Streetwise

Lauren Rudd

Sunday, July 31, 2011

Streetwise Celebrates 23 Years

Once again footprints in the sands of time mark the anniversary of a journey that began on Sunday, July 31, 1988, with the following prologue appearing in the Trenton Times of Trenton, NJ.

“Today Lauren Rudd begins writing a weekly column about Wall Street for The Times...”

Streetwise can now attest to 23 years of publication without a single missed a week. And in case you are keeping count, those years represent 1,196 columns. The irony of it all is what I wrote on that fateful day many years ago. Space does not permit a full recital, but the following words that began the column back then might once again be considered a prescient commentary on today’s market activity.

“The individual investor has been pummeled and is ready to surrender. What with the debacle of last October (Ed note: refers to the market crash of Oct. 19, 1987), many are deciding that they have had enough and are leaving Wall Street, an action reminiscent of an audience walking out on a bad play.

After going down in flames in October, individual investors retreated to lick their wounds and decide what to do next. This leaves Wall Street worried and well it should be. The individual investor has always been its bread and butter. However, these same investors are now beginning to feel that their trust in Wall Street may have been misplaced and that the game is rigged with the spoils going to the large institutions.”

Yet, there has been a degree of change over the ensuing 23 years and individual investors have benefited. The fair disclosure rule requires that everyone receive the same information at the same time, while Sarbanes Oxley helps ensure that what you read in a financial statement is accurate. The Dodd-Frank Wall Street Reform and Consumer Protection Act and the Consumer Financial Protection Bureau are additional small steps forward.

No, the system is not perfect, as victims of one of the many Ponzi schemes of late can attest to. Even more damaging is the ability of banks and investment houses to amass the financial resources that when used improperly can upend the nation’s economy, a lesson that we as a nation repeatedly buy and pay for.

Main Street knows this only too well as it writhes under the pain inflicted by the Great Recession. Main Street is not some ethereal concept but as Charles Blow said is comprised of those honest people who do honest work — crack-the-bones work; lift-it, chop-it, empty-it; feel-the-flames-up-close work; crawl-down-in-there work – work that someone must do.

Washington would be well served to learn from Main Street about the need to do the things that no one wants to do but that someone must. Otherwise we will continually face potential economic destabilization as less than one percent of the work force flaunts its ownership of a disproportionate amount of our nation’s wealth; a point emphasized several years ago by the equity analysts at Citigroup.

In an Equity Strategy Note dated March 5, 2006, they wrote that the rich are the dominate drivers of demand as they enjoy an increasing share of the country’s income and wealth that has been generated over the past 20 years. They went on to say that the CEOs who lead the charge of converting global resources into personal wealth at the expense of labor were major contributors to what they labeled plutonomy.

A similar conclusion was reached by David Gordon and Ian Drew-Becker of the National Bureau of Economic Research. According to their research the top 10 percent, and more specifically, the top one percent of the population, have benefited disproportionately from the country’s productivity surge.

However, the Citigroup report also made it clear that plutonomy is not without risk, that political enfranchisement remains one person, one vote and eventually Main Street will fight back.