The Bank of Portugal said the use by domestic banks for the various facilities available from the ECB rose to €56.3bn in March – up from €47.5bn in February and greater than the previous record level of €49.1bn in August 2010.

Bailed out by the EU and International Monetary Fund in April 2011 for €78bn, Portugal has €12bn earmarked for bolstering its banks’ capital positions if necessary in the months ahead.

The plight of Portugal’s banks was revealed following the cash injection by the ECB in February when the central bank lent €529bn to 800 banks across the eurozone through its long-term refinancing operation (LTRO).

Portuguese banks were among those frozen out from the wholesale funding markets – where banks borrow from each other or professional investors – during the height of the eurozone crisis and as a result are among a number in the eurozone that utilise ECB funding.

“I think it’s natural and reasonable for banks to have taken advantage of these funds under the circumstances, especially after the ECB relaxed some collateral requirements before February’s injection,” Teresa Gil Pinheiro, chief economist at Banco BPI in Lisbon, told Reuters.

“The LTRO injection was in late February so it’s natural that it is registered in March,” she said.

The Portuguese continued reliance on ECB funding comes amid fresh concerns in the eurozone about the price at which the governments of Spain and Italy can borrow on the markets.

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Home prices will decline 12 percent to 14 percent, according to research and advisory company R.R. de Acuna & Asociados, after Economy Minister Luis de Guindos in February gave lenders two years to make 50 billion euros ($67 billion) of additional provisions and capital charges for losses linked to real estate. That’s the most since the National Statistics Institute started tracking values in 2007. Standard & Poor’sforecasts borrowers with negative equity may rise to 25 percent this year from 8 percent in 2010, based on an analysis of 800,000 mortgages.

“There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.”

Spain’s Prime Minister Mariano Rajoy and his People’s Partyare betting the overhaul will help bolster confidence in the country’s banks without undermining a drive to tackle its budget deficit that’s threatening to reignite Europe’s debt crisis. The move is likely to force banks to sell assets cheaply, accelerating a four-year decline in residential property prices that are already 30 percent below the peak.

Government Decree

The government’s Feb. 2 decree on real-estate provisions is already leading to reduced sales prices. In the week after the plan was announced, more than 10,000 homeowners who use Idealista.com, Spain’s largest property website, lowered their asking prices. That’s 30 percent more than the weekly average during the previous month.

Banco Santander SA (SAN), Spain’s largest lender, and CaixaBank SA (CABK), the fourth-largest, are offering homes at discounts of as much as 50 percent on their Altamira and Servihabitat property websites. Bankia SA (BKIA), the No. 3 bank, went even further on March 15 by announcing that the company aimed to sell 9,000 properties this year at discounts of as much as 60 percent.

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• “The country is technically bankrupt. If you and I were in business, we would have to declare bankruptcy. Governments print money so they can get away with it. But we are insolvent and the debt will never be paid for.” –Ron Paul

• “No, the U.S. will go bankrupt. It’s just, look at the numbers, it is impossible [to pay back the debt].” –Jim Rogers
• “A chaotic future will be the result if our representatives continue to fail at their fiscal restructuring responsibilities… our nation’s fiscal mess is like a life threatening cancer that is not being treated.” –Robert Rodriguez, FPA Advisors
• “Our nation is going broke, and we are passing the costs of these misguided policies to our children and their children… we are certain to face a financial crisis like Greece or Portugal.” –Heritage Foundation, 2011 Saving the American Dream Plan
• “Nation’s debt passes grim milestone” –MSNBC Headline 1/9/2012

Even our own government is sure we are broke and our national debt is choking economic growth. Below is a slide from a presentation given to Greg Mankiw’s infamous Harvard EC10 class by Congressional Budget Office Director Douglas W. Elmendorf on February 24, 2012.

It’s official then: everyone agrees it seems, we are bankrupt. Time to move to Canada before the national debt apocalypse is upon us.

Before we panic, let’s look at some facts. We will also go over why the CBO’s slides are dead wrong. Curious statistics point to the fact that maybe we aren’t bankrupt after all.

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“But at this level we don’t think yet that — particularly given the other good news we’ve seen in labor markets and so on — we don’t think it’s going to be anything that’s going to stall the recovery,” said Bernanke in an ABC News interview on Tuesday.

Bernanke added that the nation’s 8.3-percent unemployment rate remains “too high” and that it is “far too early to declare victory” on an economic recovery.

Getting the housing market back on track and adding additional jobs for the long-term unemployed remain challenges for the economic recovery, he said.

About 40 percent of out-of-work Americans have been unemployed for longer than six months.

“Those people are obviously facing a lot of hardship,” he said.

Bernanke’s remarks came a day after he surprised markets by saying the labor market remains weak and that the Fed could still do more easing if needed.

While not a departure from his previous comments, traders took Bernanke’s speech to mean that Fed action is still a strong possibility.

Markets had been calculating reduced chances for a third round of quantitative easing after Bernanke’s less dovish comments in congressional testimony earlier this month. The Fed’s post-meeting statement March 13 also gave a nod to an improving economy without expanding on further easing.

But Bernanke’s comments this week, including the ABC interview, reinforced speculation that the Fed was prepared to step back in if needed to boost growth.

Source: CNBC

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Do you know which specific investments that Buffett made in his early career gave him his biggest returns and generated his initial wealth?

What did he see in these companies that led him to invest in them?

- Ryan

If you read Alice Schroeder’s “The Snowball” you can easily find the investments that generated Warren Buffett’s initial wealth.

Here, I’ll talk about just the first $100,000 Warren Buffett made investing in stocks.

We’ll start after Warren Buffett first read “The Intelligent Investor” but before he started taking Ben Graham’s class at Columbia. Buffett already owned Marshall Wells before he took Ben Graham’s class. He still owned the stock when he went asked David Dodd (co-author of “Security Analysis“) if he could skip Dodd’s class and go to Marshall Wells’s annual meeting. This is where Buffett first met Walter Schloss.

Let’s take a look at Marshall Wells when Buffett owned the stock.

Marshall Wells

· Biggest hardware wholesaler in America

· $200 stock price

· $62 earnings per share

So, the stock was selling for a little over 3 times earnings. The earnings yield – “E” divided by “P” – was about 30%.

This brings me to the first point I need to make about Warren Buffett’s early investing career. Warren Buffett worshipped Ben Graham. But there’s this idea that Warren Buffett started out as a Ben Graham type investor. That’s false. Buffett bought some Ben Graham type stocks – like net-nets. Graham had a big influence on which stocks Buffett picked. But Warren Buffett never invested the way Ben Graham did.

More on that later.

For now, the big difference we need to discuss between early Warren Buffett and Ben Graham is that Warren Buffett is, was, and always will be a return on investment investor. He’s not a value investor in the sense that he sees some static value and buys at a 50% discount to that.

Buffett is obsessed with the idea of compounding.

When Warren Buffett started taking Ben Graham’s class there was already a big difference between Graham and Buffett in that Graham was thinking about earning a good return on his investment capital, protecting the safety of his principal, and beating the market over time. Warren Buffett was thinking about compounding wealth. He was interested in getting rich.

There’s a huge difference there. Ben Graham – and later Walter Schloss – made a habit of returning a lot of their partnership’s gains. So, if you had $100 invested in Graham-Newman and they earned 15% on your money – the default idea was not necessarily to take that $115 and try to turn it into $132.25 next year. The first idea in Graham’s head was: “I can earn 15% on $100 safely”. So, he was concerned with how much capital the partnership could operate with and still beat the market while taking less risk.

Graham was never concerned with compounding the partnership’s wealth over time.

This is a huge difference from Warren Buffett. When Buffett ran a partnership, he took $1 and turned it into something like $27. That was always his goal. To grow wealth. Not just earn a decent return safely.

This is something Buffett wanted to do even before he knew anything about value investing. Buffett’s obsession with compounding wealth over time predates his conversion to value investing. And it was never something he had to “learn” after his time with Ben Graham. He was always obsessed with return on investment as being the key to compounding. That doesn’t mean he was obsessed with the company’s return on its own capital. But, from the earliest days, he thought of stocks in terms of the return they generated for him – not in terms of the discount to some fixed intrinsic value.

This caused Warren Buffett to invest very differently from Ben Graham – even while he was working for Graham.

It’s interesting to note that Buffett managed to invest very differently from Ben Graham even while he bought almost the same exact kinds of stocks Ben Graham bought. In fact, sometimes he literally bought the same stocks Graham bought. But Buffett always got much better results.

Why?

Because he focused. Warren Buffett told Charlie Rose that “focus” was the key to his success. He’s repeated over and over again that he doesn’t necessarily have more good ideas than other investors – he just has fewer bad ideas. Buffett focuses on his very best ideas and puts as much money as possible into those ideas.

If it sounds like I’m exaggerating when I say “as much money as possible” – check out the next stock:

GEICO

Buffett found out that Ben Graham was the Chairman of GEICO. Graham-Newman bought a huge block of GEICO stock in the past. They got the stock at a Ben Graham type price. But GEICO turned out to actually be a wonderful growth stock. Investors who kept their shares of GEICO when Graham-Newman distributed them made a lot of money over time.

GEICO’s headquarters were in Washington. So, one Saturday, Buffett took a train from New York (where he was going to school) down to Washington. You’ve probably heard this story before. Buffett knocked on the door. The only person there was Lorimer Davidson. Davidson later became CEO of GEICO. He put together the Graham-Newman deal.

Anyway, he knew a lot about GEICO. There was no better person for Buffett to meet. So, Buffett started asking him questions. And he kept answering them. And this went on for hours. Davidson explained to Buffett that GEICO was the low-cost operator in the car insurance business because they did not use agents. Buffett was sold on GEICO’s future prospects. Here is Buffett’s response as described in The Snowball…

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