Greed, Fear and Market Manipulation as Wall Street Bonuses Rise

By: Andy_Sutton

Lessons of 2007 - Yesterday I had the opportunity to take a rather remarkable group of young people to a regional business competition. This was an actual competition, not one of these contrived events where everyone wins and hand wringing is out in full force. All in all, the group did rather well with one student winning her category, and two others placing 4th in a team event. For a group of 8 I was rather pleased. I also came to see the full scope of human emotion that ensued in the hours after the competition. The rest of us should be so lucky to have the life experience that transpired yesterday although I didn't realize it myself until those early hours of the morning when the world is silent and still and permits us time for reflection. 

We talked for a long time on the way home about investing oneself into something and how it is a risk. There is the very real chance of failure. In fact, there is the promise of failure for at least some of the risk-takers. We talked about how yesterday's experience was a microcosm of business and entrepreneurship. People take risks. Some get the rewards; others don't. The ones that don't have two choices: They can put their tails between their legs and quit or they can work even harder, invest even more of themselves, take another chance and hope to benefit in some way from their experience.

We also talked about fear and how it is a powerful and beneficial emotion, when used properly. It helps one to guard against complacency, act as a motivator, and keep us on our toes. Fear and failure are powerful realities of our world. Failure tends to cleanse us of unprofitable ideas and schemes. Anyone who has ever watched an episode of the The Honeymooners knows exactly what I'm talking about. Ralph Kramden is constantly coming up with money-making schemes, but failure (and his wife) always conspires to ground his efforts.

As the bus went silent, I could almost hear the wheels turning as we all contemplated. For me, it was a catharsis of sorts as I tried to frame fear and failure and reconcile them with the diametrically opposed mantra of the bailout mentality that exists at many levels of our world today. Clearly, the two cannot exist in the same conceptual space. How can it be that the cleansing effects failure has on our economy be applied only in certain circumstances? How can any system be efficient or successful when certain parties are relieved of risk and failure that is consequently piled onto other, often unsuspecting groups. This ties directly into what I wrote about last week when I spoke of the hidden and unseen risks that are running rampant through traditionally ‘safe' investments. The risk has been transferred from people that caused the problem to the rest of us.

For a long while now it seemed as if the only negative consequence of the mortgage situation would be injured balance sheets of corporations and debtors alike. It goes so far beyond that though. It goes way down the very fabric of our conceptions of fairness, equity and ethics. For some it will change our address, but for many others it will change our very way of thinking and how we evaluate risk and safety when contemplating financial decisions. Never before have we had to operate in an environment where the scales are so overtly tipped against us.

Another glaring example of this imbalance comes today in the news that Wall Street bonuses may increase nearly 17% to almost $21 Billion. This despite the fact that millions of Americans lost out this year. Thousands have lost their homes. Thousands more have yet to. Thousands more have seen the value of investment portfolios drop precipitously. Yet somehow Wall Street manages to eke out their bonuses. This should be an affront to the average person. It is certainly an insult to any sense of fairness or decency. The take-home message here is that we cannot expect honesty, decency or fairness in anything relating to money. News flash? Probably not, but the dynamics have certainly changed for the worse in the past year.

So how does this relate to an obscure business competition in Eastern Pennsylvania? It sets apart for us in crystal clear fashion the essence of our perception of risk and failure, and then shows us how manipulation and greed take these fundamentals and turn them on their head. Hopefully the rest of us are able to take a minute and reflect on our own paradigms and perceptions and gain some benefit as well. Best wishes to all of our readers and their families for a Merry Christmas and a prosperous and safe New Year. 

By Andy Sutton
http://www.my2centsonline.com

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. He currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar.

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