Price Signals

Finance, Economy, Markets, Life

Tuesday, February 14, 2012

Paul Volcker: Foreign critics should not worry about ‘my’ rule

"... let us not be swayed by the smokescreen of lobbyists dedicated to protecting the interests of some highly compensated traders and their risk-prone banks.

US regulators are now considering what adjustments should be made in their preliminary rules with respect to market making and proprietary trading, while hopefully reducing the inevitable complications imposed by the very complexity of modern finance. I regret that the effect, if not the intent, of much of the lobbying has been to add complications rather than to clarify the principles involved. As with any new regulation, there will be, with experience, opportunities to deal with unnecessary frictions or unintended consequences. But I certainly take comfort with the stated confidence of the authorities that the rule adopted will be both workable and effective."
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I'm an investment professional and have spent the bulk of my career in the investment management industry. I am a deep value investor, but I also move in and out of asset classes based on my macro outlook (typically 10-20 trades a year). I don't mind holding a big slug of cash even if it earns nothing in hopes of hitting that fat pitch (as I did in 2009). I've been watching our current economic train wreck with a mixture of fascination and dread. The pain is not over and the worst is still to come. Under a reckless Fed that has callously disregarded its duty to supervise the markets, we are slowly but surely heading towards a day of reckoning where we will see the global currency system realign, interest rates in the United States rise sharply, and our standard of living decline measurably.
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