Investors Column – Everyone Is Doing It


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Money Matters

April 11, 2022 by Scott Crosby - Views: 185

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Investors Column – Everyone Is Doing It

S307-1.jpgUntil the 1980s, your everyday working-man was only distantly aware of the fluctuations of the stock market.  Fluctuations did not have an impact on his financial situation.

For those who could find a way to put a little money aside, a savings account was where it was kept.  

A great many people had been buying and selling stocks in the Roaring Twenties, but the October 1929 stock market collapse, with its horrific losses brought on by President Hoover scared off virtually all but the major businessmen.  The subsequent Great Depression of the 1930s, prolonged and deepened by the actions of President Roosevelt, made sure individuals had no money to invest.  World War Two made sure nobody had the time to invest.  By war’s end, those investors of the 1920s were seventeen years older, and still gun-shy from their experiences.  

Presidents Truman and Eisenhower slowly removed the strictures that prevented economic recovery.  But the young veterans were just beginning to build new lives and young families of their own.  Money was still tight.  

Buy shares of stock?  Who has money for that?  Your parents had lived through the Crash of ’29.  They were all too quick to tell you that buying stock was a foolish gamble.  Fear and distrust of the stock market kept people away.

The biggest change in attitude came with the creation of the 401k plans, in 1978, and the evolution of Individual Retirement Accounts (IRAs), between 1974 and 1986.  The end result was that an increasing number of employees were placing an increasing amount of money in the stock market, primarily via mutual funds offered as part of their employers’ retirement plans.  

For the first time since the 1920s, millions began having a financial interest in how the stock market performed.  

That day-to-day awareness was also due to the emergence of discount brokerage houses, such as Charles Schwab.  The typical full-service brokerage charged $250 per trade, which meant that, to be profitable, an investor had to wait for a gain of more than $500 on his stock before selling, to compensate for the $250 paid at its purchase and the $250 paid at its sale.  Schwab charged $29.95 per trade (that amount would dwindle over the years, to virtually zero).  Low fees made it easier to make money buying and selling shares of stock.

As the number of people interested in investing increased, the competitive marketplace made it cheap and easy to buy and sell stocks, first via an 800 phone number, and later via a website.

In the nearly four decades since, millions of people have been investing.  Retirement savings, encouraged by the 401k and IRA laws, made investing virtually universal.  Millions now have a financial interest – a very focused interest – in how the economy is doing, and who is affecting the economy for good or bad, and why.

In particular, those millions are acutely aware of the impact on their investments by politicians.

Politicians – particularly those with Socialist tendencies – are discovering that the tactics of Franklin Roosevelt, Lyndon Johnson, and Jimmy Carter, if attempted now, face a swift and negative response at the polls, from a growing swath of voters who suddenly see their investments facing losses instead of gains.  Delays in reaching financial goals due to investment losses – whether those goals include retirement or some shorter-term purchase, such as a car, a vacation home, or a child’s college, make Congress and the President clear-cut villains.  

The message is clear:  Not at my expense, you won’t!

When businesses have problems, when the stock market falls, people quickly figure out why – and who to blame.

President Biden is an old-school tax-and-spend, increase-the-deficit President.  The result was predictable:  inflation has risen to a level not seen since the 1970s.  

But the Biden and the Democrats controlling Congress face a voter-base that their predecessors never did:  voters who are very conscious of the destructive costs to their own personal fortunes of the politicians’ higher taxes and inflation.  

That fact has begun to seep past even the strongest walls of denial; Democrats are in a hurry to pass every bit of legislation they can before the November 2022 election.   They fear knowledgeable voters.  

The classic Democrat agenda of over-spending, increasing taxes, and causing inflation is getting too difficult to hide from voters who quickly notice the impact on their pocketbooks, wallets, and investments.

Scott Crosby
scott@scottschoice.com
www.scottschoice.com■

 

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