Morningstar Advisor - June/July 2009 - 46

Morningstar Conversation We’re now converting it into mandatory 10-year Treasuries, and that’s that.” Bergman: What do you make of the govern- ment’s stress tests on banks? Todd: Let me chime in with a little bit of Kane: I think we will only because they’re going to see that what they’re doing isn’t working and can’t work. It’s one of these instances where people eventually do the right thing, but only because there’s no choice to do anything else. Todd: People ask me, “When will you get the periods of time, it goes to real estate. In some periods, it goes to real production. In some periods, it goes to inflating paper of one kind or another. What distinguishes one period from another? But I am not as pessimistic as Walker. The flooding of money is, after all, worldwide at this point in the game. I note with fascination that we hear that the IMF is talking about issuing bonds that will be bought by the Chinese, Indians, Brazilians, and, God save us, the Russians. Who has the big dollar reserves and how can you get them to pump them? You get them to pump by giving them paper. Half the population of the world is still looking forward to next year. The other half is looking forward with dread, but half of them will keep going. You combine that with this flood of money, and we may muddle through it. Todd: Is the danger, though, that after you background. In Washington, the party line of both parties is that we don’t want to know anything about what was done in the U.S. in the 1930s, in part because of the political perception that that would be admitting that we’re reliving the 1930s. Neither party wants to bear that onus. So whenever I talk about the Reconstruction Finance Corporation or temporary nationalization or bank holiday or some device that gets you to more or less the same point of a quick, simultaneous fair market value evaluation of the banking system, nobody wants to hear about it, because my reference point is what was done in the U.S. in the 1930s. But if a reference point is foreign, they’ll listen to it. So they talk about the Swedish model of 1993 or the Japanese bank model of 1999. But both of those models were in turn relying on what was done here in the U.S. during the bank holiday of 1933, which was led by the RFC. Kane: I would like to underscore Walker’s point. RFC?” My answer is when they’ve tried everything else. Mayer: Well, I think that the bolstering of the commercial paper market has in fact done some of the things that they had hoped it was going to do. It’s in the banks, where their proper responsibility and powers are, that they’re screwing up. Todd: I agree with you, Martin, that the Fed has succeeded a little bit better than I thought it would in propping up the commercial paper market, which looked to be on its last legs last fall. But I think that has a short half life, and I can’t imagine that that rosy new world can last long in light of the continuing rise of unemployment, and the prospective shut down of half the automobile industry in the heartland. In agriculture, there are equally scary things happening. I think all the chickens will begin flocking home to roost in about the middle of the third quarter. Whenever the further downturn comes, if I’m right, what will these players do then for an encore? What happens if and when the next downturn comes? Mayer: I think one of the questions that has muddle through it, you reach the other side of the downturn and you look across and see the monetary tsunami coming back at you of all the liquidity you have created? Mayer: And then what do you do about it? I agree with that. I think the people who are in office three or four years from now are going to face some really nasty decisions. But in terms of how much deeper does this go, I’ve become a little less pessimistic in the last month myself. Kane: But when you say you’re less pessimistic, it is presumably because you expect inflation to cause a lot of nominal repricing that will make losses go away. It’s just a question of one poison for another. I don’t see how in the world the Fed can believe politics will allow it to extract even half of the huge amount of free reserves that are just waiting to become money supply. K Bill Bergman is a senior equity analyst with Morningstar. He also contributes to the Markets & Economy blog for MorningstarAdvisor.com. The term zombie bank came up in some hearings, and Bernanke said that the term had been invented in Japan in the late 1990s. Mayer: It’s yours, that term! Kane: No question about it. He said this, I believe, because he wanted to give the notion that we didn’t have anything in our history that you could compare it to. It shows the extent to which people will go to make it seem like this is a unique time in American history and that we have to have creative responses without any guidance from the past. Bergman: Will we see any more backbone on the part of our regulators in the next year? bewildered me is why there isn’t more work done on the question of what’s in the black box at the Fed when they put money out? How does that thing work? Where does the money go out? It seems to me that what Greenspan did was to put out money, and because it didn’t go into consumer price inflation, they could ignore the fact that it went into dotcoms and then it went into housing. But the Fed money goes somewhere, and it gets used by people eventually. In some 46 Morningstar Advisor June/July 2009
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Morningstar Advisor - June/July 2009

Table of Contents for the Digital Edition of Morningstar Advisor - June/July 2009

Morningstar Advisr - June/July 2009
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
Is SRI a Relevant Investment Strategy?
A Head for Numbers
Building a Business on SRI
Investment Briefs
The Liquidity Premium
Navigating the SRI Patchwork
Profit and Progress
How the Fed Contributes to Crises
Holding Steady
Appleseed Adds Value to SRI Formula
Four Picks for the Present
Long-Term Investors Can Find Value among Industrials
Higher Yields, Hold the Risk
Bargains in U.S. Industrials
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
Talkin’ ‘bout a Revolution
Morningstar Advisor - June/July 2009 - 47
Morningstar Advisor - June/July 2009 - Morningstar Advisr - June/July 2009
Morningstar Advisor - June/July 2009 - Cover2
Morningstar Advisor - June/July 2009 - Contents
Morningstar Advisor - June/July 2009 - 2
Morningstar Advisor - June/July 2009 - 3
Morningstar Advisor - June/July 2009 - New on MorningstarAdvisor.com
Morningstar Advisor - June/July 2009 - 5
Morningstar Advisor - June/July 2009 - 6
Morningstar Advisor - June/July 2009 - Letter from the Editor
Morningstar Advisor - June/July 2009 - Contributors
Morningstar Advisor - June/July 2009 - 9
Morningstar Advisor - June/July 2009 - Is SRI a Relevant Investment Strategy?
Morningstar Advisor - June/July 2009 - 11
Morningstar Advisor - June/July 2009 - A Head for Numbers
Morningstar Advisor - June/July 2009 - 13
Morningstar Advisor - June/July 2009 - 14
Morningstar Advisor - June/July 2009 - Building a Business on SRI
Morningstar Advisor - June/July 2009 - 16
Morningstar Advisor - June/July 2009 - 17
Morningstar Advisor - June/July 2009 - Investment Briefs
Morningstar Advisor - June/July 2009 - 19
Morningstar Advisor - June/July 2009 - 20
Morningstar Advisor - June/July 2009 - 21
Morningstar Advisor - June/July 2009 - 22
Morningstar Advisor - June/July 2009 - The Liquidity Premium
Morningstar Advisor - June/July 2009 - 24
Morningstar Advisor - June/July 2009 - 25
Morningstar Advisor - June/July 2009 - 26
Morningstar Advisor - June/July 2009 - 27
Morningstar Advisor - June/July 2009 - 28
Morningstar Advisor - June/July 2009 - 29
Morningstar Advisor - June/July 2009 - Navigating the SRI Patchwork
Morningstar Advisor - June/July 2009 - 31
Morningstar Advisor - June/July 2009 - 32
Morningstar Advisor - June/July 2009 - 33
Morningstar Advisor - June/July 2009 - 34
Morningstar Advisor - June/July 2009 - Profit and Progress
Morningstar Advisor - June/July 2009 - 36
Morningstar Advisor - June/July 2009 - 37
Morningstar Advisor - June/July 2009 - 38
Morningstar Advisor - June/July 2009 - 39
Morningstar Advisor - June/July 2009 - How the Fed Contributes to Crises
Morningstar Advisor - June/July 2009 - 41
Morningstar Advisor - June/July 2009 - 42
Morningstar Advisor - June/July 2009 - 43
Morningstar Advisor - June/July 2009 - 44
Morningstar Advisor - June/July 2009 - 45
Morningstar Advisor - June/July 2009 - 46
Morningstar Advisor - June/July 2009 - 47
Morningstar Advisor - June/July 2009 - Holding Steady
Morningstar Advisor - June/July 2009 - 49
Morningstar Advisor - June/July 2009 - 50
Morningstar Advisor - June/July 2009 - 51
Morningstar Advisor - June/July 2009 - Appleseed Adds Value to SRI Formula
Morningstar Advisor - June/July 2009 - 53
Morningstar Advisor - June/July 2009 - 54
Morningstar Advisor - June/July 2009 - 55
Morningstar Advisor - June/July 2009 - Four Picks for the Present
Morningstar Advisor - June/July 2009 - 57
Morningstar Advisor - June/July 2009 - Long-Term Investors Can Find Value among Industrials
Morningstar Advisor - June/July 2009 - 59
Morningstar Advisor - June/July 2009 - 60
Morningstar Advisor - June/July 2009 - 61
Morningstar Advisor - June/July 2009 - Higher Yields, Hold the Risk
Morningstar Advisor - June/July 2009 - 63
Morningstar Advisor - June/July 2009 - Bargains in U.S. Industrials
Morningstar Advisor - June/July 2009 - 65
Morningstar Advisor - June/July 2009 - Mutual Fund Analyst Picks
Morningstar Advisor - June/July 2009 - 67
Morningstar Advisor - June/July 2009 - 68
Morningstar Advisor - June/July 2009 - 69
Morningstar Advisor - June/July 2009 - 50 Most Popular Equity ETFs
Morningstar Advisor - June/July 2009 - 71
Morningstar Advisor - June/July 2009 - Undervalued Stocks
Morningstar Advisor - June/July 2009 - 73
Morningstar Advisor - June/July 2009 - 74
Morningstar Advisor - June/July 2009 - 75
Morningstar Advisor - June/July 2009 - Most Popular Variable Annuities
Morningstar Advisor - June/July 2009 - 77
Morningstar Advisor - June/July 2009 - 78
Morningstar Advisor - June/July 2009 - New at Morningstar
Morningstar Advisor - June/July 2009 - Talkin’ ‘bout a Revolution
Morningstar Advisor - June/July 2009 - Cover3
Morningstar Advisor - June/July 2009 - Cover4
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