Can the market alone fix the economy?

[turbo]

I repeat: Where were the tea-baggers while Bush doubled our national debt? If they were fiscally conservative (instead of hard-line ideologues), they should have raised a bit of a fuss earlier. Now that they have a new president who is tasked with fixing this mess, they seem quite eager to try to hang Bush's debt on him and try to prevent raising the revenues necessary to balance the budget.

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

BTW, the local FOX affiliate covered the local tea-baggers but seemed unable to provide any more intelligent participants than you claim that the liberal media "cherry-picked". If you want to see "cherry-picking" in action, ask the ditto-heads what they thought of Bush's bail-out package (no strings attached) and then ask what they thought about Obama's second installment of that package. Somehow, Obama always manages to come off as the villain, and not infrequently, the words "socialist" and "fascist" get tossed in there, too. Not a real bright crowd. Good for ratings but critical thinking... not so much.

 

[mheslep]

I repeat: Where were the tea-baggers while Bush doubled our national debt? If they were fiscally conservative (instead of hard-line ideologues), they should have raised a bit of a fuss earlier. Now that they have a new president who is tasked with fixing this mess, they seem quite eager to try to hang Bush's debt on him and try to prevent raising the revenues necessary to balance the budget.

It is a matter of scale. The figures under Bush: the debt went from 57% of GDP to 70% of GDP (noting that it touched 67% under Clinton). CBO says Obama/Congress will http://www.washingtonpost.com/wp-dyn/content/article/2009/03/20/AR2009032001820_pf.html" of an optimistically much greater GDP, making Bush spending look like child's play. So I am not buying that is about saddling Obama with Bush's debt, he(&Congress) are making their own at high speed.

I didn't like the spending levels under Bush, and I heard frequent criticism of Republican spending excesses from pundits. If it didn't rise to the level of protests in the streets, then perhaps it was because the spending on the wars and Katrina were seen as one shot deals and somewhat unpredictable. But the offer by the fed to help pay off other people mortgages has touched a nerve, as paying off high risk behaviour is a game changer and not a one time thing - it can go on and on. (The bank bailouts are different - I don't like those either but at least banks have to pay that money back, with interest, except for the government controlled Fannie/Freddie)

I don't believe the tax increase on incomes over $250k (the bump on the top bracket) is the problem here. Obama was clear about that in the campaign, and despite some grumbling the voters approved, for one thing because he also promised to go through budget 'line by line' and to kill earmarks. He's done neither, but the tax increases are still coming. The problem here is where and how much money is being spent. People know full well that the 5% tax bump from the campaign is not going to pay for this colossal spending increase. Now we have effective additional taxes of $650B coming through carbon cap and trade, which everybody will have to pay.

Edit: Or, as Jonah Goldberg better put it http://corner.nationalreview.com/post/?q=MThlN2I5NTc4OWIwMTVmZTBjYjE3MzRiNjQzOGJmOGQ=" , replying to common criticisms from the left:

4. Republicans are hypocrites for suddenly caring about deficits.

Well, maybe. But then so are liberals for suddenly not caring about deficits. (That part always gets left out.)

 

[Ivan Seeking]

TEA parties: What it comes down to is a bunch of Fox watchers and Limbaughvians who don't understand that according to virtually every serious economist, we have no choice. The most basic argument is that with a flat GDP, or negative growth, for a decade or more, which is the greatest fear, we will end up with a larger debt as a percentage of GDP than if we borrow and spend now. So the most responsible course of action is to borrow and spend our way out of this. And it's not like Obama is starting a needless trillion dollar war and giving Haliburton billions and billions in no-bid contracts. He is trying to target the spending in such a way that we will emerge a nation renewed - one capable of paying off the debt.

Unfortunately, it has/will cost another trillion just to clean up the mess left by the Republican mantra of deregulation, which in turn led to the crash of the economy. So really all of this gets tagged to Republican policies. Yet the Republicans protest!

 

[mheslep]

TEA parties: What it comes down to is a bunch of Fox watchers and Limbaughvians who don't understand that according to virtually every serious economist, we have no choice.

Wrong.
http://www.openmarket.org/wp-content/uploads/2009/01/final_cato_stimulusad_wpost.pdf

And there are many more economists than those who signed this letter that feel similarly.

 

[misgfool]

It is a matter of scale. The figures under Bush: the debt went from 57% of GDP to 70% of GDP (noting that it touched 67% under Clinton). CBO says Obama/Congress will http://www.washingtonpost.com/wp-dyn/content/article/2009/03/20/AR2009032001820_pf.html" of an optimistically much greater GDP, making Bush spending look like child's play. So I am not buying that is about saddling Obama with Bush's debt, he(&Congress) are making their own at high speed.

Bush administration led us to the worst collapse of (western) world economy for decades. Don't you see this significant in any way?

 

[WhoWee]

TEA parties: What it comes down to is a bunch of Fox watchers and Limbaughvians who don't understand that according to virtually every serious economist, we have no choice. The most basic argument is that with a flat GDP, or negative growth, for a decade or more, which is the greatest fear, we will end up with a larger debt as a percentage of GDP than if we borrow and spend now. So the most responsible course of action is to borrow and spend our way out of this. And it's not like Obama is starting a needless trillion dollar war and giving Haliburton billions and billions in no-bid contracts. He is trying to target the spending in such a way that we will emerge a nation renewed - one capable of paying off the debt.

Unfortunately, it has/will cost another trillion just to clean up the mess left by the Republican mantra of deregulation, which in turn led to the crash of the economy. So really all of this gets tagged to Republican policies. Yet the Republicans protest!

Again, more unsupported claims Ivan. You claim "virtually every serious economist"...who are they and why aren't the ones who disagree "serious"?

Nearly tripling Bush's deficit by borrowing from the Chinese and printing $Trillions will cause inflation...maybe hyper-inflation.

Read this...look at the formula and description for money supply.

http://www.econlib.org/library/Enc/Inflation.html

Based on historical levels (we're at the bottom), interest rates WILL rise and we ARE increasing the money supply.

the dollar shrinks—to the extent that the nominal supply of dollars grows faster than the real demand to hold dollars. A standard approach to analyzing the connection between the money supply (M) and the general price level (P) uses an accounting identity called the “equation of exchange”:

MV = Py

where V denotes the income-velocity of money (the number of times per year the average dollar turns over in transactions for final goods and services), and y denotes the economy’s real income (as measured, e.g., by real GDP). Because V is defined as Py/M, the ratio of nominal income to money balances, the equation follows. The quantity theory of money (a better name would be “the quantity-of-money theory of the price level”) says that a higher or lower level of M does not cause any permanent change in y or desired V—or, in other words, does not permanently affect the real demand to hold money. It follows that, in the long run, a larger M means a proportionally higher P. In less formal terms, putting more dollars in circulation dilutes the purchasing power of each dollar; or: prices rise when there are more dollars chasing the same amount of goods.

Thought experiments can help to illustrate the thinking behind the quantity theory. Consider an economy in which all prices are in equilibrium. Now, imagine doubling the stock of money by magically doubling the numbers on all pieces of currency and all bank account balances. All price tags must be simultaneously doubled to keep relative prices and the purchasing power of each person’s (nominally doubled) money balances the same, and thus to keep the economy in equilibrium. Prices must rise in proportion to the quantity of money. For a slightly less magical case, imagine that a Federal Reserve helicopter flies across the country and drops enough currency to double the money supply. If the people who get the new cash want to buy the same basket of goods as the population in general, a doubling of all prices is once again called for.

The real-world process by which the Fed injects new money—typically by purchasing bonds in the open market with newly created Fed liabilities—differs from these thought experiments. Among other differences, the first-round spending of the new money is on bonds, not on consumer goods in representative proportions. In the second round, the bond sellers’ banks, into which the Fed has wired newly created reserves, will themselves buy additional securities (or make additional loans), expanding the banking system’s deposits as they do so. The actions of the Fed (and the subsequent actions of the commercial banks) expand the supply of loanable funds and therefore may lower the real interest rate. The commercial banks’ borrowers (predominantly business firms) may, at least temporarily, raise the relative prices of the assets they buy (business plant and equipment). Many economists assume that such relative-price effects are negligible, but others (e.g., the austrian school) assign them a key role in their theories of the business cycle.

 

[Astronuc]

Mortgage Fraud Crackdown Is Gathering Steam in Florida
http://news.yahoo.com/s/time/20090419/us_time/08599189223000

By TIM PADGETT / MIAMI AND WENDY MALLOY / TAMPA Tim Padgett / Miami And Wendy Malloy / Tampa – Sun Apr 19, 1:15 am ET
Florida's Gulf Coast was crawling with shady real estate investors like Neil Husani during this decade's housing boom. According to the U.S. Attorney's office in Tampa, Husani and three co-conspirators working with his Sarasota-based Capital Force, Inc., bilked seven area banks out of $83 million in a mortgage fraud scheme. Between 2003 and 2006, they bought up dozens of properties, used false information to secure mortgages far in excess of the actual property values, then pocketed the difference, which amounted to more than $40 million. The properties went into foreclosure and the banks, as well as the surrounding communities, were left holding the bag. Two of Husani's partners recently pleaded guilty to the conspiracy; another was convicted, and Husani, whose trial is pending in the U.S., has been arrested in Jordan, where he awaits extradition.

The Capital Force case is one of the largest mortgage frauds to date in Florida, but it's just the tip of an iceberg of scams that have wrecked broad swaths of the state's reeling housing and commercial real estate market. The situation is worst along the I-4 Corridor between the Tampa and Orlando areas, where almost 30,000 homes are in foreclosure. (Lee County, in fact, has one of the nation's highest foreclosure rates, at about 12%.) In recent years, fraud - involving either property purchases like Capital Force's, or schemes that falsely promise to help desperate homeowners hang on to their houses and then take the money and run - has mushroomed. Now, the U.S. Attorney's office in the Middle District of Florida tells TIME, federal agents and prosecutors have embarked on a "surge" of mortgage and loan-modification fraud investigations that could result in more than 200 indictments this year in the Tampa region alone. "The idea is to do as many cases as we can at once," says Tampa U.S. Attorney Brian Albritton, "to clearly send a message that this is not going to be tolerated."

For too long in Florida and the U.S., however, it seemed as though the swindlers were indeed getting away with it. As early as 2004, at the height of the housing frenzy, FBI officials were warning Congress of a mortgage fraud catastrophe: firms like Capital Force were illegally "flipping" properties, often using bogus "straw buyers"; unscrupulous appraisers were inflating their values; sub-prime borrowers lied about their assets; and predatory lenders duped customers into adjustable-rate loans that turned out to be financial time bombs. But according to the Justice Department, prosecutions of cases like those actually dropped between 2000 and 2007. Because so many law enforcement resources were thrown at terrorism during the Bush Administration, federal real estate fraud cases often took a back seat. Last year, even as the crisis became apparent, the Bush Justice Department still rejected a congressional recommendation to create a mortgage fraud task force.

. . . .

Hmmmm. So what was going on there?

Now that digging the country out of its economic sinkhole has become an issue of national security, the feds are straining to play catch-up. FBI Director Robert Mueller told Congress last month that his agents are currently working more than 2,000 mortgage fraud investigations, compared to only 295 in 2003.
. . . .

A big problem the feds face is that the housing crash has created a whole new slew of cases. The first stage of fraud, which helped bring about the crisis, is now being followed by a second as people scheme to buy up foreclosed homes and other properties whose prices have plummeted, or as desperate homeowners hurry to refinance exorbitant mortgages or get their interest rates and principals reduced. . . . .

 

[Astronuc]

Chrysler Bankruptcy Looms as Debt Talks Falter
http://dealbook.blogs.nytimes.com/2009/04/30/chrysler-bankruptcy-looms-as-deal-on-debt-falters/

AP sources: Chrysler to file for bankruptcy
http://news.yahoo.com/s/ap/us_chrysler


Perhaps this will pave the way for GM, if GM cannot restructure itself satisfactorily.


Meanwhile - BofA Shareholders Oust Lewis as Chairman
http://dealbook.blogs.nytimes.com/2009/04/29/bank-chiefs-future-at-issue-as-shareholders-meet/

and

Sweating Over the Stress Tests
http://dealbook.blogs.nytimes.com/2009/04/28/stress-tests-no-big-deal-after-all/

After labeling its plan to “stress test” the nation’s top 19 banks an important part of instilling confidence in the market, the government is now playing down the importance of the results, which are expected to be released next week.

What gives? Writing in his latest DealBook column, Andrew Ross Sorkin says there are increasing worries that this latest effort to bolster confidence may undermine it instead.
. . . .

 

[WhoWee]

A few weeks ago, it looked like Saturn would be sold to a group inclusive of the dealers...now it's not so clear
http://www.google.com/hostednews/ap/article/ALeqM5hzJ6l3NJeV0Fmp6mjz25GNJ89AagD97RNB9O1

When GM made the Pontiac announcement, they also specified a large number of Saturn and Hummer dealerships would be closed.
http://carscoop.blogspot.com/2009/04/gm-officially-announces-pontiac-death.html

The sad part is the Hummer and Saturn dealerships are the newest and nicest out there...translation...big loss of investment for the dealers.

On a positive note, I guess this is an opportunity for someone to pick up a lot of great sites to sell something that would "connect" with a large metal half barrel corrugated roof (?)...lots of parking...maybe a hot air balloon franchise?

 

[WhoWee]

Chrysler Bankruptcy Looms as Debt Talks Falter
http://dealbook.blogs.nytimes.com/2009/04/30/chrysler-bankruptcy-looms-as-deal-on-debt-falters/

AP sources: Chrysler to file for bankruptcy
http://news.yahoo.com/s/ap/us_chrysler


Perhaps this will pave the way for GM, if GM cannot restructure itself satisfactorily.


Meanwhile - BofA Shareholders Oust Lewis as Chairman
http://dealbook.blogs.nytimes.com/2009/04/29/bank-chiefs-future-at-issue-as-shareholders-meet/

and

Sweating Over the Stress Tests
http://dealbook.blogs.nytimes.com/2009/04/28/stress-tests-no-big-deal-after-all/

I think we should anticipate a wild ride on the Dow over the Chrysler announcement. Given a 30 day window for a pre-packaged Chapter 11...the market will need to react quickly as the veil of secrecy is peeled back on the next chapter of the credit default swap story.

Some of the largest banks and institutional investors are principal. This combined with the stress tests means the next quarter will bare all...a highly unusual scenario.

I don't want to give anyone too much credit (to Obama...I'm thinking out loud)...but US ownership of a large percentage of common shares in the banks MIGHT actually help support the share prices. (However, I still think the bottom is 5,000 before we move out of this recession in about 18 to 20 months.)

 

[mheslep]

Chrysler Bankruptcy Looms as Debt Talks Falter
http://dealbook.blogs.nytimes.com/2009/04/30/chrysler-bankruptcy-looms-as-deal-on-debt-falters/

AP sources: Chrysler to file for bankruptcy
http://news.yahoo.com/s/ap/us_chrysler
...

Some of the Chrysler investors have had enough of the Gov running over the legalities:

What created this much-publicized impasse? Under long recognized legal and business principles, junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full. Nevertheless, to facilitate Chrysler’s rehabilitation, we offered to take a 40% haircut even though some groups lower down in the legal priority chain in Chrysler debt were being given recoveries of up to 50% or more and being allowed to take out billions of dollars. In contrast, over at General Motors, senior secured lenders are being left unimpaired with 100% recoveries, while even GM’s unsecured bondholders are receiving a far better recovery than we are as Chrysler's first lien secured lenders.

http://www.businessinsider.com/senior-chrysler-creditors-revolt-2009-4

 

[Astronuc]

A few weeks ago, it looked like Saturn would be sold to a group inclusive of the dealers...now it's not so clear
http://www.google.com/hostednews/ap/article/ALeqM5hzJ6l3NJeV0Fmp6mjz25GNJ89AagD97RNB9O1

When GM made the Pontiac announcement, they also specified a large number of Saturn and Hummer dealerships would be closed.
http://carscoop.blogspot.com/2009/04/gm-officially-announces-pontiac-death.html

The sad part is the Hummer and Saturn dealerships are the newest and nicest out there...translation...big loss of investment for the dealers.

In addition to closing Pontiac, GM disclosed they are cutting more than 2000 dealerships across the country.

Locally, we've seen several dealerships go under, and that was before the current recession. I think it was more the case of too much redundancy. It hasn't helped that IBM has laid off thousands of workers locally (over the past two decades), but that's the nature of the industry.

 

[turbo]

There are some initiatives that are long-overdue, like directing the military to buy from US manufacturers whenever possible. As a result, my wife's employer (New Balance Athletic Shoe Co.) is in line for some large contracts for athletic shoes. Apparently the military buys and issues athletic shoes (I didn't know that) and until now, they were probably sourcing them from Nike, Reebock, etc, whose shoes are made in factories in China. Details are being worked out, but as of now it looks like NB will be getting some large contracts for either the model 993 or perhaps a slightly different model, perhaps with special stitching, colors, etc for the various branches of the service. In any case, it's nice to see someone in DC who wants to preserve US manufacturing jobs. Good jobs=stronger consumer spending=better economy. Time to try some "trickle up" for a change. BTW, New Balance's motto is "endorsed by no one". The Davises (owners) won't pay celebrities to wear their shoes or athletic clothing. Instead they pay their employees well, with good benefits, and give generously to good causes, like public playgrounds for children, money for breast cancer research, and child-welfare agencies like Maine's Home for Little Wanderers. Good people!

http://www.nicekicks.com/2009/01/new-balance-992-new-balance-993-comparison/

 

[Astronuc]

When I worked at a refinery and later at construction sites, we used to get visits from Redwing Shoes and Snap-On Tools.

http://www.rwleatherboots.com/content.aspx?name=lifestyle_heritage
http://www.rwleatherboots.com/footwear.aspx

The refinery management actually approved the shoes because of the quality and requirements for no-slip soles.

http://www.snapon.com/

Individuals sold products out of vans in the parking lot, and the products were good. And apparently, they are still around.

 

[mheslep]

There are some initiatives that are long-overdue, like directing the military to buy from US manufacturers whenever possible. ...

Well if used, I hope that this is always the policy of last resort, and that the first instinct is always to have US manufacturers that simply made the best value product, so that US military could simply be directed to buy the best value with tax payer dollars.

 

[edward]

Hedge Funds vs Obama. This should get interesting.

A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said today in Washington before Chrysler filed for bankruptcy protection.

Obama’s team first offered secured lenders $2 billion for $6.9 billion in loans, then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion yesterday, and Obama’s patience ran out. Many dissidents paid from 50 cents to 70 cents on the dollar for their Chrysler loans, so they’re sitting on losses, according to people familiar with the matter.

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”

http://www.bloomberg.com/apps/news?pid=20601103&sid=apfauobxP3e0&refer=news

 

[WhoWee]

Hedge Funds vs Obama. This should get interesting.





http://www.bloomberg.com/apps/news?pid=20601103&sid=apfauobxP3e0&refer=news

Does Obama have legal precedent in this scenario?

Obama is not a Federal Bankruptcy judge.

At what point do the injured parties (as a result of his "involvement") have recourse against the government?

 

[edward]

Does Obama have legal precedent in this scenario?

Obama is not a Federal Bankruptcy judge.

At what point do the injured parties (as a result of his "involvement") have recourse against the government?

This is just an opinion. If the debtors hold credit default swaps bankruptcy means they will be paid in full. That was a good incentive to hold out.

The debtors were offered within $250 million of the $2.5 billion they were asking.

That is where the, this should get interesting part comes into play.

 

[mheslep]

Obama’s team first offered secured lenders $2 billion for $6.9 billion in loans, then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion yesterday, and Obama’s patience ran out. Many dissidents paid from 50 cents to 70 cents on the dollar for their Chrysler loans, so they’re sitting on losses, according to people familiar with the matter.

“They were hoping that everybody else would make sacrifices and they would have to make none,” Obama said. “Some demanded twice the return that other lenders were getting.”

$4.65B gone? How in the heck does agreeing to receive only $2.25 out of every $6.9 the investors loaned Chrysler equate to making no 'sacrifice'.

 

[mheslep]

This is just an opinion. If the debtors hold credit default swaps bankruptcy means they will be paid in full. That was a good incentive to hold out.

The debtors were offered within $250 million of the $2.5 billion they were asking.
...

And $4.4B short or what they are owed by Chrysler. There is motivation all around to negotiate, since if the process degenerated into paying _only_ the senior lenders it would likely greatly reduce the value of what's left - sick but alive body vs dead corpse. Regardless, the law is these guys get paid first, ahead of _everybody_ else including the employees.

 

[edward]

And $4.4B short or what they are owed by Chrysler. There is motivation all around to negotiate, since if the process degenerated into paying _only_ the senior lenders it would likely greatly reduce the value of what's left - sick but alive body vs dead corpse. Regardless, the law is these guys get paid first, ahead of _everybody_ else including the employees.

They don't necessarily get paid first. 70% of the debtors have accepted the government offer.

Junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full,” the dissidents said in the statement.

In bankruptcy court, the absolute priority rule is regularly modified, lawyers said. Two-thirds of the lenders can force the holdouts to go along with them in a procedure called a cramdown.

“The U.S. bankruptcy code foresees the possibility that it may be necessary to vary from ‘absolute priority,’ in particular when a two-thirds majority is convinced it makes legal or business sense,” said Richard Hahn, co-chairman of the bankruptcy practice at Debevoise & Plimpton LLP, a New York law firm that isn’t involved in the Chrysler negotiations. “If the government has consents from 70 percent, that’s more than enough” to give equity to junior creditors.

http://www.bloomberg.com/apps/news?pid=20601103&sid=apfauobxP3e0&refer=news

 

[mheslep]

They don't necessarily get paid first. 70% of the debtors have accepted the government offer...

Yes I saw; that apparently was on the pre bankruptcy filing offer. The 70% group has to hold together now that bankruptcy has been declared, we'll see.

 

[mgb_phys]

$4.65B gone? How in the heck does agreeing to receive only $2.25 out of every $6.9 the investors loaned Chrysler equate to making no 'sacrifice'.

They didn't necessarily loan Chrysler the money - they bought the debt on the market and since Chrysler wasn't exactly anybody's idea of a AAA company they paid only a fraction of the book value of the loans.

 

[mheslep]

They didn't necessarily loan Chrysler the money - they bought the debt on the market and since Chrysler wasn't exactly anybody's idea of a AAA company they paid only a fraction of the book value of the loans.

Well they still hold Chrysler paper that says IOU $6.9B + interest. And if they're not taking the full book value hit, then some other lender already ate part of it.

 

[Ivan Seeking]

According to Warren Buffet, the crisis has passed, thanks to Obama and your Democratic Government.

Billionaire Warren Buffett knows a thing or two about money, and he's giving a vote of confidence on the government's handling of the economic crisis.

Buffett was speaking at a shareholder meeting for his company, Berkshire Hathaway, in Omaha, Nebraska. Buffett told the crowd of 35,000 that the U.S. is making the right moves.

Buffett said he believes the economic crisis has passed...

http://www.kktv.com/home/headlines/44274117.html

I should add that the one good thing Bush did was to bailout the failing financial institutions. For once he got it right.

 

[mheslep]

According to Warren Buffet, the crisis has passed, thanks to Obama and your Democratic Government.http://www.kktv.com/home/headlines/44274117.html

I should add that the one good thing Bush did was to bailout the failing financial institutions. For once he got it right.

The actions Buffet actually mentioned - guaranteeing mutual funds and paper occurred on http://www.bloomberg.com/apps/news?pid=20601087&sid=akZVTnBs66uY&refer=home" last year.

"Getting in there and guaranteeing the commercial paper and the money market funds, it brought stability to the system and that has laid the framework for an improved economic situation. But that's going to take time."

Meanwhile, on Geithner's current stress test he http://www.marketwatch.com/news/sto...31A-A4E0-4E22-97E9-BE991FF2425F}&dist=msr_24":

" Still, Buffett expressed concern that the people conducting the government stress test may take "percentage whacks" on certain assets, while not taking account of the different business models and holdings of individual banks.
He cited two home equity loan portfolios held by Wells. One portfolio was originated by mortgage brokers and the other was originated by Wells. The broker originated portfolio is experiencing a lot higher losses than the in-house one, Buffett explained, suggesting the stress test may not take account of such differences...
...
"The bank stress test is very likely to be done poorly," Berkshire Vice Chairman Charlie Munger said Sunday. "Maybe the whole idea was not such a good idea."

http://online.wsj.com/article/SB124140904055482603.html#mod=testMod":

As for the broader economy, Mr. Buffett predicted more doldrums for retail, manufacturing and services businesses.
Housing, at least in medium- and lower-end markets, is seeing a pickup in activity, albeit at lower prices, the famed investor said.

 

[Astronuc]

More from Buffett and Charles Munger.

Buffett and Munger Play the Main Stage: Views on Newspapers, Triple-A Ratings, Complex Math and More

http://finance.yahoo.com/insurance/article/107029/Business-Musings-From-Woodstock-for-Capitalists

 

[Ivan Seeking]

The actions Buffet actually mentioned - guaranteeing mutual funds and paper occurred on http://www.bloomberg.com/apps/news?pid=20601087&sid=akZVTnBs66uY&refer=home" last year.

You mean back when some Republicans were bowing to their failures and acting like Democrats. How many Republicans supported even the initial actions taken by Bush? And how many would have driven us into the ground through their blind allegiance to a failed ideology? Also, how many Democrats [you know, the socialists] in Congress supported the action?

Billionaire Warren Buffett knows a thing or two about money, and he's giving a vote of confidence on the government's handling of the economic crisis.

I think your position is to question the meaning of "is". Did he say that he only supports the initial actions taken, or did he say that he gives his approval to the handling of this crisis?

 

[mheslep]

...I think your position is to question the meaning of "is". Did he say that he only supports the initial actions taken, or did he say that he gives his approval to the handling of this crisis?

No, I refer only to what he's quoted as actually saying in his shareholders meeting.

"Getting in there and guaranteeing the commercial paper and the money market funds, it brought stability to the system and that has laid the framework for an improved economic situation. But that's going to take time."

Those are clear events that happened on one specific day, there's no parsing question. He may have said something further that gives credit to 2009 policies but it is not posted or linked here yet.

Anyway, doesn't matter. As always in downturns, jobs will drive the political outcomes. Jobs killed Carter, Bush I. Currently the US is at http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&tdim=true". [Google just turned on their public data plotter couple days ago, very nice ]
If this metric turns around by 2010 the Dems will continue to do well, if it continues to climb past 10 or 11% game over, claims of failed blah blah blah under Bush will not save them.

 

[Ivan Seeking]

I have been hearing encouraging anecdotes suggesting that the worst is over. I know one person whose family owns a local restaurant. They say that business is suddenly WAY up. Also, a local organic food grower has seen significantly increased activity from the high-end restaurants [nationally]. Earlier this year, he wasn't sure if he would even plant any crops.

A couple of local building contractors are seeing significantly increased activity. One told me that the phone has rang more in the last month than during the previous year.

 

[WhoWee]

More from Buffett and Charles Munger.

Buffett and Munger Play the Main Stage: Views on Newspapers, Triple-A Ratings, Complex Math and More

http://finance.yahoo.com/insurance/article/107029/Business-Musings-From-Woodstock-for-Capitalists

This doesn't exactly sound like optimism
Mr. Buffett on Insurance

In response to a question about the worst possible development for Berkshire Hathaway's vast insurance operations, Mr. Buffett responded: nationalization.

If inflation jumped and insurance policies became extremely expensive, pressure could rise on the government to nationalize the insurance industry, he said. "When people get outraged, politicians respond," Mr. Buffett said. It's highly unlikely that such a development would happen, he added. But he did note the example of Social Security, which is a form of a nationalized annuity."

It sound like he's hoping the socialism train doesn't run him over and drag him down the tracks...or offer to buy him out for $.29 on the $1.00.

 

[WhoWee]

More on what Buffet is saying:

Headline Story

RSS ARCHIVE
Print Page | Forward Page | E-mail Us

Buffett Sees Massive Inflation to Handle Staggering Debt

Monday, May 4, 2009 2:34 PM

By: Dan Weil Article Font Size Faced with a staggering national debt relative to the rest of the world, Buffett says the U.S. government will do what every country that has denominated its debt in its own currency has done — "inflate its way out of the burden of that debt." (Saul Loeb/Getty Images)

The explosive rise of the U.S. budget deficit and debt burden will lead to serious inflation down the road, says billionaire and Obama supporter Warren Buffett.

The Congressional Budget Office predicts that government debt will peak around 54 percent of GDP in 2011.

But Buffett told CNBC Monday morning that the ratio could surpass 80 percent — unless there are significant spending cuts or tax increases.

After a testy exchange with Sen. Judd Gregg, who suggested that President Obama’s plans to hike federal spending would only increase the nation’s staggering national debt, Buffett relented by stating that, in the end, the U.S. government simply will do what every other government has done in such circumstances.

“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” Buffett said.

Experience proves that, he points out.

“Every country that has denominated its debt in its own currency and has found itself with uncomfortable amounts of debt relative to the rest of the world, in the end they inflate,” Buffett explains.

“That becomes a tax on everybody that has fixed dollar investments.”

 

[Astronuc]

Buffet on Moody's

He said that if Moody's had started to take a negative view on residential real estate, the ratings provider would have been hauled before Congress to testify about why it was hurting the U.S. economy with its bearish ratings. "They made a huge mistake, and the American people made a huge mistake," he said.

Fiduciary responsibility vs Irrational exhuberance.

Messrs. Buffett and Munger on Math and Theories [with respect to finance that is]

Messrs. Buffett and Munger made clear their complete disdain for the use of higher-order mathematics in finance.

"There is so much that's false and nutty in modern investing practice and modern investment banking, that if you just reduced the nonsense, that's a goal you should reasonably hope for," Mr. Buffett said. Regarding complex calculations used to value purchases, he said: "If you need to use a computer or a calculator to make the calculation, you shouldn't buy it."

Said Mr. Munger: "Some of the worst business decisions I've ever seen are those with future projections and discounts back. It seems like the higher mathematics with more false precision should help you, but it doesn't. They teach that in business schools because, well, they've got to do something."

Mr. Buffett said: "If you stand up in front of a business class and say a bird in the hand is worth two in the bush, you won't get tenure...Higher mathematics my be dangerous and lead you down pathways that are better left untrod."

Not very encouraging.

 

[mgb_phys]

Mr. Buffett said: "If you stand up in front of a business class and say a bird in the hand is worth two in the bush, you won't get tenure...Higher mathematics my be dangerous and lead you down pathways that are better left untrod."

It wasn't higher mathematics - it was just greed.
If you are a broker and you tell your clients to buy GE and IBM and keep them for 25years you don't make any commission.
If you tell them to buy derivatives (or spread bet) based on the price of GE times the winning points in superbowl raised to the power 'e'.
Then they stand to make more money or lose more - either way you make commission.
The only higher math on Wall St was trying to prove to the regulators that this was legit.

 

[edward]

A good read:

Recipe for Disaster: The Formula That Killed Wall Street

For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.

http://www.wired.com/techbiz/it/magazine/17-03/wp_quant?currentPage=all