Henry Blodget: Debt, banks, bailouts and Buffett
Ignore economic predictions because they're usually wrong; the world still has a nasty debt addiction; banks are still too big to fail; you will never be the next Warren Buffett; and taxpayers got hosed when they bailed out Fannie Mae and Freddie Mac. Those are just some of the musings from Henry Blodget, CEO of Business Insider.
Blodget joined us on "Ask the Experts" to discuss what's ahead in 2012, highlighting the overhang of global debt that is likely to keep a lid on growth for a while. At about 34 minutes into the show, Henry displays his passion around the very banks that used to employ him. He notes that U.S. banks are still too big to fail. His remedy? Allow the banks to fail ("fire the idiots," aka the management team), and have the government step in, just as the FDIC does when a smaller bank fails, and sell off the assets. He would also create more transparency for regulators and reinstate the Glass-Steagall Act of 1933 to separate investment and commercial banking operations (the system worked for 70 years before its repeal in 1999).
In his post-Wall Street analyst career, Blodget realized that there's no way that individual investors can compete with the pros' access to information and that we can't beat the market or become the next Warren Buffet. In fact, beating the market is a delusion that active managers, who are "full of it," promulgate to lure you into their fee-heavy funds. Blodget says that indexing not only keeps you sane, it is the "right" investment answer.
