I don’t even pretend to understand “the markets” and what makes them tick, the whole thing is so damn complicated these days I’m not sure the people on Wall Street even understand it. But I wondered something.
Seems I’ve now read that every single Republican candidate for president wants to do away with the capital gains tax completely, as well as the estate tax. Now, let’s just pretend for a minute that this happened. What would the effect be on the average American investor?
How many people do you suppose would bail out of the stock market if there were no tax consequences for doing so? What if they put their money someplace less volatile, safer, less like an unpredictable casino? With real estate still in the doldrums, would people of the “average American investor” persuasion decide there are bargains to be snapped up in that sector? Would they buy gold? Would they buy CDs like we did back in the ’70s when interest rates were so high?
And if the “average American investor” did decide Wall Street was no longer a safe bet, would anyone care? We already know that the big Wall Street guys think Main Street investors are idiots, rubes, marks, sheep led to slaughter. Or to be precise:
Wall Street’s soulless, immoral, greedy bankers really believe that the vast majority of America’s 95 million investors are not only “predictably irrational” but “stupid,” as J.P. Morgan Chase’s chief investment officer put it in Forbes a while back.
Worse, Main Street investors are losers for continuing to trust Wall Street after they lost 20% of our retirement money the last decade. Now, worst of all, Wall Street’s traders have profiled Main Street investors in their algorithms: Yes, investors are “predictably stupid losers,” what Vegas croupiers call a mark, a dumb gambler that can be easily conned out of his money.
Why so blunt? Listen: Recently I explained why the Wall Street banks must kill financial reform, to preserve their multibillion dollar bonus pool. One reader commented: “I worked at the Bear Sterns … every word written here is true. Fact is, bankers regard themselves as wolves and the public as prey, and speak about it openly, among themselves.” Then he added a sucker punch: “What is extraordinary to me is how willingly the sheep submit to this.”
Yes, folks, Wall Street is certain that America’s 95 million investors are clueless sheep headed for the slaughterhouse.
That column I quoted is over a year old, but it still feels true to me. I don’t get the feeling that Wall Street investment bankers give a shit about Main Street, the average American, 95 million of us who have our retirement entrusted in their care. If even a third of those 95 million decided the markets were just too volatile and unpredictable, and there were no tax consequences to cashing in and burying your retirement in the backyard, what do you suppose would happen? I’m not being rhetorical here, I really want to know.
On the one hand, I think you’d have a bunch of little investment guys suddenly out of work. Maybe that annoying E*Trade talking baby would finally be shoved off to Kinder-Care where he belongs. I consider this a good thing, mind you. I hate that fucking E*Trade baby. Investing is not child’s play, people!
But I think you’d also have a lot of those Edward P. Jones and Charles Schwab offices shutting down, too. The brokerages and investment houses which cater to the Main Street investor might be in trouble. I imagine there would be quite a ripple effect throughout the investment world. But what do I know.
What would Wall Street do if 30 million people pulled their money out of the market? Would there be increasing demands to privatize Social Security?
It’s an interesting thought. I really don’t know that much about this stuff, and I wonder what other folks think.
Adding …. I don’t for a minute think the capital gains and estate taxes will be eliminated and even if they were it would be phased in over a few years, at which point Main Street investors might have forgotten the middle finger Wall Street has been giving them for years. So I realize my little thought experiment is flawed. But it’s something to think about.