-
Dear People Wishing for Stock Market Trouble
NOTE: I’ve been re-running this article every time over the last three years a temporary downturn on Wall Street causes progressive idiots to celebrate. The last run was in January 2019, but here we go again.
Dear People Wishing for Stock Market Trouble:
Stock market trouble will not make Trump go away.You can have fun posting memes though! He’s owned! He screwed up the one thing he says he’s good at! Rich people will abandon him! Hah hah!
First of all, that is not what is happening. But if people want to panic based on panic journalism, by all means go ahead.
But for the rest of us from 1929 to 2018 the S&P averaged 8-10% gains. It is up well above that for this year, so declines are expected and normal. Recessions on the other hand are CAUSED by things, they do not happen in cycles per se just because it is time. Or because the MSM wants “recession” to replace “Russia” as the magic bullet to end Trump.
Everything tangled by US-China can be untangled, suggesting its long term effects are able to be mitigated directly. You can spend as much time as you like blaming/congratulating whomever that the fundamentals are strong, but they are and that speaks better to longer term trends than other factors. Even in the short term there is money to be made; if you bought on Friday’s drop you are already making money on today’s rise.
If you are learning about inverted bond yields roughly the same way you learned about Emoluments and the 25th Amendment and Russiagate, you are still listening to the wrong people.
But let’s look into what progressives are cheering for, hoping to happen, a real live recession. Any serious downturn in markets will cause more economic inequality. Wealthy people depend on periodic downturns to force middle class people to sell. The rich then buy cheap and wait for the inevitable swing back. They end up owning more stuff, and they got it cheaply.
About half of all American households own stock, in most cases indirectly through mutual funds, and, more and more via 401(Ks) and whatever company pension accounts still exist. Yet despite that broad base — half of us own something in the stock market — the richest 10% of Americans owned 84% of the total value of the market as of 2016.
Though those numbers roughly match those of America’s worst period of inequality, the so-called Gilded Age, they are a big change from 2001, when the top 10% owned only 77% of all stocks.
Today, they have more. You have less. Your part of the market exists because the few wolves need lots of rabbits to eat. You are predator or you are economic prey. Guess where this goes? Think of it as one of those pictures where parallel railroad tracks seem to get closer and closer as they recede into the distance. The theoretical end point is one person owns 100% of everything. But modern wealthy would be happy if .01% owned just 99%, close enough.
In case you missed it, that’s what the 2008 mortgage/housing crisis was all about. Middle class people lost their homes when they could not pay their mortgages. “The banks” then owned those homes and you did not. It took a few years and most prices started back up. You in turn now rent from someone who now owns those homes.
The inequality of net worth, after almost two decades of little movement, went up sharply from 2007 to 2010, and relative indebtedness for the middle class expanded. The sharp fall in median net worth and the rise in overall wealth inequality over these years are traceable to the high leverage of middle class families and the high share of homes in their “portfolio.”
What that means is middle class people have most of their net worth embedded in their homes, but see most of that “worth” is actually debt (leverage.) When times get tough, they may lose the home because they can’t pay the debt. People rich enough to spend money in downturns buy up those homes. They have extra money to ride out the tougher years until the government bails out the markets like Obama did in 2008. Same story for the stock market.
It gets worse, because you get money by working for wages. Rich people get money through capital gains, basically stuff they buy cheaply becoming worth more over time. That’s why the downturn is bad for you, ultimately good for most of them. It is math!
If you like math with letters in it, it is written as R > G. All explained here if you want to understand precisely why you are going to be poorer. And as a bonus, be sure to note the part about how in the U.S. wages are taxed at a higher level than capital gains. You can never have too many advantages.
Note also that until slavery was ended in the United States, human beings were also considered as part of capital. Meanwhile, because rich people pass on their wealth to their relatives, the children of rich people are born rich and unless they get really into hookers and blow, will inevitably get richer. They almost can’t help it. The gap between the 1 percent and the 99 percent must grow. This will create the society reminiscent of the pre-Enlightenment past we are in the early stages of now. You know it from Jeopardy! as “feudalism.”
Downturns are a huge sucking, a redistribution of wealth upward. You’re basically fucked in this process. Poverty is ennobling, so you do have that. Have a nice day!BONUS: I wrote a whole book about this called the Ghosts of Tom Joad but few people wanted to read it, so this is all kind of a fun secret between us.
Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.
Recent Comments
Leave A Comment
Buy Peter’s Books on Amazon!
Rich Bauer said...
1Markets operate on the Greater Fool theory. An economy built on unsustained debt is not sustainable. The Trump bump in the stock market was a fraud, and as they say, a Fool and his money…
01/3/19 8:36 PM | Comment Link
Rich Bauer said...
2When the debt bomb blows up the worlds economy, hoping for the “inevitable swing back” is fools gold.
01/3/19 8:49 PM | Comment Link
Rich Bauer said...
3See Venezuela.
01/3/19 9:02 PM | Comment Link
Rich Bauer said...
4Trump: You fucked up. You trusted US.
01/3/19 9:03 PM | Comment Link
Rich Bauer said...
5Canada better start building its wall.
01/3/19 9:21 PM | Comment Link
Chucknobomb said...
6I remember bringing Apple public as a broker in the 80’s for 13 a share I think. Capitalism sucks. The “War Is A Racket”. New Topic…Oh, What is Sanders view on Syria troops leaving?
01/4/19 11:07 AM | Comment Link
Rich Bauer said...
7Americans keep falling for fools gold
About a third of U.S. corporate profits flow to foreign nationals—which means that a third of the tax cut flowed abroad rather than staying at home. This probably outweighs any positive effect on GDP growth. So the tax cut probably made America poorer, not richer.
01/4/19 11:57 AM | Comment Link
Rich Bauer said...
8Speaking of the greatest fool-
Trumpie: I will shut the government down for months or years.
Man, that guy is really working on his insanity defense.
01/4/19 1:57 PM | Comment Link
Rich Bauer said...
9Fool me once
About that ex Marine arrested by the Russkies for spying, the Deep State just leaked that the guy was dishonorable discharged for theft of thousands of dollars while in Iraq. Of course, accusing somebody of stealing money in Iraq is like giving speeding tickets at the Daytona 500. Of course it is spycraft 101 for DS to drop dirt on their spies when they are. caught and disavowed. See Spygame.
01/4/19 4:12 PM | Comment Link
Rich Bauer said...
10If everybody in the federal plantation was considered nonessential, we would all be for a very long shutdown. But do you want these people running around while the rest of US are working?
01/4/19 4:14 PM | Comment Link
Rich Bauer said...
11Democrats will agree with Demented to call the Trump shutdown a strike if they can officially call Demented Mr. President Motherfucker.
01/5/19 12:06 PM | Comment Link
teri said...
12Well, now that Fed chairman Jerome Powell has announced that he is going to “listen to the message that the markets are sending” and delay indefinitely any rate hikes (2 interest rate hikes were scheduled for 2019), I think we can assume that Mr. Free Market (heh, heh, you believe they are both “free” and real “markets”, doncha?) will be safely shepherded by the Fed for yet awhile longer. Of course, the Fed’s mandate is not – NOT – to “listen to the market”, prop up the market, bow low to the market, or any such thing. Quite the opposite. But we haven’t had any independence or non-interference since the 1970’s, when Volker deliberately engineered a recession. And let’s not forget the “Bernanke put” in the 2008 “downturn”. So much for the independent Fed and the Free Market theories of modern capitalism.
So the rich will remain rich for awhile longer, your savings accounts will still earn you less than 0% interest, and the market will wobble around, but mostly be safeguarded by the backing of the Fed. Unreal.
Then when the shit hits the fan, as it must since this market needs correction badly, it will be really bad. But the rich will survive. They have a red phone going directly to the Fed.
Hey, guess what? We are bombing Syria again. Turns out ISIS wasn’t destroyed, so we are bombing hospitals and civilians and shit, along with some ISIS, in Deir al-Zour province. As I said before, Trump never said the US would end the air bombing or the arming of the “rebels”, did he?
Guess what else? Trump just sent some troops into Gabon (which is in Africa, peeps). He said the troops have “appropriate equipment” and “aircraft” and have been sent to Gabon because of the “possibility of violence” during the elections in the Democratic Republic of Congo, which borders Gabon. The troops, and possibly additional forces, will be in “Gabon, or the Democratic Republic of Congo, or the Republic of Congo” (those are 3 separate countries) until “the security in the Democratic Republic of the Congo (DRC) becomes such that their presence is no longer needed.” Or until hell freezes over, whichever comes first. Let us recall, if indeed we ever knew, that there are many diamonds and rare-earth minerals in this region of Africa which the US must plunder/have access to/capitalize on/steal.
Trump informed Congress of this move with a letter, which he sent to them “per his obligation under the War Powers Resolution”. Which is kinda funny and ironic and shit, given that the War Powers Resolution was passed into law to CHECK the presidents power to commit the US to armed conflict without the consent of Congress.
It’s all fun and games until the flying monkeys show up. And the Trump administration is as full of flying monkeys as the Bush and Obama administrations were.
01/5/19 4:09 PM | Comment Link
teri said...
13Rich,
This isn’t a strike, it’s a lockout – no matter what sort of gobblety-gook, illiterate, sub-par English the Fool on the Hill decides to use to confuse the rubes.
Jesus on a pogo stick. A “strike”, my fat ass.
01/5/19 4:14 PM | Comment Link
Rich Bauer said...
14Teri,
Since Trumpie always considered the federal government his enemy, why did it take him so long to shut it down?
01/5/19 5:33 PM | Comment Link
John Poole said...
15Will the furloughed employees working directly for or indirectly connected with the US Federal Government still support Trump in 2020? Maybe. I think the Democrats are terrified that they could lose in 2020 and will go all out for an impeachment. That is not a good way to run a government.
01/5/19 8:40 PM | Comment Link
Rich Bauer said...
16You can’t eat capital gains.
Oregon recently joined about 20 other states that allow people to scoop dead animals off the road for human consumption.
01/5/19 9:28 PM | Comment Link
Rich Bauer said...
17McDonalds stock rallied 6% on the news. You can have your capital gains and eat it too.
01/6/19 10:54 AM | Comment Link
Rich Bauer said...
18AmeriKa is for old people
For such an old guy, you sure do think young. Approx. 30 percent of disenchanted 15- to 29-year-olds want to get out of Trumps Amerika. That number drops significantly with age to 19 percent of 30- to 49-year-olds and 8 percent of people 50 and older. Furthermore, those with lower incomes were more inclined to say they’d like to leave, too.
So where would all the expats go? Canada. Following the 2016 election, more than 1 in 4 Americans indicated a desire to go to Canada, Gallup stats show. That’s more than double the number who named Canada as an ideal destination in 2016.
01/6/19 3:00 PM | Comment Link
Rich Bauer said...
19Always sell US short.
Trumpie: I am ordering our troops to come home from Syria and Afghanistan now.
Deep State: Ah……no.
01/7/19 4:46 PM | Comment Link
Rich Bauer said...
20So you are suggesting it is always a good time to buy?
Perhaps your portfolio had some Enron, World com, …maybe some GE?
08/26/19 2:25 PM | Comment Link