Each day seems to bring more evidence of impending doom. While I'm ecstatic to still have a job this week - not to mention surprised - who knows if I'll still have a job next week. Many of you out there have been out of work for months already. I've been there myself, and I feel your pain. Hopefully, you saved for the proverbial rainy day and and haven't (yet) got to the point of selling your body for money or slingin' crack rock just to get by.
Both the domestic and Global Economies seem to be slipping further into the abyss on a daily basis, despite the best intentions efforts of Central Bankers and their Political puppet masters. Sure, there's a light at the end of the tunnel somewhere around 2011 (+/-), but for many of us, there just doesn't seem to be much about which to be optimistic in the interim. Our Industry, our Country, and the World are all undergoing fundamental changes that will forever alter our futures in ways we cannot yet predict, at least not with any more accuracy than S&P's ability to predicts defaults. Moving on.
Those of us who work(ed) "in Finance," regardless of whether it was on Wall Street, The City, Dubai, or wherever, have collectively been labeled "Public Enemy #1." The ire directed upon us from several directions evokes memories of 17th century Massachusetts, untimely deaths and all. While we've yet to witness Stan O'Neal's public hanging in front of the NYSE, we are no-doubt in the midst of our generation's version of a Witch Hunt, except this time the mission is to find convenient scapegoats for a decade (again, +/-) of widespread financial irresponsibility. Frankly, I'm a bit surprised we haven't seen the pitchfork & torch crowd marching down Broad Street yet, although its probably only a matter of time before they're on the steps of Federal Hall calling for the head of anyone who walks by in well-tailored suit.
Our "leaders" - epitomized by the House Financial Services Committee - have shown themselves to possess nothing even approaching rudimentary understanding of the situation at hand, or any of its underlying facts or concepts. This ignorance, by itself, is hardly anything new. Nor, should we be surprised with the incendiary political grandstanding and finger-pointing, best exemplified by likes of Maxine Waters.
Lawmakers and Regulators alike seem intent on giving us (much) more of the same crap that helped enable the bad decision making that got us here in the first place. Heaven forbid they actually address the root-causes and underlying issues, or dare I suggest, put their careers aside and take their own advice and do what's "best" for the Country. The best part of this whole show is that people who can't evevn comprehend the basics of Business 101 are now exerting their political will on systematically important corporations, corporations that some of the most experienced, best-educated people on the planet can't even fix. Axing Rick Wagoner from GM, I think, might not have been the best idea (or the worst, obviously). He's educated and a GM "lifer," to say nothing of the fact that he basically took the helm of the Titanic long-after it'd already hit the iceberg. He's no superstar, but in my humble opinion, he seems comfortably in the middle 50% of Fortune 500 CEOs in terms of efficacy. More broadly speaking though, this action made a huge statement: If you're running a "Least-Favored Company" ("LFC"), take whatever $ you have left and get the hell out of Dodge (no pun intended).
Its so pathetic its almost humorous, or perhaps the other way around. When we desperately need people committed to getting the job done, people with intimate knowledge of their firms and industries, the Powers That Be are more concerned with scapegoating, and thereby ostrasizing the very people who perhaps have the best chance of acheiving the virtually impossible. I've been thinking, if I were a top exec at a "LFC", say sitting on $10 million liquid, maybe another $5 million illiquid, why the hell would I still be showing up for work? If I could swallow my pride and put the ego aside for a moment, I'm pretty sure the obvious solution would be to give the Government the middle finger (but ever so politely) and sit on the sidelines for a while, or until they come back begging you to help dig them out of the even bigger mess they've created.
Our other "leaders," they mostly of the corporate variety, generally haven't shown much more spine than their Legislative counterparts. When times were "good," it seems many just rode the gravy train with the proverbial "if it ain't broke, don't fix it" mentality. When crap hits the fan though it seems many emperors truly wore no clothes, just like many formerly "superstar" hedge fund managers have been shown to be little (if anything) more than highly-leveraged mutual funds. The underlying causes of such behaviour are outside the scope of this post, as are the clearly flawed incentive structures that enables them, so once again, I digress. Just as firms overshot on the "way up," there is a decidedly non-zero probability that they will overshoot on the "way down" due to general ass-covering, short-sighted decision-making, and other examples of shoddy management.
Many of these "leaders" have yet to grasp the concept that the Global Economy was over-inflated with cheap/easy/too-much credit, to oversimplify, money that didn't, ya' know, actually exist. They speak (and worse, act) as if all we have to do is pass a few laws, beef (pork) up regulation, bail out a few companies and voila, we'll be back to the good ol' days when asset prices only went up, and any Joe Schmo could buy a million-dollar house with a 200-year, NINJA IO Option-Arm mortgage. Far too often, I find myself feeling compelled to remind friends and family that comparing present-day to the artifically high price levels of mid-to-late 2007 is self-defeating, at best. While we're likely not headed back to the Stone Age, we're similarly unlikely to get back to boom-time highs anytime soon..."
I wrote the above, incomplete rant the last week of March, 2009. Truth be told, I can't remember exactly why I never finished, although I suspect it had something to do with the inexplicable upward-march in asset prices since then. Anyway, I think its interesting that despite everything that's happened over the past 4-5 weeks, my general outlook hasn't changed very much, if at all. I should clarify explicitely that despite sounding like a crazy cynic, I'm (still) a closet optimist. I think prosperity is possible, and likely; I just don't think its going to happen overnight.
Since I penned the above though, most of the data I've examined indicate we're nowhere close to returning to economic growth and prosperity in the near-to-immediate future. And by that, I mean I have no freaking idea how anyone calling themselves an "Economist" (hell, or even "Pundit") can rationalize projected GDP growth by the third quarter of this year. Even if their forecasts are based upon massive Federal spending and all sorts of bonkers bailout bullshit, I still just don't get it. Sure, savings rates are showing signs of increasing - as are a few other pieces of data - indicating we're starting to make some progress towards sustainability, but the "bad" is still grossly overshadowing the "good."
As far as I can tell, the Administration's economic triage thus-far has been, and continues to be predicated upon widening of the "Hope & Change Spread," coupled a wholesale failure to identify, address, and ameliorate the underlying causes of our socio-politico-economic malaise. Populist pandering and vague promises rooted in fantasy only serve to delay the inevitable. I won't presume for an instant to have all or even some of the answers, but it seems painfully obvious that until we're ready to address reality, any interim gains or impression thereof won't mean squat over any meaningful period of time.
So long as we consider economic and social prosperity a worthwhile endeavor, we must acknowledge that nothing worthwhile ever comes easy. No doubt, if we are to acheive these goals many sacrafices and difficult decisions need to be made at every level of the game, and by all participants. Absent these, I don't see how anyone can presume to declare us back on the road to sustainable prosperity, of any sort.
Reg FD: All cash. May have/be initiating limit short trades.