Salient to Investors: Senator John McCain said JPMorgan’s chief investment office increased risk by mislabeling the synthetic portfolio as a risk-reducing hedge when it was really involved in proprietary trading. Subcommittee Chairman Carl Levin said they found a trading operation that piled on risk, ignored limits on risk taking, hid
READ MORE... →Salient to Investors: The only winners in the financial crisis that brought Detroit to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working. Detroit’s population peaked at 1.85 million in 1950 and now is 700,000. Read the
READ MORE... →Salient to Investors: Jeremy Grantham at Grantham Mayo Van Otterloo says: The US is muddling through reasonably well in the short-term, but long-term we are in a slowdown unappreciated by most economists – because they are not interested in the long-term. US growth won’t ever return to previous levels because
READ MORE... →Salient to Investors: Ex-trader Chris Arnade writes: The asymmetry in pay is the engine behind many of Wall Street’s mistakes and rewards short-term gains with disregard to long-term consequences. The result is over-reliance on excessive leverage, banks loaded up with opaque financial products, and flawed trading models. Wall Street’s pay
READ MORE... →Salient to Investors: William D. Cohan writes: Hedge-fund managers et al are able to manipulate the market with impunity and make millions. Daniel Loeb’s selling of a big chunk of Herbalife at a price far below what he told investors it was worth is concerning, and taking unfair advantage of
READ MORE... →Salient to Investors: Going to court to prove that a mutual fund charges small investors excessive fees is often an exercise in futility because the courts have set the bar so high for plaintiffs that most suits are dismissed before they even get to trial. Niels Holch at the Coalition of
READ MORE... →Salient to Investors: Bruce Berkowitz at Fairholme Capital Mgmt said mutual funds are great vehicles but have rules that allow mutual fund holders to cash out anytime and puts his long-term investing style at a disadvantage, and hurts managers who favor concentrated positions. Berkowitz said he is prone to investing
READ MORE... →Salient to Investors: Investors and regulators say unscrupulous mortgage bond sales tactics are widespread in a market lacking transparency, where even Wall Street’s most sophisticated mortgage investors remain at risk. Marilyn Cohen at Envision Capital Mgmt said managers who depend on dealers to find securities and quote prices over the
READ MORE... →Salient to Investors: John Griffin, Jordan Nickerson and Dragon Tang at the University of Texas said Standard & Poor’s and Moody’s inflated their grades on securitized debt prior to the financial crisis to match each other’s opinions to avoid losing business. CDOs rated AAA by both companies defaulted more often than securities with
READ MORE... →Salient to Investors: Legg Mason is folding Bill Miller’s Legg Mason Capital Management division into its ClearBridge Investments equity unit as assets have tumbled and as it tries to reverse five years of client redemptions. Assets at Legg Mason Capital Management have fallen to $7 billion from a peak of $70 billion
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