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Quotes For The Week

I read a funny piece on Bloomberg.com this morning about reactions to the overuse of the phrase “green shoots” as it relates to a potential U.S. economic recovery…

“These may be the two most overused and annoying words of my investment career… Every possible sign of a recovery is anointed with the phrase.”

-John Mauldin, president of Arlington, Texas-based Millennium Wave Advisors

“Turning into daffodils.”

-Jim O’Neill, chief economist at Goldman Sachs Group

“Housing is still a drag on the economy… It may be green shoots, but they are growing slowly. It’s moss.”

-David Coard, head of fixed-income trading in New York at Williams Capital Group

“We’re not seeing them… I had a cataract operation in my left eye about a month ago and I thought, maybe now I’ll be able to see some green shoots.”

-Warren Buffett

“People talk a lot about these green shoots… I see more yellow weeds than green shoots.”

-Nouriel Roubini, professor of economics at New York University and chairman of RGE Monitor

“It is more a comment on the human condition and the innate need for optimism.”

-David Rosenberg, chief economist and strategist at Toronto-based Gluskin Sheff & Associates

Bloomberg’s Matthew Benjamin added the following in regards to Rosenberg:

A substitute phrase may also be needed if the U.S. economy slows down again later this year, said Rosenberg, the former chief North American economist at Merrill Lynch & Co.

“We will not very likely see ‘brown manure’ as the catchy horticultural replacement to green shoots,” he said.

Quote For The Week

Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report, appeared on the Alex Jones Show this past Tuesday. Dr. Faber, also known as “Dr. Doom” by the press, is famous for advising his clients to get out of the U.S. stock market one week before the October 1987 crash and for predicting the current financial crisis. The Swiss-born investment adviser told Jones and his listeners:

Basically, we had two systems until the end of the 1970s in the world. Essentially, free market capitalism— the market economy— and the planning economy. And, as you know, under communism and socialism, central planners totally failed with their policies to create sustainable economic growth. And if you traveled to Russia in 1980 or to China in 1980, these countries were really impoverished. And, the U.S., in particular, today is moving towards an interventionist policy of the government moving into the economy and trying to fix the economy left, right, and center. In the extreme case, you would go essentially to the planning economy. But it’s not going to happen right away. But, basically, the more the government has an influence in the economy, and intervenes in the economy, the current crisis is not the failure of free markets, it’s the failure of government intervention. One of the big interventions was obviously Fannie Mae and Freddie Mac which essentially had cheaper access to funds and the banking system. These were the big bankruptcies in America, in terms of size, and also other regulatory— the intervention into the money market and the supplies of money by the Federal Reserve post 2001, also, as I had just mentioned, created a problem. It’s not that the free market had failed, it’s the interventions by the government that failed. And now, these failed policies are even enlarged, and that is where I have a problem with the current economic policy makers…

So, I think we will have high inflation, and at the same time, I think what we will eventually have, is some kind of social unrest, because I can’t believe that people will be fooled forever, by what you call crony capitalism…

It can go on for quite some time, and make things much worse. But, my view would be that within the next 5 to 10 years, when the public realizes that the economy does not improve, and possibly, in my opinion, actually deteriorate, and be faced with higher taxes, which may not be obvious but they will happen because of the large deficits, then at that stage I think there will be a social revolution, or some kind of social revolution, or the next thing the government will do to distract, or distract the attention of the people from bad economic conditions, they’ll start a war somewhere…

Quote For The Week

From Gerald Celente, trend strategist and founder of the Trends Research Institute, on the Financial Sense Newshour this past weekend:

They’re setting us up for a great collapse. It’s going to happen. By dumping all this money into the system, it’s going to look like these so-called “green shoots” of prosperity will be sprouting forth. But they’ll never flower. Of course it’s going to look like a recovery. You know, the trillions of dollar that they’re dumping out there is going to have a little bit of, you know, this money manure is going to fertilize something. But again, it’s only temporary. It’s like giving someone a drug to cure a chronic degenerative disease. The drugs don’t cure those diseases, they only give you symptom relief, and that’s what we’re going to have now. People better prepare for the worst, because the worst is yet to come…

Quotes For The Week

“I am a citizen.”

-John Hamilton, at his Sandusky (Ohio) Municipal Court arraignment last Thursday after being arrested by the Sandusky Police Department for refusing to stop mowing overgrown grass at a public park (for which the city has limited funds to maintain).

“I am 100 percent sure that the U.S. will go into hyperinflation.”

-Legendary money manager Marc Faber, during an interview with Bloomberg Television last Wednesday.

“I don’t know why they got Bernie Madoff in jail… They ought to make him secretary of the Treasury.”

-Peter Schiff, President of Euro Pacific Capital and author of the upcoming book Crash Proof 2.0: How to Profit From the Economic Collapse, at the Ira W. Sohn Investment Research Conference in New York City last week.

“We are all grieving over the loss of ‘upward only’ lifestyles and the David Copperfield-style disappearing act of our net worths and savings. Even more frustrating is that we all feel that it was not ‘our’ screw up. We were lured into a false sense of security and aspirations of wealth accumulation by the cosmos. It just happened!!! We were all hit by a pandemic economic plague, not by sniper fire, so we are left without a rationale, reason or an understandable cause. We search the airwaves and the internet for solace and comfort. Why did it happen? Who is to blame? Is there a magic wand that might bring us back to life? We have an unquenchable thirst for information to help answer these questions. However, the ability to cheer up and get on with life does not rest in the plethora of governmental programs enacted to ease our economic pain, or in the well-intentioned commentary of pundits on the history and future of financial engineering and statistics. The solution rests in first, immediately adapting and surviving so that we are around in order to, secondly, understand what information is important and how that information is harvested.

The first objective is most easily achieved by understanding the Kubler-Ross book On Death and Dying, which outlines 5 stages of grieving:

Denial
Anger
Bargaining
Depression
Acceptance

I will save you 200 pages of reading by concluding that recovery is the amount of time required to go from Stage 1, denial, to Stage 5, acceptance. What we have learned after 30 years of investing and cyclical roller coasters is bypass 2 to 4 and go immediately to 5. In short: Get over it and get on with it!”

-Legendary real estate investor Tom Barrack, in his latest “Chairman’s Corner” column on the Colony Capital website.

Quotes For The Week

“On Wall Street, there’s nothing like overcharged young men, or overcharged young women either I’m sure, that will lead you to losses through inexperience and exuberance. When I was a young investor on Wall Street I thought I knew everything. I learnt the hard way that I did not know everything. But you know, it’s hard to tell that to a 24 year-old or even a 34 year-old sometimes.”

-Legendary investor Jim Rogers to CNBC staff last week

“The stimulus is so great in the United States, China and the United Kingdom, it will kick the economy up. GDP will go back positive for two to three quarters. They’ll assume everything is settled, that throwing money at it has worked. But the long-term imbalance between overproducers [like China] and overspenders [like the U.S.] will continue. It’ll be a multiyear drag on growth…

If the problem is that we consume too much and borrow too much, does it make sense to borrow more and spend more? It doesn’t make sense to solve alcoholism by giving an alcoholic a quart of whiskey, but everyone believes that we must stimulate. So that’s why we feel this is a temporary cure. This is like when you revive the drunk, he staggers down a few blocks, then falls down again…

We’re not rich, and we’re undersaved and underpensioned. Those will be a real brake on economic growth. This will be a pretty long recovery period, longer than we’re used to, but hopefully not as long as Japan took. It will not be as long as the Depression, but it will be several years, and not just two. Lord knows we have had several fat years…

President Obama is not doing the right thing. I admired his appointments in many areas, certainly in the environmental area. But then he got these tired old retreads from the financial area that notoriously didn’t blow a whistle over the last few years. They’ve all been Rubin-ized [influenced by former Treasury Secretary Robert Rubin].”

-Well-known money manager Jeremy Grantham, in a recent interview with SmartMoney magazine that appeared on their website last week.

Quote For The Week

“Our civilization survives in the complacency of cowardly or malignant minds- a sacrifice to the vanity of aging adolescents.”

-Albert Camus (Nobel Prize-winning French-Algerian writer and philosopher. 1913-1960)

Quote For The Week

Recently, legendary investor Jim Rogers was interviewed by Jamal Nassar of the Yemen Times. When asked about the U.S. House of Representatives voting 233 to 193 the other week in support of a $3.4 trillion budget outline, Rogers replied:

It’s not good for America it’s not good for the world. It’s not going to work, they are spending a lot of money on making projects work rather than building long term competitiveness of America. America does not have that kind of money, they are going to have to borrow it, print it or tax it, none of which will be good for the American economy in the long run or for the world.

So no, this is just making the situation worse rather than better, many of the Asian countries starting to spend money, but many of them have big reserves which they’ve built up for a rainy day, and now it’s rainy so they are starting to spend their reserve, many of them are spending it in wise ways to be good for the long term competitiveness of the nation. America is not.

Quote For The Week

“Reviewing the last two years, of course, it’s a misplaced trust in the competence of our leadership, from the very top. But certainly, notably, the Fed, the arch-villains of this piece, Treasury, little better, the SEC. They were cheerleaders, all of them. And they encouraged reckless leverage and low-quality debt, complicated, un-researched, generally disgraceful.

And they made no effort to resist it in any way. Even jawboning would have been a great advantage over nothing. Greenspan encouraged, admired the ingenuity of the new instruments for subprime. I mean, went out of his way to encourage it. Some, as in Greenspan, beat back an attempt to do some regulating of subprime markets. And I think it looked pretty bad.”

-Jeremy Grantham, chairman of global investment firm GMO, who back in April 2007 warned we were seeing the first worldwide bubble in history covering all asset classes, in the “Intelligent Investing” special edition that appeared on Forbes.com this morning

Quotes For The Week

For 11 years, I had the privilege of working as a civil servant within the various levels of American government. It was an experience that was eye-opening, to say the least.

During that time, I met some fine public servants, whose work on behalf of their fellow citizens was of the highest caliber.

Regrettably, I also crossed paths with some of the most unprofessional individuals I ever had the displeasure of meeting and having to work with. In their minds, government existed to serve them. So much so, I often wondered why these men and women ever ran for office or entered civil service in the first place.

On that note, here are some quotes that all of us should do well to remember:

“The government is us; we are the government, you and I”

-Theodore D. Roosevelt (26th U.S. President. 1858-1919)

“Let us never forget that government is ourselves and not an alien power over us. The ultimate rulers of our democracy are not a President and senators and congressmen and government officials, but the voters of this country.”

-Franklin Delano Roosevelt (32nd U.S. President. 1882-1945)

Quote For The Week

For better or worse, we are at a point where the Federal Reserve
Act is going to be reviewed.

-Paul Volcker, former chairman of the U.S. Federal Reserve and now a senior economic adviser to U.S. President Barack Obama, at a financial markets conference at Vanderbilt University over the weekend.

Quote For The Week

In economics, the majority is always wrong.

-John Kenneth Galbraith (Canadian-American economist. 1908-2006)

Quote For The Week

Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body- the producers and consumers themselves.

-Herbert Hoover (31st U.S. President. 1874-1964)

Quote For The Week

And I do think that we will get it stabilized, and we’ll see the recession coming to an end probably this year. We’ll see recovery beginning next year. And it will pick up steam over time.

-Ben Bernanke, Federal Reserve Chairman, on last night’s edition of “60 Minutes”

Lest we forget some of his other notable predictions, such as:

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.

-Washington Post, October 27, 2005

A leveling out or a modest softening of housing activity seems more likely than a sharp contraction…

-in testimony to a House Financial Services Committee, Thursday, February 16, 2006, (source: Washington Times, February 16, 2006)

We think that, by the spring, early next year, that as these credit problems resolve and as we hope, the housing market begins to find a bottom, that the broader resiliency of the economy which we are seeing in other areas outside of housing will take control and will help the economy recover to a more reasonable growth pace.

-in testimony to the Joint Economic Committee on Thursday, November 8, 2007 (source: “Nightly Business Report,” Thursday, November 8, 2007)

The Federal Reserve is not currently forecasting a recession.

-after a speech given in Washington, D.C., on Wednesday, January 9, 2008 (source: AFP, Thursday, January 10, 2008)

My baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of (Fed) and fiscal stimulus begin to be felt.

-in testimony to the U.S. Senate Committee on Banking, Housing, and Urban Affairs on February 14, 2008 (source: FederalReserve.gov)

Quotes For The Week

If I didn’t know any better, I would have thought legendary investors Jim Rogers and Marc Faber worked for the farm lobby. Last week, Jim Rogers, who correctly predicted the rally in commodities that began in 1999, told CNBC anchor Maria Bartiromo:

But I really think agriculture is going to be the best place to be. Agriculture’s been a horrible business for 30 years. For decades the money shufflers, the paper shufflers, have been the captains of the universe. That is now changing. The people who produce real things [will be on top]. You’re going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they’ll be working for the farmers. It’s going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that’s where the money’s going to be in the next couple of decades.

Marc Faber, who predicted the ongoing financial crisis and is famous for advising clients to get out of U.S. stocks one week before the October 1987 crash, told an audience in Tokyo last week:

Geopolitical tensions are on the rise, balance of power is shifting to China and rogue states, commodity shortages lead to increased international tensions and to resource nationalism… So you may be better off in the countryside, the middle of nowhere, and learn how to drive a tractor… Buy a farm and let your girlfriend work on the farm… If the global economy doesn’t recover, usually people go to war.