Archive for March, 2009

George Soros sees Global Depression Chances as "Quite High"

March 31st, 2009 No comments

Times Online had an interview with George Soros.

-“Unless we handle it well then I think we would. The size of the problem is actually bigger than in the 1930s.”

-G20 summit in London next week is the last chance to avert disaster.

“The odds would favour that it fails because there are such differences of opinion. It’s difficult enough to get it right in your own country let alone with 20 governments coming together, but if it’s a failure I think then the global financial and trading system falls apart.”

If the G20 is nothing but a talking shop then he thinks we are heading for meltdown. “That could push the world into depression. It’s really a make-or-break occasion. That’s why it’s so important.” The chances of a depression are, he says, “quite high” – even if that is averted, the recession will last a long time.

Categories: News

Jim Rogers is Short J.P. Morgan (JPM)

March 14th, 2009 No comments

Jim Rogers was interviewed on Bloomberg. Sadly for us, most of the things he’s been predicting about government incompetence the past year has been coming true.

-This is a bear market rally that can last days, weeks, even months
-There are more bankruptcies to come
-Government is spending money on the wrong things. Most of these projects are “make work”
-He is worried about government debt market. In a few months, they have quintupled government debt
-Massive short squeeze on the U.S. dollar from forced liquidation. It’s an artificial rally
-He owns the yen and the dollar, not sure where to put the money. Maybe real assets
-The only asset class that has fundamentals improving are raw materials and commodities
-He owns some gold, but thinks there is more money to be made in agriculture and silver. IMF is trying to sell their gold, which me hurt it for a while
-Central bank is trying to keep interest rates down, but eventually it will backfire and rate will go through the roof
-If you write-off everything in sight, sure you can show a profit [talking about C, BAC, and JPM saying they are profitable in January and February 2009]
-He is short J.P. Morgan and covered his Citigroup. He thinks they have gigantic derivatives and off balance sheet exposure, also large credit card division which will be bad
-No position in insurance companies
-Best economic sector in the world next 10-20 years is agriculture and farming. Low inventories and tons of shortages

Categories: News

Warren Buffett Interview Notes

March 9th, 2009 No comments

-U.S. economy: “It’s fallen off a cliff” “Luxury goods (business)… sort of stopped”
-This is close to the “worst case” scenario. “We are in a very negative vicious cycle”
-Economy: “can’t turnaround on a dime”
-”Unemployment will go a fair amount higher”
-He is critical of the 8000 earmarks Congress rammed through in this time of economic crisis
-Job 1, job 2, and job 3 should be to “win the economic war.” You should not use crisis to push through things you know is contentious (implying carbon cap and trade energy taxes, earmark pet-projects, card check “secret ballot”, etc.)
-M2 is growing very rapidly as you can check on the Federal Reserve web-site. Potential of being worse than inflation in the 1970s
-In 19th century had 6 financial panics when people lost confidence in the banks
-FDIC moved 8% of deposits last year and has assisted 3600 banks in its life-time
-We have a system that works started with 4 million people in 1790. Free markets, rule of law, and equal opportunity that “unleashed the human potential”
-World almost stopped last September when the Reserve fund broke the buck and money market/commercial paper markets hemorrhaged. He gives credit to Bernanke for doing the right thing and saving the system then
-Government should guarantee all deposits at all banks to give clarity and confidence to the financial system. The President should speak to this to be totally clear to the American people
-Over a 10 year period, you will do considerably better in equities vs. 10 year or short-term Treasuries. With Treasuries, you are guaranteed to lose purchasing power
-2008 mistakes include buying ConocoPhillips when oil was over $100 and buying two Irish banks
-He likes Wells Fargo and U.S. Bancorp. Wells Fargo has 1.44% average cost of funds. In 2-3 years can have $40 billion in income and $10-12 billion in losses. The spreads are enormous today and earnings power is great. Prospects 2-3 years out is better than ever
-250 million cars and trucks on road today. U.S. auto companies need to restructure where the business model can work at 13 million cars a year
-Free markets over-shoot, but works better than anything else
-Forget the (stock) quote, look at the business (fundamentals)
-Best asset during inflation is invest in your own abilities, be the best at what you do. Second best is own good businesses
-$14 trillion dollar economy U.S. GDP, stimulus bill won’t have that much impact in short-term. More important other things to do (fixing banking and financial system)
-4.5 million houses will change hands out of 80 million this year
-Obama should defer pushing his big agenda and focus on the economy
-He supports mark-to-market
-Bringing back the uptick rule is a good idea
-He is against union card-check and supports the secret ballot

Net-net: Economy is currently horrendous with no turnaround in the short-term.   He goes after Obama pretty directly to not “muddle up” job 1 of fixing the economy with the other things on his agenda.  He still likes his bank positions of Wells Fargo and U.S. Bancorp.

Categories: Articles