Archive for September, 2009

  • The Buy List YTD
    , September 10th, 2009 at 12:14 pm

    The CWS Buy List continues to perform very well. Through yesterday’s close, the Buy List is 33.31% compared with 14.41% for the S&P 500 (neither figures includes dividends). That’s a YTD high for the Buy List and it’s a high for its outperformance against the S&P 500 which now stands at 18.9%.
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    The Buy List was helped yesterday by Cognizant Technology Solutions (CTSH) which said that positive demand trends are continuing into the third quarter. The stock is now a double for us. Also, Nicholas Financial (NICK) announced the opening of a new branch in Akron, Ohio.

  • Myths of the Credit Crisis
    , September 9th, 2009 at 2:02 pm

    Arnold Kling has a good article looking at some myths of the financial crisis. One that he tackles is the idea that there was too little regulation. Instead, Kling asserts that regulation was one of the problems.

    The myth is that the regulators failed to focus on the systemic implications of financial innovation. The reality is that the regulators were keenly interested in systemic risk. However, like their counterparts in the financial industry, the regulators thought that the innovations had reduced systemic risk. The problem was not that regulators lacked a mandate to address systemic risk. What they lacked was judgment and insight.

  • Greenspan: Market crisis “will happen again” Me: Greenspan “will not happen again.”
    , September 9th, 2009 at 11:38 am

    From the BBC:

    “The crisis will happen again but it will be different,” he told BBC Two’s The Love of Money series.
    He added that he had predicted the crash would come as a reaction to a long period of prosperity.
    But while it may take time and be a difficult process, the global economy would eventually “get through it”, Mr Greenspan added.
    “They [financial crises] are all different, but they have one fundamental source,” he said.
    “That is the unquenchable capability of human beings when confronted with long periods of prosperity to presume that it will continue.”
    Speaking a year after the collapse of US investment bank Lehman Brothers, which was followed by a worldwide financial crisis and global recession, Mr Greenspan described the behaviour as “human nature”.

    Follow link to video.

  • From Wall Street to Seasame Street
    , September 9th, 2009 at 10:46 am

    It’s getting rough out there. Elmo’s mom (who’s apparently from Virginia) loses her job.

    Visit msnbc.com for Breaking News, World News, and News about the Economy

    Next up, a discussion on the national debt with Count Von Count. This may take awhile.

  • China alarmed by US money printing
    , September 8th, 2009 at 3:54 pm

    The good news is that someone is alarmed by U.S. monetary policy. The bad news is that it’s a top member of the Chinese Communist hierarchy.

    Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”.
    “We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
    “If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.
    China’s reserves are more than – $2 trillion, the world’s largest.

  • 51.04% of all trading on the NASDAQ Friday was short selling
    , September 8th, 2009 at 12:31 pm

    Check this out:

    There were 6,516 stocks with daily short volume reported and total NASDAQ trading volume of 1,318,772,463 shares. Total Daily Short Volume was 673,135,041 shares. 51.04% of all trading on the NASDAQ Friday was short selling.

  • UN wants new global currency to replace dollar
    , September 8th, 2009 at 11:05 am

    This is a pipe dream:

    In a radical report, the UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises.
    It added that the present system, under which the dollar acts as the world’s reserve currency , should be subject to a wholesale reconsideration.
    Although a number of countries, including China and Russia, have suggested replacing the dollar as the world’s reserve currency, the UNCTAD report is the first time a major multinational institution has posited such a suggestion.
    In essence, the report calls for a new Bretton Woods-style system of managed international exchange rates, meaning central banks would be forced to intervene and either support or push down their currencies depending on how the rest of the world economy is behaving.
    The proposals would also imply that surplus nations such as China and Germany should stimulate their economies further in order to cut their own imbalances, rather than, as in the present system, deficit nations such as the UK and US having to take the main burden of readjustment.
    “Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability,” said Detlef Kotte, one of the report’s authors. “But you will also need a system of managed exchange rates. Countries should keep real exchange rates [adjusted for inflation] stable. Central banks would have to intervene and if not they would have to be told to do so by a multilateral institution such as the International Monetary Fund.”
    The proposals, included in UNCTAD’s annual Trade and Development Report, amount to the most radical suggestions for redesigning the global monetary system.
    Although many economists have pointed out that the economic crisis owed more to the malfunctioning of the post-Bretton Woods system, until now no major institution, including the G20 , has come up with an alternative.

  • Buffett Sees More Trouble Ahead
    , September 8th, 2009 at 10:25 am

    The New York Times catches up with the Oracle of Omaha:

    After boldly buying when so many were selling assets, his conglomerate, Berkshire Hathaway, is pulling back, buying fewer stocks while investing in corporate and government debt. And Mr. Buffett is warning that the economy, though on the mend, remains deeply troubled.
    “We are not out of problems yet,” Mr. Buffett said last week in an interview, in which he reflected on the lessons of the last 12 months. “We have got to get the sputtering economy back so it is functioning as it should be.”
    Still, Mr. Buffett hardly sounded shellshocked in the wake of what he once called the financial equivalent of Pearl Harbor. (An estimated net worth of $37 billion would be a balm to anyone’s psyche.)

  • How the SEC Failed
    , September 8th, 2009 at 10:09 am

    Larry Ribstein points us to the SEC’s report on Bernie Madoff and it’s absolutely scathing. Here’s a sample:

    The investigation that arose from the most detailed complaint provided to the SEC, which explicitly stated it was “highly likely” that “Madoffwas operating a Ponzi scheme,” never really investigated the possibility of a Ponzi scheme. The relatively inexperienced Enforcement staff failed to appreciate the significance ofthe analysis in the complaint, and almost immediately expressed skepticism and disbelief. Most of their investigation was directed at determining whether Madoff should register as an investment adviser or whether Madoff’s hedge fund investors’ disclosures were adequate.
    As with the examinations, the Enforcement staff almost immediately caught Madoff in lies and misrepresentations, but failed to follow up on inconsistencies. They rebuffed offers of additional evidence from the complainant, and were confused about certain critical and fundamental aspects of Madoff’s operations. When Madoff provided evasive or contradictory answers to important questions in testimony, they simply accepted as plausible his explanations.

    Ouch! When you see the sheer incompetence of the government, it ought to serve as a great refutation to conspiracy theorists. Yet I have a feeling that logic and facts won’t make a dent in their efforts.
    Bonus: Madoffs get $13,800 property tax rebate

  • Oliver Stone Is Back
    , September 8th, 2009 at 8:28 am

    The New York Times looks at the return of Oliver Stone:

    While Mr. Stone’s youth was steeped in the ways of finance, thanks to his father’s profession, he did not inherit a facility for such matters. He did poorly in economics at Yale, and turned to filmmaking. He has spent the last several months researching the financial collapse by reading and by meeting with executives and academics.
    Earlier in the summer he brought Mr. LaBeouf to a cocktail party organized by Nouriel Roubini, a New York University economics professor and chairman of a consulting firm, and held in rented space at the Maritime Hotel in Chelsea. There Mr. Stone and Mr. LaBeouf discussed the financial collapse with hedge fund managers who are clients of Mr. Roubini’s firm.
    “In this financial crisis it was the traditional banks and the investment banks that had a larger role in doing stupid and silly things than the hedge funds,” said Mr. Roubini, who earned acclaim for being early in predicting the financial crisis. (Mr. Stone offered Mr. Roubini a small role in the film as a hedge fund manager.)

    I’m not surprised to hear that Stone did poorly in economics. It doesn’t sound like he’s gotten much better. The late Pauline Kael said she despised his movies. I’m not sure why anyone takes Stone seriously:

    “They control culture, they control ideas. And I think the revolt of September 11th was about ‘Fuck you! Fuck your order—’ ”
    “Excuse me,” a fellow-panelist, Christopher Hitchens, said. ” ‘Revolt’?”
    “Whatever you want to call it,” Stone said.
    “It was state-supported mass murder, using civilians as missiles,” said Hitchens, a columnist for Vanity Fair and The Nation.