Posts Tagged ‘Wall Street’

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Stocks Soar Near 12,000 While Unemployment Stays Steady Near 10 Percent

01.25.11

As the Dow Jones Industrial Average nears 12,000, its highest point since June 2008, unemployment still hovers just below 10 percent.

Just showing how much of a gap there is between perceived and actual economic health.

Meanwhile states are slashing everything from police forces to HIV testing, treatment, and counseling to college funding, and many people think that we’re in the middle of a structural shift that doesn’t seem likely to end the current unemployment rate any time soon.

For those people who still own stock, this is good news: their once vanished equity slowly regaining their worth increases their overall financial independence. And for those who had capital to invest in the market when it was at or near its low, they really should be feeling good about the news.

But for those who didn’t own stock or have 401(k)s, or who used up all of their savings to stay afloat while they were looking for work, this doesn’t help them much. Now, it could be the case that the uptick in jobs is related to this rise in the stock market. Either way, it seems that this news is indicative of one industry doing well: the financial district.

Even though, apparently, those companies saw their stocks drop:

Gains were spread across the market. Financial and health care companies were the only two of the 10 company groups that make up the S&P index to fall.

Odd considering the financial district is still giving itself large bonuses (albeit some of it deferred per new rules) and the health care industry is where much of the job growth exists.

McDonald’s Corp. gained 0.5 percent to $75.38 after it said it meet analyst expectations and warned that rising food costs could affect its margins this year.

J.C. Penny Co. jumped 7 percent to $32.52 after the retailer said it would close some stores and its catalog business to reduce costs.

So, a large retailer company shutting stores – and thus, laying off most likely hundreds of people – is good news worthy of its stock going up? And while McDonald’s showing slight improvement means that those entry-level jobs may stay intact, but those aren’t the types of careers that families can live on.

A bright spot perhaps:

Materials companies rose after a report from the National Association for Business Economics showed that economists are more positive about economic growth and the job market than at any time since the start of the Great Recession in December 2007.

Though the stocks went up based on the speculation that jobs will continue to grow, not on actual job growth. Given what we know about the depths of the unemployment rate, it seems like the stock market could be getting a bit ahead of itself.

Photo courtesy of othermore (other)’s Flickr Photostream.

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Wall Street Flip-Flops Allegiance Back to Republicans

02.25.10
Wall Street

In what was really no surprise at all, it was announced on Wednesday that the financial companies on Wall Street shifted their federal contributions from the Democrats early in 2009 to the Republicans by the year’s end.

Why?

Well, it’s pretty simple.  See, they usually favor the Republicans because they’re the ones who push for deregulation, which lets them do all that fun stuff they did for the last decade like fabricating their own impossible derivatives to line their pockets – which had a huge hand in causing our current deep recession that has forced tens of millions of Americans out of work.  When the bottom dropped out at the end of 2008 – the markets crashed, the mortgage industry collapsed, and the banks nearly went bankrupt – Obama was elected president and the financial industry flip-flopped. They started donating all kinds of contributions to the Democrats to help convince them to bail them out, which they did. 

But now that things are back to good for them – the rest of the country is still devastated and can’t get loans while average Wall Street workers get half-a-million dollar bonuses and look no worse for the wear – they’re once again throwing their support behind the Grand Old Party, hoping that they can get back to their old ways.

And the wheel goes round and round. 

This is why I fail to understand why people who are so quick to distrust government so easily lend their confidence and trust in corporations.  Both institutions are run by power-hungry people who are easily corrupted, as is usually the case with humans and power (see: any history book).  A balance where one checks the other seems to give us regular citizens – you know, the vast majority of the population – the best shot at not getting completely screwed by either entity.

I just don’t think our current political climate couldn’t handle that notion.

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You Fail, We All Fail

10.27.09

This is exactly the sort of thing we should expect from the Obama Administration.  He’s been preaching it since he started running for office: accountability.

And now he and Rep. Barney Frank plan to require that very culpability from the financial industry in a very unique way.  Essentially, if a firm gets too big for its britches and ends up on the edge of collapse – you know, like Freddie Mac and Fannie Mae, AIG, Lehman Brothers, etc. –  the government could intervene at the cost of the corporation’s competitors.  Not the taxpayers.

Think of it like when you were in school and you were put into groups to work on a project and everyone got the same grade.  You fail, we all fail.  It was sold to us as a way to have the stronger students help along the kids who weren’t grasping the material as well.  I know that I hated it because, as a good student, it just meant I had to work extra hard to pick up the slack to ensure I got a good grade.  But, it was worth it to me to do someone else’s work to be sure that I earned the marks I received.  I wasn’t going to let one slacker ruin it for the rest of us.  And, it was an invaluable lesson to learn: our actions affect those of others in our team.  And, in this case, in an odd way, all of the competing firms on Wall Street are on the same team: the team of running our economy.  If one of you cheats, you all pay the price.  Because if not, the game is over, the economy collapses.

I remember when I was in high school and my parents always warning me to be careful who I hung out with because even if I wasn’t doing drugs, I could get in trouble if I was with kids who were.  Guilty by association.  Funny how all of these life lessons we learn growing up just get tossed out the window when it comes to financial firms.

I hope the bill passes.  This is the kind of change that Obama was elected to do.

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Quote of the Day

02.20.09

I’m copying this directly from Andrew Sullivan’s blog because it’s such a great quote.

“The response of the right to the crisis in America was to flee to its catechism. The Republicans propose to bail out the economy with doctrine. Unemployment is 7.6 percent and rising, and they say: let them eat Friedman. When billions and billions of dollars are needed for the Pentagon (fine with me) and for Wall Street, it is damn the zeroes, full speed ahead–but when the prospect of relief for ordinary Americans in trouble rears its fair and compassionate head, the deficit desperately matters again. The Republicans are not only heartless, they are also hypocritical, since the cause of all this misery was the market abandon that they promoted so messianically. These are the people who would have privatized, that is, destroyed, Social Security: how can their protests not be met vehemently? This vehemence is not “partisanship,” it is analysis. It is not “populism,” it is liberalism,” – Leon Wieseltier.

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$500-Grand Ain’t So Bad

02.04.09

President Obama has put a salary cap on Wall Street execs at $500,000 and any bonuses they receive will be in the form of stock that can’t be sold until the taxpayers get reimbursed for their generous handout bailout.

Good!

Not only are some of these execs making multi-million dollar salaries, they’re also getting multi-million dollar bonuses all the while their corporations are requesting government financial assistance.  Unreal.

I get that these CEOs function something like NFL head coaches.  They’re the figurehead of this big entity and they get all the credit when they win and take all the blame when they lose.  Because of this precarious position, they get contracts of guaranteed money, so even if they suck so badly that the team goes, say, 0-16, the head coach can be fired yet still receive either the money left on the contract or perhaps negotiate a buyout.  (I’m sure there are other options since I am not, nor do I claim to be, a contract lawyer.)

Either way, once the coach inks that deal, he’s paid.  And of course the head coach wants to win just like the executive of CitiGroup wants to increase the value of the company’s stock.  At the same time, there’s no real penalty if they don’t.  A CEO tanks an entire corporation, he still gets a huge payday even though his shareholders could have lost fortunes based on his ineptitude.

I guess my questions are these:

Whatever happened to being compensated according to the quality of your performance?  Why are these select few group of people somehow outside the realm of responsibility than the rest of us? And, of course, why are these people the ones with the power of affecting so many other people’s lives and money?  Shouldn’t this be the group LEAST likely to get rewarded for failure?