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The Squam Lake Report: Reforming the Financial System
by Dougal Williams,
Ken French and Robert Shiller were among a group of leading economists who, in the fall of 2008, convened what was to become known as the Squam Lake Group. Their recently released and much-talked about book offers its authors' collective best answer to a defining question of our day.
Looking Back at a Year of Policy Mistakes
by Michael Lewitt,
As we approach the end of 2010, the global economy remains captive to a boom-and-bust cycle resulting from years of pro-cyclical monetary, fiscal and regulatory policies. With very limited exceptions, the same policies that contributed to the 2008 financial crisis remain in place. The only difference is that government balance sheets are far more leveraged than they were heading into that crisis.
Keynesian Confusion
by Michael Lewitt,
Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.
Employment is Main Focus of Fed Policy
by Asha Bangalore of Northern Trust,
The Fed is widely expected to announce the details of the second round of quantitative easing following its two-day meeting ending November 3. Advocates of QE2 expect lower interest rates to lift all interest-sensitive expenditures, including home purchases, mortgage refinances and business expenditures. In addition, bankers could be more likely to lend given paltry earnings from excess reserves and Treasury securities. Finally, the benefit of increased exports from a depreciation of the dollar may reflect in headline GDP.
Triple Down: Fannie, Freddie, and the Triumph of the Corporate State
What we need from the Federal Reserve is some leadership on the issue of making the White House take responsibility for restructuring the economy. The Fed should be telling the healthy banks to start taking a bit of risk, making some loans instead of buying Treasury bonds and agency mortgage-backed securities. A bit of increased competition in the origination channel so that performing borrowers can get a refinancing closed will unblock the economy and also do wonders for the efficacy of Fed policy.
An Exceptional Resource for Asset Allocation
by Michael Edesess,
Roger C. Gibson's fine and exemplary book, Asset Allocation: Balancing Financial Risk, Fourth Edition, shows that character and conscience-based counseling still exist, even in the financial profession. It is still possible for advisors to look out for their clients' long-term interests.
The Fed's Zero Rate Policy is Destroying America
If the Federal Open Market Committee does not soon allow interest rates to rise and thereby rebalance the policy equation between American savers and borrowers, then gold prices will climb further. Federal Reserve Chairman Ben Bernanke and the FOMC will hand the detractors of the central bank led by U.S. Representative Ron Paul the political issue they need to eliminate the Fed once and for all. And President Barack Obama will be wearing the concrete booties that once belonged to President Herbert Hoover. Unlike your worthless greenbacks, you can take that to the bank.
In a Word, Surreal
by David A. Rosenberg of Gluskin Sheff,
Why do so many people think bonds are in a bubble when they are actually the most detested asset class out there? After all, as we saw in the tech mania of the late 1990s and the housing mania of 2003-2006, bubbles usually involve a mix of adulation, admiration and adoration with the asset class in question, which is obviously missing in the current case as it pertains to Treasury securities. You can't lift up a newspaper or watch a business program on TV and not see pundit after pundit talking about the dangers of being invested in bonds. Something here is amiss.
The Future of Oil
by Robert Huebscher,
No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.
The Centre Cannot Hold
by Michael Lewitt,
"A refusal to shed discredited monetary and fiscal policies and embrace creative and politically bold solutions is keeping our economy mired in high levels of structural unemployment and below-trend growth," writes Michael Lewitt in the latest edition of the HCM Market Letter. He also believes that "misguided faith in Keynesian solutions to debt crises, a near-religious belief that mild deflation must be avoided... and uninformed media hype about the alleged benefits of mergers and acquisitions" should be added to the list of bad ideas that lead economic policy and markets astray.
Mel Brooks and the Bankers
by Thorvaldur Gylfason of VoxEU,
In Mel Brooks' hit film and Broadway musical The Producers, those charged with making their musical a success instead try to profit from making it a spectacular failure. This column argues that some bankers may have been playing the same game in the run-up to the global crisis. If so, just as in The Producers, the perpetrators should be heading to jail.
This is No Way to Run a Railroad
by Michael Lewitt,
In the latest edition of the HCM Market Letter, This is No Way to Run a Railroad, Michael Lewitt says the railroad known as the United States economy is chasing its own tail these days. Driven by misbegotten fiscal and monetary policies that ignore the lessons of history in favor of discredited financial and economic theories, the economy is trapped in a cycle of boom and bust. Lewitt also comments on the bond market, the European stress tests, GM, and the private equity industry.
Mr. Gross Goes to Washington
by Bill Gross of PIMCO,
Americans now know that housing prices don't always go up, and that they can in fact go down by 30-50 percent in a few short years. Having grown accustomed to a housing market aided and abetted by Uncle Sam, the habit cannot be broken by going cold turkey into the camp of private lending. Private mortgage lenders will demand extraordinary down payments, impeccable credit histories and significantly higher yields than what markets grew used to over the past several decades.
Fed Downgrades Economic View
by Brad Sorensen of Charles Schwab,
The Fed isn't yet ready to raise interest rates, even though doing so could be beneficial. Raising rates would give savers a bit of a return in money market-type vehicles, potentially spur those now on the sidelines of the market into action, and give the Fed some wiggle room down the road should it need to slash rates again.
Is the Market Efficient?
by Adam Jared Apt,
After Marxism, no economic theory today may be as derided and despised as the hypothesis of market efficiency. The idea is often misunderstood, sometimes willfully. So what does "market efficiency" mean? In the latest installment of his series for the educated layman, Adam Jared Apt provides some answers.
Who Cheats More?
by Dan Ariely of Predictably Irrational,
Dan Ariely provides a video of a short talk on cheating he gave on July 7 in San Francisco. While most people think that citizens of other countries cheat more than Americans do, Ariely's research has found that people from Israel, Italy, China and the U.S. all cheat about the same amount. Ariely has also found that bankers cheat twice as often as politicians do.
How to Fix the SEC
by Bob Veres,
Bob Veres' view is that the SEC is adequately funded, but perhaps is not ideally allocating the resources it already has. Fiduciary standards and regulatory reform are only part of the solution to protecting consumers from the predatory behavior of some financial services professionals in our midst. The remainder of the fix is potentially uncomplicated. See Bob's other contribution below.
Inflation Protection Investment Strategies
by Vern Sumnicht,
The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.
Why Wall Street Won't be Reformed
by Robert Huebscher,
Michael Lewitt, author of the highly respected HCM Market Letter, has just released a new book, The Death of Capital. In this interview, he identifies the challenges facing those who seek to regulate Wall Street, and why most of the proposed reforms are likely to fail.
The First Thing We Do, Let?s Kill All the Quants
by Michael Lewitt,
In the latest issue of the HCM Market Letter, Michael Lewitt draws the parallels between the Gulf of Mexico oil spill and financial reform - both, he says, demonstrate our inability to learn from our mistakes. Lewitt also comments on quantitative trading strategies, economic recovery and the capital markets.
Spain: After the Bubble
by Charlie Curnow,
Today, Barajas Terminal 4 one of the most visible artifacts of the profligacy that fueled Spain's property bubble and led to the country's current financial crisis. Spain, like several other European states, has continued to spend rapidly over the past two years, even as its economy has contracted. As a result, the Spanish government's debt has skyrocketed, raising fears of a possible sovereign default.
God Is Dead: The Implications of the Goldman Sachs Case
by Michael Lewitt,
Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.
Paul McCulley?s Design for Financial Regulation
by Robert Huebscher,
PIMCO's Paul McCulley parents his 20-year-old son with an overarching principle: If you want access to the "Bank of Dad," then you must comply with the regulations of the "Bank of Dad." Wall Street abandoned similar tenets with in the run-up to the credit crisis, and now McCulley says that core principle - to play the game, you must accept regulation - needs to be restored before another crisis unfolds.
The Four Horsemen of Growth: David Kelly?s Guide to Markets
by Katie Southwick,
With unprecedented volatility now largely behind us, J.P. Morgan's Chief Investment Strategist David Kelly believes that the economy is entering a period of recovery. To move forward, we must abandon our negative mindsets and focus on opportunities for expansion.
Reputational Risk: In Goldman Sachs We Trust
Last week during the media feeding frenzy surrounding Goldman Sachs disclosures we saw once again how the efforts in the 1980s and 1990s to deregulate Wall Street created extraordinary risks for all concerned: bankers, traders and investors. We all seem to suffer from a common, self-inflicted wound that can be summed up simply as a lack of trust. To solve this crisis, we need to restore basic rules of behavior and compensation in financial markets so that it is once again in the best interest of firms like Goldman Sachs to exercise a duty of care to all clients.
Shameless
by Michael Lewitt,
The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.
Boom and Bust
by Michael Lewitt,
The US and global economies are "trapped in a cycle of boom and bust as a result of fiscal and monetary policies from which there is no easy escape," says Michael Lewitt of Harch Capital Management. Lewitt believes the S&P will rally to 1,200-1,250, but says the long-term prognosis is "somewhere between grave and terminal." We are privileged to provide this excerpt from Lewitt's monthly newsletter and encourage our readers to subscribe to it directly.
Stiglitz: U.S. Economy Will Falter without More Stimulus
The U.S. government has botched its handling of the economy over the last eight years, according to Nobel Prize-winning economist Joseph Stiglitz. He explained how the U.S. created the global recession - and how we can get out of it - in a public presentation on his new book, Freefall: America, Free Markets, and the Sinking of the World Economy.
John Cochrane on the Dangers of Current Economic Policies
by Dan Richards,
John Cochrane is a professor of finance at the University of Chicago and the incoming president of the American Finance Association. Cochrane is also author of the widely-circulated article, How did Paul Krugman get it so Wrong?. In this interview, Cochrane identifies the shortcomings and dangers of current economic policies.
Bruce Berkowitz on the Keys to Success for the Fairholme Fund
by Robert Huebscher,
Bruce Berkowitz, manager of the Fairholme Fund, was just named Morningstar's US fund manager of the year. In our interview, he discusses current market conditions, the thesis behind several of his largest positions, his views on health care reform, and the elements of the macro environment that concern him most.
The Financial Crisis Post-Mortem: Suicide, Accident or Murder?
by Michael Skocpol,
Since the stunning collapse of America's financial system in 2008, questions have swirled around how we got here and who's to blame. The subsequent finger-pointing has yielded few answers, but now one economist has taken a cue from CSI's Gil Grissom and Law and Order's Jack McCoy. He performed an autopsy.
Stimulus II: A Modest Proposal
by Jonathan Tardi,
Our worthy public servants in Congress, not to mention in the White House itself, have worked tirelessly to solve the vexing problem of unemployment. They have courageously ignored their own ignorance in matters of commerce and finance and have unleashed a veritable cornucopia of well-intended solutions on a trusting public. In this guest contribution, Jonathan Tardi offers a modest proposal for reducing the rolls of the unemployed and, while he's at it, eliminating the national deficit.
Ten Ways to Connect with Your Clients? Children
by Nancy Opiela,
When you work with a top client throughout his or her life, you have an opportunity to ensure that the client's family stays with your firm beyond the current generation. Financial legacies are often lost when wealth passes from generation to generation, so building intergenerational connections can ensure both a successful transfer of assets - and an advisory relationship that endures after your original client passes on.
Alpha or Wealth?
by Sam Bass,
It is widely accepted that ETFs offer significant advantages over mutual funds, especially lower costs and taxes. But, as advisor Sam Bass argues in this guest contribution, the mutual fund industry may be all the more concerned that increasing numbers of investors are accepting the view that ETFs, and passive strategies in general, are better for wealth accumulation than active management - even if one assumes active strategies can generate positive alpha over extended periods of time.
Finance After Auschwitz
by Michael Lewitt,
We are again privileged to provide an excerpt from Michael Lewitt's HCM Market Letter. In this installment, Finance After Auschwitz, Lewitt examines the dangers posed by Iran, whether the market is overvalued, the future of securitization, and what should be done about the private equity industry.
Taste Testing Investment Style Sausages
by Ron Surz,
Equity indexes, like those offered by Russell and S&P are the investment-world equivalent of sausages - chopped up pieces of meat in tightly wrapped packages. Most shoppers buy sausages based on brand name, as do investors when they choose their benchmarks. In this guest contribution, Ron Surz dissects these index sausages and explains the real differences in their ingredients.
A Tale of Two Investors
by Brian Murphy,
Just as Dickens contrasted the fortunes and misfortunes in England and France in his classic novel, A Tale of Two Cities, today the divergence is painfully apparent in those who plan to accumulate wealth for their retirement and those who seek excess returns in their portfolios. In this guest contribution, advisor Brian Murphy tells the tale of two clients - one who aggressively sought alpha and the other who passively built retirement wealth.
The Financial Market Solution to Carbon Emissions
by Robert Huebscher,
While health care remains the hot topic on Capitol Hill, another piece of legislation is poised to gain similar attention. Regulating carbon emissions to address the threat of global warning is a top priority of the Obama administration, and its favored approach is to create a "cap-and-trade" market. John Parsons, an expert in the field, explains how this financial market solution might work.
Sell in September? Time for a Reality Check!
by Jeffrey Miller,
Anyone paying attention to market news must know that September is the weakest month for stock market performance. In this guest contribution, Jeff Miller explains why the so-called September-effect is really nothing more than a statistical aberration.
At the Risk of Repeating Ourselves
by Michael Lewitt,
We have said before that Michael Lewitt's newsletter is a must-read, and this edition is no exception. Lewitt questions whether we are witnessing a summer calm before the storm, comments on the secured and unsecured debt asset classes, and opines on the abuses of unregulated dark pools of capital. We encourage you to subscribe to this valuable publication through the link we provide.
Uncovering the Mayhem in 2008 in the TIPS Market
by Robert Huebscher,
In an interview two weeks ago, Yale Endowment manager David Swensen singled out TIPS as the best way to protect against inflationary and deflationary scenarios. We review a comprehensive study of the history of the inflation-indexed bond market, including an explanation for the extreme volatility in TIPS last year.
Gary Shilling: Recovery is a Year Away
by Robert Huebscher,
Among economists, Gary Shilling owns one of the most prescient forecasting records, having accurately predicted the credit crisis and the performance of key asset classes over the last several years. Now, he says, the chances that the current wave of "green shoots" will be the finale to the recession are "pretty low."e
Results 2,901–2,950
of 2,955 found.
