March 13, 2009

SOME SIMPLE SOLUTIONS TO HELP RALLY STOCKS

900…you heard me…900, that’s how many people CNBC announced are going to be laid off from Conoco Phillips, an energy company with 33,000 employees worldwide, and it sounds almost pointless. I think there are trends taking place in this country that are undermining the possibility of growth , the stability of the housing markets and the confidence in the capital markets. Its solution needs to move away from the debate that starts with “why?” which only punishes those with good ideas, to “why not?” not a novel suggestion since there isn’t much downside to being wrong right now.

STOP BUYING THE STOCK OF COMPANIES THAT FIRE EMPLOYEES
How is it that companies got into the mindset that firing employees was a way to get Wall Street to reward them with a positive analyst rating? Easy, companies tapped their ever expanding measures to control public opinion simply and started calling the expulsions layoffs. A much nicer word because it suggested the option of hiring back at some indeterminate date. Okay, fair enough but bear with me for a minute. I recently wrote about an interview with Jack Welch, former CEO of GE who commented that during recessions CEO’s around the country are faced with decisions that are based on current projections of economic growth and segmented impact on revenues. The murkier those projections are, or the deeper the economic slowdown is, the more likely the company, being lean, mean money making machine, will layoff some employee to bring much needed capital directly to the bottom line. Trouble is these days CEO’s are so panicked about the future that they are firing in droves, anticipating the worst. Now I can understand the logic behind raising much needed capital in the world but lets be honest, how can we claim faith in free market philosophy to “let companies fail” but consider human capital the only expendable resource. If the market clobbers companies that are looking to fail why isn’t the reckless firing of employee an equal indication of a company’s poor heath, not to mention poor project management.

THE TREASURY SHOULD NATIONALIZE THE NATIONAL ASSOC. OF REALTORS INSTEAD OF THE BANKS
I have a dream, a world where there’s no NAR. It’s easy enough; the NAR uses a bunch of lobbyists to pitch to Washington insiders whereas the banks give the political parties cold cash. The NAR whom I believe has been the biggest source contributing to the unstable condition of housing valuations would jump at the cash. The modus operandi of the association has been to systemically nurture the foreclosure of housing by floating public listings of values at unreasonable levels in hope of preserving their self interests above those of people being forced to sell. Either way the values of homes are declining at an alarming rate and owners are forced to compete against one another which creates distortions in the market. Give the NAR what they want, and maybe a little honesty will come back into the market.

KEEP THE MARK TO MARK AND REINSTATE THE UPTICK RULE
We’re in a bear market rally right now, sorry for the bad news. But that doesn’t mean that the bear market should be the playground of Hedge Fund managers that want to make a buck and don’t care who they screw in the process. Has anyone noticed that only assholes partake in bubbles? Look at oil, dot com stocks, REITS the list goes on. Assholes take it up and the rest of us take it down. The problem is with the endless carrot to keep people in their investment accounts and 401k’s the system shouldn’t be stacked against them. Let assets be marked, centralize the process (al la IDC) and allow for arbitration if the mark is unreasonable. And as far as uptick rules are concerned, don’t cater to people who short the market if it’s at the expense of those who don’t.


It’s that simple and although there are others I’m sure you get the idea if we are to be a society that encourages personal investment we owe it to ourselves to play by rules. Capitalism is vulgar and often unfair; it discourages the unfettered access to the markets that has caused so many people to lose more money than they ever had a chance to make. A well established set of rules opens the door to innovations by virtue of setting up obstacles. Innovative people will always get us into trouble, but remember, innovative people (the very same one) are the folks to get us out.