Interview: Russell Napier on global debt crisis

Financial Sense Newshour recently spoke to Ron Greiss of the Chart Store and Russell Napier of CLSA about the US and global debt pictures. You can hear what they have to say in this March 27 interview broadcast.

Soundbites from Alan Greenspan conceding that rising yields on US bonds are the proverbial canary in the coalmine for higher interest rates ahead lead off the broadcast. Jim Puplava and guest Ron Greiss have more to share on the state of the US' finances and its debt picture (which are rather grim).

Russell Napier chats with Jim later in this segment, sharing some key thoughts on the "structurally mispriced" US bond market. Anyone watching the Treasury market and the long-term direction of interest rates should check these interviews out.

Related articles and posts:

1. Russell Napier: The Next Crash - Finance Trends.

2. Anatomy of the Bear: Russell Napier interview - Financial Sense.

Astonishing idea: let home prices fall

Even when everyone around seems to have totally lost the plot, you can count on Caroline Baum to step in with some sorely-needed logic and truth. This week's edition: home prices and foreclosures.

Caroline reminds us, "Lower home prices can fix what government can't":

"New home sales, which lead the complex of housing indicators, fell to an all-time low of 308,000 in February, the fourth consecutive monthly decline. For existing home sales, it was the third consecutive drop after last year’s tax-credit- driven bounce.

Homebuilder sentiment has rolled over. Housing starts are bumping along the bottom, with new construction too low to accommodate normal growth in households, according to Michael Carliner, a Potomac, Maryland, economic consultant specializing in housing.

Alas, all the Fed’s purchases and all the government’s men can’t put the residential real estate market together again.

Between them, the federal government and central bank can lower mortgage rates, modify mortgages, use their power to get private lenders to modify mortgages, and create incentives to move inventory, such as the first-time homebuyer’s tax credit.

What they can’t do is manufacture enough artificial demand for an asset that was artificially inflated to begin with. Prices will have to fall, which is how supply is allocated in a market economy. (An occasional reminder is in order given the current spend-money-to-save-money mindset.)"

Go read the whole thing, and check out Barry Ritholtz's post, "More Foreclosures Please" as well.

Time-saver for those forwarding this post on to government officials: you can't alter the basic rules of supply and demand. Or as the Stones sang, "You can't always get what you want".

Economist on Greece bailout, er, "rescue"

The bailout structure you've all been waiting for is here, now that 16 nations of the European Union (EU) have agreed to supply Greece with a backstop for its debt financing problems.

The Economist has the details:

"“THIS was the case that was never supposed to happen,” said Angela Merkel on Friday March 26th, at the end of a short but tense European Union summit in Brussels. Germany’s chancellor did not need to elaborate. To her visible distaste, Europe’s leaders had just agreed a mechanism for rescuing Greece from a sovereign credit crunch...

...The mechanism agreed late on March 25th by the 16 countries that share the euro was harsh. At the insistence of Mrs Merkel, Greece will be able to tap into emergency help only if available market financing has been deemed “insufficient” by experts from the European Commission and European Central Bank..."

I'll be perfectly honest here and admit that I do not fully understand the ins and outs of this agreement, or how and when the rescue terms will exactly kick in (should Greece need to tap into the "emergency help").

Luckily for all of us, we get a simple background on Greece's problems and the EU-IMF rescue agreement from the Economist. It just might take more careful reading on your editor's part to get it through his addled brain.

You may also want to check out Peter Cohan's take on the Greek rescue plan and the EU debt contagion that's hitting Greece, Portugal, and Spain. I know I will want to avail myself of that knowledge before the weekend is through. Cheers!

Jim Rogers on life, travel, & investing

   

I mentioned Jim Rogers' most recent Bloomberg TV appearance in yesterday's post; today I'd like to link to that full interview and share some wonderful insights from Jim on life, travels, and lessons for the younger generations.

Of course, you'll also hear Jim's thoughts on the Dollar, the Euro, and the Greek debt crisis. Still, I wanted to highlight the more timeless wisdom imparted by Jim on his life and personal experiences. Hope you find the discussion worthwhile.

You can find more from Jim Rogers in our related posts section, or by using the Google search bar in our sidebar. Enjoy the clips!

Related articles and posts:

1. Jim Rogers: The Calculating Cowboy - Finance Trends.

2. Jim Rogers interview with Channel 4 - Finance Trends.

Statesmen vs. politicians

Jim Rogers offered up a great quote on the Greek debt crisis and the nature of politicians in his latest Bloomberg interview.

When asked about the effects of credit default swaps (CDS) and speculators on Greece's debt problems, Rogers replied that speculators were simply reacting to what the Greeks have done to their own finances and that, "Politicians don't normally understand how the world works; that's why they're politicians".

As we've discussed before, it is always expedient for politicians to lie and point fingers at others to distract from problems and crises of their own making. Which brings me to this line of thought: what type of behavior and leadership can we expect from true statesmen, as opposed to their more opportunistic colleague, the politician?

I turned to Google for a quick survey of opinion on this topic and found this quote at Wikipedia:

"A politician thinks about the next elections — the statesman thinks about the next generations." - James Freeman Clarke

What would our country be like if we demanded and rewarded statesmanship from our political representatives, rather than pandering and opportunism? If you'd like to consider this issue, please see the posts included below or share your thoughts with us here.

Related articles and posts:

1. Difference Between Politicians and Statesmen - Laughing Wolf.

2. Comparison: Statesman and Politician - Daily Paul.

Michael Lewis on Charlie Rose: The Big Short

Michael Lewis, well-known storyteller and author of The Big Short, joins Charlie Rose for a discussion of the financial crisis and the real-life characters in his new book, who saw the collapse coming and profited by shorting the subprime housing market.

There are many remarkable aspects to this story, but perhaps one of the most interesting themes to emerge from this discussion is Lewis' realization that the events chronicled so memorably in Liar's Poker were not, as he thought at the time, the end of an era, but rather the beginning of one that only seems to be ending now in 2010.

Enjoy the interview, and click over to our related posts for more insight on hedge fund managers Michael Burry, Andrew Lahde, and John Paulson, who profited from the subprime short trade and were profiled in Lewis' and Greg Zuckerman's latest books.

Seth Klarman: Lessons from 2008

Widely followed value investor and (Baupost Group) hedge fund manager, Seth Klarman shares his lessons from the recent financial crisis (Hat tip to Derek Hernquist for recently highlighting this piece).

Here's an excerpt from Klarman's, "Forgotten Lessons of 2008":

"One might have expected that the near-death experience of most investors in 2008 would generate valuable lessons for the future. We all know about the “depression mentality” of our parents and grandparents who lived through the Great Depression.

Memories of tough times colored their behavior for more than a generation, leading to limited risk taking and a sustainable base for healthy growth. Yet one year after the 2008 collapse, investors have returned to shockingly speculative behavior...Below, we highlight the lessons that we believe could and should have been learned from the turmoil of 2008. Some of them are unique to the 2008 melt- down; others, which could have been drawn from general market observation over the past several decades, were certainly reinforced last year.

Shockingly, virtually all of these lessons were either never learned or else were immediately forgotten by most market participants..."

As you'll read, Klarman not only goes over the (largely forgotten or overlooked) "20 investment lessons" of 2008, he also reviews many of the "false lessons" that have been learned by investors and speculators during the 2009 recovery period.

There are some very worthwhile points to absorb from Seth's piece, so you might want to bookmark his essay for future reference. You can also find a scan of Klarman's essay here.

Related articles and posts:

1. Seth Klarman: Margin of Safety - Finance Trends

2. Thomas Woods interview: Meltdown - Finance Trends. 

3. Lessons from Charlie Munger - Finance Trends.