TheWorldJournal.com

Nightmare on Wall Street
By Jean-Francois Numainville, TheWorldJournal.com

In the last few weeks and months, stock markets across the world have been in a serious loosing streak. Is this the end of the bad karma for indexes or the tip of the iceberg?

"Depressed" is probably the state of mind of many - if not all - the investors at this time around. When major companies are not announcing huge earnings loss its probably because they are being investigated for hiding dangerously high deficits in their financial results. To sum things up, nothing recently came to cheer the once happy stock brokers, whom many are probably just hoping to keep their clients just long enough so they can get out of the crisis.

In a span of 20 days - from July 5 to 25th - the Dow Jones Industrial Average (DJIA) when from about 9,500 points to an anemic 7,702 points reaching the lowest closing levels in 4 years. In those same 20 days, governmental interventions from the President of the United States and the Federal Reserve were not capable of taming the fire burning the billions of dollars in savings of investors. Those who have put confidence in the markets in the past are bitter about the numerous allegations of corruption in major American corporations. It all started last year when Enron (ranked 5th in the Fortune 500) unexpectedly announced its bankruptcy and giving away the secret to a major accountancy fraud that artificially boosted its revenues. More recently the stocks of WorldCom (ranked at number 42 in the Fortune 500), a major player in the communication industry, plummeted after a similar scandal erupted evolving Arthur Andersen - again - in a case of fraudulent financial operations.

This has created a vacuum effect in stock markets all over the map - but especially nasty in the United States - that caused a major capital outflow. This movement also had the side effect of weakening the power of the American dollar, which is now trading bellow the value of the European currency. This is something that seemed unconceivable just 6 months ago. This means that the Euro is now the currency by excellence to the investors wishing to keep their money safe. Yet, the old continent has not become a paradise for traders overnight, Europe is simply taking advantage of a major internal crisis in the US.

The corruption crisis is not only involving corporation leaders and accountancy firms, the highest sphere of power are now flagged has being just has bad has everybody else. Indeed, President Bush Jr. is was a member of the board of directors of Enron around the time of the alleged infractions, and CEO Ken Lay was a good contributor in the President electoral campaign. Also, Vice-President Dick Cheney's reputation is in stake following an investigation regarding is behavior in an energy firm - Halliburton Corporation - implicated in a scandal mostly similar to the ones that took down WorldCom and Enron.

Ironically, after September 11, the DJIA dipped down to 9,000 something level, and was followed by a regain in its value in the months that closed the year 2001. This means that at the point where all the indexes took the road to perdition - around this spring - people were no longer in the panic crisis of the terrorist attacks. This time, it seems pretty clear that nobody, but the corporate sector itself is to blame in this fiasco that cause the worse drop since the early 90's crash. Ironically, the facts seem to lead in believing that there is more to fear from us than from anthrax-contaminated letters or any other kind of attacks to cause the most harm.

© July 26, 2002