When the going gets tough, investors seek help from investment professionals. That is the conventional wisdom, but it seems that the worst economic downturn in the lives of most of today’s investors has prompted an unconventional response.

New research suggests that after going through a harrowing investment experience during the financial crisis, investors have emerged ready, willing and able to go it alone.

“The mainstream investor is increasingly self-directed in their decision making,” said Sophie Schmidt, an analyst with Aite Group LLC. “The online brokerages grew assets by close to $1 trillion between 2008 and 2010.”

GAINING MARKET SHARE

The consultant estimates that online brokers gained 3 percentage points of market share during that period while the wirehouses lost 1.1 percentage points and other retail brokerages lost 4 percentage points.

Between 2008 and 2010, assets on such direct-investing platforms as Charles Schwab & Co. Inc., Fidelity Brokerage Services LLC, TD Ameritrade Inc. and The Vanguard Group Inc. grew to $3.7 trillion, from $2.6 trillion, according to research released last week by Cerulli Associates Inc. Numbers aren’t yet available for last year.

Read the rest here.

By Nina Mehta and Josh Gallu

The U.S. Securities and Exchange Commission is examining equity trading practices that gained dominance in the past decade amid a shift to automation, according to an official in the agency’s enforcement division.

Daniel Hawke, head of the market-abuse unit, said at an event yesterday that the SEC is looking into techniques such as co-location, in which exchanges let traders place computers close to the market’s systems to shave time off executions. He said other practices under examination include the rebates that venues pay to spur transactions, direct market access where brokers let investors send orders to venues themselves, and whether the types of orders exchanges offer are being misused.

Regulators are evaluating U.S. markets after rules since the 1990s boosted competition and spread stock trading across 13 exchanges and dozens of private, broker-run venues. While the shift cut investors’ costs, it made trading more complex, and scrutiny increased after a May 2010 rout erased $862 billion from equities in less than 20 minutes. Several practices Hawke highlighted are used by firms engaged in high-speed trading.

“No one’s been able to prove whether high-frequency trading is good or bad,” Larry Tabb, chief executive officer of research firm Tabb Group LLC in New York, said in a telephone interview. “They don’t have a consolidated audit trail, clean access to good data or the quantitative analysts to really analyze data, so they’re doing it through the resources they have — which is through enforcement.”

Read the rest here.

By Inyoung Hwang – Feb 24, 2012 2:26 PM ET

A 10 percentage point increase in bets by hedge funds that equities will gain wasn’t enough to keep their short sales from limiting returns to half the Standard & Poor’s 500 Index’s performance in 2012.

The average equity hedge fund returned 3 percent this year through Feb. 10, compared with 7 percent for the S&P 500, Goldman Sachs Group Inc. said in a report dated Feb. 21. A Goldman Sachs index of the 50 most-common stock investments at hedge funds gained 10 percent.

The funds lagged behind even after boosting their net long exposure, a measure of how much they’re investing in bets that stocks will rise, to 46 percent in the fourth quarter from 36 percent at the end of September. The figure was down from 50 percent in December 2010.

The outperformance of the Goldman Sachs Hedge Fund VIP Basket suggests “that ‘hedges’ and modest net exposure have created a drag on performance rather than poor stock selection,” wrote David Kostin, a New York-based strategist at Goldman Sachs, in the Feb. 21 note. “Despite finding success with their top picks, lack of net exposure to the cyclical rally has caused hedge funds to lag both the S&P 500 and the average large-cap core mutual fund so far in 2012.”

Improved data on U.S. jobs, manufacturing and housing have helped S&P 500 industries linked to the economy do best in 2012, led by technology and financial companies. Unprecedented market volatility and concern Europe’s sovereign debt crisis would trigger a global recession boosted the appeal of defensive stocks last year, causing utility and consumer staples companies to post the highest returns.

Read the rest here.

Details on the consumer…

In order to have a little less personal information stored it behooves you to delete history b4 Google launches a new program…

8 ways to save some coin….

A minor bank run continues under the stress of the sovereign debt crisis….

“Euro-area banks may tap the European Central Bank next week for almost as much three-year cash as they did in December in an operation that could prolong a rally in bond markets.

Financial institutions will ask the ECB for 470 billion euros ($629 billion) in three-year funds for allotment on Feb. 29, the median of 28 estimates in a Bloomberg News survey shows. While that’s less than the record 489 billion euro take-up at the first tender on Dec. 21, it may increase total cash in the system by more than 300 billion euros, saidLuca Cazzulani, a senior fixed-income strategist at UniCredit SpA (UCG) in Milan.

“Part of the increase will likely be parked, at least temporarily, in the sovereign-bond market and support mainly the performance of Italian and Spanish bonds,” said Cazzulani. Still, “expectations are at a pretty high level, which creates some room for disappointment,” he said. “Gross demand below 400 billion euros would likely put upward pressure on spreads in the short term.”

Italian and Spanish bonds have risen since the ECB’s first three-year loan, suggesting banks are investing at least some of the money in higher yielding assets. That’s helped ease concern about a credit crunch and won governments time to agree on measures to contain the sovereign debt crisis….”

Full article

[youtube://http://www.youtube.com/watch?v=CWe5ZHSSSP0 450 300]

Hedge Fund Intelligence

Duke Buchan III’s $1 billion hedge fund beat U.S. stocks by 46 percent in the decade through March, a period that included the steepest equity-market losses since the 1930s.

Then came the selloff in August when global stocks suffered their worst nine-day drop since the 2008 financial crisis. For four days, The Dow Jones Industrial Average (INDU) alternated between gains and losses of more than 400 points, the longest streak ever, and its intraday swings have averaged twice the level seen during the first seven months of the year. Last week, Buchan told clients he is shutting his firm Hunter Global Investors LP.

“Markets seem to be driven more by the latest news out of Europe than by a company’s earnings prospects,” Buchan, 48, said in a Dec. 8 investor letter. “We have not weathered the ensuing volatility well.”

Traders who used to profit from price swings are struggling as record stock market volatility shows no signs of abating. Hedge funds are on track to post their second-worst year on record, with managers such as John Paulson seeing bets undermined by Europe’s two-year sovereign-debt crisis and concerns over the U.S. economic recovery. U.S. mutual funds are headed for their second-weakest year of deposits in two decades, and the top Wall Street banks posted their worst quarter in trading and investment banking since the depths of the 2008 financial crisis.

Jeffrey Kronthal, a former Merrill Lynch & Co. senior fixed-income executive, said he’s never seen so much volatility over such a long period as this in his 33-year trading career.

Read the rest here.

“NEW YORK (CNNMoney) — In a switch to a more aggressive tax plan, Mitt Romney said Wednesday that he now favors cutting marginal tax rates for individuals by 20%.

The candidate had previously said he would “maintain current tax rates on personal income” as president before moving to a “fairer, flatter, simpler tax structure” in the future.

Now Romney appears to be accelerating that timetable, announcing a move that would reduce the current top rate paid on income from 35% to 28%, with similar reductions across all tax brackets.

For example, Americans in the lowest bracket would pay 8% instead of 10%. Americans closer to the middle would pay 20% instead of 25%.

“Obviously this is a bigger step,” said Roberton Williams, a Tax Policy Center scholar who has been analyzing the 2012 candidates’ tax plans. “It’s a substantial cut and quite the switch.”

The tax cuts will be offset by limits placed on deductions, exemptions and credits currently available to top-level income earners.

“The right way forward is a flatter, fairer, simpler tax system that generates the revenue we need to fund a smaller government that is restrained to its historical size,” Romney said in a statement.

In a conference call with reporters, Romney economic adviser Glenn Hubbard said that the tax plan, even with rate cuts for individuals, should be revenue neutral….”

Full article

To print or not to print ?

“Inequality of earnings in the U.S. rose to a postwar high even as transfers of wealth, such as unemployment benefits, reached a record in 2010, according to the Federal Reserve Bank of Minneapolis.

“The bottom 20 percent of the U.S. population has never done so poorly, relative to the median, during the whole postwar period,” Fabrizio Perri and Joe Steinberg wrote in a paper released Tuesday by the Minneapolis Fed. “Low-earning households have become, during the course of the Great Recession, more vulnerable due to large losses in wealth.”

President Barack Obama has made inequality a rallying point for his re-election campaign, calling for legislation to raise taxes on millionaires after Congress extended a temporary payroll tax-cut for workers.

“My message to Congress is, don’t stop here. Keep going,” Obama said Tuesday of the payroll-tax cut at an event meant to highlight U.S. workers who will benefit.

The Senate and the House of Representatives cleared the $145 billion payroll package on Feb. 17, and the White House said Obama plans to sign it into law this week.

Money earned by the bottom 20 percent of U.S. households fell by about 30 percent compared with the median during the recession as workers lost their jobs or decided to leave the labor market, according the Minneapolis Fed study.

After Paying Taxes

Households that were in the bottom 20 percent of earnings in both 2006 and 2008 experienced a $159 decrease in disposable income, or money available after paying income taxes, said the Minneapolis Fed’s Perri, a consultant, and Steinberg, a research analyst. Those that moved into the bottom quintile from a higher-earning category had $12,236 less to spend in 2008 than in 2006, the study found….”

Read more: 

“The European Central Bank wants its second offer of cheap ultra-long funds next week to be its last, putting the onus back on governments to secure the euro zone’s longer-term future.

Bloomberg / Bloomberg via Getty Images A Euro sign sculpture stands in front of the European Central Bank’s (ECB) headquarters.

Powerful members of the central bank’s 23-man governing council are privately hoping demand at the February 29 auction will fall well short of the 1 trillion euros (837.8 billion pounds) some expect, backing their view that it should be the last.

Central bank sources say they are worried that banks will become too reliant on ECB funds, removing the incentive to restart lending between themselves.

The ECB first offered banks low cost three-year money in December to stave off a freeze in interbank lending that threatened to make the region’s debt crisis much worse.

Banks flocked to take advantage of the offer, filling their coffers, and ECB President Mario Draghi said “a major, major credit crunch” had been averted.

Some European officials have been hoping the central bank would carry on supporting the economy with a series of subsequent cheap money auctions, known as LTROs.

But the ECB wants to keep pressure on governments to improve their defense of the euro zone with better economic policies and by bolstering their European Stability Mechanism (ESM) firewall which will come into being by mid-year.

Making hundreds of billions of euros easily available to banks over a three-year period also risks fuelling a credit binge that some central bankers worry could push up inflation.

The ECB funneled banks nearly half a trillion euros in cash at the first operation on December 21. A Reuters poll of over 60 economists showed a mid-range expectation for it to allot another 492 billion euros next week with some expecting up to a trillion to be taken.

Too Generous

The first LTRO, or longer-term refinancing operation, has already eased market pressures…..”

Full article

Buy stocks and sell your bonds….

Perhaps a bit early to break out the champagne, but it seems Americans are managing finances better these days and appear to have more savings than credit card debt.

Unfortunately, these changes will hurt the so called middle class…at least the upper echelon.

Think about it….

Cheers !