Friday, May 28, 2010

Niall Ferguson on Fiscal Crises and Imperial Collapse



Niall Ferguson recently spoke on "Fiscal Crises and Imperial Collapses" at the Peterson Institute for International Economics.

The event summary, presentation transcript and slides, as well as audio and video of the talk and Q&A session, are all available at the PIIE link above.

I happened to watch Niall's historical overview of government debt crises last night, and it certainly put the current problems we are facing with sovereign debt into perspective. On a day when we are greeted with news of Spain losing its AAA rating through a Fitch downgrade, Niall's speech certainly comes at a pressing moment and the lessons he imparts are profound.

Listen closely to Ferguson's conclusion on the historical impact of the bond vigilantes in each public debt crisis. Each time, he points out, interest rates on government debt skyrocketed when bond holders saw an unsustainable fiscal program threaten the viability of a nation's debt repayment and market participants delivered their verdict by driving up interest rates on public debt.

The current crisis period is no different, despite the ravings of politicians who go on about evil speculators "attacking" their poor country's debt. As Ferguson shows, there is a time honored manner "in which financial markets voted on the credibility of a government’s fiscal policy", and the striking feature of public debt crises is the sudden loss of confidence that might befall any nation's public debt.

Enjoy the video and the insights offered in Ferguson's timely historical analysis.

Thursday, May 27, 2010

Ira Sohn Conference notes: Marketfolly

Marketfolly has put together a nice, detailed post on the recent Ira Sohn Conference and the investing ideas offered up by some leading hedge fund managers and investors at this event.

If you haven't heard the chatter about this event, we can tell you that there were some very notable speakers present, including investors David Einhorn (Greenlight Capital), Bill Ackman (Pershing Square Capital), David Tepper (Appaloosa Management),
Seth Klarman (Baupost Group), Jeremy Grantham (GMO), and historian Niall Ferguson.

Jay has summarized some of the main points and highlights from the speaker presentations, with the help of some Marketfolly readers who were good enough to share their notes from the conference. You'll also find links to additional coverage on Twitter and at Barron's.

Update: new Marketfolly posts highlighting David Einhorn's presentation and Steve Eisman's presentation, "Subprime Goes to College", have been added.

Also, if you'd like to find out more about the Ira Sohn Research Conference Foundation, which is "dedicated to the treatment and cure of pediatric cancer and other childhood diseases", have a look at the conference home page. You can learn more about their mission and make a donation to the foundation from their website.

Tuesday, May 25, 2010

Marc Faber: final crisis yet to come

In Sunday's post, we highlighted the excellent audio presentations being uploaded from the recent Mises Circle conference in Manhattan.

Now that all of the speaker presentations have been uploaded, I especially wanted to highlight a talk given by Marc Faber entitled, "Mirror, Mirror on the Wall, When is the Next AIG to Fall?".



Be sure to listen to Marc's overview of US monetary policy and his discussion of how the Fed's easy money policies fueled the dot com bubble and the US real estate bubble, and why mainstream economists such as Greg Mankiw and James Galbraith are still cheering for more money printing and deficit spending.

You'll also hear Faber's views on the global economy, the growth of emerging markets and their commodity consumption, why Americans should have at least 50 per cent of their money invested outside of the US, and why "the final crisis has yet to come".

PowerPoint presentation slides accompany the audio lecture.

Related articles and posts:

1. Faber, Rogers, & Schiff on EU bailout - Finance Trends.

2. Marc Faber: FT.com interview - Finance Trends.

3. Marc Faber on crisis & geopolitical tensions (McAlvany podcast) - Finance Trends.

Sunday, May 23, 2010

Mises Circle in Manhattan: audio presentations

The good people at the Mises Institute have been quick to upload audio of speaker presentations from this weekend's Mises Circle in Manhattan.

As noted in our Friday Features post, the guest list looked stellar, so we'll be eagerly awaiting more uploads. So far, there's audio of a very interesting talk from Christopher Whalen called, "Inflated: How Money and Debt Built the American Dream", as well as lectures from Robert Murphy and Doug French on Austrian Business Cycle Theory (ABCT) and interest rates.

With added presentations from the likes of Kevin Duffy, Marc Faber, Lawrence Parks and more, we can't wait to hear the rest of the audio clips as soon they're added.

If you want to get down to the root of the most recent boom & bust periods and understand why we're facing a legion of bailouts and economic problems, these discussions are a great resource to further that understanding. Enjoy, and tell your friends.

Friday, May 21, 2010

Features of the week

Here are some of the items I've been checking out this week. Lots of news and views for your Friday reading and listening enjoyment.

1. Finance Overhaul bill would reshape Wall Street - Bloomberg.

2. "Gambling with Other People's Money" - Russ Roberts on the Crisis.

3. An interview with "Trader Vic" Sperandeo on the euro, sovereign bailouts, and gold.

4. Dennis Gartman says the fabric of European Monetary Union is being torn.

5. "Most people are wrong most of the time" - Jim Rogers talks with Sydney Morning Herald.

6.
Crisis and Leviathan: Robert HIggs on our economy and the military-industrial complex.

7. Soundgarden covers a Black Sabbath classic, with (imagined) help from Chief Seattle.

8. Mises Circle in Manhattan: awesome guest list this weekend in NYC.

9. Barry Ritholtz' notes on the 2010 SALT conference.

Finally, I just want to make a note about the design change we've recently implemented here at Finance Trends. I want to thank Laurence Hunt for his early feedback on the readability of text in the post width margins; I've narrowed the post body margin slightly, and I hope this subtle change will make the blog posts a bit more readable.

We'd love to hear more feedback from you on blog layout suggestions or features that might make your visit here more enjoyable. Don't hesitate to leave us a comment, or drop me an email (see blog profile for contact info) with your suggestions anytime.

Thanks for reading Finance Trends Matter. You can also keep up with us by subscribing to our RSS feed or by following us on Twitter. Have a great weekend.

Thursday, May 20, 2010

Fin reg bill clear for Senate vote

The US Senate has voted to end debate over the financial regulations bill, clearing the way for a final vote on the bill in Senate.

Details from The New York Times:

"The Senate voted on Thursday afternoon to close debate on a far-reaching financial regulatory bill, putting Congress on a glide path to approving a broad expansion of government oversight of the increasingly complex financial markets that is intended to prevent a repeat of the 2008 economic crisis.


The vote was 60 to 40, with three Republicans joining the Democratic majority in favor of ending the debate. Two Democrats voted with 38 Republicans in opposition to finalizing the bill.
.."

Here's the Times' take on Republican opposition to the bill and the countdown to the Senate vote:

"...Senate Republican leaders, adopting an election-year strategy to oppose virtually every initiative supported by the Obama administration, also voiced loud criticism of the legislation while trying to insist that they still wanted tougher policing of Wall Street.

The Republicans, who had a strong role in drafting the bill and won a number of their amendments, seemed to be calculating that voters these days trust the federal government even less than Wall Street and what accept the Republicans’ contention that Democrats in Washington are in cahoots with bank behemoths like Goldman Sachs.

The vote on Thursday essentially hit the button on a 30-hour countdown for the Senate to complete its debate and dispense with outstanding amendments."

The NY Times also mentions that the final 30 hours of debate could be avoided by a unanimous Senate vote, and that "once the Senate bill is approved" (a done deal, eh?) it must be reconciled with a similar bill passed by the House in December.

Interesting to note the contrast in coverage between the Times' story and the Wall Street Journal's, which notes Republicans' opposition to the bill's "excessive intrusion by government into the markets". None of that sort of talk to be found in the Times piece (surprise, surprise).

For more details on what is in the financial reform bill, and discussion of the legislation's merits and drawbacks, please see yesterday's post, "The Latest on the US Financial Reform Bill".

Update: "Senate passes financial regulation bill" (Washington Post).

Tuesday, May 18, 2010

Latest on US financial reform bill

The Financial Times reports that the financial reform bill is nearing a final vote in Senate:

"
The
US reform of financial regulation will go to a final vote in the Senate as early as Wednesday as big banks engaged in a last-ditch effort to change it.

Senators argued in public over a broad range of measures, including an attempt to prevent California getting federal bail-out money, while aides worked in private to hammer out a single “manager’s amendment” that will be the last opportunity for changes.

The legislation, which would be the second major new law of President Barack Obama’s tenure after healthcare reform, provides for a sweeping overhaul of US finance that would force the largest institutions to spin off their riskier operations..."

The FT goes on to note that an attempt by New Hampshire Republican senator, Judd Gregg, to place limits on federal bailouts to states was voted down by Senators who opposed the proposal. You'll also find details on measures in the bill that the financial industry is fighting to keep out or limit.

Forbes opines, "Wall Street Overhaul Not Bad for Wall Street", noting that the FIRE sector of the economy (finance, insurance, and real estate) has spent $123 million so far in 2010 to "influence policy makers", and that their push has helped Wall St. shape certain aspects of the reform bill to their liking.

This, "Financial Reform Amendment Scorecard" is also a very handy resource and overview of the major areas of proposed legislation including consumer protection, card fees, a spin off of FDIC-insured banks' derivatives trading activities, and the "Volcker rule" on proprietary trading at big banks.

Also: The Atlantic asks, "Will Financial Reform Pass This Week?"; Nouriel Roubini talks to Channel 4 about banking reform and breaking up "too big to fail" banks; Points and Figures explains why the Dodd bill will be a major drag on the economy; and Ron Paul discusses the financial reform bill on MSNBC.

Monday, May 17, 2010

Interview with Anthony Boeckh: The Great Reflation

Financial Sense Newshour recently interviewed Tony Boeckh, investor and author of a new book entitled, The Great Reflation.

I'd recently heard about Boeckh's new book through Richard Russell, who commented on it in his recent Dow Theory Letters updates. It seems to have drawn quite a few noted admirers, judging by the warm testimonials from Henry Kaufman, Marc Faber, and Barton Biggs (among others).

FSN host Jim Puplava was quite impressed with The Great Reflation as well, but we'll let you hear the details of Boeckh's thesis for yourself. Check out the interview, and pay close attention to Boeckh's opening statements on the nature of inflation and debt cycles, and how money and credit creation can affect investment decisions and asset prices. Enjoy.

Thursday, May 13, 2010

Europe's $1 trillion bailout and a new world currency

When the news of Europe's unprecedented $1 trillion bailout package was announced last weekend, the storyline behind this "solution" to the sovereign debt crisis seemed (even at market-driven news outlets such as Bloomberg) rather skewed towards politicians' cries of speculators "attacking the currencies" of heavily indebted nations (where have we heard that before?).

Now that we've had a few days to digest the European policymakers' move to "defend" the euro, I thought it might be interesting to hear from some of the people who saw this crisis developing and are now explaining, in plain English, what these bailout arrangements will mean for all of Europe and for the rest of the world.

First, we'll point you to yesterday's post highlighting Der Spiegel's interview with Nouriel Roubini. If you missed it, be sure to read Roubini's views on sovereign debt issues and why Greece is just "the tip of the iceberg" for problems with government debt.




Peter Schiff offers his view of the Greek crisis and the problems (namely inflation and increased moral hazard) which are sure to come from their "American style" bailout.


Jim Rogers tells Bloomberg TV that while he is currently long the euro, he sees major problems for the currency longer term thanks to the debasement that is sure to come as a result of this latest move.

As Jim points out, the $1 trillion backing this bailout has to come from somewhere; this money will be printed, borrowed, or raised by increased taxation. Those who receive the money will, of course, benefit. Everyone else who pays for this bailout (via taxation or indirectly through inflation) will be much worse off.

You may recall that back in March, Rogers was telling Bloomberg viewers that a Greek bankruptcy would be good for the euro. Now that the euro's very survival is threatened by the longer-term ramifications of these bailout agreements, it seems more people are coming around to Jim's point of view.



Marc Faber sat down with Pimm Foxx to discuss, among other subjects, the situation in Greece and the inflationary consequences of Europe's bailout (which, as Marc notes, is largely for the benefit of the European banks). Faber's frank talk is always a refreshing tonic to the nonsense and outright lies we usually get from the talking heads in the cable TV universe.

Finally, Jim Rickards talks with Eric King about the European bailout package and the IMF's move to create a "one world currency" from Special Drawing Rights (SDRs). Pay close attention to Jim's discussion of how the IMF creates this money, and why the EU & IMF bailout merely "replaces one type of debt with more [of another] debt".

Wednesday, May 12, 2010

Der Spiegel interview with Nouriel Roubini

Spiegel Online interviews economist Nouriel Roubini, who notes, "We will have even more crises in the future".

An excerpt from Nouriel on problems in Europe and government debt:

"
SPIEGEL: What do you think about the dangers presented by Greece?*

Roubini: Today the markets are very worried about Greece, but that's only the tip of the iceberg. Increasingly, bond market vigilantes have woken up in places like the UK and Ireland. Even the US and Japan will have problems because of their huge budget deficits. Maybe not this year, but they will eventually. In the US, states like California, Nevada, Arizona, New York and Florida have immense fiscal problems. The growing budget deficits and the huge government debts are really what worry me most.

SPIEGEL: Is it really the right thing to do for the IMF and the EU to help out Greece with €110 billion?

Roubini: That is only kicking the can down the road for a year. I am afraid that Greece, more likely than not ,isn't just illiquid, but insolvent. And providing an insolvent country with money and forcing it to make painful cuts isn't going to do it. Even if taxes are raised and spending is cut, Greece won't necessarily become more competitive. On the contrary, output might fall, unemployment might rise and market share will be lost. We need a plan B."

To hear more about plan B and Roubini's outlook on the world's economies, check out the full piece at the link above.

We'll have more on the problems in Europe and the Western economies (US, UK, et al.) tomorrow, so be sure to tune in with us then.

Tuesday, May 11, 2010

Big Picture: Closer look at Dow plunge

The Big Picture takes, "A Closer Look at the 1,000 Dow Plunge":

"
I was at 30,000 feet when the crash hit on Thursday. When I landed in NY and saw what happened, the first thought was trader error. But the evidence for that remains lacking.

I spent a good part of the weekend trying to track down evidence that it was HFT, or a fat thumb, or a NYSE erroneous trade halt.To date, the best analysis I’ve seen came from a young analyst on an institutional desk. His forensic approach to piecing together what occurred is the best explanation I have come upon:
"

We'll be taking a close look at this post, which ties the action in the US stock market together with the volume and selling patterns in the index futures and currency markets. As many of the more experienced market watchers suspected, there is much more to last Thursday's story than a random "fat finger" error-driven decline.

Thanks to Bear Mountain Bull for sharing this post from Barry Ritholtz' blog with us.

Monday, May 10, 2010

Are circuit breakers a plunge panacea?

If you were checking in with us on Twitter over the weekend, you probably noticed our search for answers regarding the May 6 market plunge.

Some of our pals were quick to offer up some articles that sought to explain the 1 cent prints and canceled trades that grew out of Thursday's drop. If you'd like to find those, just search for the May 7th tweets on our page.

Today, Breaking News alerts us to this Bloomberg BusinessWeek piece on the stock exchanges seeking coordination of circuit breakers and halt of trading rules. Here's the crux of that piece:

"...Executives from six securities venues agreed on a framework for “strengthening circuit breakers and handling erroneous trades,” according to a statement from the Securities and Exchange Commission. NYSE Euronext, Nasdaq OMX Group Inc., Bats Global Markets Inc., Direct Edge Holdings LLC, International Securities Exchange Holdings Inc. and CBOE Holdings Inc. met with SEC Chairman Mary Schapiro today.

“The differences in order handling employed by U.S. markets needs significant work and must be addressed,” wrote Joe Ratterman, the chief executive officer of five-year-old alternative exchange Bats, in an e-mail before the meeting. “When acting alone, apart from each other, these differences might prove to be a big part of the very problem they are trying to handle.”

Rules to slow trading or shut markets during volatile periods may have prevented the biggest losses on May 6, when the Dow Jones Industrial Average fell 998.5 points intraday, executives from Bats, Direct Edge and White Cap Trading LLC said prior to today’s announcement..."

Even today, I'm hearing experienced market participants express frustration over the lack of any real explanation for what went wrong last Thursday. We went from a day of rumors about fat-finger trades to a gradual understanding and building narrative about trades being routed to electronic markets with a lack of bids, but I think we still have some unanswered questions and a great deal of lost trust in our capital markets right now.

What do you think caused the acceleration of last Thursday's decline? Will we find a solution to the problems of evanescent liquidity, and are more circuit breakers and exchange coordination plans the answer to these problems?

Related articles and posts:

1. Exchanges agree to market-wide circuit breakers - WSJ.com.

2. About last Thursday: more circuit breakers or fewer? - Barron's.

3. BarCap on flash crash: 'a perfect storm' - FT Alphaville.

Friday, May 07, 2010

Jim Rogers + Marc Faber talk plunge on Bloomberg

Famed contrarian investors and thinkers, Jim Rogers and Marc Faber appeared on Bloomberg TV to discuss the May 6 market drop.

Here's a little excerpt from Bloomberg's print coverage:

"Investors should consider paring their holdings after a plunge in U.S. stocks yesterday, according to Jim Rogers and Marc Faber.

Equities had a “normal correction” and were “overdue for a sell-off” after rallying from last year’s low, Rogers, Singapore-based chairman of Rogers Holdings, told Bloomberg Television today. “The market was overbought, ahead of itself and due for a correction,” Faber, publisher of the Gloom, Boom & Doom report, said in a separate interview yesterday.
..."


You'll find the Bloomberg TV interviews with Faber and Rogers linked within the story (scroll down to the bottom of the article or see the "video" tab at the top). Always interesting to hear from our favorite straight shooters at times like these.

Thursday, May 06, 2010

1500 point Dow swing = what a day

As Aiki14 (Jim Gobetz) noted on Twitter today, we saw a 1500 point move in the Dow Jones Industrial Average during one part of the day. If that's not enough to get your attention, I don't know what will.

Here's today's Market Wrap from Bear Mountain Bull with the closing figures and some thoughts on rumors of HFT madness and a "fat-finger" futures trade on Citigroup's trading desk, which supposedly contributed to (or drove) this US market decline.

Also, FT.com has the global markets view, covering everything from the day's VIX spike to Greek riots, while Stocktwits TV will be airing a show later this evening, with Howard Lindzon and friends discussing the day's action. So check that out.

Wednesday, May 05, 2010

Life after Blankfein? Goldman scenarios

Wall Street Journal examines the current "what-if" scenarios surrounding Goldman Sachs and its chairman/CEO Lloyd Blankfein.

Here's an excerpt:

"Some executives and powerful alumni of Goldman Sachs Group Inc. are talking about whether Chief Executive
Lloyd C. Blankfein can survive the legal and public-relations storm swirling around the company, according to people familiar with the situation.

The conversations being held among some partners, managing directors and other current and former executives are informal, and there appear to be no plans for a management shake-up.

The various hypothetical scenarios include whether Mr. Blankfein should resign, whether there should be a broader house-cleaning of top Goldman management or whether to separate the chairman and CEO posts now held by Mr. Blankfein...
".


As noted in yesterday's post, Goldman & chief Blankfein are now in damage control mode, hoping to part the dark clouds that have formed as a result of the recent SEC complaint and more recent talk of a pending criminal investigation.


As a result, chatter about Blankfein's possible departure from Goldman has been building this week. While one large shareholder quoted in the Journal piece stated his fervent hope that the firm's problems would go away "in the next month or so", this outcome seems highly unlikely.


If anything, the talk about Blankfein's departure as CEO will probably grow louder over the coming weeks (for a variety of reasons). Here's my quick take from Twitter earlier:

Starting to think the play of the week was/is to go long Blankfein departure futures on InTrade (no pos.) http://bit.ly/9IKjBh $GSWed May 05 17:40:38 via web


So, while we consider possible outcomes that seemed like distant long-shots just two weeks ago (nice call, Keith), it's important to remember (as Fitch reminds us in their latest ratings update on Goldman Sachs) that minding your reputational risk is key for companies, and "critically important" for financial firms dependent on capital markets.

Tuesday, May 04, 2010

Goldman, Blankfein seek damage control

If you were tuned in to Bloomberg TV this past week, you probably caught Lloyd Blankfein on the Charlie Rose Show, as I did on Sunday.

Surprised to say I sat through most of it, considering I heard others who said they couldn't make it through 15 minutes of the guy's speil. I won't rehash for you here; if you're interested, take a look at the video link above.

I will say that while I was largely unimpressed with the broad details of the SEC's case against Goldman Sachs (and the political circus that quickly surrounded it), I also got the feeling that Blankfein was, at times, making some rather spurious arguments in his PR performance at Rose's table (Charlie is a friend of Warren Buffett's and the re-runs of Blankfein's spot coinciding with Buffett's defense of Goldman and Blankfein at the Berkshire Hathaway annual shareholders' meeting are no coincidence).

For some rather frank discussion of the problems facing Goldman Sachs (and other large, money center banks), may I recommend listening to the following recent interviews with James Rickards and Bill Laggner on the Eric King broadcast (Hat tip to Controlled Greed).

As Rickards notes in his discussion with Eric King, Goldman may be facing a very real danger from the recent blows to its reputation. And as Keith McCullough at Hedgeye points out, reputational risk is not something you can fix in a New York minute.

Sunday, May 02, 2010

Forbes, El-Erian, Lasry, Griffin on reform, recovery


Steve Forbes, Mohamed El-Erian, Ken Griffin, and Marc Lasry discuss and debate financial industry regulation and the economic recovery in this Milken Institute Global Conference video from Bloomberg.com.

It's not everyday that we get to see such heavy hitters of finance sharing one stage to debate the issues of the day, so this clip is a great source of insight into their thinking on these topics.

Everything from systemic risk to government involvement in our economy and lives is up for discussion here. You'll also hear some great points (and a little debate) from Griffin and Forbes on the problems we face, economically and socially, from the expansion of government's role in the economy.

Enjoy the video, and I hope you find the discussion worthwhile.