A major, unexpected pitfall of the "investor" economy is now rearing its ugly head

[Le Jacquelope]

A major, unexpected pitfall of the "investor" economy is now rearing its ugly head

If you work in the banking and brokerage industry as I do, you know very well right now that many people are selling their shares and same-day-selling their options.

It's part of what's been causing the stock market to dip.

But that's just the tip of the tail of the beast.

Neo conservatives, under Bush, have been pushing Americans out of work and throwing around this propaganda that work is underrated, and that the future of America's workers lies in management jobs - and investing. It's part of the "ownership society" concept pushed by Bush: invest, instead of relying on social security.

The idiocy of the management argument is self explanatory, but the push to make everyone dependent upon investments, has not yet been so obviously easy to discredit until now.

The problem with turning everyone into an investor is, lots and lots of people, making whimsical decisions, can collectively put a major hurting on the stock market - the very casino in which the rich gamble their big bucks.

In other words, when the job market takes a dive, people look at their options and same-day-sale the day away to pay for bills. The less job income, the more stock sales. A dip in one results in heavy leaning on the other. When, for some reason, a lot of people sell off on a given day, it's on. Others see their particular stock dropping because some other group of people went into a profit-taking spree to make this month's bills, and a mini, or major sell off, erupts... especially since lots of brokerages have the ability to automatically limit-sell their customer's stocks ("dear computer: if it goes below 25 bucks a share, SELL!").

Normally, these panicked investors are contained because they're outnumbered by more sensible people who sell off less often; but now, not only do you have your normal number of strategic and tactical profit taking Charles Schwabbers on the market, but you also have your mom and pop Scottraders who represent a growing pure chaos factor.

The gist is, now more than ever, if the masses feel an employment or wage crunch, they are more likely to have stocks and options that they will sell to make ends meet. If you want to lower the chance of a bunch of unemployed options and shares holders dinging the market with sustenaince sell-offs, the solution is to bolster their income - by keeping the jobs that they're losing! Because if they're worried about their jobs, they damned sure are also less likely to buy your product (consumer spending is based largely on credit now... that can't last forever, no matter what the head-in-the-sand neo cons think); and downward pressure on consumer spending, ladies and gentlemen, is even more harmful to any company's bottom line.

 

[Morwen]

I don't think anything you're saying there is wrong on the face of it, but the true vast majority there is passively invested in mutual funds, even pension funds are invested that way, and if you ask some random pension fund benificiary, do they know what their fund is invested in? No they do not.

 

[Hester]

institutional money is what moves the market in big ways.

 

[petecyclone]

If you work in the banking and brokerage industry as I do, you know very well right now that many people are selling their shares and same-day-selling their options.
...
The problem with turning everyone into an investor is, lots and lots of people, making whimsical decisions, can collectively put a major hurting on the stock market - the very casino in which the rich gamble their big bucks.

Normally, these panicked investors are contained because they're outnumbered by more sensible people who sell off less often; but now, not only do you have your normal number of strategic and tactical profit taking Charles Schwabbers on the market, but you also have your mom and pop Scottraders who represent a growing pure chaos factor.

Darling, I'm fascinated and thankful that there is some real nuts-and-clits...I mean bolts...nuts and bolts discussion ongoing here. That said, I'm going to play Satan's Solicitor and check out a few of these ideas.

1) Are these share/option sellers regular investors, or participants in IPOs? The recent flurry of big-news offerings has made a few people very rich. They were the ones that sold/sold options at their first opportunity.

2) I agree that unsophisticated investors can behave erratically, however with institutional investors, especially funds, holding over $8 TTttTTttrillion in equity, I think it more accurate to say that stampedes of mas and pas are more likely to cause panic and speculation. The small investor herself won't make a brokers' heart beat any faster, but she could be a pebble that starts an avalanche, provided she's sufficiently shrill.

3) Of course the concept of the PRA's is silly. W thought it up, didn't he? But so too is the idea of Social Security. The New Deal economists simply failed to plan for increased lifespans, population growth, and inflation. Perhaps an IRA-like system would be more practical. Instead of total freedom, investors could choose from among a series of 'funds' which offered different risk and sector customization? Thus, we aren't all measured by SS's Procustean bed, but at the same time aren't thrust up the Mekong of Wall Street without the proverbial paddle.

4) While we're on the subject, I think we should consider these 33 and 34 acts, and maybe the 40 too. It's archaic, some of it, and the rest is needlessly complicated.

Great topic,
-PC

 

[Lovin Tongue]

institutional money is what moves the market in big ways.

Any moron knows this. Scratch that. LT is a moron and he didn't know so I have to take that back.

 

[landslider2000]

When I began investing, the Dow was below 1000.

Markets go up. And they go down.

 

[Sean Renaud]

Ok LT. I do agree with Bush (partially) on this particular point and really what you've done only partially hurts his system.

You're entire argument is hinged on the fact that the stock market can be affected by mass hysteria and people pulling out money all over the place to pay day to day bills. For starters if I'm not mistaken Bush was pushing stocks/bonds and investments in general as long term. As an alternative to Social Security, you know RETIREMENT, its not meant for day to day anything. So right there we've proven what you already pointed out. People as a whole are too stupid to take control of their individual destinies.

The second point goes to that unless you are a wall street junky day trading is just stupid because just like your Vegas analogy, it's gambling. That's all it is. I won't lie and say I don't occasionally do some minor day trading, for starters I've only got 2g tied up in stocks, also I'm 23 so to an extent its just play money to me. If I lose it all then I'll cry collect my knowledge and start again I'm young enough to have that benifit. (Sides as a young Marine that money should have been spent on liquer so its kinda living on borrowed time as it is.) You can't predict the stock market, you can make some damn good guesses but over all day by day it moves eratically. You want to look at month, year and decade (for bussiness that old) growth and decrease when thinking about getting in. Don't bail at the first sign of trouble, specially if you don't know what the trouble is. Stock dropping can be about something as temporary as a bad quarter.

Take the video game industry for instance. Q1 of 06 most of them had decreased revenues. Why? Christmas sucked this year. Also with the new systems coming out end of this year they aren't really producing much right now so they will also have weak Q2 and likely Q3 but Q4 and Q1 07 should both be very strong. If you sell right now (assuming you have stock) you're a fucking retard. If you buy into this stock quoting me like an expert you're a fucking retard. You should understand what is going on in a company and what causes its ups and downs. Stop thinking about stock as a peice of paper, stop thinking about it as an investment. Think about it as what it really is. A company. You own part of a company. You should show some goddamn interest in your company.

If your argument is that investing cannot work on some kind of basic level I think you're wrong. (though you've convinced me of things I thought impossible so fire away) The only thing you've proven at this point however is that stupid people can't make good decisions and that uniformed people also make poor choices. I could have told you that without a big shiny reference.

 

[Le Jacquelope]

Ok LT. I do agree with Bush (partially) on this particular point and really what you've done only partially hurts his system.

You're entire argument is hinged on the fact that the stock market can be affected by mass hysteria and people pulling out money all over the place to pay day to day bills. For starters if I'm not mistaken Bush was pushing stocks/bonds and investments in general as long term. As an alternative to Social Security, you know RETIREMENT, its not meant for day to day anything. So right there we've proven what you already pointed out. People as a whole are too stupid to take control of their individual destinies.

It's not stupid to sell stocks to pay your bills.

The second point goes to that unless you are a wall street junky day trading is just stupid because just like your Vegas analogy, it's gambling.

My mutual funds IRA took a dive in 2000. I'd have lost my shirt if I hadn't mostly stayed out of that.

That's all it is. I won't lie and say I don't occasionally do some minor day trading, for starters I've only got 2g tied up in stocks,

LOL, I put 7.8G into day trading last year. My cost basis calcs are gonna be killin me this year. It's not that hard to do until you have a lot of day trades to keep track of. Yeah, I day trade. Actually I 3-5 day trade since the bastards impose these annoying waiting periods for shit to settle, but still. I used to think you could flip a stock in an hour. What ever happened to that?

also I'm 23 so to an extent its just play money to me. If I lose it all then I'll cry collect my knowledge and start again I'm young enough to have that benifit. (Sides as a young Marine that money should have been spent on liquer so its kinda living on borrowed time as it is.) You can't predict the stock market, you can make some damn good guesses but over all day by day it moves eratically. You want to look at month, year and decade (for bussiness that old) growth and decrease when thinking about getting in. Don't bail at the first sign of trouble, specially if you don't know what the trouble is. Stock dropping can be about something as temporary as a bad quarter.

Then again it could also be another Enron.
But yeah, time in the market beats timing the market, as the advertising slogan goes. In 1929 your one dollar in the stock market is now worth ~$10,000, not counting inflation.

Take the video game industry for instance. Q1 of 06 most of them had decreased revenues. Why? Christmas sucked this year. Also with the new systems coming out end of this year they aren't really producing much right now so they will also have weak Q2 and likely Q3 but Q4 and Q1 07 should both be very strong. If you sell right now (assuming you have stock) you're a fucking retard. If you buy into this stock quoting me like an expert you're a fucking retard. You should understand what is going on in a company and what causes its ups and downs. Stop thinking about stock as a peice of paper, stop thinking about it as an investment. Think about it as what it really is. A company. You own part of a company. You should show some goddamn interest in your company.

Do you work for Janus?

If your argument is that investing cannot work on some kind of basic level I think you're wrong. (though you've convinced me of things I thought impossible so fire away) The only thing you've proven at this point however is that stupid people can't make good decisions and that uniformed people also make poor choices. I could have told you that without a big shiny reference.

Well, you call them stupid, I call them selling-to-cover-their-bills. The system cannot benefit from a meteoric rise in sell-to-cover-your-bills activity.

None of what you said, however, refutes the fact that if people's wages were to rise and if we kept the good jobs here in America, we the people would invest more and purchase more, and that would be good for the stock market.

 

[Sean Renaud]

It's not stupid to sell stocks to pay your bills..

Yes it is. Not because you shouldn't pay your bills, try not to twist what I'm saying. The money that is in your stocks should be money that you don't need in the forseeable future. No more than 10% of your income. (Do the math I've yet to find a person who can't live off of 90% of there income by cutting some fairly ignorant pleasure. I'll go ahead and say there are people who are like that because there are people working 2-3 jobs and I acknowledge that as a sad fact that needs to be changed.)

My mutual funds IRA took a dive in 2000. I'd have lost my shirt if I hadn't mostly stayed out of that.

Where are those same funds today? Where will they be five years from now? That money wasn't supposed to be for now.

LOL, I put 7.8G into day trading last year. My cost basis calcs are gonna be killin me this year. It's not that hard to do until you have a lot of day trades to keep track of. Yeah, I day trade. Actually I 3-5 day trade since the bastards impose these annoying waiting periods for shit to settle, but still. I used to think you could flip a stock in an hour. What ever happened to that?

I'm not saying you don't know what you're doing. You seem to be able to properly think things through but unless you've got some skills day trading is dangerous.

Then again it could also be another Enron.
But yeah, time in the market beats timing the market, as the advertising slogan goes. In 1929 your one dollar in the stock market is now worth ~$10,000, not counting inflation.

Exactly. Time in the market beats timing the market. Historically stock prices have nearly always increased. Hell looking on a 15-25 year basis (which assuming you start your job at 25 which is rather late and retire at 50 which is kinda early though desireable) is what you should be looking that even the depression wasn't bad. Unless you turned fifty right then but I don't advocate having all your money in stock anyway.

Enron was a bunch of fucking liars. It isn't fair to judge all big bussiness by that standard. Not unless you are going to start screaming about the evils of democracy because we elected George Bush and half way around the world somebody else elected a terrorist organization to run their country. If Enron and World.com weren't the exceptions to the rule they wouldn't still be making the news. They wouldn't still be the prime example and there would probably be a high profile example from shortly before them. There isn't.

Do you work for Janus?

No.

Well, you call them stupid, I call them selling-to-cover-their-bills. The system cannot benefit from a meteoric rise in sell-to-cover-your-bills activity.

No the system cannot benefit from a meteoric rise in sell to cover your bills. They shouldn't be doing this though. I understand that sometimes you hit upon hard times and need to sell your stock in order to pay the pills. That shouldn't be the norm though. Your stocks are for long term and shouldn't be touched unless you have no other options open to you. People shouldn't by buying stocks in January and selling them in June to pay the Water bill. That is called poor planning.

None of what you said, however, refutes the fact that if people's wages were to rise and if we kept the good jobs here in America, we the people would invest more and purchase more, and that would be good for the stock market.

Now that I get to the end of your quote I have to say. I'm not a fan of outsourcing. Particularly not American jobs that Americans are willing to do. If you want to outsource some low end job that American's aren't willing to do and while Americans can still find work so be it. Over all I'm a fan of keeping jobs here in America, closing the borders, no benefits for illegal aliens and cutting of trade with China until they start respecting some basic human rights. If jobs were better here we would purchase more. Americans as a whole are notoriously bad savers and investers so I'm not certain that we would invest more with more money. Hell I'm tempted to say we would invest less because more people would be able to an think they would be able to survive on savings alone. Neither here nor there.

I was defending Bush's personal investments over Social Security. Anything I accidently defended on the way is purely accidentle.