Sentiment heads south.

Markets seem to be coming round to the view that we are in this for the long haul and that the 'green shoots' are going to grow at a rather leisurely pace rather than at the vigorous rate that so many have been anticipating. When the SPX gets well below 800 I'll start to look at stocks again.

Over dinner a few nights ago a neighbour suddenly launched into an impassioned attack on bankers, greed and the need for much tougher regulation of the financial industry. It suddenly struck me that the call for additional oversight ,although popular, if badly handled might make matters worse- possibly much worse.

Anyone who has ever had to deal with the FSA or SEC over the last decade will know that this economic crisis did not occur because of lack of regulation - these august bodies already had vast armies of people, a record number of regulations,and near unlimited powers. Now , the regulators want even more powers and want the banks to raise more capital,lend less and impose tighter controls.

In a world where credit is evaporating , capex is shrivelling and where factory utilisation numbers are dismal (65% in US manufacturing) this enforced shrinking of capital is the last thing we need.With US and Euroland banks needing to write down another $1 trillion or so over the next couple of years governments are talking about imposing what looks like regulatory and economic idiocy. Why not simply go back to the good old days of partnership structures and unlimited directors responsibility? I'm all for sensible targetted regulation but hastily drafted rules might end up proving to have dire,and unintended consequences for the broader economy.