As I wrote on Friday, lists of lessons we have learned from the current economic troubles have been enjoying a vogue lately. A dim view of my fellow humans prevents me from being so optimistic as to believe that we are going to emerge from this fiasco meaningfully wiser. But I do have a list of lessons that we could learn from recent experience. But probably won’t.
In the best case scenario, regulators are just as smart and capable as the people they regulate. And, just to be clear, best case scenarios are rare. Many of the complaints about how the Fed, SEC, et al. blew it by not foreseeing and preventing the Wall Street meltdown are unfair. If the thousands of people making seven figures at meltdown ground zero didn’t see it coming, why would we expect the hundreds of government employees watching them from the outside to pick up on it?
25 years is not forever. Amongst my many brilliant theories is this: especially in the realm of culturally significant business phenomena, if something has been going on for more than 25 years people will mistake it for a permanent always-has-been-always-will-be thing.
Read more »
The Wall Street Journal has been running a series modestly entitled "The New Rules of Personal Finance". The most recent installment is on what to do differently now that you know that taxes will be going up.
As readers of this blog know, I’m not all that convinced taxes are on the way up anytime soon. Yes, the deficit and debt are heart-poundingly frighteningly large. And yes, any reasonable observer can see that something has to be done. That doesn’t mean it will be.
I am sure that the Administration and its supporters would, if they had their druthers, raise taxes significantly to get the deficit under control. But I am also sure they are aware enough to see that they just don’t have the political capital right now. And when would they? Next year, during the mid-term election season? In 2011 and 2012, when Obama will be facing what is looking like a tough reelection?
Read more »
It’s not exactly grabbing headlines, but our nation’s regulatory watchdogs are on the scent of yet another scourge from which investors need to be protected: leveraged ETFs. Apparently, these things are like snakes in the grass, just waiting to spring at poor innocents who wander by.
Several brokerages have taken steps to discourage their clients from buying
leveraged ETFs and in some cases prohibit it altogether. The folks at Motley Fool have been waving people off them. The association of state securities regulators named leveraged ETFs as one of their Top 10 Investor Traps, along with Ponzi schemes and currency and gold bullion scams.
And just last week, FINRA, the financial industry’s self-regulation body, announced changes to the margin requirements for buying leveraged ETFs that go a long way towards destroying their usefulness. A FINRA spokesman called leveraged ETFs ”very complicated, with a high element of risk."
Read more »
Wednesday’s WSJ had a piece on Rethinking Stocks’ Starring Role. It’s about time.
Don’t get me wrong, stocks are an important asset class, maybe even the most important one. But they are just that, a large category of reasonable 
things a reasonable person might invest in, but not the only such category. Yet for generations, received wisdom has made it the center of individuals’ investing plans, the main course in the wealth accumulation dinner.
Why? ‘Cuz the stock market went up so darn much over the last fifty years or so. (Er, uh, recent events not included. Let’s say 1957 to 2007.) I know fifty years sounds like a really long time. Long enough that you might consider it to be approximately forever. If the stock market has gone up a certain percentage on average over that long a time a person is sorely tempted to think of that as the basic nature of the beast.
Read more »
Last week the The Digerati Life, a generally worthwhile blog, had a generally worthwhile post on market timing. (Bottom line: you really shouldn’t.) But 
it had a few sentences I keep rereading.
I have in my portfolio two ETFs that track the movement of the Dow. One makes money when the market goes up and the other makes money when the market goes down. The only job of these ETF’s is to react to the overall market. The responsible thing that I do is to buy them both as a form of insurance. I buy both because I know that I cannot predict the market movements.
So Silicon Valley Blogger owns two ETFs that exactly mirror each other, such that the net of the combination of the two is zero? (Actually, it would be the T-bill rate less the management fees, which is approximately zero but maybe less.)
That can’t be right. She didn’t mean that. That would be dumb.
Read more »
In the best case scenario, regulators are just as smart and capable as the people they regulate. And, just to be clear, best case scenarios are rare. Many of the complaints about how the Fed, SEC, et al. blew it by not foreseeing and preventing the Wall Street meltdown are unfair. If the thousands of people making seven figures at meltdown ground zero didn’t see it coming, why would we expect the hundreds of government employees watching them from the outside to pick up on it?
Economics, Government, Investing, The Big Picture | Frank Curmudgeon | 
September 21, 2009 11:59 am | 
Comments (863) 
Subscribe