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  Quotations - Invest  
[Quote No.28843] Need Area: Money > Invest
"For as long as I can remember, veteran businessmen and investors – I among them – have been warning about the dangers of irrational stock speculation and hammering away at the theme that stock certificates are deeds of ownership and not betting slips. The professional investor has no choice but to sit by quietly while the mob has its day, until the enthusiasm or panic of the speculators and non-professionals has been spent. He is not impatient, nor is he even in a very great hurry, for he is an investor, not a gambler or a speculator. There are no safeguards that can protect the emotional investor from himself." - J. Paul Getty
(1892 - 1976) US oil industrialist, share investor, philanthropist and author. At the time of his death he was the richest man in the world.
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[Quote No.28844] Need Area: Money > Invest
"Speculators Extrapolate, Investors Think 'Regression to the Mean'...most people extrapolate from the near past into the more distant future. They assume that a sunny present implies a cloudless tomorrow [or that a stormy present implies winter for ever]. In contrast, few are aware of long-term 'base rates'; and still fewer realise that exceptional short-term 'case rates' eventually (and sometimes suddenly) regress [down but also up] towards their more mundane long-term means." - Chris Leithner
He runs Leithner & Co. Pty Ltd which is a private Australian investment company that adheres strictly to the Graham-and-Buffett 'value' approach to investment. He wrote a book about his approach called 'The Intelligent Australian Investor'.
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[Quote No.28845] Need Area: Money > Invest
"[Never forget that share] prices on the ASX , as everywhere else [any other stock exchange or auction type process], are formed by the most eager [not necessarily the most rational] buyers [optimists] and sellers [pessimists]. [It is why there are booms and busts and buyers and sellers markets.]" - Chris Leithner
He runs Leithner & Co. Pty Ltd which is a private Australian investment company that adheres strictly to the Graham-and-Buffett 'value' approach to investment. He wrote a book about his approach called 'The Intelligent Australian Investor'.
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[Quote No.28849] Need Area: Money > Invest
"The essence of modern banking is the arbitrage of risk: banks borrow from a group of people who are prepared to supply funds (depositors) and lend to another but not completely disjoint group (borrowers) who demand funds. In order to compensate depositors for the use of their funds, banks pay them interest; and to compensate for the risk that inheres in lending, banks charge borrowers interest. If they arbitrage successfully (i.e., receive more interest from borrowers than they pay to depositors, and recoup principal from borrowers and return it to depositors), banking is profitable. But banks cannot avoid the uncomfortable fact that they lend depositors’ funds. Banks cannot repossess these funds instantly, yet depositors can demand their funds any time they wish. Such a bank cannot meet its obligations if they fall due. Accordingly, the bank that lends deposits is, always and unavoidably, technically bankrupt.8 Fortunately for bankers, common law since the 19th century and contemporary legislation exempts banks from the normal requirements of solvency. A critical ingredient of banks’ success or failure is the creation and destruction of demand deposits. A bank lends what would otherwise be idle depositors’ balances by creating (or adding to) borrowers’ demand deposits. Borrowers then write cheques in order to spend the borrowed funds. Demand deposits facilitate commercial transactions and are an integral part of the money supply. A depositor’s signature on a cheque authorises his bank to pay a portion of his demand deposit to the cheque’s bearer. Yet as Hazlitt, Rothbard, Smiley and a host of others have noted, a crucial difference distinguishes demand deposits from other types of money. By the late nineteenth century, banks in America, Australia, Britain and other countries had generally become “fractional reserve” banks. When a bank clears a cheque it debits a demand deposit; and when a bank’s customer deposits funds into an account, the bank credits his demand deposit. Most of the time, the amount of currency paid when cheques are cleared approximates (and thus offsets) the amount received in the form of new deposits. Given that it is safer and more convenient to hold one’s liquid funds in the form of a demand deposit in a bank rather than notes and coins stuffed under the mattress or buried in the back garden, and that it is usually more convenient to write cheques than to hold large amounts of currency, under normal conditions it is very unlikely that all or even many of a bank’s depositors will simultaneously seek to convert their demand deposits into currency. Hence banks’ incentive, which has been aided and abetted by two centuries of favourable decisions by courts, as well as protective legislation, is to undertake “fractional reserve” banking. Fractional reserve banks retain only a designated fraction of their deposit liabilities in their vaults (i.e., in the form of reserves); instead, they convert most deposits into assets by lending them to borrowers. Banks lend in order to generate income to meet expenses, and to pay interest to their depositors and dividends to their shareholders. Other things equal (and assuming that the bank arbitrages successfully between depositors and borrowers, and that unexpectedly large numbers of depositors will not simultaneously seek to convert their demand deposits into currency), the lower the fraction of deposits held in reserve the more profitable the bank. At the same time, banks’ perennial risk is that they lend too aggressively. Over the decades and centuries, a rough pattern emerges: the more profitable the fractional reserve bank, the more prone it becomes in a crisis to collapse... A fictitious but still very realistic example shows how fractional reserve banking creates (and occasionally destroys) credit, and thereby creates the boom that causes the bust. Let’s assume that a gold miner extracts nuggets that are worth $5,000, and that a local mint transforms them into $5,000 of gold coins. Also assume that the miner deposits the coins (i.e., converts the coins into a demand deposit with a balance of $5,000) at his local bank. For convenience, let’s refer to this bank as Bank A. Further, assume that the law requires that banks hold a certain minimum percentage of their deposits as cash reserves composed of either gold coins or currency (bank notes). More specifically, banks are required to hold 12.5% of their deposits as reserves; as a matter of practice banks retain some additional margin of reserves above the required minimum as a precaution against unexpected deposit withdrawals; and therefore banks normally hold 15% of their deposits in gold and currency. This amount sits either in the bank’s vault or (much more likely) is a demand deposit at another (usually larger) bank. Accordingly, Bank A would retain $750 of the miner’s $5,000 deposit in reserves and would seek to lend the remainder ($4,250) to creditworthy borrowers. If a borrower obtained a loan, then the bank would lend the money by creating a new demand deposit in the borrower’s name (or by adding to the borrower’s current demand deposit) in an amount equal to the loan. Once the bank had lent its new excess reserves of $4,250, it could make no new additional loans until it obtained additional excess reserves. But the story does not end there. Quite the contrary: it’s barely begun. For simplicity, let us assume that a single firm borrowed the entire $4,250 and that it used this amount to construct additional space at its factory. Assume as well that this firm received the cheque for $4,250 and deposited it in its bank (which we will call Bank B). Bank B then sends the cheque to Bank A, where $4,250 is deducted from the borrowing firm’s demand deposit and $4,250 (either in the form of currency or more likely a bank cheque) is forwarded to Bank B. Accordingly, Bank A no longer has excess reserves from the miner’s deposit of $5,000. But Bank B has. More precisely, on its balance sheet it now has a new liability (namely a demand deposit) of $4,250 and a new asset (additional cash reserves) of $4,250; but given that it holds 15% of deposits as reserves it will retain only $637.50 in reserves against this new deposit. Bank B can lend its new excess reserves of $3,612.50 by creating (or adding to) a demand deposit for a borrower. When a second borrower spends the $3,612.50 and his cheque clears Bank B, this bank (like Bank A) would have no excess reserves available for loans. But Bank C has. Let us say that the $3,612.50 cheque is deposited in a demand deposit in another bank, and that this bank is called Bank C. It now has excess reserves of $3,070.63 and can lend this amount by creating (or adding to) a borrower’s demand deposit. Consider the process thus far. A miner has mined $5,000 worth of gold and, after having it struck into coins, deposits it in Bank A. The new $5,000 of gold has been converted into a new demand deposit of $5,000 and the money supply has increased by $5,000. Because banks keep only a fraction of their deposits in reserves, Bank A lent the excess reserves and those became a new demand deposit of $4,250 at Bank B. Bank B then had excess reserves, which became a new demand deposit of $3,612.50 at Bank C. In a fractional-reserve banking system, the “hard money” of $5,000 (i.e., the gold the miner found) has set in train a process that has thus far increased demand deposit money by $5,000 + $4,250 + $3,612.50 = $12,862.50. But the process is not finished because Bank C now has excess reserves. This process of expanding the money supply through the creation of demand deposits can continue until all of the $5,000 in gold is transformed into required and precautionary reserves. Given a reserve ratio of 15%, the miner’s production of $5,000 of money would eventually increase the money supply by $5,000 ÷ 0.15 = $33,333.33. Fractional-reserve banking always changes – and virtually always increases – the supply of money. Almost inevitably, in other words, it creates inflation. Further, the smaller the reserve fraction the greater the resultant change of the money supply (which equals the rate of inflation) Given this leverage, relatively small changes in reserves typically create much larger changes in the supply of money. Keynesians [economists who follow the theories of John Maynard Keynes} discount or ignore the supply of money; in sharp contrast, Austrians [economists who follow the theories of Ludwig von Mises, Friedrich A. Hayek, etc] diagnose these changes of reserves and of money supply as the ultimate causes of the business cycle. [so that inflation is caused by too much money chasing too few goods and services]" - Chris Leithner
Born at Winnipeg, Manitoba, Dr Chris Leithner is a First Class Honours graduate and University Scholar of McGill University (Montréal, Quebec). He also holds Masters degrees from Queen’s University in Kingston, Ontario (where he was a Senator Frank Carroll Fellow) and The Australian National University in Canberra (which he attended as a Commonwealth Scholar for Canada). He was a David Livingston Fellow and holds a Ph.D. from the University of Strathclyde (Glasgow, Scotland). He runs Leithner & Co. Pty Ltd which is a private Australian investment company.
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[Quote No.28850] Need Area: Money > Invest
"When we peruse history we find that every financial crisis and bear market has, at its nadir [- the low point of the share market bust as opposed to its zenith - the high point of the boom] (which we can identify only in retrospect), presented a golden buying opportunity. Despite what people asserted during each funk, the world did not, after all, come to an end. Hence the paradox: if everybody recognised that crises have always created buyers’ paradises, then – unless large numbers of people believe that the latest crisis is somehow different from and worse than any that had preceded it [and state this continually in the papers and on television, thus frightening people to the point that they sell out of the market] – bear markets [and the bargain buying opportunities they present] would never occur. In other words, to create a bear market, large numbers of people must assert 'we’ve been around for a long time [the usual brokers experience of twenty five years is not a long time in share market time] and we’ve never seen anything like this.' [and 'Things couldn't be worse'] This despondent view is the conjoined twin of the exuberant cry ('this time it really is different') that punctuates bull markets [and the often repeated, 'Things couldn't be better' - usually just before the market falls]. The very people who are increasingly cheerful [optimistic] on the upward run are ever more despondent [pessimistic] on the downward slide – and are prone, like many manic-depressives, to change their views drastically and suddenly. [creating great volatility, until as Daniel Turov - CFTC Licensed Commodity Trading Advisor and Member - says 'when the bulls stop asking ‘is this the bottom?’ and instead are explaining to their friends why ‘this time it’s different, and the market really is a bottomless pit,’ then it will be time to buy as the market will be ready to begin another boom phase! This is an essential understanding about the market that is becoming a field of investing called Behavioural Finance, that studies the psychology of investors' judgements, decision making and behaviour.]" - Chris Leithner
He runs Leithner & Co. Pty Ltd which is a private Australian investment company that adheres strictly to the Graham-and-Buffett 'value' approach to investment. He wrote a book about his approach called 'The Intelligent Australian Investor'.
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[Quote No.28851] Need Area: Money > Invest
"[Regarding his buying shares in great companies when they are priced as screaming bargains:] I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out." - Warren E. Buffett
Highly successful value investor, Chairman of Berkshire Hathaway Inc and one of the richest men in the world.
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[Quote No.28856] Need Area: Money > Invest
"A company in Australia can raise capital [namely the amount of the dividend it would have had to pay out to shareholders that agree] by issuing shares under its Dividend Reinvestment Plan - DRP, rather than cash." - Unknown

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[Quote No.28864] Need Area: Money > Invest
"No one can build his [or her] security upon the nobleness of another person. [Therefore take advice from others, including brokers and financial advisors et cetera, but develop your own skills and make your own assessments and decisions.]" - Willa Cather

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[Quote No.28867] Need Area: Money > Invest
"The darkest hour is just before the dawn." - Proverb

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[Quote No.28883] Need Area: Money > Invest
"The farther backward you can look, the farther forward you are likely to see. [...because as Mark Twain said, 'History does not repeat, but it does rhyme.']" - Winston Churchill
British Prime Minister
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[Quote No.28890] Need Area: Money > Invest
"What the US [sub-prime crisis, 2008] situation has shown once again is that [central banks, other banks and other] lending institutions set the price of dwellings and commercial property. If access to funds is restricted [and/or when interest rates rise], down go the property prices. [and vice versa]" - Robert Gottliebsen
Respected Australian financial journalist. Quoted from the 'Business Spectator', 14th July, 2008.
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[Quote No.28895] Need Area: Money > Invest
"John Williams (Shadow Government Statistics) debunks the notion that ‘inflation always ebbs during recession’. The severe downturn of 1973/1975 was accompanied by high inflation, per official CPI reporting, with annual inflation averaging 5.2% for the year leading up to the recession, 10.7% during the 16 months of the downturn, and 7.9% in the year following. The next recession, from January through July 1980, saw even higher inflation, with annual CPI averaging 11.6% in the year leading up to the downturn, 14.3% during the six months of economic contraction, and 11.4% in the 12 months that followed, through to the onset of the next recession. This was a period that again saw significant oil price increases, near-double-digit annual growth in M3 and mixed dollar pressures." - Bill King
He writes 'The King Report', which is a daily market commentary and analysis of global, political, financial and economic factors that influence global markets. It is the basis of many institutional 'morning meetings' and is often cited by leading investment letter writers and financial columnists.
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[Quote No.28896] Need Area: Money > Invest
"When a bubble bursts, you only hit bottom when people totally give up and vow they’ll never buy stocks again. [When] People are still more worried they’ll miss the next rally [then there are more falls to go before the bottom is reached]." - Marc Faber
Noted financial commentator and forecaster, who told investors to bail out of US stocks before 1987’s so-called Black Monday crash and correctly predicted in August, 2007 the US would enter a bear market, which it did in July, 2008.
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[Quote No.28897] Need Area: Money > Invest
"[If anyone tells you that you cannot overpay for a house or house prices never fall, do not believe them!] Certainly, houses became impressively costly between the middle of 1996 and the turn of this year [2008]. Over that period, real house prices rose by close to 190%, according to the Financial Times index. A trend fitted to a series on real house prices that goes back to January 1971 was 30% below the peak reached at the end of last year [2007]. In the third quarter of 2007, the ratio of average earnings to house prices peaked at just under six. This was almost double the ratio at the trough of 1995 and well above the previous peak of five reached in 1989. After the biggest house-price boom in the UK’s history, can the country avoid the biggest ever bust? Fathom Consulting began a bulletin released this week by remarking sardonically that ‘as the UK housing market downturn gathers pace, it is common for analysts and commentators to argue that this downturn will not be as bad as the early 1990s... They are probably right. It looks [as though] it will be worse, perhaps far worse.’ Fathom goes on to argue that nominal house prices are now [July, 2008] falling considerably faster than in the late 1980s: the Halifax price index is down by 9.6% since August [2007]. This is almost as big a fall as the 13% decline in the early 1990s, when inflation contributed more to the decline in real prices. As the saying goes, if one laid all the world’s economists in a row, they would still not reach a conclusion. In this case, too, economists differ on how far house prices have overshot justifiable levels. While it is possible to produce demographic and economic arguments for today’s prices, it is hard to believe that they did not substantially overshoot sustainable levels. A 30% decline in real prices would hardly be surprising. It could well be considerably more." - Martin Wolf
Financial Times, July 10, 2008.
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[Quote No.28899] Need Area: Money > Invest
"Normally at the end of any market fall there is what is called 'the day of no hope' where there is a huge sell off in stocks... [That is always] a wonderful buying opportunity. " - Robert Gottliebsen
Highly respected Australian financial journalist.
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[Quote No.28900] Need Area: Money > Invest
"In traditional markets shares fall and then six to 18 months later the property markets take a tumble. After the 1987 share crash property actually rose in value before coming tumbling down around 18 months after the big share fall. This time around [June, 2008] we are seeing a much closer link between the property and share markets. Housing markets around the country are in decline and commercial property is very soft. And the fall in the listed property trusts signals more than just unhappiness with the listed property trust model. We are likely to see a substantial fall in commercial property values in the wake of the decline. Naturally in both the housing and commercial property market there will always be pockets where there are markets that move against the trends." - Robert Gottliebsen
Highly repsected Australian financial journalist. Quoted from the 'Business Spectator', 15th July, 2008.
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[Quote No.28907] Need Area: Money > Invest
"...major bottoms don’t happen at the beginning of a recession; they happen at the end of one...when an economy is ready for another big growth spurt. Nor do they happen when stocks are still relatively expensive – as they are now [2008]. They happen when they are cheap...when they sell for 5 to 8 times earnings, not 10 to 15 times. They also tend to happen when the Dow and the price of gold are getting close to a one-to-one relationship. Just before the ’82 bottom, for example, you could buy the entire Dow for a single ounce of gold. Now, it takes nearly 12 ounces. Most important, a real, major bottom doesn’t happen when you’re looking for it. It comes after you’ve given up...when investors have lost interest in stocks. You may recall a notorious cover from Business Week in the summer of ’82: 'The Death of Equities.' No one was expecting a bottom; they thought stocks were dead." - Bill Bonner
Founder of Agora Publishing and founder and editor of financial newsletter, 'The Daily Reckoning'.
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[Quote No.28912] Need Area: Money > Invest
"In theory there is no difference between theory and reality. In reality, there is - especially in investing, as so much of successful investing is about how well you can learn to handle your thoughts and emotions about an unknowable future, with real financial consequences." - Seymour@imagi-natives.com

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[Quote No.28936] Need Area: Money > Invest
"...some of the old rules about how the economy responds to shocks [ and indicators of the business cycle are] redundant. [due to] ... the growth in contracting, outsourcing and small business. It used to be that the most important thing to watch in assessing incomes, confidence and bank provisioning was the unemployment rate. Almost everybody had a job working for someone else and wages were almost never cut, so it was only when unemployment rose that incomes fell and the economy got into trouble. Over the past 15 years [1993-2008 in Australia and most of the developed world] there has been a massive change in employment. These days far more people are contractors in some other form of small business, either because they want to be or, more often perhaps, because their employer contracted out their functions to get more flexibility. The government has encouraged this trend with a big gap between the corporate and personal tax rates, so that despite generally effective efforts by the tax office to prevent individuals being taxed at the corporate rate, it has seemed like a good idea to be a contractor instead of an employee. The result is that the unemployment rate is no longer the benchmark it once was. The fact that it fell in June [2008] from 4.3 to 4.2 per cent cannot be taken to mean that household incomes are holding up and that mortgages [and other debts] will be serviced. Apart from the near doubling of expenditure on fuel over the past 12 months, there has also been the drip, drip of [employment] contracts lost or just [the hours and therefore the take-home pay] reduced... So don’t watch the unemployment rate to see how household incomes are going." - Alan Kohler
Highly respected financial journalist. Quoted from the 'Business Spectator', 16th July, 2008.
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[Quote No.28939] Need Area: Money > Invest
"Share prices tend to over-react both on the way up and on the way down. In a bull market, shares that look expensive can keep rising, higher than anyone ever thought they could go. In a bear market, shares that look cheap today can keep falling further than anyone ever thought they could go. Obviously buying them at their lowest and selling them at their highest would be ideal. Realistically though, the most rational thing to do is to buy them when they are undervalued and sell them when they aren't, bit by bit. While you will miss some profit, it is surprising just how well this works." - Seymour@imagi-natives.com

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[Quote No.28940] Need Area: Money > Invest
"If you have ever been interested in investing in fixed-income securities, they come in varying maturies. The common maturities are [in years] 1, 2, 3, 4, 5, 7, 10, 15, 20, 25, 30. This is called the interest rate curve or 'along the curve' as the interest rates offered usually start low and rise the longer or further along 'the curve' the maturity date is. When you hear the phrase that the curve has inverted it means that short term rates are higher than long term rates. This usually means that inflation is high, the central bank has raised short-term rates to slow the economy and that a recession may be on the way. Many share investors study 'the curve' to try to gauge where they are in the economic cycle and get a feel for what to expect from the share market." - Seymour@imagi-natives.com

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[Quote No.28941] Need Area: Money > Invest
"Sentiment dominates at the moment. Sentiment is the herd. It is a very powerful beast. If you don't believe me....watch what it does when it turns." - Marcus Padley
Stockbroker and author of 'Marcus Today', 10th July 2008.
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[Quote No.28942] Need Area: Money > Invest
"The bad news, is we're in a bear market. The good news is it's almost over. Let's find stocks to buy." - Sir John Templeton
Famous and highly successful value investor during the 1987 stock market crash.
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[Quote No.28943] Need Area: Money > Invest
"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." - Peter Lynch
Former Fidelity Magellan Fund Manager and Author
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[Quote No.28951] Need Area: Money > Invest
"Business is not financial science, it's about trading... buying and selling. [Share trading is the same]" - Anita Roddick
Founder of ethical cosmetics firm Body Shop
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[Quote No.28953] Need Area: Money > Invest
" 'He who sells what isn't his'n, must buy it back or go to pris'n.' - Daniel Drew, 1797-1879, American financier. Short sellers are often criticized for exaggerating movements in share prices, distracting management, and profiting from misfortune. Even Napoleon reportedly once called short sellers 'enemies of the state.' Indeed, short sellers have come in for criticism any time there has been market turbulence. But short selling also has its defenders, including such financiers as Seth Klarman and Warren Buffett, who say it adds liquidity to the market and serves as a counterweight to Wall Street bullishness. The following lists key moments in short selling history: 1609 - The Dutch East India Co protests to the Amsterdam Exchange after short sellers make enormous profits on its stock. That leads to the first ever regulations on shorting in the following year. 1733 - Britain bans naked short-selling. 1917 - The New York Stock Exchange implements restrictions on shorting and requires a list by noon every day of speculators. 1929 - Short sellers among those blamed for Wall Street crash. 1932 - U.S. President Herbert Hoover condemns short selling for speculative profit on the New York Stock Exchange. 1938 - The U.S. Securities Exchange Commission seeks to restrict short selling by only allowing it when a stock's price is rising, the 'uptick rule,' which is repealed in 2007. 1940 - The Investment Company Act is passed and restricts mutual funds from short selling. 1949 - Alfred Winslow Jones, a financial journalist, creates the first modern hedge fund by forming an unregulated fund that buys stocks while shorting others to hedge some of the market risk, and thus was born the 'hedge fund'. 1987 - Congress investigates short selling following market crash. 1997 - Malaysia charges Credit Lyonnais with short selling following the collapse of the country's currency and stock market. 2001 - Wall Street firms ask short sellers not to try to profit from falling shares following the September 11 attacks. 2001 - Within two weeks of the September 11 attacks, financial regulators investigate whether groups linked to Osama bin Laden tried to profit by shorting the shares of an insurance company exposed to claims from the destruction. 2004 - The SEC approves a new rule called Regulation SHO which seeks to reduce naked shorting by requiring the publication every day of a list of the securities with significant delivery failures. In a naked sale, the seller does not borrow the stock in time to deliver the stock to the buyer within the required three-day settlement period. Reg SHO comes into effect in January 2005. 2005 - Overstock.com (OSTK.O) sues research firm Gradient Analytics Inc and hedge fund Rocker Partners, charging that they worked together to spread negative news about the company and drive down its stock price. In a conference call the day after filing the suit, Overstock President and Chief Executive Officer Patrick Byrne claimed the company was in the midst of a conspiracy orchestrated by a 'Sith Lord'. 2006 - CEO Ken Lay testifies short sellers met in 2001 to conspire to attack Enron ECSPQ.PK, ultimately bringing it down. 2007 - The SEC unanimously repeals the uptick rule in June. 2008 - Bear Stearns CEO Alan Schwartz testifies about short sellers inducing a panic and bringing down the firm before the U.S. Senate's finance committee. 2008 - The SEC makes an emergency order curbing short selling [in July]." - Reuters
(Compiled by Phil Wahba and Emily Chasan; editing by Jeffrey Benkoe) for a Reuters Article called, 'Milestones in Short-Selling History' published Wed Jul 16, 2008.
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[Quote No.28955] Need Area: Money > Invest
"Short selling is part of the price-finding solution; sure, at times it gets overdone, but when leveraged buying pushes prices to ridiculous levels, no one complains. They [market regulators] think that by stopping short selling it's going to stop these companies going down, but what about the people who own the shares? They're going to continue to sell them - they can't stop that...[Banning short selling would do little to stop market volatility and could, in some cases, accelerate price falls. For example] Say, if ANZ [bank] was down 1 per cent one day and Westpac [bank] was up, a hedge fund would classically buy ANZ and sell Westpac short and just run that as a position. That tends to reduce volatility - but without that you're going to have one less buyer of Westpac on a down day and one less seller of ANZ on an up day, and the prices will just go down further. When markets fall, people look for every excuse as to why they're falling, and it's easy to blame short sellers because people are making money from it. The reality is, anyone who short sells something has to buy it back, so it actually creates future demand for the securities, among other things." - John Corr
investment manager at hedge fund Fortitude Capital
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[Quote No.28956] Need Area: Money > Invest
"[Besides using net rental income and capitalisation rate to determine, express and compare commercial property values, it is also common to use a price per square metre. For example] Walker Corporation yesterday announced the $6.5 million sale of the whole floor of a Sydney CBD strata office building to Club Plus. The 805sqm of space, on the 11th floor of 66 Hunter Street, sold for an equivalent of $8000sqm." - Unknown

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[Quote No.28961] Need Area: Money > Invest
"If you think that rising demand causes inflation, the sensible thing to do is reduce demand. You do that by raising interest rates. The higher cost of money causes people to cut back borrowing and be more prudent. Aggregate demand in the economy falls, and, presumably, so do prices. But that is all catastrophically backwards. It is a text book cause of putting the cart before the horse. In simple terms, it is a faulty definition of inflation. Inflation is not 'rising prices.' Inflation is caused by an increase in money supply. Rising prices are merely the effect of the increased money supply. You wouldn’t blame rising prices on excess demand any more than you’d attribute a man’s drunkenness to his behaviour. The effects cannot be the cause...When money supply growth exceeds real growth in goods and services [money and credit growth exceeds GDP growth], prices are going to rise. It all begins with the artificially adjusted supply of money...Inflation begins and ends with money supply growth. Just exactly why governments pursue systematic inflationary policies is another question. And it’s not just an economic question either. It’s partly moral and partly philosophical." - Dan Denning
Editor of the financial newsletter, 'The Daily Reckoning Australia'.
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[Quote No.28963] Need Area: Money > Invest
"[Buying shares in a bear market when they are falling, even if they are undervalued, can be difficult. After all,] Few things are more uncomfortable than watching your shiny new parcel of shares take an immediate beating. [Most people, being average, want instant gratification. Successful business-people and investors accept that making money requires immediate sacrifice for long term gains.]" - Nicole Pedersen-McKinnon
Editor of Australian Financial Review's Smart Investor newsletter and website.
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[Quote No.28967] Need Area: Money > Invest
"In a rising - boom - market, the information most investors watch is the Income - Expense/Performance Statement [to monitor the earnings and free cash flow generated]. In a falling - bust - market, the factor that most investors watch is the Assets-Liabilities/Position Statement [to monitor the debt that has to be paid]. Intelligent value investors have learnt to be aware of both, at all times." - Seymour@imagi-natives.com

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[Quote No.28968] Need Area: Money > Invest
"[When a market crashes expect there to be furious investors, demanding that the government step in and stop the market from falling any further.] You've seen this before and you'll see it again when a hot stock market has sucked in all the unsophisticated retail money. People who don't understand markets can go down, they get furious. [He added that any government measures to prop up the market usually don't work.] In the long run, if the fundamentals are not positive, if liquidity is going away, if growth is slowing, and then you introduce the specter of increasing interest rates, [because of rampant inflation, government intervention] will not affect the eventual valuation of the market unless they just shut it down." - Reiner Triltsch
head of the international equity team at Federated Investors
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[Quote No.28969] Need Area: Money > Invest
"As manufacturers see the final demand for their products go down and inventories go up, they have to slow production and that means less employment." - Kevin Logan
senior market economist at Dresdner Kleinwort in New York
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[Quote No.28971] Need Area: Money > Invest
"We're used to thinking that what most affects the pace of economic growth is the level of interest rates - the 'stance of monetary policy', as economists say. But what matters more is something central bankers call 'monetary conditions'.... We know that when the [Australian] Reserve Bank wants to slow the growth in demand, it raises the official interest rate, which causes all the banks' short-term and variable interest rates to rise. The higher rates are meant to discourage borrowing and spending. So when people want to convey how hard the Reserve is pressing on the brakes - the 'tightness' of monetary policy - they tell you about the level of the official rate.... But there's more to it. The level of interest rates will have a big effect on the decisions of lenders and borrowers, but there are other factors involved. It's these other factors that go to make up monetary conditions. The second factor we need to take account of, after the level of the official interest rate, is inflation expectations. That's because what has most effect on people's behaviour is the level of 'real' interest rates. And the real interest rate is the nominal inflation rate minus the expected inflation rate. If inflation expectations are stable we can ignore them. The change in the nominal interest rate will be the same as the change in the real rate. But if expectations are changing we can't ignore them. Say the Reserve raises the official interest rate because it's worried about building inflation pressure, but expectations worsen at the same time for the same reason. Then the Reserve's supposed tightening won't have much effect. The trouble with inflation expectations [especially as relates to desired wage increases] is that they're hard to measure. We have various measures - mainly taken from opinion polling [of economists, union officials, etc] - but we're not sure how accurate they are.... That's not the end of our sum, however. The third factor affecting monetary conditions is the exchange rate. Changes in the official interest rate often lead to changes in the exchange rate. For instance, an increase in our interest rates relative to other countries' rates may attract more foreign capital inflow, thus causing our dollar to appreciate. If so, this will tighten monetary conditions for our export and import-competing industries by worsening their international price competitiveness. That is, exporters will now get fewer Australian dollars for their export sales, while domestic firms have to compete against imports that are now cheaper. Of course, this 'interest rate differential effect' isn't the only factor that can move our exchange rate. Another influence is that improvements in our terms of trade - export prices relative to import prices - usually lead to a higher exchange rate; a worsening in our terms of trade usually lead to a lower exchange rate... The fourth factor affecting monetary conditions is the banks' interest margin, particularly the margin between the official interest rate and the rates they charge on short-term and variable loans to businesses and households. We have become used to thinking the official interest rate and the banks' interest rates always move in lock-step. But there's no law that says they must. At various times in our past the banks have cut their retail rates by less than the fall in the official rate and at other times they have cut them by more... To this we could add a fifth factor: a tightening in the banks' credit standards, making loans harder to come by than they were. [All of these factors need to be considered to fully understand the 'monetary conditions' and any possible change in 'monetary policy'.]" - Ross Gittins
the Herald's Economics Editor. Published in the 'Business Spectator', July 19, 2008.
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[Quote No.28972] Need Area: Money > Invest
"How much more bullish news do you want? Twenty-four airlines have gone bankrupt this year. That's great news. Bankruptcies are signs of bottoms, not tops." - Jim Rogers
co-founder of the Quantum Fund with George Soros``
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[Quote No.28980] Need Area: Money > Invest
"I always said that mega-mergers were for megalomaniacs." - David Ogilvy

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[Quote No.28986] Need Area: Money > Invest
"The credit cycle is connected to the business cycle. [Interest rates and the availablity of credit act to either speed up or slow down the economy. Too low interest rates for too long, create asset bubbles and inflation that eventually must be burst] Irving Fisher and others have told the story of a business cycle upswing driven by a displacement leading to an investment boom financed by bank credit and new credit instruments. The boom leads to a state of euphoria and possibly an asset bubble. A state of over-indebtedness develops which often ends in a bust... Tightening of monetary policy is associated with reversals of real housing prices and business cycle downturns. [These are often engineered by a central bank in order to reduce price and wage inflationary spirals]" - Michael D. Bordo
Economist
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[Quote No.28987] Need Area: Money > Invest
"The cost of uncertainty :- So why is this rise in uncertainty [expressed as volatility in the share market] likely to be so damaging for the economy? The reason is that firms typically postpone making investment and hiring decisions when business conditions are uncertain. It is expensive to make a hiring or investment mistake – so if conditions are unpredictable, the best course of action is often to wait. If every firm in the economy waits, then economic activity slows down. This directly cuts back on investment and employment, two of the main drivers of economic growth. But it also has knock-on effects in depressing productivity growth. Most productivity growth comes from 'creative destruction' – productive firms expanding and unproductive firms shrinking. But if every firm in the economy pauses, then creative destruction temporarily freezes – productive firms do not grow and unproductive firms do not contract. This leads to a stalling of productivity growth. Similarly damaging effects also happen on the consumers’ side: when uncertainty is high, people avoid buying consumer durables like cars, fridges and TVs. The housing market is also hit hard: uncertainty makes people cautious about upscaling their house... [All of these things increase the chances of recession as well as] render policy-makers relatively powerless to prevent it...[by] limiting the effectiveness of standard monetary and fiscal policy..." - Nicholas Bloom
Economist
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[Quote No.28988] Need Area: Money > Invest
"Inflation is always and everywhere a monetary phenomenon." - Milton Friedman
Famous economist
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[Quote No.28989] Need Area: Money > Invest
"When trying to understand the connection between the availability of credit [interest rates and money supply, wages and definitions of creditworthiness] and asset prices consider this: - Consumers always demand things, but they don't always have the money to bid-up prices. Withhold money, and prices fall - add money and prices inflate. [Therefore monetary policy and the credit cycle is intimately connected to market prices and the business cycle.]" - Seymour@imagi-natives.com

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[Quote No.28998] Need Area: Money > Invest
"[When considering how vulnerable a country's economy is to a downtun, try to envisage how much leeway the government has to increase spending to stimulate the economy and to increase taxes to pay for this spending and the interest on their debt, by considering the country's Gross Domestic Product and the deficit as a percentage of this. For example...] Britain's economic downturn is worse than previously thought and there is no extra money available for public spending, finance minister Alistair Darling says... The Office for National Statistics said on Friday that public sector debt at the end of June was at 38.3 per cent of GDP, but increased to 44.2 per cent when the impact of nationalised mortgage lender Northern Rock was included. Public finances were at a record deficit of 15.5 billion pounds ($A31.9 billion) in June [2008] compared with the same time last year, well over market expectations of a 12.3 billion pounds ($A25.3 billion) deficit. The Financial Times, meanwhile, reported that finance ministry officials were working on plans to revise the rules to allow for increased borrowing without raising taxes amid the current economic downturn. One of the fiscal rules sets a government borrowing limit of 40 per cent of national income." - Unknown
Quoted from 'The Sydney Morning Herald' newspaper, July 19th, 2008.
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[Quote No.29002] Need Area: Money > Invest
"...Throughout history, many nations, when confronted by sizable debts they were unable or unwilling to repay, have seized upon an apparently painless solution to this dilemma: monetization. Just have the monetary authority run cash off the printing presses until the debt is repaid, the story goes, then promise to be responsible from that point on and hope your sins will be forgiven by God and Milton Friedman and everyone else. We know from centuries of evidence in countless economies, from ancient Rome to today's Zimbabwe, that running the printing press to pay off today's bills leads to much worse problems later on. The inflation that results from the flood of money into the economy turns out to be far worse than the fiscal pain those countries hoped to avoid. Earlier I mentioned the Fed's dual mandate to manage growth and inflation. In the long run, growth cannot be sustained if markets are undermined by inflation. Stable prices go hand in hand with achieving sustainable economic growth. I have said many, many times that inflation is a sinister beast that, if uncaged, devours savings, erodes consumers' purchasing power, decimates returns on capital, undermines the reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency. Purging rampant inflation and a debased currency requires administering a harsh medicine. We have been there, and we know the cure that was wrought by the FOMC under Paul Volcker [i.e. double digit interest rates]. Even the perception that the Fed is pursuing a cheap-money strategy to accommodate fiscal burdens, should it take root, is a paramount risk to the long-term welfare of the U.S. economy [or any country's economy]." - Richard Fisher
head of the Dallas Federal Reserve Bank to the Commonwealth Club of California, July, 2008.
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[Quote No.29008] Need Area: Money > Invest
"The worry is that the Fed owns only about $800 billion of Treasury securities, and all these existing programs, not to mention possibly helping arrange huge loans to Fannie Mae and Freddie Mac under a bailout plan now being kicked around, would consume a total of more than $800 billion. But that worry overlooks the Fed's amazing power to create as much money as it needs - out of nothing, as it were. Here's how it works. If an institution borrows, say, $50 billion from the Fed, the Fed can just post a $50 billion credit to the bank's account at the Fed, and the borrower can spend that balance on whatever it wants. It is indeed as if the Fed created cash out of nothing. And if the Fed somehow needed more than $800 billion of Treasury securities, it could buy them in the open market, and deposit the payment for them in the seller's Fed account. That way, the Fed could lay its hands on however many Treasury securities it needed. Yes, I'll grant you that this sounds odd. But if you ask a Fednik how this all works, he (or she) would tell you what I've just told you. Except that it would be dressed up in fancier language, with all sorts of explanations of how the Fed can do all this and still carry out its monetary policy." - Allan Sloan
senior editor at large, CNNMoney.com. Quoted from an article published July 22, 2008, entitled 'Two Fed myths that need debunking - Bernanke & Co. do not set interest rates, and they're not about to run out of money for bailouts.'
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[Quote No.29020] Need Area: Money > Invest
"As value investors, our ears prick up when significant declines [share market busts or new yearly lows for companies] occur, especially if there is a possibility that a diamond can be found in the rough. However before we consider making any investment decision, we must first seek an explanation for why [and has their price fall been overdone]." - Unknown
From issue 30 of 'Fundamentally StockVal', 23rd July, 2008.
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[Quote No.29021] Need Area: Money > Invest
"LPTs [Listed Property Trusts, also called REITs for Real Estate Investment Trusts] traditionally pooled money from hundreds of investors and bought quality buildings in growing cities with quality anchor tenants – those who can be relied upon to pay their rent on time. But it seems paddling along, collecting rents from a long-held portfolio of properties was not exciting enough for many managers and a large majority found more tantalising avenues to pursue. In the past five years many of the old structures were 'stapled' to the management company that received fees for managing the properties. This move enabled managers to diversify and leverage, but increased the risk to investors by exposing them to property construction and funds management... Historically, investors were attracted to LPTs by the promise of stable and steadily rising distributions. Structural changes saw managers reduce their focus on rent-funded distributions and instead pursue profit growth from acquisitions and revaluations. Coupled with rising property values and access to cheap credit, such developments resulted in the situation many now find themselves - over-geared in countries they don’t understand and struggling to sustain the same level of distributions when development profits and management fees are declining... A recent trend has seen managers pay out distributions in excess of operating cash flow, not unlike the strategy employed by infrastructure trusts. The strategy was simple; revalue financial assets upwards, borrow against those revalued assets and use the borrowings to pay out higher levels of income, in turn driving the unit price higher. This practice became the norm as unit holders became increasingly focused on the growth in their distribution levels. Paying distributions in excess of operating cash flow (i.e. what net cash the asset is able to generate) and substituting the deficit with borrowed money or equity raisings was never going to win any ‘best practice’ awards in the long term. Up until recently many LPTs were also doing this - paying distributions in excess of ‘reliable’ operating cash flows. A popular model has been to pay out development profits by borrowing against rising property valuations. While property values increased and LPTs made profits on constructing properties, distributions increased. The problem? This model only works when investors have access to cheap credit and rising property prices. Asset prices however don’t go up in a straight line and making money from developing properties can be speculative. Moreover, access to cheap credit – necessary to fuel the cycle - was a function of investment bank creativity and the party was always going to stop at some stage. [Keep this in mind should you ever consider investing in LPTs or REITs]" - Unknown
Quoted from 'Fundamentally StockVal', Issue 30, 23 july, 2008.
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[Quote No.29032] Need Area: Money > Invest
"Recessions are intrinsically the phase in the business cycle in which businesses and consumers exert restraint by unwinding some of the borrowing-and-spending excesses of the prior boom. [In this way their percentage of debt to disposable income reduces while their savings increase - in preparation for the next boom later to meet their pent-up demand, when interest rates and employment improves.]" - Dr. Kurt Richebacher
Editor of 'The Richebacher Letter', was a world-renowned author, economist, and international banker.
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[Quote No.29033] Need Area: Money > Invest
"All bubbles essentially end painfully, housing bubbles in particular. They are an especially dangerous sort of asset bubble, because of their extraordinary debt intensity. The debt numbers speak for themselves: In 1996, U.S. private households borrowed $332.2 billion; in 2000, their borrowing was up to $558.6 billion. With the housing bubble in full force, it hit $1,017.9 billion in 2004. This debt intensity has its compelling reason in the particular way that accruing 'wealth' has to be converted into cash. In the case of an equity bubble, in general, the owner realizes capital gains simply through selling a part of his stock holdings. No bank and no debt are involved. He directly exchanges stock for cash. In this respect, a property bubble is a totally different animal. Since homeowners normally want to stay in their house, 'wealth effects' have to be extracted through additional borrowing against the inflating property value; that is, through mortgage refinancing. In essence, twofold borrowing is needed: first, to boost housing prices; and second, to withdraw equity. But this debt intensity finds very little or no attention at all. Yet there is a second, even more dangerous, aspect to housing bubbles: They heavily entangle banks and the whole financial system as lenders. For this reason, as a matter of fact, property bubbles have historically been the regular main cause of major financial crises. During its bubble years in the late 1980s, Japan had rampant bubbles both in stocks and property. While the focus is always on the more spectacular equity bubble, hindsight leaves no doubt that the following economic disaster was mainly rooted in the property bubble. Both bubbles burst in the end, but the property deflation has continued for 13 years now, with calamitous effects on the banking system through a horrendous legacy of bad loans. As a result, Japan has been struggling for years with two kinds of endless price deflation: gradually in the prices of goods and services and savagely in asset prices. The main culprit in keeping the economy locked in chronic stagnation is the evil concurrence of protracted property and debt deflation plainly strangling the banking system. The third victim of a bursting property bubble is the building sector. Japan's has never recovered from the depression following its excesses in the late 1980s. After all, the property bubble of the late 1980s turned out to be the prescription for a 1930s-style debt deflation. In 2004, residential building contributed 0.51 percentage points to the reported U.S. real GDP growth, compared with 0.03 percentage points in 2000." - Dr. Kurt Richebacher
Editor of 'The Richebacher Letter', was a world-renowned author, economist, and international banker. Quoted from 'The Richebacher Letter', 6/1/2005, which accurately foretold the US real estate crash of 2007-9 and the dramatic sub-prime loan and banking crisis on the share market in July, 2008.
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[Quote No.29034] Need Area: Money > Invest
"The usual effect of the attempts of government to encourage consumption [for example intervention by central banks to unreasonably lower interest rates], is merely to prevent saving that is to promote unproductive consumption at the expense of reproductive, and diminish the national wealth [in the long run] by the very means which were intended to increase it. What a country wants to make it richer is never consumption, but production. Where there is the latter, we may be sure that there is no want of the former." - John Stuart Mill
Famous economist. Quote from his work entitled 'Of the Influence of Consumption on Production', from 'Essays on Some Unsettled Questions of Political Economy', published 1829.
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[Quote No.29035] Need Area: Money > Invest
"[It is important that value investors don't panic during bear markets.] You mustn’t get more bearish as the market falls. At the bottom of the market the outlook will appear worst of all." - Anthony Bolton
one of the UK’s most respected fund managers
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[Quote No.29036] Need Area: Money > Invest
"The best time to get into fixed-income securities, bonds, etc, is when the latest set of inflation figures confirm that interest rates have peaked. This allows you to buy in at this time and get a high yield and then as inflation falls and interest rates are reduced to stimulate the economy the price of the bond will appreciate, as its yield falls with interest rates, giving you both good yield on your initial investment and capital gain." - Seymour@imagi-natives.com

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