Comments on: THE “DADDY STATE AGENCY”

By: Dennis D

Dennis D — Sun, 09 Aug 2009 16:56:38 +0000

The Bill is in many stages of development and there is zero way of knowing how much input is coming from Dr Emanuel or Holdren. Why would Obama not appoint Dr Emanuel? Of course he would.

By: Surabaya Stew

Surabaya Stew — Wed, 05 Aug 2009 00:53:19 +0000

I would add my 2 cents, but Scott Adams already went through the reasons why something like the CFPA is inevitable:

http://dilbert.com/blog/entry/investing_in_individual_stocks/

By: DoorHold

DoorHold — Tue, 04 Aug 2009 18:30:07 +0000

This and several other blogs often challenge me intellectually, therefore I believe there should be a government Czar administering tests to determine which blogs one can or cannot read. Left to the population at large some people will get in way over their heads, may come to the wrong conclusions, or be “tricked” or actually FORCED into accepting something they might otherwise not accept. The alternative would be to “dumb-down” bloggers. Lot’s of white space. Big fonts. Limit blogging to English majors who use simple to understand and inoffensive language. That would work too.

Oh, and don’t use a hair dryer while in a tub full of water, or eat the content of those little packets shipped with some products. Ya bunch of dummies.

By: Larry, your brother

Larry, your brother — Tue, 04 Aug 2009 15:12:42 +0000

So I read your article. I’ll agree that having a bureacracy design a test would result in something akin to a giraffe–putting in a little bit of everyone’s idea results in an ungainly beast. But to think that this is new is incorrect. The idea has been around for at least 25 years, if not longer. There have always been investments that are classified as those available to a “qualified investor,” a term with a very real definition (income totals, asset levels, etc.). Experience is always an important part of the equation–no investment experience, no investment in riskiy ideas. With the explosion of financial engineering over the last 15 or 20 years, all sorts of really clever ideas have become available to people who have no idea of what the investment does, what it doesn’t do, and what happens if something really unexpected happens (a second or third standard deviation event, as they are called). Here’s an example:

In most markets, you have always been able to invest to take advantage of what you think will happen to interest rates. Buy a bond, you believe rates will stay the same or go down and not hurt you. It’s a little trickier if you think rates are going up, but you can use options or futures to bet against interest rates. The risk on betting against rates with options or futures is that your loss can be mutltiples of what you invest, so there are tests to see if you know what you’re doing (self protection from the brokerage firms, mostly). In the last few years, there is an investment called an exchange traded fund (ETF) that anyone can buy (trades on an exchane like a stock). Their original intent was pretty benign (mimic the S&P 500 returns with a lower cost than other alternatives), but - surprise! - the financial engineers have taken ahold of them. You can now easily bet against interest rates. More than that, you can leverage that bet and invest in something that moves twice as much as interest rates do. I’d be willing to bet many investors don’t realize what they’re investing in or the implications of changing interest rates. I say that because the same thing happened with similiar investments in the early ’90s (Collateralized Mortgage Obligations, or CMOs). And I’m not the only one. Full service brokerage firms are beginning to ban the trading of those instruments by the “retail” investor (maybe in reaction to the CFPA coming guidelines) because of the potential quick and severe losses by individuals.

You could argue that people, if they want to be stupid, should be allowed to be stupid. The problem is that, in the end, it will fall to you and me to get them through old age with no money. I say that because, at heart, we’re not going to let old people starve to death, living under bridges in major cities around the country. And if you don’t think that could happen, you haven’t been paying attention.

By: michael reynolds

michael reynolds — Tue, 04 Aug 2009 14:14:18 +0000

Yeah, it gets my back up too.

It’s true that consumers are essentially idiots when it comes to financial matters. (I am.) But I think the point should be to create genuinely clear, concise, more-or-less idiot-proof disclosures.

For example, for any deal have a one-sheet. Minimum 12 point type. Lots of white space. Clear bullet points. “Here’s what you’re paying today.” “Here’s what you might have to pay if this goes south.” “Here’s how much I, your broker, am making from this.”

Make sure the form is written by an English major not a lawyer.

One sheet. Big type. Clear sentences. Real numbers. And provide a government number the person can call for more explanation before they sign.