Wednesday, August 15, 2007

What's Wrong With This Picture?

I happened to log into the on-line version of the New York Times and saw the headline, "Dow Off 167 Points in Late Swoon." This, I knew, was on top of all the previous losses, and did not make me happy. I had been lulled into a false sense of security a month or so ago, as every time I checked my 401k balance, it had risen still further and was looking good. Now it looks sadly similar to what it looked like at the beginning of 2007. And did I mention I kind of need the 401k to keep going up in order to achieve my dearest goal: early retirement?

There is something wrong with a system that has the stock market going sky high, hitting new records of 14,000 points only a month ago, and now plummeting day after day. The conditions have not changed so much in the past month to warrant this big a difference. The leading economic indicators are looking good; so why is this not reflected in the markets?

As the Times article says, "Though the latest economic readings indicate that growth is steady, they also make a rate cut by the Federal Reserve less likely. And a rate cut is what many on Wall Street have been hoping for, underscoring the growing disconnect between what economic indicators are saying about the health of the American economy and what is playing out in the stock market."

The purpose of the stock market was once to actually sell shares in viable companies that had solid futures ahead of them. Under that premise, the success of the overall economy would likely lead to investment in the companies that make up the stock market. But now, as in 1929, people are just using the stock market as a fancy form of gambling. It seems to bear no reflection on either the state of the economy, or even the health of the companies whose shares are being traded.

The other thing that always bothers me about the stock market's performance is that when a company lays off thousands of people, their stock goes up. To me, there is something wrong with a system that profits off of the ordinary working man's misfortunes.

Now that so many companies have gotten rid of their pension plans and are getting their employees into 401k's instead, investing in the stock market is no longer a real choice for many middle class people. They have to do it in order to save money for retirement. And saving that money in government securities or other low interest funds will never get them to the level of savings that will enable them to have as comfortable a retirement as they would have had with a pension, unless they invest in riskier funds, such as stocks.

In 401k's, we employees can't play the markets the way the rich do, selling short and performing various other clever maneuvers that I don't even understand. Our only option is to switch between funds, but we are always advised to remember we are in the market for the long haul, and not to move things around too much. But when you're nearing the magic age of retirement, you aren't in it for the long haul anymore. And that's when losses like this hurt.

So, we sit here and watch as our 401k's plummet and lose everything they've gained in the past year, all because of a bunch of rich gamblers who like to play in the stock market. Retirement now looks more and more like a vague dream rather than a future reality. Surely there must be a better way.

Moving on....

As many have already commented on Rove's departure from the Bush administration, I will be brief on the subject. This man was responsible for much of the small mindedness, the hostility, the partisanship, and general hatefulness of the political scene over the past generation. Here is a great article that details all of his dirty tricks over the past 35+ years. This is a man who started out with no integrity and went downhill from there.

The really scary part of the article is in the second-to-last paragraph, where it mentions that "Rove and his wife have built a house in the Florida Panhandle -- the "Republican Riviera" -- and that former Florida Gov. Jeb Bush will be 59 in 2012, a ripe age for a run for the White House."

Oh My God. Not that. Rove helping another Bush get into the White House would be more than I could take.


pygalgia said...

Hey, you're trying to retire early. Some of us doubt that we'll get to "retire".
But when you threaten me with "Jeb", I become very frightened.

Mauigirl said...

When I say "retire" I really mean leave my job at the Big Corporation and do something I actually enjoy for the next decade or so - with a much lower salary. So I am looking for some security to be piled up so I don't have to be saving a lot of money out of the new lower-paying job!

Let us hope Jeb never gets near the White House.

Fran said...

And the walls and the stocks came a 'tubmling down.

If Jeb goes to 1600 Pennsylvania Ave I will retire. To Iceland or Tasmania or somewhere.

Frankly all this market stuff just instills more... FEAR. Interesting, isn't it? That seems to be the most able tool in the idiot leaders tool box, doesn't it?

Mauigirl said...

Yes, they love to scare us and make us think only they are the solution to the problems that they have created. I hope that the public has finally seen through this ploy.

Tasmania sounds really good. I will probably join you! New Zealand might be another possiblity. Both are so far from here you can almost forget that people named Bush exist, let alone run the country.

TomCat said...

Maui, you probably won't hike what I have to say. The combined policies of the Bush regime. Have skewed wealth in this country to the extent that it had never been more unequal. The last time it was even close was in 1929. Such unequal distribution of wealth in any culture promotes economic instability. As the middle class has had less and less disposable income and maxed out their available credit, lenders have increasingly moved to to the sub-prime market to keep the economic growth on track. Lending to less stable borrowers promotes economic instability. All the while, Bush has has created more foreign debt that all the other presidents in history combined. Extreme debt promotes economic instability. It also devalues the currency, and the $US is trading on the international currency market at historic lows. The devalued dollar spurred increases on interest rates. Homeowners with adjustable rate mortgages experienced payment increases that were are too much for them to afford, first in the sub-prime market, but also in the more stable prime market. Lending and currency insecurity promote instability in the stock market, explaining the wild variations that your are questioning. I hope this helps you make sense of it.

The bottom line is this. Our whole economy is teetering, because the costs of Bush's No Millionaire Left Behind program and Bush's War for Oil and Conquest are coming home to roost.

kuanyin333 said...

I especially love your last paragraph! :-) Excellent post!

Hey, come on over and enter my Elvis Blog contest, won't you?

Mauigirl said...

Thanks, Tomcat, I knew they kept talking about the subprime market being a problem but your explanation is more complete than what I have heard so far. Your reference to 1929 is very telling; I think we are headed toward a big crash. Not only are the conditions you are talking about very dangerous but I believe they have also managed to repeal some of the laws that were put in place after the 1929 crash to prevent it from happening again.

Mauigirl said...

Kuanyin, Thanks so much! I'll be over to do your contest!

kuanyin333 said...

Mahalo for informing me about my link not working! Out of all the people that viewed this site today, you're the only one who informed me! What a friend you are! I don't know how I missed that one, but it's fixed now. Blessings!

TomCat said...

You're welcome, Maui. While they have not repealed the measures they put in place to prevent a crash after 1929, they have overwhelmed them with stupidity, piled on idiocy, piled on greed. What comes now depends largely on the Red Chinese and OPEC. Both have huge reserves of $US. The Chinese, for example have around $1 Trillion. Were either to float a significant portion of these reserves, our economy would tank in short order. In the meantime, both are using their position to leverage US policy to the disadvantage of our people.

PunditMom said...

Oh, you know Rove will. We need to stop the evil now.