March 31, 2013

1. NY TIMES 3/31/13 David Stockman opinion : Beware the Stock ” bubble”. Decades of economic activism by Washington have left us exhausted and broke. Over the past 13 years the market has crashed twice: 2000 the dot com bust wiped out $5 Trillion from American Household and in 2007 $7Trillion was lost due to the Housing ” bubble”. Sooner or later, this latest Wall Street Bubble, inflated by a flood of phony money from the Fed, rather then real economic gains, will explode, too. We have choices.

2. Overheard at a recent TEDxNY Salon: A young auditor from France, is now working with Citibank to write The Regulation on the derivative portion of Dodd Frank. Is the Regulatory process residing with a business with a vested interest in maintaining the status quo? Will the Public’s interest be served with greater transparency, responsibility and accountability? Or will we have maintained our exposure to risk? We have a choice.

3. NY TIMES 3/31/13. Another opinion, America the innovative by Eamonn Fingleton, postulates that Democracy is no longer a precondition for progress. Money is. R&D spending in America has decreased by 10%. While major corporations are setting up R&D centers in China, presumably manufacturing will follow, remaining in China. Is this a choice we want?

On the upside, @ MIT Prof. Julie Shah and two graduate students are producing kinder, gentler Robots to work along side man. They are even training the humans and Robots to work together, the cross training achieved makes the ” team” perform better at manufacturing tasks. The choice is being made , it will happen.

4. LOL. Why innovators get better with age. Preoccupations by Tom Agan. There is a surprising downside to encouraging older workers to leave . Less gray hair sharply reduces an organizations innovation potential, which over the long term can greatly outweigh short term gains. Interesting, the studies are looking at the 55-65 yr olds since it can take 10 yrs min to bring ideas to fruition!


March 26, 2013

1. When it comes to the choice between the taxpayer and the Banks, we know who won. The bankers: they got to keep their Banks, their risk, their shadow banking system, with no consequences or accountability expected.

The taxpayers lost big time. They lost their homes, they took on student loans with no hope of a job, they kept their credit card debt and with limited to no funds left they missed out on the latest Bull Run of the stock market.

2. While perusing Wikipedia & other sources under Hank Paulson, several proposals were discussed to prevent the devastation of the middle class; two are listed here for your review. WE DO HAVE CHOICES.

3. The List:

. Hank Paulson proposed making the head of the Fed a super committee, with the ability to analyze risk and prevent the next bubble. A Systemic Risk Regulator with accountability and the ability to have access to all information concerning the markets. This regulator would, presumably, have a better chance of identifying and limiting future speculative bubbles. Additionally, Hank Paulson recommended a regulatory system that would reinforce the responsibility of the lenders, investors, borrowers and all market participants to analyze risk and make informed decisions to wind down the Banks without hurting the taxpayers.
. Rosalind Resnick, a journalist, recommended giving the taxpayer the same advantage as the Banks being bailed out. LET HOMEOWNERS REFINANCE THEIR MORTGAGES AT 2%: Along with all student debt, credit card debt and car loans; freeing up cash for the middle class. This is similar to the Bank’s ability to borrow at the Fed window giving them liquidity.

4. We were never given a choice. The middle class was held responsible and accountable for other people’s mistakes? We can reform the Banking system; continuing on this financial path will end badly. WE HAVE A VOICE AND WE HAVE A CHOICE. Elect someone new to Congress and break the ties that bind!

5. No institution should reside in the shadows away from Public Scrutiny. Consider slamming the revolving door between government, Regulators, and business of any kind. If you’re elected to government , you have a fiduciary responsibility to the people who elected you. We have many choices to make? Doing nothing is a choice. It means you are happier today then you were 6 years ago.

Public Advocacy: The Economist Inside the banks

March 25, 2013

It’s our choice: How far have we come since 1/24/09? My notes, from This 14 page special report.

1. Page 6: Animal Spirits; the possible causes of the “great bubble”: Barely legal mortgage underwriters, overpaid Bankers and the intoxication of easy credit. Cupidity, fraud and delusion were part of the big bubble and bust. In the words of Willem Buiter, of The London School of Economics, ” finance is a scary, inherently unstable, essential activity”.

2. Aside: People act irrationally; they buy in an up market and panic in a down market. Everyone loves to participate in a boom, but when investors lose confidence that other people will honor their promises, that undermines the market. Liquidity and credit suddenly become scarce and a devastating value destroying uncertainty takes hold. That characterizes “the bust”.

3. Page 10 Plato’s Cave. Mathematical models are a powerful way of predicting financial markets. But they are fallible.

In 1973 The Chicago Board Options Exchange traded 911 derivative contracts, this was one month before Black-Scholes appeared in print. (For the uninformed, there were 3 partners (Myron Scholes, Robert Merton & Black), from the MIT Sloan School of Management, they explained how to use share prices to calculate derivatives. In 1983 Robert Rubin Hired Fischer Black from MIT. In 1998 Long Term Capital Management was run by John Merriweather and his team from Salmon Brothers along with Merton and Scholes. Their Hedge Fund almost brought down the market when Russia defaulted on it’s loan. Their collapse was the credit crunch in miniature and should have served as a warning going forward.)

In 2007, the CBOE’s volume in contracts reached almost 1 trillion.

4. Page 13 To sum up, the Trillion Dollar bet on mortgages went disastrously wrong. Almost as damaging is the hash the Banks have made of “value at risk” (VAR) calculations, a measure of the potential losses of a portfolio. This is supposed to show, whether banks and other financial outfits are being safely run. Regulators use VAR calculations to work out how much capital banks need to put aside for a rainy day. But the calculations are flawed.

5. page 18 The Uneven Contest: Financial regulation is essential. That does not make it easy. The case for Regulation is financiers make mistakes and everyone else has to pay for them.

6. The Economist postulates: Fixing Finance. The world has a chance to make finance work better. It should tread carefully. It is worth quoting James Tobin (page 22) The advantages of liquidity and negotiability of financial instruments come at a cost of facilitating nth degree speculation which is short sighted and inefficient.

In summary, if you believe this point of view, you may want a core of regulated banks, that cannot blithely create credit, take on leverage or secrete assets off their balance sheets. If hedge funds continue to exist, then limit their access to capital.

The presumption should be for transparency. That favours market based accounting. CDO’s which trade in huge volumes should pass through clearing houses. That would have the added benefit of limiting the damage from a collapse, since the default would pass to the clearing house too. The system can be made more robust in other ways. Senior financiers could take more of their pay in equity; and hand some back if the Bank does badly.

Whatever happens, the choice hinges on the interests of the economy as a whole. After all, it’s taxpayers and savers who pay for financial crises. Centuries of boom and bust have taught us that financial crisis occur, but you can exercise some choice over what kind of crisis you get. (page 21)


March 23, 2013

Inside the banks:

The crisis has shown up flaws in the financial markets and the global economy.  Huge flows of capital into debtor Nations like America and Great Britain pumped up asset markets. These fed the instabilities of financial markets; themselves plagued by poor regulation, dangerous incentives and the reckless use of mathematical models.  Fixing this will take a lot of work over 18 months, when legislation should be ready, but already a picture of a new finance is becoming clearer:  smaller, better regulated and more conservative.


This vision is worth keeping an eye on, but the immediate priority is the imperiled banking system.  Just now, with finance in ruins, the nexus of markets and non-banks that make up the” shadow banking system” has failed.  Decent businesses are being starved of credit and driven into bankruptcy. 


Sound familiar?


Note: These words are not mine.  They are from the Editorial in The Economist, dated January 24th, 2009: Blank Cheques, bankruptcy, nationalization: the options are dire, but governments must choose between them.

We have choices: 

PUBLIC ADVOCACY: Infrastructure debate, it’s all about the MONEY

March 17, 2013

1. Bill Moyers 3/17/13 and his guest Anthony Lieserwicz postulate; THE GOVERNMENT AND THE CORPORATIONS RUNNING THIS NATION HAVE A Short term myopic focus which misses the urgency of Climate Change. 4 out of 10 people have never heard of Climate Change. HOW IS THAT POSSIBLE? It’s not too late to act, we haven’t begun to limit fossil fuels. EVER THINK WHY WE ARE SO DEPENDENT ON THEM? EVER THINK ABOUT WHO PROFITS FROM OUR SHORTSIGHTED ENERGY POLICES?

We are now heading toward a 3-6 degree change in temperature, global heat will compromise our essential water supplies and other natural resources. It will dull our senses and compromise our ability to think. Why are we delaying taking action? What do we have to do to stop emitting co2? Climate Science needs to build a bottom up grass roots movement; think locally but be aware of the global implications. We have choices.

2. THE FINANCIAL TIMES 3/19/13. CONTRACTORS REAP $138 Billion prize from US spending on rebuilding in IRAQ: While we resist building Infrastructure projects in America, 10 Top Contractors have secured business in Iraq worth at least $72 Billion. In total the US has spent $138 Billion on private security, logistics and reconstruction contractors. The US tax payers money at work, after Wolfowitz declared in 2003, ” we are dealing with a Country that can really finance it’s own reconstruction.” No single contractor has benefitted more then KBR a subsidiary of HALLIBURTON , awarded at least $39.5 Billion. Coming in second were two Kuwaiti Corporations with contracts totaling $13.7 Billion. According to FT investigative reporting, The military has created a fifth branch, known as The Private Sector? Where is our choice?

3. FT 3/19/13 Tech groups swell US cash pile. There’s almost a Trillion Dollars sitting on the side lines as Tech companies ponder how to evade taxes and the redistribution of their cash. There may be a better idea? Reward these companies for R&D. let them bring social media and technology to the next logical step. The creation of industries using social media as a global platform. The creation of “B” companies promoting social good while promoting a decent wage for more products through the use of Faire Trade. ” Buffett used to say, he’d give a dividend to shareholders, when he could no longer invest Berkshire’s money and offer the best return on investment.” We are now in a position to provide global news, global products and link the globe through these platforms, there must be more money to be made for everyone, if used effectively? We have choices.

4. LOL. FT 3/6/13 Rise of machines prompts SEC to join tech war. Kara Scannell on the effort to set up robust controls over the automated systems to which so many decisions are now delegated. The rise in high frequency trading activity , accounting for 53% of the US market in 2012 accounted for damages in the Trillions. Remember the flash crash of 2010? $200 million loss or the Knight Capital Loss of $461 million? To quote Kara, ” I don’t see these companies as financial institutions, they are engineering companies driven by algorithms. Perhaps we would be better off, paying the engineers to create a useful product. We have a choice.

PUBLIC ADVOCACY: Climate Effects plus more notes on Finance

March 14, 2013

1. NY TIMES 3/14/13 Monarch migration plunges to lowest level in decades: Interesting with the advent more farming, more corn production, logging the milkweed plants and other plants, known to produce food for Monarch butterflies has been decimated . Starting in the northern hemisphere reaching into Mexico approximately 150 million acres have been lost . NATURALISTS regard the butterflies. As an indicator of the health of the food chain and they are concerned. With the loss of insects, predators will remain. What happens to our food? We have choices to make?

2. NY TIMES 3/15/13 Spring rain, then foul algae in ailing Lake Erie; Lake Erie is sick. Each summer, a thick toxic algae appears and covers 1/6 th of the lake. Contributing to a dead zone at the bottom, reducing fish populations, fouling beaches and crippling the $10 Billion revenue generating tourist industry. We’ve reclaimed the Lake from Pollutants in the 1960’s , it can be an environmental success again. We have a choice.

3. NY TIMES 3/15/13 Floyd Norris ” Hidden Numbers make Banks even Bigger”. Under American accounting rules , banks that trade derivatives can keep trillions of dollars off their balance sheet . Thereby, masking their risk. This condition, should force change as European and American Banks are compared , using the current European accounting rules. Want transparency in banking, we have a choice?

4. LOL NY TIMES 3/15/13 Fed faults 2 Big Banks over plans for capital; Of the 18 Banks surveyed only 2 Banks were told to beef up their balance sheets and they weren’t CITIGROUP OR BANK OF AMERICA , those 2 troubled Banks got a pass and they are allowed to buy back their stock and pay back shareholders. Where are the regulators trying to prevent another 2008 type. Crash? We have choices.

PUBLIC ADVOCACY: Understanding Finances and Climate change

March 13, 2013

1. Ways the middle class loses out:
If you pay down your credit card debt, the settlement negotiated is free of income taxes. However, you have to agree in advance that the payment made to the card issuer is full and final settlement of the agreed upon debt. Otherwise, if you negotiate a settlement, the balance of the debt forgiven, may be considered income and becomes taxable by the IRS. Be mindful to discuss this fact with the card issuer, prior to paying down debt.

2. If you purchase a whole life policy, the loan and interest are taxable if you cancel the policy. Once the policy is cancelled, the interest and loan is considered income by the IRS. Remember that fact when considering policy cancellation, try to review the loan history and it’s tax consequences with your accountant.

3.BEWARE HIDDEN CHARGES: The other day I attempted to pay my cable vision bill electronically. I got caught in a loop and could not complete the transaction. When I requested a customer service representative, I was told that they had now instituted a $10.00 fee for paying your bill through a customer service rep. I immediately stated my difficulty paying the bill electronically and requested that no fee be levied at this time. They agreed to waive their fee and completed the payment transaction. It takes time and thought to be aware, but it costs money if we are less mindful. We have a choice.

4. LOL As we debate CLIMATE CHANGE, our world is indeed changing. How are we to pursue a healthy MEDITERRANEAN DIET, if some of the necessary ingredients, like Seafood and Mussel’s no longer exist? Byassal threads , the strong , stretchy filaments that anchor mussels to hard surfaces and to one another, are more likely to snap in warmer waters. Thus climate change may have major consequences for the food chain and commercial fisherman. NY. Times Business Section.

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