The Pied Piper
“Life can only be understood in reverse, but must be lived forwards...I'm losing my senses” ― Dave Mustaine
On July 21, 2010, President Obama signed the Wall Street Reform into law. It was meant to keep Wall Street from losing perspective in terms of volume. This Dodd-Frank Reform was designed to lessen the taxpayers’ obligations to Wall Streets’ mistakes. (White House, 2010) The reform also validated the stupidity of CEO’s deciding bonuses without shareholder vote. Accountability will be brought to corporate America, at least for future transactions. Mr. Obama indicated that with this law, large corporations would never again grow to the point that they are too big to fail.
It has been 2-3 years since the financial reform went into play. To understand our current position, perhaps we should look at our past. We were merrily be-bopping behind Mr. Alan Greenspan, enticed by his skill with the clarinet. The man spent nearly 19 years with the Federal Reserve, and found early on the best way to be rid of unwanted assets was to package them together and sell them at a discount. While they were not taking much of a loss selling these undesirable packaged assets, they did notice Real Estate prices increased and the markets liquidated. Mr. Greenspan has said that he has 70% success rate for forecasting the next week’s markets. (Coy, 2012) Too bad his radar was equivalent to that of a local weatherman, if only he could have forecasted the next year and the one after that.
Did Mr. Greenspan believe, “this will never hurt,” when he first saw the benefit of selling taxpayer owned assets at a discount? It seems the forecast should have called for it to come crashing down. One point Mr. Greenspan makes with his accuracy of forecasting the market, is that it’s possible based on probabilities and the knowledge of various causes and the outcome that each produce. If the recent record index highs have led pessimists to believe we’re in more trouble for things that haven’t surfaced yet, maybe it’s time to evaluate they could be legitimate based on the past years performance.
Analyst, Elisabeth Kashner, explains in her blog why the index highs we’re seeing are not new. She clarifies that the market highs stem from dividends, and the compounds from reinvestment of these dividend payments. According to Kashner, the highs we see now are from activity that is more than a year old. Based on historical data, such dividends would bring market returns. She makes the point that because the media likes simple figures; they tend to miscommunicate market information. (Kashner, 2013) Don’t let a media personality lead you down the wrong path; otherwise you may have to jump the fence to fight for the other side.
When a Wall Street Defense Attorney becomes a SEC Regulator, one must ask if it’s Wall Street, or investors that should be feeling more paranoid. Is Mary Jo White a true enemy or false friend, and to which side? She is in the position to become the next Wall Street Regulator. Some may question whether there could be a conflict of interest, as she was a Wall Street defense lawyer up until not so long ago. She has made clear that she will cut ties with those clients for at least a year. “The American public will be my client, and I will work as zealously as possible on behalf of them.” (Protess, 2013) We’ve been burned before.
One final note from Mr. Greenspan, “I've been in and out of Wall Street since 1949, and I've never seen the type of animosity between government and Wall Street. And I'm not sure where it comes from, but I suspect it's got to do with a general schism in this society which is really becoming ever more destructive.” When there is society to pay, God have mercy!
Works Cited
Coy, D. L. (2012, 08 09). Alan Greenspan on His Fed Legacy and the Economy. Retrieved 03 13, 2013, from BloombergBusinessweek: http://www.businessweek.com/articles/2012-08-09/alan-greenspan-on-his-fed-legacy-and-the-economy#p3
Kashner, E. (2013, 03 11). Why The Dow's New Highs Aren't New At All. Retrieved 03 13, 2013, from Index Universe: http://www.indexuniverse.com/sections/blog/16210-why-the-dows-new-highs-arent-new-at-all.html?
Megadeath (Composer). (1992). Countdown to Extinction. [Megadeath, Performer] NY, NY, USA.
Protess, B. (2013, 03 12). DealB%k. Retrieved 03 13, 2013, from New York Times: http://dealbook.nytimes.com/2013/03/12/mary-jo-white-says-her-s-e-c-would-be-tough-on-wall-st/?ref=business
White House. (2010, July 15). President Obama on Wall Street Reform Vote. Retrieved 03 13, 2013, from The White House: http://www.whitehouse.gov/photos-and-video/video/president-obama-wall-street-reform-vote
“Life can only be understood in reverse, but must be lived forwards...I'm losing my senses” ― Dave Mustaine
On July 21, 2010, President Obama signed the Wall Street Reform into law. It was meant to keep Wall Street from losing perspective in terms of volume. This Dodd-Frank Reform was designed to lessen the taxpayers’ obligations to Wall Streets’ mistakes. (White House, 2010) The reform also validated the stupidity of CEO’s deciding bonuses without shareholder vote. Accountability will be brought to corporate America, at least for future transactions. Mr. Obama indicated that with this law, large corporations would never again grow to the point that they are too big to fail.
It has been 2-3 years since the financial reform went into play. To understand our current position, perhaps we should look at our past. We were merrily be-bopping behind Mr. Alan Greenspan, enticed by his skill with the clarinet. The man spent nearly 19 years with the Federal Reserve, and found early on the best way to be rid of unwanted assets was to package them together and sell them at a discount. While they were not taking much of a loss selling these undesirable packaged assets, they did notice Real Estate prices increased and the markets liquidated. Mr. Greenspan has said that he has 70% success rate for forecasting the next week’s markets. (Coy, 2012) Too bad his radar was equivalent to that of a local weatherman, if only he could have forecasted the next year and the one after that.
Did Mr. Greenspan believe, “this will never hurt,” when he first saw the benefit of selling taxpayer owned assets at a discount? It seems the forecast should have called for it to come crashing down. One point Mr. Greenspan makes with his accuracy of forecasting the market, is that it’s possible based on probabilities and the knowledge of various causes and the outcome that each produce. If the recent record index highs have led pessimists to believe we’re in more trouble for things that haven’t surfaced yet, maybe it’s time to evaluate they could be legitimate based on the past years performance.
Analyst, Elisabeth Kashner, explains in her blog why the index highs we’re seeing are not new. She clarifies that the market highs stem from dividends, and the compounds from reinvestment of these dividend payments. According to Kashner, the highs we see now are from activity that is more than a year old. Based on historical data, such dividends would bring market returns. She makes the point that because the media likes simple figures; they tend to miscommunicate market information. (Kashner, 2013) Don’t let a media personality lead you down the wrong path; otherwise you may have to jump the fence to fight for the other side.
When a Wall Street Defense Attorney becomes a SEC Regulator, one must ask if it’s Wall Street, or investors that should be feeling more paranoid. Is Mary Jo White a true enemy or false friend, and to which side? She is in the position to become the next Wall Street Regulator. Some may question whether there could be a conflict of interest, as she was a Wall Street defense lawyer up until not so long ago. She has made clear that she will cut ties with those clients for at least a year. “The American public will be my client, and I will work as zealously as possible on behalf of them.” (Protess, 2013) We’ve been burned before.
One final note from Mr. Greenspan, “I've been in and out of Wall Street since 1949, and I've never seen the type of animosity between government and Wall Street. And I'm not sure where it comes from, but I suspect it's got to do with a general schism in this society which is really becoming ever more destructive.” When there is society to pay, God have mercy!
Works Cited
Coy, D. L. (2012, 08 09). Alan Greenspan on His Fed Legacy and the Economy. Retrieved 03 13, 2013, from BloombergBusinessweek: http://www.businessweek.com/articles/2012-08-09/alan-greenspan-on-his-fed-legacy-and-the-economy#p3
Kashner, E. (2013, 03 11). Why The Dow's New Highs Aren't New At All. Retrieved 03 13, 2013, from Index Universe: http://www.indexuniverse.com/sections/blog/16210-why-the-dows-new-highs-arent-new-at-all.html?
Megadeath (Composer). (1992). Countdown to Extinction. [Megadeath, Performer] NY, NY, USA.
Protess, B. (2013, 03 12). DealB%k. Retrieved 03 13, 2013, from New York Times: http://dealbook.nytimes.com/2013/03/12/mary-jo-white-says-her-s-e-c-would-be-tough-on-wall-st/?ref=business
White House. (2010, July 15). President Obama on Wall Street Reform Vote. Retrieved 03 13, 2013, from The White House: http://www.whitehouse.gov/photos-and-video/video/president-obama-wall-street-reform-vote
