Posted By Norb Vonnegut on March 11, 2010

On Thursday, March 18, I’m speaking in Amsterdam at a conference hosted by NRC Focus. The topic is “trust,” and here’s what the magazine writes:

Trust is essential for markets to function properly. In a ‘high trust society’ like the Netherlands, where people have confidence in both fellow human beings and institutions, this fact is easily overlooked. Financial institutions traditionally have been bastions of trust, both for consumers and businesses. People entrust them their savings and confidence in them. But the recent credit crisis, megafrauds by Bernard Madoff and Allen Stanford and the bankruptcy of banks like Icesave and DSB have put a serious dent in this confidence.

I plan to examine three questions. How can we regain confidence when:

• Havoc is more profitable than fixing problems?
• Employees don’t trust the companies they represent?
• Nobody has the global power to regulate financial institutions?

Send me your thoughts. I’d love to hear what you think is necessary to rebuild trust in the world of private wealth management. Are there any “wealth tools” you’d like to see? Sometime during April, I’ll post my thoughts to these three questions.

Norb Vonnegut

Category: Wild Wild World of Wealth | No Comments »
Tags: Allen Stanford, Amsterdam, financial reform, financial scandals, Madoff, Ponzi, Trust, Wall Street, Wealth Management

Posted By Norb Vonnegut on March 5, 2010

Market Defies Fear of Real Estate Bubble in China

A real estate bubble, fueled by bad loans and too much leverage, explains much of our stock market’s turmoil since 2008. So today’s article from The New York Times on the Chinese edition, caught my attention. Here are a few of the  sound bites:

Last year, a record $560 billion of residential property was sold in China, an increase of 80 percent from the year before, according to government statistics that are widely considered reliable.

Signs of exuberance are everywhere. An investor in Shanghai recently bought 54 apartments in a single day; a villa sold for $30 million last year; and in December a consortium of developers paid more than $3.5 billion for a huge tract of land in Guangzhou, one of the highest prices paid for any property, anywhere.

Prices here have risen more than 150 percent since 2003, pushing the price of a typical 1,100-square-foot apartment up to $200,000, according to real estate experts. (Shanghai residents typically earn less than $5,000 a year.)

Okay, enough already. The point is clear. Trouble is brewing. And here’s why China’s real estate bubble is a problem for everyone. Of the five largest banks in the world, measured by market capitalization, three are located in China.

With banks trading credit risk, through those insufferable Weapons of Money Destruction otherwise known as credit default swaps, I wonder what the world’s financial exposure is to Chinese real estate. Who owns the credit risk to their developments? Have they ever been to China? Or can the creditors even spell Peking? I mean Beijing.

Norb Vonnegut

Category: Wild Wild World of Wealth | No Comments »
Tags: Beijing, bubble, China, money management, real estate, Wealth Management

Posted By Norb Vonnegut on March 5, 2010

For Psychic, Suit Came as Surprise

You know there’s a problem when your money manager:

• Claims to be today’s Nostradamus;
• Names his company, Magic Eight Ball Distributing;
• Runs a website with wellness products like “Holy Tea.”

According to the SEC and The New York Times, “America’s Prophet” may be “America’s Fraud.” You can find a copy of the lawsuit against Sean Morton by clicking his name. He’s the Svengali in question. What I don’t get is how a money manager can raise $6 million from 100 investors with nothing but a smile and a cloudy crystal ball.

Norb Vonnegut

Category: Financial Scandal | No Comments »
Tags: Money Managers, Sean Morton, Wealth Management