Bernanke: "None of the things you said are accurate"
Corker: "Oh yes they are"
As the markets once again approach historic highs - the overly exuberant tone, extreme complacency and weakness in the economic data, bring to mind Bob Farrell's 10 investment rules. These rules should be a staple for any long term successful investor. These rules are often quoted yet rarely heeded - just as they are now. Farrell became a pioneer in sentiment studies and market psychology. His 10 rules on investing stem from personal experience with dull markets, bull markets, bear markets, crashes and bubbles. In short, Farrell has seen it all and lived to tell about it. Despite endless warnings, repeated suggestions and outright recommendations - getting investors to sell, take profits and manage your portfolio risks is nearly a lost cause as long as the markets are rising. Unfortunately, by the time the fear, desperation or panic stages are reached it is far too late to act and we will only be able to say that we warned you.
Warren Buffett’s aphorism: "price is what you pay; value is what you get" has been rightly celebrated. But to be a true value investor, it helps to have values. Courtesy of near-zero interest rates and global competitive currency debauchery, it is increasingly difficult to assess the value of anything, as denominated in units of anything else. The business of investing rationally becomes problematic when market participants are pursuing maximum nominal returns without a second thought as to the real (inflation-adjusted) value of those returns. In a global deleveraging that is likely to persist for some years, the heavily indebted countries will desperately need to attract foreign capital to help service their heavy debt loads. And in order to do so, they will likely devalue their currencies. There is an increasingly disorderly currency war going on out there, and the advantage of gold is clear – they can’t print it, they can’t default on it, and there will always be demand for it. Simply put, in the global currency wars, owning gold is like abandoning the battlefield altogether.
- G20 struggles over forex, at odds over debts (Reuters)
- Alwaleed Sells Airbus A380 to Invest in Middle East Firms (BBG)
- GOP Stalls Vote on Pick for Pentagon (WSJ)
- ECB officials rebuff currency targeting as G20 meets (Reuters)
- Not good for the reflation effort: Muto leads as Japan PM close to choosing nominee for Bank of Japan chief (Reuters)
- M&A Surges as Confidence Spurs Deals in Computers to Consumer (BBG)
- JPMorgan’s head of equity prop trading Gulati to launch own fund (FT)
- Tiffany & Co. sues Costco over engagement rings labeled ‘Tiffany' (WaPo)
- JPMorgan Said to Fire Traders, Realign Pay Amid Slump (BBG)
- Broker draws Tullett into Libor scandal (FT)
- Airbus drops Lithium-Ion batteries for A350 (Reuters)
"Under the terms of the agreement, which has been unanimously approved by Heinz’s Board of Directors, Heinz shareholders will receive $72.50 in cash for each share of common stock they own, in a transaction valued at $28 billion, including the assumption of Heinz’s outstanding debt. The transaction will be financed through a combination of cash provided by Berkshire Hathaway and affiliates of 3G Capital, rollover of existing debt, as well as debt financing that has been committed by J.P. Morgan and Wells Fargo. Berkshire Hathaway owns and invests in leading businesses across a variety of industries, including numerous iconic brands. 3G Capital is a global investment firm focused on long-term value creation, with a particular emphasis on building and expanding great brands and businesses. Advisors for this transaction include: Centerview Partners and BofA Merrill Lynch as financial advisors to Heinz and Davis Polk & Wardwell LLP as legal advisor to Heinz. Moelis & Company acted as advisors to the Transaction Committee of Heinz’s Board of Directors and Wachtell, Lipton, Rosen & Katz served as legal advisor to the Transaction Committee of Heinz’s Board of Directors. Lazard served as lead financial advisor. J.P. Morgan and Wells Fargo also served as financial advisors to the investment consortium. Kirkland & Ellis LLP is acting as legal advisor to 3G Capital. Munger, Tolles & Olson LLP is acting as legal advisor to Berkshire Hathaway."
We urge readers to do a word search for "Moody's" in the official department of justice release below. Here are the highlights:
DOJ COMPLAINT ALLEGES S&P LIED ABOUT ITS OBJECTIVITY - when it downgraded the US?
HOLDER SAYS S&P'S ACTIONS CAUSED `BILLIONS' IN LOSSES - did Moody's actions, profiled previously here, which happens to be a major holding of one Warren Buffett, cause billions in profits?
HOLDER SAYS `NO CONNECTION' BETWEEN S&P SUIT, U.S. DOWNGRADE - just brilliant
Pure pathetic political posturing, because it was the rating agencies, whose complicity and conflicts of interest everyone knew about, who were responsible for the financial crisis. Not Alan Greenspan, not Ben Bernanke, and certainly not Wall Street which made tens of billions in profits selling CDOs to idiots in Europe and Asia. Of course, the US consumer who had a gun held against their head when they were buying McMansions with no money down and no future cash flow is not even mentioned.
Amid all of this messy thinking we miss the simple truth behind our material wealth: It has been achieved through the accumulation, by us and inherited from our forefathers, of a stock of highly configured and embedded tools that make human effort more effective and things possible that never were before. And we turn our backs on this truth when we turn more and more of these tools over to government bureaucrats. Profits are but an intermediate end of capital investment. Its ultimate end, in fact, is the material progression of our civilization. How easily we lose sight of this, at our and our progeny's peril. We all want more economic growth, but we ignore the means to get there: the onerous choices and commitments made along the round-about path to those ends. We even confuse the means with the ends.
The 2008 crash resulted from the bursting of the biggest bubble in financial history, a ‘credit super-cycle’ that spanned more than three decades. How did this happen? Some might draw comfort from the observation that bubbles are a long established aberration, arguing that the boom-and-bust cycle of recent years is nothing abnormal. Any such comfort would be misplaced, for two main reasons. First, the excesses of recent years have reached a scale which exceeds anything that has been experienced before. Second, and more disturbing still, the developments which led to the financial crisis of 2008 amounted to a process of sequential bubbles, a process in which the bursting of each bubble was followed by the immediate creation of another. Though the sequential nature of the pre-2008 process marks this as something that really is different, in order to put the 'credit cuper-cycle' in context, we must understand the vast folly of globalization, the undermining of official economic and fiscal data, and the fundamental misunderstanding of the dynamic which really drives the economy.
- When the cash runs out: Nokia to Omit Dividend for First Time in 143 Years (BBG)
- Passing Debt Bill, GOP Pledges End to Deficits (WSJ)
- Japan logs record trade gap in 2012 as exports struggle (Reuters)
- so naturally... Yen at 100 Per Dollar Endorsed by Japan Government’s Nishimura (BBG)
- Japan rejects currency war fears (FT)
- In Amenas attack brings global jihad home to Algeria (Reuters)
- Investors grow cagey as Italy election nears (Reuters)
- Mafia Victim’s Son Holds Key to Bersani Winning Key Region (BBG)
- Bernanke Seen Pressing On With Stimulus Amid Debate on QE (BBG)
- U.S. to lift ban on women in front-line combat jobs (Reuters)
- Red flags revealed in filings of firm linked to Caterpillar fraud (Reuters)
- Apple Sales Gain Slowest Since ’09 as Competition Climbs (BBG)
- Spanish Jobless Rate Hits Record After Rajoy’s First Year (BBG)
- North Korea Threatens Nuclear Test to Derail U.S. Policies (BBG)
Nebraska Governor Appoves Alternative Route Of Keystone XL Pipeline: Will Buffett/Obama Give The Green Light?Submitted by Tyler Durden on 01/22/2013 14:01 -0400
One of the more contentious issues in the past year for America's environmentalists was the (successful) blocking of the Keystone XL pipeline over fears that it would contaminate the Ohallala aquifier in the Sandhill region of Nebraska, a major source of groundwater, and an issue over which none other than the president was quite vocal just about a year ago when he killed the idea. At least that was the pre-spun, socially accepted reason (for the real one read below). It is now time to revisit the fate of this critical pipeline following today's news that the Nebraska governor has approved a new route for the pipeline, one which avoids the most sensitive area in the Sandhills. The response from the opponents has not been late in coming: "Governor Heineman just performed one of the biggest flip-flops that we've in Nebraska political history," said Jane Kleeb, executive director of the group Bold Nebraska. And now it will be up to Obama, whose second inauguration speech had a dedicated segment to clean energy, to kill or let it go through. Since the decision will once again be about politics, the outcome is all but certain, but at least it will provide yet another theatrical sideshow to add to all the others emanating from DC these days. After all it is all about distraction.
We already posted Howard Marks' most recent letter in its entirety previously, but it bears reposting a section from Art Cashin's daily letter which focuses on one segment of Marks' thoughts, which is especially relevant in light of today's most recent comment from one Warren Buffett - a person who very directly benefited from the government/Fed's bailout of the banking sector in 2008 - who said that "Bank Risk No Longer Threatens U.S. Economy." The same banks, incidentally, who are TBerTFer than ever. An objective assessment or merely yet another example of the "handcuff volunteerism" (not to mention crony hubris) Marks touches on? Readers can decide on their own.
- Obama Picking Lew for Treasury Fuels Fight on Budget (BBG)
- Deutsche Bank Bank Made Huge Bet, and Profit, on Libor (WSJ)
- Spain Beats Maximum Target in First 2013 Debt Sale (BBG) - In other news, the social security fund is now running on negative?
- "Icahn is also believed to have taken a long position in Herbalife" (NYPost) - HLF +5% premarket
- Lew-for-Geithner Switch Closes Era of Tight Fed-Treasury Ties (BBG)
- Turkey Beating Norway as Biggest Regional Oil Driller (BBG)
- Greek State Firms are Facing Closure (WSJ)
- Draghi Spared as Confidence Swing Quells Rate-Cut Talk (BBG)
- China’s Yuan Loans Trail Estimates (BBG)
- SEC enforcement chief steps down (WSJ)
- CFPB releases new mortgage rules in bid to reduce risky lending (WaPo)
- Japan Bond Investors Expect Extra Sales From February (BBG)
Thirty years ago, the USSR was better known as the "Evil Empire." Fast forward to today, when its successor Russia, is apparently the "Tax Free Empire", and less socialist than France, at least to infamous millionaire expatriate Gerard Depardieu, who as reported previously has paid €145 million in taxes over 45 years, and who demonstratively decided to give up his French passport in the wake of France's socialist 75% millionaire tax (subsequently ruled unconstitutional), and as of today, has just been granted Russian citizenship.
- Obama Signs Bill Enacting Budget Deal to Avert Most Tax Hikes (BBG)
- GOP Leaders Take Political Risk With Deal (WSJ)
- Basel Becomes Babel as Conflicting Rules Undermine Safety (BBG)
- Portugal Faces Divisions Over Austerity Measures (WSJ)
- The Fiscal Cliff Deal and the Damage Done (BBG)
- Cliff deal threatens second term agenda (FT)
- Deposits stable in euro zone periphery in November (Reuters)
- Fresh Budget Fights Brewing (WSJ)
- China Poised for 2013 Rebound as Debt Risks Rise for Xi (BBG)
- Who's Afraid of Italian Elections? (WSJ)
- China services growth adds to economic revival hopes (Reuters)
- Asian Economies Show Signs of Strength (WSJ)
- Japan’s Aso Targets Myanmar Markets Amid China Rivalry (Bloomberg)
In the spirit of the holidays and hope for a more prosperous 2013, we thought readers might appreciate a little humor to partially offset the relentless 'cliff' doom and gloom. So please, don’t take this too seriously. But if you happen to stumble across a ‘paperbug’ or two over the holidays, perhaps you could share some of the points made here. Humor sometimes helps people realize just how hopelessly misguided they are... Quantitative easing changes nothing. Remember, the PhDs are in charge of our economies and they know exactly how much our money should be worth. Those of us concerned that our money might lose purchasing power are just being paranoid. Choice is dangerous. Think Adam and Eve and you’ll get my point. Those arguing in favour of monetary freedom, of choice in money, of repealing legal tender laws, they’re just like that nasty snake Lillith in the Garden of Eden, the source of all trouble I tell you. ‘Tis the season to borrow and spend folks, as indeed it has been since 1971.