by Tanta on 9/08/2008 11:12:00 AM

Paul Krugman would like us all to get straight on the difference between "nationalization" and "deprivatization."

I wish Professor Krugman well in his endeavor, but I'm still waiting for the mainstream press to get clear on the difference between an "asset" and a "liability." Here's USA Today, headlined "Taxpayers take on trillions in risk in Fannie, Freddie takeover":

Freddie Mac and Fannie Mae combined own or guarantee $5.4 trillion in outstanding mortgage debt. The government's decision to place both agencies into a conservatorship — in essence, taking on responsibility for that debt by wresting control from the corporations — is an historic move.

I'm sure some regular readers of this blog think it's silly to be concerned about the level of ignorance and inanity appearing in USA Today, but I'm guessing that most voters get their information about things like the Fannie/Freddie deprivatization from headlines in the mainstream press, not the Financial Times or the Wall Street Journal. So the claim that $5.4 trillion in mortgages represent net liabilities of Fannie and Freddie, instead of assets, and that these are now liabilities of the taxpayers, is going to become one of those things that a lot of people "know" and quite possibly the only thing they "know" about this subject. Eradicating that "knowledge" is going to be tough.

by lama on 8/30/2008 10:53:00 AM

A pet peeve of mine is analysts. When is the last time you heard one of them speak about cash flows other than in passing? If you do not address the components of the Statement of Cash Flows, you cannot opine on the strength of the Balance Sheet or Earnings. What’s the problem? The Statement of Cash Flows is conceptually difficult to grasp as it’s traditionally taught. The statement might be called “Statement of all the other assets and activities affected cash.” It’s not that one thing is more important than the other 2, it’s that the stool needs 3 legs.
It’s even more important to know this now. Cash is always nice to have, but even more so in a down market when it’s not so easy to borrow cash. If any of you are buying individual stocks, you have to learn how The Statement of Cash Flows works. It is not possible to assess a company’s condition without understanding it. I surfed around a bit and didn’t find anything that was very good. The Wikipedia entry was as good as any.

http://en.wikipedia.org/wiki/Cash_flow_statement

Between long hours and airports, I did not have adequate time to assemble an adequate post on the topic but thought it worth a rant.