Published CommPro.biz 2014.05.06

Walking the Edge of the Razor Blade

It would be hard to find anything gone farther astray from its intended purpose in our society than our capital markets. The New York Stock Exchange and all other such entities in the world of finance as played in the United States have forgotten their purpose, to create a source of capital for Capitalism. Instead they have succumbed to enriching the players. Those who manage the markets have allowed the investment banks and the traders to run the show. The exchanges’ purpose is to support the companies listed, not the bankers and traders.

The investment banks have strayed far from their purpose to aid in the creation of capital and to “make a market” for those “going public.” They have wandered off into the world of legalized gambling, having convinced the Congress that laws against gambling should not apply to them. It was a easy step from there into the toxic derivative instruments that plunged the world into the recession where we little folk still struggle. Traders serve little or no purpose except to generate fees for the markets and their middlemen. This is especially true of the latest breed, those rigging the markets with penny skimming high-speed trading.

These ills are just the latest in the distortions that have increasingly plagued the markets. The whole crazy focus on “Playing the Market” instead of investing has corporate management aiming for short-term goals instead of long-term growth. All it takes to unseat an otherwise great CEO is an unexpected-could-happen-to-any-company event. Take Target’s CEO Gregg Steinhafel, who joined the giant retailer right out of college and worked himself up the ladder. Since moving into the top job he has been walking the razor sharp edge between upscale department stores and grungy discounters.

Steinhafel has moved Target deftly along, playing the quarterly results game and introducing new merchandise lines without losing the chain’s flair for quality and value. His foray into Canada has not gone as well as hoped, but it’s not altogether bad and it’s far from a bad idea. Then came the massive waiting-to-happen-to-someone breech of Target’s credit card systems. While the chain lost volume, it’s a testament to Steinhafel’s solid management style that Target did not lose more. And truth be known, the fault lies more with our banking sector’s refusal to move to a more secure RFID based credit card system a generation ago with the rest of the world.

We understand that in the current climate Gregg Steinhafel had to pay the price for what happened under his watch. But there is a lesson to be learned here, and every publicly held corporate CEO has to be thanking their lucky stars that they aren’t in his shoes. They should take the ethical and moral high ground and use their clout with the Congress to focus on long-term financial health. The Wall Street anything goes Wild West financial world is bad news for everyone, for the people, for investors, for corporate America.

Published CommPRO.biz 2013.08.01

Gaming The Farmer

Farming is no place for rubes. Most who produce our food are sophisticated way beyond anything their forefathers could have imagined. Farmers always had to have a wide range of skills to survive. Sadly that’s about all many did; it took just about everything they had just to survive. Today they are mostly well educated, hard-working folks; and like their forebearers, mixing common sense and a wide range of skills.

We recently read of a resourceful farmer who built a drone and equipped it to fly over his land mapping out the soil and crop conditions and feeding the data into his computer. He put it all together for less than the fee he had been paying for a single trip by a fixed-wing plane to scope out his farm. Better yet, he got instant info instead of waiting days for data from the aerial surveillance service.

It seems a shame that all this ingenuity and skill is being trumped when it comes to what farmers get for their crops. Commodity futures have long been how the producers and users of everything from rare metals to foodstuffs have protected themselves against flux in the market. It’s where the term “hedge” came from. In recent times the commodity markets have been invaded by the monster bankers and algorithmic traders. The combination that made a joke of the stock markets.

The monster banks take the interest-free money we give them to invest in the economy and speculate in commodities, derivatives and anything else where they can turn a quick buck. The algorithmic traders are doing the greatest harm to our farmers and jacking up the price of food we put on our tables. They have turned commodity markets into the same gambling halls stock markets have become.

In every gambling hall there are sure winners and sure losers. In commodities it’s the high-speed algorithmic traders and the monster banks who collect every time. It’s the farmers, the end users and the consumers who lose. A role of government is to act as a referee in situations like this. In a similar situation at the turn of the last century, 1905, a minor commodity scandal triggered a quick response. Teddy Roosevelt ordered a full investigation. The Congress passed laws to jail those who gamed the market. The Secretary of Agriculture declared, “We have no favorites.”

Hardly the case today. The monster banks have bought and paid for the Congress. Anything they want they get. The farmers and other commodity producers get the shaft, as do the end users and the consumers. There is an easy fix for this chaotic nightmare. There is no reason for anyone to be in these markets other than the producers and end users. Return the market structure to fit the needs of those for whom they were created. Boot the speculators. Do what government is there for. Do what’s fair, it’s the right thing to do, it’s “Ethics 101.”