What’s wrong with Big?

By | 2017-07-17T12:35:25+00:00 June 30th, 2008|Global Market Update|

On Friday I mentioned that the “too big to fail” doctrine could seriously fail to deliver the kinds of financial services we need in a dynamic economy because when banks act like utilities, they just don’t keep up with changing times. There’s another reason that the big banks have problems: conflict. Not the kind of conflict where boss tells the line worker that his tie isn’t right. No the conflicts of interest that inevitably arise when a bank becomes a financial supermarket. For example, [...]

Too Big, Too Slow

By | 2014-09-03T19:54:27+00:00 June 27th, 2008|Global Market Update|

Too big to fail. That’s how the major banks have been characterized. And as we enter a new wave of financial stresses, it looks like we’re poised for a new round of forced financial mergers. That’s a good thing, right? I mean, who wants the hassle of dealing with government deposit insurance. Much better to fold a failing small bank into a “too big to fail” large bank. That way the depositors are all protected. But not so fast. If we consolidate too far [...]

Fed Musings

By | 2014-09-03T19:53:27+00:00 June 26th, 2008|Global Market Update|

By now everyone knows that the Fed is standing to and leaving interest rates on hold. Of particular interest to me was their official statement. While the economy is slow right now, the outlook for inflation is far from clear. Rising energy and food prices could sneak their way into the core CPI numbers that the Fed watches so closely. Of equal interest was the substance of the vote. Dallas Fed president Richard Fisher dissented and voted for a rate increase. The regional bank [...]

Window Dressing

By | 2014-09-03T19:52:13+00:00 June 25th, 2008|Global Market Update|

When quarter-end rolls around, everybody wants to make things look nice. But new flowers in the window boxes can’t disguise rot that may be in the window casings. At quarter-end, many public companies try to dress up their financials. They increase the amount of cash on hand, or pump up sales to show a better financial statement. Even blue-chip companies get caught in this trap. Gillette is famous for having “stuffed” their customers with product by moving cases from one warehouse to another. When [...]

Comic Wisdom

By | 2014-09-03T19:51:08+00:00 June 24th, 2008|Global Market Update|

Everybody wants to get into the act. Jimmy Durante made this line famous. While the comedian’s sense of timing was legendary, he noted that nothing succeeds like success, and once he had earned his audience, lots of other wannabes started to crowd in. But it didn’t help their performance one bit. It’s not that different in the investing world. People love a star. And they figure that if they hang with some famous investor or pay a thousand bucks for a seminar some of [...]

The Turning of the Tide

By | 2014-09-03T19:50:06+00:00 June 23rd, 2008|Global Market Update|

Warren Buffet has said that a rising tide may lift all boats, but when the tide goes out you get to see who’s been swimming naked. When the economy sours, it seems that the scandals come out. A couple years ago it was Enron and WorldCom. The latest news is about a couple of Bear Stearns fund managers, who told investors that all was well even while they were panicking over the sub-prime meltdown. They join a rogues gallery who thought that the good [...]

He’s Baaack

By | 2014-09-03T19:48:39+00:00 June 20th, 2008|Global Market Update|

Ross Perot is back. Charts and all. The spoiler of the 1992 election is on the web with a presentation of the national debt. He’s concerned that future budget deficits will grow out of control and that interest on the deficit will destroy our future. Perot’s agenda is to focus on reforming Social Security and Medicare. He’s right that that’s where the money is. He thinks we need either to raise taxes or cut benefits. Well I’ve got some news for old Ross: Bush [...]

Banking Blues

By | 2014-09-03T19:47:25+00:00 June 19th, 2008|Global Market Update|

Are banks the new tech? It sure seems that way. After the internet bubble burst, quarter after quarter went by where tech companies would lower their revenue outlooks, the stocks would dive, and people would buy in. Now quarter after quarter goes by where banks announce that they have to raise capital, the stocks dive, and new investors dive in. The latest news about smaller regional banks fits this pattern But if you averaged into Tech stocks throughout 2002 you would have received a [...]

Infrastructure Ideas

By | 2014-09-03T19:46:06+00:00 June 18th, 2008|Global Market Update|

Everyone complains about government. Why? Take roads, for example. They’re either full of potholes or under repair. And the repairs seem to come in late and over budget. Much of this can be traced to what Adam Smith call the “agency problem.” People always look after their own money more carefully than they care for the cash of someone else. And in the case of the government, it’s always someone else’s money. One way out of the pothole problem, is private toll roads. They [...]

Performance Under Pressure

By | 2014-09-03T19:44:46+00:00 June 17th, 2008|Global Market Update|

Tiger’s performance yesterday was inspiring. The 32 year-old golf great was ahead, then behind, and when it mattered, he birdied the 18th hole to come up even and force a sudden death round, which he eventually won. Tiger putted in front of thousands of cheering fans and millions of TV viewers to win the match. I’m not much of a golfer, but I know that it’s a game of inches and concentration. And when the stakes are high, nothing is more important than the [...]