The Federal Reserve raised eyebrows of a positive sort yesterday when it announced that although unemployment will top 10% this year, the end of the recession may be in sight in 2010. Its latest forecasts are an improvement over previous ones. Stock markets loved the news and futures markets this morning are following suit as the new jobless claims were the lowest in 6 months.
However, “Golden Sachs…I mean Government Sachs…sorry, Goldman Sachs” raised eyebrows of a different sort when it announced mind-boggling second quarter earnings of almost $3 ½ billion, more than it earned in all of 2008…and one of the most extraordinary rebounds in history after a near meltdown of the U.S. banking industry. And all this was after they paid pack the government $10 billion it received from the TARP program.
Goldman also blew the lid off compensation, putting aside enough so that the average pay for all employees this year will likely top $700,000.
CEO Lloyd Blankfein explained the success as reflecting “improved financial market conditions” and “a deep and diverse client franchise”…some of the best mental yoga I’ve heard.
The truth of the matter is that companies like Goldman Sachs receive preferential treatment – like bailouts and concessions – that allow them to prosper at the expense of a flawed regulatory system. In a society governed passively by free markets and free elections – a good thing – organized greed always trumps disorganized democracy.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at what’s at the base of the market’s foundation – trust!
Raised eyebrows don’t help the economy…raised confidence does.
Thursday, July 16, 2009
Monday, July 6, 2009
An Oath for Financial Markets… - July 6, 2009
With fireworks behind us, and an absence of any real heady economic data this week, statistically, we should have a quiet start to the first full week of the second half. Hopefully!
Probably the only thing we need to keep an eye on is the University of Michigan’s highly regarded report on consumer confidence – which will be out late in the week – and expected to show some improvement.
So while we ponder the facts that:
· we spent nearly $1 billion on fireworks this year,
· bought 2 billion beers on July 4th alone, and
· nearly half of us attended a barbeque…
…maybe this is a good time to reflect on what we really just celebrated – the 233rd birthday of our Declaration of Independence – and what that means for our current economic outlook. The connection is not difficult.
That first American creed talked about, among other things, truths that are self-evident…such as rights to life, liberty, and the pursuit of happiness…as well as other duties and responsibilities.
Some of these truths have come to be reflected in long-standing oaths of professional conduct – like the Hippocratic Oath for doctors who promise to keep the sick from harm and injustice, lawyers’ oaths, and other oaths that vary by state but all point to ethical standards of behavior.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at the market’s foundation – trust! – which has been badly bruised. Maybe it’s time for a new oath, one also not to engage in harm, injustice, or mischief – but this time for those who manage our money.
Probably the only thing we need to keep an eye on is the University of Michigan’s highly regarded report on consumer confidence – which will be out late in the week – and expected to show some improvement.
So while we ponder the facts that:
· we spent nearly $1 billion on fireworks this year,
· bought 2 billion beers on July 4th alone, and
· nearly half of us attended a barbeque…
…maybe this is a good time to reflect on what we really just celebrated – the 233rd birthday of our Declaration of Independence – and what that means for our current economic outlook. The connection is not difficult.
That first American creed talked about, among other things, truths that are self-evident…such as rights to life, liberty, and the pursuit of happiness…as well as other duties and responsibilities.
Some of these truths have come to be reflected in long-standing oaths of professional conduct – like the Hippocratic Oath for doctors who promise to keep the sick from harm and injustice, lawyers’ oaths, and other oaths that vary by state but all point to ethical standards of behavior.
If we are worried about when the stock market will be widely embraced again, and not teeter daily over the latest economic news, we need to look more deeply at the market’s foundation – trust! – which has been badly bruised. Maybe it’s time for a new oath, one also not to engage in harm, injustice, or mischief – but this time for those who manage our money.
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