Watching the financial crisis unfold, I’m struck with a cacophony of feelings. On one hand, like many investors, I’m in awe of the speed at which everything is changing before our eyes. On the other hand, what’s occurring seems to make so much sense in light of the entire system we’ve built up over history. I suddenly feel like the Dude in the Big Lebowski: “I dropped off the money exactly as per… look, man, I’ve got certain information, all right? Certain things have come to light. And, you know, has it ever occurred to yo
u, that, instead of, uh, you know, running around, uh, uh, blaming me, you know, given the nature of all this new sh*t, you know, I-I-I-I… this could be a-a-a-a lot more, uh, uh, uh, uh, uh, uh, complex, I mean, it’s not just, it might not be just such a simple… uh, you know?…I’ll tell you what I’m blathering about… I’ve got information man! New sh*t has come to light!”
While it is still too early to decry the death of the entire financial community, for investors and professionals alike there will be some evolutionary changes while others might be exogenous changes forces upon the system out of crisis. We’ve written before about an overview of some of the changes in the equity research community that are happening in the wake of the financial crisis. There will be requisite changes in investor relations as well and all of this will effect the end user — the investor. While over the long term, I hope this means more New Rules-type visibility and disclosure as well as further democratization of financial data and information, I am more suspicious of the short term. Investors in banks, mortgage firms, and industrial firms with financial arms have seen much of the value of their holdings eaten away while learning very little why. As outsiders, we still don’t quite understand what these firms are holding and why these holdings seem to be driving them to quick bankruptcy.
