Stiglitz Secrets

Wed, 2010/02/10 - 12:07pm | Your editor

          Canada reader RG wondered at my quoting Joseph E. Stiglitz yesterday, based on a Bloomberg article. I wrote:

 

     The Nobel laureate economist said both countries “deserve to keep their AAA rating” adding “the likelihood of a default is small in the US because all we do is print money to pay it back.” He called the panic over US default “another reflection of the absurdities in the financial markets.”

 

     RG, a libertarian, wondered: “Is this some sort of a tongue-in-cheek joke?” Here is the explanation.

 

     What Joe was saying is that the US does not risk default on debt because we can always pay it back by printing money. The US$ is a reserve currency. This is what the US Treasury Secretary means when he says our USA AAA rating is unlikely to end, except that unlike Stiglitz, a free spirit, Geithner does not explain what he means.

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USAns and Greeks

Tue, 2010/02/09 - 11:40am | Your editor

 

     In case there are any doubts, I invest in the same stock markets as anyone else does and my pocketbook has been bashed for the past week and now is emerging from its collapse. Every speculator, day-trader, or hedgie was selling short the euro and National Bank of Greece and using other portfolio assets to fund this. Today every short seller having shorted, the balance in the Trojan War shifted slightly the other way.

 

     Rare indeed is the fund manager or investor who can dodge this kind of selloff. Not claiming to be a market timer or a clairvoyant, I tend to be skeptical of those who do make such claims

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Greece, Portugal, and Sex-starvation

Mon, 2010/02/08 - 1:00pm | Your editor

     There is a theory about that Greece and Portugal are normal European countries. They aren’t. Greece keeps electing members of the half-American left-leaning Papandreou family to run the country because they represent continuity in a place that was riven by post-War shocks like repossession of territory from Turkey; an attempted Communist takeover and invasion; the monarchy abdicating; a military dictatorship; the restoration of democracy in its homeland. And then capping that incredible sequence of events, the seemingly miraculous acceptance of EU its membership application despite what everyone knew were fudged numbers.

 

     Portugal is not a normal place either. It suffered similar shocks. Having had the longest lasting fascist dictatorship in place after World War II, it overthrew this with a revolution. Not a Tea Party Sarah-Palin-style Revolution, but a real one, with people and barricades confronting tanks and soldiers.

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Panic Button

Fri, 2010/02/05 - 12:50pm | Your editor

Apologies for yesterday’s newsletter which some did not receive. Paid subscribers are reminded that they can always log on to their account at www.global-investing.com to read the latest issue. The problem may have been that the newsletter was very long because there were 5 quarterly reports covered; it may also be that our chocoholic webmaster placed 5 ads for Valentine’s Day chocolates under my signature which triggered spam-blockers.

 

     We will soon have changes in how we distribute the newsletter. Watch this space.

 

     Paul Krugman in today’s New York Times spelled out the argument for deficit spending during an economic recession and accused his opponents of “fear-mongering.” He compared the present misinformation campaign to the buildup to the Iraq War.

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Socratic Stock pick

Thu, 2010/02/04 - 2:14pm | Your editor

        We recommend that yield accounts add Portugal Telephone, ticker PT, to take advantage of the Socratic confusion I commented on this morning, at about $10.50 per share, yielding about 7.5% which is good. This is a phone stock suffering from the country where it is located, but an excellently managed company all the same. It is underowned by institutions and its price has gone nowhere.

      It is rated outperform by Reuters Company Research and this appeals, along with that dividend, to this Lusitanophile. More tomorrow.

 

 

Stake and Steak

Thu, 2010/02/04 - 12:27pm | Your editor

 

 

 

     Smith & Wollensky, the NYC restauranteur, advertises that it offers “steak for stock” to potential customers facing liquidity problems because they did not got cash bonuses. The steakhouse will buy NYSE shares at the closing price for desperate diners using stock to pay for a meal. It is probably illegal if you got shares hanging in a deep freeze in lieu of a bonus. And if you didn't.

 

     Portugal is run by a Premier called Socrates, being tainted with the hemlock of budget troubles in Greece. Europe’s southern tier and Ireland all hurt the Euro exchange rate (and "help" the dollar, in fact delaying a US recovery because exporting will be tougher.) Greece and Portugal are not as badly off as Iceland, because they have fixed currency exchange rates with the other Euro-bloc countries.

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Newfies and Feng Shui

Wed, 2010/02/03 - 12:41pm | Your editor

        Since I have decided to stop discussing whether the US Treasury is secretly buying stocks, I can focus on the real news, that Little Sweetie’s feng shui advisor and lover has lost a court case in which he tried to become the heir to the second largest fortune in Hong Kong. I do not think this is linked to the recovering Chinese stock markets, but who knows?

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Financial Innovation

Tue, 2010/02/02 - 12:09pm | Your editor

 

 

     Paul Renaud (of www.thaistocks.com) writes that inflation in the past 20 years and likely in the near future is exaggerated. Consider:

     “Inflation is mostly low and likely to stay that way for a while longer.

     “How much does an internet connection cost today vs. a few years ago? It’s better now at lower cost. The same with flat screen TVs. Read more »

Volcker and G30

Mon, 2010/02/01 - 12:40pm | Your editor

 

      It was a big Sunday in New York yesterday. Not only did Bloomingdale's open its 1st foreign department store in the United Arab Emirates (with a local emporium as partner), but Paul Volcker wrote an op-ed article in the Times on financial reform. He began with two old favorites, the risk of moral hazard after a generalized bailout of banks and lots of other kinds of institutions (AIG, Morgan Stanley) and quoted Adam Smith in favor of keeping banks small. Read more »

80 is the New 60!

Fri, 2010/01/29 - 4:54pm | Your editor

   Eighty is the new sixty! These days I am beginning to feel like a kid again. Despite being a recipient of Social Security and Medicare, mainly to finance this re-start-up, I am in my 60s. And these days, what with Paul Volcker taking the lead on Administration bank regulation and Felix Rohatyn taking the reins at Lazard Freres (after the untimely death of Bruce Wasserstein) it is the 80-year-olds who are helping run things.

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