece, his Fortune piece in 1999 and his Forbes interview in 1973-1974. Always the same reaction, skepticism.

Why is he able to do it and other people can't? Because he takes the emotion out and most investors can't do that.Folks the market is cheap thats why were seeing companies selling for less than their cash in the bank. According to Jason Zweig 1 in 10 companies are selling for less than the cash they have in the bank. We haven't seen that in a long long time.

The Long Case for Autos

If i were going to buy into the auto sector i certainly wouldn't buy the common. Buy the most senior bonds you can get,since you'll be getting yields of 30% plus the chance of appreciation on the bonds which are trading for 30 cents on the dollar.

I have no idea whats going to happen but if you think GM is going to survive your taking much less risk buying the bonds and getting 30% to wait. Either way welcome to the craps table.

The Failure to Admit Failure

I think it's an interesting article, however, letting everybody get wiped up to the debtholders hasn't been a winning fomula. If you don't believe me just look at what happen when the government wiped out the preferred shareholders in the Freddie/Fannie takeover. Nobody could raise equity money for fear they may get wiped out.

If that wasn't bad enough they let Lehman go under and the counterparty risk caused so many problems that the government had to step in with capital injections to save the system.

Making decisions based on an idealogy is bad decision making. Decisions should be made based on the facts and the risk/reward tradeoffs.