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HomeStagflation…and More Market Moving News
Posted by Larry Doyle on February 27th, 2009 8:51 AM |
U.S. Economy Shrank 6.2% in Fourth Quarter, Most Since 1982 from initial report of -3.8%. Price index in the GDP report revised up to .5% from initial reporting of .1%
Both sides of this report, along with the recently reported higher than expected CPI (consumer price index) and PPI (producer price index) certainly seem to be pointing toward a greater likelihood of “stagflation. ” Our economy has not experienced that dreaded scenario since the early ’80s.
Additionally, Citi Gets Third Rescue as U.S. Plans to Raise Stake IF privately held preferred shareholders do the same. What does this mean? Current common equity holders in Citi will be significantly diluted and the U.S. taxpayer is moving into a first loss position. Why is the government doing this? Very simply because Citi would otherwise likely lose counterparties willing to trade with it given the concerns of losses embedded in its holdings of toxic mortgage assets.
Market reaction? Stock index futures are pointing toward a 2% decline!
LD
Put Your Brokers and Bankers in Competition
Posted by Larry Doyle on February 25th, 2009 12:00 PM |
Every global financial enterprise has been hard pressed to maintain, let alone grow, revenues given the economic turmoil. With assets held in portfolio experiencing increasing levels of delinquencies and defaults, these institutions are all forced to set aside more reserves. How do businesses respond? Cut expenses and increase fees wherever and however possible. Who pays? You!!
I regularly see a sleight of hand at work on behalf of banks, insurance companies, money managers and other financial intermediaries to generate greater fees. While you will regularly be solicited with new and improved product offerings, how often are you getting the call that a fee is being increased and you may want to shop around for a better rate.
In an attempt to help you navigate this landscape, I strongly encourage you to approach your brokers and bankers and request a grid-like structure highlighting the basic products on one axis and the fee structure on the other axis. While more structured products and specialized services can be worthy of higher fees, a whole host of basic products fall into the plain vanilla category. (more…)
Caveat Emptor
Posted by Larry Doyle on February 25th, 2009 8:49 AM |
The equity markets across all sectors have gotten off to a very rocky start for 2009 (down 15% on average). In the midst of that, a lot of institutions and individuals have fled to the safety of short term government funds, money market funds that now benefit from a government backstop, and other cash alternatives. On average, these investments pay Wall Street and fund managers perhaps anywhere from .1% to .3% of the assets being managed. Those fees will not make the managers rich anytime soon. How do they respond? Welcome to the world of “principal protected notes.”
These structured notes are marketed to track an underlying index (say the S&P 500) while guaranteeing no loss of principal. Wow. Sounds like a great product. Where do I sign? Well, hold on just a second. I am not stating that structured notes do not have some degree of merit, but one needs to be very cautious in fully understanding how these notes work before purchasing. (more…)
Capitalism’s New Clothes
Posted by Larry Doyle on February 24th, 2009 8:47 PM |
In the midst of this economic turmoil, I have heard many people question whether Americans will truly change their profligate ways. Will our belt tightening occur in the proper fashion? Will we instill disciplines in the most impactful and effective areas of our lives? Or is belt tightening for others?
Peter Singer, a Thought Leader, and another of our Economic All-Stars (see left sidebar), opines on these topics in Capitalism’s New Clothes. I appreciated his piercing review of whether we will truly display the character and integrity to bring about the changes that our society so badly needs.
I hope you enjoy this piece by Singer as well as the wealth of fine writing from around the globe and collectively delivered at Project Syndicate. Hopefully these great minds help you navigate your own economic landscape!
LD
Tune In to Larry Doyle’s “Dollars and Sense” on No Quarter Radio
Posted by Larry Doyle on February 22nd, 2009 5:22 PM |
Please join us this evening from 8:00 to 9:00 p.m. ET on No Quarter Radio for LD’s Dollars and Sense. These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere!
We have two very interesting guests joining us. Lynn Marshall has one of the most unique backgrounds in the world of finance today. How does one develop a background that includes senior level experience in investment banking, agriculture, and community banking? Think Lynn has some amazing perspectives on the economy and markets? Don’t miss him.
Additionally, in light of the developments at Stanford Financial, we are very happy to have John Moynihan return to our show to discuss the dynamics in the world of offshore banking. Find out more than you could ever imagine by talking to these enlightened experts on LD’s Dollars and Sense, starting at 8 p.m. ET.
What are your questions and comments for me? 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!
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