Failure to Communicate

By | 2014-09-05T13:36:55+00:00 October 29th, 2009|Global Market Update|

So after looking at last year’s big failures, what’s next? Informal analysis puts about 500 banks on the FDIC’s “Problem Bank List.” That number has been trending up, but it’s interesting to look at the regional differences. It’s no surprise that the Northeast has been relatively unscathed by the financial crisis. Only 12 small New England banks are under various “agreements” with their regulators. It’s also no shocker that there are 41 banks in trouble in California. And, with 16.2% unemployment, seeing a couple [...]

How Soon We Forget

By | 2014-09-05T13:35:49+00:00 October 28th, 2009|Global Market Update|

A year ago, we were shell-shocked. Fannie and Freddie were in receivership. Lehman had filed for bankruptcy. AIG needed an $85 billion lifeline. And Washington Mutual, the country’s biggest Savings-and-Loan, was acquired by JP Morgan for pennies, wiping out its stock and bond holders. Is there any wonder that the market declined 20%? It’s interesting to look at why WaMu failed. It appears that reckless lending and a couple of deposit runs doomed the bank. But the most curious aspect is the “end-game.” On [...]

Intended Consequences

By | 2014-09-05T13:35:11+00:00 October 27th, 2009|Global Market Update|

In the middle of a recovery, in comes F-Troop! The gist of the ‘60s sitcom was that nothing was too certain for those dopey Feds to mess it up. Whether it was a new peace treaty or a new railroad, Captain Parmenter and Sergeant O’Rourke were fully capable of fouling up the works. So just as the banks are beginning to show signs of life and lending, in comes Senator Dodd with his proposal to freeze credit card rates. He says that his is [...]

Bubblenomics

By | 2014-09-05T13:34:08+00:00 October 26th, 2009|Global Market Update|

Are we in a new bubble? That’s the question today. As stock prices make record-setting gains after falling record-setting amounts, some wonder whether a new bubble is in the works. To answer this, it helps to understand what it takes to form a bubble. First, you need to have a new technology that seems to “change the game” in a major way. Second, the new way needs to displace the old way and lead some to conclude that “it’s different this time” and that [...]

The King is a Fink

By | 2014-09-05T13:33:10+00:00 October 22nd, 2009|Global Market Update|

Well, he ought to know. Larry Fink, CEO of Blackrock, says that a slew of money managers will put themselves up for sale rather than pay to meet new fiduciary standards. The head of the $2.7 trillion asset manager was speaking to a group of fellow predators—er, large money managers—and he noted that mid-sized firms will be subject to greater scrutiny from the SEC. He thinks it won’t be adequate to depend on broker-produced research. So, he expects that they will either have to [...]

Predicting the Past

By | 2014-09-05T13:32:32+00:00 October 21st, 2009|Global Market Update|

Your mind can deceive you. That’s one old lesson from the new emphasis on brain science and investing. For example, two-in-a-row of anything tends to make us expect a third. We may not admit this expectation to ourselves, but it is real, automatic, and uncontrollable. Our belief that the recent past will be repeated informs most of our actions—from where we plan to see a police car on the way home to what we think the stock market is going to do next month. [...]

Trading Places

By | 2014-09-05T13:31:46+00:00 October 20th, 2009|Global Market Update|

Is trade an unvarnished good? Before the financial crisis, we were frequently offered humorous pictures of anti-trade militants protesting a World Trade Organization meeting. They were reportedly concerned that global trade would wreak havoc with indigenous cultures and exploit vulnerable populations. While some could see their point, it was usually undercut by the simple fact that none of these activists were looking to move in with the indigenous peoples they were so enamored of or avail themselves of indigenous health care. The logic of [...]

In Banks We Trust

By | 2014-09-05T13:30:27+00:00 October 19th, 2009|Global Market Update|

This is Doug Tengdin from Charter Trust Whither the banks? As our historic financial panic settles out, what is the likely future of bank regulation? Clearly, we are not going back to the status quo. A hostile Congress and trillions in bailouts guarantee that. But what is the reform going to be? A Financial Consumer Protection Agency and that’s it? A mandate to break up the big banks? My expectation is that a complicated formula will essentially require more capital as banks get bigger. [...]

The Wedge

By | 2014-09-05T13:29:54+00:00 October 16th, 2009|Global Market Update|

What are taxes, anyway? Governments have to collect taxes to pay for their services. They also collect taxes to encourage or discourage various activities. For example, the mortgage interest deduction and homestead property tax exemption are designed to encourage people to own their own homes. Our governments have tax policies that affect our actions. But taxes also act as a wedge between economic actors, distorting prices and changing behavior in unforeseen ways. For example, a tax on luxury goods has the effect of increasing [...]

JP More!

By | 2014-09-05T13:29:22+00:00 October 15th, 2009|Global Market Update|

Was it all just a bad dream? With the Dow hitting 10 thousand and many stocks at one-year highs, was last year’s market panic just a piece of underdone potato? That’s the way it feels as we watch the market climb ever higher. Credit spreads have come in and global markets go up. Yesterday’s big news was from JP Morgan. Even though they bought Wamu’s bad loans last year, they reported earnings higher than any time since before the recession. Interestingly, their investment bank [...]