Bank Credit Facts

        

Banks are not making enough loans to small business, even when they have the ability to do so. The fact is, they make more money these days, with far less risk, by borrowing cheaply from the Federal Reserve and investing other than in business loans.

                 

There is also political meddling and strict bank supervision adding to the bank-lending picture.

                     

Some banking groups are now complaining that they have the money to lend, but with less takers because of the dull economy.

                     

Thriving businesses are genuinely seeking loans from banks with funds. But, too many lenders are hesitant about extending loans they once more readily made.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Federal Reserve Errors

                            

The Federal Reserve is often proven wrong. This has been the case in almost half their decisions we have gotten under  their governorships.

                     

We have to remember that economists are fallible, even when they direct the Federal Reserve.

                     

In the past, those in the Fed worried we may have deflation; they therefore inflated the economy, and added too much currency. In fact the Fed, almost automatically, has been on the side of targeting some inflation, in an attempt to prevent deflation.

                     

Thus, the Fed has been the chief culprit, causing bubbles which invariably lead to busts and eventual depressions. And today is still aiding and abetting future  inflation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Investment Strategy Back-Testing

                

Professional investors often use past data to sell a favorite personal strategy, and to predict future events.

Their financial models often resort to what is known as data mining. Information on various investing strategies of the past. They are collected and tested on a “what if’ basis for the future. This is also called back-testing; the strategies of the past are used to see what would happen, hypothetically, when projected into the future.

                     

All this is on many assumptions that the mathematical models are supposed to predict.

                     

After my decades-long investigations of investment strategies,  I can tell you this: There are some worthwhile concepts as well as gibberish in all. But no panacea exists. I would say that most of the data mining is therefore useless, except for their marketing of investment management services. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Buying Annuities?

                 

Annuity salesmen often compare benefits with the investing risks that attend stocks and bonds. They mention all the hazards of securities markets and the possibilities of market loss. But annuity salesmen often overlook downsides of their offering.

                     

Annuities certainly do have negatives; they are not for everyone. They have an insurance factor which may not be needed. And if not required, why pay for it?

                     

There are annuity management fees, contrary to some sales pitches and also early termination charges.

                     

Then there are fixed or variable annuities to select, that further complicate the picture. Fixed annuities have set returns which means the buyer has no protection from any future inflation. Variable annuities tie in securities markets but not as much as you may desire. So always be alert to the annuity sales pitch. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Disciplined Investing Helps The Odds

                

I have documented over 1,600 investment strategies used by professionals, and have looked at their pros and cons.

                     

While there is no perfect strategy, the chief pitfall in their usage is usually the lack of discipline employed to follow through objectives, not the strategy itself.

                     

I discovered why markets can be rash and erratic. When institutional investors account for 80% and more of trades, why should the markets behave so erratically? Wal Street "wizards" invariably act in an undisciplined, mob-like manner; not as true experts. Their investment results speak accordingly. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

Investing in Gold?

            

What type of gold investment would you think of? If you were entertaining such an investment.

You can trade gold as a commodity, as many do. At times, even governments trade, impacting short-term supply/demand, and prices..

                     

Want an inflation hedge? Sorry. For 25 years, from 1985 to 2010, consumer prices went up a bit more than 200%. Yet, during this time, gold prices were off by about 20%. There have been further rises, and declines.

                     

Want to head for the hills in an emergency? Gold bars are too heavy; rare gold coins would do it. But try this only in an dire emergency.

                     

Need a weakened dollar hedge? Gold is still not a panacea. It offers no earnings. And has storage and insurance costs if bought outright.

Gold isn’t too bad when interest rates are low, but proves costly when interest rates rise. And you can be sure interest rates will go far higher as inflation becomes  an economic factor for the Federal Reserve’s attention.

Moreover, higher interest rates generally spell a stronger dollar, and more pressure on gold. (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)

The Volcker Rule

                

The Volcker Rule regulations cannot measure the risk being taken by bankers; It is an oft-repeated lesson we never seem to learn.

Regulators in Washington have little idea of what they are doing. They are often wrong. And they are not penalized for their errors.

                     

Under the so-called Volcker Rule, banks are not supposed to trade with their own money. That sounds good to politicians because it appears simplistic enough to sell to voters who haven’t a clue about banking.

But funds are intermingled and the extent of supervision depends on size and there are simply too many “ifs” in the picture. Political influence also rears its ugly head, (See the Earl J. Weinreb NewsHole® comments and @BusinesNewshole at Twitter.)