Felix Salmon has a fascinating piece about the decline of publicly traded stocks:
[T]he Germans aren’t buying the New York Stock Exchange for its commoditized, highly competitive and ultra-low-margin stock business, but rather for its lucrative derivatives operations.The stock market is still huge, of course: the companies listed on American exchanges are valued at more than $17 trillion, and they’re not going to disappear in the foreseeable future.
But the glory days of publicly traded companies dominating the American business landscape may be over. The number of companies listed on the major domestic exchanges peaked in 1997 at more than 7,000, and it has been falling ever since. It’s now down to about 4,000 companies, and given its steep downward trend will surely continue to shrink.
[….]At risk, then, is the shareholder democracy that America forged, slowly, over the past 50 years. Civilians, rather than plutocrats, controlled corporate America, and that relationship improved standards of living and usually kept the worst of corporate abuses in check. With America Inc. owned by its citizens, the success of American business translated into large gains in the stock portfolios of anybody who put his savings in the market over most of the postwar period.
No more welfare queens becoming shareholders with their welfare dollars; now it’s John Galt’s world, we’re just living in it, just the way Jeebus and The Founders always meant it to be.
BGinCHI
Wages replaced by stock profits, now the latter disappearing.
We need a new name for this phase of capitalism.
Comrade Javamanphil
With fewer and fewer companies to invest in, now would be an excellent time to privatize social security into individual accounts.
Kryptik
Am I the only one who sees this paragraph and simply laughs at the naivete and historical blindness of it?
Judas Escargot
@BGinCHI:
We need a new name for this phase of capitalism.
I vote for “Endgame”.
PeakVT
The number of companies listed on the major domestic exchanges peaked in 1997 at more than 7,000, and it has been falling ever since. It’s now down to about 4,000 companies, and given its steep downward trend will surely continue to shrink.
Salmon’s piece is good and I agree with it, but I don’t think number of companies is a good metric. Using, say, the percentage of total business revenue represented by listed companies would be better (though also harder to calculate).
RossInDetroit
Weirder things have happened. The East India Company ran India as a for-profit business. They basically were the Indian government. And they were an openly traded company. Anyone could buy stock in the sole legal, administrative, judicial and commercial entity of a whole subcontinent.
Kryptik
@Judas Escargot:
I prefer “Gilded Age 2: Economic Bugaboo”
Danny
I’m not sure this is such a bad thing. I think Salmon’s assessment of how much ordinary people benefited from the stock market is incorrect. Sure some people in the middle class benefited via 401ks but I think that number is pretty modest. The stock market has mostly helped the rich get richer.
I for one won’t be sad to see the system go. It’s always been a bit of a ponzi scheme and a weird way to distribute investment (see Keynesian beauty contest).
Corner Stone
Who could write such a thing with a straight face?
Korea Beat
I’m not sure if I agree with the doom-and-gloom perspective. Shareholder actions don’t have a great track record of success. They’re expensive, very lengthy, and hard to win. Almost any corporate action can be legally justified on the ground of protecting shareholder value.
Also, the stock market is subject to so much manipulation, especially with the invention of high-frequency algorithmic trading, that it generates all kinds of distortions (just look at the Flash Crash). The fewer public companies, the fewer opportunities for profiting from stock scams and distortions.
Sentient Puddle
@Danny: As far as how it affects ordinary people, you’re pretty much right. But I don’t think Salmon’s point about it being a bad thing were in that context. I think the point was more that an increasingly irrelevant stock market makes it more difficult for start-ups to raise capital.
Not that I’m really lamenting it myself. There really does need to be a new mechanism for capital allocation, because the stock market really is that terrible.
Xenos
Is it still easy as hell to do naked shorts? If so, I don’t want my money anywhere close to the stock market.
Omnes Omnibus
@Korea Beat:
OTOH, the fewer public companies, the greater the effect of any one scam.
Agoraphobic Kleptomaniac
Yeah, remember that time civilians controlled corporations in the US? That time between those things that happened?
Jeffro
@Danny: This.
If it continues (and I certainly hope it does) people investing by saving on their own, buying bonds, or even buying into a local business can only be a good thing.
p.a.
@Kryptik: America FUCK YEAH!!
This bs reminds me of Scalia’s oral comment (possibly in Citizens United questioning) about how we shouldn’t disfranchise poor stock-owning grandmas with that mean ode gubbmint regalashun. (‘scuse me while I puke)
p.a.
@Corner Stone: America FUCK YEAH!!
This bs reminds me of Scalia’s oral comment (possibly in Citizens United questioning) about how we shouldn’t disfranchise poor stock-owning grandmas with that mean ode gubbmint regalashun. (‘scuse me while I puke)
Martin
Well, the reduction in companies since 1997 is more a function of deregulation and excessive consolidation than anything else. I don’t know why anyone with a broad understanding of them market could conclude anything else. In 1997 you had a zillion IPO dot-coms out there that had price to book values of infinity. It was the golden days of soaking impulsive investors terrified they’d miss the next Netscape. By 2000, the number of publicly traded companies was already down significantly as the IPO boom fell apart. Also starting not long after 1997 was the telecom consolidation after the 1996 law went through, which continues to this day. Energy and tech companies also started seriously consolidating around that time.
I think regular people had more money in the market in the past as pension funds have always kept a decent stake in the markets, but those dollars are drying up. People just didn’t know they had retirement money in the market because they didn’t care – it was a defined benefit, so who gives a fuck how they pay for the benefit. Changing to defined contributions changed the landscape a lot – now you have to care, and you have to be good at it, too. 401Ks have not kept pace because people find excuses to not fund their 401K, and they tend to just reinvest in their own company. The number of individual investors is pretty high, but the dollar amounts involved are tiny.
A small investor really has no hope of being able to outperform any institutional investor. Sure, you might lay down just the right bet and get lucky, but I’ve watched my stocks get yanked this way and that by the big guys. Last week my biggest holding dropped in market cap by $10B thanks to some whispered rumor. It recovered within a few days, but someone made a shitload of money betting on that drop and then floating the rumor. I can’t do that – but I can lose money from it, and the odds of me making money from it is pretty close to zero.
cyntax
I like reading Felix Salmon, and find what he says to be quite interesting. However, I think he’s not fully problematizing the history of the stock market and how companies react to pressures from Wall St.
In particular I’m thinking about how many US companies just manage towards short term goals based on quarterly earning reports. The current trends in executive compensation [ever upwards] contrasted with the actual performance of these executives and the companies they helm indicates that our current system isn’t as rosy as Felix seems to be saying. Perhaps I’m misreading him, but the importance of quarterly earning reports doesn’t seem like an unalloyed good to me.
jharp
“Civilians, rather than plutocrats, controlled corporate America, and that relationship improved standards of living and usually kept the worst of corporate abuses in check.”
Bullshit. Small shareholders didn’t control shit. And most of them lost money to the worst corporate abuses.
Enron?
Commenting at Balloon Juice since 1937
@Kryptik: I was going to make the same comment. I normally like Felix Salmon but that little paragraph is quite the fairy tale.
Ash Can
@Kryptik: It may paint an overly rosy picture, but this did in fact happen to a certain extent. Individual stock investment accounts became popular among a broad swath of middle-class investors in the ’90s — see, for example, the NASDAQ boom — and these accounts did yield nifty returns to the people who cashed out at least in part before things went to shit.
Of course, as we all know, stock issues are a double-edged sword. There were obviously plenty of people who did not cash out at the right time. In addition, with the issuance of stock, the company becomes beholden to its shareholders, and incidental niceties such as customers and employees too often get pushed to the side. Furthermore, the ladies of the Council Bluffs Quilting Society and Investment Club who own five shares of General Motors aren’t going to have quite the influence that Bigass & Loudmouth of Wall Street LLC, which owns several hundred thousand shares, will have.
IMO, the best thing about a company being publicly traded is that it’s required by law to reveal its financial workings to the public. This isn’t a perfect scenario, of course — book-cooking has happened deplorably frequently, and if you don’t have a trained financial eye you’re probably not going to catch any monkey business yourself. Still, if and when a professional financial analyst uncovers wrongdoing, it tends to make the press (even if it’s only the business press), and there’s hell to be paid, often to the extent of putting the company out of business (Enron’s a primo example). The bad thing is that by the time it makes the news, the stock price has fallen off the cliff, and the smaller investors are left holding the bag. The good thing is that the company has to face the consequences of publishing bogus numbers.
Stefan
We need a new name for this phase of capitalism.
Capitalism II: Electric Boogaloo.
joes527
The stock market as it exists today has nothing to do with distributing capital. It is all about the skim.
With high speed trading and other tricks the masters of the universe make money when stocks go up, and they make money when stocks go down. They don’t make any more money when when stocks have stable value and capital is managed efficiently. In fact, volatility is the most profitable characteristic of the market. It allows money to be transferred from the middle class’s 401 K and other investments to the rich without them having to figure out what companies are actually good investments.
Maybe it was always so, but even more so than in Vegas, the house always wins in the stock market.
A Commenter at Balloon Juice (formerlyThe Grand Panjandrum)
I generally like Felix but this article is off the mark. He cites Facebook and Twitter as companies that have gone to the private market and will not be available to the general public for investment. Well I say good! Until we know how a company like Facebook or Twitter will make money over the long haul why would the average investor put one penny into it? Why would I want to invest in a company that no proven track record of earnings?
He seems to miss the point that IPO’s almost completely stopped for the past few years as capital markets dried up during the financial scare and that larger healthier companies were picking off smaller companies at bargain basement prices.
I await Felix’s article in 2013 about burgeoning IPO’s and hoocoodanode we would ever have a stock market with this many publicly traded companies.
Corner Stone
Anyone else remember K-tel? Zooming up hundreds of dollars a day, with frightened little lemmings scared to death they had missed the next AMZN. Nobody knew what it did, or if it was any good at it, but they were god damned sure it was completely comprehensible that it was going through the roof.
Just one example of a few dozen that left me with no illusions about the glorious stock market and our MoTU Overlords.
Stefan
If it continues (and I certainly hope it does) people investing by saving on their own, buying bonds, or even buying into a local business can only be a good thing.
Yes, but how can you properly save on your own without the appreciation offered by stocks? If you keep it in cash, you’ll lose money over the long term as inflation eats away at it — the same goes for bonds, though less so.
And buying into a local business? Given the failure rate of most small businesses, that’s a pretty good way to lose your money. (And who really has the time and expertise to properly diligence such investments themselves)?
Corey
@PeakVT: In a subsequent piece up today he makes the point that the market cap of the NYSE is down in real dollars, too.
liberal
@Sentient Puddle:
IIRC, in recent years the market hasn’t allocated “new” capital at all, on net. In fact for quite a long time the number was negative.
The usual argument put forward isn’t for allocating dollars representing fresh investment money, but rather liquidity.
Stefan
The current trends in executive compensation [ever upwards] contrasted with the actual performance of these executives and the companies they helm indicates that our current system isn’t as rosy as Felix seems to be saying. Perhaps I’m misreading him, but the importance of quarterly earning reports doesn’t seem like an unalloyed good to me.
I don’t think he’s saying that the current system is rosy, or that quarterly earnings reports are an unalloyed good. His point, rather, is that it’s becoming harder and harder for an individual investor to have any meaningful and profitable way to invest his money as the rich have learned how the keep the best-performing investment opportunities to themselves.
Gin & Tonic
Responding to the several comments that call out Felix for propagating a fairy tale. I think your historical perspective is simply too short. If you look at 1950’s, 1960’s, 1970’s, the equity markets really did inure fairly well to the benefit of more-or-less middle-class people. With none of the derivatives BS, capital allocation really did play out in the naive textbook view, and your grandfather could have a couple hundred shares of US Steel or something, and was actually contributing cash to the building of plant and equipment.
New Yorker
And this is a bad thing? How many accounting scandals and frauds have there been because a Jeff Skilling character decided to manipulate quarterly earnings to push stock prices higher and thus his own compensation higher?
If Mark Zuckerberg ever decided to cook his books, at least the various poor schmucks who put their retirement dollars into Enron stocks won’t get burned.
Martin
@cyntax:
That’s my main concern. I only look at companies that take a long view, and fuck if there are hardly any out there. I’m close to taking my money out of the market because I’m not willing to risk my savings on a company that can’t see more than 90 days into the future. I’m looking 20 years, I want someone looking at least a quarter that far. Thankfully my main holding, which I bought in 1997 (ironically enough) is finally paying out.
liberal
@Stefan:
The recent bubble aside, real estate—meaning, land not necessarily buildings—is a much better investment. With company stock, unless the company is collecting rents (like Microsoft), you have to worry about things like competition. Land, on the other hand, they’re not making any more of it, and when the government or local businesses invest in things around you, you benefit from their investment, even though you paid nothing for it.
liberal
@Gin & Tonic:
Not really. My grandfather was a small businessman who lost most of his company in the depression. (My dad’s family was still relatively well off, if not rich.) After the war, he had a lot of stock, which by sometime in the fifties was worth quite a bit.
Happy ending, right? Nope. He lost most of it due to what I infer was the broker churning his account.
Not to mention that most Americans didn’t own stock in the 50s and so on.
Kryptik
@Gin & Tonic: My issue is the way he implies that it’s only at risk now, considering this decline has been underway for decades. At the very least, since the 80’s. If he made the same clarifications you did, then maybe.
Danny
@Jeffro: I really like the idea of replacing the stock market with a bond market. When you buy a bond it’s a lot easier to define what you’re getting, and it invests in the company in much the same way a stock does (though for a lot of companies stocks are viewed as “free money”). There are obviously problems with junk bonds, but there is at least an upper bound on what you can make from bonds so I think a bond market would be less susceptible to bubbles.
joes527
@Stefan:
GOLD! Don’t you watch that nice Glen Beck on the tell-o-vision?
cyntax
@Stefan:
Well, if so, I think that’s a good point. It may be as G&T points out that Felix is considering a wider scope, a scope beyond say my experiences as part of the work force and as an investor. But he is a little vague when he says:
That seems a rather inclusive timespan when, reading it through your and G&T’s interpretation (which I think does get at the spirit of what he means), we’d probably want to exclude the last 20-30 years. So it’s not a sudden change by any means.
cleek
@Kryptik:
nope
LGRooney
@Kryptik: You’re not alone.
I saw that and thought, “Since when did the public ever keep ‘the worst of corporate abuses in check’?” Owning a piece of something in a diversified portfolio is a long fucking way from controlling a company. And, since he seems to place the decline as occurring somewhere over the past 10 years or so when the decline for most started over 30 years ago, yes, his analysis is way off the mark!
Adding to that is the lack of depth in the analysis as the decline in the number of public corporations owes much more to the wild west atmosphere of M&A, the three crashes encouraged by Greenspan & his Randian acoolytes, and rampant deregulation & lack of regulatory oversight which has allowed people to maintain their portfolios while control of the firms represented in those portfolios slipped further and further away from any “civilian” control.
Jesus Christ, what idiocy!
Gin & Tonic
@liberal: I know anecdotes are not data, but I know/knew lots of people, even prior to the 1970’s un-fixing of commission rates and the dawn of the “discount brokerages”, who owned equities. And I hardly traveled in prep-school-type circles. Once the discount brokerages opened, many more people started investing in stocks. That’s certainly my experience.
LGRooney
@Danny: If we were looking at markets and organizing them as we have done historically, you might be right. However, since we have a whole industry dedicated literally to redefining things so they can get away with shit, bonds have lost their historical clarity and carry the same murkiness and risk as equities.
cleek
common people have owned stock for a long time. it was especially popular during the late 1920’s. and then something happened…
Gin & Tonic
Recall, folks, that when Peter Lynch wrote “Beating the Street” in 1993, that was still somewhat possible, and he was not viewed as a lunatic for proposing that it was possible.
In retrospect, that was probably the beginning of the end of it being possible, meaning that one more time in his career he showed absolutely fucking perfect timing (he got out personally in 1990.) I think what Felix is pointing to is a trend that has been accelerating for about 15 years now.
R-Jud
@BGinCHI:
I believe there is a name: “Shit Sundae”.
Catsy
To add to the pile-on, this particular passage struck me:
Really? Why? Because it’s currently trending downward? And that is sure to continue indefinitely… why? Oh. Because that’s what it’s been doing.
Between politics and the idiots in IT who think that trend graphs are a one-stop monitoring solution **, I’m really kind of done with the over-inflation of the value and meaning of “trends”.
** Don’t get me started on ProactiveNet–possibly the most inapt name ever for a piece of software incapable of doing anything except reacting to what it infers from past trends.
ETA: FYWP.
Suffern ACE
@Stefan:
What they have done is kept all of the income generating opportunities to themselves – which is what people need. It is still going to be possible to find some start up somewhere that will go up and up because there is a lot of money that needs to be invested. When you put your money in a 401(k) equity fund, that fund has to find a stock to invest in. But we are tied to appreciation and a lot of bond funds that pay investors 1.5-2.0% in annual interest on holdings of investments that average 5-7%.
cyntax
@Gin & Tonic:
Fair enough, but you’re doing a better job articulating it than he is. Though I am appreciative of your efforts.
And really, I think a few of us are just used to him being much clearer than this. McMegan isn’t fit to carry his calculator.
ThatLeftTurnInABQ
Argggh! ZOMBIE LIE! Kill it. Kill it with fire.
The Tea Party doesn’t give two shits about restraining Wall St. or rebalancing the economy for the benefit of Main Street. If they did, they’d be howling for an increase in the capital gains tax.
Thanks for nothing Felix, you naive and useful idiot.
PurpleGirl
Re the number of companies listed on the NYSE: Following one bank’s trail of M&A: There was Manufacturer’s Hanover Trust which merged with Chemical becoming Chemical; shortly after that, Chase Manhattan took over Chemical and remained Chase; meanwhile Chase began talking to Morgan Guarantee Trust, took it over and became J.P. Morgan Chase; that entity later took over Bank One of Chicago but didn’t change names. Within each of these mergers there were other mergers going on; I never tracked Bank One in Chicago as I tracked the others which were originally NYC locals which contributed to the non-profit I worked for. There was M&A activity at First National City Bank which ultimately morphed in Citibank/Citigroup, Bank of New York morphed into Bank of New York Mellon. Lost along the way were Franklin National/European American, National Westminster and Irving Trust, among others.
ETA: I’m somewhat amazed that I can still reel off those changes from memory with minor double checking of names.
The Republic of Stupidity
Some numbers for you to mull over…
The bond market in the US (debt vs equity, which is the stock market) is quite a bit larger than the stock market… haven’t pinned own an exact number yet, but prolly 4 times larger… or more… anybody have an accurate tally?
However… the DERIVATIVES market, which is pretty much unregulated and in private, is something like close to $700 TRILLION… or over 35 times the size of the valuation of stocks listed in the NYSE… and actually approx 11 to 12 times the GDP of the entire planet…
I suspect some poster far more savvy than me about equities can pin these numbers down more accurately, but it is my understanding that the amounts I state are somewhat in the realm of reality…
Just sayin’…
(I read a lot these days…)
Stefan
What they have done is kept all of the income generating opportunities to themselves – which is what people need.
Well, you won’t find me disagreeing with you there.
Agoraphobic Kleptomaniac
@Gin&Tonic: You’re right, that’s what he meant to say, but he didn’t. You’d think that a professional journalist would be more careful about these sort of things, rather than just stating what ends up being the mostly wrong shorthand version because he was too lazy to put in the supporting datapoints.
Kina like his use of 2 datapoints to say that the NYSE will continue it’s horrible decline because of a high pulled from the internet bubble of 1997 and the middle of a recession.
Stefan
The recent bubble aside, real estate—-meaning, land not necessarily buildings—-is a much better investment. With company stock, unless the company is collecting rents (like Microsoft), you have to worry about things like competition. Land, on the other hand, they’re not making any more of it, and when the government or local businesses invest in things around you, you benefit from their investment, even though you paid nothing for it.
Well, not really. Precisely because there’s a finite amount of land, it’s terrible as an investment opportunity for everyone; it works best if only a limited number of people participate in the market. Stocks worked for a long time because gains beget gains, and the ever-expanding pie allowed more and more people to take a slice. But with land the pie will only ever stay the same size, and the only way to allow more people to participate is to cut the pie into smaller and smaller slices.
With land, as you said there’s only so much of it and no one’s making more. Plus land is (a) very illiquid and (b) doesn’t generate income in the form of dividends, etc. — to get income from land you either have to rent it or sell it. But if everyone owns their own land, who are you going to rent or sell to?
nancydarling
I’m just a simple girl, lately from Arkansas, trying to figure this out. Why, if the derivatives operations are so lucrative, do we allow it to go on with no over sight? I understand a farmer entering a futures market for his crop, and I can understand why the processor of that crop might need to sell that futures contract—but the extent of this is so far removed from anyone with skin in the game. The size of all this as stated at @51 is insane. I read somewhere that hedge fund traders are very big into commodities trading and are responsible for the world spike in food costs. The spike is not felt so much in the US because so much of the cost of food here is in the processing, but in undeveloped countries, the cost of food is more closely linked to the actual cost of the commodity. When will the greedy bastards have enough?
PurpleGirl
@nancydarling: Why, if the derivatives operations are so lucrative, do we allow it to go on with no over sight?
Short answer: Because the industry doesn’t want it to be regulated and lose the opportunities to make humongous and filthy amounts of money.
Shinobi
Uhm…. No?
The thing causing the number of companies to shrink is not that the number of companies has previously shrunk. There is no such thing as gravity on a graph.
Also, the stock market PEAKED at 7000 companies, and before that, what did it average? 4000? 5000? Maybe it is on the low end right now, but just because it has dropped from its peak in the Dot Com boom doesn’t mean it is going to keep dropping until it hits 2, eventually we will reach a point where businesses see the stock market as an opportunity again and then things will turn around.
I have to seriously question the credibility of this writer with logic like this.
Gin & Tonic
@nancydarling:
You answered your own question. Because it is so lucrative. Leaving aside the partners, managing directors (the “rainmakers”) who make huge shitloads of money, even the guys (and sorry, it is mostly guys) who are doing the programming and the “financial engineering” make so much more than people who work for the SEC or the CFTC that it’s a grossly uneven playing field. If a really bright guy coming out of MIT or Carnegie-Mellon or Stanford can get a programming job paying $250k working out high-velocity trading, why would he go to work for the SEC for $65k or whatever? They can quite simply out-smart the regulators. All this completely leaving aside the lobbying/politics angle, or the simple incompetence that led the SEC to blow off Harry Markopolos for 10 years while he told them in great detail how Madoff was running a Ponzi.
Korea Beat
@34,
How are they not making more land? Replace one building with a taller building offering more square feet – presto, new land (effectively).
Gin & Tonic
@Agoraphobic Kleptomaniac:
With all due respect, I have no idea what Felix meant to say, I’m just squinting hard at what he wrote and trying to be charitable.
Eric S.
@PurpleGirl:
Just from personal experience. In H.S. I opened an account with Gary-Wheaton bank in suburban Chicago. In the late 1980s Gary-Wheaton was purchased by First Chicago Corp. First Chicago was buying up a bunch of locals.
In the 1990s First Chicago merged with Bank One Corp and took the name Bank One. Then in 2004 Bank One merged with / was swallowed by Chase Manhattan Bank. And briefly my ATM card read Chase. Then, somehow, possibly in the same merger but afterward we became JPMorganChase.
PurpleGirl
@Eric S.: The one thing I do know about the Bank One/JPMorgan Chase merger was that it was the brainchild of Jamie Dimon who had been hired by Bank One after he was forced out of CitiCorp. (He lost the intra-company fight to take over after Sandy Weill retired.) He always intended to return to NYC and masterminding Bank One/Morgan Chase made that possible in a big way. (I spent a little bit of time studying Dimon and his personal charitable contributions; he and his wife never gave up the NYC apartment after they moved to Chicago.)
Wile E. Quixote
@The Republic of Stupidity:
Fucking derivatives. How do they work? Seriously, the fact that the derivatives market is 11 to 12 times the planetary GDP indicates to me that there’s a serious disconnect between this market and reality. The whole derivatives market seems to be more and more like me and a friend writing each other a check for a billion dollars and then claiming, based upon the fact that we have a check for a billion dollars in our wallets, that our net worth is over a billion dollars, which it is, in a McMegan McArdle kind of way, as long as we don’t do anything inconvenient and reality based like try to cash those checks.
The more I look at the stock market the more I see a system which seems more akin to a casino skim operation than anything that’s related to the efficient allocation of capital and the more sociopathic and addictive the big players seem to be.
Wile E. Quixote
@nancydarling:
Never. These people are obsessive sociopaths.
Jonathan
@Stefan: Among other things, you can grow food in land, mine land for resources, and last but not least live on it while you do other things. The rich rarely rent because, when depreciation isn’t in play, ownership is almost always a better deal.
CLJ
@Ash Can: Auditing in theory vs. Auditing in practice. Ernst & Young earned approximately $100 million in fees for its auditing work from 2001 through 2008 for Lehman Brothers. They’re not all fraudulent of course but what rational person would assume anything but the worst with any conflict of interest much less one involving giant piles of money. All balance sheets are called into question when a system is as corrupt as ours.
Stefan
Among other things, you can grow food in land, mine land for resources, and last but not least live on it while you do other things. The rich rarely rent because, when depreciation isn’t in play, ownership is almost always a better deal.
And let’s compare the wealth of agricultural societies whose main resource is in land and extractive industries such as farming and mining with industrial societies who’ve moved beyond that….Yes, you can grow food, etc., but that isn’t saving/investing. If everyone farms, then no one will get that much richer — notice, for example, that all the peasants on Chinese farms want to move to the cities, and not vice versa.
And actually, the rich quite often rent. The upper-middle lower owns, but the truly rich rent because they don’t need the wealth appreciation that ownership may provide, and they want the convenience to move to something bigger and better when the whim strikes. (Of course, they do buy as well, but that’s mostly for the convenience and for bragging rights, not for the sake of investment. They don’t need the “better deal” because they’re too rich to care).
sneezy
@nancydarling:
“Why, if the derivatives operations are so lucrative, do we allow it to go on with no over sight?”
Because Bob Rubin, Larry Summers, and Alan Greenspan (“The Committee to Save the World”) thought it would be a good idea to allow virtually unlimited and unregulated trading in pretty much any derivative that anyone could think up.
“When will the greedy bastards have enough?”
I feel sure that you, “simple girl” that you may be, already know the answer to that question full well.
CLJ
@Stefan:
Jamie Dimon’s attempt to forclose on the community center backfires when the entire middle class responds with an impromptu breakdance on the floor of the NYSE that is so earnest and spunky it wins over all of Wall Street and finishes with Lloyd “Ice-B” Blankfein rapping “This is not a party, this is a demonstration, to counteract middle class evisceration” while everyone gets down to that “electro-rock sound”.
someofparts
I’m reminded of a line in the movie about Elizabeth I of England. When her ministers urged her to wage war in haste, she refused and noted to herself that wars have “uncertain outcomes”.
That sums up how I feel about the demise of the public stock market and our government in general. Obviously both institutions are utterly dysfunctional, to put the kindest possible spin on it. Even so, the increasing possibility of convulsive, massive change makes me worry worry worry because the outcomes are uncertain, and many of the high-probability ones will be a nightmarish descent from anything out lives so far have taught us to abide.