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Tom Armistead

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  • Obama's Loss Is the Economy's Gain [View article]
    Whether Republicans or Democrats were in power, the American financial and economic system has for years been run for the benefit of a very small minority of the privileged, less than 2% of the population, rather than for the benefit of we the people.

    After 20 years of deregulation, we have the sorry spectacle of Wall Street banks enriched by government largesse, while investors have seen their 401ks trashed by the destructive implosion of a system that was free from any restraint of any kind on the greed and dishonesty of the Financialists.

    To bail out the big banks, interest rates are so low that savers can't earn any kind of respectable return on their bank deposits.

    I'm talking about the privileged status of CDS, those innovative financial WMDs that were carefully exempted from regulation by CFMA, which slid through both houses without any debate and with few if any dissenting votes. I'm talking about TARP and bonuses. I'm talking about lobbyists buying influence. I'm taling about a system that is rotten to the core.

    I'm talking about bank regulators who studiously ignored rampant fraud in the origination and packaging of mortgages, especially sub-prime mortgages. I'm talking about a declawed, defanged and neutered SEC the couldn't spot Madoff's Ponzi scheme when it was handed to them. Republicans and Democrates alike pushed and pushed until they removed protections that had kept the economy stable for generations.

    Republicans are the party who perfected the program: "the majority of the majority rules." What that meant in practice was the rule of a determined and selfish minority. They have also perfected the practice of using a razor thin 40 votes in the Senate to obstruct any progress of any kind on any of the issues they left behind for a newly elected president of the opposing party.

    At this point I have given up on both parties, and consider myself a Populist. The two traditional parties cater to whatever the most trivial and divisive issues are that they can identify and produce sound bites on, but they are united in servile worship of the financial oligopoly.

    No amount of Republican propaganda from the CBP is going to solve any of these problems.
    Sep 6, 2010. 04:29 PM | 67 Likes Like |Link to Comment
  • Dividend Investors Beware: A New Paradigm Shift Is Coming [View article]
    Investors will do well to worry first about making money, then about paying taxes.

    I for one have noticed that efforts to hold a stock long enough to get to long term capital gains sometimes result in lost profits. Trying to guess investor reaction to tax policy changes that have not yet occurred adds a totally useless dimension to investment strategy.

    Those who are truly concerned about the effect of taxes on wealth have many options. As an example, it is not necessary to buy a late model German made automobile every three years. The diminished prestige is compensated by sales and property taxes avoided.

    Those who are concerned about state and local taxes can participate in politics and campaign against the overly-generous pensions, the practice of giving those near retirements large raises to push the pensions up, the sloppy bookkeeping which masks these costs, and the inept and/or corrupt management of the resulting funds.

    Finally, I am with Warren Buffett, who professes himself willing to pay whatever his share of the taxes is. Those who benefit from the strength, security and rule of law that prevail in this country, and from the toil and sacrifice that sustain this country, should be willing to pay their fair share.

    Chasing a lot of growth stocks is not going to get it done.

    Mar 25, 2010. 07:30 AM | 63 Likes Like |Link to Comment
  • The Only 20 Companies That Matter [View article]
    I would add corporate profits as a percent of value added have been trending up for 30 years, while wages as a percent of value added have been trending down, very proportionately. There's only 100 cents per dollar of value added, and corporations are getting more, at the expense of labor. That isn't going to revert.

    During the 2008-2009 crisis, companies took massive writedowns of goodwill, and also closed a lot of obsolete or unprofitable capacity. They really cleaned house, and emerged leaner and meaner. That was a once in a generation thing and won't repeat for a long time. So the next recession won't look as bad for corporate profits.

    Grantham and Hussman between them have cost people a lot of money, preaching mean reversion that has yet to occur, and may never occur at the magnitude they're looking for. This article is a very solidly researched discussion of the facts, specifically where it talks about US corporate profits as a percentage of global GDP.
    Mar 26, 2014. 08:20 PM | 52 Likes Like |Link to Comment
  • Property Values Set to Fall 43% from Current Depressed Levels [View article]
    Applying technical analysis to the Case Shiller index is an exercise in futility.

    Information on supply and demand, market value vs. replacement cost, aggregate mortgage debt, etc. would be a better place to look for answers.

    Many of those who have done the work on these types of information are calling a bottom in housing right now.
    Nov 2, 2009. 08:13 AM | 44 Likes Like |Link to Comment
  • The Retirement Bubble [View article]

    Growing income inequality means that many people don't earn enough by working to be able to set money aside for future use: they are living day to day and hand to mouth.

    Saving has been punished, as interest rates plummet, and inflation slowly creeps up, putting money in CD's guarantees a loss.

    Investing has become hazardous to your wealth, due to the extreme instability of asset values.

    Briefly, Financialism has supplanted Free Market Capitalism as the economic system of this country, and much of the world.

    Indiscriminate (and unregulated lending), the fraudulent sale of the resulting bogus assets, inordinate and unsafe use of financial leverage, naked CDS, naked short-selling, commodities price manipulation, and HFT created the financial crisis, and decimated the savings of an entire generation. The Fed's unwavering support of a system that relies on these destructive methods of transferring wealth has only exacerbated the harm done.

    As a financial professional, you should be ashamed to be taking the position that the above is a reality that we the people should accept and adapt to. The system needs to be changed, from Financialism back to Free Market Capitalism.

    And Capitalism, when it worked, was protected from its own wretched excesses by adequate prudential regulation. Deregulation got us into this mess. We won't escape until the financial community is put back on task serving the needs of those who work, save and invest.
    Oct 9, 2011. 06:57 AM | 43 Likes Like |Link to Comment
  • Barron's Takes Down Cramer, Again [View article]
    Jim Cramer should be regarded more as an entertainer and educator than as a stock guru. The lightning round is good theatre, Jim knows stocks and the market and you might learn something by watching.

    I can't imagine why anyone would attempt to invest by following Cramer's calls: most investors listen to what analysts and stockwriters have to say and then they make their own decsisions.

    There is an element of jealousy in the attacks on Cramer: Jim always has something to say and people listen. Those who either have nothing to say or can't get anyone to listen vent their frustration by attacking someone who is better at publicizing himself than they are.

    They would be better off working on having something to say.
    Feb 8, 2009. 05:20 PM | 43 Likes Like |Link to Comment
  • High Frequency Trading: We Fear What We Do Not Understand [View article]
    There is ample academic evidence based on working with real data to demonstrate that HFT permits predatory trading on any situation where there is forced selling. A financial institution experiences liquidity problems and needs to sell concentrated positions, the ever vigilant algorithms pick up on it and join the selling, the bottom drops out until the feeding is over. Similarly if a short squeeze gets going the computers will exacerbate that too.

    To me the concern here is that the system is inherently unstable, particularly when many participants are highly leveraged.

    HFT is a manifestation of financialism: it is trading for trading's sake. The activity does not create any economic value for society as a whole, it attempts to feed at the expense of those who invest the fruits of thrift and industry in the real economy.

    As for the alleged benefits of liquidity and narrow spreads, they are irrelevant to those who buy when others sell and sell when others buy.
    Jul 27, 2009. 06:14 AM | 39 Likes Like |Link to Comment
  • Fiscal Cliff: Let's Call Their Bluff [View article]
    Amazing, the Republican lunatic fringe is in the process of making themselves irrelevant, so Ellen has to write this article loaded up with left wing fringe ideas, as if to compete on irrelevance.
    Dec 19, 2012. 06:52 PM | 36 Likes Like |Link to Comment
  • Banning Derivatives and Other Such Foolishness [View article]
    You are operting far outside your area of competence.

    CDS are by their nature an insurance transaction, and should be regulated as such, with a requirment of adequate capital on the part of the seller and an insurable interest on the part of the buyer.

    You obviously don't have an understanding of insurance or the moral hazard created by the lack of insurable interest.
    Nov 16, 2009. 12:00 PM | 36 Likes Like |Link to Comment
  • Goldman Sachs and the Truth, the Whole Truth and Nothing but the Truth [View article]
    No amount of hairsplitting or disclaimers changes the fact that synthetic CDOs are a fundamentally dishonest product. The basic premise is to pass off the huge risk of insuring an adverse selected book of MBS as somehow the equivalent of buying a bond. It is not.

    There was a lot of pseudo sophistication in passing these counterfeits off as genuine bonds - some investors were believed to prefer taking their exposure in synthetic form. These counterfeits fufilled investment demand that would otherwise have made funds available for productive purposes, capital expansion, etc. Instead, they were drawn into the zero sum Ponzi scheme that is the naked CDS market.

    I have read enough of the prospectuses for thse to notice that they always include disclosures of conflict of interest. Basically the manager or the organizer has a stake in trading against his customer or his principal.

    Yet once more: CDS are insurance and should be regulated as such, with the requirement of insurable interest for the buyer and adequate capital by the seller. Synthetic CDOs are bundles of purported insurance policies not backed by insurable interest.

    If Eric Spitzer were still NY AG he would prosecute the perpetrators of these transactions for insurance fraud under the New York Penal Code. As for ACA, if they wanted to write reinsurance on a bundle of adverse selected CDS insurance policies they deserve to be put out of business, it's such a stupid thing to do. Any insurance trainee knows that insurance without an insurable interest is fraud, speculation, and gambling, rife with moral hazard, and illegal to boot.
    Apr 17, 2010. 03:10 PM | 35 Likes Like |Link to Comment
  • Who Is Buying This Market? [View article]
    The Fed is financing the smart money, who are buying up dirt-cheap shares abandoned by mom and pop investors, who are fleeing to the supposed safety of very low yielding bonds.

    It never really ends. At some point, interest rates increase, bonds crater, and the refugees head for the equity market, which will continue upward until 10 year treasuries, currently around 2%, are yielding 5%. That will be with the S&P 500 at about 1,800.

    And so it goes, from there the cycle will repeat yet once more.
    Feb 12, 2012. 08:08 AM | 33 Likes Like |Link to Comment
  • Most of what Wall Street does is socially worthless, so what good is it really, John Cassidy writes. "Big banks are forever trying to invent new financial products that they can sell but that their competitors, at least for the moment, cannot," he says. Most of these "innovations... serve little purpose or... blew up and caused a lot of collateral damage."  [View news story]
    The article raises a question I have long since answered for myself.

    Much of what Wall Street does serves no useful social purpose. CDS, CDOs of synthetic ABS stuffed with adverse selected CDS and sold as investments, CDO^2, stuffed with an endless recycled mass of garbage, HFT, naked short-selling, rumor-mongering, insider trading, commodity manipulation, etc.

    The proper function of the financial services industry is to serve as intermediaries between those who work, save and invest, and those who need access to capital for constructive enterprises that create goods or service that are useful to society.

    Walll Street has it exactly backward, they prey on those who work, save and invest, in order to divert the flow of capital to useless specuatlion and manipulation.

    Its a pity Washington is still supporting and permitting this parasitic evil of financialism. It's like they actually believe that if they can just somehow make things totally easy and unregulated for this band of parasitic speculators and manipulators that they will somehow create prosperity and share it with Main St. It doesn't work that way.
    Nov 22, 2010. 06:56 PM | 31 Likes Like |Link to Comment
  • A Safe And A Shotgun, Or Public Sector Banks? The Battle Of Cyprus [View article]
    "A system in which tiny cadres of elites call the shots and the rest of us pay the price."

    The US needs an economy and financial system that are run for the benefit of the 99%. That would include banks as heavily regulated utilities, taking in deposits and making loans, not speculating and manipulating with derivatives.
    Mar 21, 2013. 08:14 PM | 30 Likes Like |Link to Comment
  • Jamie Dimon (JPM) challenges Bernanke after today's speech: "Has anyone bothered to study the cumulative effect of all these [regulations]" - that it could be the reason it's taking so long for credit and jobs to come back? Bernanke essentially says no: "it's just too complicated. We don't have quantitative tools to do that... There is going to be some trade-off here."  [View news story]
    I was listening when Dimon asked his question. He prefaced it with a speech in which he gave a version of what was wrong and how it's all been fixed and doesn't matter anymore, his own viewpoint of the financial crisis and its causes and consequences. It was distorted in favor of big banks, and totally inappropriate.

    What he chose to gloss over was the total lack of prudential regulation that preceded the financial crisis. The repeal of Glass-Steagall, the exemption from regulation accorded to CDS by CFMA, the scheme where JPM, MS, GS, C, Bear Stearns and Lehman were regulated by the SEC as CSEs, they reported their risk profile once a month, based on their own opinion, and that was their supervision.

    If JPM and other members of the Financial Services industry had called off their lobbyists with their checkbooks and sat down with COngress and come up with something simple and straightforward, it could have been as easy as restoring Glass-Steagall and making CDS and other deriviatives subject to regulation as insurance, with a requirement of insurable interest on the part of the buyer and adequate capital on the part of the seller, then Dodd-Frank would have been one tenth of its current size, and very effective.

    Instead, the lobbyists connived with Congress to make the whole thing so unwiedly that no-one can or will enforce it. That was the whole point, sabotage by lobbying for complexity, which they have achieved, in spades.

    None of this brings us any closer to a day when the banks are restricted to their legitimate functions as financial intermediaries. Instead, they tax the real economy with derivatives, manipulation and speculation.

    I would ask Diman, has anyone in the banking industry sat down and done an honest analysis of their contribution to the financial crisis?
    Jun 7, 2011. 07:23 PM | 29 Likes Like |Link to Comment
  • Goldman Sachs and the Truth, the Whole Truth and Nothing but the Truth [View article]
    PS Goldman Sachs should be prosecuted for insurance fraud.
    Apr 17, 2010. 03:12 PM | 29 Likes Like |Link to Comment