Friday, August 17, 2007

Gambing for the wealthy

That's about all the stock market really is.


There was a time when the stock market actually served capitalism (and society) in a way that benefited society at large.  That time has long since passed however: now the market is nothing more than a playground for those with a lot of $$ and time on their hands. If you actually believe it is more than that… well, read on.


There was a time when stocks, and the market, served a functional purpose. Namely, if a company needed capital to build a new factory, upgrade equipment or otherwise purchase durable goods that company could issue stock. Essentially stock is a contract between a lender and borrower that says "you give me some capital, and I'll repay you out of the profits I make". Usually, that included the paying of dividends. Lenders also hoped the value of the underlying "stock" increases as the company grew and succeeded in the market.


None of that is relevant today. Please try to think of a company that has issued stock to finance a purchase of durable goods… or any purchase. Most stock IPOs are simply a way of realizing value for the shareholders who started the company.


And if you actually think stock prices are actually tied to corporate performance just track a sample of stock prices vs earnings to see what I mean. Stock prices aren't set by corporate performance – they are set by investor perceptions. Remember Amazon, Yahoo! and a host of others (not just tech co's either)? They didn't even plan to show profits for years, yet people were willing to BET that the investment would be worth something. That perception alone drove the prices into the ridiculous range.


Now the entire economy is held hostage to these markets… And those markets are driven not by actual performance of the underlying companies – you don't even hear analysts talking about that – the markets are driven by investors' perceptions.


The system is based on a delicate house of cards held together by money-brokers who decide for themselves when the market will rise or crash. Like any pyramid scheme, when enough of them decide its time to take profits, the pyramid scheme collapses leaving a few holding the bag. After a bit, they come back in, start hyping new companies and the cycle starts again. Again, like any good pyramid scheme, it depends on a continual supply of folks will to believe the hype, jump in the game and hope they aren't left holding the bag.

21 comments:

skip sievert said...

Thats a fairly accurate over view.

It would take the current market going down at least 2 or 3 thousand points to really affect much of any thing in regard to the real money people.
At some point it will get away from them though. Its a lot to control.

Since it is all smoke and mirrors, at some divining moment, larger trouble, that can not be manipulated away will take over.

Destruction of our resource base is that type of thing. An interruption in the supply of oil another, or an unexpected war, that we can not 'manage' or one that is not designed to make money, but an aberration.
A crash test looms before us.

Adam Smith style 18th. century economics of money will not work in the future, and does not hardly work now.

Intellectual Insurgent said...

There was a time when the stock market actually served capitalism (and society) in a way that benefited society at large.

When?

skip sievert said...

Good point.
When ?
It had to be before the 1938 to 1948 period, and it would probably be before the 1913 period.
1913 is when mechanical energy replaced human energy in the accomplishment of 'work'.

The precursor to that is the invention of steam power in the 18th century.
Before that our caste/class system kept the whole thing revolving. That depended on the propaganda of politics and religion.

We now have the ability to have a fair and equal society based on science. So far we prefer the dumbed social political system that is the product of the time of scarcity, and predicates itself on the ideas of scarcity.

It`s safe and fair to say that our host here is a traditionalist, and a conservative, as far as these types of concepts, and prefers to believe that our current system is good and noble and needs the reform of players accordingly and it will be sweetness and light.
However, it is the very basis of this system which is going to destroy us in a blatantly desultory way, because most people are absolutely brainwashed or clueless as to the actual dynamic of it.

Intellectual Insurgent said...

That is true Skip. Most "liberals" love big government, they just want it to be on their terms, not Bush's. Because they, like Bush, believe they fight for "good" and, thus, they would wield power in the cause of "good".

Unfortunately, as has been proven throughout history, however, absolute power corrupts absolutely, whether you are a Republican or Democrat or liberal or conservative.

With regard to the timeframe of the stock market, maybe but unlikely. The stock market is the step sister of the Federal Reserve and both are criminal organizations designed to loot the wealth of each citizen.

Reign of Reason said...

Sure... the market served it's purpose. The industrial revolution couldn't have occurred without it.

Are there big problems with the stock market now? Sure -- as I posted it is essentially a gambling establishment for the wealthy. It allows them to play a game of "who's left holding the bag" ... It's largely useless to society at large.

However, II you seem to think theres some other system out there that's better than what we have... Theoretically, I'm sure you are right, but throughout time the powerful have subordinated or used to weak... Its simply the way things work.

We have enough laws and such in place to give most people who want a fighting chance: we sure don't start out on a level playing field -- and a lot more could be done -- but I'm guessing our system of government and finance has served you and your family well...

skip sievert said...

"Theoretically, I'm sure you are right, but throughout time the powerful have subordinated or used to weak... Its simply the way things work."

Spoken like a true and jaded believer.
As I said, our host here is a conservative and not interested in real change.
Thats O.K. --
That is the reality though.

Our system is self defeating. The everything for me and nothing for you aspect of it is really very nasty, and a product of the antique system from the past.

There really is NO difference between the mentality of accepting this system, or a Republican/Democrat approach.
Just a very slightly different set of abstract concepts, but the core values are exactly the same.

You believe in the Adam Smith mentality from the 18th century.

That system controls people with a class system.
That system is based on a civil/law society to protect private property.
That system is based on money, as the arbiter of decision making.
It is not creative.
It will destroy itself.

Intellectual Insurgent said...

but I'm guessing our system of government and finance has served you and your family well...

Spoken like a true Republican. Fuck everyone else as long as I get mine.

Reign of Reason said...

first time I've ever been called a republican... interesting.

There is plenty of room for improvement in our system. That was the premise of my statement.

However, it is true that system can work for the majority of the people.

Is the playing field skewed: yes -- seriously. Government essentially works for big-business and a small percentage of our population (those with access) get the majority of the marbles.

But it is still possible to "do ok" in our society with hard work. (While many don't have to work at all... due to connections/birth/access)

Now -- I think you'd have to agree that those are all correct statements. Is it fair? Is it anywhere near optimal: of course not.

If that makes me a "republican" I guess I'm guilty. However, labeling a somewhat objective assessment of the situation doesn't mean I like it...

You are doing quite well aren't you? And you've used the current system -- as all of us have -- to get there.

Intellectual Insurgent said...

Yes, I've used the current system and I am doing quite well in that I am not drowning in debt and actually have savings accounts. But that really is beside the point.

However, it is true that system can work for the majority of the people.

How? The nature of having a "system" is cliques, corruption, etc.

skip sievert said...

dept. of brother can you spare a dime?
Sad, Poor Americans Finally Give Up On Republicans, God

"I'm going where there's no depression, To a better land that's free from care - A shocking new study by the Pew Research Center proves that Americans overwhelmingly identify themselves as Democrats today — 50% compared to 35% who say they’re Republicans. And they’re increasingly weary of religion, religious conservatives, stagnant and shrinking wages, income inequality and the sad toil of their miserable lives.

Just as beaten Depression-era voters would vote for anybody who wasn’t a Republican and specifically not Herbert Hoover, today’s ruined citizens have a vague notion that things might not be as bad with a Democrat in the White House. Still, voters don’t like Dems a whole lot more than they like the GOP: 54% approve of the do-nothing Democrats, while a deluded 41% still stand by Republicans.

What is striking is how far Americans have retreated from religion, “culture wars” and military worship, with big declines in support for all those social-conservative positions. Only 61% have faith that their God exists today, down 11% compared to the mid-1990s, while only 45% bother saying prayers today — down 6% just since 2003. Less than half trust the U.S. military to keep them safe. Once popular controversies about gay teachers and “family values” have also plummeted in importance.

Why? Because most people are now either poor or terrified of the poor rising up and killing anyone who appears to be wealthy — 44% of Americans now say they “don’t have enough money to make ends meet,” up from just 35% in 2002. And 73% agree that “today it’s really true that the rich just get richer while the poor get poorer.” Poor people have always believed this, but in the past few years the number of affluent Americans who believe this has rapidly risen, according to the Pew study.

Meanwhile, support for government relief for the rapidly growing mass of poor people has risen 12% since the mid ’90s, to 69%.

Just over a third of Americans, 34%, agree that “most elected officials care what people like me think” — which is 10% less than in 2002 and, also, untrue.

But there is good news, too: Young people, who are apparently the future of this country, are quickly abandoning religion altogether, with 19% of those born after 1977 identifying themselves as agnostic, atheist or otherwise non-religious. They also have a little more confidence in the government, because they’re even stupider than their parents. Also, they are the least likely to vote, so it doesn’t really matter what they believe."

------------ Just a little outside perspective.
R.O.R. I really do not think you understand the dynamic of what is going on.
That does not mean we don`t like you.
Are you a Republican ?
I don`t know.
But you may as well be one.
There is not a whit of difference between you and them. Zilch.
Do not feel bad, most people are brainwashed.
When you talked about 'hard work' you made me laugh.

Reign of Reason said...

However, it is true that system can work for the majority of the people.

How? The nature of having a "system" is cliques, corruption, etc.


How you ask? Well come on - the obvious answer is in front of you.

People are living their lives and society functions -- albeit disfunctionally in many cases.

Poverty is on the rise -- real wages down -- etc. etc. Serious social and economic injustices abound, but you simply cannot deny the REALITY that this broken/biased/unfair/corrupt system functions "adequately" for most of the populace.

Now -- I think you know my position well enough that I argue for a change: big change. The way our economic system is biased toward the connected/wealthy/powerful and not the intelligent/prodigious/needy/etc. is a crime.

But your rants make it sound like we live in the middle ages where the local Lord rules over the peasants. Look around your city: yes there's poverty -- but the majority of people have a roof over their head, food in their stomach and aren't worried about dying from exposure. What percentage of the world's population could even say that 200 years ago.

We've made progress as a society -- we need to make more. But basic human nature dictates that there will always be people to take advantage of... and people to do the taking.

Get over it... Its not a fair world/society and never will be. Fantasy island only exists in stories.

skip sievert said...

Wage slave rationale.

You are a hard core conservative.

You believe in the class system. Ha ha.

Intellectual Insurgent said...

You're mixing a lot of concepts. Let's pick this apart -

But your rants make it sound like we live in the middle ages where the local Lord rules over the peasants.

I'm sorry, I couldn't hear you, I was distracted by the Made In China By An Oppressed Peasant label on my shirt. Or maybe it was Made In Mexico, Turkey, Guatemala, Vietnam, etc.

In any event, local lords rule over peasants everywhere. What the hell do you think the modern CEO is? What happened to the peasants who worked at Enron? They got nothing for their labors, robbed by the local lords, and they are going to work until they die.

but the majority of people have a roof over their head, food in their stomach and aren't worried about dying from exposure. What percentage of the world's population could even say that 200 years ago.

I'm sorry, where are we talking about? Are we talking about the world or just the U.S.? Because if we are talking about the world as a whole, you couldn't be more wrong.

I've never argued that the system is fair. It's nice to see you finally acknowledge that point. But if it's not fair and that's ok, then why do you simultaneously insist that you "argue for a change: big change". Why fix it if it ain't really broken?

skip sievert said...

44% of Americans now say they “don’t have enough money to make ends meet,” up from just 35% in 2002. And 73% agree that “today it’s really true that the rich just get richer while the poor get poorer.” Poor people have always believed this, but in the past few years the number of affluent Americans who believe this has rapidly risen, according to the Pew study.

Reign of Reason said...

"44% of Americans now say they “don’t have enough money to make ends meet,” up from just 35% in 2002. And 73% agree that “today it’s really true that the rich just get richer while the poor get poorer.”"

True...

But the median income in the US is about $46,000. Not great, but better than most industrialized countries. Poverty is around 14% -- bad for an industrialized country.

Americans are whiners: they feel entitled to everything. Again, can and should we do more to effectively distribute the society's gains.

All of the above is a given, but not relevant: there are opportunities to make a decent living in the society we have created. Its not easy, fair or just... but they do exist.

People have to try to improve the system, but take some responsibility for themselves.

Reign of Reason said...


In any event, local lords rule over peasants everywhere. What the hell do you think the modern CEO is? What happened to the peasants who worked at Enron?


They got screwed... Nicely done tho: you take one egregious example and purport it as the norm.

Shall I counter with something like the philanthropy of Bill Gates? Or Soros?

Again, there are some serious problems with the system (CEO salaries being one): but you actually want to compare the average CEO to the "Lord ruling over his peasants". Enron, and dozens others are criminals... Hundreds more are crums: The system needs to be reformed -- but news-flash: most Americans still enjoy a decent standard of living under what you see as tyranny: more live well than in any civilization known to mankind.

Please elaborate an economic/social system in which those with power don't take advantage of those without it? Can you even imagine such a perfect system of laws, motivations, etc.?? I can't.

You seem to enjoy "hyperbolizing" my positions to make me seem irrational: sorry tho -- it is perfectly logical to point out that there are injustices in our social/political/economic system that need to be addressed, while realizing that for the majority, it actually works fairly well and is one of the best around.

skip sievert said...

Ok.
I believe that you believe that.

We shall see what happens.

You do seem closed minded, and are a closet politician. That does not make any difference though, since both parties are the pretty much the same.

You believe in the system. The system will not work in the future.
Maybe you will get caught up in defending dysfunctional governance.

Reign of Reason said...

Both parties are the same... i haven't claimed differently.

I'm arguing that what we have is the best humanity has come up with so far. Well, not quite: some European countries have improved on some aspects of our social/economic/governance system.

They've scewed some stuff up too.

But its an easily demonstrable fact that our current system has produced lower mortality, better living conditions, etc. etc. etc. than ANY other system humanity has developed.

Are there better systems... theoretically sure -- but the proof is in the pudding. These systems are so complex that theory and practice will most certainly turn out differently.

Intellectual Insurgent said...

I guess it depends on how you measure "better" and "best".

The U.S. is 36th in infant mortality, behind former Eastern Bloc countries like Slovenia and behing CUBA.

http://www.geographyiq.com/ranking/ranking_Infant_Mortality_Rate_aall.htm

The U.S. is 42nd in life expectancy behind Jordan, which is a nation of Bedouin and Palestinians.

http://www.physorg.com/news106121686.html

Reign of Reason said...

Again, I'm not saying things are peachy here. The US in on a decline -- all the steeper because of "The Decider's" completely inept leadership.

(But political and economic systems are like living organizations. Even the best, most innovative systems "get old" and run down under the weight of their intrinsic (one time) strengths.

I don't think the current system is fixable -- to agree with Skip. But I also don't believe it will be replaced. The populace simply will not go that way - IMHO.

The US is on a path to decline. Younger, more vibrant economies will grow to replace it on the world stage. That's simply the way of things -- all things: from living organizations to societies to political and economic systems.

I just think the only realistic thing we can do is try to hold what we have together for as long as we can.

skip sievert said...

"I don't think the current system is fixable -- to agree with Skip. But I also don't believe it will be replaced. The populace simply will not go that way - IMHO."

"The US is on a path to decline. Younger, more vibrant economies will grow to replace it on the world stage. That's simply the way of things -- all things: from living organizations to societies to political and economic systems."

I hear what you are saying, but disagree.

If there is hope right now for the planet, it lies in fundamental system change in the U.S. or North America.
Since we have the lions share of the resources of the world, we are key to changing the world.

If system change occurs here, then the remainder of the world would be forced into sustainability, as best they can have it.

If we fail to change our society into a really different looking entity, the window will close, and the future, will become a nightmare planet wide.

I would suggest that if we want to survive, we will change into something else.

However the system may opt to destroy itself, ( what we are doing now ) rather than change.

I guess I am hopeful.

I have NO hope in the current system, which spells a desultory crashing destruction down the road.