I agree wholeheartedly. But you know BBS, sometimes principles have to be overcome in the pursuit of personal gain
Let's face it, Banks, more and more, are just Government sponsored greasers. Pretty much everyone who has access to Joe Public are, in turn, controlling the banks by providing easy access to 'free' money. However, looking at this and turning 180 degrees means a lot of Banks are actually becoming equity longs. They are changing their processes and systems and will come through a better bet than presently. Moreover, Banks, by nature, are cheats. They attract people who are susceptible to encouragement to cheat, but if the so called regulators (straight from those very Govts) are supervising (yes I'm avin a larf right?) the potential guilt over all this cheating can be neatly folded up and popped in the bottom drawer.
My 'favorite' politicians are Chris Dodd
and Barney Frank
. It's amusing to see the great amount that bank, lawyer, and realtor associations and their respective individuals have donated to them. Then, the Dodd-Frank Act
is implemented, which will definitely
ensure that the political contributors will be properly
supervised. The public can now rest assured that financial markets will not misbehave because the selfless politicians have saved the day, thus preserving financial stability for future generations!
Meanwhile, Dodd is back into his career before politics: lobbying. I wonder what influence he can garner for the Motion Picture Association of America because he certainly performed well as a politician for his previous 'employers'.
The aftermath of the Libor scandal
is also amusing. In a freer market, banks would be allowed to eschew corrupted benchmarks and establish/follow substitutes. The threat of leaving induces current suppliers (of Libor-esque rates) to maintain some credibility--otherwise, they lose their consumers. However, this is not the case.
Bank executives privately told the UK financial regulator, Financial Services Authority, that they'd "pull out of the panel that sets the Libor," yet the FSA warned them not to--with the implicitly understood meaning: 'otherwise, there will be consequences for you'. Good luck escaping from their hodge-podge regulations, being charged in court, and then having to settle since the benefits offset the risks and costs of a trial. A jury of one's 'peers' could certainly be informed and make the best decision during the trial. Ah, the smell of (in)justice is in the air.
My 'favorite' event was the banks repacking those home loans, selling them to the FHA/Fannie Mae/Freddie Mac (I forget which), which in turn sells them to the Fed--of course, some banks sell directly to the Fed IIRC. How can one pass up the $45bn/month being dumped into MBS? Talk about subsidizing past, incompetent investments. This will surely induce the incompetent to now invest wisely, and also the quest for alpha continues as the interest rates on mortgages drops. It's insane that the Fed is pushing investors into seeking riskier assets; the long-term costs of future booms and busts are being ignored or improperly dismissed.
The greatest threat to the big players of business is competition, but since the competition's influence on politicians, thus legislative 'reforms', has been effectively marginalized, and that new avenues of supplying information have been curtailed--thanks to the Old Guard (Libor) being protected by the state, then it will be no surprise to see financial markets becoming more inefficient, unstable, and ultimately costly for others. Now, buyers and sellers must become more savvy--while playing a balancing act with chasing alpha.
Additionally, since the governments and central banks of the G-20 insist on avoiding budget cuts yet raising taxes, continuing deficit spending, implementing laughable laws, and engaging in competitive currency devaluation, then the future doesn't look bright. Real growth will be stymied, and the bulk of uninformed voters will be taken for a ride and then unceremoniously dumped in the river. What a wash.
Fruitcake wrote:The rise and rise recently of equities can be traced back to these fundamentals which are going through such a sea change. Banks, as we know them, are going to change. Bonds are a mine field right now and inflation and rate increases are knocking on the door. One wonders when reality will hit Bernanke between those eyes of his and he admits the great devaluation magic he has tried to pull has failed. Yield curves are starting to get twitchy and this normally signals the arrival of a surge. I believe Equities are ripe for serious play.
A significant sign of actual financial stability (thus an impending surge) would be investors retreating from reals like gold, but that has yet to greatly happen because many are concerned about the future costs of all those consequences mentioned above. But given that other higher yielding investments (ugh, like junk bonds) seem to be 'maxing out', then perhaps more investors would have little choice but to jump into equities, which is alarming...
With equities, maybe you'd be able to ride the wave shortly before the crest, but seeing that the DOW Jones is reaching an average price surpassing its 2007/2008 price, I'd be extremely cautious. But hey once the rules of the game become clarified by the regulators, then your expected surge in equities could likely occur. Then again, I'm not that knowledgeable nor do I have much experience on financial trading, so take my opinion for its perceived value.
If I had money, I'd wait for the stock markets to crash and then invest in companies (and note which executives) that regularly contribute significantly to politicians. Perhaps even following which companies politicians invest into would also be a good route. I'm not sure of this strategy's net gain since I haven't taken the time to assess the opportunity cost of either sitting on x-amount of cash for the next... year or three or five(?) or continually investing in short-term bonds (which by now I've seemed to miss the greatest opportunities)... Perhaps even eating the real (negative) interest rates of ST US treasurys may be worth the wait. In the meantime, I'll just read and write.