Commonwealth Commonsense

Leading Wall Streeter: We’re Greedy

Bill Gross is almost a saint on Wall Street. As the managing director of PIMCO bond funds, he’s a great investor and usual suspect on CNBC. So when he says something like this…

As a profession we have failed miserably at our primary function – the efficient and productive allocation of capital [emphasis original]: The S&L debacle of the early 1980s, the Asian crisis, LTCM, dotcoms, subprimes, Lehman and the resurrection, instead of the reformation, of Wall Street, are major sins of the modern era of money. Hang your heads, moneychangers. And no, it is not yet time to move on, as many banking CEOs suggest. How can bond traders make ten, one hundred, one thousand times more money than an engineer or social worker given their dismal historical performance? Why is it that some of today’s doctors are using food stamps while investment banking executives complain about millions of dollars in compensation that might be deferred in case of a future bailout?

Financiers have lost their high ground and, if truth be told, we began to lose it a long time ago when we figured out that money was more than a medium of exchange or a poor substitute for a store of value. We figured out a turbocharged way to make money with money and proclaimed ourselves geniuses in the process. Well, we’re not. We may be categorized as “opportunists,” to be generous, but society’s “paragons” and a legitimate destination for a significant percentage of college graduates? Hardly. To paraphrase Paul Volcker, the only productive invention to come out of the banking industry over the past generation was the ATM.

This country desperately requires a rebalancing of priorities. After readjusting the compensation scales via regulation and/or free market common sense, America needs to anoint a new set of Mensans who can create something more than a cash machine and make this country competitive again in the global marketplace. We need to find a new economic Keynes or at least elect a chastened Congress that can take our structurally unemployed and give them a chance to be productive workers again. We must have a President whose idea of “centrist” policy is not to hand out presents to the right and the left and then altruistically proclaim the benefits of bipartisanship. We need a President who does more than propose “Win The Future” at annual State of the Union addresses without policy follow-up. America requires more than a makeover or a facelift. It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system. It needs a Congress that cannot be bought and sold by lobbyists on K Street, whose pockets in turn are stuffed with corporate and special interest group payola. Are record corporate profits a fair price for America’s soul? A devil’s bargain more than likely.

…maybe somebody should listen.

Cuts and Tax Hikes

Looming deficits will require both tax hikes, especially on the upper class who have seen their tax responsibility slashed over the past 30 years while their incomes soared, and spending reductions in the biggest program elephants in the room.  Michael Gerson, of course, doesn’t, speak of tax fairness or returning to the levels when America’s economy was at its zenith.  It needn’t be one or the other.  But at least Gerson has the cuts right.

There can be no serious reduction in federal spending without entitlement reform. Social Security and Medicare eventually will need to be transformed from middle-class entitlements given because of age to entitlements given to those with lower incomes.

…Necessary changes will not resemble the relatively painless deficit reduction deals of 1990 or 1993. This round may require not only the means testing of Social Security and Medicare but also the reduction or elimination of middle-class entitlements such as the mortgage interest deduction and the employer health-care exclusion.

I agree with all four cuts.  But then he suggests the number of public employees must be reduced.  Do we really need fewer financial and environmental regulators?  Do we need fewer teachers and police officers?  Can we get buy with fewer road repairs, snowing plowings, median mowings and parole officers?

I bring up the last four because they are of particular interest in my locality.  I’m attending a meeting tonight about what local organizations can do to get the grass mowed on our highway medians, which grows so high due to dwindling funds in the highway department responsible for maintaining them that site lines are obscured, creating traffic hazards.  My neighbors were upset about the lack of snow plowing during the past winter’s storms, which left many streets pot-marked—and still that way three month later.  And last week, some neighbors learned that a convicted sexual offender had rented a house immediately across from our local elementary school.  They were all up in arms and contacted the local parole office.  Within a day or so, the parole officer apprehended the man for violating the terms of his parole.  There are  a lot of communities who can’t afford that level of service. 

With more oil spills, stock meltdowns, and sexual predators in our communities, if Gerson gets his way, people may yearn for the days when we had adequate government.

Obama and the Stock Market: A Year Later

Actually it’s more than  a year, but let’s look back.  You’ll recall that, after the inauguration ball balloons deflated, the Republicans started to blame the stock market collapse on Obama, or at the very least, they pointed to the stock market as proof that American business did not believe in Obama’s politics.  They pointed to the Dow, as of March 3 of last year, being down 30% since Obama’s election and 15% since Obama’s inauguration.

So where are we today, 17 months after the president’s election and not quite 15 months after his inauguration:

Since his election, the Dow Jones Industrial Average is up 14%.

Since his inauguration, the DJIA is up 38%.

So why isn’t the GOP giving him credit now?

(Thanks to the “Ed Show” on MSNBC for reminding me of this.)

Obama and the Stock Market

Remember when every dick of a GOPer was blaming Obama for the stock market’s decline?

On March 3, 2009, the Dow Jones closed at 6,726.02, continuing its drop and, despite his claims, Obamanomics (or at least his plans) have contributed to the evaporation of your retirement accounts. Looking at it in perspective, the Dow Jones is:

• Down 7,438.51 (or 52.5%) since its all-time high
• Down 2,899.21 (or 30.1%) since Obama’s election
• Down 1,223.07 (or 15.4%) since Obama’s inauguration

But there is good news to consider in all this while you down your Tums. In 2010, Republicans have the opportunity to retake Congress and overturn the socialist, stock market destroying policies. Two years later, in 2012, Republicans can recapture the White House and reduce all the taxes Obama, Nancy Pelosi, and Harry Reid raised. The campaign to restore fiscal responsibility (Obama spending trillions upon trillions that we don’t have doesn’t qualify, no matter what he says) begins today!

Well, as of yesterday’s close,

The Standard & Poor’s 500 Index has gained (emphasis added) 15 percent since Obama’s Jan. 20 inauguration, compared with a decline of 9.6 percent in the first five months of the Bush administration and an increase of 3 percent under Clinton.

GOPers, I can’t hear you!

By the way, it was shortly after March 3 when Obama said the stock market was probably then a good investment.  It’s up more than 30% since then.