Are Banks Too-Big-to-Fail?

                       

The Dodd-Frank legislation of 2010 supposedly was enacted, among its hodge-podge of intentions, to prevent big banks from failing. To do so, it helped impose rules on banks, against trading for their own accounts; so-called Volcker Rules, named after Paul Volcker, a former Chairman of the Federal Reserve.                                           

The Glass-Steagall Act, preventing commercial banks from being in the investment banking business, had been around under the Banking Act of 1934 until it was terminated during the Clinton administration.

                       

A similar law could probably have been passed now, without all the talk that casts gloom over industry and finance. Right now, commercial banks are spinning off trading activities for their own accounts but it’s difficult to distinguish activities done on behalf of clients.

                       

Yet,  banks are now bigger than ever and Dodd-Frank is murder to smaller banks. And, bigger than ever banks will continue to be too big to fail. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Bungled Financial Facts

                       

The public has had its financial basics poorly taught by the vast majority of reputed experts, Wall Street insiders and the often inept financial media.

                       

The public’s always looking for confirmation of investment facts they can use to advantage. But unfortunately with what I find has become dubious advice.

                       

And so the public continues to buy into pap. Garbage often sells like proverbial hot cakes. Gobbled up by the  unwary and gullible folks who believe the gibberish and fantasy thrown at them every day. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Unneeded Bailouts

                       

Human error was instrumental in the financial meltdown of 2008/2009.

                       

There has been finger-pointing, usually by anti- business politicians and by bureaucrats, whose immediate impulse is to blame big business and bankers; the litany of criminalization.

                       

I have always blamed human error. Whether loose monetary policy of the Federal Reserve’s inflating currency, or inappropriate mark-to-market accounting rules for securities evaluation,

                       

In the case of AIG, the value of its derivative insurance coverage was also being determined on the basis of fictitious existing market value; not on possible claims in the future, at the maturing of company obligations.

                       

That produced a condition that induced panic-laden premature bankruptcy; a rush to judgment when cool heads ought to have been the hallmarks of expertise.

                       

Another incidence of rescuers acting in the AIG panic was evidenced by the paying of debts on the basis of 100 cents on the dollar to some bankers in this country and abroad. Especially after the government unfortunately decided to take over 79.9% AIG, in its panic-driven haste.                       

Would not a government guarantee have sufficed, instead of all this taxpayer outlay? (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Why Buy Individual Stocks and Bonds?

                       

The public continues to buy individual stocks and bonds, though the odds of success will be shown to be better with index mutual funds and ETFs.

                       

Many also prefer to invest without wise asset allocation selection which I find is essentially a form of disciplined strategy.

                       

And most overlook the ability to reinvest dividends or interest in such funds, particularly, with bonds, to take advantage of the duration principle.

                       

Basic ignorance has become human nature. Despite proof that managed funds cannot consistently beat indexes; die-hards will still attempt to beat indexes, and mostly fail. While disregarding well-thought-out asset allocation andduration principles. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

The Inside Advantage on Wall Street

                       

Do Wall Streeters have an advantage that smaller investors don’t?

I frequently discuss “inside players,” those in the financial community who may have an advantage of “being there” on the inside. And how any disadvantage of being an investor “on the outside” can be avoided.

                   

                       

The inside players often make the bulk of their earnings from fees, plus the important fact they can arrange deals and contracts; not because they are smarter or more astute investors.

                       

Just one example of ineptness: Wall Street pros are notoriously poor market timers. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Too Many Financial Experts

                                       

I have often reported how easy it is to become a financial guru. Look at the vast number of available books by purported  experts, questionable analysts and costly advisers.

Keep this in mind whenever you get gratuitous advice, or see or hear a financial ad, giving one salesmen’s opinion for investing.

                       

Sometimes advice may be in the form of a public relations release. Or you get a suggestion about how to find the next hot stock, or how to outwit inflation with often risky alternatives.

                       

You must also overlook the conflicts of interest if the commentators, who rely on advertising, face a decision about criticizing would-be or current sponsors.

                       

Too much advice from gurus are thus tainted (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Trading Securities by Headlines

                       

It’s almost impossible to know after a trading day’s closing, the moods and sentiments that really drove that day’s market.

                       

Short of a major calamity or an important market- impacting event, the media does not know. But it’s ready with headline answers, as if a market crystal ball has somehow telegraphed secrets to them.

                       

It’s a shame their crystal ball doesn’t provide accurate information in advance, not aftter market closing.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole atTwitter.)

                   

Picking Winners With Adviser Certification?

                       

Added to all its uses of arcane terms and jargon and acronyms that confuse most of the public, Wall Street inside players, and its analysts and advisers, have to show you how truly bright they are at picking winners.

                       

So they have come up with certification initials they post after their names. The initials sound impressive but many are not as difficult to get as you may think. In fact, many are looked at askance by regulatory authorities.

                       

But they help market advisory services. And they impose investor inferiority. The fear of not quite being up to the task of competing with “smarter” investors. 

                      

A test is needed to get some certifications. But who says that passing a test of routine questions makes someone a true expert at financial matters?

                       

It does help someone understand the arcane terms and jargon and acronyms. The latter  mean nothing for tipping investment odds in your favor. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Different Varieties of Investment Advisers

                       

Advisers come in different guises. They may call themselves a variety of comforting names; wealth advisers is one. They may be independent practitioners, or members of a special department set up by a conventional stock brokerage or investment banking firm or commercial bank.

                       

They may be  specializing in the sale of life

insurance and annuity products. To round out their sales portfolio, they may even sell mutual funds on the side.

                       

They make their earnings from sales commissions from what they sell you or from fees on your assets they manage.

                       

But they are selling something and therefore, their advice may not be truly independent. Aside from all that, they can be costly. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Thrift Savings Plans

                       

The Thrift Savings Plan or TSP, administered by the Federal Retirement Thrift Investment Board, was created for U.S. civil service employees and uniformed members of armed services. Under the TSP program, individuals can make contributions to retirement savings

                       

The TSP is a part of the Federal Employees Retirement System, or FERS. Others include the FERS annuity and Social Security.

                       

It’s designed to closely resemble what’s available in the private sector, with tax deferred contributions to 401ks. It is also open to employees covered under the older Civil Service Retirement System or CSRS.

                       

There are five funds; all can be selected in varying amounts, including a diversified mix in the S&P 500; also a mixture of corporate and treasury bonds.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Global Investments

                       

The financial media will often discuss investing at least some of your funds overseas. But what actually is global diversification of investments?

                       

Many large American companies are doing business overseas. So investing in the S&P 500 will give you a measure of global diversification.

                       

If you do buy overseas investments to broaden this strategic step, there are emerging or developing, as well as developed countries in which to participate. Using indexed funds or exchange traded funds (ETFs), you can invest around the globe with varying regional emphasis.

                       

Use indexed funds which are not hedged against currency value changes. This also helps diversify against inflation in the U.S. and acts as a currency hedge.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)