The Bottom Line
By Chad P. Wilson
February 4, 2010
Foundation Bank --
The Volker What?
Volume VI Issue II – February 4, 2010
A monthly financial commentary for our friends, Clients and Advocates
The Apple iPad launched this month. This is Apple’s attempt to break into the computer tablet industry. It is smaller than a laptop, but bigger than an iPhone. This means it has the capacity to compete with the Amazon Kindle digital book reader. It has received mixed reviews. One such review by John Dvorak of marketwatch.com highlights three disappointments. It doesn’t have a stylus, it doesn’t have a camera, and it runs IPHONE apps instead of Mac apps. Will this next thrust in Apple’s quest for gadget dominance go right to the heart? Or will it fall flat? Only time will tell. Source:http://www.marketwatch.com/story/apples-ipad-is-far-from-revolutionary-2010-01-29
What is the Volker rule, and why should you care? The Volker rule is named after former Fed Chairman Paul Volker. President Obama enlisted his help to address the public outrage at the government offering assistance to ailing Wall-Street banks. At the heart of the rule is the desire to separate banks that engage in “risky” transactions from those engaging in “less risky” traditional transactions. For those who remember, this might be a return to the days of the Glass Stegal Act that separated investment banking from commercial banking. "We ought to have some very large institutions whose primary purpose is a kind of fiduciary responsibility to service consumers, individuals, businesses and governments by providing outlets for their money and by providing credit," Volker said during one speech in Toronto. "They ought to be the core of the credit and financial system. Those institutions should not engage in highly risky entrepreneurial activity." It sounds great in theory but it could have unintended consequences. Removing these “risky transactions” might cause mortgage rates to increase. Big Banks often borrow money at a low rate, and then purchase pools of mortgages like yours and mine. Removing this demand from the mortgage market could actually hurt the people it is intended to help. Reform to the financial system is certainly needed. But those in charge must find the delicate balance of addressing valid concerns vs. going on a witch-hunt. It’s not unusual to be outraged (and rightly so) by one side of the coin without realizing the benefits we reap from the other side. For example, one person may complain about American jobs moving overseas after purchasing a low-priced television made in China the day before. Source: http://www.washingtonpost.com/wpdyn/content/article/2010/01/21/AR2010012104935.html
Speaking of televisions, what is the next wave in entertainment technology? Perhaps it is 3-D television sets. The 3-D movie, Avatar, has set the world ablaze with talk about 3-D and its possibilities for the future. It’s not just limited to movies. Sony actually predicts that 3-D television sets will make up 30-50% of all the TV sets it sells in the 2012 fiscal year. These sets would enable people to play their favorite video game, watch the Super Bowl, or put in their favorite Blue Ray movie all in 3-D. Sony even has a partnership with the Discovery Channel to launch a television channel within the next two years whose content is strictly 3-D. There are already bits of programming moving that direction. If you watched the Grammy Awards this year, you would have noticed that the tribute to Michael Jackson was shown in 3-D. Yes, you’ll still need glasses which might run you about $200. It may seem far-fetched, but so did flat screen high definition TV’s when they first came out. Now take a look down the electronics wall of Wal-Mart, and it’s the only kind of television they sell.
Chad P. Wilson, CFP
Foundation Bank, Division of McKenzie Banking Company, McKenzie, TN - 731-554-2423
The above is strictly informational and does not constitute any sort of recommendation. Please consult your own financial advisor for specific tax, loan, or other investment advice.
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