The pseudo-investment problem is made possible by the stock market which together with the financial industry, have been instrumental in facilitating and ramping up the profit overdrive problem under capitalism. As a result, those financial facilitators have also profited handsomely themselves. Whereas an investment in any new and worthwhile business needs no more than an adequate straightforward business loan from a simple bank, the stock market, under the guise of facilitating business investments, is just a legalized and glorified casino at its basic level, with the people at the helms perpetually swaying the odds of winning in their own favors. There are so many warning signs that we are perplexed that the cat is not out of the bag yet.
Starting with IPOs (Initial Public Offering) and extending to M&As (Mergers and Acquisitions), investment bankers fatten themselves with generous fees from these large advisory assignments, proportional to the inflated stock offering prices that are made up by their own clan of financial analysts and that are welcomed by the original business owners who are guaranteed to make a windfall. Then those investment bankers dole out their IPO share allotments to their favored clients who automatically make a profit being in the front of the line. Then the shares are trumped up and peddled to a gullible public swayed by the favorable financial reporting from the same clan of biased financial analysts, credit rating agencies and financial publications who are all sleeping in the same bed.
Within each of these public-traded companies, the original business owner or a new connected hire rewards himself with an enormous compensation package as the CEO and seeks out a compliant board of directors who will most likely act at his bidding. Then, the CEO can game and time the stock market by doing things to make his company’s accounting books look good in the short-term but not for the long-term, so as to further his own gains through his stock options.
Further down the pipeline, the stockbrokers, the mutual funds and hedge funds, shielding themselves by the disclaimer that says, “Past performance does not guarantee future results,” tell their own financial advisors who have no fiduciary duties to their customers, to hard-sell to the client base, build up their big stock portfolio and take on underestimated risks, so that they can profit from all sorts of associated fees and commissions themselves. When their customers’ portfolios fail, they just change the fund managers and start all over again.
With the advent of technology, the U.S. stock market not only is vulnerable to computer glitches and security breaches, but also has been proven to be rigged in favor of high-frequency trading with advanced computers. But the stock exchanges deem it legal anyway because the high-frequency traders account for about half of the total share volume, and pay the exchanges for every trade as well as for trading software and technology. In addition, the stock market mechanisms never resolve the elephant in the room: insider trading, so the whole industry mostly pretends that it does not exist. With a herd mentality, the financial insiders always beat the others and end up winning by being first in line and thereby getting in or out of the stock market faster than everyone else while reaping the most benefits or suffering the least damages.
While The U.S. government is generally expected to be the last resort to fix the flaws, fill in the gaps and mop up the mess, it is not exactly intent on reining in the industry. Tougher financial regulations, like the 21st Century Glass Steagall Act, do not have enough backers in the Congress. The carried interest preferential tax treatment to private equity and hedge funds has no sign of being repealed or changed. Meanwhile, the U.S. has become the world’s biggest tax havens with some states having more than generous and opaque business-friendly tax laws for shell corporations, as the government itself has refused to sign on to the Common Reporting Standard, set up by the Organization for Economic Co-operation and Development in 2014, with new global disclosure standards that are forcing anonymous companies to reveal their real owners around the world.
Even with the 2008 financial meltdown, nothing much has changed. Industry-wide, the concept of conflict of interests still has no relevance, bearing or significance. The opaque and complex financial products, like mortgage securitization, CDO (collateralized debt obligation), credit default swap, etc., that even got the expert investors scammed, are still around. Nobody has gone to jail. When all else fails, the government is ready for another bailout, because certain banks or financial institutions are still deemed too big to fail. So the cycle starts over again.
For the individual or retail investors, they have been told over and over again that stocks are the best long-term investment because stocks outperform other investments like bonds, etc., and outpace inflation on average in the long term, as shown by the historical data graphs and charts. If stocks are so great, why should we not put all our money in them then? The caveats are on the words: ‘average’ and ‘long term,’ which the people who are beating the drum for stock investments do not care to elaborate and take into consideration.
Firstly, the averages are taken from the stock indices, which include only a selective group of companies. For example, the Dow Jones Industrial Average only includes the top 30 large publicly traded companies. The S&P 500 Index only includes the top 500. The NASDAQ 100 Index only includes its top 100 non-financial companies but the NASDAQ Composite Index includes over 2,500, but by no means an exhaustive list. All the indices constantly perform the switcheroo to swap out lower performing stocks with higher performing ones. So if you have invested in one of the stocks that have tanked or folded, it would not have been included in the averages or it would have been removed. If only the winnings of the winners will be averaged, but the losses of the losers will be excluded, that average result will naturally be good, but it hardly represents the overall average including every investor and very trade. Somehow, someone finally figures out they can game the indices by creating low cost index funds which use computers instead humans to pick baskets of (winning) stocks from the indices. It is almost like someone finally figures out they can learn how to count cards and win at the Blackjack table.
Judging from how the stock market and the financial industry are rigged, your stock portfolio probably does not have such stellar performance. Unless you know exactly which companies you invest in, then you can compare your stock portfolio with each company’s historical stock price performance. Otherwise, the average cherry-picked stock performance statistics have no relevance to you, but a mere feel-good advertisement for the stock market.
Secondly, for the general public, the purpose of investing is to safeguard and hopefully increase the future value (can be short or long term) of your savings, but more importantly, the purpose of saving money is to safeguard for unexpected expenses and/or reduced or ceased income, e.g. during rainy days, emergencies, unemployment and retirement. If you invest your savings in the stock market, the only way you do not lose money is when you buy low and sell high. Unfortunately, rainy days, emergencies and unemployment do not always cooperate and match such timing. So the only suitable criterion to invest in stocks is for retirement in the ‘long term,’ assuming that when you retire, your stock portfolio will cooperate. Again, timing the market is a risky proposition especially if you do not have options. So, ultimately, investing in the stock market for the ‘long term’ is only for people who have options, meaning the rich who can afford to wait till the timing is exactly right. Does anyone notice that the cards are stacked?
The concept of saving enough for retirement individually for most people is flawed, impractical and unachievable. When should you retire? Home many years should you plan for? How much money is enough? What is the cost of living in the future? What to do if you do not have a steady income? What happens if your retirement money takes an unplanned dive? There are too many unpredictable and unquantifiable variables and no satisfactory solutions. Social security benefits and defined benefit pensions are the most dependable options, but they are not available to all, are not sustainable and are not guaranteed for life. If our society truly wants to take care of people who cannot make a living anymore, for whatever reasons, old or young, then we should all work together and commit to providing a strong and sustainable safety net for all the needy.
With the NATORZ economy, there will be no need for a stock market. There will be no need to raise capital from the stock market for a business to grow and expand. There will be no need for IPOs and M&As. There will be no need to pander to the activist and majority investors seeking only handsome dividend payouts and high stock valuations at the expense of the companies’ long term viability. There will be no need to deal with conflict of interests among the cohort of the current banking and financial industry. There will be no need to focus on pursuing stockholder value maximization or return on investment for ‘profit vulture’ stockholders. There will be no need for individuals to worry about being misinformed, misled, preyed on and scammed by the financial predators. There will be no need for people to invest in the stock market to save for their retirement.
The NATORZ economy is designed to take care of business investments, and the long term viability and sustainability of those need-based businesses. It will share the profits or gains with everyone. More importantly, it will focus on universal lifetime labor employment instead of profit, so that people’s basic physical needs will be taken care of, for life. NATORZ will also provide a humane community and is committed to building a strong collective safety net that catches anyone, old and young, poor and rich, sick and healthy alike.
When and if people start to divest from the stock market and the red economy and invest in the G.R.E.E.N. NATORZ economy, they are investing or putting to use the latent financial resources right away in what is important, needed, critical, essential, or urgent, including climate change solutions. Those latent financial resources are currently sitting around idle or not being utilized because the financial gurus are waiting for the next unicorn startup companies or other blockbuster investment options, which will make them and their clients the most profits, and will mostly benefit the rich. Are we going to continue to be complicit in the current scandalous financial scheme or are we going to choose a new way to truly invest in a hopeful, secured and benevolent future? After all, there is also no point in investing for the future if there is no future at all with the impending climate catastrophe.
Let us imagine what if…