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The Future of Wall Street


Given time, opportunities will arise.


"The main thing about money, Bud, is that it makes you do things you don't want to do." --Lou Mannheim, Wall Street

They say you're a reflection of the company you keep. That's unfortunate news for those working for companies in the financial industry.

When the 20th Anniversary DVD of Wall Street was made, I was featured in the accompanying Oliver Stone documentary. Following filming, I asked the director why I was chosen. His response was that in his casting quest, he found many traders who wanted to be Gordon Gekko but few who had the humility of Bud Fox.

Given the virology of acrimony aimed at financial professionals, I can anticipate the reflex response to the above reference. Bud Fox was a crook, Wall Street is full of crooks, Todd Harrison, as a derivative trader for almost 20 years, must be a crook too.

As the point of recognition regarding the severity of the financial crisis evolves, socioeconomic anxiety manifests in kind. Capitalism, the pride and joy of our free market system, became an instant villain when an era of conspicuous consumption shifted to the age of austerity.

What some people fail to realize is that the writing has been on the wall for many years. While financial risk managers shoulder blame, culpability extends to policy makers who ignored the warning signs and uneducated consumers that lived beyond their means throughout our last, lost decade.

To appreciate the magnitude of where we are, we must understand how we got here. Only then can we begin the arduous task of rebuilding the system from the inside out and paving the way to better days.

Back to Basics

When I started in the financial industry, there was a fraternal bond of trust where transactions occurred in trading pits and over untapped phone lines. It was a time when your handshake meant something and all you had was your name and your word. It was a time, in retrospect, of great vulnerability.

After the tech bubble, the healthy and natural progression dictated we enter recession. Alan Greenspan never allowed us to take that medicine, opting instead to inject the economy full of fiscal and monetary drugs. The resulting imbalances steadily built through the years and arrived at our doorstep with a thud.

It's not wise to mess with Mother Nature. We're now witnessing the other side of risk gone awry and the cumulative comeuppance of a scorned business cycle. While Washington wiggles through the next iteration of stimuli, we're left to remember that time and price are the only arbiters of our financial fate.

Last Wednesday, I offered that a monster move was coming for the market, a binary event predicated on the reception of the latest bailout bill. My gut was that the move would be higher-a bear market bounce that catches traders leaning the wrong way-but that is a different conversation than sounding an all-clear to pile back into a bull costume.

As context for this discussion, the rally off last Wednesday's lows was acute. Bank America (BAC) tacked on 88%, Citigroup (C) added 28%, JP Morgan (JPM) lifted 24% and the PHLX KBW Bank Index (BKX), an aggregate composite of the banks, was up 30%.

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No positions in stocks mentioned.
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