» Posted by Martin Weil on December 31, 2009

Pro Publica, a new online journal in the public interest, is digging up what it can on the CDO collapse, taking up the mantle dropped by the SEC and Congress.

CDOs (Collateralized Debt Obligations) - not to be confused with CDSs (Credit Default Swaps) - were a major contributor to the excess risk that was created during the financial free-for-all era of the pre-Lehman collapse. CDO losses are on the order of $600B with much of this cost born by us the taxpayers.

If you were involved in the CDO business during the end days of the boom, please contact Jake and Jesse -- cdos@propublica.org or (917) 512-0258. Or, if you have information about others we should reach out to, please send that along, too. This is a serious investgative inquiry - responses can be confidential.

» Posted by Martin Weil on December 30, 2009

Financial regulation's long slog through Congress has left it riddled with loopholes, carved out at the request of the same industries that caused the mess in the first place. An outraged American public is proving no match for the mix of corporate money and influence that has been marshaled on behalf of the financial sector.

The Huffington Post has undertaken a remarkable piece of financial journalism, the sort one once expected of the NY Times or other print media. Entitled The Cash Committee, the article explains the hows and whys of the stranglehold financial services interests have on Congress. It is a must-read for anyone hoping to understand the realities of our contemporary political system.

Where, oh where, is our modern-day Ferdinand Pecora?

» Posted by Martin Weil on December 24, 2009

Interrupting Christmas prep for another in my caveat emptor, Wall Street broker edition, series.

The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen. When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else's house and then committing arson.

Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York., quoted in a NY Times "hitjob" (per the Goldman PR folks).

From the Times:

"Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were at first intended to protect Goldman from investment losses if the housing market collapsed. As the market soured, Goldman created even more of these securities, enabling it to pocket huge profits.

Goldman's own clients who bought them, however, were less fortunate.

Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm."

» Posted by Martin Weil on December 22, 2009

The Healdsburg Plaza, Winter, c. 1905

» Posted by Martin Weil on December 21, 2009

This amusing Op-Ed in the NYT by Joshuah Bearman tells the story of his grammar school days and his unwitting creation of a futures market for sweets that got out of hand. In addition to being a good story, it is an excellent parable on the mortgage/CDS market and illustrates why this latter market was bound to fail. (Thanks to Marilyn for the pointer.)

» Posted by Martin Weil on December 17, 2009

I've known many people in the financial business who said I'm really proud because I did it all myself. ... the first thing I say is, 'Isn't that wonderful. You did it all yourself. I think that's terrific. I don't know many people that have done that. But tell me, how did you arrange to be born in the United States of America.'

Our birthright has created enormous wealth and stability of property and for us to think that we don't want to pay our fair share of the costs running this nation when our young citizens, let us not forget, are dying in wars out there trying to protect democracy and the nation we built up, it seems to be quite outrageous.

John Bogle, founder of Vanguard, quoted in a WSJ's Wealth Report posting on the issue of the inheritance tax

» Posted by Martin Weil on December 17, 2009

Apparently the new reform legislation pushed by Barney Frank contains the following language "Nothing in this section shall require a broker or dealer or registered representative to have a continuing duty of care or loyalty to the customer after providing personalized investment advice about securities."

This is not in any way in the consumer interest, as noted in Fox Business' Sweeping Financial Reforms Don't Clean House.

"...one of the dirty little secrets in the financial advice world, namely that some people you trust for advice may not have your best interests at heart. Brokers -- in fact any type of intermediary whose primary job is selling products -- live by the standard of "suitability," meaning that the investments they select and sell to clients must be suitable for the buyer. ... By comparison, investment advisers who make money giving advice rather than selling products must live by a "fiduciary standard," meaning they have a responsibility to put your best interests ahead of their own. If it's not in your best interests -- even if it's suitable and appropriate -- they shouldn't sell it."

Given the choice between someone who offered you investment choices that they thought suitable and appropriate for you and someone who offered you choices they believed were in your best interests, which one would you choose?

» Posted by Martin Weil on December 15, 2009

If you are looking for a great blog on almost any business-related topic (Green Business, Gen X, Gen Y, Sports Business and much much more), Business Pundit has complied a terrific list of the best blog sites for 2009. I frequent a bunch of these selections (Marginal Revolution,The Big Picture, Penelope's Trunk) and have recommended them highly in the past.

» Posted by Martin Weil on December 15, 2009

...is that the Administration and Congress start paying much more attention to this man:

Bankers and regulators have not come anywhere close to responding with necessary vigor to the worst economic crisis in 70 years. There is a lot of evidence that financial weaknesses brought us to the brink of a great depression . . . The proposed changes are like a dimple.

Paul Volcker, former Federal Reserve Chairman and erstwhile adviser to the current US Administration (quoted in a Bloomberg article.)

» Posted by Martin Weil on December 02, 2009

Good while it lasts but these things usually end in tears. Chart from the WSJ.

» Posted by Martin Weil on December 01, 2009

It's that time of year when I like to reprint this basic message - gift cards are generally a consumer rip-off. Let's count the ways:
1. Many cards impose fees - sales fees, service fees, monthly fees. This is money that is gifted to the company, not your recipient
2. Some cards expire- all the money goes to the company
3. Lose your card? Likely that money is in someone else's pocket
4. Some companies go bankrupt - good luck with that
5. An enormous percentage (25-35%) of gift cards are never used at all. Again all your gift goes to the company.

If you want to support the economy, go out and shop. If you want to give money, try cash. If you have to give a gift card after all this, think one more time. After that, if you still have to go this route, make sure it is one with no fees or expiration date and that your recipient will have a use for it. If it doesn't say "no fees" right out front, walk away. Amazon, iTunes and Starbucks (no endorsement implied) are among the major retailers who offer no-fee, no-expiration cards.

» Posted by Martin Weil on December 01, 2009

License plate on a Porsche Cayenne in Greenwich CT. From Andrew Sorkin, author of the recent book of the same name - but not the plate's owner.