July 20, 2015

How The Fed And Wall Street Are Eating Their Seed Corn

When it comes to the stock market these days the overriding theme you hear from the financial media is “You’ve got to get in.” Another is, “Buy on the dips and average in.” Or, “You can’t profit if you aren’t in it” and more. So many more it would fill its own multi-volume set. However, there was some truth to many of those quips just a few years ago. Today, the amount of hidden reality to the actual destruction of one’s wealth is far more factual than any will let on. Let alone reveal.

I hear and speak to a lot of entrepreneurs who are absolutely mystified by not only the rise in the markets since the financial crisis in 2008. Rather, what many just can’t wrap their heads around is: “If the markets are a reflection of the economy. Then how in the world did we get up here?”  That line of thought I rendered down to be the overwhelming theme when discussing the current state of business affairs throughout the economy. This confusion is coming from a group of people who at one time would seek out Wall Street aficionados for insight or expertise. Today, they tend more to distrust what they hear. For what they lack in stock market expertise   – they make up in spades with an acutely precise B.S. meter honed by years of business acumen. And many confirm today; it’s off the charts far more than they can ever remember. So much so, as to avoid stepping in any of it – they just avoid it all together.

At one time entrepreneurs were not only sought out by Wall Street, rather, entrepreneurs did the same in kind. Before the advent of 401K plans and more it was entrepreneurs with the sale of their business, or profits from something else that fueled many a brokerage firms bottom line. And in many cases that relationship did well for both sides. There was true expertise needed to help one navigate the pitfalls of exactly how and where one was to put their money to work (usually a substantial amount such as after a business sale etc.) in relative safety as to finance the remainder of one’s years. Today, not only in much of that expertise gone – so too is the safety.

There’s probably no better example of this than what transpires at any bank branch today (those that are left that is). Opening a checking or savings account? You used to be incentivized to do so. But what this initial transaction is really designed for today is more along the lines of “a soft opening” to ask…”So, do you have a 401K account elsewhere?” Then the sales pitch is on by some seemingly just out of grad school quota seeking “financial adviser” with an array of pamphlets, jargon, and sales phrases anyone with any financial sense can see through. “Index this… diversify that…dividend paying yields ” and on and on. Along with whatever might be the latest tagline from the financial shows.

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