Monday, February 23, 2009

Prospect of Healthy Change Spooks Wall Street

The Dow keeps falling, reaching ever new lows, and some Wall Street analyst are blaming Barack Obama and his team for the sad state of the market. They complain that the investors are confused, and don't know the rules anymore, because the government are changing them. 

In a way, they are right, because from Wall Street's point of view, the new administration is doing exactly what it set out to do - to bring change, and change means insecurity, and makes it harder to apply the old models and rules of thumb. This is as it should be, because Wall Street has forsaken most of its credibility by pursuing short term greed so recklessly that it almost brought down the world's financial and economic system. Very few on Wall Street, and in the Republican Party complained when CEO's awarded themselves 100's of millions in bonuses for what we now know was a mostly fictitious performance. That was the order many Wall Street gurus and financiers want to return to as it made it so easy to make outrageous profits from doing no good. But that order is gone, imploded under the weight of greed and corruption. 

Barack Obama stepped into this chaos, and started to clean up the mess, but doing so he is bound to ruffle the feathers of those who profited from the Bush era corruption of the markets. It will take some time before the force of the new regime, and the new reforms will be felt and understood. Once that is done, share will start to move up again, but not driven by derivates and Bernie Maddoff style shenanigans, but but companies pursuing real opportunities, making real things and providing services we really need. It might not go as fast as it did before the latest bubble burst, but neither will it deflate as easily.

Hans Sandberg

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