BerkeleyBob

ETFs: Yes, They Have Their Drawbacks Too

I think ETFs are a cheap and cost effective way to diversify. I like, and have made gains, holding a country-specific ETF (EWZ) and recently added EWC. Also hold two gold-related ETF's, GLD and GDX. Collectively, the ETF's do not represent much more than 10% of the portfolio... and do not think individual stocks are "too risky" for retirees.

AIG Is Dead, Long Live AIG

Seeking advise from "Hammerin" Hank Greenberg is a little like seeking advise from Bernie Madoff or Sir Alan. AIG was screwing around with window-dressing and phony reinsurance before the credit default swap collapse, and Greenberg was in charge at the time.

Legalized Accounting Fraud Boosted

Thanks for a new (to me, at least) insight into the consequences of diluting mark to market. I had not heard the term "cure rate" but agree it is significant. Perhaps the aggregated individual underwater mortgages fraudulently "securitized" can be accurately valued, but unwinding the transactions is expensive and difficult, exactly the intent of the players...

Charles Schwab on the Auction Rate Debacle (WSJ)

I suppose Schwab's attorneys can cross complain or do a recognized tactic in criminal cases; "Some other dude did it". I am a long term Schwab customer, have been generally happy and find their research useful. However, this litigation is a hit to Schwab's reputation and the only bright spot is that the auction rate securities were sold primarily to high net worth or institutional investors, not widows and orphans. If I held such a frozen investment, I would be a very unhappy camper. Perhaps Schwab should take the hit and make Cuomo's suit moot.

Fractured Wall Street Fairy Tales #3: It’s a Kinder, Gentler, Chastened Wall Street (Part II)

I did not like the performance on my 401 (actually, an equivalent, I am a retired state employee) and so did a rollover and self directed this year. So far, so good. Less volatile than my investment account. The bottom line is that I am more likely to pay attention to my own money than a hired hand or mutual fund, and with that comes the responsibility for making mistakes. My mistakes, not GE's, not AIG's, not C.

Wall Street Breakfast: Must-Know News

Yeah, I've been getting the phony virus alert on this site too. Don't respond, close the box and back up a page. Works so far for me. The quality of discourse on SA varies, and a few of the posters are obnoxious but all in all this is far better than the unmoderated Yahoo finance message boards, and the Street's Stockpickr has also had some problems.

SEC Finally Exposes GE's Tricks for Beating Estimates

I took my long term loss in GE long ago, bought a small position this year and sold at about a 15% gain. The realized loss far exceeded the short term gain. The use of GE Financial to "smooth" out earnings is reminiscent of "Hammerin'" Hank Greenberg's resignation over manipulation of reinsurance and reserves to "smooth" AIG earnings. Greenberg's resignation came long before the credit default/financial crisis, I believe in 2006, when all seemed well in the financial world. The question is why should the SEC collect a fine from GE and there is no corresponding litigation to recover by shareholders.

Barron's Says Mastercard Will Rise Above $200

I read the Barron's article, but after I sold the second half of my small position in MA. I stayed with the stock when it was low, added to my position and closed it out at about a 20% gain. I like the concept of a transaction based non-financial stock without exposure to toxic loan portfolio's, etc. but think it and V a little too pricey at present...

Calpers Makes Dubious Claims Against Ratings Agencies

CALPERS is not without its faults and issues, and I speak as a retired state employee and beneficiary. They made some bad investments in property and maybe got a little too aggressive in seeking high returns a few years back. The rating agencies aided and abetted the investment banks in the issuance and circulation of fraudulent instruments of remarkable opacity. Ultimately, a jury may well find PERS more sympathetic than the big three rating agencies.

The Fine Line Between Profits and Theft

The central point is the disparity in treatment of say, GM bondholders and GS receiving 100 % payout on its non-insurance with AIG via the taxpayer. AIG bankruptcy may have been more catastrophic than what emerged but whatever AIG was doing, it was not insurance as the term is commonly defined. It was an off shore and unregulated casino.

Can We Insure Against Systemic Risk?

It isn't clear to me that the contracts AIG was peddling were insurance as the term is commonly understood. The absence of requiring an insurable interest, state regulated reserves, and nominal premiums suggest that it was more akin to an unregulated offshore casino. Of course, the rating agencies had a role in the scam. AIG carefully structured its activities to circumvent the woefully lax regulatory structure, including a feckless SEC, etc. etc.

"Washington is bluffing that it will not bail out California, and every other state suffering from collapsed revenues and massive job losses," Gregor.us writes. And if the feds think they can "take a pass and wait while the states rebuild their balance sheets and clean up their payrolls," they'll be waiting forever. "None of that is underway."

It's not that simple. Some states, California included, are net exporters of federal revenue. Others receive far more in federal funds than contributed. I don't think there will be anything like an overt federal bailout of the states, but one sector that has shown some job growth is state and local government, even taking into account layoffs, furloughs, etc. With the exceptions of public safety (cops, firefighters and prison guards) the defined contribution pension benefit of most states is not excessive. States, unlike the fed, can not print money to stimulate growth and revenues, and state and local taxes are perceived as too high, certainly in California's case, tied to volatile revenue bases.

Bloomberg Comes Down Hard on Goldman

I don't track GS stock closely, but it seems there was no unusual volume or price decline following the news of the arrest. It's sorta like the story about the counterfeit bonds in Italy--omerta is a notion not unique to the mob, or maybe there isn't much difference between the two...

Citigroup and Berkshire Pricing Anomalies

I have been puzzled by the disparity in PLD common and PLD preferred F. I am long both (small positions) but the PLD preferred has almost doubled in a short time. PLD has taken several steps to deleverage and reduce debt, but the preferred makes me nervous...

How AIG FP Brought Down the World

If you check the past few issues of Wired, there was an interesting article which I did not fully grasp about the risk prediction algorithm. Think the article was titled "The Equation That Failed to Predict". The central point was that the algorithm was mis-applied.