A stark title for another strange week in finance. 873.29 is the closing value of the S&P 500 Index today.
I hear that leaders from the top 20 countries in GDP are converging on Washington for a financial summit. Gordon Brown is making it his mission to push for greater regulation of the financial world. It is with the greatest reservation I follow the forceful Brown. I’m not a Brit so I haven’t followed Mr. Brown much until the last several months. I’m a big believer in financial cooperation and discussion. What chills my financial bones is the prospect of a global financial regulatory body. Treaties are good (especially if they have expiration dates). But I’m leery of international “bodies” and “agencies”. Perhaps I’m getting ahead of myself with speculation.
Having greater transparency is generally good. This is especially important in the derivatives and “counter-party” contracts. First of all there should be a market. That is the beauty of standardized options… there is a market (CBOE for example). There are standards, there are market valuations, and there are contingencies for when options traders cannot make good on their promises. Such safeguards are not as robust (or totally non-existent) for credit default swaps, ETNs, and similar derivatives.
My bottom line is…
- Greater transparency is good.
- A clearing-house requirement (open market) is potentially good.
- New disclosure regulations uniformly agreed to by treaty is good.
- Creating a new international bureaucracy is BAD!
- Oh yeah, dialog is good too. As is cooperation and short-term agreements and statements.
Enjoy the weekend. Chances are you’ve earned it.