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Posts Tagged ‘public policy’

Can Congress Read? Does It Open Mail Re: FINRA?

Posted by Larry Doyle on June 29th, 2011 1:59 PM |

Do those in Congress know how to read? Do they open their mail?

News is leaking that Congress may be inclined to have Wall Street’s self-regulator, FINRA, gain oversight of the investment advisory industry. That industry is currently regulated by the SEC and operates under a fiduciary standard.

The industry is fighting tooth and nail NOT to be regulated by FINRA which regulates broker-dealers under the less stringent suitability standard.

While the investment advisory industry and FINRA are duking it out, let’s return to my initial questions. Do those in Congress know how to read? Do they open their mail? Why do I ask?  (more…)

It’s the Economy, Stupid!!

Posted by Larry Doyle on October 16th, 2009 9:05 AM |

The American public is becoming increasingly wise to the ways of Wall Street and Washington.

Many Americans were duped by financial practices and products emanating from Wall Street. Where was Washington? I would assess Washington’s involvement and responses in the following fashion:

1. At worst, Washington was complicit given a wide array of failed public policy programs, especially in housing. These public policies were largely ‘greased’ by lobbying dollars and campaign contributions.

2. To a large extent, Washington was negligent in terms of oversight, especially on the financial regulatory front.

3. At best, Washington was naive given a general lack of understanding of markets and finance.

The American public is now responding in appropriate fashion. How so? In increasing numbers, they are choosing not to play the Wall Street game. What game is that? Active trading and investing. While the numbers of pure day traders may have increased, the American population at large is focused elsewhere. Where is that focus? On the economy at large and on their individual pocket books.

Washington’s focus on Wall Street and its selling of the market rebound as reflective of a return towards prosperity is a product that will not fly . . . try as they might. Why?

It’s the economy, stupid! Reports this morning indicate that wages will likely show the greatest decline since 1991. Even in the face of declining wages, consumers’ purchasing power is being further eroded by the continuing decline in the value of the dollar. That decline is inflationary which hurts consumers but it continues to present a very cheap funding vehicle for those who want to use the greenback to employ leverage in the markets. Who has the advantage in that process? The large banks. Do they spread that wealth in terms of increased credit and higher savings rates? Now why would they do that?

The American saver and consumer shouldered the cost of the bank bailouts in 2008. They are now shouldering the cost of the wealth transfer to the banks in 2009. While Washington would like to sell this dynamic differently, the American public gets it.

Washington will continue to sell this dynamic at its peril.

LD

Poll Indicates Investing Has Declined Significantly

Posted by Larry Doyle on October 15th, 2009 3:56 PM |

Have you given up on the market? Do you not trust the financial industry? Have you stuffed your money under the mattress? To an ever increasing extent, more and more Americans have become more risk averse when it comes to investing.

Alix Partners, a consulting firm, produced Half of Americans Have Stopped or Reduced Investing and a Quarter Don’t Intend To Invest for at Least Three Years:

Americans will be investing significantly less in the future, according to a new survey released today by AlixPartners LLP, the global business advisory firm, indicating that the financial crisis is likely to have a significant impact on investor behavior over the next several years.

While the U.S. financial services industry is slowly recovering from its biggest losses in decades, investor confidence appears to be recuperating tepidly at best.  A staggering 49% of people surveyed who identified themselves as “previous investors” reported either having stopped or reduced investing in stocks or mutual funds and 26% said they had no intention of investing in these bedrock financial vehicles in the next three years. The survey also found that among higher-income households, those earning more than $75,000 per annum, 21% of previous investors reported having stopped investing altogether in stocks or mutual funds.  These results could point to a significant structural contraction in the market for financial services firms and financial advisors, while also suggesting that financial companies should be thinking about how to better focus their marketing dollars in today’s uncertain market.

“Investors who had placed their trust in the investment industry are cross, cautious and confused,” observed Clarence Hahn, AlixPartners’ Financial Services Improvement practice co-lead.   “And while the collective loss of wealth in the past year has had a deep impact psychologically as well as financially, the irony is that the lost wealth can only be rebuilt through participation in the markets.  Financial-advisory firms therefore have two key challenges:  to figure out who really is going to start investing again; and to win back trust by building into their offerings a level of oversight, due diligence and risk management that will eradicate the possibility of similar meltdowns in the future.”

While brokers and financial planners will need to figure out how to reengage with a client base that was often ill-served, I strongly believe individuals will need to assume a greater degree of the burden to truly understand the art of investing. What does that art entail?  Let’s start with the following:

1. Learn about risk: how to measure risk, how to identify risk, what are the risks in different investments.

2. Learn about the values of diversity across asset classes and regions.

3. Learn about the impact of policy implemented in Washington and the influence it has on Wall Street specifically and finance and investing in general.

4. Learn about the differences in fundamentals and technicals.

How do you start to undertake the above four steps?

5. Read Sense on Cents.

Don’t necessarily give up on investing. Get started on educating yourself.

LD






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