June 2, 2021 244 PM
The Blind Bard of the Big Bend will explain how to get rich on our modern stock market. There are two ways you can approach the stock market to increase your wealth. The first and oldest way is to use your common sense and research ability to pick a company who has a profitable product, competent management and the potential for future growth. This is the old-fashioned approach which requires skills and patience, most of which are in short supply these days. Surveys show that in the sixties and early seventies, the average stock was held for at least six years. One of the smartest investors in the late 20th century is Warren Buffett. He bought his first stock before reaching his teens, and at 90 he is now worth over one billion dollars. The modern American, be they rich or poor, wants to make their billions right now!
The second approach to the stock market is the easiest. You can either buy your own $16 million supercomputer and the wizards to program it with the proper algorithms, or you can spend anywhere from a few $100,000 to a few $1,000,000 to “buy-in” to a hedge fund. Today, stocks are sold in milliseconds by the millions. The algorithms stuffed into the supercomputer will tell the computer when a stock has reached a certain high point at which time it will sell. As the stock goes down the algorithm will know when it has reached a certain low point and sells short. This up and down programming makes money no matter which way the stock market is going. One of the strangest paradoxes in the stock market is that some economic bad news will make stock prices go up, and some good news in the economic sector will make the stock market go down. It seems sometimes that logic pays no attention to the value of stocks. If, after following my sage-like advice, you think the stock market resembles something out of Alice in Wonderland, forget it! Alice has gone to Arizona and is recounting ballots.
While supercomputers and algorithms have made billions for some Americans, it has not added a great deal of wealth to the lower half of America’s economy. Wealth for the rich and our present tax laws have given billions to the top segment of the economy but little to the middle class and working poor.
Long-standing inequality in the United States has been exacerbated by the Fed’s role in touching off a multi-trillion-dollar boom in stock markets — and stock ownership is heavily skewed toward the wealthiest Americans.
Social Security is the top source of wealth for most lower-income households with workers nearing retirement, according to Teresa Ghilarducci, an economist at the New School in New York City who specializes in retirement.
If the guaranteed income stream of Social Security is treated as an asset, she estimates it amounts to 58% of the net worth for near-retirees in the bottom half of the U.S. wealth distribution. Other retirement savings represent only about 11% of their net worth, and stocks are just 1%. Home equity accounts for most of the remainder.
The stock market is soaring to new heights. But most Americans aren’t along for the ride.
Large swaths of Americans have essentially missed out on any direct wealth increase from the market’s near doubling since its bottom 13 months ago. Rather, the major beneficiaries have been the wealthiest 10% of Americans, who owned 89% of stocks and mutual fund shares held by U.S. households as of year-end, according to Fed statistics. More than half of that — 53% — is owned by the top 1%.
The Fed’s policies have helped generate jobs and reduce unemployment, which was their goal. In the process, however, the Fed has accelerated the decades-long increase in economic inequality by helping increase the wealth of people at the top far more than it has increased the wealth of working-class Americans.
There will be midterm elections in 2022, and if the working poor don’t start voting their self interest they are going to remain at the bottom of the totem pole. With so many recently added voter suppression laws now on the books it will be a hard battle. Maybe Alice will make it back from Arizona in time to help.