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http://market-ticker.denninger.net/archives/664-Ben-
Steins-Idiocy.html
Wednesday, November 19. 2008
Posted by Karl Denninger at 12:43
Ben Stein's Idiocy
Ben Stein needs to be locked up - or BBQd and eaten - for penning this
article:
In this situation, the governments that care about their citizens
should and must have extremely expansive policies. That would include
running very large deficits -- which we are doing, not even mentioning
tax hikes until the situation is stabilized, and possibly cutting
taxes as a temporary measure. Public works projects, tax rebates, even
to people who paid no taxes, extensions of unemployment insurance
payments -- all of these are necessary. Bailing out the big auto
companies, offering loan guarantees to encourage banks to lend, making
sure lending facilities are in place for credit card issuers - all of
these should be done and immediately.
"Mr" Stein is an ass - and that's being polite.
This sort of "beggar thy neighbor" concept - that is, mass and
intentional devaluation of one's currency (what else do you think
happens if you "reflate" by throwing money around?) is precisely how
we wind up with a hyperinflationary depression, which is far worse
than a deflationary one.
Deflationary depressions are nasty business, but they are created by
governments who attempt to stimulate economies beyond the point of
reasonable credit and business growth, thereby guaranteeing a
deflationary bust.
Mr. Stein was NOT, if I recall correctly, one of the people who
sounded the warning back in 2000-03 about the excesses in credit
growth nor did he advocate stopping that stupidity - going all the way
back to the 1980s! In short, where was his objection to creating the
mess in the first place?
Missing, that's where. In fact I distinctly remember Mr. Stein being
unabashedly bullish back in January of 2008. Indeed, here's what he
said January 4th of this year:
This isn't a development to strike terror into your hearts -- if
you're a long-term investor, it signals a time to buy. (As I've said
many times, if you're a short-term investor you can just skip my
column.) The history of stock market investing is unequivocal on this
point: When the market is low, when the economy is in a recession, it
is -- in the long run -- by far the best time to buy.
Such a wonderful record you have there Mr. Stein! Why, you'd only
have lost what - 40% of your money listening to this buttclown (the
SPX was at 1440, more or less, on the date that column was published,
down ~125 pts from its top! That was a time to buy?!)
Hyperinflationary depressions are worse than deflationary ones,
because a hyperinflationary depression almost always results in
political failure. For examples you can look at Weimar Germany or
Argentina, both of which resulted in the destruction of what were
democratic political systems, right up until the government decided to
take Mr. Stein's general approach.
Let's look at some more from Stein's most-recent piece of stupidity:
I desperately hope I am wrong and I may well be, but the
government has to put in a bottom here. Otherwise, the bottom is very
hard to see. Again, I hope very much I am being too pessimistic.
Government created this mess by removing leverage limits and blocking
state enforcement of predatory lending laws. In 2004, specifically,
our present Treasury Secretary lobbied as CEO of Goldman Sachs for the
removal of one of the last safeties on the nuclear credit weapons,
obtained his requested change, and in doing so set the timer on the
bombs. Where is Mr. Stein's call for the people responsible for this
to be recognized, outed and punished?
NOWHERE, that's where. In fact if you read Mr. Stein's writings
archived over on Yahoo Finance you will find unabashedly bullish BS
all the way down the pipe, until he finally got hit over the head with
a Clue-By-Four.
How long did it take Ben? Was it when YOUR retirement accounts got
clobbered for 40% of their value that you finally woke the hell up?
And how does one avoid taking the pain that results from setting off a
firecracker in your hand once you've lit it and it explodes?
Let's continue:
If workers can only rely on dividend and interest income and not
on long-term capital gains of 8% or 9% per annum, pre-retirees have to
save enormously more than they had anticipated to adequately fund
their retirement. This is serious business.
No kidding! You mean that spending more than you make and betting on
silly credit expansion - that is, granting loans to people when you
have no reasonable expectation of ability to pay, isn't a valid and
appropriate strategy?
Gee, who'd have thought that you should actually save 10-20% of your
income toward retirement instead of spending it (plus even more money
you don't have!) on IPods, cruises and Hummers?
Finally, he says that because we can't expect people to behave
prudently, he calls for:
This makes reflation even more desperately needed. I hope Mr. Bush
will wake up, stop listening to Dr. Evil, his Treasury Secretary,
Henry Paulson, and work with President-Elect Obama to get a large,
serious stimulation package into the economic bloodstream pronto.
This is getting ugly.
The ugly part is listening to you Mr. Stein.
Advocating the impossible is puerile and idiotic, and that you managed
to find an audience in Congress to spew this crap today in the context
of the automaker bailout hearings is even more stupid.
If you're dumb enough to listen to someone who has this sort of
public, easily-accessed record of accuracy you are better off with
paying a weatherman to guide your investment and economic strategy.
The weatherman, after all, is right about whether it will rain at
least half the time!
There is apparently some "backlash" to my idea of boycotting the
automakers if they get bailed out, with people wondering where my
anger was at Wall Street. Gee, have 'ya read any of what I've written
for the last year and a half folks? The tens of thousands of dollars
I've spent trying to stop this crap? I've advocated what amounts to a
personal credit boycott the entire time, have advocated that people
look into whether it makes sense to walk away from their underwater
homes, and have advocated other actions that amount to personal acts
of retrenchment that will punish those who did unsound (and I'd argue
evil) things in the context of Wall Street securitization and the
credit bubble.
Funny how people want an exemption when the anger against bailouts
extends to them, eh?
This, by the way, is one of the reasons that the idiocy of Wall Street
(and Main Street) requires leadership from Washington to stop, and if
its not forthcoming we will see the destruction of our economy.
EVERYONE is against bailouts - until its their pet industry, firm, or
region that is going to be bailed out.
Then the bleating and even threats begin.
Congress needs to let the adults into the room and banish the mouth-
breathers who have consistently been wrong since the beginning of this
mess, acting as an adult to remove the punch bowl and force the detox
process that will purge excessive credit creation from the system.
You want to know why the market keeps going down? Why various support
levels keep falling, and the stock market, while it has sharp rallies
from time to time, remains in a confirmed downtrend? Why your 401k
keeps shrinking?
It is happening because government keeps changing the rules and there
is still no transparency nor is there any reasonable belief there will
be any going forward, and the bleating continues to produce "free
money" - which the market fully-understands is in fact not free.
As a consequence there is no way for anyone to value companies and
industries on a clean, transparent basis. Neither I or anyone else
can determine if a given company, whether it be a bank or industrial
concern, is fairly priced, overpriced, or underpriced in the stock
market.
When I cannot determine the value of a company the only price at which
I am willing to buy (as a stockholder) is for pennies, spreading my
bets around with "stink bids" while being willing to be wrong at least
half the time - because all I'm doing is guessing.
There is no floor on valuations and thus prices because there is no
way to derive an honest understanding of underlying value!
I have said this all along - so long as the government continues to
meddle in this fashion the market is going to continue to fall,
because literally every sector of the market is potentially subject to
the same sort of crap! So as each sector comes under suspicion it is
taken out and sold and the market goes down further.
The private sources of money that, for example, came in to do a deal
with Goldman or Citibank got screwed by the government and they will
not be coming back.
The stupidity of our government agencies in this regard has destroyed
the analytical foundation in our equity markets and investors have
sold out as a consequence of their inability to derive fair metrics
for any firm in the United States, along with the intentional
destruction of private equity investments. Examples? Dick Bove's
"generational buy" call in the financials. Look at the XLF since then
- you've lost more than HALF YOUR MONEY listening to him; in May the
XLF, the financial sector ETF, was over $25, today it broke $11!
I said at the time his call was idiotic as there was no possible way
for him to derive an honest valuation and thus there was absolutely no
possible way for anyone to know what a fair market price was for these
firms.
Read what I said at the time in full; or the condensed version:
"The Truth: The "powers that be" (including the media, The Fed and
The Banks) are absolutely beside themselves with the possibility that
stocks, especially bank stocks, might decline in value. For "why" see
the top of this blog entry. If you fall for this you will be wiped
out. DICK BOVE PUT A MARKET PERFORM RATING ON BEAR STEARNS STOCK ON
MARCH 11th - JUST THREE DAYS BEFORE IT BLEW UP AND (THE FOLLOWING
MONDAY) WENT TO $2! You have NOT and you WILL NOT see CNBC or DICK
BOVE take responsibility for the wipe out of SEVERAL BILLION DOLLARS
IN SHAREHOLDER WEALTH - when he could have preserved YOUR MONEY if he
had told you the truth about our financial institutions and that YOU
SHOULD SELL ALL OF THEM AS THERE ARE AND WILL BE MORE EXPLOSIONS,
ALTHOUGH NEITHER HE OR I HAVE NO WAY TO KNOW WHICH ONES AND NEITHER DO
ANY OF THE ANALYSTS SINCE WE CAN'T SEE HONEST BALANCE SHEETS!"
Who was right, six months later, judged objectively?
At the same time the machinations of the Treasury and Federal Reserve
have destroyed liquidity in the credit markets and introduced insane
distortions where investors have "front run" expected bailouts and
handouts, then fled instantly when it becomes apparent that their bet
wasn't going to work out. This has produced repeated dislocations in
the credit markets with the latest being the asset-backed credit
market (ABX and CMBX) when Treasury suddenly repudiated the stated
purpose of the EESA/TARP.
These dislocations are not "natural outcomes" - they are the direct
and proximate product of government interference with what should have
been forced into the open and resolved last fall.
Recessions are the natural product of business "exuberance", but
Depressions are caused by government interference with the normal and
necessary recessionary adjustment process.
Thanks Washington; I now expect and am preparing for a Depression, and
it is specifically due to your actions that it is going to come to
pass.
It is Washington's willful refusal to force full and complete
transparency in the Capital Markets, instead extending ever-more TARPs
and other means of obfuscation, including "23A" letters, "bank
secrecy" among and in The Fed, along with intentional distortions in
the credit markets that have "crowded out" private capital and caused
it to flee that now threaten this nation and indeed the world with an
Economic Depression.
We're not alone, of course. Our idiocy is shared with the rest of the
world, who if anything have done even more stupid things than us! The
leverage in European banks is, believe it or not, actually higher than
ours, and they are more opaque!
But that other people are drinking gasoline does not give you license
to take a nip off a bottle of antifreeze under the argument that its
"less harmful" to drink the glycol in comparative terms, when both
will kill you very dead!
The Treasury, ABX and CMBX market today all continue to have their
"pointers" aimed straight at economic depression, literally worsening
by the hour. There is every reason to believe we are on the precipice
of a deflationary credit collapse that will make the 1930-32 bond
market dislocation look like a cakewalk.
Washington must stop and in fact reverse this idiocy here and now
before our economy lawn-darts into the ground at 600mph.
Don Tiberone wrote:
> http://market-ticker.denninger.net/archives/664-Ben-
Steins-Idiocy.html
>
>
> Wednesday, November 19. 2008
> Posted by Karl Denninger at 12:43
> Ben Stein's Idiocy
>
> Ben Stein needs to be locked up - or BBQd and eaten - for penning this
> article:
>
> In this situation, the governments that care about their citizens
> should and must have extremely expansive policies. That would include
> running very large deficits -- which we are doing, not even mentioning
> tax hikes until the situation is stabilized, and possibly cutting
> taxes as a temporary measure. Public works projects, tax rebates, even
> to people who paid no taxes, extensions of unemployment insurance
> payments -- all of these are necessary. Bailing out the big auto
> companies, offering loan guarantees to encourage banks to lend, making
> sure lending facilities are in place for credit card issuers - all of
> these should be done and immediately.
>
> "Mr" Stein is an ass - and that's being polite.
>
> This sort of "beggar thy neighbor" concept - that is, mass and
> intentional devaluation of one's currency (what else do you think
> happens if you "reflate" by throwing money around?) is precisely how
> we wind up with a hyperinflationary depression, which is far worse
> than a deflationary one.
Right now, we're in much more danger of deflation than inflation.
In the Great Depression of the 1930s, FDR's economic stimulus programs
and the natural business cycle had begun to revive the economy by around
1935 or so (check the archives of newspapers of that year if you don't
believe me). But then economists started worrying about inflation, just
as you are; so in 1936-37, FDR raised taxes and the economy slumped back
into depression again.
The same thing happened in Japan in the 1990s. The only way they could
get out of their deflationary depression was to reflate the currency.
But like you, they feared inflation too much; so they never created the
kind of massive stimulus needed to break out of the deflationary spiral.
And they've had slow growth at best ever since.
The moral of the story is: When you're stuck in deflation, it's "Damn
the torpedoes, full speed ahead" with reflating the currency. Once
deflation is dead, you can then tighten up again.
>
> Deflationary depressions are nasty business, but they are created by
> governments who attempt to stimulate economies beyond the point of
> reasonable credit and business growth, thereby guaranteeing a
> deflationary bust.
Right now, it doesn't matter how it started. What matters is how to end it.
With the virtual collapse of housing prices and commodity prices,
hyperinflation should be the last thing anybody should worry about at
this stage.
--
Steven L.
Email: s...@e...net
Remove the NOSPAM before replying to me.
I totally agree. Inflation is not an issue.
Vito
"Steven L." <s...@e...net> wrote in message
news:maydnQHg-b8VGrbUnZ2dnUVZ_tjinZ2d@earthlink.com.
..
> Don Tiberone wrote:
>> http://market-ticker.denninger.net/archives/664-Ben-
Steins-Idiocy.html
>>
>>
>> Wednesday, November 19. 2008
>> Posted by Karl Denninger at 12:43
>> Ben Stein's Idiocy
>>
>> Ben Stein needs to be locked up - or BBQd and eaten - for penning this
>> article:
>>
>> In this situation, the governments that care about their citizens
>> should and must have extremely expansive policies. That would include
>> running very large deficits which we are doing, not even mentioning
>> tax hikes until the situation is stabilized, and possibly cutting
>> taxes as a temporary measure. Public works projects, tax rebates, even
>> to people who paid no taxes, extensions of unemployment insurance
>> payments all of these are necessary. Bailing out the big auto
>> companies, offering loan guarantees to encourage banks to lend, making
>> sure lending facilities are in place for credit card issuers - all of
>> these should be done and immediately.
>>
>> "Mr" Stein is an ass - and that's being polite.
>>
>> This sort of "beggar thy neighbor" concept - that is, mass and
>> intentional devaluation of one's currency (what else do you think
>> happens if you "reflate" by throwing money around?) is precisely how
>> we wind up with a hyperinflationary depression, which is far worse
>> than a deflationary one.
>
> Right now, we're in much more danger of deflation than inflation.
>
> In the Great Depression of the 1930s, FDR's economic stimulus programs and
> the natural business cycle had begun to revive the economy by around 1935
> or so (check the archives of newspapers of that year if you don't believe
> me). But then economists started worrying about inflation, just as you
> are; so in 1936-37, FDR raised taxes and the economy slumped back into
> depression again.
>
> The same thing happened in Japan in the 1990s. The only way they could
> get out of their deflationary depression was to reflate the currency. But
> like you, they feared inflation too much; so they never created the kind
> of massive stimulus needed to break out of the deflationary spiral. And
> they've had slow growth at best ever since.
>
> The moral of the story is: When you're stuck in deflation, it's "Damn the
> torpedoes, full speed ahead" with reflating the currency. Once deflation
> is dead, you can then tighten up again.
>
>>
>> Deflationary depressions are nasty business, but they are created by
>> governments who attempt to stimulate economies beyond the point of
>> reasonable credit and business growth, thereby guaranteeing a
>> deflationary bust.
>
> Right now, it doesn't matter how it started. What matters is how to end
> it.
>
> With the virtual collapse of housing prices and commodity prices,
> hyperinflation should be the last thing anybody should worry about at this
> stage.
>
>
> --
> Steven L.
> Email: s...@e...net
> Remove the NOSPAM before replying to me.
ben stein is right.THIS is the time to buy...you buy companies with a
good business model,with more cash than debt, and that must be almost no
debt...and they should pay a dividend. there are many of these companies
that have had their stock bashed down along with the idiots who really
deserved to have their stock drop.
i forget who, but a guy who became the richest man in the world ,during
the 29 crash and depression, worked three part time jobs,one of them
picking up scrap coal along the railroad tracks,and he invested most of
it in penny stocks,mostly oil stocks i believe. in his early 40/s his
family tried to have him committed to a mental institute bu he
successfully fought it. he wore old clothes from the salvation army and
lived in a one room apartment in a bad area of town...when he hit his
mid to early 50's the stocks came back big time and he ended up the
richest man in the world.
so, yah,so this is the time to buy...
DISOBEY !
c...@w...net wrote:
> ben stein is right.THIS is the time to buy...you buy companies with a
> good business model,with more cash than debt, and that must be almost no
> debt...and they should pay a dividend. there are many of these companies
> that have had their stock bashed down along with the idiots who really
> deserved to have their stock drop.
> i forget who, but a guy who became the richest man in the world ,during
> the 29 crash and depression, worked three part time jobs,one of them
> picking up scrap coal along the railroad tracks,and he invested most of
> it in penny stocks,mostly oil stocks i believe. in his early 40/s his
> family tried to have him committed to a mental institute bu he
> successfully fought it. he wore old clothes from the salvation army and
> lived in a one room apartment in a bad area of town...when he hit his
> mid to early 50's the stocks came back big time and he ended up the
> richest man in the world.
> so, yah,so this is the time to buy...
>
> DISOBEY !
>
>
>
Ben Stein is the last one you should listen to, he's been wrong about
the whole current mess.
Hear it from his own lips : http://www.youtube.com/watch?v=RYX1AgEV0vo
"Uncle_vito" <u...@y...com> wrote in
news:-OCdnXUfnf-CaLbUnZ2dnUVZ_vSdnZ2d@linkline.com:
> Inflation is not an issue.
Gold bugs always have trouble grasping that.
Balanced View wrote:
> c...@w...net wrote:
>> ben stein is right.THIS is the time to buy...you buy companies with a
>> good business model,with more cash than debt, and that must be almost no
>> debt...and they should pay a dividend. there are many of these companies
>> that have had their stock bashed down along with the idiots who really
>> deserved to have their stock drop.
>> i forget who, but a guy who became the richest man in the world ,during
>> the 29 crash and depression, worked three part time jobs,one of them
>> picking up scrap coal along the railroad tracks,and he invested most of
>> it in penny stocks,mostly oil stocks i believe. in his early 40/s his
>> family tried to have him committed to a mental institute bu he
>> successfully fought it. he wore old clothes from the salvation army and
>> lived in a one room apartment in a bad area of town...when he hit his
>> mid to early 50's the stocks came back big time and he ended up the
>> richest man in the world.
>> so, yah,so this is the time to buy...
>>
>> DISOBEY !
>>
>>
> Ben Stein is the last one you should listen to, he's been wrong about
> the whole current mess.
Tell Barney Frank. If you watched the automaker's hearings, you would
have seen Rep. Frank request that Ben Stein's article on the automakers
be entered into the Congressional Record, as it agreed with the position
Rep. Frank was promoting.
JG
> Hear it from his own lips : http://www.youtube.com/watch?v=RYX1AgEV0vo
Dr Tormento wrote:
> "Uncle_vito" <u...@y...com> wrote in
> news:-OCdnXUfnf-CaLbUnZ2dnUVZ_vSdnZ2d@linkline.com:
>
>
>
>> Inflation is not an issue.
>
>
> Gold bugs always have trouble grasping that.
Read my post again because you missed one point:
"Once deflation is dead, you can then tighten up again."
I think what the gold bugs are betting on, is that Obama won't drop the
other shoe when the time comes. Any economic stimulus massive enough to
boost the economy out of deflation will be inflationary. At that point,
painful cuts in government services, painful tax increases, or painful
interest rate hikes, will be needed to fight inflation. But will a
liberal administration do what is necessary when inflation heats up?
The last liberal administration, that of Lyndon Johnson, failed to fight
inflation enough. And inflation, which had been tame previously, heated
up and triggered the wage-price spirals of the 1970s.
--
Steven L.
Email: s...@e...net
Remove the NOSPAM before replying to me.
"Steven L." <s...@e...net> wrote in
news:s_idndM7R7qW6rHUnZ2dnUVZ_rHinZ2d@earthlink.com:
> Any economic stimulus massive enough to
> boost the economy out of deflation will be inflationary.
Didn't happen in Japan, so probably won't happen here either.
> At that point,
> painful cuts in government services, painful tax increases, or painful
> interest rate hikes, will be needed to fight inflation.
The government will be able to remove cash from circulation painlessly
by simply closing down the special credit facilities. Also, banks will
eventually redeem the preferred shares the govt recently purchased.
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