LAST DITCH

Why do the big deals always happen over the weekends? So the big boyz in government and finance can take off their neckties when they bargain with each other? So the markets will be closed and unable to register a response one way or another? So the shrinking fraction of the U.S. public that pays attention to anything besides NASCAR and pornography won’t catch the news Saturday evening?

This weekend’s big deal was the U.S. government taking over the “government sponsored enterprises” (GSEs) Fannie Mae and Freddie Mac that guarantee trillions of dollars in mortgages. The “guarantee” is supposedly accomplished by converting bundles…

Don’t Steal…the Government Hates Competition

‘Taxpayers take on trillions in risk,’ says the headline in yesterday’s USA Today.

‘You can call it a bailout, you can call it a safety net or you can call it a rescue package,’ the paper quoted a research director at Argus Research, ‘but the bottom line is the American taxpayer is left footing the bill.’

The story is breathtaking. Staggering. Dumbfounding. But there it is – the biggest nationalization in history. Freddie and Fannie finance 3 out of 4 new mortgages. And now, the mortgage industry depends neither on willing buyers and sellers…nor on willing lenders and borrowers…but on the U.S.…

THE REAL COST OF A FULL BAILOUT

A recent study from the Congressional Budget Office (CBO) has zero credibility. It pegged likely taxpayer losses in the Fannie Mae and Freddie Mac bailouts at $25 billion. For those with a sense of history, it is worth remembering that the S&L bailout had a $160 billion price tag. The numbers diverge so far from reality as to be laugh-out-loud funny. Funny, that is, except that the CBO estimate demonstrates a willful disconnect with the actual consequences of federal government actions.

As demonstrated below, the real cost of the bailouts will easily exceed $1.3 trillion. In fact, the real cost is likely…

THE BATTLE FOR INVESTMENT SURVIVAL

An introduction to the principle of compound interest shows that, an investment that returns a 5% or even 3% rate, over centuries, eventually attains a colossal sum. A million dollars – a decent house these days – invested at a mere 3%, becomes $136 billion in four hundred years. At 5%, it would be $299 trillion.

This doesn’t mean that it is easy to make money. Rather, it demonstrates that it is hard. I don’t know a single example of significant success with this simple strategy. Why not? Many things can happen in four centuries. One thing that seems to happen, with…

Ineluctable Truths

Aiy! We arrived in London this morning, greeted by a dark sky, rain, and wind. Ah, the summer…we hardly knew ye…

What a delightful summer it was! (More below…)

The weather never actually turned summery – until the last two days – but it was still a marvelous respite from the workaday world of September-July.

We went back to the workaday world yesterday – taking the train up to Paris for an editorial meeting with our new French financial magazine. We are taking a risk with the publication – giving it an English title: MoneyWeek. French may be the language of Proust, but…