A BULL MARKET IN STUPIDITY

Remember the 1990s? One of the central tenets of the new, hi-tech capitalism we embraced so jubilantly after our heady victory over the forces of communism was the democratization of the stock market. Prior to the mid-1990s, buying stock was a laborious affair hamstrung by limited information (no internet meant getting daily prices from the newspaper) and formidable barriers to entry. Much like early internet users were considered to be technologically advanced people with strange, mysterious skills, pre-1990s stock owners were regarded with no small amount of awe. Few people bought and almost no one "traded."

The exclusivity of the market ended in two waves. First, the country went Mutual Fund loco in the late 1980s, allowing a wider audience to buy stocks while someone else did the work. Second, the transition of the internet from a rare technology to an omnipresent part of life gave everyone a chance to play Gordon Gekko. Along came NASDAQ, AMEX, E*Trade, Scottrade, Ameritrade, and dozens of others. We were all liberated from reliance on outmoded Second Wave institutions like Social Security or pension plans from our employers (that our employers were simultaneously liberated from the cost of providing one was just a happy coincidence). Instead we'd plot our own financial destinies in just a few minutes per day, everyone sharing equally in the munificence of The Market and becoming a fast tradin', self-made millionaire in his or her spare time.

It turns out, of course, that giving a bunch of people who know not their assholes from a hole in the ground didn't create a society of millionaires. It created millions of new investors who didn't know what the fuck they were doing. The only beneficiaries were the institutional investors who made billions off amateurs buying and selling idiotically based on the recommendations of TV and magazine "analysts." Uninformed demand was a terrific way to drive up prices; the pros enjoyed the ride, sold high, and got the hell out before John Q. Public's investment came crashing to Earth. In short, democratizing stock ownership has not and was not intended to spread wealth. That was merely a canard. The only thing it has accomplished is to make the people who were already wealthy even moreso. Massive herds of people buying what a loud guy on TV tells them to buy is a godsend for people who know better.

If you fancy yourself an investor – and I do, albeit a long term buy-and-hold one – you can probably anticipate where I'm headed here. Anyone seen the price of gold lately?

Although gold predates the stock market as a mode of investment by several centuries, it is only recently that Americans have been swept with the paranoid, frenzied, Galt-goin', Paul-votin' urge to physically hoard gold (and silver). With the general public egged on by shameless shills who stand to make a fortune from herds of new buyers, precious metals are no longer the exclusive province of survivalists. Every patriot worth his salt is burying some gold in the yard ahead of the inevitable collapse of the worthless fiat dollar. That Glenn Beck is paid by retail gold outlet Goldline International to hawk gold on the air is no cause for suspicion. That prices have quadrupled in a decade matters not a bit. That anyone buying at these prices stands to lose a fantastic amount of money is irrelevant. When money ceases to exist and gold is the only currency with any value, Uncle Larry and his buried treasure will have the last laugh!

Someone once gave me a useful piece of financial advice: if your cabdriver is talking about the wisdom of a particular investment opportunity, it's time to short it. Fads become bubbles and bubbles become crashes. The only people who win are the ones who got in before the hysteria and are sharp enough to sell high. It may be inconceivable that anyone would be stupid enough to buy at $1,200/ounce, but something tells me the average teabagger rally has more than enough candidates who qualify. The guise of democratization – "Finally, a chance for the Everyman to own gold!" – is as cynical as it is effective.

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18 Responses to “A BULL MARKET IN STUPIDITY”

  1. BillCinSD Says:

    Gotta go gold. a) I teach how to extract it and b) owning stock has now become slavery with corporate personhood so fully established with the Citizens United ruling

  2. RosaLux Says:

    Well said. What has basically happened is that "institutional finance" has been extremely successful at selling the notion of "financial autonomy" to middle class lay people. The idea that you can make a million dollars with a few stock tips from CNBC appeals to two core themes of American culture: 1) We glorify the idea of "getting rich quick." We love stories of starlets who shoot to fame overnight, old men panning for gold that strike a gold mine, Carnegie-types who go from rags to riches. We glorify wealth – but we also glorify getting things FAST. We want to lose 10 pounds overnight, learn languages just by listening to a few Rosetta Stone tapes, etc., etc. What of the great devotions? The tasks that require decades of hard work and perseverance? Outmoded, I think.

    2) Not only do we love getting rich and doing it quick, but we love being told that we are autonomous. Burger King tells us we can "have it our way." JP Morgan Chase now has a program where we, the people, vote on who they will give charity money to (even as the money they give away is really a tiny fraction of the many millions they've raked in in overdraft fees that exploit the poorest Americans). And yes, CNBC peddles the insane notion that laypeople should pick their own stocks even though they have nowhere near the financial information and know-how available to institutional investors. What's happening here? The corporate class is selling the rest of us the illusion of our own autonomy. And, more or less, the American people eat it up and smile even as they're being bilked and exploited every which way. We might be morbidly fat from all those Whoppers and we might have our stock portfolios wiped out, but at least we had it our way, didn't we?

  3. jon Says:

    But I heard this guy on AM radio tell me that Now is the Right Time to buy Gold! It's got such potential, and nothing keeps its value like gold, and…

    Oh wait: that was fifteen years ago.

    Anyone who says buying something is the key to wealth is generally full of it. The way to get wealthy is to spend less than you take in, make sure you spend it on stuff you need and stuff that goes up in value, and not go into debt for stupid reasons. Trying to get rich counts as a stupid reason if you have to do it according to some genius with a sure thing in real estate, precious metals, a hot stock, or intimate knowledge of a racehorse's urine-flow-to-land-speed ratio.

  4. Kulkuri Says:

    IRAs and 401Ks started back in the 80s and helped increase the numbers of people with stocks. Never had much luck with either. Put money into an IRA thru work in '87 only to have most of it wiped out by the crash. Whenever I started an IRA or 401K thru work, seems like the fees were more than the earnings. I still think it's all a scam!!

    Gold and silver have been the supposed hedge against inflation for like forever. Back in the 70s gold was near $400 an ounce then went down, silver once hit $50 an ounce when the Hunt bros tried to corner the market, then tanked.

  5. dbsmall Says:

    What should the muddled masses be trusted to manage on their own? Can't handle their finances. Can't handle their security. If only we had one revered one to make all of our important decisions for us. (I bet that's how cults are actually formed…desperate people clinging to someone promising not only salvation, but removing responsiblity for decision authority.)

    The interesting thing with "Gold" is that it's been promoted as a way to get rich. And, near as I can figure, it may actually be a vehicle to avoid poverty! (fiat currency can go to zero…one assumes a fixed-quantity, valued item can't.)

    That said, I have historically done pretty well in the markets, often through derivative constructs that seem to be mathematically defensible and sound. Strangely, 3 years ago, I decided to get into some junior mining stocks, and it's been the worst set of investments I've ever made…

  6. Parrotlover77 Says:

    I've been wishing I had bought a shit ton of gold in around 1998 for a while now. I didn't think the bubble would last this long, honestly. I probably would have sold it when I saw a nice local peak after it was pretty much established that Obama was going to win (thinking that a recovering economy would drive prices back down). But back then, I didn't foresee the Glenn Beck / Tea Bagger factor.

    Now I'm thinking Peak Wingnut around the midterms might be a good time to sell…

  7. Pan Sapiens Says:

    1) As far as the stock market is concerned, you could do worse than read "The Myth of the Rational Market" by Justin Fox.
    2) As for gold, I've noticed there are quite a few rich people who are stocking up, loading up, not on gold, but on property and ammo. I'm not quite sure is going through their tiny little minds, but – given the distinctly American downright cheerful hopes and wishes for the Coming Apocalypse – I guess they assume that gold, guns and guts are going to float them through the shit-storm. Little do they realize that the real animals, the ones bred to survive a downfall of civilization, will make short work of them. Me, I'm one of them few what realizes gold is essentially worthless during the End Times. Womenfolk. Now THAT's your prime investment opportunity. Highly versatile, and, unlike gold, they are edible in a pinch.

  8. displaced Capitalist Says:

    I just made a 17.5% profit on a number of stocks that I bought a year ago. I hope these rubes keep driving up the price. It makes me wealthy.

    Well, no it doesn't, cuz I don't have much to invest in the first place, but at least I have a little more to pay down my student loans. :(

  9. Crazy for Urban Planning Says:

    I once had an opportunity to talk to a real billionaire about investing. It was amazing what he said, the stock market is designed for people who don't care if they lose ten million dollars overnight – for them that is just the cost of doing business and eventually they will double or triple that money because they have more capital and information than us schmucks. What Ed and the commentators just said was spot on – we all stink…

  10. Nan Says:

    The gold ads are targeting the same demographic that buys Precious Moments figurines and Franklin Mint collectibles as investments, i.e., the truly gullible and the dumber than dirt crowd.

    Minor aside: RosaLux, Carnegie may be a rags to riches figure historically, but he didn't do it overnight and he worked damn hard to build that fortune.

  11. Ed Says:

    Yes, everyone make sure to buy a lot of women. Stock up. Good idea.

  12. Peggy (in a Bues Brothers hat) Says:

    "You there! You! How much for the weeemen?

    …The little girl! How much for the little girl?!"

  13. Comrade PhysioProf Says:

    G. Gordon Liddy ads are on the radio constantly exhorting people to buy gold.

  14. dbsmall Says:

    Leon Phelps is on the radio, constantly exhorting people to buy women.

  15. gruaud Says:

    The first time I saw a cash-for-gold ad on late night TV,
    I sold all my Au that week.

  16. Andrew Says:

    If I thought I had the secret to wealth, I damn sure wouldn't share it. Anyone who says s/he has the secret to wealth and is willing to share it at any price is at best a fool, at worst a liar.