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- Superior Biotechnology Leads to Superior Drugs
- The Delusion of Regulating Risk
- Talk of a Greek Exit Gets Louder
- Doug Casey on Taxes and Freedom, Part II
- Is Facebook the Rusty Hinge of the Stock Market?
- Fitch Downgrades Japan
- Doug Casey on Taxes and Freedom
- Greeks Run on Banks as Euro-Confidence Wanes
- To the Class of 2012
Who exactly are the 1%?
The very rich in America increasingly work in finance, marry each other and care passionately about politics
MITT ROMNEY is not the first multi-millionaire to seek the presidency, nor the richest. Ross Perot, the record-holder, spent some of his billions earned from computer data on losing bids in 1992 and 1996. Since then men who owe their or their family’s fortunes to oil, sport, publishing, trial law, ketchup, beer and bestselling autobiographies have followed.
But Mr Romney, who earned his $200m or so as a private-equity executive buying and selling companies, is the first candidate from the world of high-octane finance. As such, he illustrates the changing complexion of America’s rich. The wealthiest 1% of Americans not only get more of the pie (see chart); they are increasingly creatures of finance.
The average household income of the 1% was $1.2m in 2008, according to federal tax data. The ultra-rich skew that average upwards: admission to the 1% began at $380,000 in 2008. The Congressional Budget Office puts the cut-off lower, at $347,000 in 2007, or $252,000 after subtracting federal taxes and adding back transfers. Measured by net worth, rather than income, the top 1% started at $6.9m in 2009, according to the Federal Reserve, down 23% from 2007.
Ben Graham’s Curse On Gold
It seems that the mainstream investment community only takes a break from ignoring gold to berate it: one of gold’s most outspoken critics, uber-investor Warren Buffett, did so recently in his latest shareholder letter. The indictments were familiar; gold is an inanimate object “incapable of producing anything,” so any investor holding it instead of stocks is acting out of irrational fear.
How can it be that Buffett, perhaps the most successful (and definitely the most well-known) investor of our time, believes that gold has no place in an intelligently allocated investment portfolio?
Perhaps it has something to do with his mentor, Benjamin Graham.
Graham, author of Security Analysis (1934) and The Intelligent Investor (1949), is correctly respected as one of history’s most knowledgeable investors. Over a career spanning 1915 to 1956, he refined his investment theories, in time becoming known as the father of value investing. Much of modern portfolio theory is based upon Graham’s work.
According to Graham, while no one can tell the future, there are periods when the valuations of stocks and bonds would deviate from fair value by becoming excessively over- or undervalued. To enhance returns and reduce risk, investors should alter their portfolio allocations accordingly. A quick look at a long-term chart supports Graham’s theory clearly shows periods when one asset class offered a better value than the other:
The Federal Reserve’s Explicit Goal: Devalue The Dollar 33%
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.
But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.
The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years.
Quants: The Alchemists of Wall Street
Quants are the math wizards and computer programmers in the engine room of our global financial system who designed the financial products that almost crashed Wall st.
The credit crunch has shown how the global financial system has become increasingly dependent on mathematical models trying to quantify human (economic) behavior.
Now the quants are at the heart of yet another technological revolution in finance: trading at the speed of light.
What are the risks of treating the economy and its markets as a complex machine? Will we be able to keep control of this model-based financial system, or have we created a monster?
A story about greed, fear and randomness from the insides of Wall Street.
Money insider foresees civil unrest in U.S. this year
Charles Ortel is a managing partner with Newport Value Partners, LLC in New York City. Newport, established in 2007, provides value-added research to executives and investment firms.
An analysis by highly regarded Wall Street financial analyst Charles K. Ortel predicts weak economic growth and disappointing private investment returns in the U.S. economy during 2012 and for the foreseeable future.
What is startling about Ortel’s economic analysis is the rapidity with which his dire economic and political forecasts are being realized on the front pages of newspapers worldwide.
On Jan. 13 the credit rating agency Standard & Poor’s downgraded nine eurozone countries, including France and Austria, with the Financial Times in London reporting in words Ortel himself could have crafted that the downgrade “reignited fears about the fiscal sustainability of the eurozone.”
Coming economic violence
“With no existing government or financial institution solvent enough, respected enough or feared enough to lead the required re-balancing in peace, we believe the world will experience a painful re-calibration of economic strength and geo-political standing during 2012 in the midst of widespread civil insurrection and cross-border war,” writes Ortel, a managing partner with Newport Value Partners, LLC in New York City
He further predicts… Continue reading
Top Justice officials connected to mortgage banks
(Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.
The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.
Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.
Reuters reported in December that under Holder and Breuer, the Justice Department hasn’t brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.
The evidence, including records from federal and state courts and local clerks’ offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.
In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners’ lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven’t responded publicly to any of the requests.
While Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co – as well as at least one other bank that is among the 10 largest mortgage servicers.
