By Numerian

Wall Street cannot see that a regime change has come to the markets, one in which corporations will be increasingly on the defensive, hounded by governments everywhere looking to raise tax revenue, and assaulted by a permanent buyers strike from consumers adjusting to their own drop in living standards. Image

The financial press likes to talk up those occasions when the Dow presses on above 10,000. Such talk lately has become desultory, since it seems every other week the Dow lurches below 10,000 and then manages to climb its way back up. The market has been in this funk since February of this year, when the Dow began its most recent push from below 10,000, all the way to a peak around 11,200, only to fall three times below the 10,000 level since and recover with less and less conviction.

Is the market creating a topping pattern, or is this merely a consolidation period to be followed by new highs for the year? This is the perennial question whenever the market trades sideways, allowing the bulls and bears to thrash out the economic arguments, and ultimately allowing real world conditions to resolve whether the market will break out on the upside or downside.

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If you did that, they'd call it immoral

Michael Collins

Over at The Agonist, Numerian offered up a short, powerful explanation of what's happened with Wall Street bailout recipient, Morgan Stanley. The former investment bank bought five properties in San Francisco as the market verged on a sharp downturn. Their value fell precipitously. The office buildings lost 50% of their value at purchase.

Numerian's piece shows that the cosmetic terms used to differentiate Morgan's “structured default” are no different than individual home owners who abandon their mortgages for purely financial reasons.

“Morgan Stanley doesn't look at it that way, not when it comes to its own behavior. It only expects you, the consumer and homeowner, to have moral attitudes about financial decisions. With the corporations, morality doesn't enter into it; it's just business. That is why it is very, very important for strategic defaults by firms like Morgan Stanley to be dressed up as something different - as a negotiation done voluntarily for mutual agreement. And after all, Morgan Stanley itself isn't going bankrupt, just the subsidiary that bought these properties is acting like it's bankrupt.

“The last thing the financial industry and our worthy government leaders want is for American consumers to act as irresponsibly and amorally as our corporations do. If most Americans acted like that, not one major US financial firm would be left standing.”

ee Morgan Stanley Defaults, Numerian, The Agonist

Morgan Stanley received $10 billion in federal bailout funds as Wall Street high fliers faced collapse. in 2008. Just months after the citizen subsidy, Morgan gave 438 executives seven figure bonuses.