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Tom Armistead  

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  • 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
  • A Socratic Dialogue: Fearing the Collapse of U.S. Treasury Bond Prices [View article]
    Interest rates rise to compensate for inflation. During inflationary times the best strategy is to spend money before its purchasing power declines further.
    Jun 13, 2009. 05:39 PM | 29 Likes Like |Link to Comment
  • The Leveraged Buyout Of America [View article]
    This article represents a very good counter-argument to Dick Bove's most recent fulmination, in which he characterizes efforts to regulate JP Morgan as "McCarthyism."

    Banks should be restricted to activities that help other entities create value in the real economy.

    As far as the Fed's role in this, bear in mind the Fed was conceived on Jekyll Island, as a high level conspiracy among the most prominent bankers of the day. The Fed is a non-government entity, authorized by Congress, and owned by its members, who are themselves banks. How such an institution is to operate as the primary regulator of the industry is beyond explanation. It's the fox guarding the henhouse, yet once more.

    Eileen correctly notes that the ownership of American businesses and infrastructure is being concentrated, aided by cheap money provided by the Fed.

    As a retail investor, the only answer is, to own or control as much stock in high quality US companies as possible, and just hold on for dear life while these manipulators jerk the market and the economy around like a yoyo.
    Aug 26, 2013. 12:24 PM | 28 Likes Like |Link to Comment
  • The Retirement Bubble [View article]
    Perhaps a simple analogy will help you understand the point of regulating the financial system.

    Experience has shown we need police to enforce rules of the road. DWI drivers have to be arrested and have their licenses revoked or suspended. Otherwise, carnage ensues.

    In the US we have financialists who are drunk with greed, amorality and egotism. They take to the road, disregard stop signs, speed limits and road markings, and inflict financial carnage on innocent hardworking people who are dependent on the financial system and economy. Think Dick Fuld, Angelo Mozillo, Ken Lewis, Goldman Sachs, John Paulson, Magnetar, etc, etc.

    It doesn't resolve the issue to remove stop signs, eliminate speed limits, and erase road markings.

    You seem to want to blame the victims for getting in the way of this wealth destroying process that emanates from Wall Street. There many, like myself, who borrowed responsibly, paid off their mortgages, saved diligently into 401ks, etc., and have watched this country driven to the verge of a Depression by the reign of Greed and Lawlessness on Wall Street. Meanwhile our investments were halved in value, although they have since recovered somewhat. Too bad for anybody who had to draw on their retirement funds while they were deep underwater.

    As for the size of government, that depends on the services demanded by the public. Most US citizens would like to be free from the depredations of financial fraudsters, those who socialize risk and privitize profits, those who make financial bets that reference the real economy but have no direct relation to the creation of goods and services.

    Going back to the analogy, if a town or city becomes plagued by crime, the best response is to add policemen, arrest the offenders, add jails and jail keepers, and continue the process until crime is reduced to acceptable levels. That would mean a larger government, regretfully.

    Similarly, if property keeps disappearing, and bodies oozing blood keep turning up, and the offenders protest, there is no rule against what I did, guess what, you need more laws, rules and regulations, until inflicting gratuitous harm on others is illegal and results in sufficient punishment to deter the undesirable conduct. That means more laws, rules and regulations, regretfully.

    The failed institutions, the bad debts, the writeoffs, the destruction of the fruits of thrift and industry is ongoing. At least 400 people on Wall Street were well-informed enough to know that Bernie Madoff was a fraud. 400 people, maybe more. And only Harry Markopolos tries to do anything, and he's paranoid about his efforts, and with good reason. The SEC does nothing. Eventually the truth comes out. As for the feeder funds, who channeled Madoff's victims to him, they assert "we have done nothing wrong." If challenged in a court of law, they no doubt will decry the suits as frivolous and without merit, and vow to contest them vigorously.

    And so it goes. It was the ideology of deregulation that carefully removed protections that were put in place after the same excess of Financialism caused the Great Depression. Wall Street asserted that if only they were free to innovate without supervision or limitation of any kind, great prosperity would follow. Unbridled innovation gave us subprime RMBS, CDS, CDO's, CDO^2, the shadow banking system, HFT, the mini crash, naked shortselling, etc. And it gave us a financial crisis that destroyed the accumulated wealth of an entire generation.
    Oct 9, 2011. 03:04 PM | 28 Likes Like |Link to Comment
  • The Leveraged Buyout Of America [View article]

    Who do the banks serve? Shareholders? Officers and Directors? Hedge Funds? Much of their compensation is from holding the hedge fund's jackets while they loot the economy and financial system.

    Please consider how shareholders of large investment banks made out during the financial crisis. They were annihilated. What went on in the big banks in no way served their shareholder's interest.

    Most of the Officers and Directors retained their ill-gotten gains. Many of them retained their positions. None went to jail.

    The same could be said for the hedge fund clients of the big banks. John Paulson still has the spoils of the Abacus transaction. So do the perpetrators of other identical scams, such as but not limited to Magnetar. The pathetic Fabrice will do time, for doing just what was expected of him. He was just a hair short on art and subtlety, to get away with it like everyone else.

    Answer, big banks take immense risks in order to collect rent off the real economy. Managament and hedge fund clients are rewarded, shareholders are raped, and the public is screwed.

    Please advance your next argument.
    Aug 26, 2013. 02:14 PM | 27 Likes Like |Link to Comment
  • Approaching The Fiscal Cliff As A Nash Equilibrium [View article]

    You are placing yourself in the position of knowing what is best for the 98%. You believe they want an expensive cradle to grave security system and your wisdom is superior to theirs. Apparently you are one of the elite, and know what is best for everybody else.

    I'm one of the 98%, and I believe that the US is a democracy and we can and should have what the majority of our citizens want. I advocate a national debate that focuses on reaching a compromise on what we want from government, and how it will be paid for.

    Refusing to increase taxes for anybody, under any circumstances, is not a compromise. Refusing to accept responsiblity for eight years of spending like a drunken sailer on needless wars, tax cuts for the rich, an extraordinarily expensive prescription drug benefit as a sop to the masses and the elderly, a pork barrel homeland security apparatus, deregulation of the financial services industry to the point of causing the financial crisis, etc., is just plain cowardly, irresponsible and wrong. That's where the Republicans are coming from.

    I have never voted for a Republican for any office at the national level.
    Dec 30, 2012. 08:31 AM | 26 Likes Like |Link to Comment
  • The days of economic prosperity may well be behind us, warns Northwestern University's Robert Gordon. The robust economic growth over the past 250 years may be a unique success tale for the history books, but it's not sustainable for the future. Productivity and innovation, Gordon says will eventually succumb to the headwinds of declining demographic trends, gaps in the education system, rising income inequality, globalization, declining energy/environment resources, and of course, debt. [View news story]

    Go explain your views to those who were poisoned by industrial waste at Love Canal. Or to the widows and orphans of those who were killed in a refinery blast by Tesoro, after management carefully explained how they were increasing profits by deferring maintenance, not meeting industry best practices. I could cite numerous other instances.

    One thing regulation hasn't touched, and that's financial innovation and manipulation of stocks, bonds, CDS, CDO's, commodities and futures. It was this same innovation and freedom from regulation that gave us the financial crisis and resulting deep and lingering recession.
    Sep 1, 2012. 12:05 PM | 26 Likes Like |Link to Comment
  • Time for the U.S. Economy to Reindustrialize [View article]
    You are too polite in labeling GS, BAC, JPM et al as participants in a knowledge-based economy. Too much of their operations are in the fantasy land of financialsim, and too little in the prosaic world of utilitarian financial products, loans that support industry and the creation of productive assets.

    Eamonn Fingleton's "In Praise of Hard Industries, Why Manufacturing, not the Information Economy, is the Key to Future Prosperity," written in 1999, makes an extremely good case for the need for the US to retain (or rebuild) its manufacturing and industrial base.

    It also includes, in its 3rd chapter, an incisive and prescient critique of financialism. If there is one lesson coming out of the meltdown of our financial system, and any hope for constructive change, it is in the area of rebuilding a strong manufacturing capacity in the US, providng real jobs that create value.
    Nov 15, 2009. 07:51 AM | 26 Likes Like |Link to Comment
  • After three "jobless recoveries" in the last twenty years, NYT's Hedrick Smith suggests it's time to take a lesson from Henry Ford. History has proven Ford's virtuous circle to be effective, and if business managers "give the middle class a better share of the nation’s economic gains... the economy will grow faster." [View news story]
    I'll tell you one thing, I'm a lot worse off than I was 12 years ago, when Bush came into office and started his campaign of dismantling regulatory protections, launching unnecessary wars, dispensing a massive prescription drug benefit, building a huge and expensive national security apparatus, and paying for it by reducing taxes on the rich.

    We tried it: deregulation and trickle down didn't work, tax cuts for the rich didn't work, spending like a drunken sailor didn't work. I've had enought of that to last me a lifetime, and won't submit to more.
    Sep 3, 2012. 01:28 PM | 24 Likes Like |Link to Comment
  • Obama's Loss Is the Economy's Gain [View article]
    This is good stuff. You should sign up as a follower for CBP and then every time he puts out one of his pieces you could provide an antidote.

    And the best part is everything you say is factual, compared to his lies and distortions.
    Sep 6, 2010. 09:45 PM | 24 Likes Like |Link to Comment
  • Exxon statement says U.S. needs to adjust energy policies [View news story]
    As an XOM shareholder, I wish the company would advocate something less self-serving and short-sighted.

    Excessive use of fossil fuel has the potential to damage the environment in ways that can't be repaired. Energy policy should focus on transitioning toward other sources, increasing efficiency, and minimizing the damage done in extracting fossil fuels in the meantime.

    Tar sands production is dirty and energy intensive. Fracking is questionable, and much natural gas is flared when it could be stored for use as a clean fuel. Because alternative sources of energy are intermittent, storage solutions need to be developed, not an easy task.

    Those who advocate an environmentally responsible approach to our energy needs have a tendency to look for symbolic victories. Why Tillerson needs to put the company in front of that is beyond me. He should keep his mouth shut in public, do what he needs to do day to day, and take a long term view toward positioning the company to participate in a less harmful energy future.
    Mar 13, 2015. 09:39 AM | 23 Likes Like |Link to Comment
  • 'Sell In May And Go Away' Might Come Early This Year [View article]
    The US government was not the main cause of the crisis: the main cause was crooked banks, such as but not limited to Lehman, GS, Bear Stearns, Merrill Lynch, JPM, C, BAC, Countrywide, Indy Mac, WAMU, Ally f/k/a GMAC, etc, etc.

    The US government's contribution was a lack of prudential regulation of the banks, a stance that was driven by right wing Republican ideology as implemented by GW Bush.

    Not enough has been done to re-regulate the financial services industry, and in due course they will create another crisis.

    Rather than worry too much about old adages, the best strategy here is to watch the quality of the credit provided by banks, and the degree to which they have found means to offload the risk onto others, and to exit the market when it doesn't pass the smell test.
    Mar 12, 2013. 03:15 PM | 23 Likes Like |Link to Comment
  • The Active Quest for Alpha: A Loser's Game [View article]
    It's pretty easy for me to compute the returns I received. I start with the money I put into my brokerage account in April 2001, list dates and amounts of money taken out (or added back) over the interveing years, and list the date and final balance.

    In Excel, or OpenOffice which is what I use, the function is XIRR, which gives you the internal rate of return on an irregulator stream of payments. That works out to 8.15% for the entire period, which was the lost decade for the S&P 500. It's a computation and not an estimate.

    There is no need to be condescending toward non-professionals, or to instruct us on our inablity to beat the market. My Vanguard S&P 500 Index fund has done well also, partly because I held that money in interest bearing accounts until the market was pretty well down after the tech bubble burst. By no means did I get in at the bottom, but there was enough market timing in that one move to put me well ahead of what professionals would have done for me.

    I recently did an article on the picks I wrote up for Seeking Alpha during 2010, you could check it out to see if I can beat the market or not. You could also look back at my picks during 2009 if you have any further doubts. Try looking at the prices at which I wrote articles favoring the likes of JBL or ODP, at the time, and what those stocks have hit in the two years since.

    It's really pretty simple, you buy low and sell high.
    Apr 8, 2011. 07:20 PM | 23 Likes Like |Link to Comment
  • The Root Cause of the U.S. Housing Bubble Has Yet to Be Addressed [View article]
    Also missing from this discussion is a mention of the amount of fruadulent mortgages that were originated by the likes of Countrywide and ResCap and sold via securitization by making warranties and representations that they have refused to honor.

    These were 20 to 25 % of the total and were concentrated in California, Nevada, Florida, etc. It was not about the American Dream of homeownership, it was an orgy of speculation and fraud fueled by greed on Wall Street.
    May 27, 2010. 03:20 PM | 23 Likes Like |Link to Comment