Constant's pations

If it's more than 30 minutes old, it's not news. It's a blog.

Friday, October 15, 2004

Elliot Spitzer: The only one in town with a clue

Wall Street never really reacted when good ole Harvey Pitt spoke.

But give a whiff of Mr Spitzer, and the world now shudders.

Why the difference? Well, Wall Street and Harvey were one in the same -- Harvey is from the Andersen-club, you know, the ones who "audited" DoJ and Enron.

Spitzer announced that the insurance companies aren't playing nice. Mind you, the insiders have known this for a while, especially after the revelations in Europe over those bond deals.

It should come as no surprise that there is collusion.

What comes as a "shock" to the market isn't so much that it's a shock, but that someone actually did something about it.

High time. Let's have some credible bidding in the insurance industry. Make sure the insurance companies are getting paid for what they do, not what they can manipulated.

"Hooray for free markets." If only it were so, Momma Fed.

Why did the market react? Well, the referee finally took the needle off the record player. Well, knocked the table. A little.

Mind you, there's potentially other bad news to come with insurance losses. So, don't think the storm is over. There could be more hurricanes on the way. They laughed in Florida. For a while.

But the markets generally get it right: The amount that gets lopped off market value generally has a pretty good relationship to the overall litigation costs, the amount of puffery, that non-sense called "good will."

Some like to call it stool smoke. That's being polite.

The problem the small players get is when the market adjustment is far higher than expected, and they can't run for the exists despite their stop losses.

So, to those who have lost money, wait 6 years and you might get 5 cents on the dollar. In the meantime, enjoy the wild ride. God knows where it will end.

If you're one that's gotten out, kudos to you for giving the US market a nice reminder of where it belongs: In the trash heap. This market has unreliable market information, and regulators. Oh, and the market adjustment is just the tip of the iceberg on the potential correct if "reality were known."

"Buyer beware" was what the Supreme Court said we shouldn't have in an efficient market. Well, looks like the market is ignoring the Supreme Court. But why expect efficient markets to obey the top cop? But, they did react.

Splendid, it's about time Elliot Spitzer had the recognition he deserves.

Let's hope the state regulators of attorneys also take note and find a credible voice. Don't hold your breath. The same failed state-regulations that have infected the federal markets continue to affect the legal profession.

There's alot of smoke and mirrors when it comes to accounting; and when the smoke clears, you'll find a similarly cursorily-regulated legal profession.

Despite Enron, the attorneys were able to avoid credible federal oversight. Mind you they got a spanking on Sarb-Ox requiring attorneys to "do something different" than continue to provide a blank check.

So, corporate boards. It's up to you. Once the dust settles, you need to mobilize your political forces and push for federal regulation of the other dead-headed fiduciaries.

The cess pool isn't just in the insurance industry and capital markets. It's also in the larger fiduciary-land of attorneys, accountants, agents, and other "middle men" who have forgotten who really "owns the beans" -- the client.

There are other options, and if the US system can't get its act together, make way for the exodus to other markets. The US has long stood on a bed of roses thinking they were olive branches.

Roses do not last forever, as does the public trust in fiduciaries.