Bipolar dupe: Buffett/Graham/Grant's Mr Market

Based on the standard of writing true stuff you didn't know before-- aka real wisdom and insight, as opposed to bloggerism and punditry-- James Grant of Grant's Interest Rate Observer is one of the most valuable contributors around. Read his WSJ piece, "The Confidence Game", which points out the foolishness of trusting our financial class to fix the mess they created. Read Grant-- his columns, his wonderful books, his newsletter (no, it's not a blog-- it's valuable, and you have to pay money for the value he provides). Ponder his insights. And get yourself a copy of Graham and Dodd's "Security Analysis" ASAP. There's not been a better time in the last two decades to buy US stocks. Graham and Dodd should be your guide.

1. "Treasury Secretary Hank Paulson harp[s]on confidence: 'Today, there is a lack of confidence in our financial system, a lack of confidence that must be conquered.' What Mr. Paulson did not get around to mentioning was the excess of confidence that preceded the shortfall...."

2. "High prices boost our confidence, low prices sap it. We seek out bargains in Wal-Mart, but run away from them on the New York Stock Exchange. The proliferation of investment bargains brings us no joy."

3. "In investment markets, confidence and coherence tend to restore themselves. The hardy souls who lead the way back derive their confidence not from the Treasury Secretary but from the pages of "Security Analysis," by Benjamin Graham and David L. Dodd, the value investor's bible. But these are frightening times, and there is no very large constituency favoring the natural restorative processes of free markets."

4. "In the past week alone, the Fed's balance sheet swelled by $179 billion, to a grand total of $1.77 trillion. In announcing such radical measures, intervening governments never fail to invoke confidence. They say they must restore it.

Destroying confidence, however, is what governments do best. And the confidence they can restore is usually the kind that got us where we are today. Inflation and moral hazard led directly to the immense overvaluation of equities and residential real estate -- and of the bloating of the leverage that sustained those prices...."