repost from sky imc. initial report at Urban 75


System Failure. Wall street confidence crashes
have been surfing some of the american news-sites about worldcom and other revelations on wall street. As an indymedia Journalist, none of this comes as a shock and i have been waiting for it for a long time....

some choice commentary:

From CNN...
Goldman Sachs CEO Hank Paulson is not a touchy-feely guy. "In my lifetime, American business has never been under such scrutiny, and to be blunt, much of it deserved,'' he said in a recent speech. To FORTUNE he added, "You pick up the paper, and you want to cry.''

Phony earnings, inflated revenues, conflicted Wall Street analysts, directors asleep at the switch--this isn't just a few bad apples we're talking about here. This, my friends, is a systemic breakdown. Nearly every known check on corporate behavior--moral, regulatory, you name it--fell by the wayside, replaced by the stupendous greed that marked the end of the bubble. And that has created a crisis of investor confidence the likes of which hasn't been seen since--well, since the Great Depression.

Still, the unending revelations--and the high likelihood that there are more to come--have underscored the extent to which the system has gone awry. That has taken a toll on investors' psyches. According to a Pew Forum survey conducted in late March, Americans now think more highly of Washington politicians than they do of business executives. (Yes, it's that bad.) A monthly survey of "investor optimism" conducted by UBS and Gallup shows that the mood among investors today is almost as grim as it was after Sept. 11--and has sunk by nearly half since the giddy days of late 1999 and early 2000. Similarly, the average daily trading volume at Charles Schwab & Co.--another good barometer of investor confidence--is down 54% from the height of the bull market. "People deeply believed, as an article of faith, in the integrity of the system and the markets," Morgan Stanley strategist Barton Biggs wrote recently. "Sure, it may at times have seemed like a casino, but at least it was an honest casino. Now many people are questioning that basic assumption. Are they players in a loser's game?" Investing, notes Vanguard founder John C. Bogle, "is an act of faith." Without that faith--that reported numbers reflect reality, that companies are being run honestly, that Wall Street is playing it straight, and that investors aren't being hoodwinked--our capital markets simply can't function.

washington post
By Steven Pearlstein
Washington Post Staff Writer
Wednesday, June 26, 2002; Page A01


A major accounting firm convicted of obstructing justice. A leading brokerage caught misleading its clients. Imperious chief executives falling like flies. Huge corporations tumbling into bankruptcy. Business pages that read like the crime blotter.

Now, according to economists and market analysts, these still-unfolding corporate and accounting scandals have begun to weigh heavily on the stock market, the dollar and the U.S. economy. And the effects are likely to linger at least through the end of the year.

Just last night, WorldCom Inc. fired two executives and announced that it had mischaracterized expenses for more than a year, wiping out at least $1.6 billion in reported profits. Its shares, already below $1, plunged as low as 26 cents in after-hours trading.

"The economy and markets right now are in the midst of a full-blown corporate governance shock," said Stephen Roach, chief economist and resident pessimist at Morgan Stanley. "To presume somehow that it's over or the worst is behind us is naive."

Yesterday, the tech-laden Nasdaq composite and the much broader Standard & Poor's 500-stock indexes closed the day just a whisker above their low points after the Sept. 11 terrorist attacks, effectively wiping out the gains from last winter's rally. Analysts said the reversal reflects a growing skepticism among investors about the accuracy of corporate financial reports.

"There is clearly a liquidation going on here as people lose confidence in what companies and proponents of stocks have been telling them," said Robert J. Barbera, chief economist at Hoenig & Co.

This is not the way economic cycles usually work. Normally, stock prices rebound three to six months before a recession ends and recovery begins. That's the way things were shaping up last fall, in the rally after Sept. 11, foreshadowing the return to economic growth in the final weeks of 2001. But beginning in March, when it became clear that the accounting and corporate governance problems weren't limited to Enron Corp. and Arthur Andersen LLP, the stock market abruptly reversed course.

"I think it is very serious," said Charles Pradilla, chief investment strategist at S.G. Cowen Securities Corp., speaking of the impact of the scandals on investor psychology.

Pradilla said the revulsion is particularly intense among individual investors in stocks and stock mutual funds -- investors who until recently bought stocks when prices fell in the hope of getting in early on the next bull market. Now, these investors are confronted with the fact that large, well-known companies are suddenly disappearing almost overnight. And it wasn't just the small investors who lost money, but supposedly smart, sophisticated investors have been fooled as well.

"The market now looks like "a crooked house, a sophisticated game of three card monte," Pradilla said. "People have decided that they're better off investing in things they know and understand, like their houses, as opposed to things they don't, like stocks."

indymedia comment.....its a sure sign when the billionaires start parking their money in gold bullion. the gold price has flukuated by 15%.