little flexibility, please
We’ve reached a “delicate point” in this financial crisis, says Steven Pearlstein in The Washington Post, where “even the usual cheerleaders have hung up their pompoms, consumer and business confidence has disappeared, and investors are driven mostly by fear rather than greed.” But now that we’re in this mess, we’ve got a new threat looming: “strict adherence to economic orthodoxies” by regulators and policymakers. It’s good that accounting and banking regulators have learned from this crisis, but they need cool heads and flexibility to fix it. “A financial crisis is not a morality play,” and what matters most is not the principles, but rather getting out quickly and with as little damage as possible.
The S&P 500 and its bubbles
With trillions of dollars linked to its performance, the S&P 500 is “effectively a stock-picker for millions of investors,” says Daniel Gross in Slate. As such, it has burned millions of investors. That’s because, due to the way companies are chosen for the popular index, the S&P 500 is particularly vulnerable to bubbles. The makeup of the index is always shifting—to be added, a company needs four consecutive profitable quarters and a market cap of $5 billion. So in the ’90s tech boom, “supernova” companies—grow huge fast, explode—dragged down the index a lot. This bubble has seen fewer “total wipeouts,” but with banking stocks out, belatedly, and energy phasing in, the S&P still has its “congenital bubble problem.”
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- 31 TV shows to watch in 2014
- The sexual politics of Game of Thrones just got enormously worse
- He said he was leaving. She ignored him.
- The hidden reason for the student loan crisis
- Why atheism doesn't have the upper hand over religion
- 14 wonderful words with no English equivalent
- What would a U.S.-Russia war look like?
- Mad Men recap: 'A Day's Work'
- Aereo at the Supreme Court: No matter what, broadcasters lose
- 7 ways to quickly become a master at anything
Subscribe to the Week