(Fred Weinberg) – So here’s a question for the Masters of the Universe who think they run our economy.
Which of you morons pinned our so-called economy to China’s growth prospects?
Was it the same clown who told hedge funds in 2004 that they should invest in companies which loaned people making $50,000 a year in Las Vegas $400,000 to buy a $100,000 house for $380,000?
Or, perhaps it was the same genius who said that after we sell these putrid mortgages to stupid rich people we’ll sell other, slightly smarter, rich people a new security based on a bet that those putrid mortgages will not be paid?
Or maybe the same thief who told President George W. Bush—who should have known better—that the whole economy would collapse unless the Federal Government took over AIG insurance and paid off the fake insurance policies on those putrid mortgages much of which went—oddly enough—to that thief’s company.
I couldn’t wait to wake up last Monday morning and tune in the talking media heads because watching a train wreck on Wall Street is almost as much fun as watching the night race at Talladega.
The talking heads wail, the middle class gets screwed and the brokers leave just enough on the table to buy food with tomorrow. It’s a hell of a show. (You don’t have to worry too much. It’ll be better by the end of the week, they rarely close the casino for long.)
You’d think that the buying and selling of stock on Wall Street is the business of America.
If you ask most people, they’ll tell you that when they buy stock on the New York Stock Exchange or the NASDAQ, they’re “investing” in a company.
That’s just not true. Investing in a company is when you borrow on your credit cards to start your own company.
Very rarely, does money you hand a stockbroker actually go to the company which the stock represents ownership in. (Usually only during an initial public offering.)
What you are usually doing is buying that stock from somebody else who bought it from somebody else going all the way back to when the stock was issued by the company. In short, you’re not funding American business, you’re either allowing the previous owner to take a loss or a profit. That’s what they call “liquidity”.
It’s not much different from playing blackjack at the MGM Grand in Las Vegas except the odds are a little better at the corner of Tropicana and the Strip.
So, when you hear that the “market” is “down”, what that really means is that the stock which somebody may have purchased from the original company—maybe years ago—is being sold at a lower price than it was earlier.
It doesn’t mean that the company itself is losing money.
And, interestingly enough, when there is a huge sell-off in the market do you know who makes money?
The same clowns who made money selling bad mortgages and bets against those mortgages to investors.
Seventy-Five years ago, a guy named Fred Schwed wrote a book called Where Are the Customers’ Yachts? The title came from a classic Wall Street story about a visitor in New York more than a century ago. After admiring yachts Wall Street bought with money earned giving financial advice to customers, he wondered where the customers’ yachts were. Do I need to tell you how many yachts belonged to the customers (then and now)? Here’s a hint. None.
The same clowns who tell you to buy or sell make money every time you do. You may or may not make any money but they always do.
So, if you got a call from one of those clowns last week telling you it was time to sell or later, after the carnage that it was time to buy, you might have been better off putting the money in a savings account so you could, someday, buy a yacht.
By the way, the answer to the China question should be obvious since CBS News’ Lesley Stahl reported on 60 Minutes over a year ago that the Chinese were building empty cities with all the iPhone money they tricked us out of (I’m paraphrasing).
Apparently Masters of the Universe are too busy out in Connecticut on Sunday night to watch 60 Minutes. Or they made so much money on our housing bubble that a bigger one in China meant nothing to them. Remember, that the economy of China is controlled by their Army.
Either way, the only thing the Wall Street Masters lost last week was a little sleep as they got to the office so they could make some more money to pay for their yachts.
Mr. Weinberg is publisher of the Penny Press. Get to know more about him by visiting www.PennyPressNV.com.