Merrill Lynch

Guest Post: Who Destroyed The Middle Class - Part 2

The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.

Mrs. Watanabe, Meet Mrs. Brown

"Risk on, risk off" might be the most essential hallmark of the current market, but just focusing on the day-to-day whims of capital markets ignores longer term changes to investor risk preferences.  Nic Colas, of ConvergEx looks at the topic from the vantage point of gender-specific investment choices.  For example, more women are participating in deferred compensation (DC) plans, and the data from millions of 401(k) accounts tells a useful story.  Their retirement accounts still lag those of their male counterparts in total value and they remain a bit more risk-averse. But for the first time in at least a decade they are more likely than men to contribute to a retirement account and are contributing a greater percentage of their earnings. You’ll never see pink or blue dots on the “Efficient Frontier” of academic models, to be sure.  However, both empirical data and psychological studies do point to subtle – but notable – differences in how men and women consider the classic risk-reward tradeoff inherent in the challenge of investing. Nick suggests it may make sense to reconsider the notion that continued money flows into bonds and other safe haven investments are really "Risk off" market behavior.  At least a piece of it may well be "Risk shifting," driven by the demographic and psychological factors as assets controlled by women are clearly increasing. "Risk off" may well be "risk shift."

And Then There Were Three...

Last September we were delighted to bring you the following great news:

DAVID BIANCO NO LONGER WORKS AT BOFA, SPOKESWOMAN SAYS

Now, we are even more delighted to bring you the following breaking news:

BLACKROCK CHIEF EQUITY STRATEGIST BOB DOLL TO RETIRE

And then there were three...

Frontrunning: June 4

  • Spain Seeks Joint Bank Effort as Pressure Rises on Merkel (Bloomberg)
  • Banks Cut Cross-Border Lending Most Since Lehman: BIS (Bloomberg)
  • Shirakawa Bows to Yen Bulls as Intervention Fails (Bloomberg)
  • Merrill Losses Were Withheld Before Bank of America Deal (NYT)
  • Investors Brace for Slowdown (WSJ)
  • China's lenders ordered to check bad loans (China Daily)
  • Obama Seeks Way Out of Jobs Gloom (WSJ)
  • Noda Reshuffles Japan Cabinet in Bid for Support on Sales Tax (Bloomberg)
  • China to open the market further (China Daily)
  • Australian Industry Must Adapt to High Currency, Hockey Says (Bloomberg)
  • Tax-funded projects to be more transparent (China Daily)

Nationalized Bankia Director Will Not Receive Millions In Severance

Earlier today we reported of an instance of fiduciary impropriety so gross and abhorrent - namely the director of insolvent and nationalized Bankia preparing to receive €14 million in severance - that the public outcry was furious and instantaneous. The result: less than 12 hours later Expansion reports that according to Bankia president Jose Ignacio Goirigolzarri, the management of the the firm will waive their pension rights, and the infamous Aurelio Izaquierdo will not get his accrued pension when leaving the firm. Now, if only anyone in America had half the guts to do what it took Spain less than a day to turn around...

Swiss Parliament Examines ‘Gold Franc’ Currency Today

A panel of the Swiss parliament is discussing the introduction of the parallel ‘Gold franc’ currency. Bloomberg has picked up on the news which was reported by Neue Luzerner Zeitung. The Swiss parliament panel will discuss a proposal aimed at introducing a new currency, or a so-called gold franc. Under the proposal, which will be debated in the lower house’s economic panel in Bern today, one coin in gold would be worth about 5 Swiss francs ($5.30), the Swiss newspaper reported. The Swiss franc would remain the official currency, the paper said. The proposal may lead to a wider debate about the Swiss franc and the role gold might again play to protect the Swiss franc from currency debasement. The initiative is part of the “Healthy Currency” campaign which is being promoted by the country’s biggest party – the conservative Swiss People’s Party (SVP).

Strategic Investment Conference: David Rosenberg

david-rosenberg

Stocks are currently priced for a 10% growth rate which makes bonds a safer investment in the current environment which cannot deliver 10% rates of returns. We are no longer in the era of capital appreciation and growth. The “baby boomers” are driving the demand for income which will keep pressure on finding yield which in turn reduces buying pressure on stocks. This is why even with the current stock market rally since the 2009 lows - equity funds have seen continual outflows. The “Capital Preservation” crowd will continue to grow relative to the “Capital Appreciation” crowd.... According to the recent McKinsey study the debt deleveraging cycles, in normal historical recessionary cycles, lasted on average six to seven years, with total debt as a percentage of GDP declining by roughly 25 percent. More importantly, while GDP contracted in the initial years of the deleveraging cycle it rebounded in the later years.

Frontrunning: May 4

  • Japan has 54 nuclear reactors, but as of Saturday, not one of them will be in operation (Guardian)
  • US Readies Proposal to Clamp Down on Fracking (Reuters)
  • California pension fund (CALSTRS) sues Wal-Mart, alleges bribery (Reuters)
  • New Ripples for Gupta Case: Goldman Share Price, Volume Began Climbing Even Before Rajaratnam Trades (WSJ)
  • China says blind dissident can apply to study abroad (Reuters)
  • China paper calls Chen a U.S. pawn; envoy is a "troublemaker" (Reuters)
  • Samsung’s New Galaxy S Phone Raises Heat on Apple Iphone (Bloomberg)
  • Draghi predicts 2012 eurozone recovery  (FT)
  • Tumbling Home Ownership Marks a Return to Normal (Bloomberg)
  • Zuckerberg Facebook IPO to Make Him Richer Than Ballmer (Bloomberg)
  • SEC probes Chesapeake and its chief (FT)