Investment advisers must earn their keep (National Post) Well worth a read and a possible reason for Ed Waitzer’s comments in today’s paper!   I would qualify the 2008/2009 crisis differently as this was a rift that ran throughout the financial system (from regulators, to central banks, to governments, to financial institutions and to, a lesser extent, to investment advisors), although portfolios constructed in clients’ best interests would have been better prepared for the risks – lower costs, more appropriate structure, limited leverage and better representation of the risks.   Investment advisors would not have been able to prevent the crisis itself, and would certainly have needed much greater support in valuation and risk to have been better able to negotiate it, but the attitude towards investors, and practises employed, certainly contributed to the fall out and distress.

Let a hundred moles be whacked (FT Alphaville)

EvangeliiOnePercentium (FT Alphaville) – a Papal Critique

“The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.”

I agree with the Pope, in a big way, but it is not capitalism per se rather mankind that we have to fear.  Capitalism is just a functional dynamic that allocates resources, and if it was able to function properly would prevent the vast inequalities that we see.  I do agree that we need to emphasise humanity in our dealings but the issue is control: whatever system we have collapses to who or what is in control; power corrupts and capitalism itself has become corrupted by the control of an increasingly narrow group of self interests.

Capitalism in its current form with its vast structural imbalances is a grave risk to the world we live in.  All natural physical constructs have a base, but what has happened is that the importance of the base towards the physical integrity of the construct has been ignored.  We need to rethink how our society is meant to work and for whom, but we still need a machine: there are too many of us and the logistics of anarchy are insane.

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