Living4Dividends

Financial Regulatory Reform: The Good, Bad and Ugly

Professor Ho - I agree with you 100% on this. The government could set general guidelines and policies that mandate that Bank Officers get compensated for the profits that they make as a proportion of the risk that they take. A Sharpe Ratio Based compensation scheme. More important, somehow the Bank Officers have to have skin in the game. If they run the bank into the ground, they lose. Perhaps 25% of their retirement savings shall be in non-transferable bank stock or some sort of phantom stock. When it's their nest egg on the line - then I'm sure that Bankers will start acting like bankers of old.

On Jul 19 09:08 AM Lok Sang Ho wrote:

> It does seem that getting the compensation structure right is not
> the job of the government. However, if the compensation structure
> engenders short term behavior, even anti-social behavior, and the
> cost is external to the Board or Shareholders, then it does make
> sense for the government to ensure that incentives that compromise
> the social interest are not embodied in the compensation structure.

Financial Regulatory Reform: The Good, Bad and Ugly

You're welcome, Denko


On Jul 19 10:09 PM denko wrote:

>
> Living4dividends ... thanks for the good post. &amp; sure ... <br/>
>
> There should never have been, and probably is still no need, for
> ratings agencies to be regulated.
>
> For too long financial institutions, seeking to accumulate quality
> asset backed securities, deemed themselves aloof of normal trade
> practices in their mutli-million $ deals.
>
> The most humble yet savvy roast chestnut or barrow merchant would
> apply and endorse a greater due diligence when acquiring his daily
> bag of nuts/stock in trade than some of the world's greatest (err
> vainglorious) purchasers of CDOs.
>
> Purchasers simply abandoned the principal of 'caveat emptor' - and
> their reliance on the rating agencies seal of approval - PAID FOR
> BY THE SELLOR - has led to a predictable outcome.
>
> Did BUYERS ever think to get their own ratings agencies assessment?
> Clearly - never!
>
> If only they'd sought the barrow merchants advice - 'thinks like
> joe for jellied!'
> (joe rook - the crook) (jellied eels - deals)
>
> i.e. always - think like a criminal - and only ever trade at 'face'
> value - Buy with a long face; Sell with a straight face; (and err...
> Hold with a two face¿)
>
> fwiw
>
> ...but 'they' know all this!

Shun Stocks, Buy Bonds? I'm Not Convinced

Hammer (great name!)

Bonds will see large inflows due to the fear trade. When the economy gets underway, you will see the inflows going into stocks.

On Jul 14 10:21 PM The Hammer wrote:

> US bond funds see biggest ever qtrly inflow in Q2 2009
> ring ring ring

Shun Stocks, Buy Bonds? I'm Not Convinced

agree with you 100% - I in fact I have written articles on that subject


On Jul 14 03:46 PM The Recusant wrote:

> "The U.S. government moved to cushion the effects of the Great Depression
> by raising the official price of an ounce of gold from $20 to $35,
> effectively devaluing the dollar. Since then, deflation has been
> replaced by persistent inflation."
>
> To this should be added that the greatest increases in inflation,
> trade deficits, and national debt were after the dollar was taken
> off of the gold standard. Gold anchored the dollar, when it was cut
> loose, they could print as many dollars as they wanted. And they
> have.

Shun Stocks, Buy Bonds? I'm Not Convinced

I agree - except about the rapid recovery. thanks for your comments


On Jul 14 02:12 PM Luis de Agustin wrote:

> The downward trend in corporate quality spreads and the upward trend
> in gold price appear reestablished. Despite government unemployment
> data this proposes rapid recovery and high inflation. The dramatic
> widening of inter-corporate yield spreads forecast a global recession
> that would dramatically boost the dollar. But due to its flight to
> safety antecedent, after spreads narrow, the dollar depreciates –
> and at an increasing rate. The historical evidence suggests dollar
> depreciation set to continue and accelerate.
>
> Luis de Agustin

Who Needs Stocks When You Have a Mattress?

I agree - in fact I wrote an article sticking my neck out called: Shun Stocks, Buy Bonds? I'm Not Convinced
seekingalpha.com/artic...

Shun Stocks, Buy Bonds? I'm Not Convinced

thank you


On Jul 14 12:28 PM Investing In The future wrote:

> Stocks seem to be the latest flavor of the month. Overall a good
> article.

Employment Headwinds May Mean Jobless Recovery

thank you

On Jul 14 12:27 PM Investing In The future wrote:

> Well written, article, thank you

Employment Headwinds May Mean Jobless Recovery

Author's Update: The link to the article on the min wage hike no longer works, because the author either moved or deleted the instablog entry.

The link to the original min wage article by Aaron Smith is here: cnnmoney.mobi/money/ar...

TIPS: Cheap Inflation Insurance

Aldebert - you are 100% correct. IMHO - there is very little term risk on a TIP. With normal bonds, you get higher interest the further out you go on the yield curve. So with normal bonds - you want to stay short. With TIPS, the longer you have protection, the better.

While the interest rate adjusts on a TIP - it is minimal due to inflation/deflation. The major adjustment on a TIP is the par value adjustment for inflation. You don't get the cash until the bond matures. It is not technically interest, but effectively works like interest when considering the resulting nominal yield of the TIP

As for comparing 10 year TIPs with 10 year nominals - when comparing bonds, the only fair thing to do is to compare equal durations. It is done out of the interest of comparing apples with apples.


On Jul 07 02:03 PM Aldebert wrote:

> When discussing TIPs and comparing them to fixed rate Treasuries,
> why doesn't anyone focus on the duration (and I am refering to real
> duration, i.e., interest rate sensitivity, as opposed to the term-to-maturity
> which is mislabled "duration" on the chart above)? For example,
> take a 10 year TIP vs. a 10-year Treasury. My thinking is that it
> doesn't make sense to compare the yields on the two because every
> six months, effectively interest rate on the TIP adjusts. That is
> the fixed coupon is applied to an adjusted principal amount. Thus
> the market value of the TIP is much less sensitive to changes in
> market rates and therefore less risky compared to the fixed rate
> Treasury. Now there is a question of the basis risk in that the
> changes in inflation that will be applied to the principal amount
> are not the same as the changes in the yield curve, but I am will
> to bet that in a rising inflation environment they will be correlated
> enough to protect me. I look forward to anyone else's thoughts
> on this.

TIPS: Cheap Inflation Insurance

You are correct - If the USD falls, WIP will be the better investment. However it would be foolish fora US based investor with expenses in dollars to invest all of his money in foreign bonds. However, the dollar will never fall in a straight line - see my earlier article seekingalpha.com/artic...

If you look at my other articles - I feel it is preferable for a US investor to hold some mix of US TIPS and foreign TIPS - diversification is best. Read through my articles on WIP and TIP and decide the appropriate mix for yourself.

On Jul 07 07:45 AM prairiedog555 wrote:

> Considering the under reporting of CPI figures, and the potential
> fall of USD, do you not consider WIP's a better investment?

TIPS: Cheap Inflation Insurance

Yes, Whidbey,. I agree that equities should dominate, that's why I wrote "if you absolutely, positively have to buy dollar denominated bonds, then buy TIPs. "

thank you for your compliments on my article

On Jul 06 10:34 AM whidbey wrote:

> Love your ideas, but TIPS are not my idea for live investors. <br/>
>
> I think your dividend play ideas are the center post of a sound plan
> that will manage both deflation and inflation (which is dimming as
> a prospect). Dividend paying firms with strong franchises will reward
> the wait for a return of growth, and they will out run inflation
> if that is in the cards later.

TIPS: Cheap Inflation Insurance

Thanks Marli, for you compliment on the article.

As for Shadowstats: other "economists" have differing ideas. It isn't wise to trust one sole source for your information. Consider many differing opinions and then form your own opinion

On Jul 06 10:32 AM Marli wrote:

> Glad to see you've addressed the issue of underreported CPI figures,
> but you've only scratched the surface here. The biggest component
> of inflation for the next decade or so is likely to be related to
> food prices, fresh water and energy, which as a % of overall CPI
> tend to be relatively low compared to the real world cost of living
> as the Fed tries to smoothen out 'volatility' in the time series.
>
>
> As a result, they aren't as dynamic as they should be in updating
> the weightings for CPI components- especially when doing so would
> point to a higher rate of inflation.
>
> In the interim, I intend to compare TIP index time series data against
> two sets of CPI statistics- those officially reported by the fed,
> as well as those published by shadowstats. I'm curious as to whjat
> I will find, and will try to be as objective as possible.

TIPS: Cheap Inflation Insurance

Absolutely, AIP - TIPS only in a tax-sheltered account. Thanks for pointing that out.


On Jul 06 10:15 AM American in Paris wrote:

> Ah, yes, and you pay taxes on the iinflation adjustment to the principal
> ...
>
> I would definitely keep them in a tax protected account.

David Swensen Changes His Portfolio Allocations

Thanks - I appreciate the compliment


On Jul 03 08:19 PM Tampa DDS wrote:

> Good article.