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Friday, October 17, 2008

Credit Crisis Was Massive Corporate Booty Call

Items of Interest:

“I can calculate the motions of heavenly bodies, but not the madness of people.” — Isaac Newton, 1721, after losing his shirt when the South Sea bubble burst.
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Credit Crunch Was Massive Corporate Booty CallScience Daily:
Did Pirates Create The Credit Crunch? -- Dr Peter Hayes is Senior Lecturer in politics at the University of Sunderland. In his latest paper ‘Pirates, Privateers and the contract theories of Hobbes and Locke’ Dr Hayes argues that the roots of modern democracy were not in Britain or the USA, but were the ‘corporations’ which were created on pirate ships during the golden age of buccaneering.

Dr Hayes says: “Pirates elected their captain, voted on major decisions and distributed their booty in roughly equal shares, and there is something in the idea that a pirate ship is the equivalent of a modern corporation.

“In the 17th and 18th century privateers were backed by financiers, much like modern multi-national PLCs. The way that privateering was operating back in the golden age of buccaneering, is that a group of individuals come together, and agree to kit out a ship to sail the seven seas to see if they can pull in some gold. It was a global gamble for enormous rewards. These predatory voyages are the roots of modern venture capitalism, with these modern multi-national corporations out to get all they can get. That’s the sort privateering that led to the Credit Crunch.” ...
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CNNMoney:
Housing starts hit another 17-year low -- Home construction and building permits both fall sharply in September to levels not seen since January 1991.

Initial construction of U.S. homes fell to a fresh 17-year low in September, according to a government report released Friday.

Privately owned housing starts fell to a seasonally adjusted annual rate of 817,000 in September, according to the Commerce Department. The rate was down 6.3% from August's revised reading of 872,000 and 31.1% lower than September 2007.

Economists were expecting housing starts to decline to 870,000, according to consensus estimates compiled by Briefing.com.

Housing starts have fallen nearly two-thirds from their peak of 2.3 million in January 2006, and were at the lowest annual pace since January 1991.

"This is bad news for anyone who works in the housing industry, bad news for the economy as a whole, and the decline in housing activity just continues to deepen," said Mike Larson, an analyst for Weiss Research. "This is one of the worst downturns in the housing market in the history of our country." ...
discussion:
Barry Ritholtz / The Big Picture:
Housing Starts Stop -- Good news! Housing starts continue to freefall. This is good, at least for Housing, as it no longer adds to the enormous pile of unsold inventories that need to be worked through. (Its bad news for the economy, though)...
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Jeff Matthews is not making this up:
Horse Out of the Barn; Feds On the Case! -- U.S. Agencies Investigate WaMu Failure
Federal prosecutors are investigating the failure of Washington Mutual Inc., citing the “intense public interest” in the largest bank collapse in the history of the U.S….

Federal investigators…have been delving into the books of Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc….
That is the story, and we are not making it up: now that the subprime explosion has littered the landscape with dead banks, vacant neighborhoods and zombie homeowners, the Feds are on the case! ...
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Warren Buffett / New York Times
My Money and Mouth Say Equities -- THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities...
Discussion:
Larry Kudlow / The Corner: Mustard Seeds of Hope
James Berman / The Huffington Post: Warren Buffett Unplugged
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