Why I Have Trouble With The Stock Market

About a week and a half ago, Walmart announced that they were going to give a raise to their employees. Minimum wage workers would get a raise to $9/hour with plans for future raises later. This is a good thing. It’s a great thing. In general, offering a pay hike to minimum wage worker will pump more money back into the economy. This is the theory behind tax rebates: lower and middle income families will spend the money rather than just sit on it with investments. So how did Wall Street respond?

By beating the snot out of Walmart’s stock. For two days. Shares immediately opened the next day 3% lower and continued to drop throughout the day. The second date, another 1% drop out of the gate. Share prices did recover throughout the day, even closing above the previous day open, but still not back to where they were. And that’s my problem with Wall Street and investing in the market.

Screenshot from Google Finance.
The scale makes the drop look worse that it really is.

Walmart’s profits in 2014 were higher than the GDP of 152 countries. I think it’s ok if they share a little more of that profit with the people that help get them there.

The people who work in the banking and trade world are so disconnected from the reality of people living paycheck to paycheck that the thought of a company that made $129.74 billion in gross profit in the 12 months ending January 31 giving a raise to its lowest paid employees should be punished. I’ll give Walmart credit for taking the lead on this. $1 billion isn’t an insignificant amount of money. And for the people who are going to see those raises, it is going to be a great thing.

Which leads to the answer to the title of this post: The stock market doesn’t take a long view of anything. It’s all about what you can do for me right now, this instant. Any view beyond the next 5 minutes is irrelevant. Part of the reforms that were put in place following the 2008 financial collapse should have addressed that, but they were so gutted that they didn’t stand a chance. I just can’t think like that, I’m not wired to. Which is probably why I don’t work on Wall Street or, outside of my 401K, invest in stocks.

I’ve thought about it. I’d like to. The savings account that we have earns crap for interest and it would nice to put my money to work to earn more rather than just hang out with Wells Fargo. The problem is I don’t know where to invest it. I don’t shop at companies that behave or act in a manner that I don’t agree with and my investing would be no different. Even with companies that do behave well and act in a responsible manner, it’s really hard to join in to an investment system that is hell bent on self-destruction, not unlike an 18 year old at their first frat party kegger.

It would be nice if the people who work the levers of finance could grow up and start to act like the adults that their age would suggest they are. The idea of tying bonuses and pay to future results not just the current quarter is great. I think it’s a start. But it’s going to take people standing up and saying enough and voting with their feet and the wallets to help reform this system. And change is never going to be easy with a group that can lobby so well.

Hopefully we can all start to take a look at the long game and not just focus on what happens in the next hour or the next day. Planning for the future, even far enough out to where you might not be a part of it, isn't a bad thing. And any temporary pain it may cause is just that: temporary. The rewards that you and future generations will get to reap will be amazing.