Opinion

Ben Walsh

from Felix Salmon:

Counterparties: Why the young are falling behind

Ben Walsh
Mar 20, 2013 22:08 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Things are better, but they’re also still bad. That’s the shorter version of the Fed’s view of the job market: “Labor market conditions have shown signs of improvement in recent months but the unemployment rate remains elevated”.

The economy may be puttering steadily along, but young people are falling behind. Annie Lowrey reports that younger workers are doing worse than one particularly personal gauge of success -- their parents. A study by the Urban Institute finds that Americans under 40 have accumulated less wealth than their parents at the same age. As Lowrey points out, “because wealth compounds over long periods of time”, that puts young people at a distinct long-term disadvantage, and also lowers economic expectations. The usual culprits -- stagnant wages, the financial crisis, student debt -- are to blame. Surveys from Pew and Gallup also highlight the damage the current economy has inflicted on the young.

On the bright side (sort of), younger consumers are less enthusiastic about credit cards than they used to be. Which is fine, because for credit card companies, the feeling is mutual. They’re just not that enthusiastic about extending credit in an idling economy to people with falling wages and shockingly large amounts of student debt.

The numbers here are not completely reliable. The Urban Institute calculates that $42,000 in wealth can be lost if you buy a house when you’re 40 rather than 30. The problem is that this number comes from using data from the “past few decades”. Price appreciation during those few decades, we now know, was an anomaly. But that doesn’t stop comments like this, from a mortgage consultant, about young people’s lack of credit history: “You could say that they’re not going to get mortgages, and that could have dire economic consequences”. On the other hand, if you bought a house in 2007, that too could have had dire consequences. -- Ben Walsh

from Felix Salmon:

Counterparties: No hope for change

Ben Walsh
Mar 19, 2013 21:06 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

“Mistakes were made”, Ina Drew said last week, somehow managing to both accept and reject responsibility for JP Morgan’s $6.2 billion trading loss. But reading the Senate’s exhaustive report on the London Whale, Jesse Eisinger doesn't think lessons were learned. Despite repeated assurances to the contrary, he argues, things haven’t changed since the financial crisis:

Bankers aren't acting cautious and chastened. Risk managers aren't in the ascendance on Wall Street. Regulators remain their duped and docile selves.

from Felix Salmon:

Counterparties: Ina the belly of the whale

Ben Walsh
Mar 15, 2013 21:56 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Last night, the Senate Permanent Subcommittee on Investigations released its 307-page report (plus a 598-page appendix) on JP Morgan’s disastrous London Whale trades. The report comes 11 months after trades were first reported, and, as DealBook notes, it details how JP Morgan “ignored internal controls and manipulated documents”, all while withholding information from regulators.

FT Alphaville’s Cardiff Garcia pulls some of the most damning excerpts. For instance, the report says that JP Morgan’s assertion that they had been fully transparent with regulators had “no basis in fact”. Or take then-CFO Douglas Braunstein’s comments on an earnings call that the CIO’s trades were a hedge against rising rates. On page 283, the report says that “none of the scenarios that Mr. Braunstein himself said he relied on indicated that the book functioned as a hedge”. Matt Philips writes that JP Morgan has lost that battle: "JP Morgan now freely admits—including Braunstein under oath this afternoon—that the CIO’s problematic position didn’t act as a hedge" and that the Senate report calls them out as proprietary trades.

from Felix Salmon:

Counterparties: Retiring the 401(k)

Ben Walsh
Mar 13, 2013 21:19 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

The first generation of 401(k) holders is retiring. Duncan Black, in USA Today, reports just how bad things are looking:

According to the Center for Retirement Research at Boston College, the median household retirement account balance in 2010 for workers between the ages of 55-64 was just $120,000. For people expecting to retire at around age 65, and to live for another 15 years or more, this will provide for only a trivial supplement to Social Security benefits... And that's for people who actually have a retirement account of some kind. A third of households do not.

Disrupting the market for helping people lose money

Ben Walsh
Mar 12, 2013 22:26 UTC

Investors tend to lose money in boring, but effective, ways. Motif Investing (“turn any idea into a motif”) promises to disrupt this predictable pattern by helping people lose their money in new and exciting ways. Motif’s CEO proudly describes the company as like the iPhone, but for investing, with the ease of shopping on Amazon. The fact that that description makes no sense at all does not make it any less terrifying. It wasn’t hard to predict that Twitter mockery would (rightfully) ensue.

Here’s PandoDaily’s Michael Carney trying to describe what Motif actually does:

Since launching in 2010, the company has offered its own motif based investment ideas and allowed regular Joes and Janes to view data on the performance of these ideas, and then make actual investments. Consider it one part E*TRADE-esque online brokerage, one part think tank, one part tech startup.

from Felix Salmon:

Counterparties: Krugman-Sachs

Ben Walsh
Mar 11, 2013 22:29 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Fresh off debating the deficit with Joe Scarborough on Charlie Rose, Paul Krugman is now tangling with fellow lefty economist Jeffrey Sachs. At issue is the government’s post-crisis stimulus spending, and the basic tenets of Keynesianism. Or at least that’s what Sachs would have you believe.

Sachs and Scarborough co-authored a Washington Post op-ed titled “Deficits Do Matter”, accusing Krugman of a crude interpretation of Keynes. Specifically, they say that short-term stimulus spending hasn’t achieved increased growth. (Krugman, by contrast, has long called the stimulus too small.) Sachs and Scarborough warn that things will only get worse as the US population ages, and healthcare costs increase. Keynes wouldn’t have approved, they say:

from Felix Salmon:

Counterparties: (NO) VACANCIES

Ben Walsh
Mar 7, 2013 23:18 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Who controls how hard is it to get a job in America? The next few jobs reports, including tomorrow’s, Mohamed El-Erian says, will give us some insight into the answer to that question. If the Federal Reserve is effectively in charge, rolling “out one untested measure after the other”, that could help create new jobs. But if our dysfunctional, austerity-inducing Congress has the upper hand, expect job growth to sputter out. Neil Irwin sees things similarly, although he identifies a booming housing market, a rising stock market, and deleveraging consumers as the key forces pulling the American economy forward.

There may be, however, a simpler way to give the economy a shot in the arm: hiring the unemployed to fill vacant jobs. Sounds sensible, right? Here’s Catherine Rampell:

from Felix Salmon:

Counterparties: Ending capital punishment

Ben Walsh
Mar 6, 2013 23:27 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints toCounterparties.Reuters@gmail.com.

Apple may want to keep its capital, but big US banks want to return some of theirs. Tomorrow the Fed will release the first set of data from its stress tests. Bank execs will have to wait until next week to find out whether they’ll finally be allowed to return more capital to shareholders.

Bloomberg’s Dakin Campbell and Hugh Son write that US banks may return $41 billion to investors over the next year, using the average of estimates from research analysts at Barclays, Credit Suisse, and Morgan Stanley. As David Benoit notes, this is a turnaround from last year, when Bank of America and Citi were forced to keep their payouts at a pro forma cent a share.

Jamie Dimon, consistent flip-flopper

Ben Walsh
Mar 1, 2013 15:47 UTC

He’s alternatively demonized and deified, but Jamie Dimon is rarely called a flip-flopper. You wouldn’t know it from recent reporting, or ego-revealing anecdotes and quotes, but he’s been surprisingly inconsistent on the issue of financial regulation.

He’s famously said some very negative things about financial regulation reform: accusing regulators of undermining economic growth; predicting that increased capital requirements would be “pretty much putting the nail in our coffin for big American banks”; comparing regulation of Wall Street pay to communist Cuba; and graphically condemning the organizational complexity of JP Morgan’s regulators.

But there’s also a mellower side to Dimon’s views on regulation. He doesn’t want to do “do a bunch of stupid stuff” (who does?), but he’s fine to “wait and see” what the impact of the Volcker Rule is. He agrees that higher capital ratios are an important factor in decreasing systemic risk and thinks increased liquidity requirements are, on balance, positive for markets (cut to the 1 hour, 50 minute mark). Dimon has even gone as far as saying that Dodd-Frank will help JP Morgan gain market share.

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