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rffrydr
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 Posted: Mon Jul 26, 2010 3:45 pm Post subject: |
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Don't know how much peripheral hedge-funds are tied to this but somebody's taking this unexpected fallout from property hit:
Timothy Collins
Dodd-Frank impact on Alternative Investments
7/26/2010 3:41 PM EDT
| Quote: | The Dodd-Frank Wall Street Reform and Consumer Protection Act changes the definition of an Accredited Investor (under Regulation D) so an individual's net worth (or joint net worth with spouse) must now be calculated exclusive of the value of the person's primary residence. I know from my days in the B/D world, this will impact many advisors use of non-publicly traded REITs, private placement, hedge funds, and other alternative strategies. I am sure there will be some individuals who considered themselves qualified to invest in hedge funds, but will now fall short of qualification.
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rffrydr
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rffrydr
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| Posted: Sat Jul 17, 2010 7:57 am Post subject: |
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Slaughter the pig? Yes.
America's piggybank is also much of the world's (not russia yet). Is it also all too much?
| Quote: | | In 1984, I bought my London house. I estimate that the land on which it sits was worth £100,000 in today's prices. Today, the value is perhaps ten times as great. All of that vast increment is the fruit of no effort of mine. It is the reward of owning a location that the efforts of others made valuable, reinforced by a restrictive planning regime and generous tax treatment – property taxes are low and gains tax-free. |
http://m.ft.com/cms/s/0/8f06df9e-8ac1-11df-8e17-00144feab49a.html?catid=143&SID=google
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rffrydr
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rffrydr
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rffrydr
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| Posted: Fri Jun 25, 2010 8:17 am Post subject: |
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Ta Da! It's here.
http://www.americanbanker.com/issues/175_121/reg-reform-1021404-1.html
How could we rally on this? It'd be sending the wrong message. There's probably more to be gained here than the market is willing to give credit. No more private exchanges for instance will beget more trading and more liquid trading. --One of the bigger abuses this last decade.
Transition periods will give the Street hope for change....of Administration.
Next up: Basel III and Fannie/Freddie cleanup.
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rffrydr
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rffrydr
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| Posted: Thu Jun 10, 2010 10:01 am Post subject: |
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Glenn Williams
Fascinating Battle Between EPA and a Utility
6/10/2010 10:30 AM EDT
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Minneapolis-based Xcel Energy Inc. (NYSE: XEL) is being sued by the EPA for doing nothing. EPA wants to penalize XEL up to $75,000 per day according to the U.S. attorney's office.
What is the horrible thing that XEL is doing? Planning. They are planning changes to their pollution control equipment planned for its coal-fired power plants in Burnsville and Becker, MN. They have not changed anything.
The EPA simply wants to know if any planned changes would result in plant emissions that violate the federal Clean Air Act. They are suing to find out.
Xcel is refusing to provide the information because it believes the EPA is exceeding its authority. "EPA's request for future project information is incredibly burdensome, would be a significant drain on company resources, and provides for no environmental benefit. There is no environmental issue at stake in this dispute," "EPA's request for future project information is incredibly burdensome, would be a significant drain on company resources, and provides for no environmental benefit. There is no environmental issue at stake in this dispute," Xcel said in a statement Tuesday. Xcel told the EPA in a letter in August that the agency was exceeding its authority because the Clean Air Act only allows the EPA to investigate whether the utility is currently violating the law, not whether any future acts would result in violations.
The U.S. attorney's office, arguing for the EPA, called that "a cramped
reading" of the law. |
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rffrydr
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| Posted: Thu Jun 10, 2010 9:57 am Post subject: |
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Doug Kass
Three Rules for More Orderly Markets
6/10/2010 11:16 AM EDT
| Quote: | Once again, based on my contacts with the sell-side institutional trading community, high-frequency traders, catching a slight break in price momentum in the averages, ran rampant in the last 45 minutes of trading yesterday.
One cannot overstate the erosion in investors' confidence (both of individuals and institutions) that these programs are causing on a regular basis. In part, the existence of these programs explains why 22 of the last 30 trading days have recorded triple-digit DJIA moves.
Over the past month, I have frequently written about the deleterious impact of high-frequency strategies on the markets.
Many subscribers have asked me to recommend how regulatory authorities can remedy high-frequency trading's impact on the markets.
So, here are three basic rules that I would immediately implement for the purpose of halting the outsized impact of momentum-based high-frequency strategies that occur in the vacuum of hedge fund de-risking and in the absence of retail domestic equity inflows:
Institute a transaction tax exclusively devoted to high-frequency trading strategies. While I hate this idea, it would immediately and dramatically increase the costs to high-frequency traders and reduce the incentives and edge of many price-momentum strategies).
Bring back the uptick rule for shorting. This short-sale rule was eliminated in July 2007 -- its original purpose was to prevent traders from being able to force prices downward. Bring it back!
Disallow the ability of high-frequency traders to see order flow and to discover stop levels. |
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rffrydr
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rffrydr
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rffrydr
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| Posted: Fri May 14, 2010 10:40 pm Post subject: |
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SEC will have a hearing on floating NAV for money market funds. This, would be a killer for the industry and help banks. People are not going to want to see their “cash” trade below $1.
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rffrydr
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| Posted: Mon May 10, 2010 2:50 pm Post subject: |
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The cure worse than the disease? The house may have been saved but the funhouse has been lost:
The challenge of halting the financial doomsday machine
By Martin Wolf
April 20, 2010
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Can we afford our financial system? The answer is no. Understanding why this is so is a necessary condition for evaluating ideas for reform. The more aware of the risks one is, the more obvious it becomes that radicalism is the safer option.
People pay too much attention to the direct cost of bail-outs. As Andrew Haldane of the Bank of England, author of several brilliant papers on the crisis, has noted, these costs may be around 1 per cent of gross domestic product in the US and UK. The costs that matter, however, are those of the recession and the huge jump in public debt. If only a quarter of the world's loss of output during the recession were to prove permanent, the present value of these losses could be as much as 90 per cent of annual world product.
How did this happen? Quite simply, the financial sector has become bigger and riskier. The UK case is dramatic, with banking assets jumping from 50 per cent of GDP to more than 550 per cent over the past four decades. Capital ratios have fallen sharply, while returns on equity have become higher and more volatile. As Mr Haldane notes in another paper, leverage is the chief determinant of returns on equity and increased leverage also explains the level and volatility of banking returns. Finally, the banking sector has also become substantially more concentrated. (See charts.)
Mr Haldane bemoans "a progressive rise in banking risk and an accompanying widening and deepening of the state safety net". This is a "Red Queen's race": the system is running to stand still with governments racing to make finance safer and bankers creating more risk. The route was via liquidity, deposit and capital insurance. Mr Haldane notes that rating agencies value government support for banks. Government support must surely provide a part of the explanation for the low yields on bonds issued by these massively leveraged businesses (see chart).
The combination of state insurance (which protects creditors) with limited liability (which protects shareholders) creates a financial doomsday machine. What happens is best thought of as "rational carelessness". Its most dangerous effect comes via the extremes of the credit cycle. Most perilous of all is the compulsion upon the authorities to blow another set of credit bubbles, to forestall the devastating impact of the implosion of the last ones. In the end, what happens to finance is not what matters most but what finance does to the wider economy.
Does today's engorged financial system produce gains that justify these costs? In a recent speech, Adair Turner, chairman of the UK's Financial Services Authority, argues it does not.* Financial systems are important servants of the economy, but poor masters. A large part of the activity of the financial sector seems to be a machine to transfer income and wealth from outsiders to insiders, while increasing the fragility of the economy as a whole. Given the extent of the government-induced distortions in the system, even the fiercest free marketeer should accept this. It is hard to see any substantial benefit from the massive leveraging up of the economy and, above all, the real estate sector, that we saw recently. This just created illusory gains on the way up and real pain on the way down.
As Mr Turner notes, the promise of securitisation has turned out to be partly illusory. Arguments used in its favour – "market completion" and the ability to extend credit more widely – look highly questionable. Particularly striking was the failure of the credit default swap market to give any forewarning of the financial crisis (see chart). At bottom, the invention of complex securities hugely exacerbated the information and incentive problems inherent in complex financial systems. Even the frequently heard argument that more market liquidity is better than less is far from unimpeachable: it exacerbates rational carelessness.
So what is to be done? In answering this question, one has to start from a recognition of the chief dangers: first, the high-income countries, with their low underlying rate of economic growth and huge costs of ageing, cannot possibly afford another crisis; second, the big issue is the impact on the economy.
Against these standards, what is one to make of ideas now being floated? Three common ideas need to be put in their place.
One idea, popular in US Republican circles, is: "just say no" to bail-outs. This is a delusion. Since financial institutions are powerfully interconnected, the government cannot credibly commit itself to not rescuing the system when in peril.
Another idea, popular among US liberals, is that the chief issue is "too big to fail". Mr Haldane shows that the implicit insurance to huge banks is bigger than to smaller ones. He agrees, too, that economies of scale in banking are modest. The challenge of managing such complex institutions is enormous. Finally, the diversification these institutions seek is ultimately illusory: they are all exposed to economy-wide risks.
Yet it is important not to exaggerate the significance of size alone. One point is that some of the systems that navigated the crisis relatively safely – Canada's, for example – are dominated by a stable banking oligopoly. Another is that, as happened in the US in the 1930s, the collapse of many small and undiversified banks can be highly destructive. Size matters. But it is certainly not all that matters.
A third notion is that the big issue is regulatory completeness. It is argued that if only oversight had been effectively imposed, the pattern of overleveraging and default could have been halted. This, too, is unlikely. It is hard to regulate finance against the incentives of those who run it. Fixing the problem has to include changing incentives in simple and transparent ways. To put it bluntly, participants have to fear the consequences of making serious mistakes, not just be told to stop.
In the end, halting the financial doomsday machine is going to involve fundamental changes in policy towards – and the structure of – the financial system. There are two broad approaches now under discussion. The official one is to make something roughly like the present system far safer, by raising capital and liquidity requirements, moving derivatives on to exchanges and enforcing prudential regulation. The alternative is structural reform. Which is the least bad option? I plan to address that issue next week. |
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rffrydr
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rffrydr
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| Posted: Mon Apr 26, 2010 9:23 am Post subject: |
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IMF's vision as regulator of, say, top 50 world banks in bailout administration? This would be an exciting new twist in its old vision as global bankruptcy court.
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