This is a clip of the Q&A from yesterday’s Financial Services Committee hearing. In this clip, Rep. Scott Garrett of New Jersey makes a masterful takedown of Bernanke. It should be blatantly obvious from this clip, even though Bernanke still attempts to deny it, that the Fed was a primary contributor to the real estate bubble. Enjoy. … [Read more...]
Archives for February 2011
Bernanke’s ‘70s Show
This is a must-read editorial by Allan Meltzer. Meltzer wrote the book, both books actually, on the history of the Federal Reserve. Ben Bernanke’s ‘70s Show By Allan Meltzer - WSJ First some history of Fed policy errors "In the 1970s, despite rising inflation, members of the Federal Reserve's policy committee repeatedly chose to lower interest rates to reduce unemployment. Their Phillips Curve models, which charted an inverse relationship between unemployment and inflation, told them that inflation could wait and be addressed at a more opportune time. They were flummoxed when inflation … [Read more...]
Sage Advice
I recently came across an article by Arthur Zeikel in the March/April 1995 edition of the Financial Analysts Journal (FAJ). Zeikel was the head of Merrill Lynch Asset Management at the time. The article was written in the format of a letter to his daughter. The title is “Managing Your Own Portfolio.” I’ve included a few excerpts from the letter below. In the current environment with risk-free interest rates near zero and the stock market performing like it’s a riskless bet, the pressure to make emotionally charged investment decisions is immense. You start thinking you don’t want to miss … [Read more...]
Long Rates Breakout to the Upside
This Stock Is Dead on Arrival
You would be smart to avoid getting involved in the walking zombie that is HCA, Inc., if and when there’s an initial public offering (IPO). You may recall that back in 2006, Merrill Lynch, Kohlberg Kravis Roberts & Co., and Bain Capital Partners brought the enormous hospital chain private in a $33-billion leveraged buyout (LBO). It was a trophy deal at a time when the smoke of “greed is good” still permeated big Wall Street boardrooms. But this transaction symbolized the last puff, so to speak, before the LBO business and all of finance turned to ashes. The air has cleared, and Merrill … [Read more...]
Why Jim Chanos is short China
Jim Chanos, president of US-based Kynikos Associates and one of the world’s most famous hedge fund managers, talks to the FT's John Authers about China's property bubble and the implications for the rest of the world. … [Read more...]
The Day One Rally
Did you notice that stocks rallied strongly yesterday? The S&P 500 was up 1.67%. Do you know why the market was up? It may have been the strong manufacturing data reported by the Institute of Supply Management (ISM). The ISM numbers beat expectations. But stocks may have risen for another reason. Yesterday was the first trading day of the month. Since August 1 of last year, the first trading day of the month has accounted for a disproportionate share of stock-market gains. In the 128 trading days between July 31, 2010, and February 1, 2011, the S&P 500 gained 206 points. Of those … [Read more...]
Bill Gross’s Investment Outlook
If you aren’t familiar with Bill Gross, he is the Chief Investment Officer of PIMCO, the world’s largest bond fund shop. PIMCO manages over $1.2 trillion. It’s not easy to slosh around over $1 trillion without moving markets. If you invest in bonds it behooves you to carefully monitor what PIMCO is doing. From Bill Gross’s February 2011 Investment Outlook Sounds like Mr. Gross has had enough of Ben B.’s asset-price based monetary policy strategy. "This metaphorical devil’s bargain has its equivalent in the credit markets these days. Central bankers have lowered the cost of money for 30 … [Read more...]