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HomeWill Deflationary Forces Overwhelm Global Fiscal Stimulus?
Posted by Larry Doyle on September 28th, 2009 3:12 PM |
While Uncle Sam and his international brethren are doing everything they can to reflate the global economy, will the deflationary forces deeply embedded in the deleveraging process carry the day and the future? In doing so, will these deflationary forces usher in an economic dynamic not seen since the 1930s?
The analysis and review by market savants, media mavens, and government pundits is ultimately mere noise relative to the denouement of the question proffered above. Jeff Gundlach, of Trust Company of the West, has spoken his mind and believes deflation will ultimately weigh upon our economy and markets. Today I share with you Deflation Rising: Making the Case for a Lasting Deflationary Environment recently produced by Black Swan Trading. High five to loyal Sense on Cents reader Ben for sharing this report.
The professionals at Black Swan produce a thoroughly superb and comprehensive review of this critically important topic. I strongly encourage you to put this post in your “Save” box for further review as we navigate the economic landscape. The report is launched as follows:
“If Americans ever allow banks to control the issue of their currency, first by inflation and then by deflation, the banks will deprive the people of all property until their children will wake up homeless”
Thomas JeffersonUncle Sam, whom we’ve dubbed the “stimulator of last resort”, is doing all it can to create some inflation. Inflation creation, through the debasement of money, is one thing governments have proven historically they do quite well.
Inflation bails out creditors because it allows them to repay debt more cheaply in the future, paying back the nominal value of debt with currency that loses a substantial amount of real value.
There is no bigger creditor than government.
But that said, at the moment it seems governments are losing the battle of inflation, to deflation, despite pumping money into the market around the clock.
This report makes the case for deflation. In it we examine the powerful deflationary headwinds that could lock the US and global economy into years of deflationary pressures that are reminiscent of the lost years in Japan when they became locked in a deflationary bear hug.
The report puts forth a wealth of compelling evidence for the deflationary case. The evidence covers the following topics, complete with numerous graphs and analytics:
1. Relationship between gold and the U.S. Dollar
2. Growth in money supply
3. Review of decline in the Consumer Price Index
4. Lack of Velocity of Money
5. Increase in bank reserves
6. Decline in outstanding consumer credit
7. Decline in nonfinancial corporate business credit
8. Discretionary spending reaches 50-year low >>>the writers posit that consumption will be much more dependent on income than credit
9. Decline in personal income
10. Structural headwinds in global economy including:
— U.S. economic policies
— likelihood of asset bubble in China
— dynamics in the oil and food markets
After an exhaustive, but not exhausting, 22-page review, the writers make a compelling case that the lessons of The Lost Decade in Japan will now very likely be played out here in the United States. What plagued Japan during that decade and to a great extent even today….deflation.
Additionally, the buildup of leverage within our economy took place over a 20 year time frame with a few significant hiccups. To think that our economy will be able to delever and recover within a year or two is beyond naive. I would project this delevering, adaptation, and recovery process will take at least five years if not longer.
Whether you place yourself in the deflationary camp, the hyperinflationary camp, or somewhere in between, do yourself the favor of reviewing this report. In the process, you will be more educated and qualified to navigate the global economic landscape.
LD
No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Author Norb Vonnegut, Sunday Night at 8PM
Posted by Larry Doyle on September 26th, 2009 9:04 PM |
UPDATE: This episode of NQR’s Sense on Cents with Larry Doyle has concluded. You can listen to a recording of the episode in its entirety by clicking the play button on the audio player provided below. Once the audio begins, you can advance or rewind to any portion of the episode by clicking at any point along the play bar.
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Please join me this Sunday evening for NQR’s Sense on Cents with Larry Doyle as we dig deeper and work harder in navigating the economic landscape. My special guest will be Wall Street veteran and author Norb Vonnegut.
The 1980s saw dramatic swings on Wall Street. The ’80s brought us the start of a major bull market in bonds along with the major stock market crash of 1987. Rest assured, though, there was as much action after hours as there was during the trading days. The book that captured the true essence of that time period was Bonfire of the Vanities by Tom Wolfe.
There is no doubt the economic booms and busts of this decade make the ’80s look like childs’ play. What books will be published to capture the essence of this period? Let me propose Top Producer by Norb Vonnegut, a Wall Street veteran who understands a 10-Q, a CDO, and the spirit of the characters who drove Wall Street and our economy into the ground.
This recent review of Top Producer speaks volumes:
It seems Kurt wasn’t the only Vonnegut with storytelling in the extended family DNA. The proof is in this entertaining debut novel from Kurt’s distant cousin Norb Vonnegut. Here we meet Grove O’Rourke, a successful stockbroker (known as a “top producer” in Wall Street-speak) swirling in the aftermath of his best friend’s gory, public murder. To help the widow, Grove tries to decipher the ins and outs of his friend’s hedge fund business. Then, of course, mysteries and secrets unfurl, and our well-meaning protagonist finds himself in hot water.
The story mirrors reality — in ways that may now surprise even its author, who finished the book before the economic meltdown. The two decades Vonnegut spent as a wealth advisor are evident in the venom he brings to descriptions (”a colostomy bag in wingtips”) and in his grasp of the cutthroat world of finance. That plus his affinity for wordplay — nicknaming a raspy-voiced character “the hoarse whisperer” — will likely give you an appreciative smirk as you turn the pages to see exactly what happens to Grove in his search for the truth.
For those who have worked on trading desks and for those who would like an insider’s look at the Wall Street pace and race, Top Producer is a must read. I strongly recommend it. Norb Vonnegut will be joining me on Sunday night’s program to discuss his surefire blockbuster, as well as his views on the Wall Street experience.
What is on your mind? What would you like to address? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins.
As a reminder, all of my radio shows are archived and can be listened to right here at Sense on Cents by clicking on the No Quarter Radio tab located under the page header. (FYI, I keep an audio player of my most recent episode in the right sidebar). In addition, all No Quarter Radio programming is available as a free podcast on iTunes. From the iTunes Store, type “NQR podcasts” in the search window.
Many thanks to Larry Johnson and the rest of the team at No QuarterUSA blog for providing such a vibrant media vehicle as No Quarter Radio. I look forward to having you join me Sunday evening as we collectively navigate the economic landscape!!
LD
How the Mighty Have Fallen
Posted by Larry Doyle on September 26th, 2009 4:03 PM |
R. Allen Stanford
Sir R. Allen Stanford, the once proud and domineering master of the Stanford Financial kingdom, has not been having a lot of fun lately. How so?
Aside from the fact that he has been indicted for masterminding a multi-billion dollar Ponzi scheme centered on the Caribbean island of Antigua, his assets are totally frozen affording him no ability to retain legal counsel. As a result, he is being represented by a public defender. To add insult to injury, he sits in jail because the judge considers him a flight risk.
Life in jail is no bed of roses for Stanford, who was dubbed a knight in Antigua. What is life like in jail for Stanford? Put ’em up!! Sounds like Stanford took a beating this week. Bloomberg reports, Stanford Gets Medical Treatment After ‘Altercation’ at Texas Jail:
R. Allen Stanford, awaiting trial on charges he swindled investors in a $7 billion scheme, was given medical treatment after getting into a fight with an inmate in a Texas jail, a U.S. marshal said.
“He got into an altercation with another inmate,” Alfredo Perez, a spokesman for the Houston office of the U.S. Marshals Service, said yesterday in a phone interview. “He’s being examined by medical staff and treated for his injuries,” which aren’t life-threatening, Perez said. Perez said the incident happened about 10 a.m. on Sept. 24.
Stanford, who has been in custody since being indicted in June, faces 21 felony charges for allegedly paying investors “improbable if not impossible” returns by taking funds from later investors in certificates of deposit at Antigua-based Stanford International Bank Ltd.
Stanford is obviously entitled to due process. Does he or anybody in jail deserve a beating by a fellow jailbird? No . . . but welcome to the real world, Sir.
LD
September 26, 2009: Month-to-Date Review of the Markets
Posted by Larry Doyle on September 26th, 2009 9:49 AM |
Did the market put in a top this week? Is the Federal Reserve sending signs of taking its foot off the accelerator? Is the economy displaying an inability to gain traction? Will the G-20 communique make any real impact on our global financial system? Let’s review the market performance for the week and provide our month-to-date statistics while addressing the above questions. In the process, we can collectively ‘navigate the economic landscape,’ the mission of Sense on Cents. Let’s start our brisk Saturday morning hike with a quick review of the economic data which I deem most important and impactful on the markets:
Economic Data
>Leading economic indicators rose .6 with July’s reading revised upward from .6 to .9 . . . we put this in the net plus category . . .
>Durable Goods Orders posted a -2.4% reading vs. a consensus expectation of a 1% gain. The bulk of the decline was in transportation which is further indication that the Cash for Clunkers program pulled demand forward only to be followed by a big dropoff . . . a real negative
>New Home Sales also disappointed. The WSJ highlights,
Momentum in the housing market has slowed, indicated by yesterday’s dip in existing home sales and by today’s weaker-than-expected report on new home sales. New home sales edged 0.7 percent higher in August to a 429,000 annual rate that compares unfavorably with expectations for 445,000. August’s level would have been below July’s level were it not for a downward revision with July now reading 426,000 vs. an initial 433,000.
How did the markets handle the Fed, the data, and technical flows? Let’s continue navigating. The figures I provide are the weekly close and the month-to-date returns on a percentage basis.
Equities
DJIA: 9665, +1.8%
Nasdaq: 2091, +4.1%
S&P 500: 1044, +2.3%
MSCI Emerging Mkt Index: 908, +6.6%
DJ Global ex U.S.: 193.0, +3.9%
Commentary: equities on average declined by 2% on the week. This decline largely retraces the prior week’s advancement. In the process, have we put in a top in the market, at least for the short term? I believe we have and believe that top occurred on Wednesday after the Federal Reserve released its policy statement. I highlighted the price action of Wednesday in my commentary, “Equity Market Key Reversal on 9/23/09.”
What did the market see in reading through the Fed’s statement? Hints that the Fed knows it needs to lessen the flow of liquidity into the markets. Also, recall that the market price action for September had been a virtual straight line higher. I highlighted that fact a week ago. If, in fact, we just put in a short term top in the market, I would project that target support levels for the DJIA would initially be 9000-9100 (a 24% retracement of the March to September move of 6500 to 9900) and then 8600 (a 38% retracement). We shall see, but those levels represent key Fibonacci Retracement levels.
Bonds/Interest Rates
2yr Treasury: .99%, an increase of 1 basis point or .01%
10yr Treasury: 3.32%, a decrease of 9 basis points
This flattening of the yield curve is typically an indication that the market believes the Fed is preparing some sort of tightening. While the Fed is nowhere close to actually raising its Fed Funds Rate, we know its quantitative easing program and certain other liquidity measures have wound down and will continue to wind down over the next 1-6 months.
COY (High Yield ETF): 6.42, +6.1%
FMY (Mortgage ETF): 17.62, +1.3%
ITE (Government ETF): 57.86, +.1%
NXR (Municipal ETF): 14.27, +1.3%
Commentary: the market continues to easily absorb any and all government bond supply. I assess that development as a growing concern of deflationary pressures building in the market. Additionally, an overwhelming percentage of investor funds are going into bonds. I would be very careful about adding exposure to lower credit rated parts of the market given the outperformance of those funds to date (for example, high yield bond funds are up approximately 50% on the year). If, in fact, the economy is battling deflationary pressures (and it is) and the Fed is unable to keep ‘the pedal to the metal,’ then equities and other risk assets should retrace while Treasury bonds will appreciate.
U.S. Dollar
$/Yen: 89.85 vs. 93.11 at August month end
Euro/Dollar: 1.4670 vs. 1.4338 at August month end
U.S. Dollar Index: 76.81 vs. 78.14
Commentary: the overall U.S. Dollar Index increased by approximately .45% on the week. I do think there is a high negative correlation between the dollar index and our equity markets (dollar improves, equities weaken) as a large number of hedge funds and market speculators have sold dollars to buy global equities, a form of a ‘positive carry‘ trade. I would encourage people to track the U.S. Dollar Index closely as a good sign as to the near term direction of the equity markets.
I should highlight that the dollar did continue to weaken vs. the Japanese yen. MarketWatch reports:
The dollar remained down more than 1% versus the Japanese yen after Japan’s Finance Minister Hirohisa Fujii said he opposes intervening in the currency markets to curb the rise in the yen, according to media reports.
I feel compelled to repeat my statement of the last few weeks:
This ‘positive carry’ trade is nothing more than implementing leverage. Do not confuse leverage with brains when a market is rising because as I said the other day, leverage is death when that bull becomes a bear. As I think of market developments, I am convinced that this ultimate unwind of leverage trades currently being implemented is Jeff Gundlach’s reasoning for being bullish on the dollar. How will this work? Investors will look to exit their risk based investments (emerging market stocks and the like) and buy back the dollars which they have borrowed. In the process, the dollar may rally significantly. The timing of this unwind is the critical question.
Commodities
Oil: $66.09/barrel vs. $69.93 at August month end
Gold: $992.4/oz. vs. $952.4 at August month end
DJ-UBS Commodity Index: 123.37 vs. 125.73 at August month end
Commentary: I view this segment of the market to be the STRONGEST indicator of the global economic pulse. Additionally, the price action in commodities is likely a strong indication of the ‘positive carry’ trade put on by hedge funds and other traders.
The overall commodity index is DOWN 2% on the month. What are equity markets, especially emerging markets, doing up in the face of this price action? Great question.
Additionally, the Baltic Dry Index moved lower this week by approximately 4%. I view that movement as reason for concern. Can global equities in general and commodities specifically increase in value if the major indicator of global trade, that being the BDI (Baltic Dry Index), is in a downtrend? I think not.
Summary/Conclusion
With September almost in the rear view mirror and a number of market participants having salvaged very respectable returns on a year-to-date basis, I believe many fund managers and other market participants will look to lock in profits and returns and mitigate risk positions. What does that mean? I think cash will exit some of the riskier parts of the market and look for a safe harbor.
While the global government wizards meeting in Pittsburgh at the G-20 may have ‘smiled for the cameras,’ the released communique has ZERO enforcement capabilities and thus, I continue to maintain:
The overriding fact remains that the ‘Uncle Sam economy’ is continuing to adapt to the very changed nature of our underlying market and economic dynamics. That dynamic in which the securitization of assets remains a distant memory will force credit to remain tight. Consumers need to adapt accordingly.
Thanks for your support. If you like what you see here, please subscribe via e-mail, Twitter, Facebook, or an RSS feed.
Thoughts, comments, questions always appreciated.
Have a great day and weekend.
LD
Further Indication of a Stealth Tightening by the Federal Reserve
Posted by Larry Doyle on September 25th, 2009 1:55 PM |
Policy wonks in Washington do not publish articles in major periodicals such as The Wall Street Journal in an attempt to develop a byline. Given the impact of commentary provided by high ranking officials within the Federal Reserve, any article would be reviewed multiple times prior to submission. The Fed wants to be sure any commentary is properly nuanced so as to send the desired message, while not unnecessarily upsetting the markets.
I enjoyed reading the tea leaves embedded in just such a commentary, The Fed’s Job Is Only Half Over, in today’s WSJ. The writer, Kevin M. Warsh, is a senior Fed official and a member of the Federal Reserve’s Board of Governors since 2006. Mr. Warsh writes in a very professional fashion while laying out the Fed’s actions to date. His commentary gets most interesting in looking toward the future. While not negating the Fed’s policy statement released the other day, Warsh leaves little doubt as to which way the Fed is leaning:
In this environment, market participants and policy makers alike should steer clear of ironclad policy prescriptions. Nonetheless, I would hazard the view that prudent risk management indicates that policy likely will need to begin normalization before it is obvious that it is necessary, possibly with greater force than is customary, and taking proper account of the policies being instituted by other authorities.
What is Warsh saying? The Fed is going to need to withdraw liquidity from the system sooner than what economic indicators may indicate or market participants may desire.
“Whatever it takes” is said by some to be the maxim that marked the battle of the last year. But, it cannot be an asymmetric mantra, trotted out only during times of deep economic and financial distress, and discarded when the cycle turns. If “whatever it takes” was appropriate to arrest the panic, the refrain might turn out to be equally necessary at a stage during the recovery to ensure the Federal Reserve’s institutional credibility. The asymmetric application of policy ultimately could cause the innovative policy approaches introduced in the past couple of years to lose their standing as valuable additions in the arsenal of central bankers.
What is Warsh saying here? The Federal Reserve can not simply flood the system with liquidity to the benefit of market participants, but without thoughtfully considering the loss of its credibility.
Why is Warsh, on behalf of the Fed, releasing this commentary? In my opinion, I believe the Fed is becoming increasingly concerned that excess liquidity has flooded the system, driven asset levels too high, and the dollar too low. In the process, if liquidity were to continue to flow, the cost could be a dangerously precipitous decline in the value of the greenback.
Add it all up, and although the Fed does not want to spook the markets, this statement is an indication that the Fed is getting ready to take its foot off the accelerator. In the process, our equity markets should give ground.
LD
Wall Street Journal Goes in the Tank for FINRA
Posted by Larry Doyle on September 25th, 2009 9:18 AM |
When did real journalism move from asking the hard questions and demanding answers to the mere parroting of a party line? Recent polls indicate a lessened confidence in the media in our country. Why? Journalism has largely abdicated its responsibility to be the public conscience. I see evidence of this ‘parroting’ in today’s Wall Street Journal, which reports After 27% Fall, FINRA Plays It Safe.
FINRA, the Wall Street self-regulatory organization, has been under increasing pressure lately with the spotlight focused primarily on its investment portfolio activities. FINRA has provided virtually little to no transparency and, as such, currently faces 3 lawsuits by member firms. There is no doubt in my mind that today’s WSJ article is an attempt by FINRA to display a degree of transparency in order to keep the wolves at bay. Is FINRA fully transparent? Not in my opinion.
Did the WSJ pursue this story or was it conveniently placed to deflect the heavy criticism and charges FINRA faces in the lawsuits? Make no mistake, the WSJ has been largely absent in aggressively covering developments in and around FINRA. The returns generated by FINRA’s investment portfolio and its shift to a conservative strategy have been widely disseminated over the last few months and were highlighted here at Sense on Cents on June 29th when I wrote “FINRA 2008 Annual Report: A Special Type of Hubris”:
I personally believe it is very important for a financial self-regulatory organization, such as FINRA, to be totally transparent in every regard. Why? Very simply, transparency promotes confidence and FINRA’s position as a financial regulator should begin and end with that goal.
Against that backdrop, FINRA should not directly manage any of their own funds. To do so is an open invitation for conflicts of interest. FINRA’s own investment portfolio, managed by an Investment Committee, generated a negative 26% return in 2008. In April 2009, the FINRA portfolio shifted to a lower volatility approach but in 2008 it continued to have exposure to hedge funds, fund of funds, and private equity. As much as I believe this is a very big deal, it pales in comparison to the major issue I, and others, have with FINRA: their involvement with Auction-Rate Securities.
Why do I feel so strongly that the WSJ is serving as a mouthpiece for FINRA rather than truly digging for total transparency? Let’s zero in on how the WSJ addresses this auction-rate securities angle. As we do this, please recall the following:
1. $165 billion ARS remain frozen in investor accounts
2. A federal judge has designated the sales and marketing of ARS to be a fraud
3. FINRA did not post on its own website the failing nature and ultimate total failure of the ARS market until 2008, well after it liquidated its own position.
The WSJ, a proud financial periodical, provides less than cursory coverage to this piece of the FINRA story, in writing:
Finra used an outside consultant, Jeffrey Slocum & Associates of Minneapolis, to help choose money managers. In 2006, Finra hired as chief investment officer Boris A. Wessely, then treasurer at the Rockefeller Brothers Fund. Ms. Schapiro succeeded Mr. Glauber as the agency’s CEO in mid-2006.
One early step by Mr. Wessely’s team was the mid-2007 sale of about $650 million of auction-rate securities. The sale wasn’t influenced by any sign of weakness in the auction-rate market, which froze in 2008, but instead was a move to diversify Finra’s short-term investments away from such a niche product, people with knowledge of the move say. (LD’s highlight)
People with knowledge of the move say?? That is the best the WSJ can do to pursue what truly happened with FINRA’s sale of ARS? That statement is the equivalent of FINRA or whomever the ‘people with knowledge’ stating, ‘you’ll have to trust us on this.’
I would put forth that the days of blind trust are over and that for the thousands of investors sitting with those $165 billion in frozen ARS the days of verification are upon us.
I reiterate my longstanding call that FINRA must reveal all the details surrounding its ARS liquidation. Those details include the date of liquidation, the proceeds, the dealer or dealers through whom FINRA liquidated the ARS, and most importantly whether FINRA possessed material, non-public information and acted upon it.
I fully appreciate that my writing and questions here are aggressive, but at this point in our country’s history the American public deserves nothing less than full and total transparency from its financial regulators. Regrettably, both FINRA and the WSJ fall woefully short in providing it.
Comments, questions, constructive criticisms always appreciated.
LD
Top Producer by Norb Vonnegut
Posted by Larry Doyle on September 24th, 2009 4:04 PM |
The 1980s saw dramatic swings on Wall Street. The ’80s brought us the start of a major bull market in bonds along with the major stock market crash of 1987. Rest assured, though, there was as much action after hours as there was during the trading days. The book that captured the true essence of that time period was Bonfire of the Vanities by Tom Wolfe.
There is no doubt the economic booms and busts of this decade make the ’80s look like childs’ play. What books will be published to capture the essence of this period? Let me propose Top Producer by Norb Vonnegut, a Wall Street veteran who understands a 10-Q, a CDO, and the spirit of the characters who drove Wall Street and our economy into the ground.
This recent review of Top Producer speaks volumes:
It seems Kurt wasn’t the only Vonnegut with storytelling in the extended family DNA. The proof is in this entertaining debut novel from Kurt’s distant cousin Norb Vonnegut. Here we meet Grove O’Rourke, a successful stockbroker (known as a “top producer” in Wall Street-speak) swirling in the aftermath of his best friend’s gory, public murder. To help the widow, Grove tries to decipher the ins and outs of his friend’s hedge fund business. Then, of course, mysteries and secrets unfurl, and our well-meaning protagonist finds himself in hot water.
The story mirrors reality — in ways that may now surprise even its author, who finished the book before the economic meltdown. The two decades Vonnegut spent as a wealth advisor are evident in the venom he brings to descriptions (”a colostomy bag in wingtips”) and in his grasp of the cutthroat world of finance. That plus his affinity for wordplay — nicknaming a raspy-voiced character “the hoarse whisperer” — will likely give you an appreciative smirk as you turn the pages to see exactly what happens to Grove in his search for the truth.
For those who have worked on trading desks and for those who would like an insider’s look at the Wall Street pace and race, Top Producer is a must read. I strongly recommend it.
Author Norb Vonnegut will be joining me this Sunday evening on No Quarter Radio’s Sense on Cents with Larry Doyle to discuss his surefire blockbuster, as well as his views on the Wall Street experience.
LD
Volcker Locks and Unloads on Wall Street and Washington
Posted by Larry Doyle on September 24th, 2009 12:15 PM |
Former Fed Chair Paul Volcker
I find it interesting, but not surprising, that former Fed Chair Paul Volcker’s testimony to Congress this morning has received little to no coverage by major media outlets. Why? With few exceptions, the financial media plays along with the financial industry which pays the bills while relegating investors and the American public to the bleachers.
Recall that just a week ago I wrote “Volcker Launches Bombshell on Wall Street and Washington.” I highlighted Volcker’s direct hit:
While the insiders on Wall Street and Washington pander about real financial regulatory reform, former Fed chair Paul Volcker yesterday hit ground zero on this hotly debated topic.
The heart of financial regulatory reform is centered on the implementation of leverage by our largest financial institutions. The leverage is exercised in a wide array of activities, both on and off-balance sheet. The capital utilized by the banks in these activities is credit that has not and will not flow directly through to the economy. Why? The banks believe that they will generate a greater return on the capital via proprietary activities rather than facilitating client business and addressing customer needs.
Today, Volcker locks and loads and unleashes another volley on the wizards in Washington and their incestuous brethren on Wall Street. Whatever you may think of Volcker as a central banker, I hold him in high regard for elevating the debate at this critical point in our country’s economic history. Regrettably, President Obama’s adviser, Mr. Larry Summers, has taken Mr. Volcker’s chair away from the table. Yes, this is the same Mr. Summers who The New York Times described this past April as having received A Rich Education . . .
Mr. Summers, the former Treasury secretary and Harvard president who is now the chief economic adviser to President Obama, earned nearly $5.2 million in just the last of his two years at one of the world’s largest funds, according to financial records released Friday by the White House.
Impressive as that might sound, it is all the more considering that Mr. Summers worked there just one day a week.
Although I digress from my focus on Mr. Volcker, I find it enlightening that the man in Washington who has pushed Volcker away from the table stuffed himself at the Wall Street trough. Back to Mr. Volcker. (more…)
JP Morgan’s Winters Identifies Problem, But Offers No Solutions
Posted by Larry Doyle on September 28th, 2009 11:17 AM |
Who on Wall Street is willing to break camp and call for real change in the industry that crippled our global economy?
Strong managers and real leaders not only identify problems before they develop, but they define and implement solutions as well. No one individual or institution led us into the current economic mess and no one individual or institution will lead us out. That said, if leaders in finance want to regain a degree of credibility and respect, they can not expect to be accorded those benefits by merely identifying problems in global finance. They must also provide answers and policies which cut across the entire global economic landscape and serve the interests of all. I have yet to see this type of leadership from anybody on Wall Street or any other center of global finance.
Identifying a problem without proffering a solution is nothing short of pandering. I witness exactly that in reading the London Evening Standard’s, JP Morgan’s London Head Slams ‘Greed’ of Bankers:
Having worked with Bill at JP Morgan, I respect him while admitting that our paths crossed to only a limited degree. That said, his comments here are nothing more than a ‘tremendous grasp of the obvious.’ Bill, what about the solutions?
Where are you and JP Morgan CEO Jamie Dimon in terms of the following:
1. Total transparency in the derivatives business achieved via the utilization of TRACE
2. Compensation practices which promote full correlation between long term risks and rewards (banker compensation)
3. Total transparency for Wall Street regulatory bodies, primarily FINRA
4. Fair and equitable credit card rates and practices
5. Supporting a fiduciary standard for financial brokers
6. Support for accounting practices which offer a full and honest look into banks’ books and records
7. Legislative changes for the ratings process
Without support for these initiatives, the very culture of greed which Mr. Winters would appear to be calling into question will perpetuate.
In fact, with all due respect, his lack of speaking out at this conference or at another forum on these topics can only lead me to believe his remarks are largely disingenuous.
LD
Related Sense on Cents Commentary
For JP Morgan’s Winters’ The Ledge Got Very Narrow and The Elbows Razor Sharp’ (September 29, 2009)
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