Cognitive Economics (how things work)Uncategorized

Wall Street Disappears, Goldman and Morgan Sell Out to Socialism

It no longer matters if McCain or Obama becomes president.  The economy is going to be the big issue for the next presidential term, no matter what, and congress will have to do the heavy lifting instead of the executive branch.  Speculation, long the driver of our free economy, will have a much harder time existing.  The capitulation of Goldman and Morgan into banking throws heavy lead weights onto the back of our economy to help assure very slow growth.

Few people will understand what this change in Goldman Sachs and Morgan Stanley really means for quite some time.  It’s good for Goldman and Morgan because it gives them access to quick and easy money in the Federal Guarantees, but believe it or not, it is bad for the rest of us.  Bad because it will slow the economy, bad because it puts caps and limits on creativity in the financial world, where the U.S. has been the big leader for close to 100 years.

There will be perceived benefits.  Less risk rolled downhill to unwary investors.  But this model overall just makes it so we all put our money in one hat and let the bankers do the rest.  People already don’t pay attention to what they invest in.  Now the bankers will make a higher margin and basic investors will just get the small passbook portion even though they are the ones taking the real risk.  They will keep on telling you to just ride out market volatility for the long term.  There are different types of risk.  Under-performance is a very costly risk!

I am hopeful that real stock brokering will make a comeback in some way.  I remember when brokers had to know something.  Talk to an investment adviser lately?  They don’t know much.  They talk about Asset Allocation, Diversification, taking less risk, but even they don’t know what you have in your portfolio.  Do they have good ideas?  Smart ideas?  I haven’t heard any.

You need to know one important thing about Goldman Sachs and Morgan Stanley.  Most of their clients are multi-millionaires and can trade outside the normal rules and limits because they are qualified at a higher level than the average person.  Goldman and Morgan will be business as usual but the rest who are not accredited will fall into the bowels of the bank accounts and market average mutual funds.  An even bigger gap between wealthy and middle class will occur.