Category Archives: Economy

“Stay Invested” Mantra

April Fools’ Day Rant

When you invest with help of financial adviser or investment portfolio manager you hear it … “stay invested”. You heard it in fall of 2007, in summer of 2008, and in the beginning of 2009. You heard it often. Every time the market took a dive, you heard it, and then the market took another dive.

No matter what the economic outlook was, you heard it. You heard it over and over in person, and on all the network and cable TV channels. There were other opinions too, but the “experts” who consistently and mindlessly touted the “stay invested” mantra were, almost without exception, the financial advisers and investment portfolio managers.

Why this group of “experts” was so consistent and so wrong? Simple, they had their, not your, interest at heart. Their compensation is directly linked to the size of your investment they manage. Their compensation does not depend on the results they achieve managing your investment. Conflict of interest … plain and simple. Their “stay invested” slogan is a smoke screen used to obscure the obvious, and to discourage you from looking at other options.

If you were not convinced by their first “stay invested” rule, then they probably used the second one … “if you have a stomach for the ups and downs that come with risk, you’ll be rewarded”. They tried to shame you and make you feel like a wimp. Well, heck … the risk is not about your stomach. It’s about making or missing an important goal. Whose goal? Yours … not theirs … the conflict of interest again. If you would hedge the risk and scaled down your investment portfolio or went to cash, their compensation would be affected negatively.

Therefore, the financial advisers and investment portfolio managers not only do not want you to hedge the risk, they do not hedge the risk themselves while managing your investment. They march boldly to face the risk, and they use your money to hedge their losses.

Ah, the feeling of nausea …

Have US markets
bottomed out … yet?!

I think so … my gut feeling tells me that we are close.

I really hope so … enough already … if not now then soon, really soon. Done with the gloominess … be optimistic everybody … be positive if not bullish. Let’s start the steady recovery now!

We are in the shallow waters in stormy weather still, technically speaking. There are still dangers on the horizon: US banking and auto industry, residential and commercial real estate, big US recovery stimulus/spending plan, are still in flux, as are the Japanese and EU economies, and specifically Easter European and Russian situation. There is still Geithner factor … MIA as of now. This might be the worst risk we are still facing, but I think the freefall is over … now, how long are we going to move sideways before bouncing up?

Welcome to the 21st Century Great Global Depression … as it develops and moves at the speed of computers and automated trading systems we are using today, it’s not going to take decades for it to be over. In any case, not soon enough for many of us … too bad … unless, China anyone?

Global New Deal

Credit-rating agencies … paid for the rating of customer securities invented by the same paying customers … conflict of interest perhaps. What a joke! Time to deal with this “financial oxymoron” for real this time. The US administration has tried in recent months already, and zip … nada … nothing real has happened since. It’s about time to get real!

Source: Brown: World needs “Global New Deal”

The world needs a “global New Deal” to haul it out of the economic crisis it faces, Prime Minister Gordon Brown of the United Kingdom said Sunday.

“We need a global New Deal — a grand bargain between the countries and continents of this world — so that the world economy can not only recover but… so the banking system can be based on… best principles,” he said, referring to the 1930s American plan to fight the Great Depression.

French President Nicolas Sarkozy said the world’s response to the global financial meltdown had to be profound and long-lasting, not just tinkering around the edges.

“Europe wants to see an overhaul of the system. We all agree on that. We’re not talking about superficial measures now or transitional measures — we’re talking about structural measure, which need to be taken,” he said.

German Chancellor Angela Merkel, the host of the meeting, urged nations of the world to work together to fight the problem.

“Confidence can only be restored if people in our countries feel that we are pulling in the same direction and have understood that we really must learn lessons from this crisis,” she said.

And she proposed that a new institution grow out of the crisis, “which will take on more responsibility for global [financial] mechanisms.”

The Europeans say they have agreed international financial markets must be regulated more thoroughly. That also means stricter rules for hedge funds and credit-rating agencies.

Santelli vs.
White House

Yesterday, Santelli vs. White House … today, interesting White House reaction and more … see Rick Santelli’s criticism of the administration being discussed on CNBC.

US markets down again due to more fears and uncertainty … Bank Nationalization Casts A Shadow as started yesterday by Bernanke’s Slip of the Tongue. Let’s only hope that next week Geithner does not repeat his pitiful performance like the one two weeks ago.

Let’s be optimistic …

Can’t help it …

… that my posts are dominated by economic topics. Perhaps justified by the fact that the current state of economy is the biggest story in generations, and affecting generations to come. More from the wire … just in … so disappointing:

Geithner’s Speech Gets a Bronx Cheer From Markets

The early verdict on the Geithner plan: Too little, too little.

Markets are down, having had an adverse reaction to Treasury Secretary Tim Geithner’s presentation detailing the Obama Administration’s plan to pull the financial system out of its current morass, which many say is still too light on specifics. Certain facets of the plan resemble those that were entertained in the previous administration — with the exception of a stress-testing mechanism to determine which financial firms need assistance.

“Not doing anything is the worst option,” Dan Cook, senior market analyst at IG Markets. “Until there’s a firm plan in place it still seems like a lot of talk.”