Enemies of the Market
Every year has its heroes, and every year has villains. Some say that in the financial markets, there are a fewer heroes than villains. And while this concept is certainly up for debate, there’s no debating that there are indeed some very real market villains that rear their ugly heads each year.
In 2008, the most egregious were the big banking executives that put the global economy at risk with their outrageous leveraged bets. In 2009, it was the infamous Bernie Madoff, whose grand-scale Ponzi scheme was unrivaled in the annals of fiscal malfeasance. This year’s crop of biggest villains doesn’t have the same criminal star power as Madoff, but each in their own right represents no-less-flagrant an offender.
Here are the 10 biggest market villains of 2010.
10. Hu Jintao
China’s current president, whose official title is Paramount Leader of the People’s Republic of China, makes the list of villains for his refusal to let that nation’s currency, the yuan, appreciate against the U.S. dollar and other rival foreign currencies.
Forbes called Mr. Jintao the most powerful person in the world because he exercises near dictatorial control over one-fifth of world’s population. This power puts Mr. Jintao in a position to be an even bigger villain in 2011, especially if he continues to keep a tight leash on his nation’s currency.
9. Nancy Pelosi
In a speech on the then-pending and still-controversial health care reform legislation, the former House Speaker famously said, “We have to pass the bill so that you can find out what is in it, away from the fog of controversy.” This matriarchal comment aroused the ire of many Americans who didn’t like government’s attitude that whatever they think is best for us, we should just accept on faith.
The Speaker’s brazen comments also caused many in the markets to fear the extent of intrusion that health care legislation represents.
8. Rahm Emanuel
The former White House Chief of Staff resigned this year, but President Obama’s right-hand man was instrumental in ramming through that very unpopular health care reform bill.
Emanuel now has his sites set on being the next mayor of Chicago, a position where presumably he’ll have a much-smaller effect on the American health care system, the economy and the financial markets.
7. William Dudley
The New York Fed President is responsible for buying that $600 billion in Treasury bonds by the middle of next year. Those Treasury bonds will be bought with taxpayer money from Dudley’s former employer, Goldman Sachs Group, Inc. (NYSE: GS).
Aside from the potential conflict of interest here, what really makes Dudley a villain is his recent statement that the dollar’s value wasn’t a major consideration when the central bank decided to implement QE2.
“We’re not trying to push the dollar to any particular level,” Dudley told CNBC.
Presumably, the dollar’s decline isn’t at all related to the horde of additional money being printed by the Fed via QE2. Sorry, we’re not buying it, Mr. Dudley.
6. Mark Hurd
The former Hewlett-Packard Company (NYSE: HPQ) CEO resigned in August after it was discovered that he had a personal relationship with a contractor who received inappropriate payments from HP.
News of the scandal sunk shares of the world’s biggest maker of personal computers and printers, and millions of dollars in shareholder wealth was destroyed. One investor even sued the former CEO and the board of directors, claiming disclosures surrounding his resignation led to a drop in the shares.
5. Tony Hayward
The BP plc (NYSE: BP) executive’s languid response to the gigantic Gulf oil spill ticked off not only the victim’s of the busted well, but practically the entire sane world.
The grossly insensitive comment, “I’d like my life back,” along with that ride on his 52-foot racing yacht “Bob” — all while millions of gallons of crude oil flowed virtually unabated into the Gulf of Mexico — were two of the worst public relations nightmares in corporate history.
4. Transportation Safety Administration
Rather than gaining a reputation for keeping the airways safe, the TSA now has become best known for groping passengers and for using a “porn scan” to harass travelers at our nation’s airports.
Much of the flying public is very disturbed about what they see as a blatant overreach and invasion of privacy by this government agency, and if left unaltered, the TSA’s current policies could represent a chokepoint in the nation’s mobility.
3. Barack Obama
When it comes to implementing a less-than free-market agenda, the president certainly carries the torch. The increased role of government in the health care system, and the financial industry via FinReg legislation; the lack of clarity on the future of the Bush tax cuts; his lack of any advisers with actual business experience; and his anti-business rhetoric puts President Obama near the top of our 2010 villain’s list. To give you a sense of that anti-business rhetoric, consider this line from the president’s speech on exports given this summer:
“In the absence of sound oversight … responsible businesses are forced to compete against unscrupulous and underhanded businesses, who are unencumbered by any restrictions on activities that might harm the environment, or take advantage of middle-class families, or threaten to bring down the entire financial system.”
This revealing statement essentially demonizes business as out to prey on the middle class and the environment — and that’s exactly the attitude financial markets don’t need in a U.S. president.
2. John Maynard Keynes
How can a long-dead economist be near the top of the 2010 villains list?
Simple, his ideas currently supply the intellectual fodder for big government spending, and for the failed attempts to “stimulate” the U.S. economy. Because Keynes thought that private sector decisions can lead to inefficient macroeconomic outcomes, he argued that it’s the proper role of government to step in and provide a fix. This fix includes massive intervention in the economy, more spending, tax rate manipulation and an increased role of the central bank to manipulate monetary policy.
And Keynes’ arguments and influence indirectly lead us to our top villain of 2010 …
1. Ben Bernanke
The Federal Reserve Chairman’s move to inject another $600 billion into the financial system via the practice of buying Treasurys, aka. QE2, put him square in the crosshairs of a skeptical public. In fact, Mr. Bernanke has become the de facto stereotype of a wonkish policymaker trying to push just the right levers that will bring an anemic economy back to life.
Mr. Bernanke once gave a speech where he made the following statement: “The U.S. government has a technology called a printing press that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” He followed up this statement by saying, “A determined government can always generate higher spending and hence positive inflation.”
Perhaps the last thing the American public wants right now, while the economy still struggles and while unemployment is nearly 10%, is “positive inflation.” The Fed’s hitherto unsuccessful attempts to extricate the economy out of the doldrums highlight just how much government is actually a hindrance to economic progress, and it’s this growing realization that makes Fed Chairman Ben Bernanke the biggest market villain of 2010.