Bespoke Investment Group: 15 S&P 500 Stocks Up 100% In 2009
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Friday, July 31, 2009
Thursday, July 30, 2009
Wednesday, July 29, 2009
Tuesday, July 28, 2009
Sunday, July 26, 2009
Monday, July 20, 2009
Economist - What went wrong with Economics
From the Daily Reckoning
In the meantime, The Economist magazine, that august font of accepted wisdom, tells us "what went wrong with economics."
Nobel Prize winner Paul Krugman remarked that the learning of the past 30 years in macroeconomics was "spectacularly useless at best, and positively harmful at worst."
The Economist responds: 'What went wrong with economics?' it asks. Not much, it concludes.
Except that its most precious theories are claptrap. And its most prominent experts are nincompoops. And it helped cause the biggest economic crisis in perhaps half a century...failed to see it coming...failed to understand it...and then made it worse by offering to fix it.
Apart from that...macroeconomics is fine.
In the meantime, The Economist magazine, that august font of accepted wisdom, tells us "what went wrong with economics."
Nobel Prize winner Paul Krugman remarked that the learning of the past 30 years in macroeconomics was "spectacularly useless at best, and positively harmful at worst."
The Economist responds: 'What went wrong with economics?' it asks. Not much, it concludes.
Except that its most precious theories are claptrap. And its most prominent experts are nincompoops. And it helped cause the biggest economic crisis in perhaps half a century...failed to see it coming...failed to understand it...and then made it worse by offering to fix it.
Apart from that...macroeconomics is fine.
Sunday, July 19, 2009
Tuesday, July 14, 2009
Saturday, July 11, 2009
Oil Prices
How low can crude oil go?
After trading as high as $73 a barrel, crude oil began to buckle under pressure as the CFTC began to look into position limits that can be held by traders. Adam Hewison, Market Club, presented this one live during the Wednesday July 8, 2009 trading session.
In Adam Hewison’s new video you will see what has happened to crude oil in the last eight days. You’ll will also see what he believes will be the area that crude oil will find support.
Click here to watch this charting analysis video presented by Adam Hewison of Market Club.
Friday, July 10, 2009
Here's How Messed Up Our Financial System Is
Motley Fool
Morgan Housel
June 15, 2009
Morgan Housel
June 15, 2009
Credit default swaps (CDSes) are insurance policies on various debt products -- everything from subprime mortgages to U.S. government debt. A seller agrees to compensate a buyer if debt goes into default. It's not too different from car insurance: two parties swap risk for a premium. And just like car insurance, it can be a great tool to efficiently spread risk to those who want it from those who can't handle it. So why does Munger, Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) co-chairman, want them banned? See, in everyday life, you can't insure things you don't own. Thankfully, your neighbor can't take out homeowners insurance on your house. If the entire town could buy insurance on one house, they'd have a huge incentive to make sure it was destroyed. They'd burn it down, blow it up, bulldoze it, what have you, pocket gobs of insurance claims for their trouble, and happily move onto the next town. For good reason, laws prohibit this. With credit default swaps, there are no such laws. Investors can take out infinite amounts of insurance on debt products they don't own. This seriously distorts the motives and incentives between buyers and sellers. CDSes often don't act as insurance, but a tool to manipulate stupidly large amounts of money and rip gaping holes in the financial system, a la AIG (NYSE: AIG). The Wall Street Journal recently reported an almost comical example of this. It tells the story of a tiny Texas brokerage firm called Amherst Holdings which, likely along with other CDS underwriters, took a $27 million debt security and sold $130 million of credit default protection on it. Big banks like RBS (NYSE: RBS) JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) bought these CDSes. The debt, when reviewed, was total garbage and almost certain to default, so the banks had no problem paying up for the insurance. Now, think about this for a moment: Amherst, and likely other CDS counterparties, pocketed $130 million to insure $27 million worth of bonds. So what do you think Amherst did? Exploiting a small loophole, it used the proceeds to have the underlying bonds bought back at par, which instantly rendered the credit default swaps worthless. It was incentivized to do this because the amount it took in from CDS proceeds substantially exceeded the bond's par value, so it could burn millions of dollars buying out the bonds and still make a tidy profit. By making the bonds whole, there was zero chance of default, so Amherst's insurance obligation disappeared. Of course, there really was no insurance involved. There wasn't even an investment. As Munger notes in the opening quote, it's simply a vast, unregulated game of poker. Spun the other way, CDS buyers have an incentive to make sure underlying debt defaults. They can achieve this by buying CDSes for multiple times a company's debt load and causing a run on its assets. Indeed, this is exactly what many believe ultimately pushed Lehman Brothers into bankruptcy. In the utopic minds of those who created them, credit default swaps prevent meltdowns and mitigate risk. In reality, scarcely anything in our economy possesses a greater risk of bringing down the house. Thanks to the ability to insure debt for multiple times its value, the notional size of the CDS market is more than $38 trillion, or nearly three times U.S. GDP. That's $126,000 for every man, woman, and child in America. This is quite literally a poker game multiple times the size of the entire economy. Yet we've still done very little to fix it. CDSes are still sold, bought, and traded in staggeringly large sums based on rules dictated by those who created them. As Goldman Sachs' (NYSE: GS) annual report states, "The market for credit default swaps is relatively new, although very large, and it has proven to be extremely volatile and currently lacks a high degree of structure or transparency." Whoo-hoo! Read that quote again, remind yourself what got us here in the first place, pound your head on the table, and ask yourself why we hold frequent congressional hearings to quibble over things like executive pay, but sweep issues like credit default swaps under the table and hope they fix themselves.
Still Smart to Bet Against Treasury Bonds
From Barron's
THURSDAY, JULY 9, 2009
HULBERT ON MARKETS Though they've fallen in price, these long-term investments remain a poor choice.
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Monday, July 6, 2009
Thursday, July 2, 2009
Freedom in Honduras!!
A 'coup' in Honduras? Nonsense.
By Octavio Sánchez
Tegucigalpa, Honduras – Sometimes, the whole world prefers a lie to the truth. The White House, the United Nations, the Organization of American States, and much of the media have condemned the ouster of Honduran President Manuel Zelaya this past weekend as a coup d'état.
That is nonsense.
In fact, what happened here is nothing short of the triumph of the rule of law.
To understand recent events, you have to know a bit about Honduras's constitutional history. In 1982, my country adopted a new Constitution that enabled our orderly return to democracy after years of military rule. After more than a dozen previous constitutions, the current Constitution, at 27 years old, has endured the longest.
It has endured because it responds and adapts to changing political conditions: Of its original 379 articles, seven have been completely or partially repealed, 18 have been interpreted, and 121 have been reformed.
It also includes seven articles that cannot be repealed or amended because they address issues that are critical for us. Those unchangeable articles include the form of government; the extent of our borders; the number of years of the presidential term; two prohibitions – one with respect to reelection of presidents, the other concerning eligibility for the presidency; and one article that penalizes the abrogation of the Constitution.
During these 27 years, Honduras has dealt with its problems within the rule of law. Every successful democratic country has lived through similar periods of trial and error until they were able to forge legal frameworks that adapt to their reality. France crafted more than a dozen constitutions between 1789 and the adoption of the current one in 1958. The US Constitution has been amended 27 times since 1789. And the British – pragmatic as they are – in 900 years have made so many changes that they have never bothered to compile their Constitution into a single body of law.
Under our Constitution, what happened in Honduras this past Sunday? Soldiers arrested and sent out of the country a Honduran citizen who, the day before, through his own actions had stripped himself of the presidency.
These are the facts: On June 26, President Zelaya issued a decree ordering all government employees to take part in the "Public Opinion Poll to convene a National Constitutional Assembly." In doing so, Zelaya triggered a constitutional provision that automatically removed him from office.
Constitutional assemblies are convened to write new constitutions. When Zelaya published that decree to initiate an "opinion poll" about the possibility of convening a national assembly, he contravened the unchangeable articles of the Constitution that deal with the prohibition of reelecting a president and of extending his term. His actions showed intent.
Our Constitution takes such intent seriously. According to Article 239: "No citizen who has already served as head of the Executive Branch can be President or Vice-President. Whoever violates this law or proposes its reform [emphasis added], as well as those that support such violation directly or indirectly, will immediately cease in their functions and will be unable to hold any public office for a period of 10 years."
Notice that the article speaks about intent and that it also says "immediately" – as in "instant," as in "no trial required," as in "no impeachment needed."
Continuismo – the tendency of heads of state to extend their rule indefinitely – has been the lifeblood of Latin America's authoritarian tradition. The Constitution's provision of instant sanction might sound draconian, but every Latin American democrat knows how much of a threat to our fragile democracies continuismo presents. In Latin America, chiefs of state have often been above the law. The instant sanction of the supreme law has successfully prevented the possibility of a new Honduran continuismo.
The Supreme Court and the attorney general ordered Zelaya's arrest for disobeying several court orders compelling him to obey the Constitution. He was detained and taken to Costa Rica. Why? Congress needed time to convene and remove him from office. With him inside the country that would have been impossible. This decision was taken by the 123 (of the 128) members of Congress present that day.
Don't believe the coup myth. The Honduran military acted entirely within the bounds of the Constitution. The military gained nothing but the respect of the nation by its actions.
I am extremely proud of my compatriots. Finally, we have decided to stand up and become a country of laws, not men. From now on, here in Honduras, no one will be above the law.
Octavio Sánchez, a lawyer, is a former presidential adviser (2002-05) and minister of culture (2005-06) of the Republic of Honduras.
Wednesday, July 1, 2009
Banks or Hedge Funds
A Story within the Story
Following the collapse of the biggest credit bubble in history, there has
been no shortage of finger pointing and the hedge fund industry, which has
always had an uncanny ability to be at the wrong place at the wrong time,
has yet again been at the centre of attention. And politicians, keen to divert
attention away from themselves as the true culprits of the crisis through
years of regulatory neglect, have been quick at picking up the baton.
Admittedly, the hedge fund industry is guilty of many stupid things over
the years, but blaming it for the credit crisis is beyond pathetic and the
suggestion that increased regulation of the hedge fund industry is going to
prevent future crises is outrageously naïve.
If you prohibit private investors from investing in hedge funds which on
average use 1.5-2 times leverage but permit the same investors to invest in
banks which use 25 times leverage and which are for all intents and
purposes bankrupt, then you either don’t understand the world of finance
or you don’t want to understand. Shame on those who fall for cheap tactics
Following the collapse of the biggest credit bubble in history, there has
been no shortage of finger pointing and the hedge fund industry, which has
always had an uncanny ability to be at the wrong place at the wrong time,
has yet again been at the centre of attention. And politicians, keen to divert
attention away from themselves as the true culprits of the crisis through
years of regulatory neglect, have been quick at picking up the baton.
Admittedly, the hedge fund industry is guilty of many stupid things over
the years, but blaming it for the credit crisis is beyond pathetic and the
suggestion that increased regulation of the hedge fund industry is going to
prevent future crises is outrageously naïve.
If you prohibit private investors from investing in hedge funds which on
average use 1.5-2 times leverage but permit the same investors to invest in
banks which use 25 times leverage and which are for all intents and
purposes bankrupt, then you either don’t understand the world of finance
or you don’t want to understand. Shame on those who fall for cheap tactics
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