Market Capitalization as a Percentage of GDP

(ritholtz.com) Another interesting pair of chart from Ron Griess of The Chart Store. These two look at NYSE and NASDAQ relative to nominal GDP.

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Gartman: Warren Buffett Isn't An "Idiot" .. But He Allowed "Inexcusable" Losses

(cnbc.com) Newsletter writer and frequent CNBC guest Dennis Gartman isn't standing behind his reported "Warren Buffett is an idiot" quote.

But Gartman does tell CNBC it's "inexcusable" that Berkshire Hathaway fell roughly 45 percent in one year because Buffett didn't do enough to "mitigate" his losses in a tough market environment.


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So whatever happened to Paul Volcker?

(thedeal.com) As the details pile up about what Treasury will formally recommend on regulatory reform Wednesday, you do have to wonder what happened to Paul Volcker and his suggestion in February of a new kind of "Glass-Steagall-like" separation of financial institutions. Volcker, who heads up Obama's Economic Recovery Advisory Board, made the comments at a conference, setting off some discussion among the pundits. Then, silence. Volcker himself hasn't been seen very much -- certainly not like Treasury's Tim Geithner and the seemingly irrepressible head of the Council of Economic Advisors, Larry Summers. A piece on The Huffington Post in May did report that Volcker is talking to the economics team in Treasury and advising Obama, but his office space in the Executive Office Building is empty and the HuffPo suggested that if he has an "office," it's that of CEA member Austen Goolsbee in the White House.

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Why Most Investment Managers Have it Backwards

(www.advisorperspectives.com/Seth Klarman) For value investors, last fall’s crisis provided an unprecedented opportunity. Down markets are a great time to buy securities, as Graham and Dodd said in Securities Analysis, since the average investor can usually only get them “at prices that the future may cause him to regret.”

For Seth Klarman, founder and president of the Boston-based Baupost Group, last fall was a period that offered many of those opportunities. He delivered the keynote lecture at the annual meeting of the Boston Security Analysts Society last week. Klarman also was the lead editor of and authored the preface to the sixth edition of Graham and Dodd’s Securities Analysis, published in 2008.

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This Rally May Need a New Source of Fuel

(nytimes.com) IN early March, when stocks fell to 12-year lows, many investors were confident of at least one thing: stocks were cheap.

Three months later, after huge gains, that consensus on stock valuations is breaking down. It’s quite possible that the rally will soon become a victim of its own swift success.

Liz Ann Sonders, chief investment strategist for the Charles Schwab brokerage firm, said that after seeing the Standard & Poor’s 500-stock index jump to above 940 from around 675 in just 14 weeks, a market that had been undervalued is now “fairly valued.” So a major tailwind that propelled stocks since March has disappeared.

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How Do I Know You’re Not Bernie Madoff?

(nytimes.com) Tony Guernsey has been in the wealth management business for four decades. But clients have started asking him a question that at first caught him off guard: How do I know I own what you tell me I own?

This is the existential crisis rippling through wealth management right now, in the wake of the unraveling of Bernard L. Madoff’s long-running Ponzi scheme. Mr. Guernsey, the head of national wealth management at Wilmington Trust, says he understands why investors are asking the question, but it still unnerves him. “They got their statements from Madoff, and now they get their statement from XYZ Corporation. And they say, ‘How do I know they exist?’ ”

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Buying Stocks or Bonds is ‘Gambling’: John Bogle

Why would anyone listen to John Bogle anymore? Does anyone?

(cnbc.com) Nobody should buy a stock and nobody should buy a bond, said John Bogle, founder and former CEO of The Vanguard Group.

“You’re betting on prices — you’re betting on buying them from those who don’t know how much they’re worth and selling them to somebody who thinks they’re worth more,” Bogle told CNBC.

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The End of the Armageddon Trade

(wsj.com) Heard on the Street

It isn't the beginning of the end. But it may be the end of the beginning. The sharp rise in short-dated government bond yields in recent days around the world marks a shift in investor strategies: the Armageddon trade is being unwound.

Since the start of the year, investors have made huge gains betting on a steepening of government bond yield curves. They bought short-dated government bonds, betting yields would remain at low levels thanks to extremely accommodative monetary policy and continued risk aversion, while shorting longer-dated bonds, expecting yields would rise due to fears about inflation, massive government bond supply and fiscal deficits -- a trade known as a bear steepener.

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Berkshire Bought Municipal Bonds Amid Higher Yields

(www.bloomberg.com) Warren Buffett’s Berkshire Hathaway Inc. doubled its municipal-bond holdings in nine months amid record swings in the value of the securities that the billionaire investor labeled “unthinkable.”

Berkshire increased its investment in debt issued by state and local governments to $4.05 billion as of March 31 from $2.05 billion on June 30, 2008, the Omaha, Nebraska-based company said in regulatory filings. Berkshire added $1.09 billion to the bet in last year’s third quarter and $985 million in the first three months of 2009.

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How to Fix Financial Television

(www.ritholtz.com) Over the past 5 years, I have appeared on various Financial TV shows over a 100 times. But I am also a huge consumer of financial news, in print, on the web, radio, and of course, TV. Being on both sides of the camera gives me a fairly good perspective on what does and doesn’t work on TV. I also have some strong ideas as to what is good and bad TV in terms of providing a social utility, being part of the democratic process, etc.

Indeed, this is a longstanding interest of mine. Over the weekend, I referenced the current Columbia Journalism Review (CJR) issue that focused on the role of the media in the credit crisis, stock market and economic collapse (CJR on CNBC, WSJ & Business Press). This area has long interested me (hence, our media panel at TBP conference). But I was surprised this post generated 100 comments from readers.

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Who Is Going To Lend Us The Money To Fund Our Exploding Debt?

(businessinsider.com) PIMCO's Bill Gross joins the chorus of folks concerned that our exploding deficits are leading us down the road to ruin.

The key questions here are:"Who is going to lend us the $2 trillion a year necessary to fund this spending?" and What interest rates are they going to demand to do it?"

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Buffett Is Less Bullish on U.S. Than You Think:

(Bloomberg--Alice Schroeder) To the unschooled ear, Warren Buffett’s reassuring words that “America’s best days lie ahead” and that he’s buying U.S. stocks sound prescient, not preposterous.

But fair warning -- he’s not as bullish as he sounds.

Buffett has been right so often that what his words mean, and whether he is right now, are important questions. His skill as a forecaster has a lot to do with his psychology: a buoyant optimism tempered by extreme caution that let him score killings on stocks such as Geico and American Express Co. while steering clear of speculative bubbles, leverage, subprime mortgages, and trying to figure out a rescue for his pal Hank Greenberg’s company American International Group Inc.


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Julian Robertson's Steepener Swap Play

(marketfolly.com) Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes' billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the 'Tiger Cubs.' And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.

For those unfamiliar with Robertson, we'd highly recommend checking out the profile/biography we just wrote on him this morning. In that piece, we have outlined exactly why you should follow him (and the Tiger Cubs for that matter too). As we detailed in his profile, Robertson has a unique investment methodology. He takes a macro approach, finds a smart idea, researches it exhaustively, and places a big bet. And, when he feels he is more than correct, he will 'bet the farm.' And, it looks like we have identified Robertson's next play where he has and will continue to 'bet the farm.'


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CHART OF THE DAY: The Trash Rally

(Businessinsider.com)


Skeptical bears have dismissed the nearly 3-month old rally as just a lot of short-covering and piling into beaten down trash, like financials. With this chart, you can see what they mean. Since the lows in early March, the S&P 500 is up less than 50%, but the NASDAQ OMX Government Relief index -- a basket of companies that have taken government support in one way has more than doubled. Though interestingly, the financial heavy index has slipped a bit since early may. Major banks, which were once the most volatile stocks, have become a snooze.

See the chart here

Reflections and Outrage

Transcript of Robert Rodriquez's recent speech at the Morningstar Conference.

(fpafunds.com)

I want to thank Morningstar for this honor of speaking to you today. We go back a long time, beginning in 1986, when Don Phillips became the very first analyst to cover my two funds, FPA Capital and FPA New Income. I am deeply grateful for having been selected three times for the Morningstar Manager of the Year award and being recognized for my work in both equity and fixed income management.


For those of you who do not know, I will be taking a sabbatical beginning next year. My trusted partners, Dennis Bryan and Rikard Ekstrand will assume leadership of FPA Capital Fund while Tom Atteberry will do the same for FPA New Income. These three outstanding managers are here today should any of you wish to meet and speak with them. Having a high degree of confidence in them as well as FPA, I will be leaving all my personal investments in the various funds and will retain my equity ownership in the firm. Many executives say they have confidence in their associates but few demonstrate this in such a tangible way. I will return 2011 in a supporting role. My decision to take a sabbatical has nothing to do with the current tumultuous market or my health. More than six years ago, I discussed this as a possibility. I consider this step part of the process of succession planning and execution.

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Jeremy Grantham's Warnings to Investors

Another excellent article explaining Grantham's 2009 battle plan
(advisorperspectives.com)

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Chinese Students Laugh At Tim Geithner

(www.businessinsider.com) Poor Tim Geithner. He already comes off as kind of nervous and insecure when talking in public, but at least in the US, the only people who ever bother him are crazed Code Pink activists.

But in China, representing the country as chief bond salesman, the man named to People's 50 most beautiful people list was openly mocked.

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