Originally posted at Monty Pelerin's World ,
Hope is dying in the US.
The performance of financial markets affects everyone. For savers and investors, these markets represent the means to an improved life, at least as they define it. Savings and wealth provide options and opportunities, the quintessential aspect of being an American. These options and opportunities differentiated an American from someone who was born and destined to die in a hut or remain locked in a societal class from which there was no hope of escape.
Bonds and stocks were the primary means for savings and investments for generations of Americans. When these do not perform up to expectations, lives are changed. Plans and dreams are dashed. College educations, retirements and similar major events are deferred or never happen.
We are twelve years into this new century and Americans are losing their hopes, dreams and aspirations. Hard reality has crushed the optimistic spirit that once drove the country. The first decade rivaled the 1930s in terms of stock market performance. Twice, stock market wealth was halved in this ten-year period. Twelve years in, the S&P 500 has returned a total of 14%. That puny return has not come close to covering the decline in purchasing power of the dollar during the same period. Worse, a generation or two, has lost probably 33% of their wealth-producing years.
College graduates come out of school under-educated and buried in debt. Most cannot find a job commensurate with their education or aspirations. Taxes rise and will accelerate in the future as the federal debt and social promises become more binding. Young people find it difficult to imagine getting out from underneath their student loans or buying a home.
Outcomes in the housing and stock markets have affected millions. Equity in homes has dropped dramatically. Some have lost their homes as a result. Savings and wealth that were reasonably expected based on historical precedents did not materialize.
These outcomes are explained away in terms of markets "underperforming." To speak of housing and stocks as if they are independent entities that suddenly somehow turn bad is to miss what is really happening. Markets" are nothing more than millions of us making individual decisions intended to improve our lives. Markets do not under or overperform. It is people, the millions of buyers and sellers, that drive markets. When markets "underperform" it is because people have "underperformed" or more properly, bought less common stock or fewer homes.
People are acquisitative by nature, wanting more rather than less. When they "underperform" in terms of purchasing decisions it is because they had to. Unlike the federal government, people cannot print money or spend beyond their means, at least for extended periods of time. Eventually they hit budget constraints. That is what is being reflected in stock prices and home values. They are reflecting the lower standard of living of the country.
The feel-good spending of the prior two decades caught up with the American consumer. He was never as rich as he believed. Now, as a result of having to service this debt binge, he is poorer than he should be. That is why markets are underperforming. That and the fact that fewer people have jobs.
A recent article, "You Haven't Made Any Money In The Stock Market This Century ," struck a nerve with some readers. Reader Chugar submitted comments that expressed the general sentiment of many (my emboldening added):
I am still in the stock market and hate it daily.
The feeling of it being a wise investment left long ago. I watch the flash crashes, read about HFT, the endless blabber on business shows about "buying opportunities" have grown old.
Since all these talking heads have a vested interest in keeping the game going, if we aren't buying their products they make no commission or their advertisers are not kept happy. It isn't hard to figure out.
With that said we are trapped, for my working career I was told, buy and hold, dump money into the 401k/457/ROTH or Traditional IRA. Not to mention an underfunded pension, which may run out of money before I can even draw.
I lost track of firms and brokerage firms over the years who not only had ethical problems but legal problems. So much for confidence in what appears to be a grand scam run by well-dressed crooks.
My local credit is advertising a 3 year CD for 0.7%... Thanks ZIRP and Mr. Bernanke
I was just reminded I never really own my home with a year end property tax bill.
Taxation,user fees, access fees on and on are coming our way to finance a government that will never get enough, whether its local, state or federal.
Its criminal what is taking place in this country.
The frustration and anger is apparent in these comments. It should be. When one thinks about what has happened, it is difficult not to become angry. The stock market is not the problem. It is merely a scorecard that reflects what is happening to the country. Here are but a few of the factors:
- Freedom as a concept is praised, while government actions designed to reduce it for ordinary citizens continue.
- Working longer and harder produces less wealth than was possible for your parents.
- Living standards will be less for your children and grandchildren than they were for you.
- Leisure (going on the dole) is now a choice unaccompanied by either shame or hardship.
- Politicians have made dependency a tool to gain votes and power.
- As freedom decreases, government becomes increasingly more violent in order to achieve the behavior it demands.
- Laws are enforced selectively in favor of the political class and their cronies. No bigger rape of justice has ever been committed than the unwillingness to prosecute the banksters, regulators and legislators responsible for the looting of taxpayers.
- Government lies with impunity with respect to the true condition of the country. This behavior is obvious with respect to economic statistics but also spills over into all other areas, like personnel decisions .
- Cover-ups like "Fast and Furious" and Benghazi are ignored by a corrupt and compliant media. Lesser problems (Watergate) were cause for removing a president in simpler more honest times.
- Government's insatiable spending has decimated the private sector economy. Capital and talent increasingly flee to other countries to avoid economic persecution.
- Eventually this spending will cause much of the economy and all of the government to collapse. Massive debt defaults, impoverishment and social unrest lie ahead.
- The phrase "government ethics" is little more than a comedian's tool for generating laughter.
- The Mafia has far better ethics. It treats its customers better than government. The key word is "customer" which they must attract. Government does not have customers; it has "slaves." That is how government views private enterprice.
- Compare the payouts on illegal gambling to those of government sanctioned lotteries for a simple comparison between the two methods of organized crime. You do much better dealing with the Mafia.
The country's financial condition is deplorable and cannot continue much longer. So, too is virtually everything else the government has touched whether it be education, Amtrak, the post office, Social Security, Medicare, ad nauseum. Nothing government has done has not been a Ponzi scheme dependent upon additional theft from taxpayers to keep going.
The system is now broken. There is no one to blame for this other than government. Despite this obvious conclusion, government is still seen to be a savior by a large proportion of the country.