Investors and the economy

I find it amazing that people refers to traders and investors as if they are a group of people who deserves what they get from the risk they agreed on taking. Not knowing how interconnected everyone is to the behavior of stock market. “Yes, let’s wipe out the investors of certain big name company. We should let those too big to fail firms fail and wipe out the shareholders.”

Are you fucking thinking at all?

If there is one thing you need to know about investors is that 100% of the population is invested. You just don’t know that. In some Asian countries, where people are more emotional and the regulations are more lax (especially where I was born), you see 120% population investment. Yes that’s right, through fake heads and borrowed money.

But back to the case in point. How? I’ve never touched a bank before. Sure perhaps I am exaggerating a bit, there are those special case hippies who’ve managed to stay out of the society’s structure, but even they are impacted more or less by the investment community.

The everyday guy

An average Joe is invested in the market thorugh the pension fund that they contribute to with their paycheck. The pension funds of nowadays no longer engages in the safe and secure investment routine that guarantees a small and secure interest income. Instead, they are tagged as sophiscated institutional investors who “should know better”.  After all, they are managed by executives who are paid 10s of millions of dollars each ear to screw up. The prime example being Canada’s pension plan losing $30 Billion this year. That’s about 1/4th of their capital. Mostly from investing in risky assets because they are sophisticated.

The reason for their engagement in risk is simple. The outlay of their fund will be bigger than the inflow of capital by 2018 for most western societies and the fund should be empty at around 2048 based on current projections. This is the result of the baby boomer retirement which reduces the ratio of working poplation per retired population. Thus, less people contributing than withdrawing.

The well off

Most of you belong in this category, you got left over money, you invested in mutual funds. You got burned. While the market picked up from the crash, your mutual fund is still 50% underwater. Those fund managers cares only about the fees they get from you, they don’t really look out for your wealth. Why would they if their money is not invested in the said fund and if they can charge 2% for managing it, basically shifting the portfolio around about 4 times a year.

The rest

I guess I don’t have to convince you since you are already in the market investing.

So big names are famous and pension/mutual funds loves having them in their portfolio. It shows prestige and good judgment. Most sane funds have the big names because that’s what YOU, the average chump, wants to invest in. Guess what happens when you call your government to wipe out the big names in a bout of  righteousness? YOU take a loss. You just won’t know it until 3 months later when your statements gets updated. Or a year later when the government does a review of the pension funds.

Karma is a bitch.

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