Rest assured, we have not changed our outlook. We will from time to time use extremes to add to or reduce positions as we deem necessary. This behavior is simply prudent portfolio management but our primary convictions are not swayed by Government or Fed comments, which are notoriously misleading. In fact, I have a running debate with a colleague who seems determined to drink the Kool-Aid the Fed chairmen and treasury secretary are serving. He quotes testimony as if it’s gospel and I fear for his portfolio safety.

The US Dollar’s position as the world’s reserve currency isn’t under threat. Our trust in US Treasuries is absolutely unshakable.” – Japanese Finance Minister Kaoru Yosano – June 10, ’09

(Russia) “does not see any changes in our policy with regards to dollar-denominated paper over the next year or more.” – Russian Finance Minister Alexei Kudrin – June 12, 2009

German Finance Minister Peer Steinbrueck was reported to “not be concerned” with
the Euro’s value against the US Dollar

IMF Managing Director Dominique Strauss-Kahn “doesn’t see a weak US Dollar”.

We must invoke here nineteenth century German Chancellor Otto von Bismark’s “law” – “Never believe anything in politics until it has been officially denied three times”. There’s four for you, and there were undoubtedly many more during the G-8 Finance Ministers’ meeting in Italy.

RCM Comment: The US$ has gained strength on these stories. Does the fable of the fox and the gingerbread boy ring any bells?

The Confidence Game In Quotes: Courtesy of the Austrian Filter

February 28, 2007 – Dow Jones @ 12,268

March 13th, 2007 – Henry Paulson: “the fallout in subprime mortgages is “going to be painful to some lenders, but it is largely contained.”

March 28th, 2007 – Ben Bernanke: “At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,”

March 30, 2007 – Dow Jones @ 12,354

April 20th, 2007 – Paulson: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained.” , “All the signs I look at” show “the housing market is at or near the bottom,”

April 30, 2007 – Dow Jones @ 13,063

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

May 31, 2007 – Dow Jones @ 13,627

June 20th, 2007 – Bernanke: (the subprime fallout) “will not affect the economy overall.”

October 15th, 2007 – Bernanke: “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

December 31, 2007 – Dow Jones @ 13,265

January 31, 2008 – Dow Jones @ 12,650

February 14th, 2008 – Paulson: (the economy) “is fundamentally strong, diverse and resilient.”

February 28th, 2008 – Paulson: “I’m seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street.”

February 29th, 2008 – Bernanke: “I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”

March 16th, 2008 – Paulson: “We’ve got strong financial institutions . . . Our markets are the envy of the world. They’re resilient, they’re…innovative, they’re flexible. I think we move very quickly to address situations in this country, and, as I said, our financial institutions are strong.”

March 18th, 2008 – Bear Stearns Bailout Announced

May 7, 2008 – Paulson: ‘The worst is likely to be behind us,”

May 16th, 2008 – Paulson: “In my judgment, we are closer to the end of the market turmoil than the beginning,” he said.

May 30, 2008 – Dow Jones @ 12,638

June 9th, 2008 – Bernanke: Despite a recent spike in the nation’s unemployment rate, the danger that the economy has fallen into a “substantial downturn” appears to have waned,

July 16th, 2008 – Bernanke: (Freddie and Fannie) “…will make it through the storm”, “… in no danger of failing.”,”…adequately capitalized”

July 20th, 2008 – Paulson: “it’s a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation.”

July 31, 2008 – Dow Jones @ 11,378

August 10th, 2008 – Paulson: “We have no plans to insert money into either of those two institutions.” (Fannie Mae and Freddie Mac)

September 8th, 2008 – Fannie and Freddie nationalized. The taxpayer is on the hook for an estimated 1 – 1.5 trillion dollars. Over 5 trillion is added to the nation’s balance sheet.

September 16th, 2008 – $85 Billion AIG Bailout “Loan”

September 19th, 2008 – $700 Billion Bailout Plan Announced

September 19th, 2008 – Paulson: “We’re talking hundreds of billions of dollars – this needs to be big enough to make a real difference and get at the heart of the problem,” he said. “This is the way we stabilize the system.”

September 19th, 2008 – Bernanke: “most severe financial crisis” in the post-World War II era. Investment banks are seeing “tremendous runs on their cash,” Bernanke said. “Without action, they will fail soon.”

September 21st, 2008 – Paulson: “The credit markets are still very fragile right now and frozen”, “We need to deal with this and deal with it quickly.”, “The financial security of all Americans … depends on our ability to restore our financial institutions to a sound footing.”

September 23rd, 2008 – Paulson: “We must [enact a program quickly] in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ financial well-being, the viability of businesses, both small and large, and the very health of our economy,”

September 23rd, 2008 – Bernanke: “My interest is solely for the strength and recovery of the U.S. economy,”

October 31, 2008 – Dow Jones @ 9,337

March 31, 2009 – Dow Jones @ 7,609