Thursday 8 October 2009

Financial Times Video Interview Series on Future of Investing

In this October 2nd video interview in the Financial Times, the CEO of BlackRock (world's largest investment managers) Larry Fink says that investing opportunities in the next 5 to 7 years will be more attractive outside the USA. He sees on-going high unemployment, government budgets and slow economic growth constraining investment success.

Another of the FT series on the future of investing interviews Henry Kaufman, described as an elder statesman of Wall Street. He talks about the sources of the credit crunch crisis. It is evident that the causes are still there - huge financial concentration means institutions that are too big to fail, which they know of course, allowing them to take inordinate risks in pursuit of profit, which they have done and will do again, since the appetite for reform is now fading as markets and economies begin to recover. Meanwhile, a big cause of the original crisis - cheap money aka interest rates at zero - is still there. All of which means another crisis is down the road, But what happens if governments are still labouring under the large debts they assumed in bailing out the last crisis?

A priceless moment in this interview occurs when the interviewer asks Kaufman, who has just said he thinks institutions should be allowed to fail as a means of keeping them from taking too many risks, whether he thinks it was correct that Lehman was allowed to fail. Kaufman happens to have been on the Board of Lehman at the time. Delight as we might at Kaufman being hoisted on his own petard, we might ask where was the line between having to make less than ideal decisions while firmly holding one's nose and self-serving favoritism.

Yet another interview with Daniel Putnam of Grail Partners predicts that retail investors will see more and more complicated products, like mixes of active and passive, guaranteed and not guaranteed, personally tailored for each person. Bye, bye mutual funds, hello structured products. I see a great danger that individual investors won't be able to understand them and the providers will take the opportunity to build in very handsome profit margins. Will regulators step up to ensure that investors receive enough understandable information to make intelligent decisions about whether he/she is being offered a fair deal?

There are also interviews with Benoit Mandelbrot of (now growing in fame) Mis-behaving Markets doing an "I told you so" and a series of principal players in the Lehman Brothers collapse doing "it wasnae my fault" for the first year anniversary of the incident that confirmed that some financial institutions really are too big to fail.

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