Quote of the Day – Barry Ritholtz on Paul Krugman

Mish vs ECRI vs Krugman | The Big Picture

“Traders and Investors should always be looking for the most interesting lesson to be gleaned. In this case, it comes from the Nobel laurelate: There are times when conditions vary so much from prior circumstances that usual metrics are no longer reliable.

Advantage Krugman.”

Hey Paul Krugman (A song, A plea)

Technorati Tags: Paul Krugman, Barry Ritholtz

Quote of the Day

Two thoughts about this quote:

• One of the reasons that I like Barry Ritholtz is because he writes what he wants to write and what he feels is important to write about, not what the readership (and he gets a LOT more traffic than I do).  
• It’s a model for what I’m attempting to do at Straight Talk.  There has never been a time where it’s more crucial to understand what’s going on in the world of mortgage lending and finance than now.   I don’t always talk about the nice, the optimistic and the upbeat things.   Why?  Because I can live with myself better if I’m telling the truth…..

Tom Vanderwell

William Safire: How to Read a Column | The Big Picture

“He also showed that sometimes you have to write what (you) want, regardless of what the readership (thought it) wanted,”  Barry Ritholtz, September 28, 2009 talking about William Safire

Technorati Tags: Barry Ritholtz, William Safire

Haven’t we learned anything?

I have to admit to a couple of things:

• I don’t believe that government is the answer to all of the problems.  
• Frankly, in many cases, government is a large part of the problems.  
• I did not vote for the current administration.  If a “none of the above” option had been available, I think I would have taken that.

But I do believe that a substantial part of the problems we have right now are due to a relaxing of guidelines that kept our financial system working pretty well from the late 1930’s (after the Depression) through 2007.   And we had the opportunity in the first 6 months of the new administration to turn back the clock and put some long term plans in place to prevent the greed and rampant speculation that has caused so much pain from happening again.

And it appears that we missed the opportunity.   That’s sad and disconcerting at the same time.   Read what Barry Ritholtz had to say about it below……

Tom Vanderwell

Tactical Error: Health Care vs Finance Regulatory Reform | The Big Picture

There was a narrow window to effect a full regulatory reform of Wall Street, the Banking Industry and other causes of the collapse. Instead, the White House tacked in a different direction, pursuing health care reform.

This was an enormous miscalculation.

I’m not sure who to blame, but the leading suspects (in order) are Larry Summers, Rahm Emmanuel, Tim Geithner, and (perhaps) David Axelrod. Instead of a populist clean up of The Street (ala Eliot Spitzer circa 2,000), Obama advisors allowed a smoldering resentment to take hold and build amongst the electorate. The massive taxpayer wealth transfer to inept, corrupt, incompetent bankers has created huge resentment amongst the populace — regardless of political affiliation.

There was widespread popular support for a full reform of finance. What the White House should have pursued was: 1) Reinstatement of Glass Steagall; 2) Repeal the Commodity Futures Modernization Act; 3) Overturning SEC Bear Stearn exemption allowing 5 biggest firms to leverage up far beyond 12 to one; 4) Regulating the non bank sub-prime lenders; 5) Continuing high risk trades to be compensated regardless of profitibility; 6) Mandating (and enforcing) lending standards, etc.

Financial Reform, Health Care, Barry Ritholtz

The Case for Optimism?

Interesting article by Barry Ritholtz about the cover of Business Week.   I like his philosophy – “Hope for the Best – Prepare for the Worst.”

What do you think?

Tom Vanderwell

BusinessWeek: The Case for Optimism | The Big Picture

The U.S. economy is in such bad shape that the loss of (just) a quarter-million jobs in July was greeted as good news. Long-term unemployment and foreclosures continue to mount in the worst economic downturn since the 1930s. Health-care costs are out of control. An aging population around the globe is driving government spending through the roof. And scientists say we need an expensive crash program to fight global warming or we’ll incinerate ourselves. It’s little wonder that despite some positive news lately, the daily Gallup Poll on U.S. economic conditions as of Aug. 11 found that 53% of Americans think the U.S. economic outlook is getting worse (yes, even worse), vs. 42% who think it is getting better.

But before you assume a purely defensive posture—knees pulled to chest, hands on head—remember this: Just as people become overly exuberant in good times, they tend to get too pessimistic in bad times. While the economy remains deep in a hole, and could indeed get worse, the truth is that nobody really knows what will happen next. Prudence demands that you prepare yourself for all possible outcomes, including some highly positive ones.

Note: My motto is “Hope for the best, prepare for the worst.” No excessive optimism or pessimism required .

Business Week, Barry Ritholtz

California Foreclosures > Total US New Home Sales?

I love it! Two of my top 10 financial writers disagree!

This makes me smile.   Bill at Calculated Risk and Barry Ritholtz  are two of the financial writers who I follow quite closely and who I’ve learned a lot from over the past few years.   So, I have to chuckle when I read that the two of them don’t agree about what the housing starts information means.

Let me lay it out:

Barry says:

• Anyone who says we’re at a bottom in real estate is nuts.  (Okay I’m paraphrasing but he is rather blunt)
• There’s not a chance we’re going to “flashback” to a healthy market any time soon.

Bill says:
Well, just read below what Bill says, and then tell me.    What do you think?

(Hint – I’m with Bill on this one.)

Calculated Risk: Ritholtz: “Why are people calling a bottom for Real Estate?”

A few quick points:

# If single family housing starts bottomed in January, on a seasonally adjusted annual rate (SAAR) basis, the 12 month moving average of unadjusted data won’t bottom until October or so (depending on the shape of the recovery). Using this method adds a lag to the analysis.

# Barry also conflates calling a bottom in housing starts with: 1) “a bottom in Real Estate” and 2) “a snap back”.

First, there will probably be two bottoms for Residential Real Estate. The first will be for new home sales, housing starts and residential investment. The second bottom will be for prices. For more on this, see: More on Housing Bottoms

Most people think prices when they hear the word “bottom”, and the bottom for prices usually trails the bottom for housing starts – sometimes the two bottoms can happen years apart!

Second, looking for a bottom in housing starts doesn’t imply “a snap back” in activity. As I noted yesterday, “I expect starts to remain at fairly low levels for some time as the excess inventory is worked off.”

Barry Ritholtz, Calculated Risk, Housing Starts, Housing Bottom

Quote of the Day

This quote comes from one of my favorite and very outspoken writers, Barry Ritholtz.  I hope you find it thought provoking like I do.   The more I think about that quote, I think it sums up very well what I’m attempting to do here at Straight Talk…..

Quell the Commentary! | The Big Picture

“It is the markets’ job to reallocate money from the ignorant to the intelligent, from the lazy to the hard working and studious; from the naive to the educated, and from the speculator to the investor.”

Barry Ritholtz

Barry’s suggestions about what to do….

I’ve been a big fan and reader of Barry Ritholtz for quite some time.  Listed below are what he’s suggesting should be proposed tomorrow.   Makes a lot of sense to me.   What do you think?

Tom Vanderwell

Media Appearance: CNBC’s Fast Money (2/9/09) | The Big Picture

My suggestions:

1. Stop Regulatory Capture: Saving the banks should not be the goal; Saving the finacnial system, credit operations and taxpayers should be. No more “sweetheart” deals for the incompetant creators of the mess!

2. Bank Aggregator: Federal assistance to the private equity sector buying toxic assets sounds like a bad deal for taxpayers: We have all the risk, but private equity has all the upside;

3. Good Bank/Bad Bank is a stop gap measure. The banks that are insolvent should not be rescued. Let the mortally wounded banks die, and spin out their best components — adequately capitalized, with zero debt!

4. Foreclosure Mitigation will only work if we recognize that a modest amount of delinquent homes can be saved from foreclosure; Unfortunately, the days of easy credit put too many people in homes they could not possibly afford;

5. Expanded Insurance Wrapper: Has not worked. The Bank of America and Citigroup bailouts had the US taxpayer guarantee the bad paper; The banks still went to hell, until yet another rescue plan materialized;

6. Transparency in Governance is a good idea; Does this mean the Fed will be revealing what paper they are holding?

7. Stress test? Saving Isn’t that suppsoed to be happening already with these banks via the FDIC?

The Big Picture

Word of the Year: Bailout | The Big Picture

The word “bailout,” which shot to prominence amid the financial meltdown, was looked up so often at Merriam-Webster’s online dictionary that the publisher says it was an easy choice for its 2008 Word of the Year.

The rest of the list is not exactly cheerful. It also includes “trepidation,” “precipice” and “turmoil.”

“There’s something about the national psyche right now that is looking up words that seem to suggest fear and anxiety,” said John Morse, president of Springfield-based Merriam-Webster.

Word of the Year: Bailout | The Big Picture.

I wish I could say that this surprised me, but it doesn’t.

Anyone want to venture what they think the word of the year for 2009 is going to be?   I’m going to do a post by December 15, 2008 that has what I think the top 5 choices of word of the year for 2009 are going to be and I’m going to set it to go for December 1, 2009 so we can all see how accurate (or totally off base) I was.

Tom Vanderwell

Quotes of the Day

Courtesy of Barry Ritholtz at the Big Picture

“If they are too big to fail, make them smaller.”
-former Nixon Treasury Secretary George Shultz, said about Fannie Mae and Freddie Mac.

“Buying a house,” he said, “is not the same as buying a house on fire.”
- James Dimon, CEO JPMorgan, on his lowball offer for Bear Stearns

Tom

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