Spent some time with Liz Claman today discussing the impact on the major banks that could come with the passage of the "Volker Rule". As a bit of history here this rule is a half-way attempt at restoring the Glass-Steagall act that was misguidedly repealed in 1999. The Glass-Steagall Act was first enacted in 1933 after the market collapse which was driven by the excesses to the system of institutions that were both bank and brokerage firm. This unholy combination leads to the ability to lend money to clients to buy assets that are underwritten and supported by the very institution itself. This leads to costly consequences as it did and 1929 and again in 2008 after the law was repealed.
As a side note: The final rule will be lobbied to death and in the end nothing will actually change until after the next major financial crisis occurs which will likely be sooner rather than later.
This past Friday I visited with Bill Griffith, Maria Bartiromo and Rick Santelli on CNBC to discuss my views on the latest employment report. My take is somewhat basic in regards to the data - on a macro level the jobs that are being created are temporary, low paying, jobs that do not create long term sustainabilty for economic growth.
This problem with part-time employment is that it does not increase economic prosperity. Part-time employment, as discussed in the "Labor Hoarding Effect," has been an aggressively used tool by corporations to suppress wage growth, reduce overhead costs and increase profitability. The problem is that with the Affordable Care Act gearing up to start in 2014 even more businesses will resort to part-time employment to reduce the increased health care tax burden. I stated that:
"The issue of 'labor hoarding' is an important phenomenon that is likely obscuring the real weakness in the underlying economy. Without an increase in the demand part of the equation businesses are likely to continue resorting to further productivity increases to stretch the current labor force farther to protect profitability. However, as we may currently be witnessing, businesses may be reaching the limits of what they can do to continue increasing profits at the bottom line while revenue declines at the top. The implications for the financial markets going forward are clearly negative."
There has been little improvement in the number of people working part-time for economic reasons. However, as I stated, such weak employment leads to dependence of government subsidies which explains the rise in disability claims and food stamp participation as individuals seek to make ends meet.
I also discuss my views on the market and where to invest.
suggested reading
The Intelligent Asset Allocator
How to Build Your Portfolio to Maximize Returns and Minimize Risk
How to Build Your Portfolio to Maximize Returns and Minimize Risk