On The Money
Financial Advice for the Working Class
40 years ago, 95% of all stocks were owned by the richest 5% of the population. Back then, unionized workers, and people with decent jobs had pensions, that is, a guaranteed income after retirement. But with 30 years of union busting, downsizing, rightsizing, outsourcing, and bubble bursting, only veterans, cops, prison guards and teachers get pensions these days, the rest of us have the option of A)Nothing, or B) a 401K plan.
Thanks primarily to these 401K plans, currently, 49% of white people, 25% of black people and 16% of Hispanic people now own some stocks, bonds or mutual funds. That’s pretty much everyone who matters, demographically speaking. While more people than ever own some stocks, 80% of all stocks remain in the hands of the very wealthiest 5% of the population.
While you, a working person, may think, “Well, a 401K Plan is better than nothing.” You should think again. Sure, it seems like the stock market always goes up in the long run, and profitable companies pay dividends, but for most working people the pitfalls outweigh the benefits. Here’s why:
Everyone wants security. That’s why we all invest. You want to know that you’ll have enough money to live on when you are too old to work. You want to be able to help your children with college. You want to have money in case of emergency. That’s the kind of security most working people think about when they invest. That’s not the kind of security the stock market offers.
On the other hand, if you have millions, or billions of dollars, you know you have enough to live on, spoil your kids, and clean up their messes. No the rich seek a different kind of security. They know that they have billions of dollars, while billions of people live in poverty. They reason, rightly I think, that those billions of impoverished people might want to kill them. You see, the rich got that way by raping the environment and enslaving people. Lots of people hate them, with good reason. Lots more just want to take their money. The rich seek protection from you and I. That’s what they mean by “security”.
Don’t believe me? Go to the headquarters of any company listed on the NYSE, walk in the front door, and demand to see the CEO. The receptionist will immediately call “Security!” You don’t acquire billions of dollars without an enormous empire of people working to shovel it into your pocket. You need to keep enough of these people busy, or they turn on you. This is what the rich fear most.
It takes a tremendous amount of energy to keep all of the worlds wealth flowing into a very few pockets. Without an ever expanding industrial economy, and an enormously complex, and completely abstract financial system, those empires collapse in mutiny, with gruesome outcomes for former emperors. For this reason, no project in heaven or earth is too big to be financed. And for this reason, all kinds of bizarre, and insanely dangerous projects, like deep water oil drilling or nuclear power plants or god knows what next, find plenty of capital to make them happen.
However, the price of a company’s stock, determines how much capital it can borrow. So, a low stock price inhibits growth and expansion…for them. That doesn’t stop “Mom and Pop” small businesses from growing. In fact it helps even the playing field.
When mom and pop’s mega-store competition can’t find capital so easily, they think twice about opening a new store and operating it at a loss for a couple years, just to drive mom and pop out of business. Low stock prices slow down those gigantic conglomerates, owned in millions of little bits, mostly by a handful of people, and run by the most pathologically greedy people on the planet.
OK, so buying stocks helps destroy the planet, oppress workers, and drive small businesses out of business. But what is the up-side. Well for years the common wisdom has been that the stock market always rises over the long term. So, if you’re making a long term investment, stocks, especially the “blue chips” which I’ll talk more about next week, make a solid investment…for the rich.
Long term for a working person means 40 years, tops. Long term to the rich means 100 years or more. The enormous corporations that get traded every day on the NY Stock Exchange, don’t just produce products. They engineer our culture. They engineer our culture to benefit those exceedingly rich people who primarily want to keep us too busy and stupid to realize how badly we are being screwed. The rich get a lot of benefits from their stock market investment, the fact that it generally appreciates in value is almost beside the point. Sure the stock market generally goes up over time, but even if it loses 90% of its value, the rich still have hundreds of times more than you. For them the loss is still primarily on paper.
From the working man’s perspective, we see a different scenario. The working man has a little money each month to invest, so usually he puts it into a “Mutual Fund” or “401K” which we will talk about in future installments of “On the Money”. Basically, he puts his money into a pool of money managed by “a professional” who sends a quarterly statement telling him how his stocks are doing.
Usually, everything goes fine for awhile. Stocks rise, everyone makes money, you buy more stocks, stocks rise, you make more money, everything looks great. Then it happens. The Correction. No one saw it coming, it blindsided everyone, except that kook, who no one listened to. Stocks lose 40-50- 60% of their value. Gone… poof, just a couple years before you retire too.
The super-rich just harvested your retirement fund. You still pay the fees for managing this fund. You just lost your retirement income. Sure, in 5-10 years, the market will regain those losses, but you’re ready to retire now, and the money’s not there for you. You’ll have to sell the rest of your stocks at a loss, just to get by.
Working people should avoid the stock market like the plague it is. The harder your money works against you, the harder you have to work just to get by. There’s an overview of the stock market that’s On The Money.