The key point Mr. Loyola touches on is the lack of accountability of our congressmen. There are very little “checks and balances” in the current system other than the elections themselves.

Another key point, and something we will never get tired of saying, is that one cannot forecast that the good times will go on indefinitely and assume that one can increase costs because the income is rising, incur in debt, and so on. There are always downturns, and they are made more troublesome precisely because one has loaded up the costs before the income melts away. This is an ages-old, proven concept that is apparently extremely difficult to accept and work with, and one doesn’t get more popular by saying “calm down, let’s save up instead of spend away our new-found wealth” in politics – yet that’s precisely the commendable conduct.

We try to do it with our money, which is invested alongside our clients’. It tends to make us go up less than the market in euphoric times, but it also tends to dampen setbacks when things go south. “To finish first, first you need to finish”.

Twenty years. The very fact that it seems like ancient history shows how far we’ve come, yet it still serves as a fresh warning.

Highlights:

On accountants: “A majority of the horrors we’ve faced would not have happened if the accounting profession were organized properly.”

On the actions taken in the middle of the crisis: “The problem is so extreme that nothing “un-extreme” has any chance of fixing it. So I basically applaud the people in the government that are doing these extreme things. I’m sure they’re making a lot of decisions that in retrospect will be seen as mistakes, but given human condition where they have to do extreme things under fire, I’m not inclined to criticize them.” (…) “I’m happy to see that the Obama administration has brought in Larry Summers, who is a ferociously smart man and will try to do the right things even if it offends some people.”

On what needs to be done in the US: “Not only do we have to save the financial system, (…) but we also need a huge spending stimulus from the federal government… I don’t regard that as all bad at all, there’s so much that needs to be done in this country. We need a whole electricity distribution system (…) Much can be done in medical care. The hospitals in this country are about to get a vast improvement in its facilities and that’s all for the good. (…) The dangers from what we have to do are less than the dangers that would plainly come if we responded as we did in the 1930′s.”

On the US allowing Lehman to fail: “It was not a mistake. It actually helps to have one or two go (…) You have to have a loud failure.” - he did have to think about it a lot before he actually said it, though...

Enter Greece and other European “peripheral” countries. Investors are finding it hard to simply exit “crisis mode” after the traumatic events of 2007/ 2008. We won’t fall into the trap of discussing Macro issues – not our core skill anyway – because the main issue here is that volatility, that friend of the long-term investor holding a lot of cash, is on the rise. This post collects some very interesting articles by the Financial Times on the subject of Greece’s (and Europe’s) woes, just as food for thought.

Why the Financial Times, a paid source? Because it’s the best coverage of European markets and economies. We highly recommend this source.

LINKS:

Greece part of unfolding sovereign debt story – Jan. 29th, 2010 – Mohamed El-Erian, CEO of PIMCO (world’s largest bond investor) discusses the EU’s options in light of the Greece situation. The major takeaway is that there is no easy solution, and therefore no solution without its scares and fits of panic.

Tipping the scales on global rebalancing – Feb. 2nd, 2010 – Bond investors are increasingly jittery and why the US and Asia seem safer than Europe.

Medicine for Europe’s sinking south – Feb. 3rd, 2010 – Economists Nouriel Roubini and Arnab Das write about how Greece is the front line of a larger battle for European stability – and again the tone is pessimistic since no easy solution appears in sight.

EC: A toothless regent in Greece? – Feb 3rd, 2010 – FT’s Money Supply blog on the obviousness of how the European Commission’s lack of powers ultimately leads to situations such as Greece’s. Will these debacles lead to increased scrutiny and – more necessarily – intervention?

Record volumes for sovereign CDSs and Portuguese bonds hit as Greece fears ease – Feb. 4th, 2010 – Greece’s plan is greeted with skepticism and pragmatism – bond investors have apparently decided that the next country in “the line of shame” is Portugal.