Government Bailout Failures

                

Bailouts have invariably been failures; why do some still consider them as ongoing solutions? The 2008 financial disaster produced an assortment of bailout attempts.

                       

Some Examples: 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. The takeover of GM and Chrysler.The funding of solar energy enterprises, doomed to lose out from the very start.

                       

We had perfectly good operating car companies in the US to pick up business and relocate jobs. Still, the 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 no cost in the banking system.

                       

All this trillions upon trillions in outlay, 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 and @BusinesNewshole at Twitter.)

Separately Managed Accounts

    

Wall Street advisers, with their usual marketing diligence, have been doing relatively well, marketing ways to make money. Example: Assets held in investor’s name. Separately Managed Accounts or SMAs

           

They represent the same advisory cost problem, for a service available from mutual funds and ETFs. Especially when you are a relatively modest investor.(See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

                   

               

           

Small Cap Securities

        

Mutual funds that invest in smaller companies may at times 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 few managers can truly evaluate smaller companies, even less than they can evaluate larger operations. Smaller companies are more erratic and their corporate fortunes are more difficult to anticipate.

           

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

Hedge Funds and Political Influence

               

It’s always nice to have friends in the right places in government.

One example: Hedge funds of any consequence, under the Dodd-Frank Act, had to register with the Securities and Exchange Commission. Unless considered “family office.” That is, they have no outside investors. No matter their size in multi-billions of investments at play.

                       

The whole idea of registration with the SEC was that the size and presence of such market players, with their lack of market transparency, could make the markets risky with their actions.

                       

Hedge funds had little to do with the 2008/2009 financial meltdown but Washington politicos still castigated them.

                       

But political influence helps; regs were tailor-made to aid family-owned funds. And huge hedge funds made sure their families took control where they hadn't before. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Jobs From Budget Cuts

                  

Politicians insist that they cannot cut spending in order to create jobs during a recession or depression. They cite Keynesian economics for their reasoning; the theory of the early 20th century English economist John Maynard Keynes is their logic.

                       

However, they have been –over simplifying Keynes’ short term ideas with a religious-like permanent philosophy and are overlooking some pertinent comments and critiques that Keynes had made.

                       

Need real-life proof? President Reagan’s years are just

one of many examples that spending cuts do work. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Sales-to-Price Investing Strategy

                   

One of the strategies I have investigated, at times recommended by financial observers, has to do with

sales/price ratios, rather than usual earnings/price ratios.

                                           

You can find many instances where companies which excel in sales do better than most. But when you look at the pros and cons,  the inability to convert sales into earnings is an overwhelming problem, not an asset to be sought.

                       

Important Note: Of all the strategies I have studied. price/earnings are the least favorable despite their wide use; they cannot be disciplined, as I have often explained in detail. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Big Bank Operations

                    

The administration says it wants to help business. One way is to loosen credit, especially at big banks. At the same time, however, the administration is creating regulations which diminish bank credit volume.

                       

This means many bigger banks receive lower credit ratings. Should they do, they will have to borrow at higher cost in the bond markets. Moreover, the regulations will not have any practical effect in making banks more secure.

                       

The administration cannot have it both ways. The media go along with the charade.

                       

The markets allow big banks to borrow more cheaply than smaller banks. This means that the market feels that big banks will be bailed out once again by Uncle Sam, no matter what the administration has been saying. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)