Friday, October 17, 2008

Skate to Wear the Puck is Going

This is not a personal finance blog, and I have no intention of making it one. Still, I think this is the most important thing I've read all day for reasons that have to do with public policy.

In his New York Times op-ed, Warren Buffett declares that it's a great time to purchase stock in American companies. This is an exceptional statement for several reasons.

First, Buffet will likely be a very serious voice in an Obama presidency on economic matters, although I'd be surprised if he had a formal job. At his age and with his schedule, I can't imagine he'd be interested unless told that he was indispensable in the job. Still, as someone who issued warnings several years ago, he has a great deal of credibility.

Next, it's also significant because Buffett's never been a big stock guy:
I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.
Most interesting is his reasoning. It's not out of "patriotism." No. It's sheer greed:
A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful...fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.
In short, he expects to earn a LOT of money on others' fear and inability to bear risk. He concludes by noting that those who wait for signs of recovery will be too late:
In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

Thursday, October 16, 2008

What Issues AREN'T the candidates talking about?

Today's Politico Arena asks its panel of experts.

Some of the answers are very enlightening. Did you know the amount of shortfall in the Medicare (medical care for the elderly) dwarfs the amounts we're talking about spending on the financial crisis? Yet, both Senators Obama and McCain are proposing to make things worse in this regard. The answers of Steve Steckler, Rep. Zach Wamn (R-Tennessee) and Kenneth Scott are particularly on point.

Wednesday, October 15, 2008

The Financial Crisis - Where to Look for Information

The news is full of people talking about Wall Street and the economy. But a lot of it doesn't make anything more clear. If anything, someone who spends a couple hours reading the papers and watching TV may be more confused than when she started.

Accordingly, I've found some useful links that will help you better comprehend what is going on in the financial world and how it could affect someone who does not play in it regularly. I've arranged them by the iTunes playlist style into beginner, next steps and deeper cuts.


Planet Money - both a blog and a podcast, the NPR team makes a lot of complicated things easier to understand, and does a good job interviewing some really great guests.

Momey Magazine - a collection of relevant news articles from CNN / Money website is here.

Next Steps:

David Leonhardt - The "Economic Scene" weekly columnby the New York Times's best business reporter (and main reason to read the Times) is housed here in addition to his excellent work for the Sunday Times magazine.

Martin Wolf
- The Financial Times's highly respected columnist is held in high regard in finance ministries across Europe.

Deeper Cuts:

Baseline Scenario - The website of MIT economist Simon Johnson (who has been EVERYWHERE talking about the financial crisis) and a couple other smart guys. Baseline Scenario isn't technical, but it does get further into the details for those interested. In particular, their "baseline" narrative and recommendations is a good weekly read.

Monday, October 13, 2008

More Civil Than They're Saying

The press has continued to claim that the McCain has "sunk to new lows" etc, etc. In fact, Senator McCain and Senator Obama have actually run a relatively civil campaign. Certainly better than the last two.

A while ago I lauded Senator Obama for criticizing his own staff's inappropriate comments. When his press people went over the top in attacking Sarah Palin, Obama took them to the wood shed.

Yesterday, Senator McCain did the same with his own supporters, who were accurately maligning Senator Obama:

Fearing the raw and at times angry emotions of his supporters may damage his campaign, John McCain on Friday urged them to tone down their increasingly personal denunciations of Barack Obama, including one woman who said she had heard that the Democrat was "an Arab."

Each time he tried to cool the crowd, he was rewarded with a round of boos.
At one point, Senator McCain even took a microphone away from a woman who insisted Senator Obama was an "Arab." (see photo)

Senators McCain and Obama are trying to keep this election civil. I hope their supporters can do the same.

Congratulations Paul Krugman

I just wanted to congratulate Paul Krugman, an economist at Princeton and columnist for the New York Times. Krugman has been awarded this year's Nobel Prize in economics.

Although unfortunately known for his acidic columns assailing the Bush administration, Krugman is also a pathbreaking specialist in international trade, and his popular articles explaining international trade are among the best I've read. The research that led to the award specficially examines how economies of scale affect trade patterns.

I have to admit to being of two minds about Paul Krugman, because there are two Paul Krugmans - the partisan political commentator and the dispassionate trade economist. I'm happy to see the latter recognized.