This is not an “I told you so” moment, since it was pretty expected, but needless to say, only last week did I write a post about this:

http://online.wsj.com/article/SB125668489932511683.html?mod=WSJ_hps_LEFTWhatsNews

Yay a new comment! woo!  Here’s what Mike said, in regards to my post about Mr. Volcker:

“What do you say to the crowd who thinks the Fed is responsible for the boom and busts since 1913?

Gold/Silver are sound investments to preserve wealth against inflation. You just have to look at a graph of the dollar vs gold since the Fed started”

There is an inverse correlation between the price of gold/silver and both the dollar and the stock market.  People do tend to dive into gold when there is a scare in the market.  But to correlate that with the Fed is imprecise.  The Fed’s main purpose is to address runs on banks – exactly what it stopped for BofA, Citi, etc.  Granted, many may have not liked the government role in supporting these huge banks, but what would have happened if you got a notice in the mail demanding payment of all your credit card debt? now? at this instant? (some of this is happening to a moderate extent) Or what if you had investments in these banks’ wealth management group, and could not get to them?  How would that affect you?

Pretty badly, I assume.  The Fed provides liquidity to the banking system, as these financial intermediaries need the movement to support small business with loans, and give safe keeping to deposit clients.  There are definite criticisms about some of the Fed’s moves, but it’s doing it’s job.  Everything is subject to human error, mind you.

I’m getting off topic – yes, people buy gold as a safe guard, but as it goes up, it gets too late to pile in, doesn’t it?  It seems unreasonable to want to buy gold now, as the stock market (mind you, not the economy) starts recovering.  There are sectors that are doing well, but this is my point – be smart.  Do research.  If you really care about the growth of your wealth, you wouldn’t follow the crowd.  Yes, it is about appetite for risk, but gold doesn’t have to hold all your investments.

…that the following ad is indeed sneaky?  Care to guess why?

(ad found on nytimes.com this evening, 10/19)

Ally is the result of a brilliant marketing transformation for …get this… GM’s bank – GMAC.  The same one that received $5B in capital injection from TARP, at a cost of a ridiculous 8%.

There’s a reason why “Ally” can offer you a high rate (as written about here) – it needs it.  And 1.7%, it’s cheap compared to the 8%.  So, this “new” bank is able to raise deposits much cheaper than the TARP money it took.  I wonder what its next step is…repay TARP?

Side note – I think we can all agree that the bank’s commercials are hilarious and well-crafted.  Always gets laughs at work.

Well, more likely espresso.

How’s this theme? Thought I might switch it up a bit.

I had the pleasure of seeing former Fed chairman Paul Volcker speak at the Harvard JFK Forum on Thursday.  Needless to say, it being a public address made it quite interesting.  Granted, if it was closed to the school and its students, I couldn’t have gone – but the idiots there made me think I’d rather have to sneak in…

It started off with sitting in front of these two people that just met.  One was an older lady, the other a PhD student at MIT (pursuing some science based degree, naturally).  Anyways, they were discussing how they were both moving from being a spectator of the market to a more involved investor.  The older woman avidly defended gold, and the absolute need to get out of the current market.  *sigh*  They started talking about foreign exchange trading, how the student watches for rate changes (I think he meant Fed’s target rate changes) and how he buys the dollar at the instant gap that the rate change creates.  He made $50! woo!  They continued to complain about the weak dollar.  *shakes head*

More hilarity ensued – the guy sitting in front of these two, next to me, proceeds to take notes on the “advice” these people were giving out.  ”Buy gold” he notes to himself, and copies graphs of historic gold prices.  Then researches the plummeting dollar.  Are people really this impressionable?  You can’t make money from overhearing a good tip.  Well maybe you can make $50 but to really get involved it’s a second day job.

Paul Volcker was a gentleman through the whole night.  He offered comedic relief if nothing else.  Not meaning to demean his talk, but for those who didn’t understand what he was talking about, at least he was funny.  He made some good points – to bring back the Glass-Steagall act, and to reform the system where a bank is either gone into government conservancy or liquidated.  Not government supported.  Agreed, Mr. Volcker.

He allowed a lot of time for questions from the audience, but lines were formed before I even got a chance to get up there!  One question came from a guy representing some non profit advocacy firm (??), where he asked the former chairman if when he traveled outside the country to meet foreign dignitaries, he got the permission of the President.  Huh?

Another question came from a student asking about derivatives trading.  Were you looking to make a buck here?

The last insane question came from a woman, a writer both here and in France, apparently.  ”Mr. Volcker, where can I go to get a patent?  You’re a government official, you should be able to direct me to where I need to go.”  Pass.

I wish I got the opportunity to ask a question now – I think my question would have been how he thinks Bernanke’s plan is in regards to mopping up the excess liquidity once money starts to move again.

In the end though, it was nice to be around an academic mindset again.  I look forward to future events at the Forum.

Thank you, Mr. Volcker, for your time.