Wall Street takes home huge bonuses on poor risk analytics and then we the tax payers bail out the investments. This is the primary reason the retail investor has had enough of Wall Street and put their money into bonds and has basically declared "I am not losing any more of my money."
We first saw this with the United States, Iceland, Greece and now Hungary is stepping into the game of socializing losses. Should governments bail out private organizations that have taken billions in profits?
Unfortunately the answer is yes, but we must also let the market work through this downturn rather than trying to get back to the status quo. In other words governments must let deleveraging occur in an orderly manner rather than trying to support a system that is clearly "broke."
If a bank or financial firm is on the verge of bankruptcy and it will bring down the rest of the system, then it should be dissolved and broken down into smaller parts that can be run by smaller companies. The likes of AIG, Citibank and others that are so massive they risk global global collapse need to be reduced and given to the one thing that makes the capitalism work: SMALL BUSINESSES.
Additionally, everyone has hated hedge funds and blamed them for all sorts of problems; however, I have yet to see a hedge fund get bailed out. In fact, if we treated those groups that played at being "hedge funds" like actual hedge funds then we should let them participate in "creative destruction" rather than "destructive creation" the the former being the true process of capitalism wherein an obsolete idea is replaced with a new and creative idea (from Hot, Flat, and Crowded by Thomas Friedman), whereas "destructive creation" has been our recent love affair with subprime mortgage CDS Swaps and other creative instruments of high risk that earned billions but ended up requiring trillions to fix.
No small business has ever had to work so hard in these times as now. Small businesses are suffering while large corporations that didn't manage their risk get bailed out while government spending is reduced for those that managed their risk.
A shortened holiday weekend with high expectations for a Friday Non-Farm payrolls report had the week starting off extremely positive. The 2% moves continued to occur with the S&P rallying into the 200-day moving average.
