OK, I suppose it's my conceit to think with any given post that I've brought some unique perspective to bear upon whatever trifle caught my attention. And I suppose I might just as often be an ignorant horse's ass. But this time I'm admitting to being an ignorant horse's ass up front. I'm about to spout off about something of which I admit PREEMPTIVELY I know not a damn thing.
There, I said it.
I was listening to NPR's "Marketplace," a daily show about financial things, and the host, some slick, 30-something dude named "Kai," was pontificating about the day's stock market performance (which they call, with self-congratulatory swagger, ...wait for it... "doing the numbers").
I'll try to paraphrase: "The Dow was pretty flat today on news of the government's pending third quarter productivity reports, which are expected to come in somewhere around half a percent below expectations; that caused an early rally to run out of steam, though some strength was regained at the end of the day after news of Kirk Kerkorian's sale of additional GM shares..." And on and on in similar fashion for the whole hour long show.
And the whole time I was thinking: You know what, dude? You don't know SHIT about what those stock market numbers mean. OK, I don't know shit about any of it, but I don't think you do either, and neither does most everybody else that dabbles in this bullshit. Who gives a fuck about productivity figures (or whatever the hell it was)? What does it even mean in a way that translates to anything human? Who even knows about the existence of these reports except a small group of people telling each other what they should or shouldn't like? One can hear, night after night, this stupid program interviewing one brown-nosed "analyst" after another about what this bevy of arcane flotsam means--because it's all so far from obvious to the rest of us--and it all sounds like a bunch of salesman-slick doubletalk, a mumbling wad of pseudo-speak. One would do equally well to read tea leaves or to gaze into a crystal ball. The whole setup seems like a grand, ritualized, business-suited circle-jerk, a kind of ongoing orgiastic, self-referential congratulatory frat party that appeals to a certain kind of money-grubbing lower tier mind who is convinced that he and his ilk are "players" and are responsible for making the world go round (and should be compensated accordingly).
This little snitty personal moment of mine led me, after breathing deeply from a paper sack, to ponder a reacquaintance I made a few days back. This acquaintance--not a friend, but somebody I kind of knew second-hand thru a close friend--had recently gone in a short span of time from the very edge of bankruptcy to renewed prosperity, a kind of riches-to-rags-to-riches-again story. Last I had heard, a couple years back, he was about to lose everything to a series of shady dealings by which he had backed himself into a corner. When I inquired now about how the fall had come, I was only a little surprised to hear that the phoenix had risen to even greater heights, somehow (yet again) bypassing that inconvenient ashes stage altogether.
This person has always struck me as the quintessential business type, the kind of person who listens to this above tripe and uses the information to bilk somebody. The guy had always been the proponent of the Big Deal, someone who deals with big debts, big risks and big payoffs. And when things went sour, well, the genius was in getting someone else's money to go down the drain, in getting someone else to take the fall. Instead of a pair of striped pyjamas, our hero is suddenly in possession of several impressive new personal properties scattered about the country (including shiny new wheels and strategic investment properties for each of the kids) and a renewed, jet-setting lifestyle. And not surprisingly, I learned that his super-lucrative new job involves titles and duties which are probably arcane and gaseous to Joe Consumer. He is some kind of Portfolio Manger now, some Asset Allocation Blah-Blah Specialist Whatever, whose work commanded an impressive salary.
In my bottomless pit of cynicism, I couldn't help but decide I'd been duped not to expect this all along: the guy whose contribution to society is least comprehensible--and, I might argue, would be least missed if he vanished--is most grotesquely compensated, compensated in a way that breaks entirely from any reality a working stiff could comprehend. During the business downturn of the past five years, story after story finds the top brass making huge salaries and obscene bonuses for heading companies which are losing vast sums of money. Failing executives are let go, punished with cumbersomely bloated severence packages. The guy throwing bags at United Airlines is just shit out of luck.
This all dovetails nicely with my utter incomprehension about the sanctity of stockholders in our present business model (a sanctity reinforced again and again during the hour of "Marketplace"). The stock price--which, near as I can tell, is merely an indicator of the general public's view of the merit of a company (after, that is, the huge initial fund raising of the IPO)--seems to have become the bottom line for business here; everybody--manager and peon alike, though the managers seem to have a nice insulating layer of blubber--appear to be in the service of supporting the stock price. Unless to add an additional set of smoke & mirrors between voting stockholder and overcompensated executive, I have yet to figure out why this business model has taken over from a simple supply-and-demand marketplace.
Is this naive of me? Would a jumbo jet ever get built without this kind of self-proclaimed mover & shaker? Would there be skyscrapers? Is there some seminal dreamer buried in there who has brought us medicine and advanced technology? Or is it just a slice of bell curve mediocrity playing a game of "Make Your Mark"? When the incomprehensibility (to me) of it seems to blur with the line between Have and Have Not, I fear the worst.
4 comments:
I am with you on the bogus market analysis. If these guys actually knew how all of these market indicators would actually move the market, they'd be using their knowledge to get filthy rich. Hindsight is always 20-20.
I also think that you are on the right track in regards to the over-paid middle managers (or even the top managers). I think that most of them could disappear overnight and they wouldn't be missed. That sounds to me like folks who aren't worth all that much to a company, and who therefore don't need much compensation. Even if they are important to the functioning of the company, it seems that there are plenty of candidates around, and so it shouldn't cost much to replace any who are actually needed. Any way you look at it there doesn't seem to be much justification for the compensation.
The whole stock market world seems to have a strange connection to reality. On the surface it just appears to be a rich man's gambling arena. Given that the company never sees any of the money moving around as stocks are traded it doesn't seem to really matter that much what the stock is worth. The only folks who care are the stock holders (some of whom are company executives) and the worst they can do to the company is vote in new executives if they aren't happy with the way things are going. Even then, I don't see how the company (or the executives) can really have much influence on the going price of the stock. Back in the days when stocks were valued for the dividends they paid then there was a connection between performance and value, but now that everyone is so focused on appreciation in stock prices that connection seems to have largely been broken.
I do think, though, that we need the capital provided by the investors in the stock market to finance the big things you mentioned. There is a risk inherent in these endeavors and so some will pay off and some won't. The only way to get folks to risk losing their investment is to sometimes have that investment pay off very well. For all of the get-rich-quick IPOs that we hear about there are many others where the initial investors never see their money again.
The good news is that the stock market is no longer just a playground for the rich. With discount and online brokers folks with just a little to invest can buy stocks. Now anyone can try their hand at betting on companies and see if they can strike it rich or lose it all.
And we can all listen to Marketplace and hear why our investments didn't pay off the way we had hoped.
I remember talking to someone where I referred to playing the stock market as gambling. And they hemmed and hawed at that description before conceding that it was, in fact, gambling, and not fundamentally different than putting the money on the roulette wheel. But one is considered immoral and the other is widely seen as clever or at least savvy.
I grasp the IDEA of it: putting forth a general business idea, and having people buy stock on the strength of their enthusiasm for the idea, with an expectation of getting paid a dividend based on how the business does in the market. And the shares would gain or fall in value based on the company's performance, and hence trading the shares themselves becomes a kind of business, something quite removed from the original business that gained from the IPO.
But it still sounds like an idea cooked up by some business-savvy dude who wanted to be rich without having to work for a living.
The kicker is that the scheme seems to work, at least for some, and said dude may end up rich. C'est la vie.
I can relate to your frustration and disdain for the exec who seems to find ways to escape financial reality and end up working for nothing but getting paid a lot to do it.
I remember a few years ago when there were calls for reform of CEO salaries and golden parachutes, linking profitability (or lack thereof) to bonuses (or your fired). I thought the Warren Buffets of the world would influence them and mandate accountability. Evidently not. Too many predators like the odds and ratio of victims to bloodhounds.
I enjoy your writing style. I like your attitude. You should start up a publication or write for one that demands financial accountability.
friend of woolf
Thanks for the comment. I have a friend who is working on her PhD in business, and I'm always goading her about this stuff. I guess she'll have the last laugh when she can stop out my carping with solid gold earplugs!
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