I wish I could find it in my heart to find a little more sympathy for the nation’s shareholders, I really do. But the news that the All Ordinaries has dropped 10% in the past 19 days, thereby officially counting as a “correction”, had a certain bitter irony to it. Because despite all the endless energy pumped into financial reporting, stock analysts and the business media, despite all the incredible intellects that devote themselves to plotting the trajectories of numbers, the sharemarket is, at the end of the day, a casino. No wonder the Packers are good at business.
I’ve seen the ASX trading floor, and it looks a lot like a pokie – it’s noisy and there are lots of flashing lights that record how you’re doing your money. So really, when you take a loss like this, you should be able to double up. Or better yet, win a feature.
Or perhaps a more suitable analogy might be a game of Jenga, where you progressively build it up until it gets too high, and then there’s a “correction”, like the one we’ve just had. Generally involving gravity. This phrase always amuses me as well, because most hardened capitalists like to say the market’s always right. Except for when it’s totally, massively wrong, of course, which is when it “corrects”. Like it was about the US subprime mortgage market.
The market, of course, is nothing more than millions of individual transactions, all mysteriously aggregated. Which is why I also find the capitalist emphasis on individualism so ironic. Because few things, in fact, support the New Age assertion that we’re all connected like financial markets. Why, you may ask, have those who’ve put their savings into shares taken an absolute pounding today? Because American financial institutions issued dodgy loans – in some cases to people without assets, income or employment. “Subprime” really is a euphemism. The best way to describe these high-risk loans, evidently, is the “dodgy”, or perhaps “crappy” mortgage market. With banks playing the role of the loan sharks, now furiously kneecapping those they never should have lent money to in the first place.
Another illustration of the interconnected nature of the global economy came in the form of the Asian financial crisis of a decade ago, when several nations’ economies tanked thanks, in part, to currency speculation. So it may be more accurate to say that we are all, in fact, connected to George Soros.
I’m not especially gritting my teeth today, because, ladies and gentlemen, I don’t own a single share. (Yes, you’d think they’d reward consistently superb writing like this with a parcel of Fairfax securities, but it seems they don’t know their luck.) I started a CommSec account once, when I had a bit of cash but didn’t actually get around to buying anything. Well, any shares, anyway – I did buy a Playstation 2. It all seemed too hard, and really, I had no idea what to buy. The only smart investment decision I ever made was not to touch Telstra with a ten-foot barge pole, although that was more motivated by lifelong resentment than financial sagacity.
Which makes me think that if I want to build wealth, I should seriously consider becoming a professional blackjack player rather than buying shares. At least I kind of understand the rules.
Housing’s good too, of course. At the risk of making a bad pun, it has a wonderfully concrete quality. It can crash, albeit not so regularly, but compared with share certificates, it has the wonderful quality of keeping away rain and cold. And sure, I know that over time, the stock market has accumulated more quickly than housing. But so it should – it’s far more nebulous, and far more prone to “corrections”.
But despite my total non-participation in the share market, I’ll feel it. We all will, whether though rising rents or mortgage interest rates. Because we’re all connected to each other through the inextricable web of capitalism.
So, the foolish risk-taking of American banks will affect all of us to some degree. Much as we all have to pay for a costly war through our taxes because of the foolish risk-taking of George Bush. And I resent that. We shouldn’t have to pay more rent or repayments in Sydney because overpaid analysts stuffed up at Bear Sterns in New York. As with Iraq, the foolish optimism of Americans ultimately affects everyone. In fact, I’ve a good mind to choreograph a controversial Rock Eisteddfod piece about the subprime lending market. And I don’t care if the President’ll be here or not.