Saturday, October 11, 2008

A Little Sanity In This Insane Market

Two of the true greats from the investment business on CNBC.

John Bogle invented the index mutual fund.
Ken Heebner's sheer genius places him at least on par with the other greats, Peter Lynch, etc.
Everyone should consider owning his mutual funds, CGM Focus Fund, CGM Real Estate.

Also, further below are some other good articles and commentary.

When markets turn around, many don't recognize it nor want to invest in it.
And, market bottom after market bottom, investors always pull out the maximum amount of money from mutual funds right at the worst time - the bottom in the market.

I'm not saying jump in here, but if you haven't sold yet, it's likely too late.
I went to cash a while ago in my trading account and missed this huge plunge. This was due to my rule of staying out of a weak market, and using Investor's Business Daily as a guide for market direction.

Some Quotes from the video:

Heebner: "I think the government here has been brilliant. I think everything that's happened in the last two weeks should make everybody very confident about how alert and quick the government has been to react to the problem..."
Heebner: "The U.S. economy led the world into the recession, and we're going to lead it out..."

Here are some great thoughts about your investments...

By the way, here is a very recent clip of Ken Heebner talking about his current leanings...

And, Larry Kudlow: The Light at the End of the Crisis

Paradoxical as it may be, strong government actions to stabilize banking are necessary to preserve the free-market-economy system. No free-market economy can survive without stable banking and credit. Without readily available credit, entrepreneurs can’t put their new ideas into commercial practice. And without that vital innovation, economic growth suffers.

Meanwhile, the Federal Reserve has essentially moved off its fed funds rate target and is instead focused on injecting huge quantities of new cash into the banking system. The most basic money supply controlled by the Fed is now growing at a 16 percent rate after being nearly flat for 18 months. In the last five weeks the Fed has injected nearly $700 billion through a variety of lending facilities. This is important. The demand for liquidity during this period of asset and credit deflation cries out for massive new cash supplies from the central bank.

Then there’s oil, which is almost forgotten in this panic. The $150 oil shock and elevated prices at the pump are what worsened the credit crunch and hastened the recession. But now oil is about $80 a barrel. When the dust finally clears, lower energy prices will be an important tax-cut, pro-recovery factor. Meanwhile, the exchange value of the U.S. dollar is up 16 percent in recent months. That’s an anti-inflationary sign of confidence.

And here's the WSJ Gordon piece that Kudlow mentions: A Short Banking History of the United States

We are now in the midst of a major financial panic. This is not a unique occurrence in American history. Indeed, we've had one roughly every 20 years: in 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008.

How could the richest and most productive economy the world has ever known have a financial system so prone to periodic and catastrophic break down? One answer is the baleful influence of Thomas Jefferson.

No small part of the reason that an ordinary recession that began in the spring of 1929 turned into the calamity of the Great Depression was the inability of the Federal Reserve to do its job. It was completely reorganized in 1934 and the U.S. finally had a central bank with the powers it needed to function. That is a principal reason there was no panic for nearly 60 years after 1929 and the crash of 1987 had no lasting effect on the American economy.

While it will be painful, the present crisis will at least provide another opportunity to give this country, finally, a unified banking system of large, diversified, well-capitalized banking institutions that are under the control of a unified and coherent regulatory system free of undue political influence.

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Anonymous said...

Heebner, Bogle? Sure. Kudlow? He's so discredited by now, I don't understand why he is allowed near a live mike anymore.

Rob Baker said...

"discredited"??? I would agree he's quite bullish most of the time, but markets are also bullish most of the time. Larry Kudlow was one of the guys behind the Reagan economic revolution, which gave us the expanding economy we have today.