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Commentary

Linkfest: Outrage, China, Mutual funds off Trading Terminals

Links for reading:

  • Main Street tells Wall Street, “Get A Real Job” (Bloomberg)

    In the 14 years I’ve written columns for Bloomberg News, I’ve had plenty of feedback from investors who said they lost money at the hands of corrupt brokers, plus a steady stream of vitriol from financial executives who say I’m clueless, stupid, and deserve to lose my job.

    I have never, though, been bombarded with anything like the fury and frustration expressed this time by people far removed from Wall Street, ranging from computer programmers to administrative assistants to the caretaker of an estate. Typically a handful of e-mails will float in; this time the number topped 60 and counting.

    It’s just starting, but it’s too little, and obviously too late. With US unemployment (disguised as “U6”) at 17% and counting, there’s increasing amounts of despair in the real economy while the financial institutions are smoking something else. It’s now obvious that the powers are on the side of the financials – so I think there will be a lot more anger before they even acknowledge that a sense of fairness must prevail.

  • Naked Capitalism: China Lambastes Dollar “Carry Trade”, Diverting Attention from its Currency Manipulation

    Excellent article on how the US policy is geared towards helping banks recapitalize easily, with low interest rates (you can’t get lower than zero) and high spreads. To understand this – how easy is it for you to make a profit if you know you can buy from a market and sell it to the “Fed” at a slight profit? That’s the kind of game going on with things like Mortgage Backed Securities and so on. Plus, the idea is to spike asset prices rather than clean up banks.

    More importantly though, on China, Yves Smith says it like no one else can. China’s massive growth has been because of a conveniently pegged Yuan; the US can’t cut it’s debt levels unless it runs a current account surplus – which will spell death for China’s export led economy. China hasn’t a right to scream Wolf, says Yves, as it was a problem they started by buying up dollars and pegging the Yuan in the first place. Great read.

  • Mutual funds will soon be traded from brokerage terminals. Sub-brokers are, after all, present in every small town in the country; and allowing them to sell mutual funds provides a distribution reach no one else has. Unfortunately this will mean some entry loads again, in the form of brokerage. But that, at 0.5% must feel a lot lesser than the 2.25% the funds used to charge.
  • John Paulson buys 2% of Citibank, sells 2 million Goldman shares. He made a killing shorting sub-prime, and now he’s buying out the guys the government owns. Sweet. Don’t read too much into the GS sale, though.
  • John Mauldin forwards Hugh Hendry’s commentary (Eclectica, November 2009) – a fantastic read on the Dollar, China’s huge inventory and capacity and Why Deflation is more likely in the next year than Inflation.

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