Are you tired of reading explanations -- such as changing interest rates, profit growth, Yen carry trade -- about what makes the market move? Well then you're in luck because Reuters reports that this market is moving on drugs. That's right. According to Harris Stratyner, a psychologist at Caron's New York Recovery Center, some executives he treats are experimenting with cocaine, opiate-based drugs, Ecstasy and marijuana. Drugs don't make stock prices go up but they fuel the bankers who run it.
And these bankers are making big bucks. Six of the largest U.S. investment banks - Goldman Sachs Group Inc. (NYSE: GS), Lehman Brothers Holdings Inc. (NYSE: LEH), Citigroup Inc. (NYSE: C), JPMorgan & Chase Co. (NYSE: JPM), Morgan Stanley (NYSE: MS) and The Bear Stearns Companies (NYSE: BSC) - combined for $17.6 billion in first-quarter profit this year. That's after paying out $28.8 billion for pay and benefits.Those profit and pay figures are more than double those seen in the first quarter of 2000, the last days before the dot-com bubble burst.
It's not as if the banks don't know what's going on. One hiring manager at a major New York bank told Reuters that new staff must take a urine test, which is typical for the industry. But he said new hires can choose when to schedule the test during a 45-day period before their start date."Our drug test is not so much a test of whether you actually take drugs as it is an intelligence test to see if you can figure out how long it takes to get traces of the drug out of your system." .
I am not sure how many of the banks listed above have drug problems. But one, Morgan Stanley, went on the record admitting its employees use drugs. It claims that this problem has not increased. However, if employees cheat on their drug tests, how would it know. According to its spokeswoman Jean Marie McFadden, "To my knowledge, we have not seen an uptick in drug use."
And the pressure that leads bankers to feel that they need to take drugs is affecting the people who produce those record financial results in other ways. And by produce, in at least one case, I mean manufacture fake numbers.
Overwhelming pressure and anxiety to meet profit goals undid star trader David Becker as he rose the Citigroup corporate ladder. Nine months after becoming global commodities chief, Becker headed to prison. Citigroup discovered that in 2004 Becker and others conspired to overstate profits by $20 million.
Becker pleaded guilty and is serving a 15-month sentence in federal prison. Before he committed his crime, he sought psychiatric help to deal with the pressure of balancing family and career.
Are drugs a way for these megabucks bankers to cope with pressure or just another perk they can buy with their stock market fueled winnings? And what would happen to stocks if these bankers were prosecuted for their drug use?
Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns shares of Citigroup and has no financial interest in the other securities mentioned in this post
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