Wall Street History

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Wall Street History

11/03/2006

Bits and Pieces

[From Deadwood, South Dakota]

Sometimes the best laid plans go awry. I’ve been traveling the
past two weeks in the great American West and Plains; having
flown to Tucson, rented a car, and driven well over 2,000 miles
through southeastern Arizona, New Mexico, Colorado,
Wyoming, Nebraska and South Dakota.

So I thought during the trip I’d glean some price data,
particularly in terms of gasoline. Consider this a time capsule.
Not the most earth-shattering stuff, I’ll grant you, but it’s as good
a field study as the nationwide surveys you’ve been supplied.

Needless to say I tanked up quite a bit, most of the time $20
worth as there were countless stretches where I didn’t dare let the
tank get too low. In other words, many a time where it was 50-
70 miles before the next station.

The price I paid at the pump, simple “self-serve regular”:

Tucson, AZ $2.12
Benson, AZ $2.59 [couldn’t figure this one out]
Lordsburg, NM $2.33
Hatch, NM $2.39
Raton, NM $2.49
Colorado Springs, CO $2.29
Scottsbluff, NE $2.21
Spearfish, SD $2.21
Deadwood, SD $2.19

[The latest figure on the national average was $2.22, and of
course state taxes come into play in the above.]

I also decided to check out the price of a Big Mac, stopping at
many a McDonald’s along the way. Yes, I ate them and it’s
amazing how uniform the taste is. I like McDonald’s, though
back home I have to admit I only go there about once a month, if
that.

Big Mac

Lordsburg, NM $2.89
Truth or Consequences, NM $2.79
Raton, NM $2.99
Cheyenne, WY $2.79
Chadron, NE $2.79

I’m curious as to why Raton was $2.99. All of these places were
along the interstate, except for Chadron, which is in the boonies.
[Good Division II football team, however!]

I’d give you the price of beer during my trip, but that would be
revealing perhaps too much.

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In light of the fact there is little ‘meat,’ so to speak, in the above
exclusive reporting, I just wanted to add some commentary by
New York Democratic Senator Charles Schumer and New York
Republican (Independent) Mayor Michael Bloomberg on New
York City’s imperiled position in world financial markets. It’s a
topic I’ve been writing about in “Week in Review” and it’s
critically important.

Just this week I’ll be commenting in my other column on how
Hong Kong has topped New York in terms of total market
capitalization of initial public offerings (IPOs) in 2006. [London
is first.] I’m not sure Schumer and Bloomberg were aware of
this fact when they wrote their op-ed in the Wall Street Journal
on November 1.

Four factors are key these days. Globalization of the capital
markets, overregulation, frivolous litigation and incompatible
accounting standards.

Charles Schumer and Michael Bloomberg:

“The first is beyond our control; advances in technology and
communications are allowing capital to flow more freely, making
it much easier to locate financial activities anywhere in the
world. But we can, and must, do something about the other three
factors to maintain and expand our competitive edge.

“First there are more than 10 federal, state and industry
regulatory bodies in the U.S. The British have only one such
body. Industry experts estimate that the gross financial
regulatory costs to U.S. companies are 15 times higher than in
Britain .

“With the benefits of hindsight, The Sarbannes-Oxley Act of
2002, which imposed a new regulatory framework on all public
companies doing business in the U.S., also needs to re-examined.
Since its passage, auditing expenses for companies doing
business in the U.S. have grown far beyond anything Congress
had anticipated .

“Second, what lessons can we learn from other nations’ legal
environments? The total value of securities class-action lawsuits
in the U.S. has skyrocketed in recent years, to $9.6 billion in
2005 from $150 million in 1997. The UK and other nations have
laws that far more effectively discourage frivolous suits .

“Third, what lessons can we learn from other nations’
experiences with international accounting standards? Most
European and Asian countries have already begun to adopt
international accounting standards, which businesses tend to
prefer over the American system. Yet we have set no timetable
for doing the same.

“In the last quarter of the 20th century, we achieved an almost
exquisite balance between regulation and entrepreneurial vigor in
American financial markets. We learned that too much
regulation stifles entrepreneurship, competition and innovation;
while too little regulation creates excessive risk to industry,
investors and the overall system .

“New York cannot afford to lose its place as the global leader in
financial services. We have to carefully redefine this balance of
innovation and regulation. That is what we seek to do over the
next several months.

“Our ability to do that, and to answer these three questions, will
determine the future of New York – and, in many ways, the
nation.”

What Schumer and Bloomberg don’t come right out and say is
that tens of thousands of very high-paying jobs are at risk,
possibly far more. Not just in New York but around the country,
and we have only ourselves to blame.

I’ve mentioned from time to time how even before Enron,
WorldCom et al, there was this feeling that our markets were
superior. I’ve often stated that I’m not real keen on emerging
ones because of the “lack of transparency.”

But what we’ve learned the past few years in particular is that
this is false. While personally I would still be very careful in
placing bets overseas, there is no doubt we could learn a lesson
or two from Britain especially. And this idea we have 10
different regulatory bodies versus one in other countries is
absurd. Unfortunately, these kinds of changes will not occur
overnight. The states will be loath to give up power, of that you
can be sure.

Wall Street History will return next week. A look at the price of
oil .from an equity index standpoint, not at the pump.

Brian Trumbore

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