Randy Parker Hall of Fame

At left is Congressman Arthur Davis of the seventh district of Alabama. He is the newest member of the Randy Parker Hall of Fame. Why you ask? Because the guy is a stand up guy who has some guts. He said that his votes to support Fannie Mae and Freddie Mac were wrong and that he regrets them. He went on to say he wished more of his Democratic colleagues would come clean and do the same (I know, there is plenty of blame to go around). This guy is standing up and admitting his share of the blame and saying he was sorry for it. That's what a stand up guy does. So welcome to my Hall of Fame Congressman. Now go say hi to Jackie Robinson, upper right, because he is a Charter Member of the Randy Parker Hall of Fame.

And just to show you I am a stand up guy too, if I am going to let Congress have it when they do the wrong thing, I am going to praise them when they do right. Welcome Arthur Davis.

More Fundamentals from Thomas Jefferson...

With cudos to my sister-in-law Ginger who reminded me what Jefferson said : "A government big enough to give you everything you want is big enough to take everything you have."

Monday October 13 Reality Check Part III: Lessons from Home.

The world is falling down around your ears and you are wondering what will happen next. Well me too. Just remember one thing. You are who you are today because of certain fundamental principles you have followed through time. They are what have made you what you are and they need to be remembered and repeated in times like these.

I am just back from my 30th high school reunion. I did not go to the 10th or 20th, so this was a real treat. Some things were a shock to behold...like the guys who have done way too many drugs and had their eye balls spinning in their heads while they talked to you. But others told me inspiring stories of prevailing in the face of great adversity...children with special needs, spells of severe illness, deceased spouses and carrying on with two kids and not knowing what will happen in the future. Fancy elixirs and potions or magic spells did not get them through to the other side. They stuck to what they knew would work.

As you go forward, let me ask you to ask yourself what it is that defines who you are. Find that out and then stick to it. Because that is what is going to get this economy to the other side too. People rationalized and justified the legitimacy of the tech bubble during the 1990s with the mantra "All the old rules have changed! The old fundamentals don't apply any more!" I don't have to tell you about the internet bubble eh? Folks told me on visits to Florida in the recent past that they could foresee their real estate values sustain 20% per year increases indefinitely because this was a new and different market. Arthur Burns, Chair of the Fed back in the 1970s said the same thing during the recession of 1973-75 "the old rules don't apply anymore." They said the same thing in Japan in the 1980s and in the US during the 1920s hey days. It is a lie that you have to rise above.

Patton was quoted as saying "although I have fought under many guises, many names...in the end...always me."

And me...and you too.

Sunday OCTOBER 12 Reality Check Part II: Lessons from Horse Race Gambling

Good Morning. We go back to work tomorrow. So let's review one more time...

Horse race gambling rule #4: Scared money don't win.

When next week roles around there are going to be some great values around. Look me in the eyes and tell me this is not a full-blown financial panic like you read about in the history books. It is. The sell off has little to do with fundamental analysis and everythig to do with panic. Bank of America at $19? Sign me up. JP Morgan led by Jamie Dimon at $38? Order here! Petroleum stocks clobbered...I'll have some of those too. And I will buy with confidence because I have done my handicapping for myself (horse race gambling rule #1) and I am confident in my analysis. I don't buy equities with scared money.

And neither should you. If you don't have the guts to ride out market volatility then you should not have been here in the first place. And if you want to get back in but are going to worry about it, then you are playing with scared money and are going to lose.

But for those of you out there who want to make some plays and cash, now is looking like the time. If the market tanks to 5000 then who cares anyway.

Sunday OCTOBER 12th...Reality Check Part I: Lessons from Horse Race Gambling

Good morning. Rules become rules for a reason. It never hurtsw to go over and over them. So, we go back to work tomorrow and need to remember.....

Many of you have been clammoring for me to tell you all the rules of horse race gambling since I spilled #3: If you can't take the losses, don't bet.

Well now the good doctor is going to tell you the most important one by far. I can't leak them out all at once. They cost too much to learn myself. But here it is:

Horse race gambling rule #1: Do your handicapping for yourself.

That is, study the horses racing the day you are going to the track and trust your own analysis and choice making abilities. Don't rely on what you heard somebody say or the dreaded "common tout" who calls you over and says, "hey buddy, this horse is a sure winner, you got to get on it." Or they will say "your horse ain't got a chance in the world!" So you change your mind and the horse you got talked off of wins and pays $26.50. That is the surest way to be parted from your cash. Some stumble bum, broken down old horse player with a five-day beard, six teeth, and a hunch is going to determine your picks? No no! Don't fall for it.

So let me ask...how many of you are making your current investment decisions based on what you just heard on CNBC, or what Jim Cramer just said? "Ah ha! That is the piece of info I have been looking for! Sell, Sell, Sell!" Please understand I am not in the investment advice business with this blog. I am just asking you for some self-reflection. If this is how you are deciding to move your money, without any careful thoughts of your own, without doing your handicapping for yourself, then you are no better than some fool at the race track that bets the farm on the ranting of some stew bum common tout. Because that is what those talking heads on TV are. There is no difference here. And that is how you are managing your money. Like a fool.

I don't want to be too hard on anyone. But go through the above reality check to see if you fit. If you do, you are playing a very dangerous game that you are going to lose.

And if you see that broken down old horse player with a five-day old beard and six teeth at the track...tell my brother I said hi.

FRIDAY OCTOBER 10th OK, let's look at it again...

For those of you who are unaware, I have a one hour interview with Ben Bernanke in my second book (that's us on the left). We talk about the economics of the Great Depression for 60 minutes (that's all the time I had, see?). If you don't want to pop for the book it is also available free on my university web site http://www.ecu.edu/cs-educ/econ/parkerr.cfm . There is a link there that will give you the pdf file so you can read it all, if you wish. It is somewhat technical and may not be your cup of tea. I understand. So let me cut to the chase. On pp. 65-66 I have the following exchange with the Chairman (who was a Governor at the time, May 2005) :

Randall Parker: Are there any lessons from the Great Depression that need to be relearned?
Chairman Bernanke: As I said before, the two main lessons which I think have been learned to a large extent, but always can be re-emphasized, are first that a central bank’s primary responsibility is the maintenance of price stability, to provide low and stable inflation in the medium term, to avoid sharp inflations or deflations and particularly to avoid the instability of expectations associated with an unanchored price level. The second lesson is that the financial industry is a special industry in terms of its role in macroeconomic stability. Major
upheavals in the financial system can be extremely disruptive to the economy as a whole and therefore the central bank and other government institutions have a particular obligation to make sure that financial stability is preserved, that banks and other financial institutions are well capitalized and well managed and that there exists a mechanism for responding in the event of
crisis, such as the discount window or a deposit insurance system or whatever you need to make sure that the financial system will remain whole even under a great deal of stress.

That is what the man said. I am reminded that during the 50th anniversary of the founding of the State of Israel, the Knesset invited a survivor of the holocaust to come before them and tell them the one thing he has learned from his life's experiences. He told them "when someone tells you they are going to destroy you, you have to believe them!"

Read it again...."or whatever you need to make sure that the financial markets remain whole even under a great deal of stress." When Dr. Bernanke says "whatever you need" you have to believe him!

SATURDAY OCTOBER 11th Name that photo...

Hey, it is the weekend so let's have some fun. On the left is my #1 horse playing buddy Marshall Gramm. He is the Chair of the Department of Economics and Business at Rhodes College http://www.rhodes.edu/ in Memphis, Tennessee. Here he is with the famous stallion Cozzene (go ahead and click on it). Cozzene recently died and that is too bad. He had a wonderful life. Cozzene won 10 times and hit the board (that is came in 1st, 2nd, or 3rd) 20 out of 24 races in his career. He will be missed. Cozzene went out on a high note being retired after he won the Breeder's Cup Mile in 1985.

As Rod Stewart instructed me when I was younger and had more hair "Every picture tells a story don't it?" http://www.youtube.com/watch?v=LhemoVkL9LQ That song still gets me really pumped up. Anyway, if every picture tells a story then every picture needs a name too, right? Here's my name choice for the picture in the upper left...how about "One Horse and One Jackass". For those of you who have a mustard seed of interest in horse racing, you can visit Marshall's excellent horse racing blog at http://www.equinometrics.com/ . As for his choice in friends, I keep demonstrating that it is somewhat lacking.

THURSDAY OCTOBER 9th Big Guns...

I am sure I don't have to tell any of you just what a critical time it is in our economic history. Where we wind up will depend crucially on what policies we pursue. Read this short piece from the Wall Street Journal written by my friend Lee Ohanian:

http://online.wsj.com/article/SB122342618776613613.html


Dumb things got us into this. Dumb things will make it much worse. Ask yourself if higher taxes and autarky are the right paths to go down at this particular time. If your answer is "yes" then congratulations, we are now on the fast track down the road to serfdom as Hayek coined it.

And what's this business about the Fed doing too much or over stepping their bounds? Eh?
Let me disabuse you of the notion that Ben Bernanke is going to throw up his arms, give up and
quit when he still has bullets in his gun. He fired off some more rounds yesterday. It ain't happening dude. The picture on the upper left is the U.S.S. Wisconsin firing off her 16 inch guns at night. Cool huh? Think in these terms. Or alternatively, watch the video below of the poor schmuck who brought a rifle to a tank fight.





This thing is not going over the edge as long as there is anything the Fed can do about it. You can cash that ticket pard. You hit it with everything you got like that poor schmuck on the receiving end in the video.

Read this short blurb about who we have in the driver's seat (thanks Phil):
http://economix.blogs.nytimes.com/2008/10/08/in-praise-of-bernanke/

He knows what to do, and he is doing it.

Now, do you suppose that poor schmuck ever heard about camouflage?

Subprime Primer...fasten your seat belt.

Who says life has to be complicated? Fine dining is one of my main hobbies. While many of the up and coming hot new chefs are making sauces with cactus needle juice and insist on ingredients from ports unknown, for my part, it is still hard to beat the simple things like a martini to kick start the party followed by a grilled veal chop and a great bottle of California Cabernet Sauvignon or a French Bordeaux.

On today's menu we have a simple, uncomplicated offering...the subprime mess explained by...stick figures (thanks to ECU Department of Economics Alumni Hall of Fame member Derek Pszenny). When this originally came across the desk of the funny economist (Hey that's me! http://www.funnyeconomist.com/) it was R rated. Well we can't have that. So I have made it into a G rated piece. This is a family web site. We want to make sure our itsy-bitsy econ bloggers don't need no naughty words explained by mommy and daddy.

So fasten your seat belts...with apologies to our Norwegian friends...if I must say so myself...this is funny. Click on the link below and then start the slide show from the beginning. For some reason I can't get it to just start there.


http://www.funnyeconomist.com/Subprimeexplanationclean.pps

Barney Frank plays Claude Raines...Or...Who you got in the pick 6 at Belmont?

OK, Congress is now on the warpath and wants heads on sticks for "who did this to us". Well I think they should have what they like. If you have not done so already, read this short piece by Charlie Calomiris and Peter Wallison (Charlie Calomiris is interviewed about the economics of the Great Depression in my second book and is a majorly serious scholar).

http://online.wsj.com/article/SB122212948811465427.html

Is there anything here that is beyond common comprehension???

There is plenty of blame to go around, but maybe Congress should start by looking in the mirror. But this is not going to happen. Just look at the behavior of a one Mr. Barney Frank. It wasn't his fault...OH NO...don't blame him.

This is the worst Claude Raines impersonation I have ever seen. Remember old Claude (that is him above next to Representative Frank)? He was the guy in Casablanca who closed down Humphrey Bogart's casino when he was "shocked, shocked to find gambling going on." Then someone handed him his winnings and he said "Thank you."

http://www.youtube.com/watch?v=nM_A4Skusro

The good folks of Congress are so pathetic and nauseating because they don't even have the guts to admit they were gambling and encouraged all the too-smart-by-half derivative geeks on Wall Street to come along for the ride. You make these stupid loans...we will buy them and insure them. Heads you win, tails you win and get bailed out.

I tell you what all you broken down horse players out there, if someone said to me, "Parker, go to the horse races every day...bet all the money you got. If you win you keep it. If you lose Warren Buffet will give you all your money back and you can start again tomorrow fresh." I would only have one question, "who you got in the pick 6 tomorrow at Belmont?"

Years ago, Colin Powell indicated he thought America needed "a new sense of shame." I think that is more true now than ever. Congress is the last place you will find it.