The Caronavirus has shone a light (not the kind Trump thinks is a cure) on some of our country’s basic truths – economic disparity, health care deficiency, political dysfunction, and many more. One truth that shines as bright as any is the confirmation that the stock market is a fixed casino.
Anyone with an ear, or a 401K, knows that the stock market has sunk from its historic highs at the beginning of the year to its now lamentable lows. Again, like during the Great Recession, when the brokerage statements arrive, we don’t open them, we open a six-pack instead.
Ostensibly, this is because of the virus. People are sick and dying. Businesses are closed. People are out of jobs. People are on food lines. These are all horrible things and all good reasons why the markets should be declining as consistently as the virus is increasing. The thing is, though, they aren’t.
The markets, as a whole, are down. But the graph of market prices goes up and down without any reference to the status of the virus. Some days the market is up. The next day it may be down. In between, though, more people die, more people become unemployed, the food lines grow, and so on. The consistent societal degradation imparted by the virus is not reflected in a similarly consistent degradation of market value. So, why the inconsistency? If the markets are tied to the reality on the ground, why would they not be falling every day?
Here’s why: the stock market is a fixed casino. It is not based on the reality of anything. It is based on the perception of that reality by a select few – the Villains of Value; the Monsters of Money – the folks otherwise known as the Wizards of Wall Street. They buy and the market goes up. They sell and the market goes down. For purposes of my thesis here, I shall call these folks the “Controllers.”
Now, many Controllers are decent enough people. They are just doing their jobs. But, as Cool Hand Luke said to the jailer who pled that defense when he kept locking Luke up, “that don’t change nothin’.”
A few recent examples of how our financial markets work emphasize this fact.
A few days ago, news reports were rampant about how the firm, Gilead, had developed a drug that might help Caronavirus patients. The market went wild. Gilead’s stock went up 11% to a high of 85. Further reports clarified that the drug was not a cure, but the reports continued to say that the drug would be a big help. If Gilead’s stock price truly depended on the performance of the company, then its stock should have continued to rise. It was likely about to do monster business. Wrong. Two days later the stock was down 5 points. Why? The Controllers took their profits and ran. They left the table with their winnings. Smart, but that’s gambling, not investing.
I also read about a guy named Bill Ackman, a hedge fund manager who made $2.6 billion since February. How? Did he invest in companies that he thought would make money? Hardly. As described in the New York Times, he bought “insurance on various bond indexes – a bet that the debt bubble would burst – based on his hunch that investors would abandon the riskier securities in those indexes as the pandemic spread from Asia to the West.” Insurance on a bet. Sound like blackjack to you?
How many steps apart was Ackman’s $2.6 billion dollar profit from anything remotely connected to actual corporate performance? And he collected that mountain of cash while some people died and others lost jobs and the bread lines grew and all because of precisely the conditions that made him the money.
Make America Great Again.
And there’s more. The Controllers have an even bigger say in our lives. They will have the capacity to influence the 2020 election more than even Putin does. Trump’s election bet is placed almost entirely on the economy. In our 401K society, “economy” certainly means feeding the family, but now, it means more than that. From the CEO’s to assembly line workers, retirement funds are a large measure of wealth. Just imagine the difference in political possibilities if the numbers in those accounts are going up or going down on Election Day. The Controllers will determine that.
We have to beat the Controllers. Those of us who see a Trump re-election as the equivalent of eating our pets must be energized to get out there and work our asses off to make sure President Biden takes the oath next January 20th. If the story of Bill Ackman doesn’t do that for you, my bet is that you drank Clorox to keep the virus away.
We were right 