By 8:00am this morning I’d received panicked phone calls from three clients who’d (figuratively) shot themselves in the foot and were cocking back the hammer and sighting down the barrel to take better aim. They needed my help to stop and collect themselves.
After four hours of scampering around I’ve got the bleeding staunched and kept the damage to a minimum. When will people learn to call me first?
I had a very interesting, spirited discussion with one of the clients who’s a mortgage banker. He thinks the economy is in much, much worse shape than anybody in the government is letting on. I agreed with the litany of symptoms he recited but I don’t think that anybody in or out of government is prescribing the medicine that will actually help the situation. Instead we’re going in to the doctor with a broken arm and he’s recommending a face lift.
To give some contours to what my opinion is I think we need to stop propping up failing business models whether they’re in the financial services industry, the auto industry, or the airline industry. I agree that we need to preserve liquidity but I don’t see any reason to preserve shareholders’ equity while doing it.
Most especially I don’t think that another stimulus check of the same sort as the last is called for at all. Our economy is already too dependent on consumer spending and giving it a hand in becoming moreso is foolish IMO. We need to craft some measures very carefully to incentivize business investment in the United States. I’m open to suggestions on how to do this but raising the corporate income tax or taxing capital gains more highly probably won’t help.
One suggestion might be to make it compulsory for performance bonuses to be paid in shares of the company concerned, and for it to be illegal to sell said shares within five years of the award. In megacorporations everywhere, but particularly in American-based ones, short-termism is one of the major causes of just about any problem you care to mention. Get appointed, sell assets like a drunken sailor on shore leave, collect your bonus for the last quarter’s profits and leave before the brown stuff hits the spinning thing.
I agree that we need to preserve liquidity but I don’t see any reason to preserve shareholders’ equity while doing it.
That rhythmic percussive noise you hear is my applause…
Markets only work when risk is real, and bad choices are penalized.
I agree. We shouldn’t intervene to preserve equity. With the exception of oil stocks and some banks. And of course we should make sure the muni bond market is sound.
And I resent any implication that my portfolio leans toward oil, banks and tax-free munis.