Random Thoughts: Wall Street Unoccupied?

By Todd Harrison  OCT 12, 2011 9:30 AM

The unintended consequences of crisis management often become more dangerous than the problems they were created to solve.


A few years ago I shared Ten Themes for 2009, in which I suggested we would be wise to prepare for a not-so-quiet riot. Nestled within that article was the following vibe:

"The age of austerity has arrived and we’ll see a steady stream of social strife as the rejection of wealth increases in size and scope. Societal acrimony, which began to percolate last year, will manifest through social unrest and geopolitical strife as we edge ahead.

This is, without question, the single greatest socioeconomic risk as we stand at a critical crossroads. On one side, there is orderly debt destruction that will pave the way for inside-out globalization. On the other, there is isolationism as sovereign nations -- and the people within them -- protect their interests at all costs."

Fast forward to modern day. Big businesses from BP (BP) to Goldman Sachs (GS) are widely considered “evil.” Protestors have occupied lower Manhattan in an effort to magnify their vocal displeasure. Across the pond, riots are commonplace as austerity measures are implemented. People are pissed, and in many cases rightfully so.

The untold story, at least thus far, is what happens if the protestors achieve the desired result. Since 2008, the securities industry in New York has seen 22,000 jobs vanish, according to Comptroller Thomas P. DiNapoli, and an estimated 10,000 more heads are expected to roll by the end of 2012.

I’m no stranger to income disparity. The chasm between the haves and have nots has also been a longstanding theme in Minyanville before, during, and after it was masked by the lower dollar and skewed by the spending habits of a slimming margin of society. That’s a valid and pertinent discussion, but one for another time.

The inevitable reality is that NYC will be hit by two congruent forces: higher taxes and spending cuts, neither of which is pro-growth. An optimist will observe that the point of recognition has finally arrived and admitting you have a problem is the first step toward solving it. Indeed, we have to go through it to get through it and we’re going through it now.

The other side of the trade, however, needs to be noted. Should Wall Street continue to shrink -- it’s viewed as an acceptable casualty of war in the eyes of Main Street and K-Street -- New York City will be disproportionately affected as lower tax revenues further crimp an already skin-tight budget.

To this I would say to those who are Occupying Wall Street: I hear you and in many cases, agree with your points. Just be careful for what you wish. The unintended consequences of crisis management often become more dangerous than the problems they were created to solve.


Twitter: @todd_harrison

No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.