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My Sunday Washington Post Business Section column is out. This morning, we look at the newly impaneled Office of Mortgage Origination and Securitization Abuses.

Print version had the headline A Chance for a modern Pecora Commission to right Wall Street wrongs.

It’s fair to ask: Is this new task force a meaningless exercise? The article looks at the ways to tell if this office is for real. How the structural set up of the office will reveal if this is a whitewash; further, the areas that get investigated will also tell us if this a serious investigation.

Here’s an excerpt from the column:

“So, here we are, four years after the great financial collapse, three years after the recovery began and in the last year of Obama’s term — and the president has finally decided to investigate the role of fraud in the great global financial crisis. Hence, this new task force — the unit of Mortgage Origination and Securitization Abuses — begins behind the curve. The statute of limitations is, in many cases, close to elapsing.

Even so, do not dismiss the investigation out of hand because of the timing: History informs us that a serious investigation can begin four years after the fact. Recall that Ferdinand Pecora was the fourth chief counsel for the Senate committee that investigated the Wall Street crash of 1929 and subsequent Depression. He was appointed in 1932 and received broad investigatory powers in 1933. His report ran thousands of pages. Thanks in large part to Pecora’s findings, Congress passed the Glass-Steagall Banking Act, which separated commercial and investment banking; the Securities Act of 1933, which established penalties for filing false information about stock offerings; and the Securities Exchange Act, which created the Securities and Exchange Commission to regulate the stock exchanges. Nearly 50 years of financial stability followed.”

The dead tree version of the paper has a classic photo of Pecora:

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click for ginormous version of print edition

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Source:
A modern Pecora Commission could right Wall Street wrongs
Barry Ritholtz
Washington Post, January 29 2012
http://www.washingtonpost.com/business/a-modern-pecora-commission-to-right-wall-streets-wrongs/2012/01/22/gIQAJ3uoYQ_story.html

Washington Post Sunday January 29 2012 page G6 (PDF)

Some fascinating reads to start your Sunday Morning:

• Who Owns The World’s Financial Assets? And Why Are U.S. Households So Fascinated With Stocks? (Wall Street Rant)
• Chasing the Mirage of Hedge Fund Returns (Forbes)
• George Soros: How to Save the Euro  (NY Review of Books)
• Why Tech Stocks Look Better—Even for the Risk Averse (WSJ)
• The one percent war (Reuters Magazine) see also NJ Gov Chris Christie to the 1%: Please Occupy New Jersey (WSJ)
• GDP growth still not enough to get back to full employment (Washington Post)
• Legal Foreclosure Issue two-fer:
…..-Arizona attorney general: Bank of America impeding investigation (Phoenix Biz Journal)
…..-Bill takes aim at Colorado foreclosures (Denver Post)
• The Office: Can It Be Fixed? (Grantland)
• How Siri is ruining your cellphone service (Washington Post)
• N.Y. Airports Account for Half of All Flight Delays (NYT)

What are you reading with Sunday morning coffee?

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U.S. Economy Picks Up Steam

Source: WSJ

When I started this blog lo so many years ago (Summer 2003) it, amongst other things, acted as a repository of all the cool things I came across. In addition to my own ramblings, I wanted to keep track of stuff found online. I also hated losing the graphics/charts/tables when a site went dark.

That leads me to posting an occasional infographic. Okay, a lot of infographics, perhaps a few too many.

That’s why I found this particular piece so amusing:

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via Casual Sophistication

“Things in the U.S. aren’t nearly as bad now as they were back in 2008 and early 2009, but don’t try and tell the retail investor that. They’re truly spooked.”

-Justin Walters, co-founder of Bespoke Investment Group.

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Here we are 12 years into a secular bear market, and the concern amongst investors is capital preservation and risk management. Indeed, as the nearby cover of this weeks Barron’s is an article about the fear amongst investors (click for larger version). It may be the single most Bullish thing I’ve seen this year.

I find some of this hilarious:

• A recent survey conducted by Investment News found just 43.6% of financial advisors planned to increase their clients’ allocation to stocks this year, down from 63.4% at the start of 2011;

• A survey by the Yale School of Management showed a marked decline among investors who felt confident there wouldn’t be a stock-market crash over the next six months. The outlook was especially grim among individual investors, who seemed as worried about a crash as at the height of the financial crisis.

• Notwithstanding the downgrade of U.S. debt, investors bent on capital preservation are buying enough Treasuries to drive the benchmark yield on 10-year notes to below 2%.

• Of more than 300 new exchange-traded funds launched in 2011, the two most popular by far were conservative strategies that steered investors toward stability and capital preservation.

• Risk aversion is particularly acute among “Generation Y” investors born after 1980, who have decades to go before they retire but are especially reluctant to invest.

These data points show the depth of risk aversion amongst the investor class.

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Nervous Investors

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click for larger graphic

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Source:
Just Don’t Lose It!
KOPIN TAN
Barron’s, January 28, 2012
http://online.barrons.com/article/SB50001424052748704895604577178933290614156.html

More business regulations.

That is what survey after survey around the globe shows that the world’s populations wants. Despite a relentless propaganda campaign of misinformation, fabricated data and false narratives, the public has not been fooled by the 1%. The best efforts of a well funded group of ideologues — Free Market absolutists, anti-Democracy and Randians — these pro-corporate radicals has not yet succeeded in fooling all of the world’s population all of the time.

How do we know this? A 25 country survey last year by Edelman. They asked the question:  “When it comes to government regulation of business, do you think that your government regulates business too much, not enough or about the right amount?”

Most of the world thinks there is insufficient regulation across all industries. The United States, where 31% there was too much regulation. Ironic considering we originated the global financial crisis. The next closest country was Germany at 28%.

Significant pluralities or outright majorities stated that more regulatory oversight was required, with four exceptions: Singapore, UAE and the USA. Singaporeans at 21% were the lowest, but that is no surprise in a nation where spitting gum on the sidewall may lead to a caning. Only 33% of the Emirate residents said more regs were needed. In Sweden, the number is 31%. In the US, more business regulation was requested by 37% of Americans.

As we can can be seen in the chart below, most of the world has a very different perspective.

One major caveat: I would imagine the major events of the past few years probably has people thinking of disasters in specific industries: Banking, Energy Exploration and Nuclear Power. If the questions were asked about those specific industries, I believe the response for more regs would be much higher. And if the question was asked, “outside of banking, deep water oil drilling and nuclear plants” I assume we would get lower numbers.

Hence, this survey may be less about the ideology of regulation and more pragmatic about reigning in dangerous and disaster prone sectors.Too bad that concept never entered the surveyors minds . . .

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UPDATE: January 28, 2012 1:22pm

Apparently, Finance Remains Least-Trusted Industry in Annual Edelman Survey

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click for large graphic

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Source:
How the Public Sees Business Rules
FLOYD NORRIS
NYT January 27, 2012   
http://www.nytimes.com/2012/01/28/business/survey-takes-publics-pulse-on-business-regulations.html

Via TechDirt, we learn the frequency with which Hollywood insists every new technology will destroy the movie business:

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click for full infographic

giant infographic after the jump

Read the rest of this entry »

Succinct summation of week’s events:

Positives:

1) Italian and Spanish bond yields continue lower, 10 yr in Italy below 6%, Spain’s below 5%
2) German IFO business confidence rises to 8 month high
3) German consumer confidence at best since April
4) Euro zone mfr’g and services composite index unexpectedly moves back above 50, led by Germany
5) US Durable Goods orders in Dec surprise to upside but how much was pulled forward from 2012 due to 12/31 expiration of full depreciation expensing?
6) Jan UoM confidence rises to best since Feb ’11
7) Richmond and KC mfr’g survey’s both rise
8) Bank of Thailand cuts rates, Reserve Bank of India cuts reserve requirements

Negatives:

1)Portuguese yields spike, 5 yr CDS up 150 bps on week to new high
2) Spanish unemployment for Q4 rises to 22.9%
3) Italian consumer confidence holds at lowest since at least ’96 when survey began
4) Q4 US GDP rises 2.8%, a touch below expectations but nominal GDP gains just 3.2%, the weakest since Q3 ’09. If deflator was in line with expectations, Real GDP would have been up just 1.3%. Real final sales up just .8% vs 3.2% in Q3
5) Initial Jobless Claims normalize at 377k after holiday distorted 356k last week
6) Inflation expectations within UoM rise to 3.3%, the most since Sept and remains above the 20 yr avg of 3.0%. Expectations also rise to multi month highs in TIPS market
7) New Home Sales remain anemic, prices fall 12.8% y/o/y
8) FOMC stretches out zero rates until late 2014, US$ resumes downward trend against everything. Fed destroying the price mechanism as if interest rates are artificially priced, what are assets really worth? If we don’t know what assets are really worth, how can capital be efficiently allocated? And, if ZIRP was effective, Japan’s economy would have boomed over the past 10 yrs.

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Source:
Bloomberg Brief
January 24, 2012

If you missed yesterday’s discussion on Correlation at the Dow Jones Expert series lecture, the PowerPoint is here

Last reads of the week:

• An investor’s worst enemy? Their brain (The Globe and Mail)
• The 2012 Stock Rally Has Erased Bearish Sentiment (WSJ) see also ‘Bailout Nation’ Author Says Correlation Killing Volumes (Traders Magazine)
• Fighting Bernanke Hazardous in Gundlach View of Housing Market (Bloomberg)
• Josh Brown: Perhaps I’ve Been a Bit Too Harsh with Wire Houses … (WSJ)
• Banks Face Bind Over Cash Pile (WSJ) see also Europe could learn from US debt scramble (FT.com)
• In Punishing Year for Hedge Funds, Biggest One Thrived (DealBook)
• GM was the “good” bailout: Jobs, Jobs and Cars (NYT)
• Pic reunites Monty Python members (Variety)
• Supply-side economics at core of Gingrich plan (Washington Post)
• Apple and Google as Creative Archetypes (NYT)

What are you doing this weekend?

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Source: WSJ