Monday, April 21, 2014

Financial Sarcasm Roundup for 04/21/14

This week's sarcasm combines a few seemingly unrelated items in one brute force face-smash.  First, insider trading may get a lot harder to convict if prosecutors must prove foreknowledge of benefits.  The modern surveillance state doesn't cover telepathy.  Second, IMF research shows just how much the Fed's bond buying has boosted bond prices by lowering yields.  The World Bank noticed the relationship almost a year ago in one of their papers, so maybe it takes the IMF longer to do math.  I should be fair to the IMF since they've been busy bailing out Europe and other deadbeat regions.  Finally, there is now documented proof that Silicon Valley's biggest tech firms colluded in hiring practices to hold down tech compensation.  It reminds me of the greed I witnessed in financial institutions.  I feel badly for the nerds who thought they'd be raking in dough working for tech titans.

I threw these three news items together because they all make me think of how elite privilege is becoming entrenched in America.  Preppies can risk more insider trading and the more pedigreed traders at hedge funds will probably get away with it.  The biggest banks get first run at borrowing low to fund their carry trades under the Fed's pumped buying programs.  Even tech firms resist legal challenges to their unfair competitive practices.

This ominous trend in favor of elite privilege is antithetical to free enterprise.  Retail investors can't compete against insiders who routinely access non-public information at little risk.  Small firms can't compete against big banks skimming carry trades or big firms cherry-picking talent.  Challenging this atmosphere in court requires expensive class action lawsuits that extract a pinprick in damages from giant firms.  Those firms continue to earn monopoly rents.  The more likely solution is a massive market crash that flushes many bad actors out of C-suites and into bankruptcy.  That outcome is the only corrective mechanism the free market has left.