Investors 411 Blog

The ongoing war over the “Shadow Banking” System –  the major battles – whose winning - the sides -. Is London Burning? – The G 20 meeting – winners and losers – The Critic. Economic tends for the future – more regulations, delevering, & degloblization.

Photo of riots in London over G 20 meeting from the Atlantic

Shadow Banks

Definition – Over a decade ago Shadow Banks were formed when the US congress began to strip regulations from the financial system. Huge “to big to fail” institutions (from AIG to GE) were created and allowed to hide their over leveraged assets. This created false wealth and 100′s of billions for those crooks who ran the scam. It brought the entire world to the precipice of economic meltdown.

The Battle – Shadow Institutions are winning (so far)

• Trillions of taxpayer dollars and printed money are being given prop up shadow banks
• Programs designed to have taxpayers bailout banks (See nobel prize winner Joe Stiglet’s in NYT editorial
• Accounting rules (Mark to Market) are being changed to allow less transparency
• almost nothing outside of political jaw boning has been done to break up  ”to big to fail” shadow institution

The Sides - These sometimes fluctuate  and politicians know how to hide their true colors, but basically a partial list looks like

• Defenders of shadow banks – The Bush administration, the Obama administration, Wall Street and the shadow institutions. 
• Opponents – unlikely and less powerful group- Most notable Paul Krugman, France Pres. Sarkozy, Alan Greenspan, Joe Stiglets, Lindsey Graham (R senator), some other major Republicans and Democrats & American taxpayer who is going to pay.

Is London Burning?

One photo says a thousand words (see above). No matter how right you think your position is – is it right to break into institutions, hold CEO’s hostage, cause the death of an innocent bystander, destroy property, attack your employer when the business folds, write letters to the families of workers for banks threatening their kids?

Both the media far left and far right are pouring oil on this fire. The lefties in London are hurting their own cause. See comments made by “The Critic” on right hand side of blog.

One big positive coming out of G 20 is greatly increased funding for IMF (International Money Fund). MIT’s  Simon Johnson has an editorial on this and credits Obama.

Long Term Trends

Future trends depend on if or how much major Shadow Institutions are able hide their toxic assets and keep their to big to fail  size.  The following trends (good or bad) seem to be gaining at least a foothold.

• The desire for more regulations to prevent bubbles.
• “Delevering” – Over leverage risk will get reduced as everyone saves more
• “Deglobalization” – Nationalization, protectionism, will grow as countries turn from greed to survival

Very interesting editorial on this by PIMCO (bond giant) Bill Gross and its negative long term future for stocks

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Tom Friedman, over the years has, perhaps, been the most quoted columnist in Investor’s411. No one is always right, but he sets himself apart by innovation. (also, 3 Pulitzer’s and many best selling books) Friedman’s column yesterday on socializing the risk and privatizing the gains for finance and the environment pulls two diverse problems together. Also today- other economic editorials & executions for sexuality.

Friedman

There a lot of meat in his NYT editorial “The Price is Not Right” chew on some of it.

After illuminating “creative destruction” he concludes  “Destructive creation” has wounded both the Market and Mother Nature. Smart regulation and carbon taxation can heal both.

Other Editorials

(If you have an editorial or comment you’d like to share post it on the comment section of the blog – Thanks)

Here’s  diverse group of editorials

•  Rally is Built on Sand? FASB Can Help – by  Chris Ciavocco (Ciavocco vs Reilly below)
• Banks Demand Perfume for Rotting Balance Sheets - by David Reilly – Bloomberg
• How the Financial Crisis Is Shaping the Corporate Model – NYT
• Automakers and Banks: A Double Standard – by James Suroweicki – The New Yorker

Executions for Sexuality

Here’s a story American Corporate media will ignor

Ahmadinejad said there were no gays in Iran and his fellow Shia who now dominate Iraq are having a mass execution of 100 supposed “criminals” many of them for the “crime” of just being gay. This is the supposedly wonderful democratic government we created in Iraq that is killing “gays by the batch” (story) “20 criminals” in each batch.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING