“I’ve seen the future, brother. It is murder.” Such is the cultural apocalypse envisioned, lo these many years, by Leonard Cohen, that craggy, increasingly hoarse, but, hey, once again touring, Canadian singer-songwriter. Don’t blame the denizens of this rent financial world for thinking some of his lyrics might have been intended for them (“When they said REPENT REPENT, I wonder what they meant”).
Generally, it pays to be an optimist. When markets sink, we all suffer. When they rise, who wants to be left behind? But optimism isn’t easy to come by lately. Hopes that greater calm might follow the Bear Stearns demi-bailout are fading, as financial companies, and their stocks, continue to wobble, and the economy falters, extending the damage these enterprises did to themselves to just about everyone else.
Even today’s investment bubbles aren’t as productive or as much fun, at least for Americans. Unlike with, say, dot.com stocks or their homes, they are not benefiting from the current run-ups in oil and other commodities. These are other people’s bubbles. Instead of enjoying rapidly rising asset values, Americans face escalating costs: After years of money-saving outsourcing, we now import inflation, and U.S. companies will increasingly become targets of overseas acquirers, notwithstanding the stirring defense by the political class of its citizens’ right to drink Made-in-America beer. This state of affairs leaves all too many of us wavering between the temptations of schadenfreude and the need to survive.
Money management is one of the rare corners of the financial world that has been prospering of late. But even in this fortunate area, where 30 percent-plus profit margins remain common, shrewd executives sense that the atmosphere is darkening, as we note in this month’s special report on the industry, which begins on page 51 and features our benchmark ranking of the 300 biggest asset managers in the U.S. Though asset growth outpaced stock market returns in 2007 and margins stayed strong, much of that good news occurred in the first half of the year, before the onset of the credit crunch. With a bear market threatening and a recession looming, wise heads foresee a period of tumult on the horizon.
Janus Capital Group CEO Gary Black, for one, expects to see a wave of mergers and acquisitions as shaky firms are eliminated. “There will be a lot of consolidation among -major players,” he predicts. “Those that have weak or bad performance are getting -crushed.” He’s seen the future, and it’s, well, not pretty.
