The financial press mob has formed and appears to be rolling out the virtual guillotine while howling for the heads of nearly every top investment bank over the past few weeks. The crescendo has risen as further deep losses have been revealed by many of these institutions.
The recent decapitation of O'Neal from Merrill leaves Citigroup Inc's Charles Prince, Bear Stearns Cos Inc's James Cayne and Countrywide Financial Corp's Angelo Mozilo at the top of the list of prominent U.S. chief executives hunkered down in the their corner offices trying to deflect blame. Recent news indicates that the Citigroup saga will end today with the resignation of Prince; although this will not likely appease the media rabble but rather serve to further feed the frenzy. The press horde was not apparently pacified by the recent changes at ABN AMRO where Rijkman Groenink has recently left, or at UBS where Peter Wuffli was forced to walk the plank a few weeks back. Each day new articles are shouting for more heads to roll.
Will this spill over into an increasing list of investment banks; even Goldman’s where Mr Blankfein has been recently upheld as an example of active and able management. Will Ken Lewis over at Bank of America survive as risk management practices and investment banking services have come under scrutiny? The list created by the press continues to get larger as well as the increasing angry buzz of the articles. Has someone started a pool on which corner offices will be vacant by the end of the year?
Other CEOs under microscope as Merrill chief exits
http://uk.news.yahoo.com/rtrs/20071030/tbs-uk-merrill-ceo-fallout-7318940.html
Report: Citigroup CEO May Resign
Citigroup CEO Will Offer to Resign Sunday; Board Expected to Hold Emergency Meeting
http://biz.yahoo.com/ap/071103/citigroup_board_meeting.html
Sunday, November 4, 2007
Saturday, November 3, 2007
Quick Note: FeedBlitz Email Update
Feedblitz has an outage this past week including database corruption issues for updates since October 26th. If you signed up for email delivery of the blog and are not getting emails then please try subscribing again.
It appears that we have several hundred people on the mailing list. If you know someone who would benefit from the blog material then please urge them to sign up for daily email delivery. Thanks!
It appears that we have several hundred people on the mailing list. If you know someone who would benefit from the blog material then please urge them to sign up for daily email delivery. Thanks!
Is Your Investment Bank Executive a Doper
Was your senior investment bank executive lost in a haze of purple smoke while your CDO investments went down the flusher recently. Would you expect this press from the National Enquirer or the Wall Street Journal? A furor erupted this week over an article in one of these publications and it is probably not the one you are thinking.
The November 1st front page Wall Street Journal article profiling Bear Stearns’ James Cayne outlines a none too flattering portrayal of his work (or lack of work)… and drug habits. Being exposed as a pothead on the first page of the world’s most prestigious financial newspaper can not really be considered upside press. However it is the outline of his failure to focus on work related issues while the firm was in crisis and losing $3.8B with two failed Hedge Funds that will justifiably place Cayne in the hot seat.
Bear CEO's Handling Of Crisis Raises Issues
http://online.wsj.com/article/SB119387369474078336.html?mod=hpp_us_whats_news
Financial Times provided additional commentary in context of the heads rolling at other investment banks recently.
Bridge, golf and herbal refreshment for Bear’s Cayne
http://ftalphaville.ft.com/blog/2007/11/01/8542/bridge-golf-and-herbal-refreshment-for-bears-cayne/
As expected, Cayne came out vehemently denying the allegations in material that was sent to many financial media outlets. Despite this, his longevity at Bear Stearns is still very much in doubt.
Bear Stearns CEO Denies WSJ Allegations
Bear Stearns CEO James Cayne Denies Drug Allegations in Wall Street Journal Article
http://biz.yahoo.com/ap/071101/bear_stearns_personnel.html?.v=1
The Bear Stearns Memo: Cayne Speaks
http://dealbook.blogs.nytimes.com/2007/11/02/the-bear-stearns-memo-cayne-speaks/
The November 1st front page Wall Street Journal article profiling Bear Stearns’ James Cayne outlines a none too flattering portrayal of his work (or lack of work)… and drug habits. Being exposed as a pothead on the first page of the world’s most prestigious financial newspaper can not really be considered upside press. However it is the outline of his failure to focus on work related issues while the firm was in crisis and losing $3.8B with two failed Hedge Funds that will justifiably place Cayne in the hot seat.
Bear CEO's Handling Of Crisis Raises Issues
http://online.wsj.com/article/SB119387369474078336.html?mod=hpp_us_whats_news
Financial Times provided additional commentary in context of the heads rolling at other investment banks recently.
Bridge, golf and herbal refreshment for Bear’s Cayne
http://ftalphaville.ft.com/blog/2007/11/01/8542/bridge-golf-and-herbal-refreshment-for-bears-cayne/
As expected, Cayne came out vehemently denying the allegations in material that was sent to many financial media outlets. Despite this, his longevity at Bear Stearns is still very much in doubt.
Bear Stearns CEO Denies WSJ Allegations
Bear Stearns CEO James Cayne Denies Drug Allegations in Wall Street Journal Article
http://biz.yahoo.com/ap/071101/bear_stearns_personnel.html?.v=1
The Bear Stearns Memo: Cayne Speaks
http://dealbook.blogs.nytimes.com/2007/11/02/the-bear-stearns-memo-cayne-speaks/
Friday, November 2, 2007
Confused about Investing: Join the Majority
A small number of investors in America pound their chests and loudly proclaim they are experts. However, an even larger population appears to be thoroughly baffled about the basics associated with investing; nearly half admit investing is confusing. The community of the perplexed is probably larger because only a portion of investment holders are willing to step up and admit their incomprehension.
Many investors struggle with basic concepts such as diversification and understanding basic asset classes such as stocks and bonds. Multiple studies have demonstrated that many investors need help, including a number who smugly believe they are knowledgeable experts.
A recent article from Bankrate outlines the dynamics associated with investor knowledge and competence:
Half of investors confused; is the other half lying?
http://biz.yahoo.com/brn/071023/23591.html?.v=1&.pf=retirement
What should an inexperienced investor do?
Inexperienced investors should focus on low fees in their mutual funds and concentrate on investing in index funds for many asset classes. Reducing fees has been demonstrated to have much greater impact on long term investment returns then excess market returns generated by some actively managed funds with higher fees. John Bogle, the founder of Vanguard, has outlined this in many of his presentations
For those who need guidance regarding their investments, I would urge that they hire a “Fee only” financial advisor. At the NAPFA site you can search for “fee-only” planners in your area. NAPFA, the National Association of Personal Financial Advisors, is the nation’s leading organization dedicated to the advancement of Fee-Only comprehensive financial planning. See the Find an Advisor form at: http://www.napfa.org/consumer/planners/index.asp
You should NEVER use a commission based (“No-Fee”) advisor. These advisors, generally associated with large brokerage firms, normally put you into high-load products that earn them the most commissions; rather then low-expense funds that are proper for your financial future. Any advisor who attempts to place you in a mutual fund that is not “No-Load” is doing you a disservice.
So in summary; use low-expense mutual funds, focus on index funds, and get “fee-only” guidance if you need help.
Many investors struggle with basic concepts such as diversification and understanding basic asset classes such as stocks and bonds. Multiple studies have demonstrated that many investors need help, including a number who smugly believe they are knowledgeable experts.
A recent article from Bankrate outlines the dynamics associated with investor knowledge and competence:
Half of investors confused; is the other half lying?
http://biz.yahoo.com/brn/071023/23591.html?.v=1&.pf=retirement
What should an inexperienced investor do?
Inexperienced investors should focus on low fees in their mutual funds and concentrate on investing in index funds for many asset classes. Reducing fees has been demonstrated to have much greater impact on long term investment returns then excess market returns generated by some actively managed funds with higher fees. John Bogle, the founder of Vanguard, has outlined this in many of his presentations
For those who need guidance regarding their investments, I would urge that they hire a “Fee only” financial advisor. At the NAPFA site you can search for “fee-only” planners in your area. NAPFA, the National Association of Personal Financial Advisors, is the nation’s leading organization dedicated to the advancement of Fee-Only comprehensive financial planning. See the Find an Advisor form at: http://www.napfa.org/consumer/planners/index.asp
You should NEVER use a commission based (“No-Fee”) advisor. These advisors, generally associated with large brokerage firms, normally put you into high-load products that earn them the most commissions; rather then low-expense funds that are proper for your financial future. Any advisor who attempts to place you in a mutual fund that is not “No-Load” is doing you a disservice.
So in summary; use low-expense mutual funds, focus on index funds, and get “fee-only” guidance if you need help.
Rent vs. Buy: The Debate Continues
With the recent housing market turmoil, the controversy over rent versus buy has returned to the forefront in the financial press. This new focus varies greatly than the majority of the articles printed two years ago, which all emphasized the importance of purchasing a home at all costs.
In short term situations, renting has advantages over buying. For those who want to settle down for the long term, home ownership has some key advantages over renting; it provides some good tax breaks and allows you to build equity over time. Ownership is an excellent form of investing in your future.
However, it is important that you only put yourself in a home ownership position that you can afford. Avoid interest only and other exotic loans. If you can not qualify to purchase a home under traditional lending standards with a 30 year fixed rate loan then you should not pursue the situation. Currently most of the population is watching awestruck at what transpires when property owners over-extend themselves. In many cases these foreclosed owners should have never been given a mortgage. The good news is that banks are quickly returning to traditional lending standards which should avoid a repeat of this fiasco.
One good method of evaluating homeownership versus renting is to take a levelheaded dollar and cents based approach. For people that plan to hold onto a home for the long term, there is usually a significant financial edge for ownership. One valuable calculator that provides a comparison can be found at:
Should I Rent or Buy A Home?
http://finance.yahoo.com/calculator/family-home/hom-06
One recent article about the “New Realities of the Rent vs. Buy Debate” can be found at:
Now That Housing Has Soured, Renters Are Glad They Didn't Buy
With real estate in a slump and foreclosures soaring, renters are cheering now. Is the conventional wisdom that it's better to buy than rent mistaken in today's market?
http://finance.yahoo.com/real-estate/article/103796/Now-That-Housing-Has-Soured,-Renters-Are-Glad-They-Didn't-Buy;_ylt=AsBWkzMQVUcwR6U4hOjGB9i7YWsA
In short term situations, renting has advantages over buying. For those who want to settle down for the long term, home ownership has some key advantages over renting; it provides some good tax breaks and allows you to build equity over time. Ownership is an excellent form of investing in your future.
However, it is important that you only put yourself in a home ownership position that you can afford. Avoid interest only and other exotic loans. If you can not qualify to purchase a home under traditional lending standards with a 30 year fixed rate loan then you should not pursue the situation. Currently most of the population is watching awestruck at what transpires when property owners over-extend themselves. In many cases these foreclosed owners should have never been given a mortgage. The good news is that banks are quickly returning to traditional lending standards which should avoid a repeat of this fiasco.
One good method of evaluating homeownership versus renting is to take a levelheaded dollar and cents based approach. For people that plan to hold onto a home for the long term, there is usually a significant financial edge for ownership. One valuable calculator that provides a comparison can be found at:
Should I Rent or Buy A Home?
http://finance.yahoo.com/calculator/family-home/hom-06
One recent article about the “New Realities of the Rent vs. Buy Debate” can be found at:
Now That Housing Has Soured, Renters Are Glad They Didn't Buy
With real estate in a slump and foreclosures soaring, renters are cheering now. Is the conventional wisdom that it's better to buy than rent mistaken in today's market?
http://finance.yahoo.com/real-estate/article/103796/Now-That-Housing-Has-Soured,-Renters-Are-Glad-They-Didn't-Buy;_ylt=AsBWkzMQVUcwR6U4hOjGB9i7YWsA
Thursday, November 1, 2007
For Golden Years: Stick with Proper Portfolio Diversification
In the current environment where the gains in foreign markets have outsized the U.S. indexes over the past few years, there are an increasing number of articles focusing on the benefits of investing overseas. Urged on by many international funds, the financial media has been hyping American investors to greatly increase their exposure to foreign markets, sometimes to the point of recklessness.
It is important that investors adhere to standard diversification strategies to ensure long term success. Greatly increasing your exposure to foreign markets now simply because they have had a good run is not prudent; remember past performance in no guarantee of future performance. Investors should keep in mind that international markets, especially emerging markets, are extremely volatile. They are just as likely to go down 50% per year as up 50% per year. The trend of the falling dollar which has ignited international gains can reverse at any given moment, backing up like a bowling ball to mow down your overseas investment returns.
Keep in mind that your retirement is funded in U.S, dollars; this usually implies that your exposure to dollars should significantly exceed the percentage capitalization that the domestic markets represent. Merely matching your domestic portfolio allocation to the 50% capitalization represented by U.S. equity markets is not sufficient. Especially in view that many of the foreign markets representing the bulk of the world capitalization lack the regulative oversight and adequate disclosure of the American stock markets.
Increasing your exposure to international investments now is really a form of market timing, something most financial advisors urge you to avoid. It makes more sense to stick to a long-term properly diversified portfolio that aligns with your age and risk tolerance.
One example of an article pushing investors to greatly increase their foreign exposure is this recent gem from Forbes:
For Golden Years, Invest Abroad
http://finance.yahoo.com/focus-retirement/article/103799/For-Golden-Years,-Invest-Abroad?mod=retirement-IRA
It is important that investors adhere to standard diversification strategies to ensure long term success. Greatly increasing your exposure to foreign markets now simply because they have had a good run is not prudent; remember past performance in no guarantee of future performance. Investors should keep in mind that international markets, especially emerging markets, are extremely volatile. They are just as likely to go down 50% per year as up 50% per year. The trend of the falling dollar which has ignited international gains can reverse at any given moment, backing up like a bowling ball to mow down your overseas investment returns.
Keep in mind that your retirement is funded in U.S, dollars; this usually implies that your exposure to dollars should significantly exceed the percentage capitalization that the domestic markets represent. Merely matching your domestic portfolio allocation to the 50% capitalization represented by U.S. equity markets is not sufficient. Especially in view that many of the foreign markets representing the bulk of the world capitalization lack the regulative oversight and adequate disclosure of the American stock markets.
Increasing your exposure to international investments now is really a form of market timing, something most financial advisors urge you to avoid. It makes more sense to stick to a long-term properly diversified portfolio that aligns with your age and risk tolerance.
One example of an article pushing investors to greatly increase their foreign exposure is this recent gem from Forbes:
For Golden Years, Invest Abroad
http://finance.yahoo.com/focus-retirement/article/103799/For-Golden-Years,-Invest-Abroad?mod=retirement-IRA
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