In a dramatic turn of events, the wheels came off the government "bailout" plan today when the House of Representatives defeated the proposed legislation by a vote of 228 (nay) to 205 (yea).While the government is temporarily unable to address the situation, the private sector has been busy recapitalizing the banks in its own free-market way: stronger...
Monday, September 22, 2008
An important distinction
Last week was a week of enormous consequence in the financial world. The events were so dramatic that they will be analyzed, discussed and debated literally for decades. It is no exaggeration to say that Wall Street as we knew it is no more, with the news today that Morgan Stanley and Goldman Sachs agreed last night to be converted into traditional...
Friday, September 19, 2008
This week is not an indictment of free markets
Around the world, proponents of greater government control of economic activity are arguing that the emergency measures taken by the Treasury and the Fed this week, and the financial-sector turmoil which led to them, repudiate the credibility of the market economy.For example, in this article from the New York Times this week, French lawmaker Bernard...
Thursday, September 18, 2008
Don't jump off the ship in the middle of a hurricane
Here are two revealing diagrams, one which we posted back in January showing the three successive market lows during the bear market of 2000-2002, and one which is beginning to look very similar to it from today.In the first diagram, we marked with red arrows the three successive sharp bottoms, each lower than the one before, which look like someone...
Wednesday, September 17, 2008
The Fed shows some backbone
Yesterday, the Federal Open Market Committee voted unanimously to hold their target funds rate unchanged at 2.00%.Wall Street was urgently calling for yet another rate cut. Fed futures in the days leading up to yesterday's decision indicated a climbing percentage of bets that the rate would be cut by .25%, with an 88% probability indicated the day...
Monday, September 15, 2008
Hurricane hits Wall Street firms
The weekend's momentous events saw the end of investment bank Lehman Brothers as it filed for Chapter 11 bankruptcy.*As the assets of Lehman are sold off to meet their obligations to their creditors, other firms holding similar assets will potentially see the market value of assets held on their own books revalued, probably downward.For some of them,...
Thursday, September 11, 2008
September 11, 2008
"Soldiers of the 148th Ohio: I am most happy to meet you on this occasion. I understand that it has been your honorable privilege to stand, for a brief period, in the defense of your country, and that now you are on your way to your homes. I congratulate you, and those who are waiting to bid you welcome home from the war; and permit me, in the...
Monday, September 08, 2008
The wages of socializing, revisited
The biggest news of the day, and probably the week, is the historic seizure by the government of the two entities it originally created, Fannie Mae and Freddie Mac.This sorry episode should be a clear warning to all observers of the wages of socializing.The concern is that many commentators and members of the media will portray it as a failure of...
Thursday, September 04, 2008
Ownership of businesses through multiple economic cycles
An important aspect of the Growth Stock Theory of investment as envisioned by Mr. Thomas Rowe Price in the early 1930s is the concept of owning companies through the ups and downs of business and stock market cycles.This approach distinguishes the genius of Mr. Price's discipline from almost everything else that you hear from Wall Street and the financial...
Tuesday, September 02, 2008
What about commodities -- revisited
Back in March of this year, we wrote a post entitled "What about commodities???" in which we noted that the steep rise in commodities prices had been generating the predictable interest in commodities that always arises when the stock market has done relatively poorly relative to commodities (the same phenomenon occurred in 2005).As we noted then,...
