Finance Trends Letter

Some of you may have read Bloomberg's article on the Federal Reserve this week entitled, "Bernanke may redefine Fed mission in financial-market stability" . I found it to be an appallingly misleading piece of pro-Fed boosterism. If you're looking for one more piece of mainstream writing that supports the idea of increased powers for the Fed in the wake of the global financial crisis, you've found it: " Ben S. Bernanke ’s renomination allows him to redefine the Federal Reserve’s mission as he expands its power over financial markets and pulls back on a credit surge the central bank used to keep the economy from collapse, economists say. Bernanke’s agenda during the next four years will include elevating the Fed’s role in reducing excessive risk in major financial institutions, figuring out how to curtail asset bubbles, and scaling back $1.2 trillion of monetary stimulus. “He will have the opportunity to permanently change the structure of the Federal Reserve s...

Bloomberg examines the trade off between following the economic forecasts of Nouriel Roubini and catching the recent rally in US shares. Has keeping up with Roubini's insights meant that you've missed the rally ? More from Bloomberg: " Making money on the thinking of Nouriel Roubini isn’t what it used to be. The New York University professor, who in 2006 foretold the worst financial unraveling since the Great Depression, has yet to say the economy is worth investing in again. “There is a big risk of a double-dip recession,” wrote Roubini, also known as Dr. Doom, in his column in the Financial Times this week. Anyone attempting to apply Roubini’s wisdom to stocks may be forgiven for missing the biggest rally since the 1930s as the Standard & Poor’s 500 Index climbed 52 percent in six months. While Roubini said in March the advance was a “ dead-cat bounce ,” that it may “fizzle” in May and warned in July that the economy’s “not out of the woods,” th...

Checking out a new post at Tim Knight's blog, Slope of Hope , entitled, "Big Picture" . As you can probably guess from the title, Tim has a rather definite bigger picture view of the markets and the economy. Let's just say that he's not convinced about the merits of the government's much heralded stimulus efforts. Here's an excerpt from Tim's post : " One of the nicest compliments I ever received was from Tom Sosnoff (the co-founder of thinkorswim) who told an audience, "the thing I like about Tim, as opposed to a lot of other technicians, is that he actually has an opinion ." That I do! Oftentimes I will read newsletters or speeches where technicians will carefully word things so that " either A is going to happen or B is going to happen" . This way, no matter what direction the market goes, they are safe. ( "As I predicted, "B is going to happen", and it has! ) I believe the historic levels of government interv...

Those of you following Finance Trends on Twitter may have seen my earlier tweet about the upcoming "Digg Dialogue" interview with Tim Geithner , hosted by WSJ online editor Alan Murray . That interview will include questions submitted to Geithner from Digg users - and many of them, from those concerning a proposed audit of the Federal Reserve to questions about Geithner's past tax "issues", are appropriately on target and often hilarious. So while I had a great time reading through some of these user comments (hat tip: Howard Lindzon ), I had to wonder how many of the top questions would actually make the cut. Now, Alan Murray informs us that he has indeed posed these Digg questions to Tim Geithner, and that the full interview will be up on Digg and WSJ.com on Tuesday. In the meantime, here's a brief clip from that interview . In this segment, Geithner states that the US bailouts and rescue efforts of financial firms were not designed to help Goldman Sach...

Just caught a new post from Zerobeta called, "How to be a market maker in ideas on Stocktwits" , that serves as a great follow up to yesterday's post on filtering out noise and finding value in Twitter & Stocktwits. Here's an excerpt from Zerobeta's post : " The manner in which the market maker adjusts his/her bid-ask spread as information presents itself is crucial to success. Over the course of the day the market maker will get a ton of order flow and must discern which orders are contain no information (ie “noise trades”) and which trades contain relevant information (ie “informed trades”). For example, if an informed trader hits the market maker’s offer, he/she knows to raise his bid/ask to adjust his inventory appropriately. In general, the best market makers are the ones who can filter through the noise and obtain the best information (and most informed bid-ask spread) at the lowest cost. On StockTwits we are all market makers in ideas. The ke...

Sharing a cool "After Hours" episode of Stocktwits TV (8/18/2009) with Howard Lindzon & Steve Gomez, aka TodayTrader . In this program, Howard & Steve discuss the basics of getting started in trading, using Stocktwits for sharing & disseminating trading ideas, the rise of high frequency trading & flash orders, and how to stay focused on what's most important when you are confronted with a barrage of information. One of the key ideas shared in this episode (and in the 8/17 ep .) was the importance of filtering out the noise in any given medium and finding the information that provides the most value for you. Howard & Steve offered the example of filtering your info flow on Twitter and Stocktwits to build a useful network for sharing info and ideas with like-minded people. This theme of managing information in an age of 24/7 news cycle and information overflow is something that really stands out for me, and it is an idea that I touched upon in our 20...

Wanted to further highlight this article by trends forecaster Gerald Celente, who says that the "Second American Revolution" is underway. Some excerpts from Celente's piece: "The natives are restless. The third shot of the “Second American Revolution” has been fired. History is being made. But just as with the first two shots, the third shot is not being heard... The third volley, fired in early August, was aimed point blank at Senators and House members pitching President Obama’s health care reform package to constituents. In fiery town hall meetings, enraged citizens shouted down their elected representatives. It took a strong police presence and/or burly bodyguards to preserve a safe physical ...

Thanks to everyone who participated in this week's blog contest . I really appreciate all the feedback and suggestions that were offered to help us improve the blog. Also, thanks to Aaron at MagsDirect.com for his help in sponsoring the contest giveaway, 2 free 1-year subscriptions to The Economist. I'm sure our contest winners will appreciate the prize. I've selected Maria at Bear Mountain Books and John at Controlled Greed as this week's contest winners. Thanks for voicing your suggestions along with our other commenters (they were ALL great!), and I will email you to confirm your prize and pass your mailing info along to the publisher. Now for some Friday links; our "Features of the Week" . 1. Financial media coup d'etat - Wall St. Cheat Sheet. 2. John Paulson buys banks hit by credit crisis - Bloomberg. 3. Charting the markets: "Where to look next" - Quint Tatro. 4. Natural gas: down and out and unloved - Frank Barbera. 5. America: fat...

As I mentioned in Sunday's post , Finance Trends is having a little contest giveaway this week. Up for grabs: two free subscriptions to The Economist . The contest rules are pretty simple; I'm looking for suggestions on how to improve the look & feel of this blog (aside from a few added features & tweaks, we've pretty much stuck with the same "Classic Blogger" design template since inception). What I'd like from you is a suggestion (or two) on how to best update this blog for the future. Should we change our layout design to include a more readable background color? Create new template features for mobile blog readers? Add new data feeds or interactive features to our sidebar columns? We're counting on your advice; the theme here is change for the sake of improvement, rather than change for the sake of change. Leave us a comment with your suggestions, and please include your name & email . I will make a careful note of all suggestions & ann...

A little evening reading from rogue speculator & blogger, Dasan . Being a bit of a poker player, Dasan has collected some of his thoughts on the parallels between poker and investing and put them down for us to read in a post entitled, "Fishes, Donkeys, Bulls & Bears..." . Here's an excerpt from that piece: " Element of Luck. No Limit Hold’em, for the uninitiated (is there anyone left in the US who hasn’t played Hold’em?) is a game consisting of luck and skill. Why is it so popular? Because it has a huge component of luck in the short run. If I play one hand against Phil Helmuth, and just go all-in, he has no advantage over me. In fact, many beginning poker books advocate an extremely aggressive pre-flop game as a way to neutralize your disadvantage against more highly skilled players. This is why you often see Helmuth go into a childlike tantrum when he raises the standard 3x raise and some amateur that raises him all-in pre...

From the weekend edition of the Financial Times, evolutionary biologist & "guru of collapse" Jared Diamond has, "Lunch with the FT" . Here is a preview of that article: " Jared Diamond is the guru of collapse. Collapse is the title of one of the books that have made him a world-famous academic. It is a theme that captures the Zeitgeist : markets have collapsed, banks have collapsed and confidence, even in the capitalist system itself, has collapsed. Diamond’s celebrated book – which added to the reputation he earned through Guns, Germs and Steel, a Pulitzer prize-winner about why some societies triumph over others – sought to discover what makes civilisations, many at their apparent zenith, crumble overnight. The Maya of Central America, the stone-carving civilisation of Easter Island, and the Soviet Union – all suddenly shattered. The question lurking in Diamond’s work is: could we be next? Could the great skyscrapers of Manhattan one day become deserted...

Just wanted to give all of our readers (including those of you in RSS land ) a quick heads up on a couple items of interest at Finance Trends. First, Stocktwits will be hosting its weekly MacroTwits discussion hour tonight at 9 PM EST. For those who don't know, MacroTwits is a fun & engaging macroeconomic roundtable hosted by blogger and Stocktwits member, Gregor Macdonald . As you can see from the link above, MacroTwits is now televised live on Stocktwits.tv, alongside of a streaming chat box where Stocktwits members share market commentary and macro links in 140 characters or less. You don't have to sign up to Twitter or Stocktwits to follow the discussion, but you will have to join Twitter & "follow" Stocktwits if you want to participate in the forum. For more on how to use Twitter and Stocktwits, please see our explanatory post. Secondly, we'll be running a little contest here in a couple of days. Details will be laid out in full early in the week, ...

John Bogle, Douglas Kmiec, and John Templeton Jr. share their views on current societal values and their effect on our behavior and the financial markets in, "The Culture that Spawned the Crisis: A Closer Look" . This talk provides an interesting follow up to the themes of capitalism and morality vs. immorality discussed in our last post, "BB&T prefer liberty & reason to bailouts" . A key point made by John Templeton Jr. early on in this talk: "Culture is Everything". As the opening argument suggests, changes in our cultural values have led to a marked change in the way that we live, interact, and do business with each other, and not necessarily for the better. Hat tip to Stocktwits community member, Aiki14 , for drawing our attention to this discussion. When you find the time, please enjoy this video and the discussion on "the social, cultural, and moral causes of the current financial crisis in the United States" . I hope it will spur s...

Found a very interesting article yesterday from The New York Times on North Carolina-based bank, BB&T . It centers on the company's moral underpinnings and a business philosophy that has helped BB&T avoid much of the fallout of the current economic crisis. It turns out that the bank's chairman, John A. Allison IV, is a devoted Ayn Rand student and a vocal critic of the government's interventions in the economy. He also feels that the current financial crisis, often pilloried as the result of excesses wrought by an era of free-market madness, was largely brought about by the government itself, through the monetary interventions of the Fed and government regulations that supported irresponsible lending by the GSEs. Here are excerpts from, "Give BB&T liberty, but not a bailout" : "OVER much of the last four decades, John A. Allison IV built BB&T from a local bank in North Carolina into a regional powerhouse that has weathered the economic crisis ...

Bank of America has paid a $33 million fine in a quick n' easy lawsuit settlement with the SEC. The agency had accused BofA of misleading investors on the issue of bonus payments paid out to employees of Merrill Lynch, the firm acquired by BofA in January 2009. BofA did not admit to or deny the SEC's charges of making "materially false and misleading" claims to investors on bonus payments at Merrill. ZeroHedge and Aiki14 had a few things to say about the news and its effect on the day's trading. You can head on over to read their posts (be sure to flip through the comments section at ZeroHedge), as well as the Bloomberg news stories included here, for more detail and color commentary. Related articles and posts: 1. Bank of America fined $33 million by SEC - Bloomberg. 2. Paulson's gift to Lewis delivered at gunpoint - Bloomberg.