Standpoint: Did Bernanke Really Had a Choice?

Having read another CNBC article about The Case Against former FED chairman Ben Bernanke and how he and the former secreatary of the US Treasury Henry Paulson allegedly mistook the readings of the United States economy in 2007, I was quite emotional and political in my first reactions about what was written about their courses of action.

Their actions might have or might have not prolonged the recession in the United States yet, the questions lies, if they have had let these financial institutions like Bear Sterns and Merrill Lynch fail, would the United States banking system recover faster and stronger from the current financial crisis?

According to the CNBC article The Case Against Ben Bernanke, the problem with this current economic crisis was not liquidity but credit. Yet in the contrary, Oil was reaching an all-time high that period of time where the dollar is forced to devaluate in order to give the much-needed liquidity for the financial markets to continue to work. If credit was the problem, credit could have been the problem because there wasn't much liquidity around. This is considered to be a simple case of scarcity of the much needed liquidity. Having said that, it is definitely not credit but liquidity that became the culprit to this financial turmoil.

Another argument lies is how the FED and the US Treasury Department sponsored the Merrill Lynch and Bear Sterns deal. Critics claim that by letting these very big financial institutions fail, we could have had sent a stronger signal to the other financial institutions about corporate responsibility.

I strongly believe that letting the if not the whole but part of the financial institution fail would yes, be a major blow not only to the United States economy but as well to the global economy. I would presume that Bernanke and Paulson was being guided by history in trying to make things work in the present. The case of the United States Depression Era in the 1930s was quite a classical example of having the "invisible hand" of free-market economics work. But the question still unanswered up to now with the government's action that time is: Is the invisible hand invincible too?

How to Choose Your Investment Style

I have undeniably been always skeptical about how Warren Buffett's investing philosophy could endure our current investing climate. A technician at heart yet a person who are very discriminating with corporate and economic fundamentals, I do agree with Bloomberg's article entitled "Buying Like Buffett Beats Investing With Him Amid Stock Rebound ".

As investors, we always encounter the same conflict of discipline in investing the markets. We have the so-called "quants", the technicians, and the fundamentalists. With unlimited resources in the internet, investors could have the tendency to get confused on which investing discipline to follow. Having said that, I would just like to share my personal criteria for choosing an investing discipline in a specific asset class and purpose.

1. Volatility of the Asset Class

Not all asset classes are the same. Trading in equities entail different stop loss orders compared to trading the USD/GBP currency pair. Usually it is a matter or my personal preference to put tighter stops in trading more volatile asset classes. With the enormous liquidity in some of the most volatile asset classes, like commodities and currencies, the tolerance of a paper loss should be more discriminating as sudden loss in capital is quite a big normal for positions that are opened in these certain instruments.

2. Duration of Your Position in that Specific Asset Class

If your investment objectives include holding a particular position for a maximum of 3 months, it is definitely very remote to succeed using fundamental analysis in this time frame. A lot of you guys might object with my position on this but do we consider investing in a market hype on that company that had a new acquisition an investment based on market fundamentals or market sentiment? I would assume 3-month positions also include market timing and because of this, technical analysis is what I believe what suits this situation as technical analysis study the result(price) of the interaction between supply(sellers) and demand(buyers).

3. Capital Requirements

Your capital dictates how well-diversificated or dedicated your portfolio should be. My personal believe is that diversificating and dedicating capital to various asset-classes should be mainly dictated by how extensive one’s investing knowledge and objectives is. If one prioritizes capital appreciation more than capital stability, currencies and emerging market equity market ETFs work best with each other. On the other hand, if one seeks capital stability more than capital appreciation, inflation-protected treasuries combined with blue-chip low-beta equities work better than investing in commodities and currencies alone.

Link:
http://www.bloomberg.com/apps/news?pid=20601213&sid=aQ0n7_eiINkQ

Standpoint: Tax Havens

Perhaps you've already heard Bearer Share Corporations in Panama or numbered Swiss bank accounts in Geneva. Many of these certain corporate structures and banking accounts in these certain tax shelters has one goal in mind: protect your money by giving it an anonymous owner.

Most people consider these places as tax shelters. Using these places as a tax shelter is very simple to understand. If Sam, a C-level officer of a Fortune 500 company is being compensated partly by his multi-national company in his personal bank account in Luxembourg, how could the United States government tax him fully if the income they only know Sam is being compensated is the income that particular corporation pays him inside the United States? According to an ABC news documentary, the United States alone losses 100 billion dollars in uncollected taxes every year because of these certain tax shelters. They claim that the uncollected 100 billion could have been spent to build greener infrastructure or increase their own company's R&D spending.

Is it really counter-productive to allow these certain tax shelters to thrive? The only reason these certain tax shelters exist is because of their government's guarantee to banker-client secrecy. As a result, governments around the world has put more restrictions and regulations in the inflow and outflow of private funds sometimes resulting to the unintended manipulation of our free market forces.

I strongly believe that these certain tax shelters critics claim are states that put value to market forces second to none. As a result, concepts in market competition would therefore make decision-makers divert some if not all of their funds to these certain places for the pursuit of more productivity of their funds. It is quite logical to say that if states want to generate their desired revenues from taxes, they must, at least, improve efficiency in tax collection and not punish those who are considered to be the most productive factors of our world economy.