Investment Banks - Gamblers All


Therefore I’m the worst kind of gambler.

Now, before I get into excessive breast beating and teeth gnashing, let’s face it, EVERYONE WHO “INVESTS” IN STOCKS is gambling. That money you put in General Electric or General Motors or General Mills, etc. does NOT go to those companies. It goes to whoever sold that stock, plus a slice of it goes to the brokerages involved. Typically, not a penny goes to the company on the stock certificate. The companies don’t do more R&D, buy more equipment or hire more people because you “invested” in them.

So you are not investing in American industry, you are just gambling that some other sucker will pay you more for your stock than you paid. Or – more rarely – that the company represented by the stock will dole out some of its profits as dividends to you as a stockholder.

We all believe that buying stock is better than playing roulette because we make more informed bets than “black or red,” etc. And it’s just more respectable than playing the slots, throwin’ dem bones or blacking the Jack. The problem is (as you can tell from my simplistic analysis above), gambling in the stock market is too complex for most non-financial-specialists to even comprehend properly, much less beat the house or do something socially productive with your money in the market. (Options, by the way, and most of the ‘sophisticated financial products’ invented by Wall Street wizards, are even further removed from the companies they pretend to be about. Gambling on gambling, so to speak.)

Actually, all this is to plug this article by Elliot Spitzer, that horny toad of a genius. It’s called:

The Goldman Casino - Do investment banks do anything that helps America anymore?

For the really tough questions we (and our elected representatives) should be asking about our financial mess, read the Spitzer piece. Forget about his peccadilloes and listen to his analysis.

In the meantime, if you want to really invest in American business, find a promising start-up or a struggling local firm and invest or loan directly to the company. Or put your savings in an institution that actually finances businesses.

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