High? What High?

Said a really curmudgeonly guy
On the Dow Jones Industrial high:
"It's still quite a ways
From the Internet craze,
When adjusted for core CPI."

Dow Jones Record High

Despite the new highs in the Dow,
Economists still disavow
The hope that those wishin'
To find a position
Will likely be getting one now.

The stock market's rate of return
Is based on what companies earn.
As long as it's more,
On the stock exchange floor,
Employment's of little concern.

Regulatory Oversight

If the SEC chairwoman-candidate
Has both tried the Street and defended it,
One may sensibly ask
If she'll make of her task
To have reined in the Street or befriended it.

According to the New York Times' Dealbook, there's a "signal to Wall Street in Obama's pick for regulators."  So, one may ask, what is the signal?  In announcing his nomination of Mary Jo White to run the Securities & Exchange Commission, President Obama said: "It’s not enough to change the law; we also need cops on the beat to enforce the law," adding: "You don’t want to mess with Mary Jo." Indeed, Ms. White made a name for herself as the United States Attorney in Manhattan in the '90s, prosecuting the 1993 World Trade Center bombers and John Gotti, among others. The current US Attorney in Manhattan, Preet Bharara, who put inside trader Raj Rajaratnam in jail, is among the generation of prosecutors trained by Ms. White.

This is all well and good, but her appointment sends other signals as well.  As a recent, must-watch PBS Frontline documentary points out, no Wall Street or financial industry figures have been prosecuted for the frauds that contributed to the financial crisis.  As chair of the litigation department at Debevoise & Plimpton for the last ten years, Ms. White made it her business to keep the industry's leaders "untouchable".  The "revolving door" between Wall Street and Washington has long served to take the teeth out of regulation; it remains to be seen which way the door is turning in the case of Mary Jo White.

A Sandy Saga

Here's the ballad of Hurricane Sandy,
Who proved just a little too handy
At blowin' and drenchin'
And throwin' a wrench in-
To Wall Street's modus operandi.

Liquidity's normally fodder
For the markets to act as they oughter,
But as mortgages do,
When Sandy came through,
The stock market went underwater.

She disrupted the stock trading minions,
Though in most educated opinions,
This hurricane paled
Before those that whaled
At Floridians and Carolinians.

The wind filled New Yorkers with terror,
And climatically did something rarer,
Since trading has ceased
For two days at least
Not since the Victorian era.

It's a terribly deep devastation
In the experts' informed estimation,
Though the Keynesian boost
As rebuilding is loosed
May deliver some small compensation.

The Business of Money

If those who manage and gather it
Were not so quick to slather it
On those who watch and legislate it,
Less so for to regulate it,
Likely there'd be risk in it,
But less than now exists in it,
Regaining public trust in it
When rules are more robust in it.

Last night, Dr. Goose attended a stimulating panel discussion at the Museum of the City of New York entitled: "Can Wall Street Reinvent Itself?" The short answer is that nobody knows, but you can provoke some necessary clear thinking and soul-searching when smart, knowledgable and conscientious people tackle the question. Moderated by NYU financial law professor and retired Lehman investment banker Ronald Filler, the panel included -

• Josh Brown, financial advisor at Fusion Analytics and former broker, author of Backstage Wall Street, blogger at Reformed Broker;
• Heidi N. Moore, New York bureau chief of Marketplace radio and former Wall Street Journal reporter;
• Bill Miller, partner at the Herskovits law firm, providing legal counsel to securities-industry firms, registered persons, whistleblowers and defrauded investors; Forbes contributor, blogger at Broke and Broker.

If there was consensus among the panel, it was that the public's trust is damaged and can only be regained by by an industry structure that rewards working in the client's interest, with simple, strong rules to enforce such behavior.

Is It Just an Expression?

Investors incessantly say:
"Sell in May, and then go away,"
And stock market nerds
Who heeded these words
Are 6% richer today.

Via the FT's Alphaville blog, we learn that May 2012 was a very bad month indeed for US equities:

The Dow Jones Industrial Average had its worst month in two years in May. The index fell 6.2 per cent, the largest decline since dropping 7.9 per cent in May 2010 (Wall Street Journal). Closing down 0.23 per cent at 1,310 on Thursday, the S&P 500 had its worst month since last September (Reuters).

A strict observance of the "Sell in May then go away" rule, executed on the first of the month, would therefore have yielded the best results.

Reversal of Fortune, Part II

There once was a trading technician
Who failed in his primary mission;
The bank, for this drawback,
Attempted to claw back
The bulk of his trading commission.

In reading of the fallout from the $2 billion derivative trading loss at J. P. Morgan & Co., and the bank's closing ranks around embattled CEO Jamie Dimon, I was struck by the mention of possible clawbacks in the compensation of those, such as the "London Whale" Bruno Michel Iksil and his erstwhile boss Ina Drew, who had direct responsibility for the loss. This got me to wondering: in our world of Too Big To Fail, moral hazard and golden parachutes, is the clawback of ill-gotten bonuses something that actually happens? I put the question to you, oh ye denizens of Wall Street!

Which Recovery Matters Most?

When the market was all of a-tatter,
To revive was a serious matter
In housing and jobs,
With the preference, obvs,
For the former ahead of the latter.

Q: If initial jobless claims fall less than expected, and the EU's economic sentiment indicator falls more than expected, how does the Dow react?
A: It jumps up by 100 points, provided that existing home sales rise more than expected.
The National Association of Realtors said on Thursday that its seasonally adjusted index for pending sales of existing homes jumped 4.1% from the previous month, vs. the 1.3% increase expected by economists. On the strength of this news, and against the headwinds from the US hiring slowdown and the European malaise, the Dow Jones Industrial index rose 114 points, or 0.9%, to reach 13,205. Investors evidently believe that the first sign of a US recovery will be in the housing market, whence all of our financial crisis troubles have come.

Reversal of Fortune, Part I

Said an equity trader named Corso:
"After last week, I certainly swore so
That the Dow was at pains
To give up its gains,
But this week it looks even more so."

The Dow Jones Industrial Average suffered its worst one-day drop for the year to date on Tuesday, falling 213.66 points, or 1.7%, to 12715.93. On the heels of a disappointing, holiday-shortened previous week, that made for a 4% decline over five trading days. After celebrating its best quarter in a decade, it's as if the market paused for reflection, looked around and didn't like what it saw. The Fed seemed to hint last week that no further stimulus would be forthcoming, and the European debt crisis heated up again on Tuesday, with rising Italian and Spanish bond rates reflecting renewed risk fears. Perhaps the rudest shock of all came from China, where we learned that sales of Caterpillar plunged 50% in March, casting doubt on both the company's prospects and the Chinese growth outlook.

Non-Farm Payroll Holiday

When unfortunate news is disclosed
On a day that the market is closed,
Investors are hopin'
That, at the next open,
It's better than firstly supposed.

The US stock market was closed for Good Friday, as were European exchanges, and thus could not react to the surprisingly weak employment data that came out on that day. The Bureau of Labor Statistics announced at 8:30 AM last Friday that non-farm payrolls increased by 120,000, much less than the 200,000+ increases in the previous three months, and definitely below expectations. Unable to trade on the news, market professionals thus had all of a three-day weekend to mull it over, a weekend punctuated by Easter and Passover celebrations. Is it possible that festive gatherings with family afforded the trading community a new perspective? We'll find out on Monday at 9:30 AM on Wall Street.

Cruelty to Muppets

Said a Goldmanite, freaking his guys out:
"How my conscience courageously cries out!
Though I trusted this firm, it
Exploited poor Kermit,
Rapaciously ripping his eyes out."

The New York Times set Wall Street ablaze today with its publication of Why I Am Leaving Goldman, a banker's bitter swan song to a financial culture gone astray. Greg Smith, the suddenly former head of equity derivatives in the firm's London office, made an earnest confession (perhaps too earnest) of what everyone else has said for years: Goldman, Sachs makes money by ripping off its clients. Inside the firm, clients are disparaged as "muppets" who deserved to get their "eyes ripped out" (sorry, Kermit). But, aside from the insertion of non-disparagement clauses in the Vampire Squid's employment contracts, what will change as a result of this cri de coeur? Maybe nothing, but it does provide a moment of clarity for reflection: conservative blogger Noah Millman, a former equity derivatives man himself, explains the money behind Goldman's changing ethos -

It takes discipline to say, “let’s take care of the customer, and think of the long term” when you’re talking about normal amounts of money. When the amounts of money become as staggering as they were in the mid-2000s, the game – at best – becomes “how can we convince ourselves that we’re taking care of the customer.” Because what if the only way to take care of the customer is to get out of the game?

However, the final word should go to Marketplace's Heidi Moore, who looks into the soul of Wall Street and asks:

Did Goldman change the way it did business? Maybe. But the more likely view is that those flaws - in the industry, in the firm, in other firms - have been there for a long time and the scales just fell from his eyes when it finally turned against him.

Corzine's Congressional Testimony

"A billion-point-two, evidently,
Has failed to be found, accidentally;
Though we foundered, it's true,
When our funding withdrew,
Our finances were fine, fundamentally."

Ex-MF Global CEO Jon Corzine told the House Agriculture Committee that he was "devastated by the enormous impact on many people's lives" when the giant futures broker went bankrupt. In his first public appearance since the firm's collapse, Mr. Corzine expressed regret but not remorse. MF Global's failure was, in his view, precipitated not by his misjudgment in holding a $6.3 billion leveraged position in European bonds, but rather the market's sudden lack of confidence in in the firm's balance sheet. Regarding the notoriously missing $1.2 billion in MF Global customers' funds, Mr. Corzine testified: "I simply do not know where the money is."

Preoccupied with Wall Street

Said the protesting, earnest young bands,
In their Occupy Wall Street demands:
"With a shortage of jobs
Comes a surfeit of mobs
With way too much time on our hands."

The Occupy Wall Street protest in lower Manhattan preoccupied the New York Police Department over the weekend, in a march across the Brooklyn Bridge that resulted in 700 arrests. The protesters also captivated the attention of millions and inspired similar movements in cities including Chicago, L.A., Montreal and Melbourne.  Occupy Wall Street appears to be an organic movement that feeds on a generalized anger at the state of politics and the economy.  Though there is no set list of demands, one protester perhaps summed up the grievances best:

"From 2006-2009 I owned a business with 12 employees. I closed my doors in 2009. I lost my home in 2010. I lived in my truck for six months. Now I rent a tiny room. I have no health insurance."

Seismic Media

In our national corridor of power
Was a quake felt in many a tower;
Though the trembling in it
Would last for a minute,
The twittering lasted an hour.

From the Beltway to Broadway, and from the Federal Reserve to the New York Stock Exchange, people up and down the East Coast stopped what we were doing yesterday, gripped by fear and uncertainty at the (mostly) slight trembling of the Earth and swaying of buildings. The 5.9-scale quake, which would have barely raised eyebrows in California, unleashed an all-time wave of Twitter messages as millions of earthquake virgins used social media to share their "first time."

Don't Buy Retail

Wall Street sees contrary sentiment
In retail investors' presentiment,
So, when Mom or Pop's right,
One asks if it might
Be the good call that coincident'ly went?

The Wall Street Journal's Kelly Evans writes in her Ahead of the Tape column that the American Association of Individual Investors' sentiment survey has been showing more predictive power than usual in the first half of this year.   Market professionals often see retail investors as a contrary indicator; small investors typically react in a herd to broad market moves, such that, as Stifel Nicolaus strategist David Lutz puts it: "If everyone's on one side of the boat, I like being on the other one."  The fact that the S+P 500 index climbed 6.6% after a bullish reading of the AAII December survey is an interesting departure, but how soon before Mom and Pop revert to type?

Bankers' Remuneration

Said a pundit, "Where's the validity
That the bankers are paid so unfittingly?
Does the world so demand
The result of their hand,
Or it's just their control of liquidity?"

The Utility of Wall Street

A pundit who pondered intently
That bankers abound evidently,
Found it hard to discern
What they all did to earn
The Beemer, the Benz or the Bentley.

Note to English speakers: click here for the Google translation of the Financial Times Deutschland column "Das Kapital."

Ken's Reluctant Conclusion

"Wall Street," said Feinberg, the Pay Czar,
"Inadvisable though its displays are,
 Didn't break any laws
Merely because
Of how great its renum'rative ways are."

Perfect Game

Wall Street's "too big to fail" titans
Had a quarter so good that it frightens;
On the trading parquet,  
They made money each day -
Is it rigged? Incredulity heightens...

Post Mortem on the Dow's 1000-Point Drop

Said CFTC Chairman Gensler
To Geithner, "Are we among friends, sir?
(I'd like to say how
They whipsawed the Dow,
But I really don't think that I can, sir.)"