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Greenspan: No Apology for Missed Forecasts (video)

Greenspan: I Don't Apologize for Missed Forecasts: "Greenspan: I Don't Apologize for Missed Forecasts - Oct. 23 (Bloomberg) -- Alan Greenspan, former Federal Reserve Chairman, defends his actions on monetary policy, offering no apologies for missing economic forecasts. He speaks on Bloomberg Television's "In The Loop.""

Caveat Emptor Bond Investors

Repeat and Remember: when interest rates rise, bond prices generally fall

If You’re a Bond Investor, Beware of the Seesaw - " . . . . the S.E.C. has been giving a warning of a different sort. Bearing the general title “Interest Rate Risk,” this latest bulletin is a cry for understanding. It’s about bonds, and for most people, the subject is confounding. The problem isn’t a new scam but a lack of knowledge about how bonds work, which can be dangerous in a time of rising interest rates. In its bulletin, the agency points out that investors need to understand that when rates rise, bond prices generally fall. This inverse relationship is a fact of life in the bond market. Like gravity in the physical world, it’s constant, powerful and important. But outside trading floors, business schools, banks and brokerage firms, bond dynamics are fairly obscure, surveys find. That’s troubling in a time like this, said Lori Schock, director of the agency’s Office of Investor Education and Advocacy. “We’re not predicting what’s going to happen to interest rates or when,” she said, “but we do know that rates can’t go much lower. And we know that they can go a lot higher.”. . ." (read more at link above)

Marc Faber says No Safe Haven Left (video)

Faber: No Safe Haven Left, Gov't Wasting Money: Video - Bloomberg: "Oct. 14 (Bloomberg) -- Swiss investor Marc Faber, publisher of the Gloom Boom & Doom Report, speaks to Bloomberg's Tom Keene and Sara Eisen about where to invest amid market uncertainty. (Source: Bloomberg)"

Economist Warning, Bitcoin Backlash

Bitcoins, or any currency not issued by a legitimate government, will always draw scrutiny from regulators--after all, we have enough problems with governmental currencies!

Economist Warns a Bitcoin Backlash May Be Coming from Governments and Banks | MIT Technology Review: "Governments and established financial institutions are likely to launch a campaign to quash the decentralized digital currency Bitcoin, according to a leading economist and academic. Simon Johnson, a professor of entrepreneurship at MIT’s Sloan School of Management, expects Bitcoin to face political pressure and aggressive lobbying from big banks because of its disruptive nature. . . ." (read more at link above)

Big Banks, Bad Mortgages, Caveat Emptor

The American Banker newspaper is reporting that banks may be hiding losses from their shareholders:
The nation’s four largest banks are holding $57 billion of seriously delinquent loans that they’ve been slow to move into foreclosure over concerns that the Federal Housing Administration, the government mortgage insurer, will refuse to cover the losses and hit them with damages, according to industry sources.
The Guarantee That Banks May Fear to Invoke - " . . . Rebel Cole, a former Federal Reserve Board economist who is now a professor of finance and real estate at DePaul University in Chicago, says the banks could face heavy losses on the loans because the F.H.A. might refuse to cover them. The article adds: Some lenders acknowledge that they will likely end up eating losses on defaulted loans held on their balance sheets and settlements related to past claims. They are also likely to try to avoid the risk of getting hit with damages by forgoing the FHA claims process and absorbing some losses themselves. . . ." (read more at links above)

Internationally US $100 Bills Preferred (video)

These New $100 Bills Are Going to Be Huge Overseas - Businessweek" . . . .“The hundred is extremely popular in other countries,” says Tu Packard, a senior economist at Moody’s Analytics (MCO). “In countries that have high inflation, it’s a more trusted medium of exchange.” Where hundreds are concerned, she adds, “the fresher the bill, the better.” Older, beaten-up currency is often frowned upon in countries that have seen their own currency devalued quickly. Packard recalled having an easier time exchanging a hundred-dollar bill in Kyrgyzstan than her travel companion did because her own note appeared newer and less-weathered. The hundred typically has a longer lifespan than other bills because it is used less frequently. The average hundred circulates for about 15 years, according to the Fed."

The Fed has put itself and us in a QE Trap

At first we were in a liquidity trap as Paul Krugman so eloquently and repeatedly explained, but now the unintended consequence of Federal Reserve Quantitative Easing (to get us out of the "liquidity trap") has put us in perpetual slow-growth as the Fed cannot stop QE without fear of another recession --

"As soon as the economy picks up a bit, the authorities begin to talk about tapering, which sends long-term rates sharply higher and nips the recovery and inflation in the bud, effectively preventing them from winding down the policy. In this kind of world the economy never fully recovers because businesses and households live in constant fear of a sharp rise in long-term rates."(source infra)

Fed Faces Cost Of Quantitative Easing - Business Insider: ". . .Had the Fed not implemented QE, long-term rates would not have risen so early in the rebound, and the economic recovery would have proceeded smoothly. Now, any talk of ending QE pushes long-term rates higher and throws cold water on the economy, making it more difficult to discontinue the policy. That raises the possibility that by buying longer-term securities the central banks of the US, the UK and Japan have placed themselves in a QE “trap” of their own making and will be unable to escape for many years to come. I have previously described QE as a policy that is easy to begin and hard—even scary— to end. The recent drama over tapering signals the start of the less-pleasant second part. . . ."

Proof of this is the recent snafu over tapering --

It's Time For A Nonhuman Fed Chairman - Business Insider: ""Why bother with transparency when you can and do change your minds?" asked ED&F Man Capital managing director and bond market veteran Tom di Galoma, saying what it seemed like everyone was thinking following last week's FOMC decision."

And I wonder if anyone in the White House or Congress understands any of this?

High Frequency Trading, Wall Street, Rigged for Crisis

This Sociological Theory Explains Why Wall Street Is Rigged for Crisis - Bill Davidow - The Atlantic: " A good place to start would be to reduce the excessive trading volumes that lie at the root of accidents like the Flash Freeze, Flash Cash, and Goldman debacle. There is no valid reason for high frequency trading to make up more than 50 percent of all stock trades, and there is no pressing need for some $4 trillion in daily foreign currency transactions. A Tobin tax on transactions, first suggested by Noble laureate James Tobin in 1972, of as little as 0.1 percent, would significantly reduce these volumes. Smaller transaction volumes would reduce the size of accidents and possibly their frequency." (read more at link above)

Yellen, Bernanke, Fed (video)

Yellen to Make Bernanke Look Like Hawk, Faber Says: Video - Bloomberg: Sept. 18 (Bloomberg) -- Marc Faber, publisher of the Gloom, Boom & Doom report, talks about the Federal Reserve's decision to refrain from reducing its asset purchases and the outlook for the central bank's leadership. Faber, speaking with Trish Regan, Adam Johnson and Matt Miller on Bloomberg Television's "Street Smart," also comments on stock, bond and commodity prices. (Source: Bloomberg)

Trading bots, ultrafast extreme events, UEEs

To identify activities that might be triggered by automated systems, the authors defined something called an ultrafast extreme event (UEE). These are cases where a stock price moved at least 10 consecutive times in the same direction, all within 1,500 milliseconds. The total magnitude of these mini-crashes and rises had to be at least 0.8 percent. That may not seem like much, but it represents over 30 standard deviations from the normal run of trading. (source infra)

Trading bots create extreme events faster than humans can react | Ars Technica: "....the authors make a pretty compelling case that fast trading systems, coupled to a limited number of trading strategies, have caused a fundamental change in the behavior of the stock market. This shift leads to sudden changes in the value of stocks that aren't linked to any underlying financial factors. (In most cases, the change seems to be transient, and stocks return to their former value rapidly.) What's not at all clear is what triggers these UEEs, and whether changes in market regulations or trading strategies could eliminate them."

HFT, High Frequency Trading

In Which I Interview an HFT and Ask Him Some Tough Questions: " . . . We have ~13 “lit venues” (exchanges, ATS, ECNs) and something like 60 dark pools. Yet, it’s important to have a unified “best bid / offer” so that investors who are forced, because of choices their broker might make, to deal with just some subset of these 70+ venues aren’t being screwed by bad prices. There are lots of related issues, including what to do, if anything, about dark pools, and how to reduce the latency embedded in the NBBO (national best bid / offer). Also related is the issue of funky order types, against which Haim Bodek has become a very vocal opponent. His concerns aren’t unjustified. But most of these problems would be obviated with a minimally-latent NBBO and/or an end on the ban on locked markets. These issues can get pretty technical, but they do have some far-reaching implications. . . ."

Warren Buffett, The Intelligent Investor, Optimism

Buffett's top 'picks': Wedding licenses, investor 'bible': " . . . When one student asked for a stock tip, Buffett, widely considered the most successful investor of the 20th century, gave him a simple answer: Buy a copy of The Intelligent Investor, the investing bible written by Benjamin Graham, father of value investing. That and two wedding licenses, Buffett said, were his best investments. . . . Buffett's optimism was clear throughout. "If you look at the twentieth century, with two wars, the Spanish influenza, and the Great Depression, and the Dow went from 66 to 11,497. With all those terrible things happening, America works." (read more at link above)

Portfolio: Buffett adjusts Berkshire-Hathaway portfolio

Marc Faber, QE Unlimited (video)

Marc Faber: We Are in 'QE Unlimited': Video - Bloomberg: "Sept. 18 (Bloomberg) -- Gloom, Boom & Doom Report Editor Marc Faber comments on the Federal Reserve deciding not to taper QE today. He speaks on Bloomberg Television's "Street Smart." (Source: Bloomberg)"

Women, Wall Street

The real reason women are leaving Wall Street - Quartz: " . . . . “The business has changed,” she muses, “It is not as intellectually challenging as it used to be. It’s more like cage fighting. Long-term investment today means a month; mathematicians convince themselves they can quantify risk in their arcane products that no one can understand; and fee structures are out of line with investor returns. No wonder people are cynical about Wall Street.”" (read more at link above)

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