PrintThat’s the only conclusion I can draw from today’s headlines.
First, let’s look at the New York Times (NYT). “Insider Inquiry Inching Closer to a Billionaire” discusses the implication of Steve Cohen, one of the rock stars of the hedge fund and investing world, in insider trading. “Hewlett’s Loss: A Folly Unfolds, By the Numbers” is about Hewlett-Packard’s write-off of nearly $9 billion of the $11 billion purchase price of a company that was, apparently, an accounting fraud.
The Wall Street Journal (WSJ) has the same stories on its front page, with “Trading Charges Reach SAC,” about the insider trading scandal, and “HP Says It Was Duped, Takes $8.8 Billion Charge.” Both stories also appear on the front page of the Financial Times (FT), along with “Adoboli imprisoned for 7 years in UK’s biggest bank fraud case,” about a rogue trader at a major investment bank. The NYT has the trader story on the front business page, and the WSJ has it on the front markets page.
So what’s a reader to think? To my mind, this type of story is a good part of what is driving the current “tax the rich” meme—a sense that they’re all crooks and don’t deserve the money, and that taking it back through taxes is not only necessary but just. You saw this in the attacks on Romney during the campaign, and the story continues. The unfortunate thing is that it’s not just propaganda, as these stories show.
The government isn’t doing much better, as we have seen recently with multiple scandals in Congress, the White House, and now the military. Perhaps the lesson is that people are people, no matter where they work. Personally, I think the genius of the American system is that we have multiple power centers, so that when one goes off track, as it inevitably will, the others can pull it back to the center.
We are seeing this right now in both the business world, as regulators shake out scandals and bail out systemically risky failures, and with government, as CEOs and the Fed weigh in on how the current fiscal cliff must be resolved. (See “Fiscal cliff is already causing damage to US, says Fed chief,” on page 4 of the FT, and multiple articles on the CEOs over the past week.) The financial world is a mess not only at the corporate level, but at the governmental level as well.
It continues to look likely that “the rich” will pay higher taxes, but many of “the rich” will be surprised to find themselves in that category. On page A6 of the WSJ, “Most Households Face ‘Fiscal Cliff’” includes a good exhibit outlining who will be paying and how much. As I’ve mentioned in a couple of posts, the less affluent will actually end up getting hit the hardest, proportionally, and the AMT will be the biggest nasty surprise for the middle class. But, in dollar terms, the upper middle and upper income classes will still get slammed.
With all that said, and acknowledging that we could be facing a tough couple of years, I am still incredibly grateful that I live here in the U.S. On almost any metric you care to name, we are best positioned to thrive over the next couple of decades, and we have the benefit of a system that largely self-corrects over time.
I am also incredibly grateful in my own life for my family, first and foremost, and also my profession and the company I work for. The financial world is a mess, with many problems, but I work for a firm that is committed to excellence, to ethical behavior, and to everyone involved. I have a chance to look at many other companies and industries as part of my job, so I know just how rare Commonwealth is.
On that note, I wish everyone a very happy Thanksgiving. May you all be as blessed as I am, and enjoy the holiday with your loved ones. Thank you for reading.
