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HomeWhen the Oracle of Omaha Speaks..
Posted by Larry Doyle on February 28th, 2009 4:20 PM |
Warren Buffett’s annual letter to shareholders is always a highly anticipated event by market participants. Given the fact that Berkshire is effectively a diversified holdings company, Buffett has a unique perspective into a wide array of businesses. He also has the wisdom of investing over many years and through many challenging markets.
Well, if misery loves company, it has a solid partner in the person of Warren Buffett because 2008 was Berkshire Hathaway’s worst year ever. In reviewing Buffett’s letter allow me to offer some highlights. For those who have an even passing interest in the markets and investing, reading this letter is akin to attending an opera by Pavarotti.
I beg your indulgence as I attempt to be the opening act and provide an overview of the “Oracle of Omaha’s” thoughts on the markets and economy: (more…)
“My Mama Told Me . . .
Posted by Larry Doyle on February 28th, 2009 2:20 PM |
. . . You Better Shop Around.”
What does that wonderful song from Smokey Robinson and the Miracles have to do with our economy? I’ll tie that in a bit later.
More and more people are inquiring of me how and why banks are making credit tighter both in terms of availability and in terms of rates charged.
This tightening of credit is due to the “crowding out effect” from dramatically increased government borrowing along with the actuality and likelihood of increased defaults across all consumer and corporate loans. In the face of those defaults, banks will set aside more capital in reserve to cushion those losses.
What is a consumer to do? There are two tactics:
1. Everything’s Negotiable which I highlighted in a post dated December 23, 2008. Talk to your bankers and/or credit providers. Put your banks and other credit providers in competition. Where does one start and how does one easily comparison shop? I’m glad you asked because that leads me to point #2.
2. Shop around (thank you, Smokey)! Sense on Cents provides links via our Primers (in the right sidebar) for a look across the market to virtually every consumer credit need. Remember I have NO professional relationship with any of these entities. From borrowing needs to investing, with many stops in between, I hope these primers help you navigate the economic landscape going forward!!
And now, a trip down memory lane . . .
February 2009 Market Review
Posted by Larry Doyle on February 28th, 2009 10:13 AM |
Prior to going to the comments section of my son’s report card, human nature dictates that I first look at the grades. In that same vein, let’s see how the markets performed for the month of February:
Let’s review my specific projections from the January 2009 Recap: (more…)
The Case for Sense on Cents
Posted by Larry Doyle on February 27th, 2009 10:24 PM |
Welcome to Sense on Cents!!
Why am I so enthused about the potential for this site? I could write at length in answering that question, but in short I firmly believe the “product” delivered here is in very strong demand and very short supply. Collectively as we navigate the economic landscape we will learn, share, and become more comfortable with the economy, the markets, and global finance. While the economy dominates our news currently, where can one go to make sense of it? Welcome to Sense on Cents!
Sense on Cents is truly a reflection of my professional instincts and personal interests. I sincerely believe this site can elevate the level of financial literacy, economic knowledge, and market insights for those who come here. Additionally, I am pleased to provide a wealth of information on career planning, global perspectives, financial primers, and meaningful literature. The sharing of opinions and active dialogue are strongly encouraged. I hope you feel comfortable coming here, find it to be of great value, will offer your perspectives, and will spread the word! While making “sense on cents,” I feel strongly we will find the relationships and returns to be very rewarding, especially relative to the risks!
I thank Larry Johnson for his tremendous support from my very first day at No Quarter and look forward to a continuing, close working relationship with him, Susan, and all involved at NQ. I sincerely hope and believe our efforts can and will promote our mutual interests.
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Shake Hands With Uncle Sam
Posted by Larry Doyle on February 27th, 2009 5:30 AM |
When trading bonds on Wall Street, I always wanted to know what the largest accounts were doing. A handful of these accounts were so massive that in order to make a meaningful change in their portfolio they had to execute trades of monstrous size. In executing trades with these clients, there was enormous risk. That said, if I did not provide enough liquidity to the accounts then we would stop seeing their inquiry. Information is everything, so not seeing their business was even more dangerous than printing some of it. Given this balancing act, I would try to pick and choose my spots. Amongst these clients is the largest bond manager in the country, Pacific Investment Management Company, otherwise known as Pimco, headed by the legendary Bill Gross (one of our Economic All-Stars highlighted in the lower left sidebar).
Bill offers his thoughts on a monthly basis. Anybody with even passing interest in the markets should read his remarks. I will offer an overview: (more…)
Ceteris Paribus
Posted by Larry Doyle on February 26th, 2009 2:01 PM |
Economic and budgetary analysis by their very nature often employ a “ceteris paribus” approach or similarly base line assumptions. Ceteris paribus, translated as “all other things being equal,” or base line assumptions are necessary given the fact that economic analysis has so many variables. Well, let me share with you that ceteris are NEVER paribus and base line assumptions are almost always skewed to bias the results in a desired direction.
***UPDATE: I was not aware at the time of my writing but it is reported that the Obama administration is projecting the economy will grow at a 3.2% GDP in 2010. That assumption is wildly optimistic. No respected economist would project that figure. Consensus has it in the 1.5-2% range. What does this mean? Well, lower growth means lower revenues, means higher deficits, means greater funding needs, means more borrowing, means higher government interest rates, means more “crowding out”, means slower growth for the economy going forward!!
There was little doubt about President Obama’s social agenda and economic platform during his campaign. While markets will somewhat discount campaign rhetoric, they do not discount economic reality. The markets are sending a strong signal that Obama’s economic proposals and proposed budget are anything but pro-growth. Obama Delivers $3.6 Trillion Budget Blueprint runs the risk of raising taxes at a time of economic distress. Raising taxes was a prime factor that increased the economic malaise in the 1930s. Obama is willing to take that risk as he sticks to his campaign plan and is pressured by the liberal wing of the Democratic Party. (more…)
Put Your Brokers and Bankers in Competition
Posted by Larry Doyle on February 25th, 2009 12:00 PM |
Every global financial enterprise has been hard pressed to maintain, let alone grow, revenues given the economic turmoil. With assets held in portfolio experiencing increasing levels of delinquencies and defaults, these institutions are all forced to set aside more reserves. How do businesses respond? Cut expenses and increase fees wherever and however possible. Who pays? You!!
I regularly see a sleight of hand at work on behalf of banks, insurance companies, money managers and other financial intermediaries to generate greater fees. While you will regularly be solicited with new and improved product offerings, how often are you getting the call that a fee is being increased and you may want to shop around for a better rate.
In an attempt to help you navigate this landscape, I strongly encourage you to approach your brokers and bankers and request a grid-like structure highlighting the basic products on one axis and the fee structure on the other axis. While more structured products and specialized services can be worthy of higher fees, a whole host of basic products fall into the plain vanilla category. (more…)
Looking Back and Looking Forward
Posted by Larry Doyle on February 24th, 2009 2:41 PM |
John Mauldin, one of our Economic All-Stars (see sidebar on left), provides personal insights and perspectives that are truly cutting edge. Additionally, John has relationships that provide real clarity.
John Mauldin recently published commentary from Paul McCulley of Pimco and former Fed chairman Paul Volker. I had the good fortune of working with Mr. McCulley in the late ’90s at Union Bank of Switzerland. He is a true gem. Mr. Volker, like him or not, is regarded as one of the world’s leading central bankers. Their comments are both comprehensive and understandable as we look to navigate the economic landscape!
Mr. McCulley looks backward and reviews the following:
— the basics of our banking system
— a review of the “unregulated” shadow banking system
— the deleveraging process
— questions on the implementation of the government backstops, including the Term Asset-Backed Lending Facility to restart the consumer lending markets, and the public-private partnership. (more…)
Tune In to Larry Doyle’s “Dollars and Sense” on No Quarter Radio
Posted by Larry Doyle on February 22nd, 2009 5:22 PM |
Please join us this evening from 8:00 to 9:00 p.m. ET on No Quarter Radio for LD’s Dollars and Sense. These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere!
We have two very interesting guests joining us. Lynn Marshall has one of the most unique backgrounds in the world of finance today. How does one develop a background that includes senior level experience in investment banking, agriculture, and community banking? Think Lynn has some amazing perspectives on the economy and markets? Don’t miss him.
Additionally, in light of the developments at Stanford Financial, we are very happy to have John Moynihan return to our show to discuss the dynamics in the world of offshore banking. Find out more than you could ever imagine by talking to these enlightened experts on LD’s Dollars and Sense, starting at 8 p.m. ET.
What are your questions and comments for me? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins!
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