The Roman poet Virgil once said in the epic poem The Aeneid. “I fear the Greeks even when they bring gifts.” This line was in relation to the Trojan horse left by the Greeks to gain entry into the walled city of Troy. The story ends with the sacking of Troy if you’re not familiar with it. I mention that line now because I get the same feeling listening to the financial community these days. I fear the politicians even when they bring gifts.
Since the election financial stocks for the most part have gotten a pretty good bump. Goldman Sachs is one of the main reasons the Dow took off like a rocket ship after the election. The goliath New York bank has risen roughly thirty five percent since the election. It’s also a main component of the Dow Jones Industrial Average. Before the election the financial sector stocks for the most part lagged other sectors in terms of performance. The reasons for the lag varied from more regulation, mounting legal costs, low interest rates etc. It was sound a theory and predictably the sector as whole didn’t deliver on profitability targets quarter after quarter.
Than the election happened and the financial stocks found life and turned in some pretty good gains after being dormant for essentially three years. The jubilation and run up in prices was attributed to a President elect who will promote a friendlier business climate. A tax code that will be reformed and taxes will be lowered. Less regulation and interference from the government agencies hindering business. And last but least a cabinet that was formed straight from the CEO’s and business leaders of some of America’s greatest companies. However all this got me thinking.
Now I’m pro-business and always will be. Anything to help business run more efficiently and profitably will always be in my wheel house. However I’m not so naïve that business can run itself with no outside inference. Business does need a baby sitter; you can’t have the inmates running the asylum basically. Business isn’t some singular entity that controls itself. It involves millions of people who respond to incentives and self-interest. Those self-interests are what create bubbles and economic calamity for the masses if not monitored.
All this talk about less regulation and business friendly environment is positive. However all the jubilation and back slapping also has me curious. This isn’t Ayn Rand’s paradise where market forces are the end all be all when making decisions. This shouldn’t be free for fall to roll back regulations with impunity and let business manage itself. We can’t let the barbarians into the city, their needs to be a wall.