Monday, November 26, 2012

AP-fonderna – fixing them the wrong way

 Unga Aktiesparare, November 26th 2012, Alexandre Arnbäck

Like other pension systems around the world, the Swedish one has suffered from twelve years of difficult markets (IT bubble, 9/11, Financial crisis, EURO & Government debt). Many of us, have been told that “unprecedented events” are jeopardizing our pensions and we might have to contribute further, work longer or receive less. In the wake of the turmoil, our government (and many others) has asked for an audit. Sweden has received its audit and the feedback period is almost over. I am concerned and so should you be. Why? Well first of all, the vast majority of the audit committee is from the financial industry, people making money on taking commissions from our pension savings. Would you ask Philip Morris and Japan Tobacco to analyze and suggest improvements for the anti-smoking policy?

 What else? In its 622 pages, the big conclusion from the report is “unprecedented events” were unpredictable. Great! Is that not the definition of risk per say? Did we really need a group of experts and 622 pages for that? Because I can tell you we will have other unprecedented and unpredictable events in the future – that’s what the future is about.

So, 622 pages of financial mumbo-jumbo not accessible to most of us, and since the pension issue concerns all of us, let’s make it accessible. Let’s picture the financial markets as a lake, the boats are the different pension funds and the passengers are us, the workers, contributing on a monthly basis with a portion of our salary. Then, imagine a river (economic growth) pouring into the lake increasing its level.

30 years ago, pension funds, which used to invest in safe bonds, started to look at riskier assets such as equities, hoping for improved long term growth to further finance our pensions – a great idea. Then came 20 years of quite steady market increase, meaning the river was pouring enough water to increase the level of the lake. This had tremendous effects for three groups of people:

• First for us, the workers, as financial markets provided us with extra money for our pensions.
• Second for the political and administrative chiefs who tapped each other’s backs for having taken the wise decision to increase risk. • Last the financial system (banks and other money managers) because they could take more fees each year without anyone noticing since the level of the lake was increasing.

Financial companies and other banks made us believe they were the architects of that success. In our lake example, imagine captains (bankers) are able to convince passengers that the boat is floating higher not because of the tide but thanks to the fantastic technical ability of the boat they purchased wisely and piloted skillfully.

Weather is uncertain (read risk), as are financial markets. One day early 2000, the river slowed down and the level of the lake started decreasing. Unfortunately, that period lasted (and maybe still is). What happened? The passengers started worrying they might get stuck in the middle of the lake and never navigate home. The captains told them, “let’s buy better (and more expensive) boats”. No matter what they did, the level of the lake (and the boats) kept going down.

Now that the level has gone down for about twelve years, captains are feeling the heat from passenger complaints so our government asked for an audit. That audit is 622 pages long and almost no passenger can understand it. But it looks very professional, so most probably passengers will calm down and hope again the captain will be able to influence how high the boats can navigate.

Where is the catch?

Do you believe anyone could influence the weather? In financial markets it’s the same, and there is a reason for which most pension systems around the world are suffering, it’s because the tide is going down, and the captains can’t do anything about it.

What does the 622 page audit suggest? Well they more or less say that you have to switch to more modern boats. Will that increase the level of the lake? Certainly not! Will the lake tide go up? Maybe, but it will not depend on the boats or the captains.

What could the solution be? The audit suggests creating three (instead of seven) free standing pension units. Fair enough. One idea though: request that one of the three be a solid floating platform without a captain (read buy financial markets as a whole without the costs). In ten years, by comparing the three pension systems, we will know if it makes sense to continue to pay for expensive captains and ships rather than trusting the level of the lake.

It is our responsibility as workers to make sure our government and financial system treat our savings fairly. If we do not reclaim control over our drifting system, we and our children will pay the price.

Av: Alexandre Arnbäck, Financial coach and Co-Author of “Heal your investments, a story your banker will never tell you”.

Monday, October 22, 2012

Inducements: the problem continues

Finance Watch

If you were choosing an investment product, would you want the salesman to recommend what's best for you – or what's best for them?

 On 26 September 2012, the European Parliament voted to drop a proposed ban on so-called "inducements" paid to financial advisors. "Inducements" are payments that banks make to financial advisors for recommending one product over another. They work something like this:

These payments put the interests of financial advisors in direct conflict with the interests of their customers. Some Member States* have already decided to ban them but in others, consumers are still unprotected.

Finance Watch is urging EU policymakers to protect all European consumers – and in the long-run providers too – from the potentially dramatic consequences of miss-selling investment products.

If you want to know more about the European Parliament's vote on the EU directive and regulation on markets in financial instruments called MiFID2, please have a look on Finance Watch website

*The UK, Netherlands and Denmark have bans or restrictions on inducements in place or planned from 2013. The UK ban follows a period in which British banks face billions of pounds in compensation claims after miss-selling payment protection insurance and interest rate swaps to consumers and small businesses.

Sunday, October 7, 2012

Businesses 'lack trust' in banks

bbc,  BBC News Business

Businesses' trust in banks and other financial institutions is falling.

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Wednesday, September 12, 2012

Better Markets

Better Markets released a Report detailing the enormous costs of the financial and economic crisis that began in 2007 and continues to this day. As detailed in the Report, the cost of that crisis is at least $12.8 trillion as measured conservatively by lost GDP. It includes the destruction of human capital from long-term unemployment, lost household wealth, foreclosures, government bailouts, emergency spending measures, and the other actions that were necessary to prevent a second Great Depression. In addition to monetary costs, it details many costs of the crisis that simply cannot be quantified, including the widespread human suffering that has resulted from the surge in poverty, homelessness, and hunger.

Wednesday, August 29, 2012

FSA cracks down on uk wealth managers

Rashmi Kumar, Campden FB

The UK’s financial services regulator is cracking down on the country's wealth management firms, following revelations of “significant widespread failings” within the sector.

Read the Article

Wednesday, July 25, 2012

Wall Street Legend Sandy Weill: Break Up the Big Banks

The former CEO of Citigroup recommend to return to the “Glass–Steagall Act, which imposed banking reforms that split banks from other financial institutions such as insurance companies”, to avoid the “to big to fail” syndrome.

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Wednesday, July 18, 2012

Stress in the Financial Sector

Dukascopy TV, Doireann Mc Dermott, Alexandre Arbäck

In this interview, Alexandre Arnbäck, co-author of heal you investments. a story your banker will never tell you, says why he think investors are stressed by the financial sector and what they should do to invest with peace of mind.

Tuesday, July 10, 2012

Many Wall Street executives says wrongdoing is necessary: survey

Lauren Tara LaCapra,

A quarter of Wall Street executives see wrongdoing as a key to success, according to a survey by whistleblower law firm Labaton Sucharow.

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Wednesday, May 30, 2012

Facing Down the Bankers

Annie Lowrey, The New York Times

Portrait of Dennis M. Kelleher, who is battling against Wall Street and its lobbys to regulate the banking system.

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Monday, May 21, 2012

Holder Must Appoint Special Counsel to Investigate Politically Connected Dimon, JPMorgan

Better Markets, a nonprofit, nonpartisan group promoting the public interest in financial reform, today in a letter to Attorney General Eric Holder called for the appointment of a special counsel in connection with the multibillion-dollar trading loss at JPMorgan Chase & Co. to avoid conflicts of interest and ensure public trust in the American judicial system.

Read the Article

Thursday, May 17, 2012

Retirement : active or passive investments ?

Tim Grant, the Pittsburgh Post-Gazette

Tim Grants add substance to the active versus passive debate. Why a fund manager would share his great ideas and knowledge if he really knew which investments to pick? Using his own advice would allow him to make more money than management fees according to  Adam Yofan, president of Alpern Rosenthal Financial Services.

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Thursday, April 12, 2012

Monday, April 2, 2012

The Volcker Rule and structural issues Dennis Kelleher

How to balance the interest of society and banking or how to protect society against banking? From 1929 crash to the 2008 financial crisis : review of the regulation and deregulation of banks - causes & consequences.

Monday, March 19, 2012

Investor fear leads to losses in 2011

Stephanie Ptak, Dalbar, March 2012

Dalbar Study:
Equity mutual fund investors gave up on the markets shortly before the year-end recovery and suffered a loss of 5.73%, compared to a 2.12% gain for the S&P 500. This erodes the long-term gains that began to recover from the devastating losses of 2008

Friday, March 16, 2012

Goldman Sachs Resignation Letter, March 16th 2012

The New York Times published this op-ed letter “Why I Am Leaving Goldman Sachs” by Goldman Sachs executive Greg Smith.

Read the Article
Read the Article

Friday, January 20, 2012

Confessions of a former stockaholic, January 20th 2012

This is the testimony of an investor, formerly "addicted" to the sound of media and financial markets, which eventually found safety using passive management techniques.

Read the Article 

Friday, January 6, 2012