Finance Trends Letter

While yesterday's post dealt with money laundering and present-day drug smugglers , today's feature looks at their 1930s precursor: bootleggers of alcohol and the US Prohibition era of the 1920s and '30s. Russ Roberts of the EconTalk podcast speaks with author, Daniel Okrent about his latest book, Last Call: The Rise and Fall of Prohibition . Roberts notes at the outset that the book is not only a history of Prohibition, but also a thorough look at America and its social history leading up to the Prohibition era. It also seems to provide a real insight into the development of the progressive movement and its resulting "well intentioned" legislative acts. Have a listen to Okrent's and Roberts' look back at the rise and fall of prohibition; you may enjoy the insights on the unintended consequences of Constitutional amendments which were set up to restrict individual rights (rather than defend them). Related articles and posts: 1. The Economics of Prohibiti...

Here's a rather interesting piece of reporting from Bloomberg: "Banks Financing Mexico Drug Gangs Admitted in Wells Fargo Deal" . " Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet. They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else. The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank of America Corp. , Bloomberg Markets magazine reports in its Augus...

Chart of the Day brings us this latest figure on "Post-Massive Bear Market Rallies" . In other words, they're plotting the extent and duration of some major index rallies that have occurred after a 50% or greater decline. Have a look at their chart description for more on the Dow and Nasdaq rallies which followed major market declines, and why this post-bear rally may be flattening out over the coming weeks and months. What do you say: are we in for a downward move in the major US market averages or a sideways consolidation period? Or are you prepared for whatever comes our way?

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li...

As I don't pretend to be an expert on matters of currency movements, here are comments from a few more knowledgeable sources on the recent policy shift in the Chinese renminbi (yuan) currency peg. 1. China to put renminbi in a currency basket - Daily Reckoning. "The renminbi is now 'flexible!'" These cats reckon that moves higher in the RMB vs. the dollar are not a foregone conclusion (as many/most suspect). 2. Chinese yuan under 5 by 2020 - Maoxian. Chairman Maoxian sees a long-term controlled appreciation of the Chinese currency that is likely to suit the country's own interests (and timetable). 3. Yuan revaluation impact to be limited - PragCap. Bondsquawk contributes this post on the revaluation, noting that deterioration in the euro is having an effect on "China's plan of allowing considerable appreciation for the yuan". 4. Chinese currency: why Americans should care about yuan revaluation - CSMonitor. Notes on how the exchange rate fle...

Some Friday reading (and listening material) for you in our, "Features of the Week". 1. Medvedev says he'll make Russia a "dream" for foreigners - Bloomberg TV. 2. Russian President Medvedev's interview on BP, Euro, political instability - WSJ. 3. North America in the lead? ETF assets & money flow. - Derek Hernquist. 4. James Rickards on, "Why BP Will Not Survive" - King World News. 5. Looking for stocks making "The Next Big Move" - Joe Fahmy. 6. "Refusing to Be Counted" : a conscientious objector to the census - Vijay Boyapati. 7. Interview with Jim Rickards on IMF, a global currency, and the economy - King World News. Hope you enjoyed these articles, interviews, and video features. Have a nice, peaceful weekend and we'll see you next week!

As noted on Twitter this AM, government estimates on the BP oil spill have been raised again , with the Obama administration now claiming 60,000 barrels a day are flowing into the Gulf. We've been following these estimates with interest, noting earlier this month that estimated spill numbers seem to be purposefully climbing higher towards Matt Simmons' earlier call of 120,000 barrels/day. Simmons made his call on the BP spill's magnitude toward the end of May in this Financial Sense Newshour interview . That estimate seemed to echo a report from Purdue University engineering professor Steve Werely , and today Matt Simmons is on Bloomberg repeating the 120k barrels/day estimate, citing research from a report published on Sunday. If you're curious about what the credit markets are saying about BP's future, here's a snapshot from Weekly TA on the CDS market's reading . WSJ reports that CDS on BP debt climbed to a record 625 basis points Wednesday, before se...

Hedge fund manager and author, Seth Klarman (Baupost Group) was recently profiled in Bloomberg for his investing acumen, as well as for the enduring popularity of his 1991 book, Margin of Safety . An excerpt from, "Klarman Tops Griffin as Investors Hunt for 'Margin of Safety'" :   " Seth Klarman almost doubled his hedge fund’s assets to $22 billion in the past two years as the industry shrank by sticking with the off-the-beaten-path investments he’s pursued since starting out in 1983. Unlike John Paulson , who made $15 billion by betting against home mortgages, Klarman didn’t see one big trade that would profit as markets began to collapse. The founder of Baupost Group LLC focused on corporate bonds he calculated would yield solid returns even if the economy got worse. “We didn’t have the degree of conviction Paulson had,” said Klarman, whose views are so closely watched by investors that his out-of-print book, “The Margin of Safety,” is ...

Leigh Drogen, who you may know from the Stocktwits stream and Stocktwits TV, has a nice post up at his blog on the utility of technical analysis . Here's a bite: " Joe Retail Investor : But isn’t technical analysis just a religion, it’s one of those things that only works if everyone thinks it’s real. Is there anything real about technical analysis, I know when a company is cheap, can you tell when a stock is cheap based on the technicals? Leigh : Well, no, that’s not really the point of technical analysis, and no, technical analysis isn’t just a religion. Here’s what technical analysis is. Because people are the ones buying and selling assets in the market, or writing the algorithms which buy and sell assets for them, asset prices will always be subject to the fallibility of human emotions. Certain emotions in the market represent themselves by certain price and volume patterns, the same patterns have existed since the beginning of the market, and they will exist unt...

" A mind without instruction can no more bear fruit than can a field, however fertile, without cultivation. " - Cicero ( Roman author and statesman , 106 BC - 43 BC). Found my way to this New York Times piece from Stanley Fish entitled, "A Classical Education: Back to the Future" . Here's an excerpt from Fish' commentary: " I wore my high school ring for more than 40 years. It became black and misshapen and I finally took it off. But now I have a new one, courtesy of the organizing committee of my 55th high school reunion, which I attended over the Memorial Day weekend. I wore the ring (and will wear it again) because although I have degrees from two Ivy league schools and have taught at U.C. Berkeley, Johns Hopkins, Columbia and Duke, Classical High School (in Providence, RI) is the best and most demanding educational institution I have ever been associated with. The name tells the story. When I attended, offerings and requirements included four yea...

An image of one of many beautiful paintings & sketches seen at the Art Institute of Chicago's Matisse exhibit . This painting is called Blue Nude (Souvenir of Biskra) and was painted by Henri Mattisse in 1907. If you're in or near Chicago and love art, go see the exhibit if you haven't already. Not only are there some fabulous paintings & sculptures on display, but also some great drawings that seemed to be overlooked, judging by the attention paid to them by the visitors I shared the viewing galleries with. For those who can't make it to Chicago for the exhibit, you may be interested to catch a glimpse of the work on display in this video overview of Matisse: Radical Invention, 1913-1917 .

John Carney on, " The Missing Culprit at the Credit Ratings Hearings" : " While there can be little doubt that the ratings process was not what it should have been, it is hard to understand why the ratings of a venerable company like Moody’s went so awry without focusing on the role of government regulation. Even more importantly, it’s impossible to understand why the poor performance of ratings agencies led to a financial crisis of such scale and extremity without delving into the role of government. For decades, the has government all but guaranteed that the ratings process was reserved for a narrow oligopoly of just a few companies—primarily Moody’s and Standard & Poor’s, with Fitch a distant third. The main mechanism for this guarantee is a rule put in place by the SEC in 1975 that declared that brokerages and money market funds have to hold securities rated by a small clique of companies the SEC annointed as Nationally Recognized Statistical Rating Organization...

Tuesday's notes, culled from our Twitter stream and our favorite blogs and news sources: 1. Matthew Simmons was interviewed on the Financial Sense Newshour, where he discussed the BP Gulf oil spill disaster with host Jim Puplava. Simmons says the spill " could be the biggest ecological catastrophe the world's ever had ". 2. Here's a weekly chart of BP I posted to Chart.ly this afternoon. Note that today's down move, the biggest 1 day drop in BP since 1992 , has brought BP's share price down toward its 2003 & 2009 lows. 3. Richard Russell says the world's wealthy are fleeing fiat currencies , piling their money into hard assets such as gold, silver, gems, art, and beachfront real estate. 4. Bear Mountain Bull wraps up today's market action , and is on the lookout for short setups. Randy also points us to Puru Saxena's piece on the latest bubble-blowing actions of the world's central banks. Be sure to check that out. 5. Eric King int...