Jim Chanos and Mohammed El-Erian on CNBC

Chanos is still bearish on China and compares it to the USSR. El-Erian disagrees. Worth watching..

Bernie Madoff Interview

A long interview with Bernie in the Financial Times, and the second he has given thus far. The most interesting quote from the interview:

‎"[Picard] has already recovered $10bn and he will cover $20bn easily. If he is successful, he may get $50bn. There will be $30bn profits to go around, which would make me one of the greatest money managers in modern history.”

Madoff's first interview in prison was with NY Magazine, and makes for a good read.

The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”

Marc Faber up close

‎"if you drive motorcycles in Thailand, you have to be an optimist.”

CNBC has a nice piece up on the always insightful and entertaining Marc Faber, Editor of the Gloom, Boom, and Doom Report. I've followed Marc for many years now, and I had the opportunity to meet him a couple of months ago at an event in LA. Quite lively for a perma-bear.

Why Marc Faber Is Such a Bear

Charlie Rose Interviews Charles Ferguson on his documentary 'Inside Job'

Charlie Rose Interviews Charles Ferguson on his documentary 'Inside Job'
The best movie I saw last year. Mandatory viewing for anyone who wants to learn how Wall Street brought about the last crisis, and how it was aided and abetted by regulators and academics.

My views on the Chinese Economy

I have been bearish on the Chinese economy for some time now. When economic policy makers focus on the rate of growth rather than the quality of growth, they are just asking for trouble. As Jim Chanos memorably put it, China is on a Treadmill to Hell, held hostage by its need for speed.

A result of that policy is tremendous overcapacity abetted by state subsidized loans. Capital appears to be allocated regardless of the ultimate profitability of the underlying projects. This can be seen in China's famous empty cities, the biggest mall in the country that is 99% empty, and its 64 million empty apartments. During the credit crisis of 2008, the government realized that the collapse in aggregate demand in the United States would severely hurt it's export-based economy, so it forced its bankers to hand out property loans to anyone and everyone. Indeed, China's stimulus as a percentage of its GDP dwarfed the US's. Fast forward two years and we are witnessing a giant property bubble and an economy that relies on fixed asset investment (construction) for 60% of its GDP.

The implications for investors are serious, especially for investors in emerging market securities. China is a major engine of growth for the global economy and the 800 pound gorilla in Asia. A fiscal crisis in that region would likely lead to a significant decline in emerging market securities. As with any bubble, the excesses are easy to spot, but the difficult part is timing the popping of the bubble. I expect things to come to a head in late 2012 as policy makers find it more and more difficult to tame inflation, and as the sovereign crisis shifts from continental Europe to UK and the US.

Caveat Emptor.

For further research:
64 million empty apartments in China - An amazing video news story from Down Under

China: The mother of all gray swans by Vitaliy-Katsenelson

Interview with noted short seller and China Bear, Jim Chanos


Chanos, Roach Discuss Outlook for China's Economy

The latest from Papa Gross

Bill Gross’s April commentary is out: http://www.pimco.com/Pages/Skunked.aspx

Bill’s gotten more and more shrill over time, which is surprising for someone in his position, and in this commentary he points out the obvious facts that most people either choose to ignore or are ignorant about – our debt and entitlements situation is precarious and we won’t be able to grow our way out of it. There really are no easy choices left but the longer we wait to take action, the more difficult the choices.

Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates.

New interviews with Niall Ferguson

Ferguson is an original thinker who is always provocative and well worth listening to. As Consuleo Mack puts it, he definitely has the gift of gab.

Financial Thought Leader Niall Ferguson discusses why the centuries long dominance of Western economic and political power is waning and what the United States needs to do prevent it from slipping even more.

In his recent book, "Civilization: The West and the Rest," Ferguson attributes the dominance of the West over the East to the following six "killer apps":

1. Competition

2. Science

3. Property Rights

4. Modern medicine

5. Consumer Society

6. Work Ethic

Niall Ferguson on the six "killer apps" of Western civilisation by intelligence2

Interesting article on the Tata Group

The Economist has an interesting article on India's Tata Group:

Out of India

Under Ratan Tata, the business group that bears his name has transformed itself from an Indian giant into a global powerhouse

All David Stockman All the Time

Ronald Reagan's former budget director, David Stockman, has been on a tear lately. Not burdened by partisan politics or crazy-eyed ideology, he tells it like he sees it, which makes for refreshingly honest commentary.

As such, the interview below with Reason TV is must-see TV.


Some of his main points:
1. We live in a Welfare-Warfare State, a state of affairs that is not sustainable
2. We need to Bush's reverse tax cuts for all Americans
3. We need to means-test entitlement programs
4. TARP was a bad idea - Hank Paulson was the most incompetent treasury secretary ever!
5. Bailouts don't work and they don't make sense
6. He believes in "narrow" banking - not every bank should be insured by the FDIC
7. The end of Bretton Woods and the Gold Standard unleashed a wave of speculation and volatility
8. We don't need to spend so much on defense. The Soviet Union was a house of cards, so Star Wars and the huge military buildup was not necessary
9.  Wars should be funded on a pay-as-you-go basis (i.e. raise taxes). The last honest war president was Truman.
10. Social Security and Medicare are an inter-generational Ponzi scheme.

The Triumph of Politics Over Economics

http://reason.com/archives/2011/03/21/the-triumph-of-politics-over-e

The End of Sound Money and the Triumph of Crony Capitalism
http://mises.org/daily/5113/The-End-of-Sound-Money-and-the-Triumph-of-Crony-Capitalism

Crony Capitalism Strikes Again
http://www.minyanville.com/businessmarkets/articles/federal-reserve-fed-central-banking-wall/3/23/2011/id/33504?page=full

Rare interview with John Burbank (Passport Capital)

End of QE2
Too early to tell if there will be QE3
Regardless, we need to fund $2T deficits next year -- will need to raise $800B from Banks or the Fed.
Resource Scarcity and Saudi Arabia
Concerned about resource scarcity
Started investing the middle east in 2006-07
One of the largest investors in Saudi Arabia

The country is not in any index and does not attract institutional money

Aramco may have over $1T in revenue in the near future
Financial Firms

No stake in financial firms

Regulatory issue vs. a bottom up analysis issue

Banks should be not allowed to pay dividends

We are pretending things are stable and back to normal
Recovery

We are "not recovering"

Housing prices are still falling

Mortgage Duration issue (low coupon) - will not be able to refi if rates rise so people will be stuck in houses for a long time

Fed is stuck with owning a lot of mortgages - the problem will get worse over time

Let them Eat iPad!!

On Friday, March 11, President of the New York Federal Reserve Bank, Bill Dudley (aka Clueless Billy)  gave a speech at the Queens Chamber of Commerce. He tried to explain to the masses why inflation was not a threat and why core inflation (i.e. inflation after you remove everything that goes up) was actually quite tame:

"Today you can buy an iPad 2 that costs the same as an iPad 1 [did]. That is twice as powerful. You have to look at the prices of all things."

This lead to widespread derision from the audience. One audience member called the comment "tone deaf."

"I can't eat an iPad" was the classic response from another.

Richard Fisher gets it

Federal Reserve Bank of Dallas President Richard Fisher is one of the few people working at the Fed who gets it:

“There’s lots of liquidity sloshing around the U.S. financial system,” Fisher said. “We are seeing signs of all the intoxication that typically takes place when we have the ambrosia of cheap and readily available capital.”

Unfortunately, the mad men are in charge and there's not much we can do to stop the train wreck that awaits us. Be prepared for the inevitable chorus of "it wasn't our fault" and "nobody could have seen this coming."

Dubai on Empty

Vanity Fair on Dubai's artificiality and exploitation of its immigrant workers.

Dubai is the parable of what money makes when it has no purpose but its own multiplication and grandeur... Dubai is a place that doesn’t just know the price of everything and the value of nothing but makes everything worthless.


The workers, who make up roughly 71 percent of the population, have precious few rights here. They can’t become citizens, though some are the third generation of their family to be born here. They can be deported at any time. They have no redress. Many of the Asian laborers are owed back pay they aren’t likely to get. There are reams of anecdotal stories about the abuse of guest workers. I’m told about the Pakistani shop assistant who, picking up an Arab woman’s shopping bags, accidentally passed gas, got arrested, and was jailed.

The Financial Crisis: Will It Lead to America's Decline?

Niall Ferguson at the Aspen Institute, January 2011

Thomas Friedman on America and China