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Warren Buffett, chairman of Berkshire Hathaway, attends the Allen & Company Sun Valley Conference.
Billionaire investor Warren Buffett released his annual Berkshire Hathaway shareholder letter over the weekend. As Marketplace's Heidi N. Moore reported on Monday, this is a much-anticipated and closely studied document. And as one of her sources pointed out, sometimes it's more interesting to focus on what went wrong in Buffett-land than on what went right — because Buffett provides engaging details on both outcomes.
For this letter, you want to zero in on the housing market, which in early 2011 Buffett figured would begin to recover in a "year or so." Wrong! Or to quote the Great Man himself: "dead wrong." Berkshire Hathaway has several housing-related companies in its portfolio, so Buffett would ultimately like to see the long-expected bounce-back. He's optimistic — because you can't fight human nature! Or more accurately, randy human hormones:
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OAKLAND, CA - OCTOBER 13: A man walks his dog in front of a Chase bank office on October 13, 2011 in Oakland, California.
Controversial stuff from Bloomberg this morning about how banks are thoroughly unexcited about bread-and-butter customers who have less than $100,000 in deposits:
JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, said about 70 percent of customers with less than $100,000 in deposits and investments will be unprofitable following regulations that cap lenders’ fees.
“I’m trying to give you a proxy for what the banking industry has to look forward to if you don’t take into account business bank clients and getting more of the affluent wealth wallet,” Todd Maclin, chief executive officer of consumer and business banking at the New York-based company, said today at an investor presentation.
The biggest U.S. banks are grappling with lost revenue from regulations such as those that cap debit interchange fees and overdraft charges, making customers with low deposits more expensive for lenders to manage. JPMorgan, run by CEO Jamie Dimon, sees its greatest opportunity with affluent customers that have more banking relationships with the company, Maclin said.
Check out the above video, one of the series, of Michael Lewis in conversation with Jacob Weisberg of the Slate Group. It's a quickie but a goodie. Lewis covers a lot of ground. The young guns of Wall Street shouldn't have been getting paid $2 million! Credit default swaps (a) shouldn't have been invented — "innovation" in finance is not necessarily a good thing — and (b) were bound to lead to people betting against the securities, mainy home mortgages, they were based on.
But things really get interesting when Lewis starts sounding exactly like L. Randall Wray, an increasingly prominent economist from the University of Missouri, Kansas City, and a proponent of an increasingly popular new school of economics thinking called "Modern Monetary Theory" (some call it Neo-Chartalism). Wray also says the big banks need to be broken up. I've embedded a video below in which he discusses this idea. He's not exactly Michael Lewis. But the message is quite similar.
Greed isn't good. Greed isn't right. So says Michael Douglas, in a public service announcement for the FBI that asks viewers to become whistleblowers if they witness securities fraud or insider trading. Not sure how often the public sees those things. But man! Douglas clearly isn't one with the Gekko character anymore! There's always been a bit of cult around Gekko — amoral Wall Streeters who took the greed-is-good message with zero irony. Can't help but think that even Douglas won't be able change that.
Listen in to my weekly Economics Report segment on "America Now with Andy Dean." I've been doing this for a few weeks now, and have appeared in the broadcast a number times before that, and although Andy gives me plenty of grief for my "liberal" positions, I have to hand it to him: He does a three-hour radio show every day and really has his preparation down. Whenever we talk, he knows his numbers — cold. Good examples from Last Friday's show include our discussion of the Consumer Financial Protection Bureau's investigation of bank overdraft fees and of the Obama/Romney plans to reduces corporate taxes. We also have a little fun an the expense of Meg Whitman and HP's consternating plan to introduce a Windows-Intel tablet.
It's always great to talk to somebody who has a good grasp of data. My colleagues at KPCC always strike me as being great at this, as does Mr. Dean.