80% tax on short-term investment gains

I don't. I read definitions on Wikipedia.

I kinda meant that as a rhetorical question.

One person might believe that paying a "living wage" is socially responsible. Another might believe that paying people what the market bears is socially responsible because it makes for a lower barrier to entry.

RF

You are aware that the capitalist "system" allows shareholders to decide for themselves how to compensate their managers, not specifically that they have to compensate them based upon a given financial metric? Also, many managers are not compensated based solely upon an increase in EPS. I encourage you to read some proxies to get an idea about all the different metrics Boards use to determine what value is created by a given management team and how to give them proper long-term incentives so that they are aligned with shareholders.



How do you define "expand" my business? I'm pretty sure BAC shareholders are not very happy with their management even though they definitely expanded their business by acquiring Countrywide and Merrill.

I haven't had the time to read through all of this thread, but I'll make a few comments.

Most Wall Streeters are in the business of falsely creating value. That is precisely why we have seen the complete bankruptcy of major Wall Street corporations. If they were such rock solid businesses that created value, why did they crumble? It's b/c most of the wealth that Wall Street generates is fake. It's created out of thin air. I don't doubt that there is room for SOME companies to provide things like investment banking services, financial advisory services, trading, execution, research, etc. But when every company provides excessive amounts of these "value-adding" services, there really is no value anymore.

How can we lose 40%+ in one year in the stock market? A building or manufactured goods certainly would not depreciate in value that quickly. The run-up of the market was created out of thin air.

I'll borrow words from Gordon Gekko: “The richest one percent of this country owns half our country’s wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It’s bull**it. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own.”

I think the people at Caterpillar might disagree with you, they're down 52% from a year ago.

RF

Yeah after I posted I wanted to take that statement back. When the housing bubble burst, real estate and tangible property did lose over 40% of their value. Even so, there is something tangible to back up the asset in the case of real estate or manufactured goods.

I one day want to be a Wall Street analyst/PM. But I do think Wall Street tends to move toward grossly disproportionate excess whenever possible. Anyway, one of the main points I want to say is the US is based primarily on a service economy, and many of those services (specifically financial services) are complete BS. I mean how many times can you re-package a mortgage into an MBS, CMO, etc.? It's all smoke and mirrors.

That repackaging is a key component of risk mitigation. That adds value.

RF

I find it funny that people are ready to go witch hunting on the first words "OK, folks, we have done some things wrong, lets see what we can do to make it better".

Guys, what do you want me to say - that everything is fine and that everything is going back to 2005 or 2006? That we are going to graduate and step on the elevators that are going to get us to enormously paid positions in the i-banking? That we are going to get USD 300.000 doing the same as 4 years ago? Well, I can say that if it is going to be easier for you, but...

Awful truth - this is not just a minor crisis, this is not just a normal recession cycle. The economy is changed and we have to prepare ourselves for that in next 2 years. We could ignore reality, but that won't help us a bit. For me, it is an exciting challange, I see new opportunities in this turbulent times. The things will be different, we will have to redefine some methods and mechanisms, to analyze the past and conclude where have we gone wrong, to dismiss some old prepositions and to implement new.

Getting back to drawing board is as exciting as it could be, at least for me. If your only goal is just to go back 4 years back, hoping that everything will be just like in "good old times", well, I can do nothing but to wish you best luck. In the end of the day, everyone should chose his/her own path.

Instead of conclusion, let me cite President Obama:
"We need young people instead of the, you know, a smart kid coming out of school, instead of wanting to be an investment banker, we need them to decide they want to be an engineer, want to be a scientist, they want to be a doctor or a teacher, and if we're rewarding those kinds of things that actually contribute to making things and -- and making people's lives better, that's going to put our economy on solid footing, we won't have this bubble and bust economy that we've gotten so caught up in for the last several years."

A few comments:

We don't need to worry about whether or not we need more scientists or doctors. If we need them, the market will respond with the appropriate incentives.

Does an investment banker who structures a bond offering and saves a company from bankruptcy "make people's lives better"? I would say yes. It might not be as visible as a doctor who saves someone's life or a scientist who discovers a cure for a deadly disease, but it undeniably made people's lives better.

If Obama thinks he can cure the economy of the "bubble and bust" cycle, he's really deluded himself. It's been happening since before the 1600s.

RF

But, now the US is arguably becoming more like Europe...State-driven capitalism.

I'm not saying this is good or bad, but the US is moving away from its traditional free market capitalist roots.

I think that is debatable. I think Obama meant that nowadays getting rich at a young age, as quickly as possible, is so glorified that graduates want to spurn the science and engineering fields for a shot at getting rich quick. The incentive system is designed to reward people in the short-term, and that is what leads to unscrupulous activities. To create a tangible and successful product requires a lot of work, risk, and intelligence. I think his point is that the chance for rewards through those avenues are viewed as too difficult, so people want to work only to amass as much wealth for themselves as possible, instead of producing tangible products that are sold to create wealth. I don't think he doubts that both roles are important, but rather that too much attention has shifted to the former.