Notes From the Fieldby Martin Weil

May 24, 2012

I Confess

Stories such as this one on alleged insider manipulation of the Facebook IPO or the feckless risk-taking by JP Morgan, an institution that we the taxpayers are guaranteeing against failure, are just the most recent indications of a capital market system that has been captured for its own benefit by the largest players. Enron to Madoff, Long Term Capital to Lehman Brothers, individual investors are wholly justified in questioning whether the playing field is so tilted against their interests that it is just not worth “playing.”

For the better part of 17 years, my job has been to help clients plan their finances and make prudent investment choices, be those equities, fixed incomeĀ  or other, based on a fundamental trust in the fairness and transparency of the US capital markets. I cannot today offer those assurances so readily. Four years after the abuses of the prior years nearly brought down the global system, our once robust regime of investor protections has yet to be repaired.

Capital investment, innovation and a fair legal and regulatory framework went hand in hand to foster America as the great financial and societal success story of the past 100 years. From my perspective, job number one is restoring the integrity that was once the hallmark of the US system. There are days when I am not so sure this can happen without a further crisis.

(Addendum: Just as I was about to post this, I read Out of Stock, an analysis of the fall from favor of equities at major UK institutional investors. My favorite quote: “the cult of equities is dead.” Not quite the bullish indicator that this headline would be had it appeared on the cover of Time. But for a contrarian, it is a small clue that the process of investor fatigue that typically presages the next great bull market may finally be starting. Please note that I said “starting;” this has always been a long process.)

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