Investment Banker True Interests

Why do many investment bankers who have been in the financial community for years, have entered ranks of chefs, gardeners, nutritionists, and other endeavors other than financial, in later years?

They often show their true interests when terminated or when they have accumulated sufficient funds. Perhaps they were not interested in finance after all. They wind up doing work outside finance.

You would think they knew enough about finance to have it in their bones to write, talk or teach about investments. To remain with finance in some way.

But seemingly they do not. Finance to many is a job that pays more than it ought to, to many who are ill-prepared for the job, other than the right school and connections.

And it shows frequently in Wall Street’s insider efforts. ( See the Earl J. Weinreb NewsHole® comments.)

The SEC’s True Regulatory Function

The SEC’s regulatory function is protecting those who are not fully aware of conventional investment information or knowledge.

Investors in hedge funds ordinarily are not the usual mutual fund investors. It’s strange, therefore, why SEC watchdogs have taken time to look into such questions as “side-pocket” arrangements” that hedge funds made with their more sophisticated investors. Using them, funds may, for instance, limit the ability for hedge investors to prematurely cash in their stakes.

Or for that matter, regulate them as tightly as they are under the Dodd-Frank Act.

Hedge funds are not mutual funds. That is why some investors choose to use them. Hedge fund managers do not want to tip their investing hand as new SEC regulations require, unless the hedge funds are “family-owned." I have commented on this before. ( See the Earl J. Weinreb NewsHole® comments.)

So-Called U.S. Budget Cuts

What if you don’t need a new car but you pass a new car showroom and look at some new models?

You look at one for $100,000 that suddenly catches your fancy, and you decide, why not, I’ll buy it.

But you get a pang of conscience when you look at the payments so you buy another car in the showroom for only $20,000.

Do you go home to explain your purchase to your spouse and boast; don’t worry, you just cut the household budget by $80,000 by spending $20,000 instead of $100,000, all of which you cannot afford?

Well, that’s how liberal politicians boast about cutting their budgets.Their attempt is to cut the INCREASED spending they can’t afford

Note: Federal budgets are automatically increased by current law every year. (See the Earl J. Weinreb NewsHole® comments.)

The Current Result of Government Bailouts

Bailouts have invariably been failures; why do some liberals still consider them as solutions?

The 2008 financial disaster was a bailout attempt through a whole assortment of action:

The takeover of banks. The takeover of Fannie Mae and Freddie Mac. The takeover of AIG.The Troubled Asset Relief Program (TARP) to buy bad mortgages from banks. The Public-Private Investment Program to buy the same troubled assets. And the takeover of GM and Chrysler.

We had perfectly good operating car companies in the US to pick up business and relocate jobs. Still, the Obama administration had to bail out General Motors and Chrysler. That helped their powerful union but did little else for the economy. Ford and others in the industry operating in the U.S. were able to carry on without bailout help.

The government pumped out money. Federal Reserve funds were priced down to practically nothing in the banking system.

All this outlay cost trillions upon trillions and with little success to show for it, compared to what would have happened if the politicians and their experts sat on their hands. ( See the Earl J. Weinreb NewsHole® comments.)

Separately Managed Accounts or SMAs

Wall Street advisers, with their usual marketing diligence, have been doing relatively well, marketing yet another way to make money.

Assets held in investor’s name. Separately Managed Accounts or SMAs.

I repeat my past comments about SMAs: They’re expensive. About $600 billion are being handled this way. They represent the same advisory problem, of high cost for a service available from mutual funds and ETFs, when you are a relatively modest investor. ( See the Earl J. Weinreb NewsHole® comments.)

Providing Private Home Mortgages Is Risky For Amateurs

Because it is getting difficult to get a decent return on savings these days, ordinary folks are making some extraordinary risky decisions, when attempting to increase returns on investments.

One example: It’s absolutely stupid for a layman to give private mortgages to homeowners when banks have already turned them down.

If banking or lending is not your trade or business, but merely a side hobby that appears to offer a return better than conventional investments, forget about that enticement. The relatively few extra dollars will never be worth the risk. ( See the Earl J. Weinreb NewsHole® comments.)

Small Cap Stocks and Index Funds

It is often said that mutual funds that invest in smaller companies can do better than index funds which specialize in similar, so-called smaller cap stocks. At times they have not done badly, when trying to outperform the indexes of larger companies.

But there is a fallacy here. Few managers can truly evaluate smaller companies, even less than they can evaluate larger companies. Smaller companies are more erratic than those larger, and their corporate fortunes are more difficult to anticipate.

Smaller public companies may do better than larger companies for shorter periods but are more susceptible to business hazards and cycles. ( See the Earl J. Weinreb NewsHole® comments.)