SEC won’t seek to suspend mark to market | Reuters. And the SEC should not suspend the rule. For all the business group whining about mark to market, they neglect to take responsibility for adopting sound financial risk management skills. Mark to market is not the problem, its all the fancy can’t lose strategies Read more
Category Money, Finance, and Investment
Saw this article Geithner Says Administration Will Ensure Bank Access to Funding and could not help but make a quick note. Bulls??? Until the government knows how much money was lost, there is no way to ensure funding. The premise underlying the actions to date is that the US government can borrow more than the bankers lost (or more than the bank asset holders are going to welsh on in the future). I’m starting to have my doubts. Read more
Professor James Van Horne, of Stanford University, recently wrote an article identifying sixteen United States’ credit crises during the last two hundred years. Even if he were off by one or two, Enough! I remember too many in my lifetime. As a way forward, I suggest the next set of regulation rid itself of three premises:
- Sophisticated investors need less protection, and
- People, unchecked by peers, will honor large dollar contracts
- Business models should be independent of financial structure
Alan Greenspan notoriously reiterated that our economic systems relies on trust. Unfortunately, the reality suggest that too much trust facilitates financial crisis. Read more
The World Bank, and the International Monetary Fund have both followed a prescription of encouraging free trade. Some of the devastating effects are included in this article available on Bloomberg.com: Exclusive. Encouraging countries to avoid self-sufficiency in their food supply is a very dangerous act. Poor countries, especially, do not have a consistent set of services or goods that they can export, which is both needed to purchase imported food and the very reason they are poor. Encouraging specialization in a small country, the ultimate aim of free trade, is in effect and investment strategy that ignores diversification and insurance principles. And for a small country far too risky. Read more
This week, I placed an investment buy order. In reaching this decision, my intuition says now is the time. I’m not suggesting converting one investment into another, that’s a different analytical exercise. But buying means taking available cash, delaying spending, Read more
Regulation to credit default swaps is coming. Hoooray! With the agreement on November 14, 2008 between the SEC, Federal Reserve, and the Futures Trading Commission, a great deal of uncertainty is soon to be lifted of the shoulders of the financial markets. Hopefully, global markets will follow suit. The regulation, hopefully, brings the transparency needed about the nature of transactions, and importantly, creates a level of guarantee that people who sell swaps, have the resources to back them up if called upon.
Thank goodness the rest of us will be able to interpret a consensus risk of default, from a well understood market, rather than guessing at from a closet market. Alan Greenspan should be thanked for many things, but effectively leaving a credit default swap market unregulated is not one of them.
With this news, look for markets to have reduced volatility in the first quarter of 09 and well run companies, (that is to say, proper leverage) will be rewarded with strong gains.