Violent Postmodernism Impacts Equity Valuation

Always, I�m searching for an abstraction that embraces the kind of world we live in and how it impacts financial markets.� You don�t find this in Wall Street�s jitterbugging over quarterly earnings reports, management changes, deals, the collaring of inside info traders or even new product innovations like iPads and statin drugs.

We live in a violent post-modernism world that periodically compresses equity valuations here, in euro land and emerging markets.� I�ll define post-modernism later on, but consider the daily montage of conflicts covered in The Wall Street Journal, The New York Times or any other quotidian of record here and abroad.

I am talking about violence in financial markets expressed as daily volatility in stocks and commodities tied to atrocities inflicted on innocent civilians as well as active participants in countries like Libya, Syria, Iraq, Iran, even Yemen.

At the turn of this century, antagonism to authority took a violent turn with deep upheavals in political structure and extreme, even grandiose terrorist acts like 9/11.� Dictatorships in Iraq, North Korea and Iran sought nuclear hegemony.� The overthrow of venal dictatorships in Egypt, Libya and the slaughter of civilians there and in Syria give me pause.

Not only is the world now a more hostile spectacle, but our financial markets equally wax violent.� In euroland we are witnessing the failure of middle class socialism during the postwar era.� England�s politicians foolishly discard Keynesian fiscal policy and snuff out growth with their induced austerity measures.� Bank stocks can explode 5 to 10 percent, daily.

Go south into Africa from Tunisia to Nigeria, Uganda then Kenya.� As violence escalates, the official portraiture of dictators like Hussein and Qaddafi, now Assad witnessed grotesque enlargement.� Even Egypt re-erupts as the mix between civilian politicos and army generals boils and bubbles over.

At home, the Big Ap! ple endu res Occupy Wall Street.� Vociferous demonstrations over escalating college tuition at state universities were notable on both coasts – Southern California and the Big Apple.

I remember no demonstrations over the Korean War which lasted three years.� In the fifties, the Street was a small enclave of undercapitalized brokerage houses trading in bonds, mainly.� Many succumbed in the early seventies, even before negotiated,commissions were mandated on the Big Board.

A $10,000 bonus then was a big deal.� Harvard MBA�s started at $100 a week, many weeded out after one year.� The cream of the class went to work for Standard Oil of New Jersey, General Motors and Union Carbide.� They wore starched white shirts, mackintoshes and fedoras.� Now, graduates thirst to join hedge funds or start-ups.

My charts on financial profits – banks, insurance underwriters and brokerage houses show miniscule pretax profits in the entire postwar period up to 1990.� Then, profits took off from $50 billion and reached $400 billion in 2006, only to wax negative by $100 billion in 2008, but then rebounded fully to the record level of $400 billion.