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Economic Review

03/03/09

Why the continued meltdown in US Stocks you ask?  Simply because there continues to be no tangible change to factors that helped produce the debacle we are facing.

The US Equity markets resumed a meltdown status this week as the major averages are posting well over 10 % losses and that adds to the over 30% losses posted in 2008.  Why the exuberant slide in prices?  Probably the most noteworthy factor is a loss in confidence in a number of facets of the US system.  Yes, there are several well founded criticisms of the recent Obama bailout plan, the misallocation of tarp assets, the nationalization of some of the largest US banks, but believe it or not, these may not be the most prevalent drivers.

What is really starting to disgust investors is the lack of accountability for outrageously poor decision making and accountability by business and political leaders alike.  There continues to be political leaders that head committees whose previous actions could be seen as directly accountable for the recent conundrum seen in the mortgage and real estate crisis in America, where these individuals continue to pontificate the direction of new bailouts as opposed to being ousted from office and investigated for wrong doings.

On the business side, CEOs continue to try to pad profits by outsourcing labor to low wage zones without equitably distributing the profits of those actions to the employee base that helped produced them.  In general, CEO compensation remains despicably inappropriate and more so in light of their pathetic performance.  One of the forefathers of sound management theory (Peter Drucker) stated that no CEO should make more than 20 times the pay of its least paid worker, where profits should trickle down to the employee base.   He went on to state that one of the demises of the great US capitalistic system would be the greed of its corporate leaders.

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