The Mess That Greenspan Made - Part 414

Herman Cain’s 2006 Investment Advice

After watching the ascent of GOP hopeful Herman Cain, I couldn’t help but think that his name had graced the pages of this blog before, and a simple search turned up this story from 2006, in which it becomes clear that, if Cain is elected to the nation’s top political post next year, hopefully he’ll do a better job running the country than he did picking stocks, as the housing bubble was about to burst. The 2006 article, in its entirety, follows.


Supply Sider Investment Advice

June 11, 2006

There’s been a little yellow sticky note at the top of my computer monitor since the end of January of this year. It says, “1/21 – Cavuto – Herman Cain – BZH – $75″, in reference to a recommendation made by Herman Cain on the Fox business news show Cavuto on Business to buy Beazer Homes at $75 about five months ago.

It’s been sitting there for a while now, and it wasn’t really clear what should be done with it aside from maybe adding it to the collection of prognostications that are kept in a text file on my computer desktop. But that text file contains predictions from people whose opinions are respected here, so Herman’s little stock tip really didn’t fit neatly into that category.

So, when John Rutledge started talking about commodities the other day on Larry Kudlow’s show (a program that is viewed here about once every few weeks, and then only to listen to Barry Ritholtz and Herb Greenberg unsuccessfully try to beat some sense into Larry’s skull on Thursday afternoons) the idea was hatched to combine these two bits of supply-sider clairvoyance into a short little Sunday post to demonstrate the dangers that lie in wait for anyone taking investment advice from these types.

First, what followed Herman’s prediction:

[Continue reading this article at Seeking Alpha.]

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GOP Hopefuls Do Not ♥ Ben Bernanke

Poor Federal Reserve Chairman Ben Bernanke was the subject of intense criticism by GOP Presidential candidates during last night’s debate, though Texas Governor Rick Perry, who started all the Fed bashing about a month ago when he warned the Fed Chief to stay away from Texas, was noticeably silent on the subject. Details are in this report at Reuters.

Newt Gingrich led the charge. Asked if the nationwide Occupy Wall Street movement had a valid grievance about income inequality and the out-sized influence of big banks, the former House speaker pivoted:

“If they want to really change things, the first person to fire is Bernanke, who is a disastrous chairman of the Federal Reserve,” said Gingrich.

“Bernanke has in secret spent hundreds of billions of dollars bailing out one group and not bailing out another group. I think it is corrupt and it is wrong for one man to have that kind of secret power.”

“I wouldn’t keep Bernanke in office. I would choose someone of my own,” said Republican front-runner Mitt Romney, who did not include Bernanke when doling out praise to Bush and Treasury Secretary Henry Paulson for pulling the financial system back from the precipice in late 2008.

(Ron) Paul termed Bernanke’s predecessor, Alan Greenspan “a disaster” because of policies that fueled investment bubbles such as the early 2000s Internet stock boom and bust.

“Bernanke compounds the problem,” Paul said. “He’s inflating twice as fast as Greenspan.”

Bernanke’s term ends in early-2014, so, should any of these GOP hopefuls occupy the White House beginning in early-2013, it should make for an interesting and awkward period leading up to the nomination process in the fall.

JP Morgan’s $2,500 Gold Call

Here’s JP Morgan’s chief commodity guru Colin Fenton explaining why the investment bank still sees a sharply higher gold price by the end of the year.

Clearly, there’s a little backpedaling going on here as Fenton cites the looming risk of recession as the reason for ratcheting down their price target from $2,500 an ounce to $2,100/$2,200 an ounce, still a hefty double-digit gain from current price levels.

On whether the metal is in a bubble, Fenton notes:

If we plot the gold price against entitlement spending in the U.S. federal budget it’s almost a one for one correspondence … Fundamentals are important because the unfunded liabilities Joe was talking about earlier is what is being priced in.

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Wednesday Morning Links

Slovak talks after bailout block – BBC
EU raises stakes in fight against crisis – Washington Post
As Greece Avoids a Default, Recapitalization Plans Emerge – NY Times
Senate Blocks Obama’s $447 Billion Job Creation Plan – Bloomberg
Harrisburg, Pennsylvania, Files for Bankruptcy, Lawyer Says – BusinessWeek
‘EU Leaders Are Staring at Markets Like Rabbits at a Snake’ – Spiegel
Fact or fiction? No one on Wall Street went to jail for financial crisis – CSM
Chanos: New Yorkers Don’t Appreciate Anger of Protesters – Bloomberg
Occupy Wall Street and the 2012 elections – Fortune
The Biggest Threat to the Occupy Wall Street Protest – Fiscal Times
China – Continued Boom or Epic Bust – The Burning Platform
China’s debt spree returns to haunt – Telegraph

Oil rises to $86 on weaker dollar to euro – AP
Comex Gold Solidly Higher, at 3-Week High – Kitco
Stock gurus aren’t what they used to be – MarketWatch
What US Stocks Follow More Than Anything Else – CNBC
China Yuan Strengthens as PBOC May Allow More Gains – BusinessWeek
‘Gold prices advance on strong Asian physical demand’ – Commodity Online
Gold price is on its way to $10,000 an ounce – Barisheff, StockHouse
Paulson Tells His Investors: ‘We Made a Mistake’ – DealBook
Bolivia passes law to buy local gold – Mineweb
Forget About Stocks? – Random Roger

The Seven Biggest Economic Lies – Robert Reich
Why Believe In Keynesian Models? – Krugman, NY Times
Economic recovery begins with forgiveness – MarketWatch
UK unemployment total hits highest in 17 years – Guardian
Bond Insurance Could Contain the Debt Crisis – Spiegel
Posen: BOE Prepared to Add More Stimulus If It’s Needed – Bloomberg
Housing Market Problems In The US Manageable, Says Economist – WikiPeers
Foreclosure Market Flush with Damaged Inventory – ZillowBlog
Jim the Realtor: “Market is a buzz” – Calculated Risk
JPMorgan: ‘QE3 By Q1 2012′ (Where Did We Hear That Before?) – Daily Capitalist
Republican Presidential Candidates Vow To Oust Fed’s Ben Bernanke – Reuters
Fed Oversight of Nonbank Financial Companies Is Weighed – NY Times

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