Posted on
April 30, 2009,
12:13 am.
Page 433 of Cra$hmaker; Dominic Ancona and his campaign managers and regional operatives are discussing whether average Americans are able to figure out what’s best for them. One of the regional directors is skeptical and cynical, saying, “Most people base their political decisions on emotions and what they think are needs—all generated or manipulated by campaign advertising and managed news. Self-government’s usually an exercise in self-deception.”
However, Gregory Boston, one of Ancona’s managers, explains with absolute certainty how the campaign will presume average Americans can and will figure out what’s best for them. Dos Santos, another of Ancona’s leaders, explains the simple reasoning behind their message:
“Everyone wants economic security. Economic security depends on economic growth. And that depends on production, production on investment, and investment on savings. But government doesn’t produce, invest, or save—it only redistributes and wastes. So, to maximize economic welfare, America must minimize redistribution. Minimizing redistribution requires protecting private property and personal liberty. Liberty and property depend on restricting not just the government’s size, but also its ambit. And circumscribing that demands strict enforcement of the Constitution. So, specifically, we’ll focus on separating bank and state, repealing taxes that burden production, and otherwise freeing the market from Washington’s heavy hand. When everything comes into focus, people will see us as an all-American movement, because in the long run everyone except a tiny minority of elitists and their lackeys will benefit from the reforms we’re proposing.”
After this, Boston pulls out some t-shirts to give a graphic example of the tone of their campaign message: white t-shirts depicting black ants and green grasshoppers. “Ants versus grasshoppers—building for the future versus squandering the present.”
Posted on
April 28, 2009,
8:40 am.
It’s been a year since I started my Tickerspy portfolio based on the tenets of value investing. It outperformed the S&P during the first 6 months, but when October and November arrived, it performed just as badly or worse than everything else out there.
Then it started to outperform once again, and was helped due to a hedge I used during February and March. Currently, the portfolio is slightly hedged again. After returning 20% and beating the S&P by 59% since inception, during a period of economic crises, I think that’s a pretty good record.
Posted on
April 26, 2009,
5:33 pm.
Often times, when comparing past and current stock charts, one will see identical or similar patterns. This might be due for any number of reasons. I believe its probably a combination of a significant amount of investor psychology and a small amount of coincidence. Investors will react to crises or tectonic shifts in markets in the same way regardless of the time period.
So for example, I took a look at Rowan Cos. (RDC), a major provider of international and domestic contract drilling services, and a large holding of Robert L. Rodriguez’s FPA Capital.
First, lets get a big picture of the stock’s history.
Just from looking at the chart and without knowing anything about the company, you can tell that this is probably a company in a very cyclical industry by looking at the large number of steep advances and declines. So let’s compare a past decline with the current one we are now experiencing.
The chart above is from late ‘97 to early ‘99, a period of 482 days from top to bottom. The next chart will be our current situation.
The current situation is that RDC topped in the middle of ‘08. It’s been 299 days since the top. So how can this comparison help us? Let’s think of the current situation. Last year, the world had the most spectacular run-up in energy prices and one of the most spectacular declines probably in modern history. Now the entire world is in recession and countries are doing their best to fight deflation. Can we really say that an energy services company like RDC has put in a bottom after only 299 days during brutal economic conditions when in the past it took 482 days to put in a bottom in what were probably comparatively rosier times?
I think the answer is no and that we won’t see a bottountil at least October of this year.
But on the other hand, can we also simply rely on what a stock chart looked like in the past in an attempt to predict the future? Can we forget about the fundamentals of the company? The answer to both questions is No. The goal of this post was mainly to convey my fascination with how similar price patterns can often repeat themselves over the course of history.
Posted on
April 26, 2009,
3:46 pm.
The last bubble to pop? The education bubble, says Al Fin (got the link via Simoleon Sense).
Cost of tuition has risen…
Forty-seven universities have built billion-dollar endowments, while doubling their average tuition from 1995 to 2005. The average US public college tuition rose 35% between 2001 and 2006, while private college tuition rose 11%.
While quality of education has declined…
SAT scores peaked in 1964. Twenty-two percent of college freshmen need high school-level math. From 1995 to 2005, reading proficiency among Americans with graduate degrees declined from 51% to 41%. A 2006 study found that 20% of students pursuing 4-year degrees had only basic quantitative skills, and half could not perform complex literacy tasks. In the early 1960s, the average college student completed 60 hours of schoolwork per week. In 2003, only 33% of freshman reported 6 or more hours per week. Those doing less than one hour per week doubled over 16 years to 16%. Meanwhile, 47% receive A average grades, compared to 18% in 1968.
With this knowledge, I am beginning to feel more and more that my college degree means a lot less than I thought it did.
As suggested by the doctor quoted in the article, colleges and universities should fire the counselors, send the deans back into the classrooms, dismantle the football teams and turn the stadiums into playgrounds for kids, ban fraternities and sororities, and board up the student-activities office. Once you have more administration focused on actually teaching kids and once you free up the kids’ time, I think a school should probably double or triple the current amount of work required to just to PASS the class.
What would be the result? I think you’d probably see a lot of students leave and also a decline in applications. But the end result would be smarter kids and the school would have a growing reputation for academic excellence.
Posted on
April 24, 2009,
10:09 pm.
From page 333 of Cra$hmaker, this passage is delivered by Evgenii Stolypin in the State Duma and the Federation Council of the Federal Assembly, the parliament of the Russian Federation. The Deputies were hotly debating charges that the on-going discussions between the Chairman of the Central Bank (of Russia) and an American Adivisory Committee over a possible Russian gold standard violated the Central Bank’s constitutional duty to protect the stability of the rouble.
“Russia cannot save herself by aping Western democratic capitalism,” Stolypin warned the Deputies. “An amoral market economy guarantees no one freedom. To the contrary: it promotes the corruption of government. In the West, markets cater to consumerism. Unfortunately, many people cannot earn from voluntary transactions with others as much as they would like to spend. To obtain more income, they ask the state to steal for them from their fellow citizens. As more and more people use the state to supplement their incomes, the market provides the most efficient forms of lobbying, political action, propaganda, and other techniques for promoting redistribution of wealth—which becomes simply another product offered for sale. The society then cannibalizes itself through every variety of political looting.
“Where has democratic capitalism taken the United States?” Stolypin asked. “To the highest, most subtle and effective form of fascism—in which powerful interest groups conspire with politicians and the media to fool the people into lending legitimacy to a system designed to rob them at every turn. Friendly fascism that says Have a nice day! while it deftly picks the people’s pockets.”
Posted on
April 23, 2009,
10:17 pm.
Bloomberg reports that American Express beat Q1 profit estimates. However, consumers spent less:
The company has posted profits and set aside more reserves for failed loans this year as surging U.S. unemployment makes it harder for customers to repay debt. The jobless rate reached 8.5 percent last month, a 25-year high, and American Express said today that it expects the rate to reach 9.7 percent in December. Consumers also spent less, charging an average of $2,391 in the quarter, 16 percent lower than a year earlier.
This is just an anecdote, so I decided to update my chart of total consumer credit outstanding.
I still am skeptical that consumers will soon be spending at 2005 levels. I feel that this crisis has possibly marked the beginning of a gradual shift towards less consumer spending. With a dramatically lower level of consumer spending, repayment of substantial debt, and baby boomers and others removing money from the stock market permanently, I think we will be lucky if the S&P surpasses its highs within the next seven years. I hope I’m wrong, but I feel like we’ve lived too high on the hog for too long not to endure a painfully long period of readjustment.
Posted on
April 22, 2009,
3:20 pm.
Via Bloomberg:
Freddie Mac Acting Chief Financial Officer David Kellermann, 41, was found dead early today in the basement of his home in a Washington suburb, police said.
There were no signs of foul play, and the death is under investigation, Fairfax County, Virginia, Police Officer Shelley Broderick said. She said early reports from others in the department indicated Kellermann’s wife reported a suicide. The medical examiner’s office said it’s conducting an autopsy, and the results may be released as soon as today.
…
The Securities and Exchange Commission and the Justice Department have been questioning executives about Freddie’s accounting practices, according to company filings. McLean, Virginia-based Freddie and Washington-based Fannie Mae, the mortgage-finance companies seized last year by U.S. regulators, reported in September that they were under investigation.
I don’t think its a good sign when the company CFO is found dead without any signs of foul play. Especially with a failed company like Freddie Mac, I bet there is some really scandalous stuff just waiting to be uncovered. Either that or the guy knew too much.
Posted on
April 20, 2009,
9:15 am.
This is a great data visualization of the relationship between taxes and spending as percent of GDP.
I suggest clicking here to see a larger version of the video.
Posted on
April 19, 2009,
7:42 am.
The Office of Thrift Supervision tells Florida’s largest financial institution, $14 billion BankUnited of Coral Gables, to find a buyer to raise its depleted capital to acceptable levels or risk a government takeover. (Zero Hedge)
Two more bank failures; will real estate continue to plunge for two more years as banks withhold foreclosed homes to prop sales? (Gold Versus Paper)
Posted on
April 15, 2009,
10:54 pm.
I’m reading Cra$hmaker, a two-volume +1,000 page book about a plan to take down the Federal Reserve and restore the gold standard. It’s filled with top notch discourse on constitutional law, economics, politics, history, religion, literature, and philosophy. Here’s one of the many interesting quotes about a gold standard.
A gold standard’s good for all nations because it integrates their economies in a world market, eliminates the rivalries, antagonisms, and exploitations from competitive inflations of national paper currencies. But the Establishment in the United States wants no gold standard, at home or abroad. Return to a gold standard would undermine the Establishment’s domestic dominance. Inflationism, credit expansion by central banks, and monetization of debt could no longer buy political power by redistributing wealth. And return to a gold standard would end the role of the Federal-Reserve paper dollar as the world’s reserve currency. This would prevent the Establishment from exporting domestic inflation to other countries. Thus, restoration of a gold standard in the United States would curtail political corruption by the Federal Reserve at home and end its imperialism abroad.
This quote comes from a speech an incendiary academic gives to an economic conference which the protagonists of the book are attending. The academic is advocating that Russia’s chance at salvation and return to power lies in instituting a gold-standard in partnership with Germany.
I chose to type up the above quote because I think it’s quite interesting to me that Russia and China have recently suggested a new global reserve currency to replace the dollar. However, they only seem to be advocating a bundle of fiat currencies and not something based on hard, physical assets.
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