Stocks and Stones May Break Our Bones
by Edmund Lis
My wife thinks it’s nobody’s business, but if you’re writing an honest commentary then you need to tell the truth. So here is my reality: I’m underemployed, underinsured, underwater on my mortgage, and sadly I’m not alone.
Unfortunately, more and more Americans are finding themselves in the same boat. What’s even sadder is that it didn’t and doesn’t have to be this way. So what’s the cause? In very simplistic terms, it’s Greed, Laziness and a little global conspiracy for good measure.
Obviously, G&L are nothing new, they are two of the seven deadly sins that have been part of religious dogma for millennia. What is new are the scale, speed, and shear number of people who can be affected and or “infected.” What I mean by infected is how easily people can get caught up in the greedy allure of an easy money bubble, the most recent bubble being housing, and we all know how that’s turning out.
I want to focus on the stock market and how technology and speed have turned it into just another form of gambling. Now don’t get me wrong, I like to gamble, but we should save that for the casinos, lottery or a friendly game of poker.
When I was first learning about economics, the concept of a stock market made sound financial sense. It kind of worked like this: a company (that actually produced something) needed capital to grow so they offered shares of ownership (stocks) in return for a percent of the profits that were then paid as a dividend. For years, the basic strategy was to buy quality stocks and hold them (prices didn’t fluctuate much), sometimes for generations. Wealthier people just bought more, and middle class people either bought or were given stock in the companies where they worked.
That’s what it was like growing up in Flint, Michigan, a General Motors town. Everyone I knew had some relationship with GM and only bought and drove GM cars. They also bought stock when they could. The community was made up of executives, supervisors and line workers who worked at GM as well as at suppliers like Goodyear, Dow Chemical, & AC-Delco. There was a pride and sense of ownership — back then you could get your butt kicked for owning a Ford, let alone a Japanese car.
Then something started to change. Companies started outsourcing, workers quit caring about quality, and the markets became obsessed with share price instead of company value. I don’t know what happened first or who’s to blame, I only know that it’s been spiraling downward ever since.
This brings me back to the markets and how they help perpetuate the death spiral. Because everything has become so fast with computerized trading and fractions of a second can mean big bucks, the market has become very short-sighted. It’s all about the quarterly reports; that’s only three months of a person’s or company’s working life.
If a company is doing poorly but says that they are going to lay off employees, they get rewarded by the market and their stock price goes up. If a company is doing well but didn’t meet the analyst’s expectations, their stock gets clobbered. To compound the problem, executive compensation has been tied to the performance of the stock, not just the company.
Back in the day, the average CEO made 50 to 100 times the average worker’s salary. Now it’s become obscene, with that number rising tenfold at the same time that worker wages and benefits are being eviscerated. It’s no wonder that just like me, the average American is struggling.
So, is all this a result of a fluke global recession caused by a greed-driven housing bubble or is it something more? Well, I for one, love conspiracy theories and ever since hearing way back in high school about David (very rich guy) Rockefeller’s Trilateral Commission and its goal of “remaking global trade and finance” I have believed that eventually we would have what George Bush Sr. (a Trilateral member) called “A New World Order.” I also believed this could be a good thing, as it would create a better chance for peace in the world. But what I didn’t realize then, but am starting to see and feel now is that to create a true, fair, and balanced global economy you need a level playing field.
The problem is that America and the EU are too high, and even with China and Asia’s growth, there is no way they can catch up. So that means our economy needs to come down so we can meet them halfway. Looking around at how fast the world and its economies are changing, the only thing I can think to say is “Are we there yet?”
(For archives of Edmund’s columns please visit www.whatsthepoint-edmund.blogspot.com)