Guest Author - Tony Daltorio
There is some good news this week as both stock markets and credit markets globally improved. Do not read too much into the stock market rally yet. The last week of the month is notorious for giving false signals and fake-outs as far as market direction goes. I am much more interested in what the markets will do over the next two weeks.
BANKERS GONE WILD
All across the globe financial institutions have been bailed out by their governments with many measures, including capital injections. The term capital injections means that governments put money directly into banks by purchasing new shares of preferred stock of the banks.
I have been fascinated to see the differences between the Wall Street culture and how things are done in other countries. For instance, in Asia many CEOs of banks have been forced to make a public apology for their mistakes. In Asia, the banks are putting the government money to work and making loans.
In Europe, the apologies have been less public. However, European CEOs are taking construtive action. For instance, the CEO of one of the world's largest banks, Josef Ackermann of Deutsche Bank, is giving back his entire $17 million bonus for 2008. In Europe as in Asia, the banks are putting governments funds to work by making loans.
What about the US? As far as the Wall Street bankers are concerned the party is still on! After all, the punchbowl has been re-stocked with taxpayer-funded booze! Most US banks are still not making many loans. What are they doing with that government money??
First, nearly every bank that has received government funds is looking to use those funds to buy other smaller banks that aren't on the government dole. Some takeovers have already happened. The US may end up being left with only a handful of banks.
Second, nearly every bank has used the governments funds they have received to greatly expanded their employee bonus pool for this year. And you guessed it - most of the bonus pool will go to the top brass. Have they no shame???
ELECTION 2008
I usually don't like to discuss politics, but since the election is Tuesday I thought I would mention it briefly. Just to go everyone some background - my favorite Presidents of the modern age are Kennedy, Reagan, and Clinton. And please remember to vote on Tuesday!
My thoughts on the election? I have become a cynic. I have been expressing the same cynical opinion to family and friends since January. I tell them to simply follow the money and see which candidate is receiving the most monetary support from Wall Street and that person would be the winner.
One candidate has received steady support from most Wall Street executives all year, led by the Wall Street powerhouse firm of Goldman Sachs. The support at this time is easily tens and tens and tens of millions of dollars.
That candidate is Sen. Barack Obama. Sen. John McCain is very strongly disliked on Wall Street because of his history of having an independent streak and his attempt a few years ago to end the gravy train that Wall Street was getting from the mortgage giants Fannie Mae and Freddie Mac. So my cynical political prediction is Sen. Barack Obama in a very easy victory.
