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Quotes For The Week

A hat-trick of quotations for you…

The rejection of the package is good because it shows that some people in the U.S. are still sane. A bailout will not buy the U.S. a way out. The government is less powerful than markets in fixing this mess.

-Marc Faber, in a September 30 phone interview with Bloomberg

Sometimes I think we need to put out an ad: “No, we don’t have any more jobs than you do.”

-Jodi Royal-Goodwin, the redevelopment agency director for Reno, Nevada, in response to an influx of homeless people coming to the city looking for jobs

Altogether, we have had eight years of no gains in real median wages, flat stock market returns, and minimal net new jobs. Despite what you have heard, after adjusting for debt spending, population growth and realistic adjustments to the GDP deflator, there have only been 3 or 4 quarters of GDP growth since 2005. If you adjust for military, government and minimum wage positions – i.e. jobs funded by tax payers and jobs that don’t pay anything - there have been absolutely no net new jobs. Bush’s largest gains have been with inflation, oil and food prices, debt, trade deficits, bankruptcies, foreclosures, and healthcare costs. If an assembly of the world’s leading economic strategists were to design the most destructive economic disaster possible, they could not match the results of Bush’s tenure. Even the most loyal Bush supporters will admit he has been an absolute disaster – that is if they’re being honest.

-Mike Stathis, Managing Principal of Apex Venture Advisors and author of America’s Financial Apocalypse, in a Market Orackle (UK) piece from September 14

Quotes For The Week

This week, the QFTW (plural!) have to do with the looming government bailout of Wall Street and the financial system:

It’s astonishing, devastating, and very harmful for America and American citizens. It means we’re in for the worst recession since World War II, as well as higher long-term interest rates, higher inflation, higher taxes, a weaker dollar and substantially lower stock prices.

-Jim Rogers, legendary investor and CEO of Rogers Holdings, in the September 22, 2008, issue of the New York Sun

CBS News found 21 former staffers from the Senate Banking, Housing and Urban Affairs and House Financial Services Committees are now lobbyists for financial firms. Their job? To lobby those in Congress who will shape the financial bailout. The former staffers now represent hedge funds, private equity firms, investment banks and the failed mortgage giants Fannie Mae and Freddie Mac.

-CBS News, September 26 2008

The bottom line is the Democrats want to give this money to the banks because most of it’s going to go to the large New York city banks, and those folks are generous supporters of the National Democratic Party, senators and congressmen running for re-election, and Barack Obama.

-Peter Morici, University of Maryland business professor and multiple-time winner of MarketWatch’s “Forecaster of the Month” award, September 28, 2008

You have the former Chairman of Goldman Sachs asking for 700 billion dollars, and in his initial request, asking for it in such an un-American way that I think he should have resigned. I think Paulson has terminally misunderstood the nature of the American system. Not just no review, no judicial review, no congressional accountability. Give me 700 billion dollars, 700 BILLION dollars! I’ll be glad to spend it for you. That’s a centralization of power that is totally un-American.

-Newt Gingrich, former Speaker of the House on ABC’s “This Week with George Stephanopoulos” roundtable, September 28, 2008

Quote For The Week

From the office of U.S. Senator Jim Bunning (R-K.Y.) last week:

Bunning Declares The Free Market Dead

Washington, DC
Friday, September 19, 2008

U.S. Senator Jim Bunning today issued the following statement regarding the Treasury Department’s bailout of Wall Street.

“Instead of celebrating the Fourth of July next year Americans will be celebrating Bastille Day; the free market for all intents and purposes is dead in America,” said Bunning. “The action proposed today by the Treasury Department will take away the free market and institute socialism in America. The American taxpayer has been misled throughout this economic crisis. The government on all fronts has failed the American people miserably.

“My great grandchildren will be saddled with the estimated $1 trillion debt left in the wake of this proposal. We have gotten to this point because nobody has been minding the store. Both Secretary Paulson and Chairman Bernanke should be held accountable for their inaction – and now because of that inaction – the American taxpayer is left with bill.”

“We must take care of Main Street. Small businesses in Ashland, Bowling Green, and Paducah are hurting because of high taxes, and energy costs. Those small businesses are the economic engines that fuel our economy. I hope in the closing days of this Congress we can pass legislation to help those good people on Main Street rather than helping the power brokers on Wall Street.”

Quotes For The Week

Yes, you read correctly. There are two Quotes to start off the week. And, oh, what a week it’s been so far!

Quote #1: Jim Cramer

Back on August 4, I talked about CNBC television personality, former hedge fund manager, and best-selling author Jim Cramer, who declared the U.S. stock market bear was dead. Cramer said on July 15:

I am indeed sticking my neck out right here, right now… declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15, and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside…

My bottom call isn’t gutsy. I think it’s just a smart call that all the evidence points toward. Bye, bye bear market. Say hello to the bull and don’t let the door hit you on the way out.

On July 15, the Dow Jones Industrial Average stood at 10,962.54, and the S&P 500 at 1,214.91, at the close of trading.

Earlier today, the Dow finished at 10,917.51, while the S&P 500 fell to 1,192.70.

Boo-yah!

Quote #2: Hank Paulson

Earlier today, U.S. Treasury Secretary Henry Paulson told White House reporters that despite the financial chaos on Wall Street on Monday, Americans can remain confident in the “soundness and resilience in the American financial system.” The former head of investment bank Goldman Sachs talked a little about the U.S. housing market, and predicted housing would start to rebound soon. Paulson told reporters:

I’m not saying two or three months, but in months as opposed to… years.

Back on July 22, I wrote:

From the CNBC website this afternoon:

Treasury Secretary Henry Paulson said America’s housing market could turn a corner and begin recovering within months, but it will take longer to resolve all housing-related problems.

“Obviously, it will go on beyond months with some of the issues in the housing market, but I believe we can get to the point within months where we turn the corner on housing,” Paulson said in a televised interview with Fox Business Network.

Sound familiar to anyone? From my post “Paulson Weighs In On Housing” from July 2, 2007:

Today, U.S. Treasury Secretary Henry Paulson spoke to Reuters about a number of economic issues, including housing. Paulson said the U.S. economy is healthy, despite problems with the subprime mortgage sector. The former chairman of Goldman Sachs stated that the downturn in the housing market is “at or near the bottom. It’s had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn is going to come other than it’s at or near the bottom.”

Kind of sucks being called to task for such “definitive” statements, huh?

Quote For The Week

Robert Shiller, Yale economics professor and chief economist at MacroMarkets, had the following to say about long-term U.S. home prices in an interview on Yahoo! Finance’s Tech Ticker last week:

There’s a lot of misconceptions about home prices. People think that there’s a strong historical uptrend to them. And in fact, by my data, there is not. In fact, home prices in the United States, if you correct for inflation, in 1990 were about the same as they were in 1890.

Quote For The Week

A home is to live in. For most people, seeing real estate as an investment that will surely appreciate is risky business. For one thing, while prices are already down in many parts of the country, they might go lower. So the cheap house you buy now could still sink in value. And while we’ve become accustomed to 6 or 7 percent returns on real estate, historically prices have just kept pace with or barely exceeded inflation. It’s probably wise to buy a home you want to live in rather than an investment with four walls.

-Jim Guest, President of Consumers Union, the independent non-profit publisher of Consumer Reports, in the September 2008 issue of the monthly publication.

Quote For The Week

Financial analyst Eric King talked about gold and silver on the Financial Sense Newshour this weekend, and warned listeners:

But I want people to listen carefully to what I’m about to say to them. Do not listen to statements made from this government. Ignore them. Ignore statements made by Paulson, who is retiring in November right after the election. They have been consistently wrong in all of their statements. They have lost control of the system, in my opinion, and the system is breaking right now. The United States banking system is insolvent, and they are trying to keep this hidden from people and try to get more suckers to put more money into these banks, but the suckers are not lining up anymore. A big tax bill is going to be laid on the American public, and as Greenspan stated in Belgium, the Federal Reserve, and even the Treasury, stands ready to create money without limit. We are about to go into that phase now where we are going to have very serious money printing, and the Fed knows it, Paulson knows it, the Treasury and Bernanke know it, and because of that they had to crush these metals ahead of that…

Quote For The Week

Joseph Stiglitz, a Nobel Prize-winning economist and professor at Columbia University, talked about the housing bailout bill that was recently signed into law. From the CNBC website last Friday:

What bothers me from the point of view of public policy is that Freddie Mac and Fannie Mae came to the American taxpayers, asked for the right to write a blank check and Congress gave them that right.

What should have happened was corporate reorganization, keep the companies going but not protect the management, the shareholders, not even protect the creditors… The whole basis of a market economy is a system of accountability. You make decisions, you take risks, you get the upside, but you also take the downside.

These guys that are supposed to be assessing and managing risks have repeatedly failed and I think that’s what we really have to get our minds around. The fact that we had such confidence in these gurus of the financial markets… We turn to them about how to fix the system, but these are the guys that broke the system.

The amount of potential liability that we undertook when we passed that bill with that blank check— we just don’t know. This is the worst kind of public irresponsibility.

And America will probably pay dearly for it in the end…

Quote For The Week

CNBC television personality, former hedge fund manager, and best-selling author Jim Cramer has declared that the bear market in stocks is officially over. From the CNBC website last Wednesday:

If you thought you heard Cramer call a bottom during Tuesday’s Mad Money, you were right.

“It smells to me like something, in fact many things,” he said, “have at last changed for the better.”

“I am indeed sticking my neck out right here, right now,” Cramer continued, “declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15, and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside.”

“Stop waiting,” he said, and “buy the next dip because I think it might be the last big one.”

Famous last words? Cramer doesn’t think so. He told CNBC viewers:

My bottom call isn’t gutsy. I think it’s just a smart call that all the evidence points toward. Bye, bye bear market. Say hello to the bull and don’t let the door hit you on the way out.”

The Dow Jones Industrial Average ended the day at 10,962.54, and the S&P 500 at 1,214.91, back on July 15.

Quote For The Week

When I was down at the University of Illinois at Urbana-Champaign in the early nineties, I used to read the The Onion, a fake newspaper chock full of satirical articles, every once in a while. Apparently, the publication’s still going strong. From their July 14 issue:

Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to begin encouraging massive private investment in some fantastical financial scheme in order to get the nation’s false economy back on track.

Current bubbles being considered include the handheld electronics bubble, the undersea-mining-rights bubble, and the decorative office-plant bubble. Additional options include speculative trading in fairy dust—which lobbyists point out has the advantage of being an entirely imaginary commodity to begin with—and a bubble based around a hypothetical, to-be-determined product called “widgets.”

The most support thus far has gone toward the so-called paper bubble. In this appealing scenario, various privately issued pieces of paper, backed by government tax incentives but entirely worthless, would temporarily be given grossly inflated artificial values and sold to unsuspecting stockholders by greedy and unscrupulous entrepreneurs.

“Little pieces of paper are the next big thing,” speculator Joanna Nadir, of Falls Church, VA said. “Just keep telling yourself that. If enough people can be talked into thinking it’s legitimate, it will become temporarily true.”

Why is there a lurking suspicion that this story might not be so fake after all?

Quote For The Week

The folks who sat on the sidelines, they should feel legitimately annoyed that the more speculative folks who bought homes they couldn’t afford are going to be bailed out or helped by the federal government… And these other folks [who] acted responsibly and didn’t get in over their heads and decided they didn’t want to buy
the home, they’re not getting any benefit.

-Edward Leamer, senior economist at the University of California and director of the prestigious UCLA Anderson Forecast, on government efforts to bail out homeowners struggling to avoid foreclosure.

Quote For The Week

The administration is doing what they always do, blaming the fire on the person who called 911.

-New York Senator Charles Schumer, deflecting blame that he was partially responsible for the IndyMac bank run and failure last week.

When a senior senator who is in a number of influential posts regarding oversight of bank regulators directly attacks the confidence of a depository institution, it matters. Not surprisingly, the director of the Office of Thrift Supervision concluded that the collapse of the bank immediately following the Senator’s comments was not a coincidence. Director Reich concluded that Senator Schumer had ‘given the bank a heart attack’.

Why? Why would a federal official with enormous power, destroy an institution on which tens of thousands of depositors (not all of whom are insured) and employees depend? Why would a New York Senator attack a Pasadena bank, acting as some sort of amateur, self-appointed, long-distance bank examiner?

-Jerry Bowyer, CNBC “Kudlow & Co.” Contributor

Quote For The Week

The art is not in making money, but in keeping it.

-Old Proverb

Quote For The Week

Another one bites the dust. Another prediction for a turnaround in the housing market, that is. Back on January 4, White House chief economist Edward Lazear talked to CNBC about the housing slump. From my post that day:

By the way, earlier today Mr. Lazear told CNBC in an interview that the U.S. housing slump was almost over:

The big drain on the economy for the past year and a half has been housing… eventually that is going to bottom out and when that bottom outs, even if it doesn’t expand, it will remove that negative drag on the economy.

Housing has been unfortunately a negative and that should stop probably in the next six months.

While the housing numbers for June aren’t due out for some time yet, I think it’s pretty safe to say at the end of Lazear’s six-month timeframe that there doesn’t appear to be any let up to the U.S. housing bust.

Mr. Lazear shouldn’t feel too bad. He joins a distinguished group of economists, analysts, journalists, etcetera, who have tried, and failed, to call a bottom in the U.S. housing market.

Next, please.