Politics and the stock market are, to my mind, a little too closely related.
An NBC News article, April 12, 2015. The headline reads: “Voters Split Between Clinton and Trump in Hypothetical November Matchup.”
The next Presidential election is shaping up to be a spectacle. You don’t have to be an avid news reader to know that. Headlines splash the latest scandal; they keep us up to date on the latest poll results (like the NBC news headline today).
But there was something in this NBC report that caught my eye. This is the first sentence of the report: “Hillary Clinton still leads the Democratic field nationally with 49 percent support among Democrats and Democratic-leaners, but her margin narrows slightly to six points from nine points last week…” 1
Margins narrowing on a point spread…sounds a lot like what could happen in the stock market on something called “spread betting.” If you don’t know what that means, don’t worry. Most who have money in the stock market don’t—and this isn’t a blog about how the stock market works.
Rather, this comparison underscores what I have long believed: we were brought up believing that “the people” (us Americans), vote the president into office. That’s actually not true. It’s the guys at the top who really decide who wins, just like it’s the guys at the top that decide stock market outcomes.
First, politics. When we vote for president, we’re actually directing the electoral college who to vote for President. (If you don’t really know what the electoral college is, don’t worry. Many Americans don’t).
The electoral college was set up by our founding fathers because they were afraid a direct election could be manipulated and because they didn’t really trust the populace. So the electoral college as set up as a buffer between the population and the people actually voting in the President. 2
There are a few problems with this. One: pretty much anyone can be voted as a member of the college. The only stipulation is that the person cannot be a U.S. Senator or Representative, and they can’t hold an “Office of Trust or Profit,” in the U.S. So this means that if you work for the U.S. government, you can’t be a member of the electoral college. However, it makes no stipulation for a criminal record or mental health record—that’s a little disturbing.
More to the point, most electors are nominated by the political parties in a given state. They are often chosen in recognition of their service and dedication to their political party. Even though it is rare that Electors disregard the popular vote by casting their vote instead for the party’s candidate, it can happen.3
There are four times a president was elected who didn’t win the popular vote.4
However, there is something more at stake. Politicians may deny to their constituents that money doesn’t buy their vote, but when some of them have been asked out of context, they’ll tell you that basically that “our politics in Washington are broken and that multimillionaires, billionaires, and big corporations are calling the shots.” That’s from Russ Feingold, a three-term Democrat senator from Wisconsin.5
It’s not hard to make the connection that those who control the political parties are also these same millionaires, billionaires, and big corporations.
In other words, it’s the folks at the top, the money guys, the ubiquitous “they” that decide who gets to control Washington. We the People are definitely a low rung on this totem pole.
The same can be said for the stock market. You think you have a chance to win in that game, but I’m sorry to say, that’s rigged as well. It is a known fact that big institutions, brokerage firms, banks, and big traders can move the price of stock, and oftentimes these “fat cats” all play together because they know the stakes. Billions of dollars.6
There’s even a way these “fat cats” can control the market in the very way stocks are traded these days—on a computer. Forbes.com, reported on a “60 Minutes” story that aired in 2014 that said, unequivocally, “The stock market is rigged.” They were talking about High Frequency Trading, FTC, and some financial firms have invested billions of dollars in computerized systems and fiber optic cables in order to trade faster than anyone else. That means if they see a stock star to rise, they can buy faster than the ordinary trader sitting at their computer. They can also sell faster than others.7 This is just one of the ways Forbes has reported on how the market is rigged.8
These “market makers” win when the market goes up and when it does down, and unfortunately, they control both.
I believe that people are hurt by what they believe is absolutely true but is in fact a fairy tale. I’m a financial consultant, and one of the questions I often ask when I’m talking to someone about their money is, “if what you believed to be true turned out not to be, when would you want to know?”
The stock market is not for the amateur, and it is dangerous to not know what your money is doing when it is in a savings vehicle that is tied to the equities market. The stock market can be lucrative for those who know how to play it, and pretty much for those who can afford to lose money in the short term. It is also very important that you know what you’re up against. I have said in other places, it’s not inherently bad, it’s just speculative. It’s not really for anyone who is risk-adverse, meaning you don’t like losing money.
I’m in that latter category. If you are too, there are ways to keep your money protected even while it enjoys the upside potential of the market. That’s something no “market maker” can offer you.
If you want to find out more, I invite you to visit www.MyFamilyFinancialMiracle.com.
And while you’re at it, read “Is Wall Street Rigged Against the Little Guy” at Forbes.com. It’s eye-opening.
8See http://www.forbes.com/sites/jaysomaney/2015/08/24/is-our-stock-market-rigged/#438db8481b15; and http://www.forbes.com/sites/jaysomaney/2016/03/27/is-wall-street-rigged-against-the-little-guy/#7dbe162832bf