The annual shareholder letter from Leucadia National Corporation is always stimulating. A few passages I liked from the latest one, which I just got in the mail:
It is ironic that the financial shenanigans that begat the financial crisis in the first place are being treated and ostensibly cured by financial shenanigans of our own government.
We have read a lot about the ongoing deleveraging of America. In case you don't start and end your day with your nose in the Wall Street Journal, deleveraging is the newly rediscovered concept of paying your debts without reborrowing.
Jon here: I think they are correct. People seem to have come to see refinancing their debts as something almost like a political right attached to being a citizen. The idea that you actually have to pay them off is...un-American!
The debt elephants in the room are national and state governments.
The Federal Reserve has said it will continue to suppress interest rates for the foreseeable future, postponing the pain for the overleveraged as well as postponing the inevitable witching hour when governments are forced to take the bitter medicine of raising taxes, cutting expenditures, or both.
The full letter is in the new annual report, which is here. To be clear, I make no recommendation on the stock either way. The guys who write the letter -- Ian Cumming, Chairman, and Joseph Steinberg, President -- are very smart and there is much to be learned from their point of view and their business history.
By the way, I do think that if we tried to bring our budget into balance or near-balance immediately, either through raising taxes or cutting spending, it would cause more political pain than our system can handle. But we do need a clear and credible path to doing that, else we risk losing the faith of the creditors who buy our bonds.