Some of the best financial quotes of the past month.
Speculation continues to rage on the fate of sterling, and other currencies and sovereign debts.
Following last month's comments on British government debt from PIMCO's Bill Gross -- "[British] Gilts are resting on a bed of nitroglycerine" -- the head of the UK's Debt Management Office, Robert Stheeman, declared himself to be "very comfortable" sitting on nitroglycerine.
Former Chief Economist for the World Bank, Joseph Stiglitz, appears to take a positive view of national debts in general. Dismissing fears of a Greek default, according to the Telegraph, he urged national authorities to intervene in the markets to "teach the speculators a lesson". Why anyone would want to exact revenge on people for allocating their capital as optimally as possible was not explained.
"[the idea of a default by Britain or the US] is so absurd, it's another reflection of the absurdities in the financial markets … the likelihood of a default is so small, particularly in the US because all we do is print money to pay it back."
Long-term savers may not feel so reassured by those remarks, honest though they may be.
Niall Ferguson, on the other hand, takes a different view:
"US government debt is a safe haven the way Pearl Harbour was a safe haven in 1941."
Buffettology
Buffett-watchers have had more material to pore over, with the release of his latest letter to investors. Addressing the vexed question of personal risk and reward in the financial sector, the Oracle of Omaha proclaims:
"The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. … CEOs and, in many cases, directors have long benefited from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well."
The difficulty of outperforming the market with a fund as large as Berkshire Hathaway was also on his mind.
"Berkshire has many outstanding businesses and a cadre of truly great managers, operating within an unusual corporate culture that lets them maximize their talents. Charlie [Munger] and I believe these factors will continue to produce better-than-average results over time. But huge sums forge their own anchor and our future advantage, if any, will be a small fraction of our historical edge."
Recent announcements also show that Buffett has increased his company's stake in Tesco (LSE: TSCO). You can find his full letter at this link.
Buffett is, at least in principle, a big fan of keeping it simple. Also in this camp is behavioural finance guru James Montier, and he blames the current crisis partly on the way in which mathematics and theory took over from common sense and experience:
"The reason for this obsession with needless complexity is clear: it is far easier to charge higher fees for things that sound complex. We would be far better off if we abandoned our obsession with measurement in favour of understanding a trinity of risks ... valuation risk (buying an overvalued asset), business risk (fundamental problems), and financing risk (leverage)."
Keeping the taxman happy
Finally, although this looks like it has been around for some time, I have to credit the Evening Standard for highlighting recently this very useful piece of the American tax code:
"If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner."
No, it's not a hoax -- I can even give you this link to it. I'm sure many conscientious thieves are glad to have that issue clarified officially.
More from Padraig O'Hannelly:
