The Death of the Credit Card Economy

(Slate.com-Daniel Gross) The most revolutionary notion in commerce today is one of the oldest. If you want to buy something, you may actually have to pay for it. We are reverting from a "borrow and buy" economy to the "cash and carry" model of our grandparents.

The Olesons may have extended store credit to Ma and Pa Ingalls in Little House on the Prairie, but widespread consumer credit is a very recent phenomenon. It began in the 1920s, when expensive consumer durables—cars, refrigerators—were first produced in mass quantities. It wasn't until Bank of America began carpet-bombing California with credit-card applications in the 1960s that the debt wave started in earnest.

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September: The horror story

(MarketWatch.com) September is almost upon us.

You'll take this as very bad news indeed if you read any of quite a few of the investment newsletters I follow. Their editors have recently been making a big deal out of September's supposed tendency to be bad for the stock market.

But should you change your behavior because of this historical tendency? I'm not so sure.

Read the entire article

Integrity Bank of Alpharetta, Ga., fails

(CNBC.com) Integrity Bank of Alpharetta, Ga., on Friday became the 10th U.S. bank to fail so far this year, done in by the very business it was built on — real estate lending.

Regions Bank of Birmingham, Ala., is assuming all of Integrity Bank's $974 million in insured and uninsured deposits in 23,000 accounts, and about $34.4 million of the bank's $1.1 billion in assets.

The remainder of Integrity's total assets are being retained by the FDIC. The FDIC said it estimates that Integrity's failure will cost its deposit insurance fund $250 million to $350 million.

Integrity Bank, which opened for business in November of 2000, specialized in real-estate lending in the Atlanta area with a self-described "faith-based culture." Throughout the early part of the decade when the housing market was booming, Integrity Bank grew into a billion-dollar, publicly-traded company — but when the real estate market started faltering, the bank found itself in trouble.

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Munis Gain as Tax Cuts Expire in Shift to 40% Bracket

(Bloomberg) Wall Street has some election-year advice for its customers: load up on municipal bonds because income taxes for the wealthy are bound to rise.

With a record budget deficit of $482 billion awaiting the next president, strategists are betting Democrat Barack Obama and John McCain, the presumptive Republican nominee, will be forced to increase charges for top earners. That would boost the value of the tax exemption on income from state and local government debt, which has eroded since Ronald Reagan made cuts a pillar of his administration when he took office in 1981.

``Tax rates are going to be higher no matter who's elected,'' said Craig Elder, the fixed-income analyst in the private wealth division at Milwaukee-based Robert W. Baird & Co., which oversees $60 billion for individuals. ``If you're in the top tax bracket, munis are your strong buy right now.''

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Fire Bernanke, Hire Trichet: Jim Rogers

(CNBC.com) The head of the European Central Bank should be running the Federal Reserve because he is doing a better job at protecting his economy, investor Jim Rogers, CEO of Rogers Holdings, told "Squawk Box Europe" on Friday.

European Central Bank President Jean-Claude Trichet can be depended on to fight inflation, which is a worse evil than recession, Rogers told "Squawk Box Europe."

The economic stimulus packages announced in the U.S. and Japan this year will plunge the countries in a prolonged period of economic decline, because they will create inflation and will prevent the cleansing of the economies he said, adding "recessions are like forest fires."

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Fannie, Freddie and the Low-Risk-Investment Myth

(Wall St Journal-Deal Journal Blog) The fates of Fannie Mae and Freddie Mac reportedly hang over meetings of the Federal Reserve. As the government considers its options for the two mortgage giants–nationalization, restructuring or just plain nothing–it is becoming clear that telling shareholders to jump in a lake is a bigger problem than it first seemed: big holders of Fannie and Freddie securities range from banks to foreign governments, and wiping out the value of their investments risks deepening the stress on the wider financial-services industry.

The Financial Times points out today that regional banks hold $36 billion of the preferred stock in Fannie Mae and Freddie Mac. Dealbreaker’s John Carney noted that the Fed is pressuring the Treasury not to wipe out shareholders because it could hurt regional banks that already are under pressure.

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Don Harrold with another Cramer Classic

Cramer's recent call of a bottom in housing got this response from Don Harrold....this is a much watch video for Cramer followers.

Watch the video here

This Blame Game is Short on Logic

(FT.com) Read Doug Kass's editorial which recently appeared in the Finanical Times. Doug reviews the history of short selling and the recent attempt to blame the current financial crisis on the "short sellers".

Read the entire editorial

Japan Goes on Buying Spree, Shrugging Off '80s Bubble

Bloomberg) -- Japanese companies are increasing overseas acquisitions, using their cash-hoards to snap up assets beaten down by the global credit crisis and economic slowdown.

The value of foreign purchases by Japanese companies this year has already topped 2007's total by 91 percent, according to data compiled by Bloomberg. That's the biggest gain among the world's 10 largest markets and contrasts with fewer deals in the U.S. and U.K., where credit is drying up after the subprime rout.

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The Biden Economy: What Obama’s VP Pick Means for Wall Street

(Wall St Journal-Deal Journal Blog) Barack Obama picked Delaware Senator Joe Biden as his running mate in a 3 a.m. pick Saturday that gave a new meaning to the “Friday night news dump.”

Biden’s foreign-policy experience made him Obama’s choice, according to the news reports. But what are Biden’s views on the economy, taxes, deal making and Wall Street? Deal Journal took a look.

Not a fan of hedge funds: In a Democratic primary debate on This Week last year, Biden blamed hedge funds and private-equity funds for the credit crunch: “We need more transparency, particularly with regard to hedge funds and private equity funds. They are the ones that are causing this thing to go under. And there’s no transparency, no accountability. We don’t know how deep this problem is.”

A stable capital-gains tax: Biden voted no to cutting the capital-gains tax rate in 2005 and 2006. Obama favors imposing an income-tax regime on investment profits from private-equity firms and hedge funds that are currently taxed as capital gains. In 2003, the capital-gains tax rate was cut to 15%. Biden believes raising taxes on dividends will raise $195 billion a year.

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Best and Worst Performing Stocks of the Current Bear Market

(Bespoke Investment Group) Since the current bear market began back on October 9th, 2007, the Russell 1,000 is down about 18%. Of the stocks in the index, 8.5% are down more than 50%, while 25% are actually up since then.

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Feldstein Says Low Rates May Not Boost U.S. Growth

(Bloomberg) Harvard University economist Martin Feldstein, a member of the committee that charts American business cycles, said the Federal Reserve cannot count on low interest rates to buoy economic growth.

``Lower interest rates are not going to get us anything more,'' Feldstein, who retired in June as president of the National Bureau of Economic Research, said today in a Bloomberg Television interview. ``The economy has really shown one sign after another of weakening.''

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Lessons from a “lost decade”

(Economist.com) Will America follow Japan into a decade of stagnation?

AS FALLING house prices and tightening credit squeeze America’s economy, some worry that the country may suffer a decade of stagnation, as Japan did after its bubble burst in the early 1990s. Japan’s property bubble was also fuelled by cheap money and financial liberalisation and—just as in America—most people assumed that property prices could not fall nationally. When they did, borrowers defaulted and banks cut their lending. The result was a decade with average growth of less than 1%.

Most dismiss the idea that America could suffer the same fate as Japan, but some of the differences are overstated. For example, some claim that Japan’s bubble was much bigger than America’s. Yet average house prices nationwide rose by 90% in America between 2000 and 2006, compared with a gain of 51% in Japan between 1985 and early 1991, when Japanese home prices peaked (see left-hand chart). Prices in Japan’s biggest cities rose faster, but nationwide figures matter more when gauging the impact on the economy. Japanese home prices have since fallen by just over 40%. American prices are already down by 20%, and many economists reckon they could fall by another 10% or more.

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Buffett Suggests Edwards Supporters File Class Action Suit

(AmericanThinker.com) In an interview on CNBC's "Squawk Box," billionaire Warren Buffett suggested that donors to the John Edwards for President Campaign might consider filing a class action lawsuit. "I think if I had given him money I'd probably be asking him for it back now" quipped the investor icon in a half serious, half joking manner. "I think if I were Edwards I might give up a haircut or two and return some of the money....if they (donors of the smaller amounts) had known the facts they wouldn't have sent him the money."

Buffett's main problem with Edwards was the fact that he continued to solicit contributions long after he knew the story of the affair would eventually prevent any chance of him occupying the Oval Office. "Edwards was essentially soliticing money from people to further his ambitions to become President," said the billionaire. "He knew that in effect he wouldn't be elected president....he knew the story was out there. It might be kind of interesting if some contributor would bring a class action suit on behalf of people who were led to send money to a man under false pretenses."

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Moody's Downgrades Fannie Mae and Freddie Mac

(FT Alphaville.ft.com) New York, August 22, 2008 — Moody’s Investors Service downgraded the preferred stock ratings of the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) to Baa3 from A1 and the Bank Financial Strength Ratings (BFSR) to D+ from B-.

The preferred stock ratings and BFSRs remain on review for possible further downgrade. Fannie Mae’s and Freddie Mac’s Aaa senior long-term debt and Prime-1 short-term debt ratings were affirmed with stable outlooks.The firms’ Aa2 subordinated debt ratings were affirmed, but the outlook was changed to negative from stable.

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CNBC's Becky Quick interviews Warren Buffett

(CNBC.com) Real time blog of the interview.

Go directly to the live blog

Emerging-Market Retreat Is `Overdone,' Mobius Says

(Bloomberg) Emerging-market stocks have tumbled more than is justified because demand for raw materials continues to boost economic growth in those nations, Mark Mobius said.

``The correction seems to be overdone but not necessarily over because sentiment globally is very bad,'' Mobius, who oversees about $40 billion in emerging-market equities as executive chairman of Templeton Asset Management Ltd. in Singapore, said in a Bloomberg Radio interview. ``Demand for these commodities will continue at a pretty high level, simply because of the demand from China, India and these other countries.''

Read the entire story from Bloomberg

Some Say Bailout of Housing Giants Is Inevitable

(NY Times-DealBook Blog) Financial conditions are continuing to worsen at the mortgage finance giants, Fannie Mae and Freddie Mac, leading some investors to prepare for a government bailout even as the Treasury Department and the companies say such government intervention will not be necessary, The New York Times reported.

Stock prices of both companies fell again on Tuesday, and some large overseas investors slowed their purchases of securities issued by the companies. Share prices at both Fannie and Freddie have plummeted by more than 24 percent in the last two days, and more than 85 percent since December. On Tuesday, Freddie Mac was forced to pay its steepest borrowing premium in 10 years.

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August Busch IV stays on after InBev takeover

Who was August Busch IV actually looking out for himself or the BUD shareholders?

This article gives you a look at the answer

(Telegraph.co.uk) The chief executive of Anheuser-Busch, the Budweiser brewer which last month succumbed to a $52bn (£28bn) bid from rival InBev, is to receive a payoff and contract worth $125m on completion of the deal.

August Busch IV, who vowed earlier this year that the brewer his family founded would not be sold on "my watch", is to be handed a consultancy role with the enlarged company worth $17.6m. He will get a one-off consultancy fee of $10.4m and $120,000 a month until the end of 2013.

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Marty Whitman's Third Qtr Letter to Third Ave Shareholders

(Third Avenue Funds Website) Marty Whitman's letters are a must read for serious value investors. Whitman discusses short sellers and how they have impacted a number of his holdings. Very interesting piece from one of the best.

Read the entire letter

Running a Hedge Fund Is Harder Than It Looks

(NY Times DealBook Blog) Only a few years ago, it seemed so easy to start up a hedge fund. So easy, in fact, that Ronald G. Insana, then one of CNBC’s best-known anchors, tried to get in on the action with his fund of hedge funds.

But now that Mr. Insana has been forced to shutter his fund, his story is a cautionary tale for those who may be considering hanging their own shingle, Andrew Ross Sorkin writes in his latest DealBook column.

While Mr. Insana’s arrested foray into the world of hedge funds isn’t a large-scale flameout, Mr. Sorkin says, it’s an increasingly familiar storyline about the real hardships of running a hedge fund.

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Schwab Market Perspective: Stocks Climb Wall of Worry

(Liz Ann Sonders and David Kastner--Schwab.com) August 15, 2008

Stocks climb the wall of worry. A breakdown in the price of oil and other commodities, combined with a rally in the dollar, is lifting investor sentiment. Although there could be some more upside for the market, the history of bear markets shows that new lows could be in the offing.

Financial crisis still simmering, but edging toward a boil. Many of the government's efforts to shore up the credit markets have been somewhat successful. Yet, continued turmoil in the mortgage market is spilling into the broader economy. Until the housing market stabilizes, this is likely to continue.

The elusive housing market stabilization. As inventories remain stubbornly high, home prices continue to fall. While further declines are likely, the pace of house depreciation has slowed, offering some hope of stabilization next year.

Fall in commodities eases inflation concerns. Key measures of inflation continue to climb, but slower economic growth prospects around the globe have brought commodity prices lower. Inflation gauges, which are lagging in nature, should recede in the coming months.

Consumer and corporate woes. Retail sales have been bolstered by the federal stimulus checks, but the boost is quickly fading. As the unemployment rate rises, dour consumer sentiment threatens to reinforce a negative feedback cycle of slower consumer spending and weaker corporate confidence.

Global inflection point playing out. It is now clear that the U.S. is not alone in the economic slowdown. Although this is negative in many ways, it has brought commodities down and the U.S. dollar up—sparking a shift in U.S. and regional performance

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U.S. SEC to propose new short selling rule in weeks

(Reuters) The top U.S. securities regulator plans to propose new short selling rules in the next few weeks.

U.S. Securities and Exchange Commission Chairman Christopher Cox said on Tuesday that the proposal "will focus on market-wide solutions" but is not intended to have any impact on the direction of prices.

Cox also said fails to deliver "were reduced substantially" for the stocks covered under the SEC's recent emergency short selling rule.

"It was a very effective order from that standpoint," Cox told reporters after a news conference.

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Fleckenstein: Greenspan in Bubble Denial

(minyanville.com) In a Wall Street Journal article headlined "Greenspan Sees Bottom in Housing, Criticizes Bailout" former Federal Reserve chairman Alan Greenspan said: "Home prices in the US are likely to start to stabilize or touch bottom sometime in the first half of 2009."

He did leave himself some wiggle room, as he also noted: "Prices could continue to drift lower through 2009 and beyond."

Of course, we shouldn't forget that this is the same man who in October of 2006 opined: "I think the worst of this [housing problem] may well be over."

As I noted in my book and often in this column, while Greenspan was in office, he went to great lengths to suggest that housing couldn't experience a bubble. And, as the Journal pointed out, he also tried to make the case in 2004 -- when many of us were already certain that a disastrous bubble was in full bloom -- that "a national severe price distortion seems most unlikely in the United States, given its size and diversity."

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Why Fannie, Freddie & Lehman Needed the Short-Selling Ban

(Wall Street Journal-Deal Journal Blog) In the Peanuts cartoons, Linus held on to a ratty blue blanket, believing it gave him protection against a chaotic and unpredictable world.
Put Linus in a business suit on Wall Street and picture his little blue blanket as the SEC’s ban on so-called naked short-selling–in which traders sell stock without actually having borrowed actual shares.

The ban may have been derided by one academic study as nearly useless and even harmful to the process of allowing the markets to work efficiently. Still, four trading days after the ban lapsed last Tuesday night, those formerly protected financial stocks are getting hammered. Is it possible the ban on naked short-selling played an important psychological role in protecting those stocks from the vagaries of the markets? As the great investor Benjamin Graham wrote, “most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble…to give way to hope, fear and greed.”

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Smithers: Stick to Cash

(FT.com) Economic commentator Andrew Smithers has a dim view of growth prospects for the eurozone, UK and Japan but overall, he takes an unusually mild approach in his latest world market report to clients.In short, says Smithers:

• The unexpected surge in worldwide inflation shows that output has been running well above its equilibrium level. Growth must therefore slow to well below trend rates if inflation is to fall back.

• Below trend growth will mean lower profits in terms of national accounts. Larger falls are likely in company accounts, as the profits booked by the change from historic cost to current value accounting turn to losses.

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U.S. Subprime Crisis Not Over; Large Bank May Fail

(Bloomberg) -- A large U.S. bank may fail in the coming months as the global credit turmoil continues to hurt financial markets, said Kenneth Rogoff of Harvard University, a former chief economist at the International Monetary Fund.

``The worst is yet to come in the U.S.,'' Rogoff said in Singapore today. ``The financial sector needs to shrink. I don't think simply having a couple of medium-sized banks and a couple of small banks going under is going to do the job. We're really going to see a consolidation even among the major investment banks.''

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Longleaf Partners Semiannual Report Available

In case you missed it the Longleaf Partners semiannual report is available.

Read the report

Buffett's Berkshire Discloses Stake in NRG Energy

(Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. disclosed a stake in NRG Energy Inc., the second-biggest power producer in Texas. Buffett also made an undisclosed transaction involving ConocoPhillips, the second- largest U.S. refiner.

Berkshire had 3.24 million NRG shares as of June 30, the Omaha, Nebraska-based company said today in a regulatory filing disclosing equity investments at the end of the second quarter.

``When there are market dislocations we're always going to take advantage of them,'' Buffett, 77, told reporters at Berkshire's annual shareholder meeting in May.

Berkshire spent $3.98 billion on stocks in the quarter, more than twice the investment from the previous three months, separate filings show. The company was the largest shareholder of companies including Coca-Cola Co. and American Express Co. as of June 30, with an equity portfolio valued at $69.5 billion.

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U.S. Consumer Prices Rose More Than Forecast in July

(Bloomberg) -- U.S. consumer prices jumped to a 17- year high in July, reducing the ability of the Federal Reserve to lower interest rates should the economic slowdown deepen.

The consumer price index climbed 0.8 percent, twice as much as anticipated, the Labor Department said today in Washington. The cost of living was up 5.6 percent in the year ended in July, the biggest surge since January 1991. So-called core prices, which exclude food and energy, also rose more than projected.

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Michael Price Shorts Citigroup, Sees Few Banks to Buy

Bloomberg) -- Billionaire investor Michael Price is betting that Citigroup Inc. and Wachovia Corp. will keep tumbling and says he found few banks to invest in after total losses from subprime mortgages increased to almost half a trillion dollars.

``Citigroup's got more pain coming,'' said Price, who runs New York-based MFP Investors LLC and was chairman and chief executive officer of Franklin Mutual Advisers LLC in Short Hills, New Jersey.

Price, 57, is selling short both stocks even after Citigroup, the biggest U.S. bank by assets, tumbled 33 percent this year and Wachovia, the fourth-largest, lost 52 percent. In a short sale, investors borrow shares and sell them on the expectation they can be purchased at a lower price before paying back the loan.

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Analyzing Wall Street’s Research

(NY Times-DealBook Blog) At a recent conference, Frank P. Quattrone opined that former New York attorney general Eliot Spitzer’s landmark settlement in 2002, which forced the separation of investment banking from research, had been disastrous for the quality of research.

“I am not denying that there is the potential for conflict — always has been, always will be,” Mr. Quattrone says in Andrew Ross Sorkin’s latest DealBook column. “I’m just questioning the best means of managing the conflict.”

Mr. Sorkin agrees that the pendulum has probably swung too far. However, finding a solution isn’t exactly a walk in the park, he notes.

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David Einhorn: Private Profits and Socialized Risk

David Einhorn's presentation at Grant's Spring Investment Conference

Long but worth reading

Read the presentation

It’s Hard to Be a Hedge Fund

(Wall Street Journal-MarketBeat blog)

Hedge funds had a rough July as bets on rising commodity prices and falling financial stocks failed to pan out, according to research firm Morningstar Inc.

Hedge funds have been getting a little summer trim. (Wikipedia)

The Morningstar 1000 Hedge Fund Index fell 3.07%, its worst monthly performance ever.
“In July, the bet on long commodities and short financials didn’t work as well for hedge funds,” said Daniel Farkas, hedge fund analyst for Morningstar. The trade has been a favorite of traders for some time.

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Bank Losses: Half Trilliion and Counting

(The Big Picture-Barry Ritholtz) Remember the good old days? Ahhh, a simpler time, when we were repeatedly told that sub-prime didn't matter, that it was contained, that it would never tick above $60 billion dollars at most, and have zero impact on the broader economy?

Only not so much. We learn via the number crunchers at Bloomberg that :

"Banks' losses from the U.S. subprime crisis and the ensuing credit crunch crossed the $500 billion mark as writedowns spread to more asset types. The writedowns and credit losses at more than 100 of the world's biggest banks and securities firms rose after UBS AG reported second-quarter earnings today, which included $6 billion of charges on subprime-related assets.

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Bank of America, Broker Rally May Fade as Shorts Limit Expires

(Bloomberg) Bank of America Corp. and Morgan Stanley's monthlong rally, propelled by an emergency limit on short-selling, may end as the rule's expiration lets investors redouble bets that losses will mount.

Mortgage underwriters Freddie Mac and Fannie Mae and 17 brokerages resume trading today freed from the Securities and Exchange Commission's restriction aimed at preventing stock manipulation. The group's shares rose by an average of 17 percent since the SEC's action on July 15.

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US Tsy's Paulson says won't stay on past January

(Reuters) U.S. Treasury Secretary Henry Paulson said in an interview aired on Sunday he had no interest in staying in his post beyond January when a new administration takes office.

"I look forward to doing other things next year," Paulson said on NBC television's "Meet the Press." The interview was taped on Saturday in China.

"I'm going to run right up until the end," he said. "I'm focused on getting everything done I can get done between now and January 19th."

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Bill Miller: Toughest market I've seen

(Fortune) Shareholders of the battered Legg Mason Value Trust mutual fund won't find many answers in manager Bill Miller's second-quarter letter to investors.

In his note this week, Miller, who famously beat the S&P 500 for 15 consecutive years until stumbling in 2006, deplores market conditions that continue to punish value investors, but doesn't discuss his strategy. His $9.7 billion LMVTX (LMVTX) fund has dropped 34% since last July, while the S&P 500 fell 12%, and suffered outsized losses as financial stocks plummeted.

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Remembering Michael Metz

(Reuters) Michael Metz, Oppenheimer & Co's highly regarded chief investment strategist and a five-decade Wall Street veteran, died late Wednesday at the age of 79, the company said on Thursday.

Metz had been battling cancer, according to a close friend, Steve Stern.
Metz, who joined Oppenheimer in 1969, was one of the rare voices on Wall Street warning about many major bubbles. He recommended to clients earlier this year that stocks were headed for a dramatic fall -- shortly afterwards he was proved right as the major indexes entered a bear market.

Metz was one of the first analysts to raise red flags about the dangers of the deteriorating housing and credit markets. He based that call on the stock market on the belief the U.S. economy would be in recession "all through 2008 and 2009."

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Ron, It wasn't as easy as it sounded, was it?

(Mediabistro.com) CNBC's Ron Insana, the veteran anchor who left the chair in February 2006 and became a senior analyst, is leaving Insana Capital Partners, the company he started upon leaving CNBC full-time.

"He plans to join S.A.C. Capital, the Stamford hedgefund company, as a managing director," reported CNBC correspondent Melissa Lee today.

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Mean Street: Improving Your Odds in the Wall Street Casino

(Deal Journal Blog-Wall Street Journal) If you believe in efficient markets, every now and then a pesky question comes up that doesn’t fit neatly into your theory: Like whether the identity of a buyer or seller of a stock really matters.

It’s hard to believe that it doesn’t. The entire stock market has been constructed to conceal the identity of buyers and sellers. And why would there be such a hullaballoo about corporate-insider buying and selling if it didn’t matter?

Yesterday, in response to a column on Fortress Investment Group, a reader wrote, “If a Wall Streeter is selling, you don’t want to be buying. End of story.” And I thought, “Gee, that sounds right.”

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Berkshire Hathaway 2nd quarter net falls 7.6%

(Bloomberg) Billionaire investor Warren Buffett's Berkshire Hathaway Inc. posted its third straight profit decline as lower rates pressured results in insurance operations.

Second-quarter net income fell 7.6 percent to $2.88 billion, or $1,859 a share, from $3.12 billion, or $2,018, a year earlier, the Omaha, Nebraska-based company said yesterday. Excluding investment gains, profit was $1,465 a share, beating the $1,352 average estimate of two analysts compiled by Bloomberg.

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The Snowball: Warren Buffett and the Business of Life (Hardcover)

Alice Schroeder's long awaited book on Warren Buffett will be released on September, 29 2008.

This is a must read for the serious value investor.

Pre-order through Amazon.com here

Buffett Builds Berkshire Holdings as Earnings, Stock Decline

(Bloomberg) Devotees of Warren Buffett's investing strategy may need to look no farther for a bargain than the battered stock of the billionaire's Berkshire Hathaway Inc.

``Regardless of what's happening to earnings, the cash is still rolling in and asset prices are down,'' which will help Berkshire add holdings, said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which oversees $800 million, including Berkshire shares. ``It's Buffett time.''

Read the complete article from Bloomberg

U.S. Consumer Credit Increases $14.3 Billion in June

(Bloomberg) U.S. consumers borrowed more than twice as much as economists forecast in June as a decline in home equity forced Americans to fund purchases with credit cards and other loans.

Consumer credit rose by $14.3 billion, the most since November, to $2.59 trillion, the Federal Reserve said today in Washington. In May, credit rose by $8.1 billion, previously reported as an increase of $7.8 billion. The Fed's report doesn't cover borrowing secured by real estate.

Consumers are using credit cards and loans to cover expenses as falling home values cause banks to restrict access to home- equity lines. The Bush administration sent out tax rebate checks in the past three months to help support spending, which accounts for more than two-thirds of the economy.

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Joe Granville Turns Bullish

(MarketWatch) The good news: a long-time bear has turned bullish. The bad news: it's Joe Granville.

Unfair! Some readers get angry whenever I mention Granville, veteran editor of The Granville Letter. They remember his clownish behavior in the early 1980s, when he had a hot hand and was the most famous letter writer in the world, and also the subsequent disastrous performance of some of his portfolios, among the worst for which the Hulbert Financial Digest has a record.
But that was then, and this is now.

Granville has retrenched, abandoning systematic stock advice, so that the HFD now follows only his market-timing advice. And that's been quietly successful for some time.

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Retailers miss targest as the last batch of government stimulus checks were sent out

(MarketWatch) U.S. retailers, led by Wal-Mart Stores Inc., reported disappointing July sales as the last batch of government stimulus checks were sent out and cash-strapped consumers remained cautious about discretionary purchases.
Of 36 retailers that have reported July sales, 61% have missed estimates, according to Thomson Reuters.

Clearance sales, tax holidays and a slow start to the back-to-school season failed to give the lift that retailers had hoped for. Consumers are still facing high food costs and gasoline prices, which are leading them to reduce trips to malls and to consolidate purchases in one-stop trips.

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Tweedy Browne Letter to Shareholders (2nd Qtr 2008)

We always find the Tweedy Browne shareholder communications to be worth reading. From tweedy.com


Read the entire letter

Paris Hilton responds to McCain Ad

Funny video from--believe it or not, Paris Hilton...wonder how McCain will respond?

Watch the video from funnyordie.com

Massachusetts fires Legg Mason's Bill Miller

(Reuters) Massachusetts' $50.6 billion pension fund on Wednesday fired a Legg Mason Inc (LM.N: Quote, Profile, Research, Stock Buzz) unit run by fund manager Bill Miller and four other fund firms from managing a $1.8 billion U.S. stocks portfolio due to poor performance.
The pension fund, at a board meeting, approved transferring about $1.4 billion of the $1.8 billion portfolio to asset manager State Street Global Advisors, a unit of State Street Corp (STT.N: Quote, Profile, Research, Stock Buzz). State Street will manage the assets as an index mandate linked to the Russell 3000 index portfolio, the fund said.

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Morgan Stanley Said to Freeze Home-Equity Credit Withdrawals

(Bloomberg) Aug. 6 -- Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won't be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.

Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.

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The Larry Kudlow Recession Summer Rally

(BigPicture-Barry Ritholtz) Sometime last week, I heard my pal Larry Kudlow admit "We are in a Mild Recession." That sent me scampering to the Modern Kudlow To Standard English Translation Guide, to see what this meant. That translates to "We are in a broad and deep recession."

Back on July 15, I suggested it was time to cover shorts for a Bear market rally, reiterating an earlier -- too early -- call for a move higher. But this ? LK admitting a recession ? This was big news. I turned to one of the fellow fisherman/economists in Maine, and said "Larry used the R word? The negativity must be tremendous. That means we are due for a counter-trend rally."

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Fed Shift Indicates Main Rate Will Stay at 2% to Revive Economy

(Bloomberg)
Federal Reserve policy makers indicated that interest rates won't budge until next year as they wait for the credit crisis to abate and inflation to ease. The central bank, which left its benchmark rate at 2 percent yesterday, said ``downside risks to growth remain,'' dropping a reference in June's statement to ``diminished'' dangers. The Fed also said price increases are of ``significant concern.''

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Greenspan warns of more bank bail-outs

(FT.com)

More banks and financial institutions could end up being bailed out by governments before the credit crisis is over, Alan Greenspan, the former chairman of the Federal Reserve, warns in an article in Tuesday’s Financial Times.

However, Mr Greenspan cautions that a heavy-handed regulatory response to the crisis would do more harm than good because it would depress global share prices. He worries that governments, already troubled by inflation, might try to reassert their grip on economic affairs.

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Warren Buffett On the Big Screen to Highlight An Inconvenient Debt

(CNBC.com) Warren Buffett will participate in a live Omaha "town hall" event to be seen in hundreds of movie theaters across the nation, following the screening of a documentary movie that argues the U.S. is going broke.

Its backers, notably Pete Peterson's foundation, hope the film I.O.U.S.A. (tag line: "One Nation. Under Stress. In Debt.") will focus public opinion on America's federal budget deficits and national debt the way Al Gore's An Inconvenient Truth energized the "green" movement.

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Don Harrold on Cramer's Market Bottom Call

So, Jim Cramer called "the bottom"? Maybe this time he's got it right! Cramericans around the world hold their breath in anticipation! Caution this is hilarious.

See Don Harrold's video on youtube

Protecting Your Banking Assets

(Schwab Center for Financial Research)

The Federal Deposit Insurance Corporation (FDIC) took control of the Pasadena-based IndyMac Bank, F.S.B., on Friday, July 11, 2008, leaving many depositors nervous during the weekend of July 12–13. Although bank failures are relatively rare events, prudence suggests evaluating the steps you can take in order to protect the assets you have in the banking system. Steering depositors away from panic and instilling public confidence in the banking system were reasons why Congress created the FDIC in 1933 as an independent agency of the United States. The FDIC insures deposits at 8,494 banks and savings associations and is backed by the full faith and credit of the U.S. government. When a bank fails (which has happened 127 times in the past 15 years), depositors can take some comfort in knowing federal law requires the FDIC to make payments as soon as possible.

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Boone Pickens on his energy plan

(New York Times)

Questions for T. Boone Pickens
In the Air

As a Texas oilman and major contributor to the Republican Party, you’ve just launched yourself, at 80, into green stardom by devising an energy plan that relies mainly on wind power. How does it feel to be in the company of Al Gore, Nancy Pelosi and other leading Democrats? If they’re on my side, that’s good. We’re working on a nonpolitical venture here.

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NO FUN(D) FOR HEDGES

(NY Post) New York's Top 100 hedge-fund titans are getting flattened in the credit crunch.

The high-flying traders - who were touted around the globe for their killer 2007 returns and $100 million paychecks - can't get out of the red in the first half of 2008, according to hedge-fund performance records obtained by The Post.

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Barton Biggs on the markets

(Globe and Mail)

Barton Biggs sounds uncharacteristically flustered on the other end of the line. “Can we do this in half an hour?” the renowned Wall Street veteran asks, postponing a scheduled interview. Later, he requests another 40 minutes while weighing the potential impact of the latest market-roiling developments. The news this week was not the sort that would cheer a true believer that brighter days are, if not just around the corner, at least in sight.

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Investment Strategy by Jeffrey Saut (7/28/08)

This strategy piece by Jeffery Saut of Raymond James is worth reading.

Last week I received the following letter: “I know you’ve been hearing from Barrie about concerns he has for the future of the economy; I’m equally concerned and wondered how my portfolio is positioned for what I see coming. Here’s what I’m worried about:

(Source: raymondjames.com)

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INTERVIEW: Rogers Sees Commodity Bull Market For Next Decade

Renowned investor Jim Rogers thinks it's laughable that some analysts are suggesting the bull market in commodities may be over, but it's nothing he hasn't heard before in his nearly 40 years in the business.

"People have been telling me for seven years that the bull market in commodities is over, practically every time we have a correction, and I suspect they'll be saying it for at least another seven years. The bull market is not over yet - it's had a big correction but it's not over yet," Rogers told Dow Jones Newswires by telephone. (Dow Jones Newswires)

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Another One Bites the Dust!

Aug. 2 (Bloomberg) -- First Priority Bank with six branches on Florida's Gulf Coast was closed by state regulators, becoming the eighth U.S. bank to collapse this year amid failed loans and writedowns linked to a slump in home prices.

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When The Facts Change, Jeremy Grantham Changes His Mind

Joanna Slater (WSJ) has this bit on comments made by a notably bearish sort.Jeremy Grantham, one of the founders of asset manager GMO, isn’t known for looking on the sunny side of things (he referred to himself as a “perma-bear” in a recent note).

Read entire story from Wall St. Journal MarketBeat blog

Bill Miller's recent shareholder letter (2nd Qtr)

"A group of us were standing around a few weeks ago when Warren Buffett wandered over. Chris Davis had dubbed us the Value Support Group, as we all adhered to that approach to investing..." We were commiserating over how badly we had done in this market, how valuation appeared not to matter and had not for the past couple of years, how it was all about momentum and trend, and how we were all losing clients and assets over and above our losses in the market. It seemed like we needed a 12-step program to cure us of our addiction to buying beaten-up stocks trading at large discounts to our assessment of their intrinsic value. (leggmason.com)
Read entire letter