Deep Market Thoughts…Why Bother?

Posted by Howard
on April 1st, 2009

Why would any institutional money remaining in the market be buying stocks?

They should’nt be.

Sure, old man Buffett was buying stocks hand over fist in January and taking ads out in the New York Times, but he became a sellout with that ad campaign…a shill for the government.

The market needs institutional money, but not all institutions money managers are criminal or dumb. The Obama administration is behaving as if EVERY institutional manager is indeed a criminal or dumb.

Most of the criminals are now outed. If not outed, they are planning to be caught. Redemptions will uncover their schemes in due time.

Time and simple corrective measures would have cleaned up the stock market. Instead, Obama and company think they can fix the economy and stock market at the same time with drastic measures. It is not working and will not work.

The remaining institutional investors will not pour money into stocks when the government is so actively involved in earnings and regulations. PERIOD.

Last fall I was getting excited about prices of my favorite brands, but there is no price low enough if institutional investors are not engaged.

Umair Haque has some great points in his latest post – ‘Obama’s Double Standard on Corporate Governance ‘

Obama’s Double Standard on Corporate Governance

If you’re a company that makes cars, and the government bails you out, it will exercise oversight at C-level, and monitor that taxpayer money isn’t being wasted.

If you’re a company that makes markets, and the government bails you out, it will exercise no oversight, and keep bailing you out, no matter what errors you keep making, pouring taxpayer money into an endless black hole.

There is a very, very big problem with an economic policy that is so clearly and deeply biased. It massively dilutes incentives for real investment. Why invest in anything if there’s a double standard, and certain sectors are favoured? Why would a venture fund invest in cars, if Obama’s double standard favours banks?

Why is there such an obvious and massive double standard? It’s Dubyanomics, all over again.

Geithner has destroyed the dollar. Does Obama really want to destroy the productivity gains that could resurrect the dollar as well, with the kind of biased bailouts that make banana republics implode?

It’s lame — really, really lame, and it gets lamer by the day. Just read this. Shouldn’t bailouts be run by, well, people that aren’t giant ex investment bankers and currently active private equity investors?

Isn’t that kind of like appointing King Abdullah to “advise” Detroit on building an energy-efficient car?

Here’s the point. I know Obama wants to combine the expertise of the private sector with the resources of the public sector.

The Obama administration seems to have thrown caution to the wind when it comes to structural conflicts of interest inherent in explicit or implicit private/public partnerships across the board. Whether it’s the Geithner Plan, the Detroit Bailout, or the stimulus, the Obama team ignores clear, crippling conflicts of interest. Why is that a problem? Simple: because the strategic expertise of the private sector can very easily be applied to looting the public sector.

Here’s a likely — and strategically pointless — next step. Will appointing a CRO help us build a better auto industry? Of course not. It will just eviscerate the car industry we do have, by shifting to a low-cost operating model. That’s what turnaround artists do: make companies profitable again. What they don’t do is reinvent moribund industries and sectors.

Let me make that sharper. The problem isn’t that GM isn’t profitable. It’s that GM, Ford, et al have destroyed a better, renewably powered car industry for decades. A CRO won’t fix that conflict of interest — in fact, she has every incentive to amplify it.

And there’s another lesson in that. Obama is failing to distinguish between different kinds of private sector expertise, and allocate them where they are needed most.

It’s an open thread, and I’m really (reaaally) getting tired of being morally, ethically, and intellectually lamed out by the Obama team. Ugh. My little kid sister could do a better job of reforming an institutionally broken economy.

So comment away — and those of you who were skeptical about a new Cold War: Does it look any more real now, when Wall Street gets another free pass, but Detroit gets taken to the mat?

Maybe the administration should take a week off…even a month off and let things just happen. The self importance attitude of Obama and crew is making it easy for me to stay out of this market. It is a train wreck and headed for further damage because prices don’t lie.

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