Wall Street Folly

Jeremy Grantham, the investment guru who correctly predicted the 2009 market rally, now warns that a new bubble is forming.

Stocks are likely to move higher in coming months, but prices are expensive, and long-term investors should be mindful of a volatile mix that Federal Reserve policy and government actions are causing, according to Mr. Grantham, the frequently bearish chief investment strategist at Boston-based institutional money manager GMO…..

“Once again, the Fed is playing with fire,” Mr. Grantham wrote in his latest quarterly letter to institutional clients…..

Switzerland—George Soros said the Obama administration’s plans to tax and curb the activities of big banks are “premature.”

“This development came too soon because the banks are not out of the woods,” said Mr. Soros, chairman of Soros Fund Management LLC and founder of the Open Society Institute.

However, he told journalists gathered at the World Economic Forum’s annual meeting in Davos that he supported the plan in principle, though it didn’t go far enough and should include financial markets…..

Carlyle Group co-founder David Rubenstein said emerging markets are the best place to invest as their economies grow faster than the developed world.

“Emerging markets are the most attractive places to invest and rebounding more rapidly,” he said today at the World Economic Forum’s annual meeting in Davos, Switzerland, citing countries like China, India and Brazil, Korea and Turkey. “We’ll see lots of capital going into these countries.”…..

It is also a “pretty attractive” time to invest in the U.S. because prices are “very low” and the risk of systemic failure has been eliminated, Rubenstein said. He cited the energy sector, health care and financial services as attractive areas

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Traders are buying protection against defaults on sovereign debt at more than five times the rate of company bonds as governments fund ballooning deficits.

The net amount of credit-default swaps outstanding on 54 governments from Japan to Italy jumped 14.2 percent since Oct. 9, compared with 2.6 percent for all other contracts, according to Depository Trust & Clearing Corp. data. European countries led the jump, with the amount of protection on Portugal climbing 23 percent, Spain 16 percent and Greece 5 percent……

Wall Street Toughens Rules on Clawbacks - Wall Street Journal

Banks and securities firms are toughening rules that give them power to seize pay from employees whose bets or other actions blow up later. But they still mightn’t be tough enough.

Known as clawback provisions, such internal rules used to cover just top executives or fraud. Last week, though, J.P. Morgan Chase & Co.’s board expanded the provisions to include any employee at the New York bank who gets company stock as compensation. In addition, J.P. Morgan can now grab stock awards from employees found to have taken excessive risks or who didn’t blow the whistle on bad risk-taking…..

Tags: Banks, Barack Obama, Bears, Bonuses, Carlyle Group, CDS, Clawbacks, Compensation, David Rubenstein, Davos, George Soros, Jeremy Grantham, Sovereign debt, Taxes