financial cogitations

Getting tougher for consumers to shift risk

SunLife announced this week that it will be closing it’s variable annuity and individual life insurance businesses.  Genworth closed it’s variable annuity business earlier this year.  SunLife will focus it’s energies on more group focused insurance products and MFS Investment Management which it acquired in 1982.  (Fun fact: MFS invented the mutual fund in 1924)  Genworth’s attention is now placed on life insurance, long term care and other types of retirement income products.

With today’s market conditions, these companies feel that they cannot adequately hedge the risk they take on for the consumer given the fees generated by these annuity and life insurance products.  Obviously they don’t see that the consumer would be willing to bear more cost within the products so they decided to exit the businesses altogether.

Financial products will continue to come and go.  Products will also continue to evolve.  Keeping up with it all will always be the challenge.

Video games are tracking to be the fastest growing form of mass media over the coming years.  Last year this market segment was twice as large as the recorded music industry and may soon surpass the film industry in size.  The largest market is the US with 72% of households playing games of some sort followed by China and Japan.  Zynga’s IPO this week is expected to cross the $1B mark and will be the largest tech IPO since Google.

Cost Basis reporting changes

Starting 1/1/12, financial service firms will have to report cost basis information about your mutual funds and exchange traded funds to the IRS.  The days of lack of tracking, lost information and trying to make a best guess all while paying your CPA to muddle through it with you will be behind us. 

Each firm will likely have a default method of calculating your cost basis when you sell a position and you should have a choice of either following that default or using another method.  This decision must be made at the time of the fund sale and cannot be changed after completing the transaction. 

So, while there are a number of nice pieces to this change, it is quite important that you understand a bit about cost basis and how it affects your exact situation.

The top four banks in France have seen their funding from money-markets decline 93% over the past year.  US money-market mutual funds decreased their holdings in French banks 68% this past November alone.  Most of that money has left the Eurozone entirely. 
The US Federal Reserve cut in half it’s lending rate to European banks at the end of November.  This was part of a coordinated effort along with other central banks around the world. 
Money-market funds recognize the Eurozone banks as too risky a place for their clients assets.  The US government places it’s citizens assets in those very same banks because it believes that very same risk is something with far greater consequences.

The top four banks in France have seen their funding from money-markets decline 93% over the past year.  US money-market mutual funds decreased their holdings in French banks 68% this past November alone.  Most of that money has left the Eurozone entirely. 

The US Federal Reserve cut in half it’s lending rate to European banks at the end of November.  This was part of a coordinated effort along with other central banks around the world. 

Money-market funds recognize the Eurozone banks as too risky a place for their clients assets.  The US government places it’s citizens assets in those very same banks because it believes that very same risk is something with far greater consequences.

Sovereign or not?

Sovereign Bank was sold in 2008 to Banco Santander.  They haven’t been independent of outside authority or “sovereign” for years.  The name is supposed to be changed to Santander in 2012, not for the purposes of truth in labeling, but to broaden the brand of it’s parent.

As a side note, Banco Santander placed over $3B of it’s clients money with Bernie Madoff.

Online social sites will likely be the new place to issue stock for small companies.  There is amazing support behind the idea and we are now at a point of just ironing out the details.  The Entrepeneur Access to Capital Act removes many of the federal regulatory hurdles put in place in the 1930’s when issuing stock.  It appears that raising $1m per year will be the cap and there will certainly be some cap per person investing as well.  Crowdfunding sites like Kickstarter, IndieGogo, RocketHub and Peerbackers will likely benefit from this legislation.  There is some talk of adjusting the rules so other social sites like Facebook, Twitter and LinkedIn can participate as well. 
On the one hand, it’s interesting to see the partial unwinding of this Great Depression era legislation happening with such expediency.  So many blame the unwinding of the 1930’s Glass Steagall Act for todays problems with the financial system in the United States and ultimately the economic malaise throughout the world.  Yet, on the other hand, the US states with the lowest unemployment rates today have the strongest presence of small businesses.
Time will tell us how this works out, but making it easier for small businesses to be built and thrive is a good thing.

Online social sites will likely be the new place to issue stock for small companies.  There is amazing support behind the idea and we are now at a point of just ironing out the details.  The Entrepeneur Access to Capital Act removes many of the federal regulatory hurdles put in place in the 1930’s when issuing stock.  It appears that raising $1m per year will be the cap and there will certainly be some cap per person investing as well.  Crowdfunding sites like Kickstarter, IndieGogo, RocketHub and Peerbackers will likely benefit from this legislation.  There is some talk of adjusting the rules so other social sites like Facebook, Twitter and LinkedIn can participate as well. 

On the one hand, it’s interesting to see the partial unwinding of this Great Depression era legislation happening with such expediency.  So many blame the unwinding of the 1930’s Glass Steagall Act for todays problems with the financial system in the United States and ultimately the economic malaise throughout the world.  Yet, on the other hand, the US states with the lowest unemployment rates today have the strongest presence of small businesses.

Time will tell us how this works out, but making it easier for small businesses to be built and thrive is a good thing.

Our english speaking brethren halfway around the world managed to avoid the past recession.  They also boast one of the most successful education systems in the world.  Correlation?  (By the way, the same can be said of South Korea)

Our english speaking brethren halfway around the world managed to avoid the past recession.  They also boast one of the most successful education systems in the world.  Correlation?  (By the way, the same can be said of South Korea)

Same as it ever was

The meaning within Once in a Lifetime by the Talking Heads is certainly open to interpretation.  The coming and going of materialistic identifiers along with life’s constants represented by water, speak to me.  As we build our lives, we work within things we can and cannot affect.  Some things are of our own doing, while others happen anyway. 

I do believe we can learn from our personal past and the past of those before us.  The world we live in today has caused so many to reconsider what is important in their lives.  Yet, to believe where we are today and the path we are following is some new journey is naive.  The past has always repeated itself.

A link embedded within the attached Wall Street Journal posting brings you to an economists work published in 1936.  The details are amazing.  This is a time where the entire world lives within the most difficult of economic circumstances.  The financial and political state of the time along with the preceding 75 years are highlighted. 

The refrain, “same as it ever was”, is continually true regarding economic cycles and conditions.  We must not only understand these markets but affect what we can while holding onto what’s truly important in our lives.

http://blogs.wsj.com/totalreturn/2011/12/05/there-is-no-new-normal-economy/