The rules of the game have to change

The rules of the game have to change to the point where anyone

investing in the stock market understands them. Let’s face it,

many of the companies and individuals facing public scorn did

nothing illegal. On Wall Street it was akin to some sort of magic

show. The sleight of hand was rewarded and applauded. You bought

stocks because a company could manipulate the numbers. You loved

management that found ways not to pay taxes. The CEO that could

only pull a rabbit out of the hat was seen as behind the times.

Heck, we loved to see the company sawed in half, only to emerge

whole by the time the earnings were announced. The President has

to understand that the audience doesn’t want that anymore. They

want reality television. No more tricks, no more hocus-pocus.

No more voodoo accounting. No more but-but.

In the end, the president has to cast a net so wide and ambitious

that he may even be snared by it. This is the law and order party,

so we expected longer prison terms. However that doesn’t change

the fact that there is too much gray area in the rules, and until

that changes many public companies are going to go for bling-bling.

After all, that is the difference between a for-profit and a

not-for-profit-company. At the very least, individual investors

buy stocks in companies because they think the company will grab

the brass ring (if you’re lucky, maybe said company

will reach the platinum ring).

A final thought on the Bush address. It is obvious that he has a

formidable obstacle in front of him trying to fix a problem that

is systemic in nature. Years of status quo have to be torn down,

almost overnight if the US equities market is to ever recover from

its current state. In the meantime, his get-tough approach could

put another nail in the coffin of small publicly traded companies.

I’m talking about the 3000 or so companies that trade like

orphans in the market, with no Jack Grubman to pump them. These

companies already pay a disproportionate amount of money on

compliance and filings. They simply can’t be expected to adhere to

the new rule changes; it will put many out of business. I’m not sure

if the public is in the mood for special exemptions or if the Bush

administration really cares or understands the problems. Yet it

could be disastrous. These small companies are already afraid of

the SEC, because they don’t have the large legal department that

can fight back. They need a break, or else another victim of the

current crisis in the American financial system will be the

American promise itself. The dream is that a company can get

financing and challenge the giants and in the process add to the

spirit that has kept America ahead of the rest if the world in

terms of innovation andtechnical prowess.

It is a tough and dire situation. Somewhere down the line the

goal of innovation and achievement gave way to greed. We all have

been seduced by bling-bling, but now it’s back to basics,

hopefully the market can hang in there while the transition is

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