Are we witnessing the end of the surge on Wall St? Or is, what we witnessed this week, no more than a minor correction? The current roller coaster ride on the NYSE and other world markets including Australia, demonstrates just how much of a casino these places are.
Putting aside the investment most Australians have with the markets through their super funds, let’s call this out for what it is. While conservative governments pride themselves in using the markets as a guide to economic health, the reality is, they are nothing of the sort.
They are nothing more than gambling houses for institutional investors, merchant banks, brokerage firms and individuals brave or foolish enough to chance their hand.
Yes, there is a plethora of data to show a healthy stock market is necessary for each of us who hold super accounts but overriding that is the reality that super accounts are a secondary consideration when investors make their moves to buy or sell.
Super funds benefit on stock markets by good luck, rather than good management.
To equate these monetary whore houses with that of a feeding frenzy in a poorly run zoo would not be too far from the truth. To pretend that the stock market runs world economies is an insult to the average person’s intelligence. It does no such thing.
Better it didn’t exist, rather than have good performing companies pretending they have inflated values which are based on no more than a guess or a whim. Better it didn’t exist than to use well managed firms as a vehicle in a calculated strategy to make a quick profit from a confidential in-house tip-off.
Better, because only those who got in first benefit, while those who bought late are left wearing a loss when the ones who got in first decide to get out.
At the other end of the market, better it didn’t exist than to have poor performing companies suffer a rumour, become a target for takeover, and lose enough value to become a bargain. Invariably we see the new owners strip these companies bare, show long time employees to the door and bask in the glory of less competition in their chosen market.
Better it didn’t exist if all it does is enable banks to use excess reserves to pump money into a honey pot to reward executives with obscene bonuses.
The markets always recover after a crash. That’s because the crash had nothing to do with performance. Markets are manipulated by traders, by boardroom decisions, by insiders, always with one thing in mind: be first, or if not first, then cheat.
All bull markets, including the one witnessed on the NYSE over the past 5 years, end in a crash. It’s not an accident. It’s planned that way. Bull, crash, bear. Bull, crash, bear.
The clear majority of the QE money issued by the US Federal Reserve in the post GFC period, went into the stock market. It didn’t create jobs, it didn’t bring about the modest recovery experienced since the GFC. That came about by direct government stimulus spending in key job creating industries.
The QE money that flooded the stock market could, if targeted toward production and services, have brought about a quicker recovery.
Is this a responsible method of wealth creation? Money invested in the markets doesn’t produce anything except more money. The higher the index, the greater its value. But nothing has been produced. No jobs have been created.
Perhaps it is time that we called out our politicians who claim that the markets “won’t be happy if we continue with deficit spending.” Of course, they won’t and that’s probably the best reason to continue doing just that.
Better it never existed, or at least, have its reputation downgraded to no more than the commercial casino that it is.
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All true John.
Speculation in the share market or with real estate or fine art or classic cars or famous wines is just a ponzi scheme where new money makes the price of the commodity appreciate. Nothing is produced and no worthwhile jobs are created. Wealth is produced as long as the ponzi scheme continues or if there is a crash.
I suspect the real purpose of restricting access to the aged pension and the creation of our compulsory superannuation system was to help stimulate the share market ponzi scheme which predominately benefits the most wealthy, to provide massive management fees to the fund managers – currently over $25 billion p.a. much of which goes to the big 4 banks, to offload toxic fossil fuel assets onto mums and dads super fund investors and to provide weak oversight over corporations so that their leadership are free to asset strip, retrench, off shore, contract out and generally worsen conditions for employees.
The fact that Quantitative Easing just provided cheap loan funds to speculators shows that the FED and Obama are/were sycophants of Wall Street. Main Street may have also had access to this cheap finance but with generally stagnant consumption demand due to stagnant wages and high unemployment and underemployment, they generally chose to not invest in improving their businesses or expanding capacity. People’s Quantitative Easing where newly issued money went straight to consumers and thus increased demand would have made much more sense. The previous Labor government did something similar to People’s QE following the GFC by increasing the deficit and providing cash grants to the less wealthy.
Time to end all the scams of the neo-liberal era and implement the Green New Deal with full employment and a job guarantee system.
Agree completely.
The entire financial industry is based on fabrication, yet it impacts everyone. Have no idea how to pull this false god down and start again.
http://static3.businessinsider.com/image/4c1938f57f8b9a6503ca0100/wall-streets-greed-is-good-is-a-lot-less-nasty-than-you-think.jpg
I suspect that when the fossil fuel industry totally collapses..and THAT could be just as soon as the next bit of electric car technology breakthrough…those oligarchs of those nations that are solely reliant on oil for sovereign income will throw their money at crypto currency….a) because they can avoid detection and b) to avoid taxation…Am I right?
Hubby has played the stock market for over thirty years, according to him he has shares only in safe reputable companies, he does not borrow the money, and is in it for the long term…Dividends he receives are higher than the bank interest…
Timely post John, I was thinking just recently about Trumps claim that his good economic management has manifest itself in the bull Stock market.
Knowing that the Stock X is merely a gambling house for the rich, does not help the fact that uninformed people get concerned when the inevitable corrections come after the bull market.
Joseph
I agree(!!!!) Crypto-currency will become (and already is) a haven for many wishing to hide money out of sight. Many small players will/have get burned.
Greed is a part of the human psyche – which is why I do not believe MMT will solve inequity.
Tonightly (Tom Ballard) last night on ABC showed how much fun Wall St was having at the bell.
Go to 11:00 – 11:20 mins – Market Meltdown.
https://www.youtube.com/watch?v=J9p_mh8ulk0
Filing it under happy clappers, shorting the market.
I don’t know much about the stock market and I don’t know much about crypto currencies. But if we’re going to talk about people hiding money out of site and hoping for a bit of tax evasion, let’s look at one Malcolm Bligh Turnbull who allegedly keeps up to $200 million in a Canary Islands bank account.
Helvityni, there are many like your hubby. I too enjoyed dividends in the past. But let us also remember all those mum and dad investors who bought into Telstra 2. They paid $7.40 for their shares and have received dividends in the interim. But the value of their investment is now half what it was when they first bought. Their long term return will never match the term deposit interest they would have received over the same period. There will always be winners, but as an accounting identity, that means there must always be losers. Is this any different from a casino?
@Joseph,
The crypto market is even more of a dodgy casino than the stock market, and it will collapse long before the fossil fuel industry does.
@ ret
Dodgy? Absolutely.
Will it collapse? I don’t think so.
Some form of e-currency will survive and become the dominant global medium of exchange.
A prediction: As our economy becomes increasingly intermeshed and dependent upon computing, I foresee a day when governments bemoan the high cost of manufacturing physical money and opt for the ‘safety’ of encrypted currency.
Diannaart, only 3% of government money creation is notes and coin. 97% is electronic. 100% of bank loan creation is electronic.
John
I’m not claiming producing money is a budget drain – I am suggesting a future government will, to further justify the transition to digital.
Welfare card?
Re the share market:
Yep! Just ask warren Buffett.
Really? I never knew that. Now I will have to revise my investment strategy which I’ve followed for the last five decades. LOL.
But I assume the above is not investment advice. At least, I hope not!
Hang on, isn’t crypto currency digital?
helvityni at 4:54 pm
At 30 years, he is a ‘newbie’ – relatively speaking – a youngster when it comes to playing the stock market. As for dividends, they are important. Also for me, a retiree, is the existing dividend imputation arrangements. Not so for foreign investors.
Another reason not to cut company taxes for multi nationals.
Invest in cash and get 3/4% (at best), invest long term in equities and expect 6/7% long term. (at least for me.)
Matters Not,
As a retiree he also gets the franking credits…
This morning (watching the ABC news) I brought up the subject of big losses on the stock market…he did not seem worried…corrections and all that kind of stuff….
Earlier on I used to take some interest in his dealings, and told him not to buy anything without my blessing….
PS.”Now it’s the time to buy”, said the man, “Please, wait a bit” , was my contribution to the ‘discussion’ of this family’s finances..
@Roswell
Yup, crypto-currency is, indeed, digital – which is the bulk of all fiscal wheeling and dealing, right here and right now – the only exception being actual cash.
PS
Don’t forget how much governments would like to eradicate the ‘cash’ economy. Not too long before the 99% will be back to barter just to keep food on the table.
helvityni, the headline(s) invariably trumpets HUGE SELL OFF! Never a headline HUGE BUY UP . No reminding people that every seller needs a buyer otherwise there’s no trade. If it’s dividends and franking credits that you want – and you aren’t a trader – then the share price matters little on a daily basis. Traders like to think they can get ahead of the market and some do. But it’s almost impossible to compete with those armed with inside knowledge.
I tend to pick and stick. So far so good. But don’t lower the corporate tax rate – for a whole range of reasons – including selfish ones.
Matters Not, I showed husband your post, and he said :’Pick and stick’ is my policy too, and it has served me well so far… Shouldn’t that be ‘we’ instead of ‘me’….was my comment…..
Helvityni, I would however recommend investing in funds that have divested their fossil fuel assets as well as unethical things like smoking or gambling. 🙂