Streetwise

Lauren Rudd

Sunday, July 29, 2012

Footprints in the Sands of Time

Benjamin Franklin was given to say that you may delay, but time will not. And so it is that once again footprints in the sands of time mark the anniversary of a journey begun long ago. On Sunday, July 31, 1988 the following prologue appeared in the Trenton Times of Trenton, NJ.

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

Streetwise can now attest to 24 years of national publication without a single missed a week. If you are keeping count, those years represent 1,248 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 24 years. 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 if they are ever fully implemented and funded.

No, the oversight is not perfect, as the victims of various Ponzi schemes can readily attest to. Just as damaging is the continual violation of the public trust, illustrated once again by the ongoing Libor scandal.

Meanwhile, Main Street continues to writhe under the pain inflicted by the Great Recession. And Main Street is not some ethereal concept but 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, enjoying an increasing share of the country’s income and wealth; wealth generated over the past 20 years as corporate executives convert global resources into personal affluence at the expense of labor.

The strike at Caterpillar is an excellent example. The company wants to freeze wages, while giving large bonuses to management, despite a high degree of profitability.

David Gordon and Ian Drew-Becker of the National Bureau of Economic Research wrote that the top 10 percent, or more specifically the top one percent of the population, have benefited disproportionately from the country’s productivity surge.

Yet, the Citigroup report also stated that plutonomy is not without risk, that political enfranchisement remains one person, one vote (questionable nowadays) and eventually Main Street will fight back.