A Sucker for a Pretty Business Journalist

Hat tip to Sivaram for alerting me to Michael Lewis's review of Alice Schroeder's Buffett biography in the New Republic¹, "Master of Money". Lewis notes in the beginning of his review that,

Buffett has a long and happy history of admitting attractive, intelligent women into his life, which Schroeder describes without mentioning how neatly she fits into the pattern.

How she fits in the pattern, apparently, is that unlike other female business journalists -- e.g., CNBC's Becky Quick, and Liz Claman (now at Fox Business) who preceded her as the network's Buffett correspondent, Schroeder was intent on using her access to paint a warts-and-all portrait of Buffett as a person as well as as an investor. That leads to some interesting material, which is surveyed in Lewis's review. It's an entertaining read, as Lewis's essays usually are.

The photo above, of Warren Buffett and Alice Schroeder, comes from Khotanharmon.com.

¹Now that Condé Nast has pulled the plug on Portfolio, perhaps TNR will be a regular home for Michael Lewis's essays.

More Obama Supporters Concerned by the President's Recent Actions

Last week we noted the concern expressed by two supporters of President Obama, Jim Cramer and Stewart Taylor, about the President's recent statements and actions (see "Buyer's Remorse" and ""More Buyer's Remorse"). This week brings more notes of concern from Obama supporters. On Monday on CNBC, Warren Buffett made a point similar to the one Taylor and Cramer made: in an economic emergency, the president's primary focus ought to be dealing with that emergency, not trying to enact other policy priorities. To underline the point, Taylor used the metaphor of a burning house: you put the fire out first; you don't water the lawn. Buffett used the analogy of World War II, saying that we have been hit with an "economic Pearl Harbor". From the transcript of his CNBC appearance Monday:

[I]f you're in a war, and we really are on an economic war, there's a obligation to the majority to behave in ways that don't go around inflaming the minority. If on December 8th when--maybe it's December 7th, when Roosevelt convened Congress to have a vote on the war, he didn't say, `I'm throwing in about 10 of my pet projects,' and you didn't have congress people putting on 8,000 earmarks onto the declaration of war in 1941.

[...]

[J]ob one is to win the war, job--the economic war, job two is to win the economic war, and job three. And you can't expect people to unite behind you if you're trying to jam a whole bunch of things down their throat. So I would--I would absolutely say for the--for the interim, till we get this one solved, I would not be pushing a lot of things that are--you know are contentious, and I also--I also would do no finger-pointing whatsoever. I would--you know, I would not say, you know, `George'--`the previous administration got us into this.' Forget it. I mean, you know, the Navy made a mistake at Pearl Harbor and had too many ships there. But the idea that we'd spend our time after that, you know, pointing fingers at the Navy, we needed the Navy. So I would--I would--I would--no finger-pointing, no vengeance, none of that stuff. Just look forward.

Warren Buffett may not have much else in common with the "dissident" feminist intellectual Camille Paglia, but she supported Obama as well -- and like Buffett, is concerned by some of what she has seen since he was inaugurated. In the first part¹ of her Salon column Wednesday ("Obama's Clumsy, Smirky Staff is Sinking Him"), Paglia blamed the problems on Obama's staff:

Yes, free the president from his flacks, fixers and goons -- his posse of smirky smart alecks and provincial rubes, who were shrewd enough to beat the slow, pompous Clintons in the mano-a-mano primaries but who seem like dazed lost lambs in the brave new world of federal legislation and global statesmanship.

Heads should be rolling at the White House for the embarrassing series of flubs that have overshadowed President Obama's first seven weeks in office...

[...]

First it was that chaotic pig rut of a stimulus package, which let House Democrats throw a thousand crazy kitchen sinks into what should have been a focused blueprint for economic recovery. Then it was the stunt of unnerving Wall Street by sending out a shrill duo of slick geeks (Timothy Geithner and Peter Orszag) as the administration's weirdly adolescent spokesmen on economics. Who could ever have confidence in that sorry pair?

¹The second part of the column is, inexplicably, about something completely different: Paglia's recent trip to experience Carnival in Bahai, Brazil, as the guest of a popular Brazilian singer.

Buyer's Remorse

From Jim Cramer's open letter to the White House yesterday:

I favored Obama over McCain because I thought Obama to be a middle-of-the-road Democrat, exactly the kind I have supported all my adult life, although I will admit to being far more left-wing during my teenage years and early 20s.

To be totally out of the closet, I actually embrace every part of Obama’s agenda, right down to the increase on personal taxes and the mortgage deduction. I am a fierce environmentalist who has donated multiple acres to the state of New Jersey to keep forever wild. I believe in cap and trade. I favor playing hardball with drug companies that hold up the U.S. government with me-too products.

But these are issues that we have no time for now, on the verge of a second Great Depression. This is an agenda that must be held back for better times. It is an agenda that at this moment is radical vs. what is called for. I am proud to have voted for the Obama who I thought understood the need to get us on the right path, and create jobs and wealth before taxing it and making moves that hurt job creation — certainly ones that will outweigh the meager number of jobs he’s creating.

Most important, I believe his agenda is crushing nest eggs around the nation in loud ways, like the decline in the averages, and in soft but dangerous ways, like in the annuities that can’t be paid and the insurance benefits that will be challenging to deliver on.

So I will fight the fight against that agenda. I will stand up for what I believe and for what I have always believed: Every person has a right to be rich in this country and I want to help them get there. And when they get there, if times are good, we can have them give back or pay higher taxes. Until they get there, I don’t want them shackled or scared or paralyzed. That’s what I see now.

The photo of Jim Cramer accompanied his essay on his Mainstreet.com site.

Subprimes and The Efficient Market Theory

Many active investors who don't believe that markets are fully efficient (if they did, of course, they wouldn't be active investors) nevertheless believe that markets are mostly or frequently efficient (see, for example, Warren Buffett making this point in his 1988 Berkshire Hathaway Chairman's Letter). How then to explain the yawning gap between the market prices of certain mortgage-backed securities and their supposed hold-to-maturity or intrinsic values?

Brian Wesbury, chief economist of First Trust, reiterated on CNBC today a point he made in a recent Forbes column: if 100% of the mortgages in a subprime mortgage CDO defaulted, owners of the security would recover something -- perhaps 40 cents on the dollar -- from the sale of the houses. And yet, two months ago, Merrill Lynch unloaded some CDOs for about 22 cents on the dollar (Barry Ritholtz argued at the time that, since Merrill was financing about 75% of the sale itself, the actual sale price for the assets was about 5.47 cents on the dollar).

If what Wesbury says is right (and it seems reasonable), why aren't institutional investors lining up to bid on subprime-backed paper for 22 cents on the dollar?

Another 52-Week High for BPT

On CNBC earlier today, the anchors noted that only 6 NYSE stocks were making new highs today (versus 400+ making new lows). BPT must be one of the six. It's currently trading at $106.05. BPT is still trading at less than 9.5x next year's estimated earnings though.