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HomeLet’s Meet David Darst
Posted by Larry Doyle on March 14th, 2009 6:00 PM |
David Darst may not be a household name for the general public, but for those involved in the world of finance he is held in very high regard. In fact, I think so highly of David that in the Sense on Cents Reading Room, I included his book:
The Complete Bond Book: A Guide to All Types of Fixed-Income Securities
by David Darst
– the Wall Street insider’s Bible to all types of fixed income securities.
David was interviewed yesterday on Bloomberg News. He touches on issues I have recently addressed here at Sense on Cents. I appreciated his commentary on the fact that the equity market rally this week was a “psychological” bounce in the context of a bear market. I addressed the particulars of the current market psychology in my piece, Is the Market Oversold? UPDATE.
Darst also offers enlightening color on overall market outlook, inflation, and places to hide amidst this turmoil. I know you will not be disappointed in viewing Morgan Stanley’s Darst Sees Psychology Driving Stocks. It’s a 5 minute clip from a man with a lifetime of experience!! I am happy to bring it to you as we collectively navigate the economic landscape.
LD
Mortgage Modification Guidance
Posted by Larry Doyle on March 14th, 2009 12:00 PM |
There is little doubt that there was massive fraud perpetrated by unsavory and unethical mortgage brokers during the housing boom. I do not mean to paint all mortgage brokers with the same brush. As with any industry, there are a tremendous number of highly ethical people working hard to make an honest living. Regrettably, not everybody falls into that camp.
Our economy would be well served if both local and federal authorities worked harder to expose the criminals in the system, indict them, prosecute them aggressively, and make them pay a very stiff price for their actions.
Not too surprisingly, some of the same ilk that wrote fraudulent mortgages are now populating the mortgage modification industry. People need to be exceedingly careful in engaging those who seem to want to help them modify their mortgage. (more…)
Is My Insurance Insured?
Posted by Larry Doyle on March 12th, 2009 6:30 PM |
The world of insurance occupies almost every corner of our lives. Life, home, auto, disability, long term care, personal articles. Rather than addressing what is insured, an easier question may be to ask what isn’t insured.
Given the intricate web of products and accompanying risks, we clearly are not currently dealing with your grandfathers’ insurance companies.
All that said, insurance is a relatively simple business. A policy is underwritten, premiums are collected and invested, and on and on we go. In fact, with major policies incorporating outsized risks, insurers can “lay off” risk with reinsurers, such as Munich Reinsurance, Swiss Reinsurance, and General Reinsurance. One would think this should be a steady and stable, if not quiet, industry. It would be such if companies did not reach for outsized returns through ever greater risks, primarily in the products in which they invested. While The Quiet Company, Northwestern Mutual invests primarily in high quality corporate bonds, entities like AIG trafficked in esoteric CDS. Hartford Financial Services played in the lower credit sectors of the commercial mortgage space, sub-prime mortgages, and junk bonds. (more…)
How Do We Track Housing?
Posted by Larry Doyle on March 12th, 2009 7:07 AM |
At the core of most, if not all, of our economic problems lies housing. I do not need to replay the tape of low rates, shoddy underwriting, and Wall Street securitizations that all played a dramatic role in creating a bubble the likes of which we have never seen and hopefully never will again. All that said, housing is an enormous market with a wide array of factors impacting it. How does one track it? Are we supposed to rely on our local brokers telling us things feel better? Should we ask contractors if they are bidding on jobs? Dare we rely on our local or national media outlets to provide their expertise and pandering? If we did, housing may have bottomed 14 different times in the last 10 months. In all seriousness, how can we track housing? Welcome to Sense on Cents.
There are two indexes that have developed over the last few years and are enormously respected by market participants. One index, the S&P/Case-Shiller Home Price Indexes, is released on a monthly basis. This index tracks a variety of regions in the country but not every region. Still, all things considered, this index is widely watched as a reliable indicator of health in housing. The index is typically released toward the end of each month. The most recently released report was on February 24th, A Look at Case-Shiller Numbers, by Metro Area. In this report, all indications are that housing has yet to see any support. (more…)
Where Can I Put My Money?
Posted by Larry Doyle on March 11th, 2009 5:06 PM |
With stock markets down 15-20% on the year and 50% over the last 14 months, everybody in the market is asking the same question, “where can I put my money?” While many asset managers are touting the equity markets as a great buy at these levels, cooler and calmer heads are stating that the economy and markets are likely to have a slow recovery. The question screams where to put one’s money to earn more than the pittance offered in bank checking and savings accounts.
I read a very informative piece in today’s WSJ, Locking In Returns You Like. First off, this piece is very user friendly. It provides a wealth of information and links to websites which will provide good market insight.
Over and above referencing some quality products (GNMAs, TIPS, municipals), it also broaches the topic of laddering which I believe is a very valuable technique in building a bond portfolio.
Additionally, the article highlights FPA New Income Fund which is managed by one of our Economic All-Stars Bob Rodriguez. (I have no professional relationship with anybody on this site!!)
I think you will find this article a very valuable resource and I would recommend putting it in the “save” column for future reference. As you review the products highlighted and topics broached, please do not hesitate to ask anything you may not fully understand.
LD
Turn That Screw a Little Tighter
Posted by Larry Doyle on March 10th, 2009 6:30 PM |
The screwing that Americans have taken on the development and marketing of the scam known as Auction Rate Preferred Securities (ARPS) continues. I have written at length on how the regulatory body, FINRA, actually owned $650 million in these 
securities at calendar year end 2006. I have persistently questioned how a regulatory body could possibly own a security which was knowingly mismarketed. Was FINRA negligent, complicit, or both? Did FINRA liquidate its position prior to the market imploding on all other owners? While many institutional owners of ARPS have been made whole, many retail clients are still left holding the bag.
Well, the screw that is ARPS just got turned another notch tighter. It turns out that the issuers of ARPS (municipalities, hospitals, colleges and universities, et al) are contractually obligated to pay an ongoing underwriting fee to the Wall Street banks despite the fact that these regularly scheduled auctions no longer occur. (more…)
Keystone Kops
Posted by Larry Doyle on March 9th, 2009 5:40 PM |
On the heels of the Bernie Madoff fiasco, there was massive pressure on the gross incompetence displayed by the SEC. Not unlike a police department that is under fire, the SEC needed a high profile case to gain a measure of vindication. Enter Allen Stanford and Stanford Financial.
I am not here to defend Allen Stanford nor any of the activities that transpired in his offshore bank located in Antigua. However, the SEC also froze the assets of all clients housed in Stanford Financial’s brokerage operation based in Houston. Unlike Bernie Madoff, who did not employ a custodian, the bulk of Stanford Financial’s assets were housed at Pershing Financial, one of the largest custodians in the business. While the concerns revolving around Stanford are in the Caribbean, the SEC’s act of freezing ALL customer accounts has been the death of this brokerage entity. Hundreds of legitimate jobs have been eliminated. Thousands of customers have faced unnecessary and undue financial hardships since February 17th as a result. (more…)
