Words from the (investment) wise for the week that was (September 22 – 28, 2008)

By Prieur du Plessis, on September 27th, 2008 posted in: Investment, Markets, Money Leave your comment

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As I am travelling in Europe at the moment (see “Another town, another train…”), this week’s edition of “Words from the Wise” does not provide the customary review of the financial markets’ movements and economic statistics. Given time constraints, today I will only share with you a number of video clips in lieu of excerpts from news items and quotes from market commentators. Quite a few of the video items include links to related articles for those who prefer the written word.

Firstly, as we are awaiting word on the bail-out plan, a very topical quote from Jim Welsh (Welsh Money Management): “We will be told that the Federal Reserve and the Treasury have finally gotten it right. The scope and size of the proposed program will arrest the decline in home prices, restore stability to the financial markets, enable banks to get back to the business of lending, and restore the confidence of the American consumer.

“While the program certainly has each of these points as a goal, the amount of time to achieve each goal is unknowable, but an important factor. Moses was told he would lead the Jews to the Promised Land. He didn’t know it would take 40 years. And, in all due respect to Bernanke and Paulsen, Moses was working with God. They are working with Congress.” (Hat tip: Barry Ritholtz’s The Big Picture.)

Speaking of Barry, he has put pen to paper to write a memo “from Wall Street to Washington, D.C.”, spelling out in no uncertain terms the role that Uncle Sam played in enabling the current financial mess. This a must-read item.

Source: Slate

Another quote comes from from Milton Friedman: “If you put the Federal Government in charge of the Sahara Desert, there’d be a shortage of sand within five years.”

Still on the topic of the bail-out plan, Bill King (The King Report) offered his ideas on how to put a more credible plan together. His thoughts are insightful and deserve the urgent attention of the powers that be. Click here for the full story.

Next, a tag cloud of the text of all the articles I have read during the past week. This is a way of visualizing word frequencies at a glance. As the saying goes: A picture paints a thousand words …

Economic reports

Source: Yahoo Finance, September 26, 2008.

In addition to the European Central Bank’s interest rate announcement (Thursday, October 2), next week’s economic highlights, courtesy of Northern Trust, include the following:

1. Personal Income and Spending (September 29): Consensus: Personal income +0.2%, consumer spending +0.2%.

2. ISM Manufacturing Survey (October 1): The consensus for the manufacturing ISM composite index is 49.5 versus 49.9 in August.

3. Employment Situation (October 3): Payroll employment in September is expected to post the ninth monthly decline (-100,000), following a loss of 84,000 jobs in August. The jobless rate is predicted to have risen to 6.2% from 6.1% in August. Consensus: Payrolls – -100,000 versus -84,000 in August, unemployment rate – unchanged at 6.1%

4. Other reports: Consumer Confidence (September 30).

Click here for a summary of Wachovia’s weekly economic and financial commentary.

A summary of the release dates of economic reports in the UK, Eurozone, Japan and China is provided here. It is important to keep an eye on growth trends in these economies for clues on, among others, the trend of the US dollar.

Markets
The performance chart obtained from the Wall Street Journal Online shows how different global markets performed during the past week.

Source: Wall Street Journal Online, August 3, 2008.

The world is still steeped in its deleveraging process, and from all accounts this process has not been completed. For this reason, caution should still be exercised, since the economic background remains, at best, precarious. And do remember Charles Darwin’s words: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”

That’s the way it looks from Cape Town (or rather from economically depressed London and Dublin for the next four days).

Source: Bill Perkins, via New York Times, September 24, 2008.

MSNBC: Paulson, Bloomberg, Pearlstein & Liesman on the financial crisis

Source: MSNBC, September 22, 2008.

The Wall Street Journal: Shiller – bailout “fuzzy”, but better than alternative
“At a forum co-sponsored by the Yale School of Management and The Wall Street Journal, Professor of Economics Robert Shiller
says US Treasury Secretary Henry Paulson’s proposed bailout is a ‘fuzzy’ plan he doesn’t like, but that it’s still better than doing nothing.”

Source: The Wall Street Journal, September 24, 2008.

The Wall Street Journal: “Bailout Nation” author questions current bailout plan
“Barry Ritholtz, the writer behind the popular economics blog ‘The Big Picture’, discusses his soon-to-be-published book, ‘Bailout Nation’. He also tells WSJ’s Christina Jeng the government might be too quick to come to the rescue and it might not even benefit the economy.”

Source: David Ranson, The Wall Street Journal, September 23, 2008.

Bloomberg: Morgan’s Roach says bailout plan will help stop panic
“Stephen Roach, chairman of Morgan Stanley Asia, talks with Bloomberg from Beijing about the US and Chinese economies, the US government’s $700 billion rescue for financial institutions and China’s commodities demand.”

Source: Tom Keene, Bloomberg, September 23, 2008.

CNBC: Picking apart the bailout plan
“Analysis on the $700 billion bailout, with Chris Whalen of Institutional Risk Analytics and CNBC’s Steve Liesman.”

Source: CNBC, September 26, 2008.

John Authers (Financial Times): Good luck Tara
“John Authers on credit markets’ fears about the Troubled Assets Relief Act currently under debate in Congress.”

Click here for the full article.

Source: John Authers, Financial Times, September 24, 2008.

CNBC: Marc Faber – Fed is to blame
“The Federal Reserve, which has encouraged excessive borrowing, is to blame for the credit crunch that has gripped world markets for more than a year, Marc Faber told CNBC.”

Click here for the full article.

Source: CNBC, September 23, 2008.

Bloomberg: Moody’s Zandi sees “much higher” odds for deep recession
“Mark Zandi, chief economist of Moody’s Economy.com, talks with Bloomberg about Treasury Secretary Hank Paulson’s bank bailout plan, its impact on the economy and prospects for a recession.”

Source: Bloomberg, September 23, 2008.

Bloomberg: James Chanos sees “looming crisis” in municipal finance
“James Chanos, president of Kynikos Associates, and Jim Grant, the editor of Grant’s Interest Rate Observer, talk with Bloomberg about US financial industry turmoil, Senator Charles Schumer’s proposal to deal with the crisis, and the outlook for markets.”

Source: Pimm Fox, Bloomberg, September 18, 2008.

John Authers (Financial Times): Value post bailout deal
“John Authers looks at the prospects for the US economy and the markets after the bailout deal.”

Click here for the full article.

Source: John Authers, Financial Times, September 25, 2008.

Financial Times: Orin Kramer on his investments, the US economy and taxes
“Orin Kramer, of the New Jersey State Investment Council, talks to Chrystia Freeland, FT’s US Managing Editor, about the performance of the New Jersey pension fund, the effect of the financial crisis on the US economy, the economic policies of Senator Barack Obama and the possibility of paying higher tax if a Democrat is elected president.”

Source: Financial Times, September 24, 2008.

Bill Moyers: Bill Moyers talks to Kevin Phillips
“Bill Moyers sits down with former Nixon White House strategist and political and economic critic Kevin Phillips, whose latest book ‘Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism’ explores the role that the crumbling financial sector played in the now-fragile American economy.”

Source: Bill Moyers Journal, September 19, 2008.

CNBC: Warren Buffett explains his $5 billion Goldman investment
“Warren Buffett was interviewed live by telephone on CNBC’s Squawk Box this morning about his surprise investment of at least $5 billion in Goldman Sachs.”

Click here for the full article.

Source: CNBC, September 24, 2008.

Francesco Guerrera (Financial Times): Buffett/Goldman – a shot of confidence
“Warren Buffett’s investment in Goldman Sachs is a huge shot of confidence but comes at a high price, says Francesco Guerrera.”

Source: Francesco Guerrera, Financial Times, September 24, 2008.

Financial Times: End of the investment banking era
“Chris Hughes, FT’s investment banking correspondent, explains why Wall Street’s two biggest surviving investment banks opted to submit to tighter regulation.”

Source: Financial Times, September 22, 2008.

John Authers (Financial Times): Ban on short selling creates new problems

Click here for the full report.

Source: John Authers, Financial Times, September 24, 2008.

YouTube: American Dollar = Toilet paper, financial Armageddon crisis

Source: YouTube, September 22, 2008.

Financial Times: Jerome Booth – Why emerging markets look solid
“Jerome Booth, head of research at Ashmore Investment Management, says a reassessment of risk in the developed world makes emerging market currencies and sovereign debt look attractive.”

Source: Financial Times, September 18, 2008.

Financial Times: Jerome Booth – Why he’s bullish on Russia
“Jerome Booth explains the impact of the global financial crisis on Russian investments, and why he remains bullish.

Source: Financial Times, September 18, 2008.

Paul Kedrosky (Infectious Greed): We all should get US bailout tombstones
“A friend of mine pointed out in an email this morning that since all we taxpayers are party to a big transaction (i.e. bailing out the US financial system), Treasury should send us all fine new Lucite-encased tombstones for the deal. He sent a sample.”

Source: Paul Kedrosky, Infectious Greed, September 21, 2008.

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