Wednesday, June 27, 2012

Banking Requires Risk,Former Fed Chairman Says

Alan Greenspan,86,former Federal Reserve Chairman,is halfway through writing his new book.He's been asking why did the most sophisticated  technologies fail to capture the greatest crisis on September 15,2008?There are certain things that simply cannot be forecast,Mr.Greenspan answers.Animal spirits can't be defined in terms of numbers.
The only way to preserve Europe is a political consolidation of Europe.You're trying to put together a whole series of different cultures.They must be under the same political tent.
In my experience,the Glass-Steagall  Act of 1933,which separated commercial banking from investment banking and was later repealed, is not where our problems lie.Productivity goes up because we add cutting edge technologies.If you're gonna use our scarce savings to finance questionable institutions,you're not gonna have money for cutting edge technology.Banking couldn't exist without the taking of risks.Some of the bank's portfolio will fail.Without risk,there is very little by way of innovation.Creative destruction is what moves our economy forward.
The only thing Europe is currently doing is financing deficits;not eliminating them.It's taking the easy way out,with very negative long term consequences.That is not conducive to a stable system.The American economy looks very sluggish to me.Over 90% of it,the non-durable goods,is doing fine;the other 8% is down by 50%,Mr.Greenspan noted.
Alan Greenspan was Federal Reserve Chairman from 1987-2006.He is the author of the best-selling "The Age of Turbulence."

Wednesday, June 20, 2012

Dell's Big Shift Means Profits

Dell Computer has shifted to being an end to end solutions provider of enterprise solutions and services,founder and CEO Michael Dell noted.As a result,cash flow rose to 5.5 billion dollars last year,and the company was able to initiate its first dividend of .08 a quarter.It also continues share buybacks.The steady cash flow and the shift we made should allow us to pay a dividend in perpetuity.IT is still the area where companies get productivity.The areas we can grow in are servers;storage;networking;and security.Our business is 80% commercial.The vast majority of our profits come from businesses,institutions and governments,with 19% from consumers.It's a split similar to that for the overall industry.
We're constantly introducing new products.The enormous amount of data needs to be secured and protected.We feel confident in our ability to grow the enterprise side of our business.We're investing organically and acquiring.The amount of data being stored is doubling every 18 months,and is expected to continue for the next five years.
You see a general kind of pause and caution now.Controlling cost is exactly the kind of thing we're focused on,Mr.Dell pointed out.
Founded in 1984,Dell's first international subsidiary was opened in the U.K. in 1987.In 1990,a manufacturing center was set up in Limerick,Ireland.International sales were growing exponentially by the late 1980s.Today there are manufacturing and solutions centers from Brazil to Malaysia and China.
Dell Computer(DELL)

Wednesday, June 13, 2012

European Outlook:Fear and Dealing With Fear

A recent stock market uptick was essentially a bear market rally,said Michael Woolfolk,PhD,Senior Currency Strategist and Managing Director at Bank Of New York Mellon.Until we get a resolution to the Greek exit question,the market will continue to be defensive.With the Greek election on the 17th,there is likely to be further turmoil in Europe.There's quite a bit of movement from the periphery into the core.The concern is,what's gonna happen to the periphery?The next step is,the fear factor is so great,they start to move out of Germany.The status of the U.S. dollar is unique in the global financial system.The move to cash will be overwhelmingly U.S. dollars.How far are government officials prepared to go in financing the periphery?You're already starting to see some cracks in the willingness of Europe to take care of its own,Dr.Woolfolk observed.Larry Summers,former U.S. Treasury Secretary and President Emeritus of Harvard University,thinks the situation in Europe is very difficult.The single currency is brittle.The risk is in lack of confidence and self-fulfilling fear.A central bank wants to bend over backwards to be reassuring that liquidity is there.It's a kind of bargain between the different actors.The overwhelming imperative is to instill more confidence than exists today,current Harvard professor Larry Summers counseled. Bank of New York Mellon(BK)

Wednesday, June 6, 2012

Global Money Manager:What You Have To Do

There is considerable concern about the fate of the European banking system in these troubled times.It's about deposits,and you're worried about deposit flight,according to Peter Fisher,Global Head of Fixed Income at BlackRock.It's a bigger issue than whether Greece leaves the euro currency.You want a banking system that's stable for Europe.You don't have to have a fiscal union;but not having a banking union,that's a problem. In a high volume,low liquidity environment,you have to bring your risk level down.You've got to be much more judicious.In the U.S.,I think Congress will not want a recession this year,and will pass a marginal measure;but will have a rude awakening in October,when the market reacts to the fiscal cliff.As a return play,you look at high quality corporates and fixed income,Mr.Fisher advised. BlackRock has offices in 27 countries worldwide.From governments to pension plans,insurance companies and individuals,the money management firm serves its diverse clientele with risk management,strategic advisory and investment system services,building portfolios totaling approximately 10 trillion dollars. BlackRock Inc.(BLK)