In my new book, The Age of Deleveraging: Investment Strategies for an Era of Slow Growth and Deflation, I discuss nine reasons for slow U.S. economic growth and real GDP gains of about 2% annually in the long run.

1. U.S. consumers will shift from a 25-year borrowing-and-spending binge to a saving spree. This will spread abroad as American consumers curtail the imports of the goods and services many foreign nations depend on for economic growth.

Continue reading Nine Reasons for Slow U.S. Economic Growth

Nine Reasons for Slow U.S. Economic Growth originally appeared on BloggingStocks on Fri, 10 Dec 2010 12:30:00 EST. Please see our terms for use of feeds.

Continue reading Can Regulators Fix the Market?

Can Regulators Fix the Market? originally appeared on BloggingStocks on Tue, 14 Sep 2010 11:30:00 EST. Please see our terms for use of feeds.

Continue reading Bermuda Readies Itself for New Insurance Regulation in Europe

Bermuda Readies Itself for New Insurance Regulation in Europe originally appeared on BloggingStocks on Mon, 22 Mar 2010 16:00:00 EST. Please see our terms for use of feeds.

"We want to make sure the playing field is level."

So said U.S. Secretary of Agriculture Tom Vilsack, speaking in regard to the Obama administration's mounting concern about consolidation of control in America's agricultural system.

In light of that statement, investors may wish to exercise due caution when making future plays in companies such as Monsanto (MON), Archer Daniels Midland (ADM), and Tyson Foods (TSN), just to name a few. A recent Associated Press report indicates that the administration is undertaking a series of workshops aimed at creating policy initiatives with a focus on awakening competition in agriculture.

Continue reading Agricultural Caution Is in the Wind

Agricultural Caution Is in the Wind originally appeared on BloggingStocks on Tue, 09 Mar 2010 13:20:00 EST. Please see our terms for use of feeds.

"The party is over. Never again." These are the words of Speaker Nancy Pelosi regarding the bill to regulate financial markets that passed the House of Representatives on 223 to 203 vote.

In broad terms, these are the provisions of the House bill:

• Large financial companies would be hit with billions of dollars in fees and would see new restrictions on their operations.
• The Federal Reserve's powers to write consumer-protection laws would be stripped.

Continue reading 'The party is over': House passes bill regulating Wall Street

'The party is over': House passes bill regulating Wall Street originally appeared on BloggingStocks on Sat, 12 Dec 2009 09:20:00 EST. Please see our terms for use of feeds.

It's easy to save the world when you've already taken care of yourself. But, we rely on these mavericks -- the wealthy who realize they can make a difference -- to do what we cannot on our own. So, it comes as a relief that Bill Gates, founder of Microsoft (MSFT) believes executive compensation is still too high.

It's a murky topic, and some forms of regulation, Gates believes, won't help. In a discussion on philanthropy at the 92nd Street Y in Manhattan, where many of the people Gates criticized send their kids for early education, the former CEO and still rich guy cites the $1 million executive salary cap required by law in 1993 as a big mistake. While compensation has to be controlled, he believes this measure backfired and thinks that other, similar efforts are doomed to fail now.

Continue reading Rich still too richly compensated according to richest of them all

Rich still too richly compensated according to richest of them all originally appeared on BloggingStocks on Thu, 12 Nov 2009 15:40:00 EST. Please see our terms for use of feeds.

There may be a new rule coming from the Fed that will make banks stronger but will hurt investors. There's a good possibility that banks will have to raise their "well-capitalized" capital requirement from 7% to 8%. The current definition of "well-capitalized" is 6% but the unofficial rate that regulators like to see is 7%. That means for every asset on the books of $100, there is now $7 of capital to back it up. With the new rule, that capital cushion would go to $8. That means the FDIC would have more protection against losses ($8 of protection is better than $7). But the question is: where do banks find the extra $1?

They can come up with it several different ways, none of which help current investors. The first, and easiest way, is to simply sell assets and lower the total size of the bank. If a bank of $1 billion has capital of $70 million, it could sell enough assets to shrink to $875 million. Then the capital base stays the same at $70 million (assuming no gain or loss on the sale of the assets) but the percentage of capital is now 8% rather than 7%.

Continue reading If you own bank stocks or want to, pay attention

If you own bank stocks or want to, pay attention originally appeared on BloggingStocks on Wed, 16 Sep 2009 17:20:00 EST. Please see our terms for use of feeds.

Now enter the government that wants to regulate the derivatives market and force more transparency in reporting transactions, which heretofore have been kept secret. One of the proposals is to have each transaction go through a clearing house so that there would be a visible record of the securities and the players.

Continue reading Jamie Dimon vs. the US government: do not regulate JPM

Jamie Dimon vs. the US government: do not regulate JPM originally appeared on BloggingStocks on Wed, 15 Jul 2009 14:00:00 EST. Please see our terms for use of feeds.

A few weeks ago Dodd's Senate banking committee held hearings on the need for regulation of the financial industry. Present were 10 regulators each from one of 10 different regulatory bodies. Dodd commented: "the picture of 10 people was the picture of the problem."

So it seems that we have too many regulators, none of whom were able to individually or collectively deal with the recent financial debacle. Now lawmakers are trying to figure out what to do and how to do it. Obviously there will be fierce power struggles among the existing agencies. Hal Scott, professor at Harvard University said: "its grown topsy turvy since the civil war driven by a reaction of events -- the turf was where industry always wants its own regulator that they can be more comfortable with."

Continue reading Politicians and bank regulators will battle over turf and powers

Politicians and bank regulators will battle over turf and powers originally appeared on BloggingStocks on Fri, 29 May 2009 17:00:00 EST. Please see our terms for use of feeds.

This post is part of a feature in which we wonder whatever happened to some notorious financial felons. See all 17.

Just say it's been "a long and winding financial road" for billionaire investor George Soros -- but one that's had more smooth traveling than detours.

True, the Hungarian-born Soros was fined $2 million by a French court in 2002 for insider trading, which France's highest court upheld on an appeal on June 14, 2006, but other than that transgression, critics would be hard pressed to find other operational/financial flaws.

Soros is perhaps best known for one of the most cunning and successful short-term plays in investment fund history. On September 16, 1992 Soros sold short more than $10 billion worth of the British pound, after the Bank of England failed to raise interest rates. Soros' profit on the ensuing fall in the pound: about $1.1 billion.

Further, the other dimensions of Soros life that some critics would cite -- his social activism and philanthropy -- are viewed as positives by many others. Soros has promoted nonviolent democratization in Central and Eastern Europe, and other states, and pledged hundreds of millions of dollars to numerous universities globally and to antipoverty programs in Africa, among many other charitable acts.

Continue reading Financial Felons: George Soros

Financial Felons: George Soros originally appeared on BloggingStocks on Thu, 20 Nov 2008 18:10:00 EST. Please see our terms for use of feeds.

Continue reading Soros calls financial crisis worst since Great Depression, sees more market declines

Soros calls financial crisis worst since Great Depression, sees more market declines originally appeared on BloggingStocks on Thu, 03 Apr 2008 13:04:00 EST. Please see our terms for use of feeds.

Growing Google again worries government regulators originally appeared on BloggingStocks on Thu, 10 Jan 2008 16:03:00 EST. Please see our terms for use of feeds.

As the SEC considers a proposal to raise the minimum liquid net worth for hedge fund investors from $1 million to $2.5 million, the agency is receiving hundreds of letters (WSJ, subscription required) from individual investors. Many of these experts make excellent arguments for why, if anything, the net worth thresholds should be raised. Here are some of the best arguments: One of them asked why small investors should be restricted from hedge funds, but not speculative Pink Sheets stocks? Another summed up the laissez-faire argument pretty succinctly: "Stay out of my wallet, stop trying to protect me from myself, stop presuming to know more than I do about my own life, risk-tolerance, and financial sophistication."

The problem with hedge funds is that it makes very little sense to regulate them in such a sweeping, unilateral way. Why should a conservative fund that specializes in lightly leveraged merger arbitrage or covered calls be regulated the same way as a highly leveraged fund that trades Pokemon card futures? It just doesn't make sense.

But since the whole idea of hedge funds it that they're not regulated, treating each fund differently would require investigation of each one -- which defeats the whole purpose.

Continue reading Should unsophisticated investors be allowed to invest in hedge funds?

Should unsophisticated investors be allowed to invest in hedge funds? originally appeared on BloggingStocks on Sun, 02 Sep 2007 13:40:00 EST. Please see our terms for use of feeds.

Carnegie Mellon University Professor Allan Meltzer has an interesting editorial in this weekend's Wall Street Journal (subscription required). As Congress considers ramping up hedge fund regulation, Meltzer isn't buying it: "... whatever the perceived problem, more regulation is not the answer. It is far better to change some incentives for excessive risk-taking. The old saying is true: Capitalism without failure is like religion without sin. The answer to excessive risk-taking is 'let 'em fail.'"

He makes a compelling case against bailouts of collapsing hedge funds, arguing that these can serve to increase excessive risk-taking.

The recent explosive growth in hedge funds and private equity will lead to some inevitable blow-ups in the years to come, probably starting soon. Just recently, a pair of Bear Stearns (NYSE: BSC) funds collapsed. As the panic sets in, investors and regulators would do well to keep a copy of Meltzer's column close by. Only through painful failure will investors learn the pitfalls of excessive risk.

See also:
Jon Ogg: Bear Stearns' subprime fund implosion -- media hype, or serious meat?
Kevin Kelly: Less talking, more hedging please
Tom Taulli: No June gloom for hedge funds
Zac Bissonnette: Is Bear Stearns in play?

Should hedge funds be allowed to just collapse? originally appeared on BloggingStocks on Sun, 22 Jul 2007 12:40:00 EST. Please see our terms for use of feeds.

According to an article in the Financial Times, three-quarters of U.S. chief financial officers believe that Sarbanes-Oxley should be repealed. In other news, Paris Hilton does not believe that driving on a suspended license should be illegal.

But seriously, does the fact that CFOs believe that Sarbox should be repealed mean anything? According to the article, "Last month, Financial Executives International, a grouping of treasurers and chief financial officers, found that costs associated with implementing Section 404 had fallen by 23 percent since 2005. But it also found that 78 percent of executives polled in a survey believed that the costs of Sarbox still outweighed the benefits."

It's hard to quantify the benefits of Sarbanes-Oxley, which makes doing a cost-benefit analysis difficult. It's probably impossible to know how many cases of accounting fraud the bill has prevented -- kind of like trying to figure out how many deaths per year are prevented by laws requiring that guns be kept in locked cabinets when children are around.

Still, the CFOs do have a right to complain: Sarbanes-Oxley was passed mainly to restore investor confidence after the collapses of Enron and Worldcom, among others, and it may be more stringent than necessary. The SEC will enact some reforms to the bill to make it more business-friendly, while still keeping the substance in place to protect investors.

CFOs say 'Repeal Sarbox!' But does that matter? originally appeared on BloggingStocks on Sat, 09 Jun 2007 14:10:00 EST. Please see our terms for use of feeds.