preferred, not common
Waiting for CNBC: A tour de force from Tkacik.
Stress: A handy interactive graphic from the WSJ.
Cheese war ends. Everyone wins: Roquefort returns! Yay!
Free Online Graph Paper / Grid Paper PDFs: An incredible resource for geeks who use paper.
Investment Outlook: Bill Gross needs a translator. Representative sentence: “The ghost of Bernard Baruch still counsels that 2 + 2 = 4, but the repercussions of getting something for nothing should dominate the hopes that mankind will get off the deck and revert to a mean or median standard representative of outdated political and economic philosophies.”
First, William Gross said this:
“our President, whom I voted for and still strongly support, has shed his predecessor’s regal robes for a populist’s cloak”
I agree with him, and I do believe that the way that the dissident Chrysler creditors were handled was poor and counterproductive.
He also said this:
“the rebalancing of wealth from the rich to the “not so rich” is a long overdue reversal, one that I have encouraged in these Outlooks for at least the past several years”
I agree again.
“The threat, of course, falls under the broad umbrella of “burden sharing” and is a difficult one to interpret and anticipate, if only because the concept is evolving in the minds of policymakers as well. But clearly, as this financial crisis has morphed from Bear Stearns to FNMA, Lehman Brothers, AIG and now Chrysler, the claims of stockholders and in some cases senior debt holders have suffered. Please hear me on this. That is the way it should be. Capitalism is about risk taking and if you’re not a risk taker, you should have your money in the bank, Treasury bills, or a savings bond, not the levered investment of a bank or an aging automobile company. Let there be no company too big, too important, or too well-connected to fail as long as the systemic health of the economy is not threatened.”
I agree again. His basic point is the following:
” Slower growth can be a public good if it avoids the cataclysmic effects of double-digit unemployment, escalating foreclosures, and fear of financial insecurity. But the Obama cannon shot will have financial consequences. Do not be deceived by the euphoric sightings of “green shoots” and the claims for new bull markets in a multitude of asset classes. Stable and secure income is still the order of the day. Shaking hands with the new government is still the prescribed strategy, although it should be done at a senior level of the balance sheet. If the government indeed becomes your investment partner, you should keep the big Uncle in clear sight and without back turned. Risk will not likely be rewarded until the global economy stabilizes and the Obama rules of order are more clearly defined.”
In other words, Gross believes that more govt intervention will lead to slower growth. This is often the case, but there’s still a chance that sensible policies could make our situation much better. So I’m not nearly as pessimistic as he is.
My opinion was that William Gross has been arguing that making bondholders take losses is worse for the economy than having taxpayers pay more money, because we need those investors to provide the investment that creates businesses and jobs. I guess I was wrong. At least in this post, he’s arguing that we might well have to do this, but it will have some negative consequences as well as benefits, and we don’t need to shoot ourselves in the foot by demeaning investors whose investments we’d appreciate, especially in an economic tsunami.
I agree with his assessment. However, the taxpayer’s interests come first, and we will simply have to accept some possible negative consequences to that principle.Putting it delicately,I consider the consequences of screwing the taxpayers to be far worse and less fair than screwing the creditors.
However odd his manner of presentation might seem in this post, I consider it sensible and I am glad that William Gross is not advancing the view that I formerly took him to believe in.- Posted by Don the libertarian Democrat