email - archives

The Unsinkable Ben Stein. Sat, Aug 22, 2009 I've culled some choice quotes from Ben Stein's column, "How Not to Ruin Your Life". By not taking any of Ben's advice, one could make a good start. Stein makes Jim Cramer seem like the Delphic Oracle. By reading Ben's articles (from 2006 - 2009), it's clear that his function - whether he knows it or not - is to maintain an intravenous drip of mindless optimism to a slightly higher class of idiot than the Jim Cramer mob. Bear in mind that Ben made the Creationist 'documentary' "Expelled". What did you expect from a man who believes that a man on a cloud made the world in six days? RATIONAL ANALYSIS? Read them and laugh - or weep, if you took this claptrap as serious investment advice: A View of the Economy from Abroad Posted on Thursday, July 5, 2007, 12:00AM I'm writing this from Frankfurt, Germany. The perspective from my perch here in the financial district at the lush Villa Kennedy Hotel allows me to offer a few bullet-point thoughts on the economy. First, I'm not at all worried about the stock market despite the recurrent panic about subprime mortgage problems and resistance to some loans by lenders in private equity deals (which used to be called, appropriately, leveraged buyouts, or LBOs). Subprime is a small sector of the mortgage market, as I've said before. It might be 15 percent at most. The defaults and delinquencies in this sector might be roughly 15 percent, which makes for a total problem rate of about 2.25 percent of the whole mortgage market. If all this goes into foreclosure (which is unlikely), it will realize about 60 percent upon liquidation at the very least. That means the real loss might be about .9 percent, or less than 1 percent. That's a large number, but tiny in the context of the economy... ...So, in a word, things are good -- and they can be even better if you dress better. Go for it. How Speculators Exploit Market Fears Posted on Thursday, August 2, 2007, 12:00AM In other words, it's all the speculators trying to panic us so their sell programs will make money. And they'll make money as long as they can spread their panic. When they can't do that any longer, they'll work the long side -- and make up reasons for that, too. In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way. Don't sell. With all the shrieking about the market, it only fell to what it was about five weeks ago -- and we didn't think we were poor then. So let the speculators shout "fire." As of right now, they're not blowing anything but smoke. No Nightmare on Wall Street Posted on Thursday, October 25, 2007, 12:00AM As I write this, the markets are in turmoil. Stocks have fallen considerably since their recent highs. There's growing gloom on Wall Street, and the newspapers are filled with scare stories. The upshot: Now is the time to buy. Not for tomorrow, not for next month, maybe not for next year. But for the long term, it's absolutely time to buy.... ...Those are the reasons I don't see a recession brewing. Or, if one is brewing, it doesn't strike me as a long, strong one. Given that, if the market is pricing stocks as if there'll be a major recession, and pricing financials as if there'll be a collapse in New York, you might do well to buy broad indexes of stocks and indexes of financials. The road ahead will be bumpy. Fine -- "mama, that's where the fun is," as Bruce Springsteen sang long ago. But if times are better than Wall Street is betting, you may want to bet against Wall Street. They're in it for a day or an hour -- you're in it for life. And you have an immense advantage: You can take advantage of their panic. Feeling the Crunch Posted on Thursday, December 13, 2007, 12:00AM the smart observer is the guy or gal or who knows this crisis won't go on forever, and the time to buy stocks, mutual funds, and ETFs is when everyone is worried -- not when they're chirrupy and happy.... ...Still, the lessons for us are keen and cut like a knife. But be brave -- these periods of crisis are inevitably the time to buy, even if you have to wait years for the crisis to sort itself out. It takes guts and counterintuitive thinking, and if you don't have the stomach to do it, no one will blame you. Bursting the Economic-Fear Bubble Posted on Thursday, December 20, 2007, 12:00AM Simply put, the media and the short-sellers on Wall Street are trying to scare us into having a recession. Since the nice people who read this have some interest in facts and figures, here are a few reasons why things aren't so bad. ...I don't want to be Pollyanna here. There are real problems with our economy, primarily inequality and a looming retirement crisis for baby boomers. But facts are facts, and life is about "how many" as well as "how." The truth is that we passed through a far worse crisis in the tech collapse of 2000-2002, when roughly one-sixth of the nation's wealth was erased. Now, with the mortgage crisis and other problems, we're not even talking about a loss of one-tenth of 1 percent. There's a lot to ruin in a nation. We'll get through this just fine. The road may be bumpy for a year or two, but we'll come up roses in a short time and will be ready to smile -- sadder but wiser. Don't Buy the Panic Posted on Friday, January 4, 2008, 12:00AM Wow. What a time. Housing is correcting rapidly, but from a super-high level. The stock market is correcting rapidly, too, but also from a very high level. The dollar is collapsing. As I write this, oil is hovering near $100 a barrel. What to do? First of all, panic. Just kidding -- don't panic... ...Again, don't panic. We've been through many recessions since World War II, and we always get through them and go on to a brighter future. And we always look back and say we wish we had bought more stocks and more real estate when times were hard. Rethinking the Recession Posted on Thursday, January 17, 2008, 12:00AM Are we in a recession? No one knows. Indeed, it's literally impossible to know. A recession is six consecutive months of negative economic growth. At most, December 2007 would be our first month, so we wouldn't know until sometime in June 2008 if, by the end of May 2008, we'd been in a decline for six straight months. So no matter what anyone tells you, we can't know if we're in a recession yet... ...There's another key truth about recessions: They always end, and the economy always goes on to a new plateau. It may take a while, but the stock market always moves on to a new high. So stay hungry. Work harder. Dig deeper. Keep investing in broad indexes. You'll come out all right on the other side. No Pain, No Gain Posted on Thursday, January 31, 2008, 12:00AM "These are the times that try men's souls." So said a great patriot, Thomas Paine, during the difficult days of the United States' infancy. Now we're enduring trying times for investors. Scary, unsettling times. The market, as I write this, as measured by the Dow, is down about 14 percent from its high last fall. Unemployment is up, although still at a low level by postwar standards. The volatility in the market is breathtaking, with 200 points up or down on the Dow now routine... ...If you have enough money to invest without scaring yourself and your family, now is a fine time to buy broad indexes of stocks. Just don't expect these buys to pay off right away. As I've said many times before, my advice is strictly for long-term investors. To my readers who are financial advisors and brokers and planners, please help your clients understand this. Get on the phone with them and calm them down -- you're their lifeline in the storm. Now's the time for you to step up and help your clients make the right choices: Remind them that slow and steady in the market wins the race. It's simple, but it's true. Irrational Times Call for Rational Measures Posted on Friday, March 14, 2008, 12:00AM This is going to be a bit controversial. Bear in mind that I often make mistakes and could be wrong about some of this, but it's all food for thought. Irrational Pessimism First of all, markets are made up of human beings, and human beings can be irrational. They can be irrational on the upside, they can be irrational on the downside... ...It's a myth that all regulation is bad. In banking, regulation saves greedy, foolish people from killing their own banks and the economy in general. Let's save the banks, save the economy, and lay the foundation for a smarter tomorrow -- starting today. And then let's investigate what role speculation by hedge funds against the credit markets has played in our current problems. Some killers have made a bundle out of our troubles; let's find out exactly what they did. It's going to be a scary story, but that's fear for another day. Recessions Are in the Eye of the Beholder Posted on Thursday, May 8, 2008, 12:00AM This is as true of giant national events as it is of neighborhood ones. I've been involved in many of these big events, from Watergate to the Drexel/Michael Milken junk bond scandal. The media simply never gets it right. They give an impression, highly colored by the inexperience, bias, and laziness of the reporter. Most of all, in national events, the reporting is based upon the reporter's urgent need to magnify his or her own importance. This is only human, but it's good to recognize it. I've been thinking about this a lot because in the last few weeks, we've seen a barrage of data buried in the back pages of major newspapers telling us that the "recession" everyone said was a certainty, the "recession" that the reporters assured us would be about as bad as the Great Depression, is simply not happening.... ...My evidence is anecdotal at this point, but I'm hearing of an uptick in home sales in my beloved Southern California and my native Washington, D.C. I think the tide is hitting full ebb, and while it may ebb for a while, it'll turn before long. The nation is still rich. Mortgage rates are low. Employment is high. Contrary to media reports, loans are easily available to qualified buyers. Houses are still tax-subsidized. Young families need homes. We old people need retirement homes. People are moving for many reasons, and they need homes, too. Clearly it's a good time to dip your toe in and see how you like the residential real estate water. Bunk, More or Less As for the financial journalists, take a cue from Henry Ford, who famously said, "History is more or less bunk." I wouldn't say business journalism is all bunk. But I would say it's about glorifying the reporters and selling newspapers. And while fear sells papers, it doesn't make for good investors. Don't Panic - Buy Index Funds and Real Estate Posted on Thursday, July 3, 2008, 12:00AM Now for some reassuring words. Of all of the columnists writing in this space, I suspect I am the oldest. This means I have seen the most economic fluctuations. This also means I am less terrified about them than younger heads.... ...The best bet usually is what has gone down the most, and that, for now, is real estate. I got a letter from a thoughtful reader saying he was going to wait until real estate had reached its all time low before he bought. But how will he know? And how rarely does he find a home he truly loves? Even when homebuyers buy at the top of the cycle, if they love their homes, and if they can hold on, they always end up delighted. Yes, there will be news saying housing will not recover THIS TIME. But in fact, except in really depressed areas, housing recovers EVERY TIME and goes on to pass its prior record. The real story of real estate, as my brilliant money manager friend, Phil DeMuth, says, is of failing to buy, not of staying away successfully. The plain fact is that you don't know when real estate will be at bottom until it's too late. If you see a home you love, buy it now if you plan to be in it a long time. And know that the headline writers want to whip you up and make you crazy about the economy. They sell fear. Stay calm and stay well to do. Why Oil Will Keep Falling Posted on Monday, August 4, 2008, 12:00AM Some people say that buying oil futures cannot affect prices because someone else is always selling. But then if that were true, no price would ever change. Concentrated buying has to affect the market price for oil. Or, to put it another way, if it's the only new factor in the market, we have a clue about what's causing the price changes. Now, I don't say it's been done by agreement and secret monopoly buying. I don't say it's illegal. But it tells us something big, in fact two big things: one, the price will fall further. Commodity bubbles always end. Second, it's not being done by the oil companies, and they deserve no blame. It also tells us that when we are buying a car, we might not expect to see high gasoline prices forever. We might also be wary of putting a lot of our money into commodities. Bubbles can take a long, long time to correct, but they always do. Drill, Baby, Drill Posted on Monday, September 29, 2008, 12:00AM This is a bill that cries out for veto or massive revision. It's just a bill to curry favor with the beautiful people, not with ordinary citizens. It is exactly what we do not need, which is vastly more drilling and production of American oil and gas in American waters. Lessons from a Very Bad Year Posted on Monday, December 22, 2008, 12:00AM If someone had told me that the market -- adjusted for inflation -- would be down by more than it was in the Great Depression while most Americans still basically had high prosperity, I wouldn't have believed it possible. It goes to show what stupendously bad Treasury stewardship can do. If someone had told me Treasury and the Fed would allow the fourth- or fifth-biggest investment bank in America to fail, I would've scoffed. But they did it, and we got a stock market crash, a severe recession, and national fear as the result. The night Paulson and Bernanke let Lehman fail was the night they drove old American investors down... ....In the meantime, please don't blame yourself for your losses. We all make mistakes, yours truly especially. [Never a truer word, Ben]. My hat is off to those like Doug Kass who saw it all coming. My hat is not off to those who claimed afterward to have seen it coming. I have met so many people who tell me they sold out in October 2007 that I think I must be the only person left in this country with any stock. (That would make me by far the richest man on the planet, and I guarantee that I'm not.) We're just human beings with human failings. Efficient market theory fooled us. Buy and hold fooled us. Trust in government fooled us. My own failings fooled me. Something else will fool us next time. As my grandmother used to say when her children made a mistake, "Don't worry, you'll do it again." If we learn even a little from what's happened, we're far ahead of Henry Paulson. In that spirit, have a Merry Christmas, Happy Hanukkah, and Happy New Year. Advice for Fresh Graduates During Tough Times Posted on Monday, March 9, 2009, 12:00AM Be thrifty. You will be far ahead of the game if you can live on much less than what you earn. Then you can have savings and build them up for the time when you move to a new city or a new job and require "starting-out money." It is just a great feeling to not be desperate. Slowly, VERY slowly, reality begins to sink in for Little Ben. Time to put down that glass of Cognac, put on a dress and lipstick, and head for the lifeboats post haste. Fortunately, one's chances will be better as a first class passenger than as one of the awful riff-raff in steerage... Why This Time Feels Different Posted on Tuesday, June 2, 2009, 12:00AM “This time, it’s different.” These are four of the most dangerous words in personal finance. They’re dangerous because "this time" is almost never different. This was explained to me by one of the smartest people in finance, Jim Rogers, many years ago. The problem is that this time, during this particular financial crisis, it looks as if it really is different -- at least, it does to me. I don’t mean that investment decisions should have new criteria or that corporate valuations should have a new basis or that we should abandon capitalism. By “it’s different this time,” I mean that, in this recession, the suffering among individuals and families close to me is incomparably worse than I have ever seen it before... ...The third reason this recession has hit so hard is that, now that the baby boomers are running out of time to accumulate money, there is no sure way they can do so. The stock market, despite a remarkable recovery since March, still sends shivers down the national spine. Real estate, which could possibly recover someday, has become a curse word. Federally insured cash is safe -- but it makes no money. If inflation strikes, as it might, then cash will be a loser. I do not have a magic bullet for this situation. The sad fact is that the grasshoppers are in big trouble. The ants are doing all right, but this is a nation of grasshoppers. For people in Gen X or Gen Y, there is a lesson here: Small is beautiful and less is more. The old-fashioned virtues of saving and prudence still hold true. The show-offs will pay for their showing off. Perhaps. And, from 2006 - the Unsinkable: Do I Hear Cannons? Must Be Time to Buy Posted on Friday, August 4, 2006, 12:00AM You're not hurting people when you call them up or send them letters asking them to make sensible, carefully chosen, prudent investments. You're not wasting people's time when you urge them to prepare for retirement instead of letting them put it off for another day. You're doing them a major favor by helping them with an often unsettling but always necessary task -- preparing for economic security and, by so preparing them, taking the fear out of their future. You're helping them just as much as if you'd told them to eat more fruits and vegetables or get more exercise or quit smoking or get regular checkups from their doctors. You're helping them as much as if you'd told them to get a good night's sleep. When you sell, you're selling safety and two of Franklin D. Roosevelt's greatest goals: freedom from fear and freedom from want. When you sell a good product at a fair price that takes the terror out of growing old, you're doing everyone a service. Be proud of doing it, and know that you're doing it for the customers' good. It is no shame to sell peace of mind. What a piece of work is Ben, how noble in reason, how infinite in faculties, in form and moving how express and admirable, in action how like an angel, in apprehension how like a god! the beauty of the world, the paragon of animals—and yet, to me, what is this quintessence of dust? Ben delights not me— nor woman neither, though by your smiling you seem to say so. more rants - about me - contact