The good news is that the finger-pointing has started.
The redoubtable Barry Ritholtz writes in The Big Picture, "Time to Get Swedish":
"If the behavior of these corporate executives is nothing short than egregious (sic the grammar but we get his point anyway): Their embarrassing attitudes, foolish excesses, sense of entitled greed is annoying but tolerable when its on their own shareholders dime; when the taxpayer is footing the bill, it is utterly unacceptable.
To paraphrase a Mellon, its time to liquidate the banks, liquidate capital, liquidate shareholders, liquidate bond holders . . ."
As if we didn't know that these guys spent BIG-TIME on themselves? Note that Mr. Ritholtz supported the TARP bill.
And from Bloomberg.com today comes the headline, "Biden, Summers Sound Economic Warnings, Push Stimulus (Update1)". In the article, it is reported that:
"Pressure to overhaul the program (TARP) is mounting after reports that John Thain, the former Merrill Lynch % Co. chief executive officer who was ousted last week, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees."
As if what should be done with our potentially insolvent financial system has anything to do with a million-dollar office renovation. Guys like Thain were actually being paid a million dollars a week.
From the time that the Pecora Commission began around the start of 1933 to investigate Wall Street of the 1929 Era, the Dow Jones Industrial Average tripled, from about 60 to about 180 at the beginning of 1937. From the time of the Enron collapse stretching into the hysteria about Dennis Kozlowski's water closet and party excesses (Tyco CEO), to revelations about Adelphia Communications (private company), Worldcom and other misdeeds, and the mostly-for-show Sarbanes-Oxley Band-Aid legislation, the stock market bottomed and approximately doubled from the 2002 bottom to the 2007 top in the U.S., but did far better in more dynamic and volatile markets.
As the blame game seeps from those who knew this stuff was going on all the time to the public at large, the markets will be healing and the assets that are going to go up in the next up-cycle for the financial markets will be under accumulation by the smart money.
Similarly to the blame game going on as detailed above, the same Bloomberg article described above has the following quotes:
"Vice President Joe Biden told the CBS program “Face the Nation” that “it’s worse, quite frankly, than everyone thought it was.” Larry Summers, Obama’s top economic adviser, said the economy faces “very difficult” months, speaking today on NBC’s “Meet the Press.'"
This also suggests that things are really not going to be so bad, though it does not prove the point. If they were really, really bad, no one would tell you. Then the public would get scared and make things worse yet, as they/we did after the messes with Fannie, Freddie, AIG and Lehman Bros.
The productive capacity of the world continues. Neither bombs nor plague are destroying significant amounts of physical or human capital. Terms of trade have shifted, for now, toward consumers of raw materials and toward the Western world, as the export economies of Asia are cutting prices like crazy to keep their factories busy. On a personal basis, I braved I-95 in South Florida today (rated the locale of the absolute rudest drivers in the entire US of A) and noted more speeders than before, a private indicator of animal spirits.
I do not know if common stocks listed on an American exchange will be especially good vehicles to play a rebound in financial markets, but absent nuclear war or another Black Swan event, or truly horrible policy mistakes by governments, then we should watch the fundamentals of the economy and the leading indicators, and when they look a lot better than the popular headlines and the rhetoric of politicians in Washington, things will in fact be getting a lot better.
Not that we're there yet.
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