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Guest Post: If The Market Crashes, Who Owns Enough Stock To Even Care?
Submitted by Charles Hugh Smith from Of Two Minds
If the Market Crashes, Who Owns Enough Stock to Even Care?
Since 81% of all stocks are owned by the top 10%, a stock market crash has little effect on the bottom 90% of Americans.
It is assumed without question that the stock market is some quasi-sacrosanct barometer of the U.S. economy. But who even cares if the market crashes? Only the top 10% who own it. Yes, millions of (generally government) workers have an indirect stake in stocks and bonds via their state/union pension funds, but it's still informative to look at the distribution of who actually has a stake in the market's rise and fall.
This data is from pre-recession 2007, so I suspect ownership has become even more skewed to the top 5% as those below liquidated stocks to pay the bills as household income and housing equity plummeted.
A severe decline in the "wealth effect" would probably crimp the top 10% tranche's carefree spending, which accounts for some 40% of the nation's consumer spending. If the market crashes, high-end retailers and restaurants would likely see sales fall significantly. While there would be consequences, we should be careful not to overstate the stock market's role in the nation's Main Street economy.
And what are the chances of a real crash? For insight, we turn to the The Chart Store's chart overlaying the current rally and collapse with the Dow circa 1907. The similarity is rather uncanny:
The only difference is the Fed launched QE2 late in 2010, which kept the rally alive for another 6 months. But as we can see, it didn't change the future decline, it simply set it forward a few months: the current market has now caught up with the 1907 decline.
The past is simply one possible pattern of many to consider, but the remarkable similarity of these two charts suggests that there may be more downside ahead.
One last point: those who exited the stock market won't care if it crashes because they opted out of playing the risky game altogether.
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Don't insult the Muppets like that; they'd provide much better governance.
Apologies, Muppets.
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All those Wall Street jumpers certainly have the potential to hurt the people walking on the street, as entertaining as it must be to watch.
See, Bill has proven, it really does matter. If these fuckers jump, the real people in the streets below them will get hurt.
How do I buy insurance against falling bankster bodies?
ok, rudely buttin in, dept, ms_C, but i penned some stuff to the earlier string and then decided to try to catch up w/ you, about the bill still video and some of the Q's
Money creation - Wikipedia, the free encyclopedia
not sure this will help, but slewie is from missouri, too, ms_C.
thanks for being thoughtful.
we don't need another "bandwagon" full of people for whom "what he said" is their answer, when they are not able to explain cogently what "he" is saying.
we can use the treasury to pay off the debt with debt-free "money".
so that = no more debt! see, use US notes rather than FRNs. but, we must start at step one, of course.
when the experts don't agree, we need to figure out why and work thru it.
"trust me" isn't vigilance.
maybe zH is vigilance, at least for some.
if a CB can push a button, create currency, and use it buy something, does that make the currency "backed" by anything except legal tender laws and stinkin badges?
if the FED can "create" USDs for the PDs and either give it to them or trade/swap it to them, does that mean the digits are "backed" by something?
if a commercial bankster can create USD's by fractional reserve banking, and trade it to slewie for his iou, does that mean something "backs" the USD's?
i'll watch the rest of the video later, but he seems to be saying national debts? they don't matter! GDP does, tho. so far it doesn't seem to have ocurred to bill that maybe we just borrowed way too many green stamps.
don't feel a need to respond, today. we'll see this again. later, i imagine. but this bill still seems to be getting a following. as a film maker, he presents pretty well. but...?
oh: here's the bill still link that i got to too late, earlier: SR 23: Baby Birds - YouTube
see ya! [edit: i did this on an e-mail and pasted it, didn't mean for the "bold" at the end, but can't fix it w/out going back to the e.]
A sovereign nation that can print its own money cannot be in debt to itself. Anything else is fraud.
Just letting you know I saw this slewie. I am open to discussion. Not sure I get it in my belly. Or if I do get it, it is so simple the banks simply "poof" disappear.
While people in Japan are heading for a dirt nap, BIS is spinning positive results
I will first explain economic and financial developments in Japan. Japan’s economic activity has been picking up steadily as the supply-side constraints caused by the earthquake disaster have eased due to efforts from concerned parties. As for the outlook, Japan’s economy is expected to return to a moderate recovery path with production regaining traction, backed by an increase in exports and a rise in demand for restoring capital stock. However, the Bank recognizes that the economic outlook entails considerable uncertainty and judges that recent developments call for closer attention to downside risks. In the United States, concern over fiscal consolidation has not dissipated in financial markets even though the debt ceiling problem has settled for the present, and views on the economic outlook have become more cautious. The sovereign debt problem in peripheral European countries still warrants attention and emerging economies face the challenge of achieving price stability and economic growth at the same time. As such, the prospect of overseas economies entails a high degree of uncertainty. There is a possibility that these developments in overseas economies and the ensuing fluctuations in the foreign exchange and financial markets will have adverse effects on business sentiment, and consequently on economic activity in Japan. On the price front, the year-on-year rate of change in the CPI has been slightly positive. Continue reading.
Masaaki Shirakawa: Recent developments in Japan's economy and the conduct of monetary policy
conduct of monetary policy
"A high degree of uncertainty" At least they are being precise.
The stock market is only a gauge of national ego now. And the number of people that care is falling fast. The twin crashes of 2000-2 and 2007-9 soured most people out of any significant positions.
Credit Rating Agency Reform Act — that says a credit rating agency could have its licence registration revoked if it leaked information about its pending downgrade decision before making that information publicly available. It also said that the rater must have policies and procedures to prevent such a disclosure.
just buy tza & faz
Then the IMF, keep the lemmings confused by hanging many flags in background. Talk about emerging markets and purchase your copy of Rosetta Stone® Chinese (Mandarin) Edition for only $379. Call in the next 10 minutes.. you'll receive a dozen fortune cookies & a new Ipad. Don't delay, limited supplies on hand. LOL.
http://www.rosettastone.com/homeschool-chinese
IMF tidbit.
http://www.imf.org/external/mmedia/view.aspx?vid=1104269972001
I have a translator who told me the comedy. Enjoy. Both BIS and IMF will not reply on my request to open a public forum comment section on their site. Shocked I tell you, hehehehee.
The 1929 crash was after the banks started failing.
Farmers got hit with a 1-2-3 combination of the Haber-Bosch nitrate fertilizer process jacking up yields, the hybrid corn development jacking up yields, and mostly the Detroit automobile boom taking land out of fodder production for horses as they were replaced by automobiles, trucks, and tractors.
My dad grew up on a fodder farm. Grew alfalfa in California's Imperial Valley.
I opted out after I recovered from the 2008 crash. Pm's (paper and physical) and other tangible goods, since then.
Just far too simplistic...normally Smith's articles are interesting and at least entertaining, but this one is a simple minded statistical con aimed at simple minded folks who cannot make connections.
For example, after a market crash all those poor sales folks at Nordstrom's are going to be out of work, boat builders will suddenly find their services unneeded, ditto home decorators, butlers, maids, kitchen staff, gardeners, and various other assorted people dependent on this top layer of the food chain for their sustenance. There would be far reaching unintended conseqiences.
However, being entirely self centered, and short the market, I welcome a crash with open arms...bring it on and make it soon!
Nice piece. Stock market aint a market. Just welfare for billionaires. Traders can play just as well if S&P at 444 or 40,000. Leverage squeeze works at any level. Besides, it is about time sheeples understand buyer beware and true risk. skools open bitches ! Party On Garth.
Will anyone explain to me how these numbers square with the percentage of ownership of stocks held by pension funds, insurance companies, endowments, and churches? When I look at the numbers the majority of stock is owned by these entities.
So now it's just the rich left to rape and pillage each other in the stock market? Karma.
Only skin this black swan has left in the market is a bit of SRS, SDS, QID and a block of XOM....a grrl has to have some oil....
Why is still called a market?
This grrl likes to get kissed before I get fucked....
You go grrl!!! Got Gold???
Not enough gold yet....but damn near enough silver to make myself a full size Surfer!
I know it probably sounds stupid too....bit embarassing....but I'm stashing $100 boxes of nickels too....WTF....I'll let my tinfoil flag fly....
CHeers!
nobody is paying attention to the fact that europe will soon be fiscally consolidated.
http://www.bloomberg.com/news/2011-08-11/germany-should-approve-euro-bonds-soros-writes-in-handelsblatt.html
once this crisis deepens, the debt laden european countries will sell the rest of their souls by allowing a germany led centralized entity to control their fiscal accounting. these countries will have no choice to give it all up, as they need their handouts. germany will finally, once and for all, get to control how the rest of europe handles its finances. no more worries about slackers bringing down the union. italy is already begging for it.
and what does that do to gold?????????
they are coming for you and your kind..
this Global Lie has gone on long enough..
your entire gene pool will be removed, erased, scrubbed from the planet! never to pollute it again.
you and your kind should be running, as far and as fast as you can.. away from the wave that is going to rise up against you.
what do you think about that?
what does that do for gold?
The U.S. army had to be called out and sent to New York City to stop the rioters who had started hanging bankers in 1907.
I would love to see a replay. Maybe we could slow the army down longer this time and have a thorough cleansing this time.
Really interesting, thanks for putting this data together. Although the top ~20% control ~80%, is it possible that the little stock that the little people own represents an equal or greater percentage of their net worth (if they have any)? If that is the case, then this will hurt the lower percentiles... just a thought.
http://www.networthprotect.com
That's not the issue though. What is happening is that the leaders and a number of the population (probably more than 50% of the idiots who post here) ascribe to the proposition that government is worthless and we would do better if we transfered the power to the corporations. Now this is ignorant, short-sided and indicates a person who has no working knowledge of what led to the first two world wars but that's what we think. However the government cant' say that they are helping the copropations so they say they are helping the "markets." Same thing only one is more politically palatable than the other. So when you are being inculcated by propaganda (listening to the radio or watching TV or 90% of the time spent on the internet) every time you hear the word markets substitute the word corporation and you will probaby get closer to the true meaning of whomever is speaking.
What the heck? I go to a Home Depot today and the place is eerily empty for a Saturday - I ask the cashier how business has been and she replied, "Up and down this week, maybe the stock market has had some effect." Strange - a clerk making $10 an hour has her pulse on the stock market, my how the 2008 meltdown created awareness at all levels.
Consumer sentiment was affected, no doubt. Somebody(ies) is forcing QE3.
That first chart is absolute bullshit from Socialist's at the EPI even is it had some crap about pensions footnoted in it. Tyler you should be embarassed to post a story based on such blatantly obvisous garbage. CALpers alone is good for a percent or two!
Europe on the brink:
http://www.independent.co.uk/news/business/news/growth-stalls-across-the-eurozone-2337202.html
Few comments:
-See the head and shoulder forming from March 2009 to Jan 2013 in your chart? this time it likely breaks to the down side back to the old low instead of bouncing up as in 1907
-serious stock market break will reduce pressure on CEOs to keep pushing hard on the bottom line by off-shoring jobs and cutting costs (once the stock falls by 70% what is another 10%?) and may actually helps keeping jobs in the US/Western world
-I agree the desperation shown by govt to write off all economic down cycles and keep asset prices artificially high at any cost will keep economy stagnant and job growth from happening, they need to come off that obsession and realize that they can't really affect it
If the market crashes more people will be asking for bailouts. Bailouts are free money handouts to those who find the opportunity to play victims when a pot of money is availble. But there is something much better for an investor than getting bailed out by the governmanent: making the money on his/her own, and bailing out themselves. How?
Here is an example: You get a timing signal to buy DGP on July 8 at 49.23. You put $10K in DGP and sell it at 62.27 on August 12, for a 26.5% profit. That is a cool $2,650 in just a month.
You take that $2,650 and go to the Carribean for a 10 day vacation. You have just been bailed out!
Ladies, and gentlemen, that is how it works best. You bailout yourself, on your own! No need to wait for anyone else to do it for you!
But you must be lucky to pick that DGP timing signal to use. You must have the conviction first that gold is moving up to pick that timing signal, and stick with it for a month. So if your conviction is right, you'll get your bailout!
time123
admin at http://invetrics.com
P.S.
The above return data is real, not made up.
I love it!! A shill on ZH. We know what happened in the past, tell us what's GOING to happen. That's the hard part.
Doesn't anyone on here see the huge disaster that AAPL will be? AAPL is the TOP stock in the USA, but it's based on Air, and I don't mean their notebook. They may own patents, but they don't own the technology. By owning I mean having developed it, understand it. When the shit hits the fan, the Asian producers of Apple's gadgets will pull the plug, and Apple will have nothing, just a hand full of patents.
Apple is a marketing company, NOT a tech company, and everyone fell for it. AAPLE is the biggest bubble stock around. THIS is the point to sell your AAPL shares, if you even remotely care about your investments.
I think your analysis is correct "The Tower" and as you imply, of all the things which have been "Out sourced" nothing is ever going to come back, not ever, our economy no longer has the skills to build the things we have "Out sourced", you are one preceptive fellow!
Ah, the 1907 crash.
The collapse of the New York Knickerbocker Trust Company, engineered by none other than J.P. Morgan to make the case for the need for a Central Bank in the U.S., with Paul Moritz Warburg delivering the theoretical background concept and Woodrow Wilson the puppet President to make it happen by not vetoing it.
I think the problem Joe Blow has when his 5 shared tank is bigger than the problem the top 10% have when their mega portfolio tanks.
Calls for a referendum on EU membership after David Cameron's U-turn on tax
http://www.guardian.co.uk/world/2011/aug/14/eu-referendum-cameron-uturn-tax?CMP=twt_gu
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I wonder how much of the stock markets wealth is held by foreign central banks and sovereign wealth funds if any? At any rate, the biggest U.S. companies are heavily vested in developing emerging markets that results in lower consumption in the U.S. and other developed countries.
Daily global production and distribution numbers(starting with energy) are too large to grow fast enough to keep up with emerging market growth so their has to be a concomitant decline in developed countries.
The status quo relies on the notion that the world is powered by money and that more money will always create more resources. Even if this were true, the hundreds of millions of new cars and trucks that have gone on the roads in emerging countries has been done in far too short a time frame that is necessary to bring enough new energy on line. Global growth is far ahead of energy production lead times. If global conventional oil production was at say 100 million barrels per day, we would still be flipping houses, buying granite counter tops, stainless steel appliances and using undocumented workers.
Globalization of U.S. money of all kinds including U.S. markets is working against the majority of Americans because it results in lower consumption in the U.S.
"Since 81% of all stocks are owned by the top 10%, a stock market crash has little effect on the bottom 90% of Americans"
--------------------------------------------------------------
BRAVO! This is THE PROPAGANDA RATIONAL behind "BAILOUTS" - that the wealthy (the elites) OWN the factories and distribution systems (and banks, i.e. financial & credit distribution system) and WITHOUT THEM, the economy would fall apart.
BUT! in a WELL REGULATED economy - a genuinely democratic economy where the power of the wealthy is RESTRAINED by the power of voters (restrained, that is, by the power of well INFORMED voters) the money goes WHERE IT IS NEEDED MOST to ENCOURAGING the production of that which is most beneficial to society in the long term (environmental protections, education, health care, alternative energy, etc.), and NOT to the GREED and CONCENTRATION of wealth in hands of a few puppet masters.
i.e. Hank Paulson's "GIVE ME $700 BILLION RIGHT NOW - or I will WRECK the economy" Sept. 2008 "TARP" bailouts demand of then Speaker of Con-gress Nancy Pelosi (followed, semi-secretly, by Timmy Geithner at the NY Fed writing ANOTHER check for $630 billion THAT SAME WEEK! - effectively DOUBLING the real "bailouts" amount in first month, alone!)
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9MTZEgukPLY
...is pure DISASTER CAPITALISM _EXTORTION_ - as Naomi Klein so knowingly writes about
http://www.naomiklein.org/shock-doctrine/reviews/time-magazine-disaster-capitalism
I read that book, and found it very convincing. As the NYT article you cite demonstrates, she was very careful about fact checking and provides extensive footnotes and bibliography.
However, I always felt like she never really established an intimate connection between electroshock therapy and its application in the economic sphere. Even in the interview, she uses the word "metaphor". She alleges the following:
" When the peaceful battle of ideas didn't defeat the left in Latin America, then you had a wave of military coups, often supported by the CIA, and many of these U.S.-trained Chicago boys, as they're called in Latin America, rose to prominent levels of governments — heads of the central bank or finance ministers — where the economic shock therapists were working hand-in-hand with the very real shock therapists who are in control in these countries through repressive means, including torture."
This kind of just dangles there, and yet it is her whole thesis. Yes it was shocking to read the case histories of people who were victims of McGill University, when this university was using them as guinea pigs for experiments that amount to crimes against humanity--if I take Klein at her word--and which, so far as I know, the university has never disavowed or apologized for. Nevertheless, perhaps because it is the CIA she is talking about, and it is therefore impossible to verify any claim, she doesn't seem to get beyond a plausibility argument for the connection between electroshock and economic shock therapy. I was disappointed that the interviewer didn't pursue this. I feel it's the weak point of her whole doctrine, in spite of being somewhat plausible.
At the same time, it seems clear that these economic policies do seem tailor-made for profiting from disasters which either occur naturally or are engineered beforehand. I'm just not sure that the electroshock thing is more than a metaphor.
Even according to that crazy chart next bottom is
between 2009 low (roughly) 7k and 2011 13k
which is 10k on the DOW. What this chart didn't show
is interest rates and money supply. So? we are at the
bottom already (inflation adjusted.)
Only idiot can say that US Equity Market matters only
for rich. It matters for All Americans, except
homeless.
Sure it probably don't matter for 500 ZHers, who keeping everything in Metals hopping for collapse, but that's only very few people. I know many just a regular workers, who retired millionaires by investing large portion of their salaries in the Company stock (401k). That company is Harley Davidson, if you care.
So? Yes, Equity Market is a big deal and it matters.
The fall of free market capitalism rushes towards us, accelerated by the greed and stupidity of those in charge.
The rot began in the '80s with the Reagan-Thatcher embrace of supply-side economics, the iron follies of Friedrich Hayek and Milton Friedman's Chicago economists. It has been spreading ever since.
Any lingering notion that a deregulated market operates as an efficient allocator of the means of production, distribution and exchange has been crushed by the convulsions we've endured since 2008.
Eventually, with the decline of the American imperium, the Chinese will take over. If you want to know how the world will look then, think Singapore on a global scale. There will be a glittering facade of free enterprise and quasi-democracy controlled from above by a flinty oligarchy in Shanghai.
In the meantime, the lunatics are running the asylum. The world must be mad when greasers like Silvio Berlusconi or the gun-totin' Momma Grizzlies of the American Tea Party get anywhere near the levers of power. Barack Obama, cried up as the new Franklin Delano Roosevelt, turns out instead to be the new Jimmy Carter - well meaning but hopelessly ineffectual.
The panic that followed Standard & Poor's downgrading of the US government's credit rating to AA+ was beyond bizarre. These turkeys were up to their necks in the crash of 2008, willy-nilly dishing out their AAA approval to junk investment "products", sub-prime housing debt and the like. To hear them posturing now as an arbiter of financial purity is a thunderclap of cognitive dissonance, akin to learning that Anders Behring Breivik has come out for gun control.
Zerobama was well-intentioned, you say? As I have been pointing out recently, it seems entirely plausible, that he is just an American version of Carlos Menem of Argentina, who likewise turned his back on his campaign promises and plunged that country into barbarism. It never ceases to amaze me how ideologies warp intelligence. I don't even disagree with you on your main points. But I think Zerobama is fully conscious of being a stooge.
"Well meaning" as a relative term as in relative to all the other candidates in the Republican and Tea Bagger party. I voted for Obama and absent a run from Ron Paul I will vote for him again as there are currently no other candidates worth a crap. So far I'm not fooled by this Koch Brothers funded astro-turf tea bagger movement.
I was surprised to see Charles Hugh Smiths' name on this post. Before this, I used to enjoy his blog.
The American factory workers (there are a few left!) at my job all have their retirement funds in 401(k)s. They panic just like everyone else when the market tanks.
Think again, Charles!
The naivete of the unsophisticated layperson is breathtaking. Look at my paper gains--I'm rich!
Perfect sheep for the fleecing.
the amount in the averqage workers 401k is almost immaterial. In fact it is misleading, becuase the workers feel they have a stake in the market so swallow the crap put out by the elites. the great masses would benefit more from the decrease in energy and food costs with a market decline over a year than they will gain from a risiing stock market. The loss in spending power with asset price risis is greater than the gain. You just don't get it.
Why do you think higher oil prices crimps the economy, or other higher commidity prices. If the gain was more than the loss it would work the other way around
A big crash will be the excuse to finally end social security benefits for good.....there's your 95% hurt factor
I think their goal is to capture Soc. Security as an investment fund by promising "better returns" through stock & bond ownership. This, once in place, would give the insiders outsized rewards and further control.
I don't think anyone would disagree with the need to reform insane pensions.
well +100^666
that pisses me off so much I'm embarrassed
+100666
I like the goodies in the tool bar that let me block and superscript, subscript. You gave me an excuse to do it. ;-)
thank you miss....... can't seem to find those tools here on my interweb tubes. still looking...........
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