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The Cost of Doing Business

Posted by Larry Doyle on July 28th, 2010 7:15 AM |

It takes money to make money.

Simple business principle, correct? A basic, fundamental business tenet, right?

Well if the money it ‘takes’ is used to pay inordinate fines and penalties resulting from management’s willingness to jeopardize reputation and principle in pursuit of profit, what does that say about the business enterprise itself?

Will the $550 million fine recently imposed on Goldman Sachs fundamentally change the manner in which Goldman engages clients and operates its business? I have chuckled more than a few times upon reading that Goldman’s mortgage employees involved in the structuring, trading, and sales of the securities at the center of this entire debacle will have to undergo continuing education type classes. These classes are truly nothing more than a ‘check the box’ perfunctory exercise. Honestly, I would love to be a fly on the wall during these classes as I am sure some of the material covered and accompanying discussions would provide real comedic fodder. Read the rest »


Startling Statistics Speak Volumes

Posted by Larry Doyle on July 27th, 2010 1:05 PM |

Thanks to a good friend of Sense on Cents for sharing an array of truly startling statistics about the distribution of wealth in our nation today. These stats are embedded in a recent article which ran at Yahoo Finance entitled, The Middle Class in America Is Radically Shrinking. Let’s review the statistics first and add comments later:

•    83 percent of all U.S. stocks are in the hands of 1 percent of the people.
•    61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
•    66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans. Read the rest »


Continuing Consumer Contraction Points to Accelerating Double Dip

Posted by Larry Doyle on July 27th, 2010 6:10 AM |

2nd quarter earnings are certainly coming in stronger than expected, and our equity markets are having a solid rebound this month. Are these earnings reflective of real underlying strength in the economy or corporations that are now operating more efficiently?

Has our economy hit a soft patch? Is it declining? Are we rebounding from a recent downturn? Might we experience a real double dip?

The initial reading of 2nd quarter GDP is due this Friday. To say that it is highly anticipated would be a huge understatement. Consensus expectations for 2nd quarter GDP are running between +2.5% and +3%. Recall that the final 1st quarter report registered a +2.7% reading.

A Sense on Cents favorite has a decidedly different view of 2nd quarter economic activity and the subsequent GDP. Read the rest »


Keine Transparenz Mit Diesen Untersuchungen

Posted by Larry Doyle on July 26th, 2010 3:19 PM |

“Was ist das, LD?” What is this, you ask?

Did you inadvertently hit your keyboard and Sense on Cents is now being delivered in German?  No, don’t worry about that. Although I have always had a strong interest in the German language and history, my language skills have faded over the years. That said, I think readers should be able to figure out the key German word in my title. (I hope my grammar is correct!!)

In light of the European Bank Stress Tests released on Friday, I am compelled to highlight the fact that for a number of German banks there was “No Transparency with These Tests.” How so? Read the rest »


Has the Recession Really Ended?

Posted by Larry Doyle on July 26th, 2010 11:25 AM |

In the course of a discussion this past week, I made the point that I do not believe our economy has ever truly come out of the recession which officially began in December 2007. The National Bureau of Economic Research (NBER) is responsible for measuring the start and end dates for economic contractions and expansions. Why is it that the NBER has never officially declared an end to the recession? Interesting, very interesting.

On this topic, a good friend shared with me a fabulous piece which addresses our current economic health and the major hurdles for our future economic growth and prosperity. This piece, Quarterly Review and Outlook by Hoisington Investment Management in Austin, TX, addresses these hurdles in forthright, layman’s fashion. Read the rest »


How Much Are You Paying for That Fund?

Posted by Larry Doyle on July 26th, 2010 6:30 AM |

A few weeks back, I chastised a local financial commentator, Julie Jason, for her condescending demeanor toward Madoff investors. This week, I am happy to praise Ms. Jason for her intuitive nature and exploratory work on mutual fund fees and expenses.

All too often we hear asset managers touting their performance and investment expertise. I have hardly ever heard an asset manager addressing the fees and expenses charged for their so-called management expertise. To this end, I tip my hat to Julie Jason for highlighting this critically important topic in writing, Helping Figure Out the Fees:

You may have heard that mutual fund 12b-1 fees, part of the operating expenses of a fund, will be eliminated, which would imply that mutual fund shareholders could benefit from lower costs. Lower costs should mean higher performance.

Don’t be so hasty! Wall Street does not merely allow fees to walk out the door. Read the rest »


Persistence Pays Off in Colorado Complaint Against E*Trade

Posted by Larry Doyle on July 24th, 2010 3:50 PM |

“The only thing necessary for the triumph of evil is for good men to do nothing.”

This quote is commonly attributed to Edmund Burke, an Irish statesman, author, orator, and political philosopher who lived in the 1700s. The depth of Burke’s words continue to resonate today. In fact, I thought of his words of wisdom when reflecting on the latest episode in the ongoing saga surrounding the auction-rate securities travesty.

No doubt there remain many miles to go and mountains to climb before real justice and full compensation are afforded all those who were defrauded in the distribution of auction-rate securities. That said, this week brought a small victory for all ARS holders — and one individual specifically — as word broke that the state of Colorado has filed a complaint against E*Trade for improperly distributing auction-rate securities. Read the rest »


Bruce Malkenhorst Should Thank Robert Rizzo

Posted by Larry Doyle on July 24th, 2010 10:15 AM |

Bruce Malkenhorst must be a very happy man today and for that he should thank Robert Rizzo.

Who is Malkenhorst? Who is Rizzo? What is the story here?

Readers may recall that 14 months ago, Malkenhorst, a former municipal employee in Vernon, CA was exposed as the recipient of a sweet little ‘half million dollar pension’ connected to his duties in the bustling metropolis of Vernon, CA. How bustling? Vernon, a community in southern California, has a total population of approximately 100 citizens.

Malkenhorst and his cronies in Vernon singlehandedly redefined the concept of municipal fiscal abuse. I highlighted this story and accompanying unbelievable details a year ago in writing a story which an inordinate number of readers have reviewed entitled California’s $100, 000 Club.

This week, Malkenhorst and his pals in Vernon must have partied real hard and toasted Robert Rizzo all week long. Why is that? Read the rest »


Mortgage Servicers Are Hugely Conflicted

Posted by Larry Doyle on July 23rd, 2010 12:57 PM |

Information is everything. Those who control the information have immense power. The allegiances of those in control of the info obviously have an enormous impact on how the information is processed and dispensed. The potential for conflicts of interest are significant. Standard business fare, correct? Have these conflicts played out on Wall Street? All too often. How so?

I have repeatedly highlighted the conflicts within our financial regulatory structure. We also know that the credit rating agencies have been enormously conflicted. Anywhere else? Let’s enter the world of mortgage servicing, ….. Read the rest »


Will European Bank Stress Tests Be “Garbage In, Garbage Out?”

Posted by Larry Doyle on July 23rd, 2010 6:52 AM |

All eyes will turn toward Europe this afternoon for the much anticipated release of the Euro-style Bank Stress Tests. Those who truly embrace real ‘sense on cents’ know that the process and the data are far more important than the actual results. Why is that? If these tests are charades or nothing more than ‘garbage in,’ then the results will most assuredly be ‘garbage out.’

On this note, let’s review a few comments from a Bloomberg preview of these tests. Bloomberg reports, Success for Stress Tests Hinges on Data, Not Failures:

1. The success of the European Union’s bank stress tests hinges on how much detail regulators provide about the basis for their conclusions, not on the number of lenders that fail, investors said. Read the rest »


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Larry Doyle

Larry Doyle A Wall Street veteran's views and instincts on the markets, economy, and all things financial.







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