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Taking Stock

@mhoye: Market indicators down on fears market indicators won’t riseā€¦ wait um what ca.reuters.com…

These graphics are poached from a friend’s private journal, but I suspect they won’t mind; it’s informative.

@adammcnamara: The stock market: Because you don’t really need your money. google.ca/finance #fack

You know how every single stock portfolio in the universe always has the disclaimer that “historical performance is no guarantee of future earnings”? Yeah, take a look at this. This is the Standard and Poor index over the course of the 80s:

Over the 90s:

And finally, from 2000 to 2010:

One of those things looks very much unlike the others, you’ll notice. In particular, if you started investing in the late nineties or early zeros, you’ve got a decade or more of evidence behind you right now implying that all those people who’ve told you to invest in stocks are thieves and hucksters, and odds are good that you’d have done better putting 90% of your money in a savings account and taking 10% of it to a casino.

From the Globe And Mail, in February:

While youth unemployment in Canada is running at almost 14 per cent, it’s far, far higher in other regions. In the European Union, for example, fresh readings today showed the jobless level among young people at 21 per cent. In South Africa, it’s a stunning 51 per cent. Here’s a telling, and worrying, statistic from Britain: Among fresh college grads, unemployment is 20 per cent.

Periodically I read articles about how young people aren’t “planning for the future”, with all the real-estate-buying, kid-having and so forth that implies, I am enraged by it. I want to show the author these numbers and then smack them across their sanctimonious faces until they stop talking forever. You want people to take the money they don’t make at the job they don’t have, buy bubble-priced real estate, take on a dependent and throw whatever’s left over on what amounts to a craps table? Awesome plan, old person. You get a gold star.

I’ve been able to do these things; I have a house, and a kid, and they’re awesome. But I’ve been incredibly mind-blowingly fortunate to do so, in the same way that previous generations of people, who are now writing these hand-wringing articles, were incredibly fortunate to live through twenty years of relentlessly upward prosperity. I had a computer as a kid, and turned that into a valuable career. I had ample nutrition as a toddler. For all the times I’ve hit my head, I’ve never hit it hard enough that I couldn’t feed myself or understand NTFS, LDAP and shell scripts afterwards. And being lucky isn’t a plan.

And, possibly worse, this is a profound structural and generational problem. My friend David Eaves will talk about this at furious length if you give him the opportunity;

Yes, young people reject the status quo, but it is deeper than that. They eschew the tools that Martin wants them to use – not just party politics but traditional media as well. They reject the whole system. But this isn’t out of juvenile laziness, but for the very opposite reason. In a world filled with choice, one that fragments our attention, they seek to focus their energy where they will be most effective and efficient – at the moment, that frequently means they are uninterested in the slow and byzantine machinations of politics (why engage when every party, even the NDP, are conservative?), the snobbishness of traditional media (when’s the last time a columnist on the Globe actually responded to a reader’s comment on the website?) or a hierarchical and risk-averse public service (held hostage by the country’s auditor general).

… and in a lot of ways I don’t think he goes far enough. It’s not just that young people “reject the whole system” for their complexity, lethargy or conservatism; it’s that there’s a large and growing pile amount of evidence available now that these systems a straight-up sham. Did every TSE-listed company lose 5% of its profits, 5% of its assets or announce a 5% cut in expected growth on Tuesday? Did any TSE-listed company lose 5% of anything except the aggregate price on the sticker? Some did – the people who make the Yellow Pages had a long-overdue bad day, apparently – but how much of that was just panic? Some, most? So maybe, just maybe, this is all just a collective fictions that let rich people get richer and pretend the poor are at fault for their poverty while the dwindling middle class pushes their chips around a roulette table. Is that a naive, oversimplified way to look at things? Maybe. I’ve also got a decade of evidence that when financial shenanigans get complicated then somebody, usually lots of somebodies, are about to get robbed.

And in that environment, the only way to win for sure is to be the house, or not play at all.

7 Comments | Skip to comment form

  1. Jamie

    There is one other way to win: be the bookie (ie. stoke broker/financial adviser).

  2. mhoye

    That’s quite true.

  3. Ian Hurst

    During a lull in lunch time investment conversation with coworkers Wednesday (which isn’t that weird a thing, at a startup), I told the crowd I thought stocks were a scam, that there had been three stock market crashes in the lifetimes of even the youngest people at the table, that the whole system is designed to fail at small investor expense. Mostly I got quiet looks of disapproval. One guy asked me then what my investment strategy was. When I said “horde cash and pay down debt”, he quipped, “What kind of return do you get from the safe beneath your bed?” I just laughed. Cue market crash a day later. A smarter guy than me would have made some money on that prediction.

    I’m not even a particular market skeptic. Nor am I a pessimist by nature, or a doom sayer, or a communist, or whatever the pejorative of the week is. It’s just… shit keeps failing. I mean, it fucking *fails* all the fucking time now. What the hell are people thinking?!

    But all this is trivial next to the self inflicted impoverishment thing normal people have been doing down here for the last 30 years. But you can only get so subversive at lunch before people start avoiding you…

  4. Ian Hurst

    Another thing, I am getting pretty scared. As a thirty something guy with no family and a half decent career, I have some margin for failure before I completely eat shit. But the general American public ain’t all that far now from outright ruin, and we’ve got no credible alternative to our status quo. So what’s left? INcredible alternatives? Do not want.

  5. Oration

    Good statisticians will discard the outlier. How would the graphs look without G.W.Bush?

  6. mhoye

    The outlier at the other end of the spectrum is the 1982-1999 window.

  7. Kaitlin

    Except that at times, the bookie also playing the game. There are a lot of financial advisers (poor ones, I’d argue) that tell their clients to divest but don’t do so themselves. How many brokers on Wall Street or Bay Street weren’t just destroyed by their companies, but through their own investments?

    I don’t have answers, I’m just saying.