Packer16

Has anyone else looked at this name? It appears to be cheap and have a temporary issue with investing in preferred stocks/debendatures of banks. It has a nice insurance franchise with an average combined ratio in the 80s historically and exposure to Japan. Packer

The only way for inflation to increase is that if spending increases relative to other more savings based currencies such as the yen or yuan and/or if the only way to increase the provide money to pay for deficit spending is via inflation. One black swan scenario is China becomes unstable as unemployment increases, China needs its foreign reserves to cover its own problems and reduces purchase of US debt. This would increase the cost of borrowing for the US or the US could inflate its way out of its spending commitments. Also eventually the Keynesian spending now occurring may end up in stagflation but that is years away. Packer

What about the scenario where the gov't and private investors come in ahead of the pfd and the pfd becomes a fixed income bond with no equity participation based upon selling the toxic asset acquired from WAC at market value to combined public/private fund? Packer

I think the true character of Obama's changes are being shown. Where is his pragmatism? He campaigned on change and that he would compromise but his actions are showing that he will listen but not compromise on what he believes are "fair" outcomes in his eyes (i.e. higher taxes, more regulation, higher spending and tremendous subsidies for un-economic fuels and vehicles - i.e. the gov't knows the best economic outcomes, the market is wrong and we will subsidies the best "fair" outcome) and he is using the crisis to push his "fair" outcomes. This may push the US over the edge in terms of a currency crisis and will at least cause capital to go on strike. I am surprised the U of C economists are not saying anything. Where is Alan Goolsebee? The guys leading the charge are the Keynesian guys (Summner and Jared Bernstien) who think the market is something they can engineer to meet their goals of a "fair" outcome. What a waste of time and energy that will only prolong the economic downturn and hurt those who they intend to help. You would have thought these guys would have learned from the 1930's and 1970's but I guess they are blinded by their own quest for "fairness". Funny thing is that I believe in many of the same "fair" outcomes, however, the way to achieve these outcomes is not by government edict and market manipulation and control but by individual action. The only thing gov't action will create is confusion on the rules of the game, thereby, causing wealth to go down as people stuff savings into more risk averse investments. In addition, they cause un-intended consequences. Packer

I think the key point the article makes is leverage. The US system could have made it through if it were not leveraged like it is. The banks would have lost money on its loans but not threaten the whole system. I think the article points out that Europe (with higher leverage) is in a much worse situation than either the US or Canada and even if the US system was less leveraged the European bank would have cause similar problems. Packer

I disagree that a free market system is based upon a self-serving premise. Where you see most of the abuse is non-free market situations, where individuals and/or companies can shield themselves from real competition and/or are in regulated industries where they stretch rules beyond what history or the regulators say are wise. Competition focuses you on the customer and his/her needs which leads to better products and services and leaves little time shower yourself with wealth or other distractions. This self-serving premise is what leads to a distorted view of free markets, anti-growth regulation and a collectivist excuse for regulation. Packer

My concern is the uncertainty in and counter-productive policy. Historically, the US has followed free market policies and let the chips fall where they may and the rules were well understood. However, the new administration seems to be following Keynesian policy (it seems to be their economic policy - based upon Obama's recent comments and policy) and this will decrease the value of all investments as politics is added to the mix of rules because of the govt's investments/spending. I was disappointed as I thought the U of C folks he had in his economic team would temper this but this has no happened to date. The downfall of Keynesian economics is that it says that if you do x, y will be the result. As though the economy is a machine that you can fine tune. The statement that the plan will produce or save TBD jobs is an example. This sounds good for a rationale but how verifiable is this? It is a non-provable result and how it was used with fear to increase spending in a rushed fashion with no debate reminds me of collectivist countries (like the former USSR). The result - increased gov't spending (not just spending that would have occurred in the future anyway) - that wouldn't have been acceptable in normal situations. The gov't is doing what consumers did that caused this situation in the first place. The market is now disciplining the consumers for their mistakes. Historically, the gov't always has had a margin of safety in its spending plans. I think by rolling out the stimulus first without knowing what the banking fix is going to cost (plus a margin of error) is going to be a mistake. At this point, the market will lend to the US but once the total plan is on the table, the market may not be so generous. It may be especially painful if the US needs more money than planned and the markets will not provide it as we have spent up our margin of safety. Packer

I agree and the artificial stimulation only delays the required reduction in capacity to reduce the inventories, but no one in gov't seems to get this so there policies are just making the problem worse (i.e. subsidizing excess capacity with gov't spending). Packer

What is going on is the US and others have overconsumed via debt and the productive capacity of goods and services have to adjust to this fact. Debt has pulled future consumption to the present. Wages and prices must adjust to this fact. No one seems to admit this (most of all the gov'ts). Most if not all of the policies that are being followed by governments are trying to deny and/or fight this. They are increasing demand by spending (trying to reduce declines in prices that the market says should decline by spending) which is not sustainable. It did not work in the 1930s, the 1970's and it will not work today. I think the reason the market is having a hard time going up is that with the gov't intervention fighting against the market forces, the rules of the game are unclear. In addition with the gov't taking a larger role in demand and consumption, the rules are not based upon economics (which are known) but by politics which are unknown. This increases this risk premium required so until the gov't intervention declines (i.e., an exit plan), the market will not rally like it did in the 1980's and 1990's. I think the market did not expect the non-productive spending (which is what the stimulus turned-out to be). Most of the large market gains occurred when the country has moved from a more Keynesian spending approach to a more private investment approach. I guess the current bill puts us back to a Keynesian approach, so when we convert back to a private investment approach we will get a pick-up. I guess what I am pointing out is that with this change in philosophy (more gov't intervention in the markets), the period is probably more similar to the 1930's and the 1970's than the recent period of time where recessions were allowed to run there course without massive spending and recovery periods were quicker than in the 1930's and 1970's. That being said there are many cheap stocks like SGA, SSP, GCI, JRN, BLC, CBS, TWX, CX, DELL and DINE. I guess this is like the 1970's. Buy cheap stocks and wait for more pro-market gov't actions. Packer

It would not surprise me. No one has read the entire bill before the vote. Also, the financial services industry has greased the skids in both parties. It is a shame the industry that needs the most reform and was a major cause of the crisis will not be held accountable because they have paid off or convinced those in charge that they are the only ones who can save the system. I think we should have John Bogel as treasury secretary not an Wall Street insider who has a vested interest in maintaining the current costly and wasteful system of intermediation between investors and users of capital. Packer

Has anyone come across a good primer and/or investing book on how to evaluate life insurers? Thx. Packer

Sanjeev, I like the everything on one board because then I can scan the topics and choose the ones I am interested in. In addition, many threads that start out as FFH or BRK discussions then move onto other topics. Thx for setting this up it is great. Packer