While the government is the focus of the public's rath over our current situation, other factors have certainly played a critical role in our dilemma.
Over the years, our capitalist system has devolved and been constantly exploited by the few at the expense of our common good.
One is the area of wealth concentration. At no time since just prior to the great depression has wealth concentation in this country been the highest, for example:
In the 22 years between 1976 and 1998, the share of the nation's private wealth held by the top 1% nearly doubled, going from 20% to 39%. In 1982 the wealthiest 400 individuals in the “Forbes 400” owned $92 billion. By 2000, their wealth had increased to over $1.2 trillion. Since 1987, the adjusted gross income or AGI of the top 1% has risen 386% while their share of total tax burden has risen 53%.
With wealth concentation, inevitalby comes concentration of power. As evidenced by the gridlock in Congress, people today feel totally powerless against the rich and corporations, which the Supreme Court has regrettably now bestowed the sames rights as an individual.
As a nation, shouldn't we be concerned more about developing the next generation of millionaires rather than perserving the wealth of current millionaires?
The stock market is no longer about investment but traders focus on how their co-ordinated efforts can be used to manipulate share prices, currencies, or interest rates to their advantage. The exchanges have sold out to the holy god of high frequency trading which has resulted in the SP500 going nowhere over the past 5 years despite the combined earnings of the companies in the SP500 growing 45%.
The primary rationale of investing in stocks was to benefit in the success of a company, but high frequency trading steals the wealth these companies create away from the shareholders to the investment firms running these programs. Once again enriching the few at the expense of the many.
If the SP500 index had just grown at the same rate as earnings of the SP500 firms over the past 5 years, shareholders would be $4 trillion richer.
The ability to manipulate investment markets ranging from equities to the LIBOR has lead to widespread corruption. Hardly a week goes by, without word of a large fine against a major investment house. Over the past 40 years, there have been 7 financial scandals that have cost this nation trillions of dollars, yet very few have paid for their roles in these scandals.
On a number of accounts, corporations are also not blameless for our current plight.
The dividend yield of the SP500 was fallen from 4.2% from 1970 to 1990 to average under 2% during the past ten years. While many executives believe they can get a better return for their shareholders by reinvesting profits back into their companies rather that paying dividends, this practice is defeated by high frequency trading that suppresses share prices, effectively transfering the wealth corporations create to Wall Street traders.
Non-financial corporations, now hold a record $1.7 trillion on their balance sheets, but this capital is providing little return for shareholders. Many firms primarily use it as war chest for aquisitions. While I see nothing wrong with non-organic growth, a Goldman-Sachs study found that only 30% of all acqusitions between 2000-09 met the goals of the acquiring firm.
Corporations warn Washington about high corporate taxes, but a growing number of firms such as Seagate, Apple, and Google, set up shop in such conutries as Bermuda, Ireland, and the Caymen Islands to avoid paying taxes.
So while our angst is focused on the dysfunctional Congress, there are primary forces beyond politics that are driving our current plight.
We have met the enemy and they is us!
Happy New Year!
I had to read through your post a second time to get a better grip on what you have written.
I have long been of the opinion that stocks should only be considered as ownership in companies, and stocks value should directly reflect what stock buyers see as the ability of companies to create value for them, the owners.
By clever use of algorithms, high frequency traders have successfully developed a system of gaming the stock market, and I have long been of the opinion that slowing down trading would be a prudent approach to control this issue.
When I say slow it down, I mean something of the order that trading in a companies stock would be best to happen once a week or so. This would allow stock shoppers who consider companies for their value creation merit time for due diligence, while forcing high frequency traders to look up a new trade.
OK, I realize that asking for once a week trading would be asking a little much, but wouldn’t something like opening a companies stock for trading once an hour be reasonable?
I just can’t see that in the time that it takes a company to sell a couple of toasters between high frequency trades that the value of the company has changed in any meaningful way.
I agree that high frequency trading has been a problem, and I agree with the rest of your comments.
The obvious answer is a 'transaction tax' on financial 'trades' including stocks and derivatives. This is no different than the 'sales tax' levied upon 'consumers' today. We should have both or neither! Note that the recent 'fiscal cliff' political theater allowed involuntary 'payroll taxes' to rise. Investment income, particularly 'carried interest' should be taxed at the same rate as wage-earners are required to have 'withheld' to the government, particularly by removing the cap on SSN FICA 'contributions' (as if they are voluntary!) and including investment income under its umbrella. But no, the powers that be need to generate additional 'fiat currency' while they can. While the US is obviously a plutocracy, it isn't as bad as say -- India, our ally Pakistan, and of course Afganistan where we continue to spend billions monthly. Even Europe isn't doing better, though the Eurocrats have been massaging that system for centuries with political theater. But then, perhaps Treasury isn't considering creating a 1 Trillion Dollar Coin to deposit with the Federal Reserve. And some call it a 'fiat currency'. No wonder Geithner is resigning. I'm no socialist, but the discrepancies in tax rates among 'citizens' is alarming and will lead to problems shortly as the bills come due and the lawyers sue. The 'middle class' has never disappeared this quickly before since Roman times.
I'm loathe to post this msg here as there are already so many boards overflowing with OT political trash.
I do notice that not a single comment on STX technology has occurred here for quite some time which is quite disappointing. Clearly, Yahoo has achieved its objective in attempting to aid in fleecing the retail investor while diminishing any actual discussion of STX and its business with the board format update. Perhaps some posters would like to actually get (and keep) on topic again?????
There are other forums for these types of opinions!!!!!!
Wow, I came here to learn what people know about STX. The conversation has taken quite a move tangentially from the STX subject. But that’s OK, I have contemplated what is wrong with the whole picture way too far for any sane person to have done. It isn’t easy to isolate the real drivers of cause and effect related to issues this complex, or is it easy?
Let’s assume for a moment that it is easy. I would love to hear in the simplest terms with all things, such as emotions, rants, spins, red herrings … taken out of the discussion what some of you see as the purest of drivers to the success, or lack thereof that has taken or is taking place in the United States. What makes us different for the good; what makes us different for the bad?
I believe that a most robust economy is a battleground between the haves and the have nots. It takes both. But, the most critical element of a robust economy is that the middle class is kept in the game. One of the most interest things I learned from Anthropology 101 is that the percentage distribution of geniuses is equal among the various races of people. And I think that does prove out. So,
• Without opportunity a great deal of genius is wasted
For instance, when you see people of third world countries cutting sugar cane by hand all day every day, or walking around barefoot in clay and water to make bricks etc. for not quite enough wages to buy food with a necessary balance of nutrition, remember, the percentage distribution of geniuses among these people is the same as among people who look smarter than them by being well kept. People without opportunity may not look smart, but they are.
The great depression was a defining moment in the US, we had to make a decision as to weather to keep the middle class in the game or not. America had become as a third world country with one distinct difference, we elect our government officials, and can thus influence economic policy. The Grapes of Wrath by: John Steinbeck is a great book to read to learn about how the US had reached third world status for many during the depression.
Anyway, with the election of FDR, economic policy was adjusted to keep the middle class in the game. Social mobility, if you will, was kept alive. Without federal policies such as Minimum Wage, Social Security, Unemployment Insurance, Medicaid, Medicare, Group Insurance supplemented by employers…, the Great Depression may have never ended, and social mobility might have never been seen again in the US.
I’m sure that many of my readers have just became quite emotional as they are of the school of thought that the above mentioned policies are precisely the things that have ruined the US economy, and I respect that school of thought. I fully agree that government spending is out of control and that substantial downward adjustments to entitlements are inevitable. But, if used in balance with economic growth, entitlements themselves promote it. Spending by the middle class is good for all classes from rich to poor. It brings forth the necessary pin action to maximize the power of an economy. The rich are richer because of it, and many rich people are now rich because of it. Many, if not most rich people, without economic policies that have kept the middle class in the game, could have been massaging clay with their feet all day making brick.
With that said, the rich need protection as well. Many people, probably most, will spend down to their last penny regardless of economic policy. Thankfully, others will accumulate capital necessary to do business, hire employees etc.
I could go on and on with this guys, but, let’s turn the bully pulpit over to you guys for a while. All constructive criticism is welcome and appreciated.
“Anyway, with the election of FDR, economic policy was adjusted to keep the middle class in the game. Social mobility, if you will, was kept alive. Without federal policies such as Minimum Wage, Social Security, Unemployment Insurance, Medicaid, Medicare, Group Insurance supplemented by employers…, the Great Depression may have never ended, and social mobility might have never been seen again in the US.”
Since you cannot prove a negative….we will never know that without FDR’s progressive policies….we would never have come out of the depression. While I know that we were all taught in school that the New Deal turned the country around….new research has concluded this may not be the case (read “The Forgotten Man” by Bloomburgs Amity Shlaes). In fact…they may have prolonged the depression. In today’s standards….FDR’s record of unemployment would be considered a dismal failure. Almost 10 years of double digit unemployment from 1931 till the start of WW2! The fact is…WW2 pulled us out of the Depression….not FDR.
Just so you know….Group Insurance supplemented by employers had nothing to do with the New Deal. It was an accommodation by FDR after he froze wages during World War 2. Skilled workers were scarce as all younger, capable men were fighting the war. As a result…the older men (or women) who stayed behind began chasing higher wages for their skills. FDR froze wages but business had a hard time attracting help without competitive pay practices. FDR allowed them to offer health care insurance and it became a practice ever since.
Medicare and Medicaid were also not part of the New Deal. While amended to the Social Security act…they have only been around since 1965. I guess this is all mute…as Social Security, Medicare and Medicaid are all on a path to insolvency and as evidenced by the recent Fiscal Cliff deal…our representatives are unwilling to fix them.
If you believe social mobility should be manipulated by Government….take a look at Europe. They played this game and failed….as have the Soviet Union. Leave social mobility to the “invisible hand” of the free market. It’s not perfect….but it’s the only system which allows individuals to succeed on their own merit. Perhaps after Social Security and Medicare implode…it will raise its hand and lift us to prosperity. That is…if the government doesn’t just seize all means of production…..for our own good.
All well and good except for one serious flaw in your logic. Giving someone money even though they haven't produced any goods or services (or contributed to the funds being used for such) DOES NOT grow the economy. Certainly we need temporary safety nets for those that fall on hard times, and I have no objections to that form of welfare. Money is just a convenient method for bartering goods and services and cannot/should not be used for anything other than that.
To illustrate, take it to the extreme. Suppose everyone was taxed at 100%, the funds collected then divided and returned equally to every one. What do you think the outcome would be? There would no longer be a middle class or rich class, just a poor class. And unemployment would be 100%.
Don't only blame the traders.
To certain extend, I feel that the management colluded with the manipulators to keep stock price low.
Both STX and WDC afford to perhaps double or triple the dividen payout, but they never did it. Why ? This will easily blow away the High Frequency Trading !
Sentiment: Strong Buy
“While the government is the focus of the public's rath (uh that should wrath) over our current situation, other factors have certainly played a critical role in our dilemma.
Over the years, our capitalist system has devolved and been constantly exploited by the few at the expense of our common good.”
Our government should be the focus of the public wrath….and it should be your focus as well. It seems no where in your rants are you critical of the government agencies which are responsible for protecting the individual investor. You admit we have a dysfunctional government….doesn’t this include the SEC and FINRA? Or are you only critical of them when there is a republican in the oval office? Is it easier to attack “our capitalistic system” or “corporations” than to hold accountable the regulatory agencies that are supposed to enforce our laws and protect investors?
“As a nation, shouldn't we be concerned more about developing the next generation of millionaires rather than preserving the wealth of current millionaires?”
So what do you recommend? Shall we REDISTRIBUTE the wealth in this country more than we already do? Shall we seize from the successful and hand it over to those who have failed to succeed? Shall we tax the rich until there are no rich no more? I’d like to change the world too….but I don’t know what to do. One thing I do know….this concept hasn’t worked out very well in Europe.
“So while our angst is focused on the dysfunctional Congress, there are primary forces beyond politics that are driving our current plight.”
These primary forces as you call them are not beyond the law or politics. If they break the law…they should be fined and imprisoned like any other crooks (and yes…insider traders have gone to prison). While I agree that white collar crimes are not pursued aggressively enough….it seems your politics have blinded you as to the real culprits….the bloated and corrupt federal bureaucracies which time and time again fail to do their jobs.
It's time for you to open that money market fund. People like you have no business even thinking of the stock market. A money market ill make you sleep easier. Every 3 months your statement arrives and you learn that inflation ate up your .005% interest and you only lost 1% of you holdings. You could hang on like that for many years until your BROKE. I will continue to invest and chase the American dream; hopefully I'll get there sooner then later.
I refer you to the comments made in a Barrons interview last April by STX CEO and former Bear Stearns I banker, Stephen Luczo, that echo my sentiments:
"Because the drive stocks are not being priced on fundamentals, they being priced by large investment banks for volume, and volume requires volatility"
"So that's why all the big firms are in a different camp than the smaller research firms on their perspective of the drive industry. Is it because these are the smart guys, and those aren't? That doesn't make any sense. It is because the banks are MOTIVATED by volatility and the boutique firms aren't. And therefore the research reflects that. So you can create and environment that always creates doubt, with billion dollar market cap swings in a week. It's insane. Why does it work? Beacuse you have traders who love to make that work"