WRITINGS ON THE WALL

...or on the front page of the Wall Street Journal as the case may be.

I thought we might leave Greece alone for the time being and do a little thought-provoking and crystal balling based on two stories that appeared side-by-side this morning in the WSJ. One was about a company--doesn't matter which one--ringing the closing bell at the NYSE yesterday ending not only the trading day but their involvment forever as they had just been purchased by a European company that was not listed on the Big Board. The story went on to say that since 1997, the number of listings on the NYSE had actually declined while around the world there had been an explosion of new public companys that had chosen other exchanges on which to list. There were other reasons given for the decline in listings...all valid...such as the increase in M & A activity throughtout the years but among the major reasons given were also cost and regulation.

Right next to this story sat another on the decision taken by Union Bank of Switzerland to spin off its investment bank into a seperately capitalized, wholly-owned subsidiary as a result of the new rules concerning capitalization requirements instituted by the Swiss banking regulators. By a wide margin, Swiss capital requirements are among the most rigerous if not THE most rigerous in the world. The though was that the new head office for the investment shop would not be in Switzerland but in one of the geographic area were its business is conducted: the U.S., London or Asia.

So why write about these two disperate events joined seemingly simply by their juxtaposition on the page of a newspaper? Easy. Each has a lesson to teach us, one looking back into history and one looking into the future.

Like the company which rang the bell the NYSE is about to disappear having accepted a bid to be purchased by DeutschBourse. Forget about the jabbering of that newly-minted dope Charlie Schumer about preserving the name. The Big Board is gone, a victim of the times but very much a victim of the monumental mismanagement of this country's financial climate by people like Schumer and his colleagues in Washington. Two moments to keep in mind: the institution of Sarbanes-Oxley which was supposedly designed to prevent another Enron through better regulation and Dodd/Frank the complete piece of stupidity whose birth we have just witnessed. SOX killed the NYSE by making it just too much of a pain in the bum to list in the U.S. for people who had alternatives and the minute SOX was enacted, alternatives arose like mushrooms after a rain all around the world. It took a while but the end was predictable and unstoppable.

So now we come to UBS. Does anyone for one moment think that there is a prayer that the new head office for investment banking will be in the United States or London for that matter? Why the hell would ANYBODY much less the Swiss want to put up with the regulatory nonsense in those two spots particularly the United States? My bet is Singapore: it's clean, it's green and it works...just like Switzerland. The fact that it has a 15% tax rate just might enter into the decision. Frankly, the Swiss authorities and the management of UBS don't care. You see, the Swiss are, in the end, risk-adverse and investment banking is the risky side of their business. In Switzerland they have money management...other peoples' money...and they are good at that. No risk, no cost of capital, and if the investment banking guys screw up again? Well, everyone knows that they were independently capitalized (at a far lower level in Singapore no doubt), so don't look to us. The fact that Asia is the area of future growth doesn't hurt either.

So what have we accomplished? We have driven out the great engine of capital formation from our shores and spread it around the world. We have reduced our workforce. We have lost and continue to lose influence and prestige and while we were doing all of that, the stated purpose of our legislation which was to insure fairness, safety for the individual investor, "transparancy" and all of the other nonsense politicians like to spout have pushed the businesses into juristictions where we have neither control nor influence. And we did it out of sheer, utter stupidity, neither realizing that we were in or about to be in competition with jurisdictions around the world and worse, not caring. And in our fiscal and monetary policy of today we show the same stupidity of years past. When will we ever learn? Two stories, connected just by their positioning on a page? Oh no. Much, much more than that. They are windows to our future which to me right now doesn't look all that good.