Wharton University of Pennsylvania have put together a fantastic presentation dedicated to explaining the sub prime crisis and what needs to be done to fix it.

There are 7 videos you can watch that explain the various stages and compare it to Japan.

There is an Interactive Special Report on the Sub Prime Crisis, The domino effect from the housing bubble and a glossary of all the terms to do with sub prime.

It is something all Baby Boomers should study as it will make you more financially aware. Plus you will understand why you must take control of your nest egg and not leave it up to your financial planner or adviser to protect it for you.

If you have lost money in this crisis plan to ensure it doesn’t happen again or at least find ways to minimize any losses. Read the rest of this entry »

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The world financial system has allowed toxic derivatives to be sold around the world with no questions asked from any government or financial institution. Why is it we quarantine animals, food, drugs and even illegal aliens but allow billions of dollars in derivatives to pass through our countries unchallenged?

One thing this globalization of financial markets did was encourage massive growth in international credit and the aftermath of the Dot Com boom gave the financial whiz kids the Internet infrastructure to package debt and move it around the world so fast the financial and government watch dogs just lost the plot. Our national financial borders were left unguarded.

Globalization has resulted in the contagion of the US sub prime problems spreading around the world at Internet speed. But that doesn’t mean globalization is wrong. It just means that the globalization frontier needs some sheriffs who can tame it. Read the rest of this entry »

I am so annoyed by all these people who said they did not realize what was happening and are now providing expert opinions on how to fix the credit crisis.

Greenspan says he did not expect Wall Street to take advantage. He actively encouraged Congress to support sub prime loans.

“In 2004 Business Week Magazine criticized his keeping of low interest levels too long and his concurrent praise of sub-prime lending vehicles such as ARMs as leading to a housing bubble.”

Wall Street manage risk, that’s what they do and are paid well to do it. They got billions of risky mortgages to manage. Initially they did their job. Then they cashed in on the lucrative sub prime mortgage business. The model was fine until the sub prime problems just got too big.

Mr Paulson has not been tested at Goldman Sachs in severe adverse financial conditions like the one we are facing now. I understand he got $38M as his last paycheck at Goldman Sachs before becoming Treasury Secretary. Read the rest of this entry »

I have found some people in the wealth management industry have come from an engineering background. They have used their engineering training to try and design robust retirement plans for their clients. They understand an investment philosophy needs to be able to withstand serious market turmoil.

One of them was a civil engineer who designed oil rigs. He said if he designed oil rigs like the finance people design investment systems most oil rigs would break up in a hurricane, but they don’t.

How would you like to hear that every 5-7 years a hurricane will destroy most oil rigs and it might take 5-7 years to get oil supplies back to what they were? Just hang in there and oil will flow again.

These engineers-turned financial planners try to design investment plans with “plan B’s”, loss minimization strategies, what if scenarios, and cash is a position tactics. Their aim is to actively protect and preserve your capital against financial tsunami’s so your nest egg will survive and thrive. They try to anticipate the one-in-a-hundred-year crash - the black swan event. Read the rest of this entry »

Socialism slows down economies and reduces investment returns. It taxes the very people who create the wealth that gives you the returns on your nest egg. In a Socialist state risk taking is punished. America seems likely to become a Socialist State in November and this will seriously affect Baby Boomers retirement nest eggs.

I just finished watching Dr Zhivago, The new version. It was good but Julie Christie who played Lara in the original version made the movie for me .

I recall the scene where Yuri Zhivago is arrested and taken to see Strelikov the Revolutionary leader. Yuri complains about the senseless shooting of a young boy. Strelnikov replies, “individual people don’t matter”, and a little later he adds, “the end justifies the means”.

Fast forward to today with Obama talking to “Joe the Plumber” telling him he should support wealth distribution. Can you see it …. Read the rest of this entry »

Baby Boomers it is now time to Panic. I don’t mean the uncontrolled hysterical panic of absolute fear. I’m talking about a controlled panic even if that sounds like an oxymoron.

Panic gets your adrenalin working and makes you more alert. It’s then a fight or flight choice.

You need to take the flight option right now. Figuratively speaking you have to run away from this catastrophe and take as much of your wealth as you can.

Why?

Because the another shoe still needs to drop - the Credit Default Swaps or CDS’s. It seems in the US alone there are over $60 Trillion CDS’s that have to be unwound. That dwarf’s the Sub Prime Mess by about 60 to 1.

What are Credit Default Swaps? Read the rest of this entry »

“Me thinks he doth protest too much”, may well be appropriate here. I saw Rudd-747 interviewed by Kerry O’Brien on ABC 7:30 Report Thursday night and he was wriggling like an eleven year old school boy about to get the cane.

I can understand he was reluctant to answer Kerry’s very direct questions about the viability of our Banks. He could start a panic if he hints of any problems.

He managed to side step most questions on the basis he is not a forecaster of future trends. He really didn’t have any answers apart from advice for the G20 meeting, nor was he reassuring as far as I was concerned. But then I don’t know if anyone would have handled it better.

The real issue is no one knows what is likely to happen. The free markets are being completely distorted across the world by individual actions from different governments who often have far worse problems. A 1,000 point swing on the DOW is not capitalism at work, it is investors trying to work out what the governments will do next and speculators trying to capitalize on fear and greed. Read the rest of this entry »

The IMF has a mandate for surveillance of the international monetary system. I thought I might take a look at how well the surveillance was carried out.The IMF appears to have been right on the money BUT…

It does appear it is really a paper tiger when it comes to doing anything to influence nations. In fact it appears to be more concerned with countries not losing face with “bad press” than actually trying to ensure bad behaviour is publicly reported and corrected.

What might be more concerning though it the lack of interest of the board members in attending Board meetings. Maybe that says it all.

The IMF Surveillance Mandate states; Read the rest of this entry »