moore_capital54

Zarley you are wrong - QE is being used to to purchase government debt which was incurred as a result of fiscal stimulus. Here is how the world looked before Keynes got his way, and before fiat money ruled the world: http://www.searsarchives.com/homes/1915-1920.htm Actually this is a better link: http://www.searsarchives.com/homes/bydate.htm When the issuance of money is governed by a tangible asset, confidence is instilled in the currency while discipline is instilled in the economy. In this system a house is a home, not a vehicle for speculation/financial asset or atm.

Another video for you nitwits that think Keynes didn't invent QE:

Policymakers are clearly alarmed at the mounting job losses and are concerned that 2009 will see trains, malls and restaurants a lot less busy than they have been in 2008. The question is whether the use of unconventional solutions will amount to over-egging the pudding. On the one hand, there is the risk of delay at a time when deflationary pressures are growing. There is talk of a classic Keynesian liquidity trap, when nominal interest rates fall close to zero and the authorities find it impossible to stimulate demand through lower borrowing costs. Prolonged deflation makes matters worse because real interest rates remain positive no matter how severe the recession becomes. On the other hand, there is the risk that policymakers could be storing up big inflationary problems by hitting the panic button too quickly. In case the current economic pain is being caused by the inevitable time lag between policy being eased and policy becoming effective, then adopting the policy known as quantitative easing may prove reckless. The solution proposed by Keynes in the 1930s was for central banks to buy up long-dated treasury bonds and gilts to drive down long-term interest rates. There are other ways of going about quantitative easing - cranking up the printing presses for one - but if this is to be done, then manipulating the long end of the bond market is the way to do it. But in addition it is useful to know that Keynes himself approved of this approach. In March of 1930 before the Macmillan Committee in the U.K. of which Keynes was both a member and also a major witness he argued in favour of this policy as follows. ''My remedy in the event of the obstinate persistence of a slump would consist, therefore, in the purchase of securities by the Central Bank until the long term market-rate of interest has been brought down to the limiting point....(with respect to the 1930s slump) the Bank of England and the Federal Reserve Board (should) put pressure on their member banks...to reduce the rate of interest which they allow to depositors to a very low figure, say 1/2 per cent...(and) these two central institutions should pursue bank-rate policy and open market operations à outrance.'' (See Report of the Committee on Finance and Industry (Macmillan report), 1931 Vol II, p.386. cited in Benjamin Higgins,'' Keynesian Economics and Public Investment policy'' in Seymour Harris,ed. The New Economics, Keynes' Influence on theory and public policy, N.Y.:Alfred A.Knopf, 1948, p.470 note 9.See also Peter Clarke, The Keynesian revolution in the making 1924 - 1936, Oxford:the Claredon Press, 1988.pp.150ff ) These posts just proved you are dead wrong. Keynes invented QE, the confidence level in your postings is founded on nothing more than hot air (or is that smoke).

Huh? If QE were some mechanism for financing stimulative government deficits, I might go along with it. But, it's not. It's an alternative to stimulative fiscal policy because the government cannot or will not run larger deficits Zarley with respect, are you a fan of Bob Marley? Because it sounds as though you are smoking something. Your post makes zero sense.

http://www.bloomberg.com/news/2011-08-25/hoenig-says-fed-should-focus-on-fixing-u-s-finances-instead-of-economy.html I don't buy it.

The Fed is “running a laboratory experiment” on what drives inflation: the money supply or the output gap, says Laurence Meyer, a former Fed governor and now vice chairman of St. Louis-based Macroeconomic Advisers “How it turns out will do a lot to influence the economic debate,” he says, adding that his money is on Bernanke.

Myth the advice was from Libor+1 not Zarley. I will agree to disagree with you on Bernanke. But Please just read this piece before going to bed tonight thinking Mr. Bernanke is a saint. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8tjEzB.d.kU

More for you: MONETARY CRANKS PROMOTE FIAT MONEY None of the four believed that a free market money system would allow prices, including the interest rate, to allocate capital, apart from government creation of money to assure the clearing of markets. They saw money as a government function. They did not trust the free market to provide a market-clearing monetary system under a legal system that prohibits fraud but does not allow government-created money. None of them accepted the international gold standard. Keynes hated it. It kept government and central banks from inflating. This kept governments from creating policies that would match supply and demand.

Zarley, so much circular logic in so many sentences.... One of the central tenants of keynes doctrine is reducing the dependence on hard money (Barbarous relic). Moreover, and this is where you are proven to be 100% wrong, under keynes policy governments have been led to believe that it was OK to run fiscal deficits which have been then subsidized by quantitative easing. Hence QE is essentially subsidizing governments lack of discipline which under Keynes is necessary! Don't take my word for it? Watch this video specifically around 9:00 http://www.bloomberg.com/video/73591226/ Specifically watch the last part where Mr. Mcculley says and I quote " Sovereign Governments that have the ability to run large deficits because they have a fiat currency regime need to DO IT AND DO IT WITH DISPATCH WITHOUT APOLOGY" I don't disagree with you that fiat money is an invention that predates Keynes by centuries, but that is a misleading statement as Keynes was the first economist to "Successfully" rationalize the usage of fiat money in a prospering economy. Until then Fiat Money was only resorted to during despair by governments that had no other alternative. You cannot seperate Keynes Doctrine from Fiat Money or QE for that matter. I will debate this with you all day if I have to but I think this post settles the argument.

Precisely Parsad!! We are basically flat on our BAC position and imho the intrinsic value has increased after today's events. We sold RIMM into strength today generating a good profit and redeploying in BP/DELL/MT

Sorry here is the rest of it. Sorry about the length but it's well worth it: "QE as far as the eye can see U.S. monetary policy will be even more aggressive in the months ahead. QE3 is inevitable. It is notable that within days of the end of QE2, equity markets fell, just as they did when QE1 came to a close. Since the Federal Reserve has made it clear that it is targeting equity markets, enough new money will be printed to turn the markets around and ensure a higher level of general price inflation, thus implementing the next stage of default by debasement. Huge dollar swap lines will likely be reinstated to meet the liquidity requirements of the world`s financial system and to ensure the safety of America`s money market funds which have much of their assets in European bank paper. It is curious to imagine how a Tea Party-dominated Congress will respond to the Fed. Europe, of course, has its own set of problems. The Euro Zone (EZ) has dithered its way into the contradictory policies of forcing austerity on its weakest member countries (the so-called PIIGS) while simultaneously loading them up with additional debt they cannot repay from the European Financial Stability Facility (EFSF) to avoid near-term default. The EFSF is an emerging European Treasury Department, a fiscal authority financed and run by Germany to match the EZ monetary authority which is the European Central Bank (ECB). The EFSF is expecting to be empowered to issue bonds backed by the 17 economies of the EZ and then lend these funds to member states at interest rates well below the market rates that these states would otherwise borrow at, if they have access to markets at all. The borrowers are required to enact specific austerity programs in order to qualify for the loans. Austerity is meant to bring debt-to-GDP ratios down in the long term but it risks driving these countries into deeper recession which only makes them more insolvent. Where is the logic in lending more money to insolvent debtors? This kick-the-can policy may yet be overturned. The EFSF--which is expected to be the bailout fund for the latest Greek rescue-- needs to be approved this September by all the parliaments that participate in the EZ. Opposition to this plan is growing in the north. Even if it is approved, the EFSF is not of sufficient size to bail out Spain and Italy, should they require it, and the bond and CDS markets for these countries have suggested that they might indeed be next. The EFSF is essentially a method for conferring Germany`s credit rating to the indigent southern EZ members. But Germany`s debt-to-GDP ratio is already at 82.3% (98.6% for the U.S.) and its economy is considerably smaller than Italy and Spain combined. Demands on the EFSF may well be a bridge too far for the overburdened Germans. The European Central Bank is equally odd. It has hiked interest rates as growth has slowed in order to project an image of probity but meanwhile has bought the bonds of the PIIGS and accepted downgraded PIIGS debt at par from commercial banks to save them from ruin. In early August, to address the seizing up of inter-bank credit markets, the ECB advised that its previously announced suspension of bond purchases and special lending programs to banks had never really happened and that all-but-free six-month money was available to banks for the asking. This announcement was then followed quickly by another…to buy Italian and Spanish bonds aggressively. We do not see these purchases being sterilized. The ECB does not call this QE. We do. The ECB`s balance sheet is more impaired than that of the U.S. Federal Reserve and its current leverage is estimated to be well above 100 to one (55 to one for the Fed). A small write-down of Greek debt would probably require it to seek fresh capital. Therefore, defaults and write downs must be avoided. The large European commercial banks which the ECB backstops are extremely undercapitalized compared to their American counterparts as they rely almost exclusively on short-term funding. The 90 biggest banks in Europe collectively face an estimated Euro5.4 trillion in principal loans coming due over the next 24 months. We believe this debt can only be rolled over if the ECB backs these banks and there are no sovereign or major commercial bank defaults in the EZ. Meanwhile, deposits flee PIIGS commercial banks and European bank stocks have collapsed. We believe that the ultimate decision, perhaps only weeks away, will be to monetize the sovereign debt of the PIIGS on a very large scale in order to preserve the Euro Zone. We believe the totals will eclipse by far the Fed`s QE 1&2. Formal default for a member country is not an option under the EZ charter and would give rise to an enormously complex series of problems. Not the return of 2008 Is this 2008 all over again? Investors are asking this question as markets tumble. Will we once again see the U.S. dollar scream higher amid fears of deflation and a liquidity crunch while everything else collapses? We do not think so. Confidence in the U.S. dollar has surely been shaken and there are no comparably deep and liquid currency markets to replace it as a safe haven. In 2008, markets did not know how the authorities would respond to the crisis (remember Lehman Brothers and the failed TARP vote in Congress) or whether the means existed to flood the world with liquidity. Now it is known. In 2008, gold recovered its losses and closed up on the year. This time around, we expect it will continue upward and outperform all alternatives including the dollar as the monetary authorities predictably respond to panic with massive money creation more quickly and more precisely than three years ago. It has already begun. There will be no Lehman moment this time. The next challenge will not be deflation but its opposite, and we believe gold will reach levels that cannot easily be imagined. Will gold equities finally begin to follow the gold price and separate from other equities? We think this may in fact prove to be an important inflection point for gold stocks. Institutional investors are hugely underweight gold in their portfolios. We believe that they may now find undervalued gold shares to be irresistibly attractive."

Libor I don't think that's going to happen at all. As investors we must learn from history. When facts change we must adjust our methodology and include all the new information we now know. I find it kind of odd that most investors refuse to see the obvious change in financial policy ever since lehman. I remember that before lehman I couldn't imagine in my wildest dreams the Fed or any other Central Bank doing anything along the lines of what they did. I remember discussing this with friends and colleagues. We all thought of QE were to happen, along the lines of what subsequently occurred, the US dollar would collapse right then and there and all foreign buyers would dump treasuries. I have mentioned his name several times on this board, but I think Albert D. Friedberg is one of the most gifted investors in the world. Over the last 10 years he has been spot on on almost every inch of this cycle. I am going to quote from Mr. Friedberg's last commentary to investors: "With the economy weakening, outstanding debt will accelerate due to lower tax revenues and higher support payments under existing programs. In its already frightening deficit projections, the Congressional Budget Office assumes completely unrealistic rates of increase for economic growth, revenues and expenses. The most recent CBO budget projections (January, 2011) assume that over the next five years (2011-2016) U.S. government revenue will grow at a compound annual rate of 11.4%, expenses by 3.9% and real GDP by an astounding 3.2%...compounded annually. These are the numbers on which both parties negotiated the debt ceiling deal. Those deficit projections are therefore about to get much more frightening, to the point where they will overwhelm the policy stances of both parties. In our view, we will either see massive real cuts in both entitlements and defense spending as well as significant increases in taxes or a much lower dollar with consumer price inflation that will take your breath away. We expect inflation."

Myth, Keynes set the precedent for fiat money, without Keynes doctrine spreading like a virus throughout academia the concept of QE would not even exist in it's present form.

And I just want to add that I think you are one of the more intelligent posters on this board, I just think you are waiting for a 1940's style value investing utopia that may never happen due to the fact that since 1971 financial assets are denominated in fiat currencies, not governed by tangible assets, and increased at will by man. You may never ever get your great businesses at 3x FCF and you should seriously look at periods after 1971 and use that as a basis.

Munger under your assumptions of the events that would cause the fundamental value of the common shares to be worth less (no pun intended) IE: the 5-10% haircut you have repeated several times on this thread equating to $100-200B in losses, even Buffet's PFD position would be worth less, so you are dead wrong. Buffet's analysis which forms an opinion of a PFD investment of "only" $5B which is meaningless in terms of capital to BAC validates that the common is extremely undervalued as well. In reality you have been proven wrong for the fourth of fifth time on this board, and actually as a contrarian indicator you worked perfectly, once again, based on the history of your posts.

For those that think QE3 is not happening, I am going to go on record today and say that not only is QE3 going to happen but it will make QE2 look like a test run. Mr. Bernanke and the rest of his Keynesian cohorts have an ideology which revolves around maintaining aggregate demand. Along these lines, it is funny to see all the banter about gold topping and how money has been exiting the metal due to perception as a risky asset. Well as of this writing, gold is now positive for the day while indices are at their lows, and I am certain that in the next World Gold Council report on demand you will see substantial central bank purchases occurred these last two days. Gold aside, equities such as BP/CSCO/MT/DELL/BAC/ represent amazing opportunities here.

Munger I simply most disagree with you. GS rose substantially from the time of Buffet's investment. Your argument only holds credence due to the recent drop in markets over the last 30 days. Also, The investments in GS and GE were made at much higher price/book price/earnings ratios.

Val - In this environment, and considering the sentiment that was surrounding BAC, this was a small price to pay almost like a Triple A Rating. I completely agree with Moynihans logic in allowing Buffett to invest. Also the arguments here about why they raised capital when they kept saying they had enough are ridiculous. Munger and others are calling for a 5-10% haircut in total assets, in that world what is $5b? it wouldn't do anything. If things play out as Munger and others believe, $5B won't save BAC. But if thing's play out the way Moynihan and longs believe, then the additional dilution is bearable.

It's going to suck being a value investor when Buffett is gone, I can tell you without a doubt that if not for this Buffett investment there was, even if this is a remote chance, a chance that the shorts/media could have distorted the image of the brand to the point where it would have affected the fundamentals.

I am the happiest I have ever been right now, in a while!! Not for the fact that I am up on this position but that I saw what Buffett saw :)

Great, maybe I have a chance to make that list next year lol -3% per annum over time is terrible

"If facts materialized showing the BAC represented a great buying opp, I'd be the first into the market, buying as much as I could. " Munger by the time you see the facts BAC will have already reversed. In terms of credibility, I am a new member to this board and would have at least given you credit had I seen in your posting history any investment ideas or any solid research or calls. Nothing.. All I see is someone that is good at articulating fears and appears to get a kick out of engaging the community whenever their ideas appear to be going south, even if it is temporarily. Further analysis indicates that there is a direct correlation between the increase in your posting activity and the volatility in the name you are tearing apart or if it's the market than the market. You stop posting when ideas do well, and at best will provide some kind of conciliatory praise before rejoining the community several months/weeks later... IE: "OK its been a while, I see you guys got lucky congrats... So here is why your all wrong this time" That is the tone I have extrapolated from your posting behaviour.

Munger again, you are answering your own questions. The reason BAC cannot distribute dividends or buy back stock is the same reason it will never be allowed to fail or take significant write downs. Post Lehman, there is an implicit guarantee on too big to fail institutions. Just as BAC was denied a dividend or a stock buy back, the Central Banks will be there should the only real risk to it's business emerge... a bank run.

Wire: BLOOMBERG News (BN) Date: Aug 24 2011 10:53:27 Bank of America Memo Says JPMorgan Merger Talk Is ‘Baseless’ By Christine Harper and Alexis Xydias Aug. 24 (Bloomberg) -- Bank of America Corp., the biggest U.S. bank by assets, dismissed speculation it’s considering a merger with smaller rival JPMorgan Chase & Co. as “baseless” in a memo to employees. “Some blogs are speculating about rumors of merger talks with J.P. Morgan Chase, which are baseless and don’t even make practical sense,” the bank’s communications department said in a memo to employees yesterday that was obtained by Bloomberg. Jerry Dubrowski, a spokesman at Bank of America, confirmed the contents of the memo. The memo also rebutted a blog’s suggestion that Charlotte, North Carolina-based Bank of America needs to raise as much as $200 billion as “just wrong.” “We have a clear path to meet the new regulatory requirements under Basel III and we intend to meet these standards without having to issue additional common stock,” according to the memo. For Related News and Information: On banks and mergers: TNI BNK MNA <GO> Bank of America financial analysis: BAC US <Equity> FA <GO> Top finance news: FTOP <GO> --Editors: Steve Dickson, Dan Kraut To contact the reporters on this story: Christine Harper in New York at +1-212-617-5983 or charper@bloomberg.net; Alexis Xydias in London at +44-20-7073-3372 or axydias@bloomberg.net

Munger he could use this month's salary.... Your views are far from balanced, there is an agenda behind them.