Don't know where Wolf is getting his data from but there are plenty of Americans with 100k or more in their 401k. Article is as disingenuous as they come.
15
The last time the stock market crashed, I lost my job because my employer figured that the economy would have a downturn. Crashes affect people other than investors.
This time my job isn't in danger because I've taken early retirement and gotten out of the rat race.
8
As I glance at the comments, I see a lot of cynicism but no one seems to grasp that this piece is about the ups and downs normal to security markets and the realistic effect on most people. The decade-long recovery from the financial recession was not normal. The average person is not really getting the short end now because 1) most stocks are not held by them and 2) it's only a correction for a market that since at least January has increased in value for no good reason. The market will now be more volatile, which is actually normal. The effect on most people...not much. The problem here is with some readers, not the author.
Eclectic Pragmatism — http://eclectic-pragmatist.tumblr.com/
Eclectic Pragmatist — https://medium.com/eclectic-pragmatism
6
Here was my experience: daily stock market ups and downs only hurt or help short term traders--- who are essentially casino gamblers and depend on computer algorithms to do their dirty work---serious problems, like the financial crash of 2008 hurt everyone. My house value plummeted after that crash, and it took me years to recoup its value enough to sell it just to break even. My one meager attempt at buying stocks for the longer haul went belly up, as I saw their value fall, even as Morgan Stanley's charges ate up whatever tiny profit I could make. I decided to cut my losses and cash them in.
Alas the lesson at the time for me was that “stock market investment” seemed to require more knowledge than I had or wanted to acquire, and my investment “advisor” eventually moved out of town leaving me without an sense of what I was supposed to be doing. I never tried again because I couldn't afford to risk what little money I had left. I concluded that it was a fun game for knowledgeable risk takers, but not useful for regular folks who just wanted a return on their investment. Back in the 90s when I had the choice between a state-funded retirement system and TIAA-CREF, I chose the former because I distrusted the market at that point. Now in my 70s, I may have made the wrong choice, but at least I don't stress over the market's “corrections”. For the bigger picture, I just hope that the greed that always runs the market doesn't create another crash before I die.
3
Every state has a pension fund that pays for the retirements of its public employees - the teachers, police, firefighters and so forth.
And when those pension funds aren't doing well enough to pay what they've committed to their retirees, guess who makes up the difference?
(hello there, Illinois and New Jersey - this is of particular interest to you)
Everybody, whether they're in the stock market or not.
8
So who pays 90 percent of the total tax revenues? Probably the same 10 percent that has 84% of the stocks. So on the one hand your pointing out the largest percentage of America has no presence in the market. But your going to ignore the fact 90 percent of the population makes a negligible contribution to tax revenues.
9
I suspect that the 10% cheats on their taxes, by hiding their money abroad and other tricks. It's widely speculated that Trump pays few taxes and that's why he refuses to release his records. If nothing else works, they bribe their Congressman to lower their tax rates.
I'm in the 90% and "contribute" to tax revenues, and don't consider it negligible.
7
It has always interested me that the people holding a big stake in stock markets seem
to panic at the threat of working class wages going up. If you're a middle-class worker and you invest in the stock market you're betting against yourself. As luck would have it I'm about to receive an inheritance shortly, not huge but enough for me to fully retire. Whatever I do to conserve it, it won't be any big investment in the stock market. I know some people who think I'm naive, or backward because of this stance, but I won't be sweating over what happens to the stock market. Course I do have social security now, and what I'm really sweating over is Paul Ryan's plan to destroy Social Security as we know it because Wall Street wants that pot of money. What I will do if that happens in my lifetime I do not know, but I sure will do everything I can to avoid playing the roulette wheel of the stock market.
6
This is encouraging -- not the facts being reported, but the fact that these facts are actually being reported. For years it was difficult to answer simple questions about the distribution of wealth in the USA. Questions like 'What portion of shares are held by middle class Americans?' Not only has work been done to answer such questions, but the answers are now available on the front page of the NY Times.
It is also worthwhile to reflect that the latest sell-off was prompted, inter alia, by news about rising wages for ordinary people. The share-holding class obviously thought this was BAD NEWS from their point of view. What better sums up the essential antagonism between people who really work for a living and people who make the bulk of their money simply by virtue of having money in the first place? What is good for Wall Street is, at best, *irrelevant* to most of America. At worst, what's good for Wall Street is *bad* for most Americans.
6
Doesn't encourage me much. The gini index is significantly increased since the glory days of the 50's, with "living wages" paid to folks with HS diplomas. Yet we hear next to nothing about it, and rather than blame a maldistribution of income for stagnated incomes, we blame an offshore g of jobs. A ridiculous target, when the US GDP is nearly 25% of the planetary income, for what, 7% of the planetary population. The wrath of the many may be justified, but it is grossly misdirected - to the great relief of the fabled 1%, I'm sure.
1
Almost all of us have a stake in the stock market. When I read an article like this, my first guess is that the author was an English major who didn't understand math or economics, and certainly doesn't understand how to analyze data. I hope I'm wrong.
9
It reminds me of a set of interviews I read in the Times a few months ago, saying they thought the 90% don't have a lot of money because they can't manage their spending well. ( Of course the 10% all have financial advisers to do their planning for them). It's called living in a bubble.
2
Please don't disparage English majors. This piece is nonsense to this one since many larger organizations, like hospitals, universities (the largest employers here) offer matching retirements funds through their chosen Market investment firms. I have to take issue with her numbers. English majors have to cite their sources.
1
"President Trump asked, “How’s your 401(k) doing?” I wonder how the 401(k)'s of Trump's foreign workers at all his golf resorts are doing. I am sure he gets one for each employee.
5
Income? No. Not much impact on average.
Wealth? No. Not for liquid assets.
Retirement? Yes, as there is much of private retirement funds invested in stocks and bonds.
Money for the last 10-20 years of your life are kinda important, but not reflected in income, working money or wealth.
4
I'm so far from the upper 10% that I'm almost in a different universe. And, unemployed, I'm living off my retirement savings while waiting until I can collect Social Security. This correction has already taken a huge chunk of my savings, and I'm at an age where I'm unlikely to be able to replace it. The economy may be strong, but don't think the stock market isn't affecting ordinary, low-income, older citizens. We're among the most vulnerable to its fluctuations.
21
Yeah, but EVERY pension, both the government-based social security money and any company or workplace pension you might have, is invested in the stock mrket.
In the long term, the up and down fluctuations don't mean a lot to those pension funds, because as long as what goes down comes back up at some point, you *should* be OK as long as the money is conservatively invested.
But, let's say that you have a pension fund from the place you used to work at ... and that company is now a bit wobbly financially ... if the amount in the pension fund drops because of the market drops and if that drop is sustained for a while, then suddenly, your pension is "underfunded," that is, it doesn't have enough money to pay people out and if the company that you worked for goes under, your pension income will drop.
So it is a little bit misleading to argue that regular people are not affected by the stock markets.
10
You are wrong Wendy Social Security by law can only invest their excess in Treasuries.
1
Most of Social Security's intake is simply transferred to current recipients, not invested. I've heard it called a giant Ponzi scheme.
1
I'm a middle-class person hoping to retire in a couple of years.
My retirement accounts lost $25,000 during this recent crash.
So, this is not just an issue for wealthy stockholders.
It's also for those of us who have been frugal while working in hope of having a more comfortable retirement.
11
These market swings dramatically affect many of those over 70. Since defined benefit pensions have been, in most cases, replaced by defined contribution accounts (401K), once an individual is over 70 they MUST take a withdrawal each year. It doesn't matter whether the account is up or down, the rules are that a required minimum withdrawal must be made. This gives that individual little choice but to take the money out when the market is down (worst possible situation). Not only have you lost the gains that went away with the drop, but what's left earns less as well. This is a double penalty for those counting on a reasonable retirement. So to say that the market doesn't affect a large portion of the populace, as this author contends, is simply FALSE.
14
You are required to take the money out of your retirement account. You aren't required to spend it. You can easily re-invest it in a taxable account.
5
I remember that after the 2008 crash, TIME magazine wrote an article analyzing 401K plans and concluding that they do not work well as retirement investments -- too much danger of losing a lot of money at once. But people are still encouraged to use them. Why?
4
By limiting focus on share ownership, one fails to see how the majority are affected by the stock market. Everyone has a stake, almost no one has a voice (something entitled to shareholders and even there is essentially non-existent except for the very, very few large shareholders).
The stock market is legalised gambling where the profits are privatised but the losses are socialised (as we have seen in every crash since 1901, 1907, 1929, 1937, 1987, 1990, 2000, 2007, 2010, 2015, and 2018). It is these losses that we have a 'stake' in, not the profits which is I think where the writer was coming from. But unfortunately that is part of the illusion, the trick, and the intended focus of Wall Street is to focus on the profits and not draw attention to the losses in investment in local communities, the investment in long term strategies, the investment in the betterment of humanity rather than the quarterly returns of maximising profit.
The fixation on Wall Street and the markets is an illness, it is the blinders we put on to not see the greater economy and it hides the unnecessary suffering of most for the benefit of the very few.
We may not have an ownership stake in the Stock Market, but we have a consequential stake just like other victims of gambling; it isn't the gambler, but rather the family that suffers.
7
The market's current unrest is one of the strongest arguments against the privatization of programs such as Social Security, which would benefit mostly the banks, funds and other entities involved in the trading of stocks, in addition to making the market's current bumptious behavior look like day in the park.
9
The feel of this piece is dismissive. No, of course most people don't have alot of money to put into equities. But most people who have any retirement savings whatsoever (and these same business pages are constantly telling people to save enormous percentages of their take-home pay if they want to postpone starving on the streets in their later years, no?) have at least some in equities, in IRA or 401 K or 457 mutual funds. It may be meager amounts to those who are raking in the bucks and those who are writing about it for the media, but actually, losing a third of one's retirement account, which is what happened when the great recession hit, is a substantial amount of money for the people to whom it belongs. If you only have 50K in retirement savings, losing 10 is a very big deal. Even 5. At least for us "little people."
18
I just checked and my 401K is down $11,000 in the past few days. Sure, the experts say to pay attention to long-term gains, not short-term losses. But when the gains start, it will be with at least $11K less as a base. Perhaps this is the "relatively little effect" Mr. Wolff is describing. Luckily, I'm not retiring tomorrow.
The biggest swindle I've seen in my lifetime is the changeover from pensions to 401Ks. Employer matching, they said! My employer stopped matching in 2009 and has not matched since. So I've effectively been forced into a system where my retirement savings are invested in a mediocre, under-performing mutual fund. And like everyone else, I lost a lot more than $10K after the 2008 financial crash, on top of negative % or paltry returns for years after. "Legalised gambling where the profits are privatised but the losses are socialized" indeed.
9
The article is deceptive (deliberately?). The soft-pedaled fact buried in the article (as it is stated by opposite) is that fully 50% of Americans are invested in the stockmarket, mostly through 401Ks. Saying "10% of people own 84% of the stock wealth" is just socialist envy politics.
8
Though usb peons don’t have massive amounts in stocks/ mutual funds does not mean that the affects of the current market will not impact our cash flow.
8
Good thing the Republicans were able to get their tax package passed to give money to the wealthy. Hopefully the reduction in taxes will help offset their losses in the market.
6
How can one argue that we don't all have a stake in the stock market when companies are apt to layoff workers when the market plummets and ask the public (the vast majority without any holdings in the stock market) to pay for bailouts of poorly managed publicly traded companies and risky (some would argue fraudulent) investments when things turn south. Does anyone remember 2008?
22
Does anyone remember the 1980s, when the stock market steadily climbed as profits increased, mergers and acquisitions created giats, and the manufacturing workers of the country were decimated with layoffs? Shoot, they don't hire and fire according to the stock market. They do anything to increase shareholder profits, and they've shown a willingness to put thousands of people out of work to do so, not to mention putting customers and communities at risk by pushing deregulation and degrading the environment.
10
how many companies stocks rally at the news of big layoffs ..whats good for wall st is not always good for americans
2
Over the years, managers at large and midsize companies had a very difficult time convincing non-exempt and hourly employees to invest a part of their earnings in 401(k) plans. Basically, there was a lack of trust in management. No matter how many times it was said that the 401(k) funds were held outside of the employer's accounts, many were non-believers. However, that war was won long time ago.
Basically, the only way that the author's and Wolff's analysis could be correct is that most everyone's 401(k), I.R.A., and retirement accounts are 100% loaded with no-risk guaranteed investment accounts, bonds, and certificates of deposit. What happened to 'targeted retirement funds' as one of the safest saving options, which contain large amounts of stocks in the early years?
Gut feel says that the quoted data is either wrong, or has been misinterpreted.
10
No offense but I think it's you that's misinterpreting the article.
Add up all the little guys with $20,000 or $100,000 or $500,000 in the stock market, and it doesn't amount to a hill of beans compared to a handful of individuals who own $20 billion.
3
My 401k was held by a trustworthy institution outside my workplace. I wouldnt ihave invested if it had been company 401k. Relatives I know took their money out in the 90s because of the downturn of the eighties. They lost their tax exemption and left their account barren. I left mine in and it has increased greatly.
2
So the full faith, force, integrity and investigation resources behind this article say 84 percent of America are not effected but your “gut” tells you otherwise and you think you should share this publicly? Thanks
1
Every pension fund depends on the market.
23
Your own graph shows almost 45% of households have indirect exposure to pension funds, which you then dismiss as inconsequential because most of that wealth, in absolute terms, is earmarked to the top 10% of Americans.
The author is missing two things here. First, the wealth disparity in America is now *SO* great that there is literally no statistic that will ever show the rest of America owning more than a smidgen of it. Regardless of how much absolute wealth a person has, any significant hit in percentage terms is going to hurt and force people (the 90%) to pull-back on spending. The cash flow from the 90% is enormous, and you didn't cover that at all. This is what recessions are made of.
This leads us to the second problem... To a lay-person... to someone in that 'bottom 90%' (or at least the ~45% of Americans with pension fund exposure), policies across America have willfully neglected funding pension funds for decades now. But when the 2008 crash occurred, the low-hanging fruit that states, counties, and cities could pick to shore up other services were their pension fund payments. They got behind. Way, way behind. Today, in 2018, THEY STILL HAVE NOT RECOVERED FROM THAT. The burden has become so enormous that the cost of recovering pension funding is now beyond the capabilities of probably half the states in America. It's basic math. Now throw in a market crash, what do you get?
Yes, the markets do matter. A lot.
-Matt
44
Well said. Wait until state and local governments need to fund their pension promises, and that funding obligation crowds out spending on services for the poor. Then we'll see how even the poor depend on the stock market, indirectly, for their well being.
12
Nice.....
3
In a real free market, not one in which the fed picks winners and losers, the market would not matter to pension funds, they could keep their funds in Government products like T Bills, and their contributions realistic, rather than getting involved with Wall Street who is usually the only winner.
As far as I can see, the stock market is undergoing a correction after investors overbought earlier this year. It's nothing to be dismayed about in the long run. But to say we don't all have a stake in the stock market is a bit silly. If my employer -- a publicly held company -- is forced into foreclosure because of a stock crash, I will be affected regardless of whether I personally own stock or not.
Our fortunes rise and fall together.
32
Couldn't agree more. Much of what I've been able to accomplish in life is due to the stock market and I'm not talking buying a second or third house but practical stuff that enabled me to employ people. Investing has a ripple effect. -- thegamesmenplay.com
10
Every citizen indirectly has an interest in the stock market. Every public pension is invested in the stock market. Good returns reduce the future required contributions. Since most major cities and public plans are dramatically underfunded, those plans need all the help they can get. Pull your heads out of the sand.
21
CLEARLY Wealth comes from saving green stamps. Not stock ownership.
7
Right because the little guys are never hurt by market problems. Nope. Us little guys are always looked after when big concerns loose money. No layoffs, nothing bad ever happens to the lowly workers...
The other thing that bothers me about this article, those like them, and the commentaries on TV, etc...its just more evidence of how wealth is purposely shoved to the top, and that us little guys should just shut up and let the Big Players play. Let them romp and knock things over so eventually we have to suffer the biggest hurts. And when it all falls down, they make even more because they bet on the falls too...so who cares? Not the Big Players.
Hey you avg. working jerks, dont pay attention to the more important American Royalty while they muck things up. You're not worthy of such stature, and no one cares about your puny savings, 401Ks, and maybe those dozen shares of your employers stock you managed to buy on those measly wages. Go back to work, and maybe youll get to keep your job!
17
It's not my fault. my IRA pension money is in mutual funds and it sits there year after year, hopefully appreciating until I need to start drawing out some $$ a few years down the road. There are millions of very small investors like me who do not go in and out of the market every day to buy and sell. That's for the big boys, the institutions. So who is manipulating the market this week? Who/what is causing the extreme volatility? It's not me. I feel like I am being manipulated by forces beyond my control. Does the SEC have anything to say about computer trading and its artificial effects? This is no longer about buying and selling stock, this is about moving decimal points a couple of places. Seems I should be in another market for humans only.
17
The only winning strategy for the middle class is to invest steadily in a low-cost total market index fund, then after many years withdraw the money a little at a time.
13
Isn't investing in real estate deals rather than stocks, then declaring bankruptcy multiple times, the path to personal wealth -- or the White House? Or perhaps obtaining a seat at the feeding trough of Congress via the largess of lobbyists for special-interest groups? How about algorithms now controlling markets? AI stock traders and government traitors -- what could go wrong?
11
Nah, it's politics. Trump started with a lot of money from Dad. Hilary, on the other hand, got rich as a politician.
No, it's not "whataboutism", it's calling out the hypocrisy in our party elite.
1
That is still a very large voting block of Americans who do hold stocks in pension funds and may vote against a party in office, when they see the retirement plan shrinking after it finally showed some real gains.
6
Most people would benefit more from wage increases than stock market increases.
And yet, when wages rise, the stock market falls.
1
I'm content to know a good drubbing in the stock market eases the vast economic inequality that harms our society. I mean, really, who cares if the stock market plunges, a few top percent of the wealthiest families? It's their casino. To a very important degree, it's only newsworthy because it's happening to the wealthiest. When something happens to the poor, no one cares.
3
Stay classy. Not every one in the market is ultra wealthy, but I know you have to stick to the narrative in your head.
4
That's right. That's why the wealthy will take what they can and now pay a lot less taxes on their gains, whatever they are. That's why this is not a correction it will be a return to less than 20,000, the starting point where the wealthy took advantage of the change in the tax laws. Just sayin'.
Gosh, did the capital gains rate decrease? I missed that.
I'm amazed by the comments on here. It sounds like people only read the headline before commenting.
"I'm not rich and I own stock". Yeah, so what? The article clearly states that a majority is owned by wealthy people - not that ONLY wealthy people own stock.
"What about pensions?" Yeah, what about them? Again, clearly mentioned in the article. This is exactly why this needed to be written since clearly people only see a headline, e.g., "stocks plummet" and then jump to all kinds of conclusions.
4
Yes but small investors get in to the market too late.
They know to buy stocks low and sell high, but view mutual funds as savings accounts, moving assets into these funds when the return is positive and out when the market declines.
So they end up buying high and selling low.
Perhaps we need Glass-Steagall back. There is a difference between savings and investing.
3
I predicted this fall way back when the new tax plan was proposed and the stock market started to rise. Those with expendable, investable, savings or income invested their money in a rising market in anticipation of lower taxes on any gains especially in anticipation of the new tax law. Once the law was passed they would dump their holdings as soon as as the market showed any signs of turning and things like bonds showed a better or safer return. Anyone who bought rising stocks before the new law has an incentive to sell before the value gets too close to their initial investment. Anyone who stays will be left "holding the [empty] bag". And anyone who sells will pay the new lower gains rate so they have every incentive to sell, quickly!
1
People must keep in mind that logarithmic factors are set to dampen this market that equates to being unethical but are working to pressure things downward; just consider: Do we have great inflation? Are bond interest rates inflated like they where were in the early '80s, like 16 percent? Are wages really growing that fast? This current downward draft is not based on fundamentals--so think who benefits from it? Think about that, and get back to me. Think about what's truly changed in the world economy since last year? The fact that emerging markets got sort of hit is a laugh as well. So as our leader would say: "a rigged" system. Too bad, it seemed to being doing so well.
3
Ray Boshara is quote as saying “It’s too bad such a small percentage of the population has any real or meaningful ownership stake in equities, given their historic and current growth." Most people I know don't earn nearly enough from their full-time jobs to even begin to save for retirement. That's what's really too bad. I don't know a single person who has money to put in a 401(k). Give me a break!
2
There are exceptions like Berkshire Hathaway, Costco and American Express etc.
Companies that act for long term interest of their shareholder.
4
Well, I can't help but observing that significant declines in the stock market presage economic recessions. That was certainly the case in 2007.
That said, I don't panic about the index funds I've established for my retirement when the market goes south. However, I feel kind of panicky about the security of the income streams that provide me with a living in the present day. I suspect that many Americans feel the same way.
We are very wary of this "economic recovery" as most middle class Americans are teetering on the edge of insolvency even now, and our federal lawmakers seem hellbent on demolishing the safety nets that will prevent us from living on the street when the next recession hits.
4
I'm with Michelle Singletary - stocks are on sale - why wouldn't you buy some?
If you liked a stock yesterday at $100 per share, why wouldn't like it today at $90 per share.
The economy is strong and corporate profits are increasing - corporate profits determine the value of stocks in the long run, not the day to day fluctuations in the stock market.
If you are going to be invested for 5 years, you are almost guaranteed to make a profit.
We teach too little about personal finance in our schools. Back in the 1950's a math teacher introduced our 7th grade class to stocks and it has stuck with me ever since - even when I did not have money to invest in stocks.
10
If you were someone already invested and you're now watching the market head down, with what money are you doing that buying? The little guy never sells at the high and buys at the low.
Dollar cost average? Pay yourself first with automatic deduction? Company match? Most everyone I know grew up in post-WW2 family life with emphasis on saving money, above all other financial priorities. We think we need all the things we now spend money on first, like big cable bills, big data plans, granite kitchens, new model cars, dinner on the go, soccer camps, hair&nails, 3 kids in music lessons etc. Then we say we can't afford to save fo retirement?
Dear NYT,
Just give me the facts please. Be specific too. What are the reasons the market is in decline at this point? How can the previous gains be restored? Are you the oracle you claim to be and can you produce a truly informative article concerning the stock market? This is your challenge.
6
Dear Cathy,
I have no idea what your comment has to do with the article.
Trump voter don't know; Trump voter don't care. Trump voter don't own no stock.
7
Yeah, all that misery, foreclosure, homeless camps and 18% Unemployment that happened after the crash of 2008 was just a mirage right?
13
Many Americans, especially the Cult of Trump, seem to be just as greedy, gullible and stupid as they ever were. They believed the lies and drank the KoolAid. The temporary pennies they receive from the tax bill, for which THEY and their children will pay, as the rich get richer, are meaningless. The promises and fake self-praise for the rise of the Market are finally showing their true colors. Here go the 401K and retirement plans. If you think WE are going to bail you out this time, you had better think again.
5
Trump followers are not members of a cult. They are just the opposite of your cult. The cult of sanctimony.
1
"It's a racket," he said. "Those stock market guys are crooked."
Al Capone
Those words are just as true now as they were then.
6
My Jewish friends in Manhattan used to tell me that The 80% saves while The 20 % invests, as in "Jesus Saves but Moses Invests." Come on people, It is common knowledge that investing your savings is the ONLY way to MAKE money. Good-bye Wells Fargo and Hello Vanguard, etc.
13
The are other companies like Schwab that actually do a better job than Vanguard and their returns are better.
4
Where is Richard Wolff when you need him?
1
You may have no money in the market but if the stock of the company you work for tanks there's a chance you may too. I am working class and have a 401K invested in a aggressive strategy of stock indexes. I've done really well over the last twelve months so if there's an adjustment well I'm still well ahead. Wall Street is still the steadiest investment over time.
11
Scrumper, I’m with you. People who have 401ks and pension benefits need to realize that the stock market is how their money is invested. Universities and other non-profits also have stock market investments. My 401k has gone way up and then back down but I’m leaving my investments alone just as I have for the past 40 years because over the years I have had a positive return on mu investment. Stay in for the long haul.
6
...until you need to cash in. Timing is everything!
3
I do have to cash in a portion every year but it has always been replaced by interest accrued before I had to withdraw again. It’s not my only source of income, which helps.
2
When the stock market goes up the rich, and only the rich get richer. When the stock market goes down it hurts the poor only. The wealth have special, sophisticated investment products to allow them to win whether the market goes up or down. If the market is going down they short all their positions. They have the inside information not available to the common man or woman.
But when the market goes down sadistic republicans enact policies to punish the poor—they do it just to please their rich masters.
2
Fred, you seem to live is some alternative universe which is out to get you. I would assume you're also a staunch opponent of the Trilateral Commission and a firm believer in a second shooter in Dallas. Oh, if only the"rich" were as secretly connected as you seem to believe.
5
Bravo, James. My thoughts exactly. There is no conspiracy with either the market or assassination. People who espouse such views have way too much time on their hands.
4
I'm somewhat in your cup, but, as Warren Buffett once said when asked why he does so well: "I just guess better than they do". Many fortunes have been lost by the greedy, and few LEGAL secrets (except those hidden in the new tax codes) tip the scales. There are always the con artists and crooks like Trump that act "above the law" until, hopefully, they are caught. Bernie Madoff may be in jail, but his wife is not suffering.
This is misleading. While many do not directly own stocks or even have a 401k or pension nowadays, we all do have a stake in the market in one way or another. If you own a home or rent an apartment, it might be part of the same system of financial products. Even if you do not have any connection at all to the financial markets (you probably live in a trailer in the desert too), your life is impacted by how the market functions for those in it. Cost of food, goods, property, healthcare, etc. are all going to impact everyone.
If a company cannot get loans, has lost value, and is loosing money, it can't do as much as a healthy, well run company.
This is my argument as to why *all*people, even poor people and anyone at any age (well, first job or 16 onward), should invest money in something like a low cost IRA or other reputable form of investment and a savings account or CDs as part of any kind of safety net and retirement fund. Start small. $50 a month (but there my be lower options). Keep it simple. Keep it low cost. Make it automatic. You won't miss it! In your later years, you will be glad you saved anything at all!
8
Good for you - wise advice. It's nice to see someone not grinding an axe, but helping.
2
I am in a low cost IRA and my paper worth has diminshed by $10,000 this week--what is your advice for me? as an elderly person I may not live long enough for the market to come back.
1
Noni - we share a boat. The higher the returns, the higher the risk. I intend to ride this out and, quite soon, see my equity values rise again. It's nauseating to watch this roller-coaster. I would wait a bit to withdraw this year's required distribution (it's based upon 12/31/17 values, which were really high) until your IRA balance picks up some value. Withdrawing the money prematurely gives you less of a basis with which to gain value.
1
"Unemployment is near record lows, total output is rising at a faster rate, bond yields are up, oil prices have increased, and consumer and business confidence remain high. Every major economy around the world is growing in concert, simultaneously propelling and reinforcing a positive cycle."
And not a single breath about America's income disparity, the single greatest predictor of a nation's well-being.
7
Try running that tale by retirees who have reached age 70 and must, by law, take required minimum distributions from their IRAs or other tax-advantaged accounts whether they want to or not. For people who are in their early retirement years and need to have their saving last for perhaps decades to come, taking an RMD from an account already depleted by a severe market downturn can have a crippling impact on their income stream that will last the rest of their lives. These is especially true for those of modest means.
10
You are kidding, right Ms. Cohen? You are actually trying to tell us that the International Mafia Robber Barons who control half the wealth of the world - starting with the craps tables called "markets' - don't have any affect on the rest of us?
Do you think we were born yesterday? Do you watch fox so-called news and think we're all stupid enough to believe them?
You are wrong. WE THE PEOPLE get it now and WE will take whatever action is necessary to tax back all the stolen wealth the Robber Barons think they control and put OUR United States of America back together after the 40+ year agenda to try to destroy us.
This Will Not Stand in OUR United States of America. Not now. Not ever again.
5
This way too simple.
Most of the wealth in this country is owned by a small percentage at and near the top levels - and it is gotten worse and will get worse yet. Obviously that includes an outsize share of the stock and bond markets.
No people should go around crying the sky is falling.
But market changes affect state and municipality budgets via the impact on retirement plans - how much they have to contribute up front and on an ongoing basis. That affects taxes; that affects expenditures - programs and services.
It would have an impact on private companies which still provide pension plans.
Found a reference that said there was $ 5.3 trillion in 401K plans as of Sept. 2017; at least 13% had over $300,000. on the flip side 63% of women -- and 52%% of mend - had $10,000 or less.
When I was in my 20's I didn't know anything about investing, and like today's millennials, had little savings and wasn't troubled by the stock market ( during the time of stagflation). Changes since then have made investing accessible - cheap, and simple, retirement investing was drastically altered by the introductions of IRAs to encourage people to save in a way that over the years, returns more than inflation will take away.
What would be an improvement is if more Americans had sufficient income to invest so that they could build assets for their retirement years.
The fact that market fluctuations have little effect on wealth for most Americans is not good news at all.
4
So true, but "would" and "could" are rational terms. Most people choose to spend and deny when they have excess cash. If SS were not available, there would be colonies elderly living, and dying, in tents on every street. Just ONE reason we need competent governance, one of many. Consider healthcare...
1
In our consumerist society, most Americans choose to 'buy' stuff rather than 'invest'.
Throw in some 'debt' and most Americans are paying off credit cards rather than saving.
When you consider that over a third of Americans over 55 have saving zero for retirement, you begin to get the picture.
The writer makes it seem it is a game just for the wealthy. In fact, we need more Americans to have savings (and investments) to ensure they can afford to retire. Our 'consumerist culture' is partly to blame for this problem. Don't blame the people that do save for a rainy day....
6
Much of that "stuff" is medical and educational in nature. For instance, I went in for my six-month dental exam and need to return to fix a broken crown which resulted in a cavity. That's $500. And I'm lucky enough to have insurance. Otherwise, the cost would have been over $1,5k. That's a minor expense compared to the cost of cancer treatments, Alzheimer's, diabetes, injuries from accidents etc.
And how is less spending going to help? That's all our economy is based on any more. Why do you think there was such an outcry when that lunatic Suze Orman said people should stop going out to eat? What do you suggest all of the retail and service industry workers do for money when people stop eating out and spending? And don't say they should get a different job. What would you have them do? You need to fundamentally change the economy before you tell people not to spend money.
I’ve never owned a single stock/I hope Wall Street goes under/I’d never trust a bizness that/relies so much on plunder.
3
Capitalism does not necessitate inequity or greed - those are human attributes. Owning parts of successful, ETHICAL companies, who provide employment for millions, is honorable, and stockholders GET TO VOTE. I would only hope they vote for better alternatives than Trump.
3
A huge part of the problem that isn't being discussed other than on CNBC is the role the volatility index ETFs have played in these panic moves and speculation on interest rates. When a financial instrument loses literally 80% or more of its value in 10 minutes i.e. XIV, resulting in the instrument or its fund being liquidated a.k.a. closed down, you know there are problems and that the market is getting way way way way away from the fundamentals.
3
Take a deep breath and relax that most Americans have no ownership stake in the firms that own, build and shape nearly every vital aspect of our lives.
9
The current market correction should be a worry for the broader economy since it is linked to rising interest rates, which ultimately choke off purchases of major capital items such as housing, cars, and appliances. It should also be noted that this market decline comes at a time when US economic policies are in disarray, with a trade war looming with China and uncertainty over NAFTA. Given this environment, it wouldn't take much to push the markets much lower leading to a recession.
5
I dunno about this analysis. I'm not in the top 10% of the wealthy by any means, but I've always had tens of thousands in the stock market, generally mutual funds, and now thanks to an inheritance it's hundreds of thousands. I'm not complaining, for sure, but a massive drop in the stock market would definitely affect me. And, even in my 20's whatever savings I had were put into mutual funds, so it would have affected a younger, poorer me as well.
And there are secondary effects to consider too. If the stock market drops and keeps dropping, won't major corporations, which also have a lot of money in the market, start curtailing their spending? I'd think they'd be hiring fewer people, giving out less raises, and so on, and thus affecting the wealth of plenty of people who may not be investing in stocks directly.
Nonetheless, I don't think the recent ups and downs are anything to worry about for most people. Seems to me that within a year, the Dow Jones (or Trump's preferred "Do Joans") will be up above where it was before the sell-off a few days ago. All most people have to do is hang in there, maybe invest a bit more when the index drops further.
4
If you inherited hundreds of thousands of dollars, you are absolutely in the top 10% of wealth in America.
1
Dear Capt. Oblivious,
Actually no, the top 10% currently means having over $1,182,390.36, and I'm not quite there yet. Thanks for getting me to look this up though, turns out the top 1% is over $10,374,030.10, which is lower than I thought.
The stock market is demonstrating the lack of faith we have in our country's leadership. Of course it's going to crash.
2
And, this is exactly what the left is hoping for, consequences for the middle class be damned.
5
Unwise words from a divisive Republican, and untrue. Your "left" just fought for DACA rights - and DACA children can't vote, so it's not a political power play. Look at the issues and Republican partisan turmoil objectively, and perhaps re-evaluate your stance.
3
I remember the good ol' days when politicians preached strength for Main Street not Wall Street.
The only thing a strong stock market does is to improve--temporarily--our global standing, which is ironic when we consider MAGA's promise and duplicitous rhetoric.
4
This is really a weird silver lining to put on the fact that most of the wealth in this country is concentrated in the hands of a few. "Feel better, the stock market won't affect you because you have no assets anyway."
16
To paraphrase J.K. Galbraith, there are two kinds of economists: those who don't know the future and those who don't know they don't know.
To all those readers (and others) who are moaning and groaning about the markets losing around 10% in the last few days -- admittedly a non-trivial amount -- where were your complaints last year, when the markets were up around 30%?
Long-term investors are not forced to sell at a particular moment; short-term investors should be aware, as many have pointed out, that they're playing in a casino.
8
That's why we call long-term strategies "investing", and short-term ones "trading". One does the same with the latter in Vegas.
3
Well, this writer did not take into account the emotional impact of drops. This kind of drop creates fear, fear creates hoarding, hoarding creates fear, people don't buy that car, they don't go to Miami Beach, they sit and wait.. even people who don't invest in the stock market are affected, yes it's a buy now it's cheap time, but many people are fearful, what if it's a falling knife? This guy is out of touch with the regular American.
5
This is such an incredibly misleading article. Notice how there is no mention whatsoever about the pension funds for teachers, firefighters, cops, and sanitation workers, that are invested in the market. If the market truly tanks, the American taxpayer is on the hook for paying out the difference of the pensions that are not funded by positive market returns.
Furthermore, the if the stock of specific company starts dropping precipitously, that company may very well decide to start laying off employees. Even such employees own no stock, such layoffs would certainly affect them.
My father is a retired NYC cab driver who never owned a share of any stock in his life. He mentioned that in the 80s, business was good for him. After Black Monday in 1987, he noticed a drop in his business revenue.
I am not certain what the point of this article is. But, it is definitely both silly and misleading.
27
Agreed. By utilizing the chimera of statistics, the writer attempts to convince the holders of 401k and 403b accounts that we're really not affected by the market downturn because the 1-percenters own most of the stock anyway. These accounts are very important to average working people! Sometimes NY Times writers are so out of touch.
6
Rich people have 401k's too.
Anyone who justifies stock ownership with nothing more than: "they've done well over the years" is missing the point. Ownership is how wealth is built, and is the foundation of capitalism. Returns to ownership are more variable, and therefore less predictable than interest earned from lending, but they ARE ALWAYS GREATER over time. Otherwise, no one would take the risk of going into business. Wall Street glosses over this very basic fact with all sorts of jargon and the "game" of investing, but it is THE MOST BASIC fact about money. Forget it at your peril - it will cause you to do something stupid with your portfolio at exactly the wrong time.
9
This article is terribly shortsighted. Every single payer of state and local taxes is very much invested in the stock market. If the promises made by state and local governements to public sector employees in the form of pensions cannot be met because their investments do not perform, then taxes will rise. Federal bailouts aren’t out of the question either if history is any guide. The reality is that we all need and benefit from growth.
10
So we're just all mostly voyeurs standing around the craps tables watching a few high rollers going wild and crazy? What a stupid waste of time. But please don't hesitate across the front page to make it sound as if the sky has just fallen. Someone must be buying you a lot of free drinks to make themselves feel important.
2
Direct ownership is only one facet. This column is too simple minded considering the interlinking world of finance and real economy.
People thinking of putting the global genie back in the bottle is greatly mistaken. Remember the precipitating factor of the Great Recession is the CDO and CDS, financial instruments Main Street never heard of. Even people who dabbled in the stock market didn't know what Ted Spread is until it was too late to run for cover.
Another example is Long Term Capital Management, run by a couple of Nobel winners. Its collapse heralded in the (financial) Asian Flu back in the early 1990s.
So, don't be too certain the stock market is an independent entity even though Main Street and Wall Street don't have an one to one relationship. Instead, be wary about the decimation of regulations and rules people put in after they suffer crisis after crisis like the S&L
7
The author has obviously not started planning for retirement!
13
Here we go......
Rich people- Bad
Poor people should be given stock
We hate it when someone else has more than up (stomp feet)
1
Actually this article didn't say anything like that, and most of the comments don't either. Poor people shouldn't be given stock, but if they've got money to invest, they should definitely try to invest wisely.
1
Yes, and many of those who do own stocks or commonly stock mutual funds are those approaching retirement who can least afford to lose it.
Remember yesterday when they tell you we should privatize social security.
8
You sound like the band on the titanic. Hey, the band is still playing so everything must be ok.
Repent ye sinners, Patricia, Republicans, Democrats, the end is near, buy stock in the National Girdle Company, it's bound to expand figures have proven it.
2
The "market" is a scam. Wake up.
How big a stake in the stock market do Donald John Trump and Vladimir Vladimirovich Putin have is what really meaningfully matters most.
1
It is indeed a shame how few have an ownership in America's stock market.
But I know from experience some of these 84 percenters.
I have worked for 45 years in the oil industry - started with Getty Oil in Los Angeles.
Getty was a small but very rich company company with benefits - almost too generous by today's standards.
One big benefit was to invest in their ESOP (Employee Stock Ownership Plan) - a precursor to later 401k's.
Under ESOP, Getty allowed you to contribute up to - 16% of your gross (yes) salary. And they would match up to 6% in Getty stock.
I am an engineer.
And I knew fellow engineers who could hardly set aside just those 6% of their gross salary, where theoretically, they would have doubled their money - no sweat.
The Arabs oil embargo begot "decontrolled" prices and promptly shot up to astronomical "$30 per barrel". Hard to believe today what a panic it caused.
Soon, all engineers were in demand and Getty was fast losing them.
To staunch this haemorrhage, Getty offered you a "bonus" in stock equivalent a years worth of gross (yes again) salary to be held in ESOP. It was all yours if you stayed with them 4 years, every year a quarter was "forgiven." Ok, you had to pay taxes on some.
May be you will believe what I am driving at.
Many refusef to take Getty money: "why do I have to sign for 4 years when I could easily get a better job."
In less than 2 years, our industry collapsed.
And many of these engineers joined those 84 percenters.
4
What a ridiculous, smug, self-satisfied article. A stock market crash of 2008-9 proportions affects everyone, even those with no stocks.
As I correctly predicted on these blogs last Wednesday, the game is over. You will see a horrific Friday and possibly meltdown on Monday.
And this will affect every American and foreign investor, as well as those who don't own stocks, because when the economy experiences stagflation everyone loses, especially the 99 % who are at the mercy of the wealthy and the speculators.
10
The 2008-09 crash was driven by different factors
3
This article is so off base: I have older friends whose retirement accounts were decimated in the Great Recession with no time left to make it up. I was a state employee from 2008 to 2015, no one got raises for 7 years because of impact on state budgets from the crash.
This writer must be living in a bubble.
18
God, it's about time the NYT pointed this out. The stock market, despite the media's obsession with informing us on an hourly basis how its doing, affects only the rich.
“The recent stock market dive is like a holiday weekend sale.” - Yeah, at Tiffany's!
4
"Even the lowest-income families (the bottom fifth of earners) spend 40% ON LUXURIES and 60% on necessities, according to the study’s author, Torsten Slok, chief international economist for Deutsche Bank Securities." (caps added)
Nobody forces you to buy a $90 pair of sunglasses or $200 jeans or a car you cannot afford
Delay gratification, live below your means, invest in the market
14
Bravo! Great advice.
3
A lot of people with limited resources love those $200 sunglasses and the $800 Apple Iphone. Then they complain that they have no money and resort to those payday companies for loans.
1
Some things are luxuries to some, but, necessities to others. Last year we purchased a new mini van. I’m mobility disabled & need a vehicle I can put my manual, or power wheel chair in. Our first lasted 16 years. It was one we got on sale (new) that had bells & whistles we didn’t need (leather seats for one). But, to get the stripped down model, it would have cost us MORE. As it wasn’t on sale. This new one has no bells, or whistles. We did get a plan that takes care of small dings, & much of the maintenance, our monthly payment is only $100 more than the payment on the first one. With much more value. Just no leather seats, temp readings outside, or which direction we are headed in (miss that one). Some would say it was an extravagance we didn’t need. We are 67, & hope it is the last car we have to buy. My husband’s work care is an ‘09 Impala, we got for $0 from my brother who can no longer drive. That better last until retirement as he isn’t using the mini van for work. So some would categorize it as a luxury, & yes getting out of the house could be considered that to some. But to those I suggest you stand at a window & think, ok, I’m not getting out of this house/apt/condo for 2 months (or more). That happened last year when my husband had a couple of hernias (from work) repaired. The other luxury was having our groceries delivered. He couldn’t carry them in, I can’t, it was a luxury turned into a necessity.
We are readers of The NY Times. We can afford The NY Times. Our incomes and investments are likely above average. And a good amount of our net worth may fluctuate with the markets.
This article seemed better suited for the Fox crowd.
5
Another classic from NYTimes. How about state pension funds? University endowments? Philanthropy? College funds? NYTimes is getting weirder by the day. If my wealth goes down I won’t go out to eat, buy new car, etc. everything is impacted.
19
Most rich people did not inherit gobs of money or cheat and steal to get there. They got rich because they worked very very hard and lived below their means and invested their money.
Read "The Millionaire Next Door"
8
Great book! I read over 20 years ago and I still have it and swear by it.
1
If that were true social mobility would be higher.
https://www.brookings.edu/blog/social-mobility-memos/2015/01/30/wealth-i...
Luciano. it isn't true. Some people who have accumulated wealth did start out poor. But most have "come from" wealth to begin with, and have had not only family money, but access to education and networks of other people with money. and power to ease their way. Steve in Chicago is right - if you look at social mobility information, the tendency for Americans to remain in the class they were born into is shockingly high - much higher than when I grew up in the 50's-60's
If stock market is not significant or unimportant, NY Times wouldn't publish two articles in the front page right after the S&P's 3.7% decline. Don't kid our self that no matter how you describe it, it is a symbol of free market and financial strength. Better to find out and explain why the decline rather than saying only the top 10% owns the stocks so that it is not significant nor important.
8
The NYT seems intent on making sure we all are pacified in this market correction. "Wall Street Money" vs. "Main Street Money." Etc.
Please. I can think of 3 market meltdowns (1987, 2000 and 2008) that directly correlated to my losing my job within a few weeks. Please don't tell me otherwise.
When markets tumble—and yes, it may all be funny-money—but consumers and businesses tighten their belts. Projects that are in planning get postponed. People who live on retirement investments live on less.
Money's movement slows, and changes course. And people lose their jobs.
Perhaps the NYT is doing it's bit by showing nice infographics, trying to keep cooler heads prevailing. But I feel talked-down to in this article.
9
Oh what a wonderful economic model. stocks up. employment up. stocks go down. Who came up with than lame model?
1
The filthy rich I figure. They like lots of unemployment as they can hire people for lower wages & sock away more for themselves. The stock market to them is just a game & money the playing tokens.
Contrary to several of these comments, Wolff's research purports to take indirect stock ownership into account. However, in the article's summary I do not see accounting for university and school endowments which make these institutions more accessible for lower income students, effectively raising their spending power. Major stock losses weaken this effect.
3
The stock market is the biggest casino in the world and, like all casinos, the game is rigged.
1
Let's face it. The stock market and Wall Street are basically a gigantic, corrupt casino. And the house always wins. If possible, live below your means and aggressively save. Don't "invest" unless it's in yourself. Otherwise, Invest only if you have to because of an employer controlled plan. We all need to live on income, not "ifcome."
2
Sure, those who hold stock would tend to lose the most in the value of their stock holdings and those are people who have the most money to own stock. Of course those are the top whatever-percent of the richest whatever-percent of the top 10% of the wealthiest. But here's the point that's missed (and so incredible after just a few short years): a significant market downturn impacts the economy in a way that causes something we call a recession (and a really bad one is called a depression and the worst kind is called a Great Depression). And it's during those times of fallout that the richest, who own stock, still stay rich, but the other 99% - 90% of us really suffer, stock or no stock because, at some point in the downturn, unemployment skyrockets. I can't believe the NYTimes doesn't understand the deeper implications of a market downturn. Oh, sorry, let's try to allay fears and, for now, we'll call it a correction. Funniest word there is to describe the destruction of "wealth" because it implies the level it reached was "incorrect" in the first place which is why it had a "correction." Absurd language and an absurd point of view.
3
All downturns do not equal recession/depression/Great Depression. Sometimes the market has soared beyond it’s means to sustain, & it falls. Once it is above a 10% loss, it’s called a correction, not considered a downturn. Learned that just this week. So panic isn’t needed yet. Oh depressions used to be called Panics. Which I think could be a better term. If you are not in the market for the long term, you shouldn’t be in the market. Learned that in Accounting 47 years ago. Oh, during the Great Depression many of the wealthy lost everything (or most of everything). If you want to know why office buildings started to have sealed windows, it wasn’t because of air conditioning, it was because of the wealthy jumping out of them in ‘29. Could say it ‘rained’ wealthy men back then.
The headline promises more than the story delivers. Of course, relatively few people are directly affected by stock market gyrations. However, business profits and hence stock markets prices influence employment opportunities and the cost of insurance premiums for most Americans. In this sense stock valuations indirectly affect most Americans. It is this fact that is the basis of the cliche that stock prices affect everyone.
2
Our wealth? This word has become cliche. Most Americans are not wealthy, and the stock market is a bore.
" Most Americans are not wealthy,"
someone is spoiled.
1
You speak of the upper 1%, I presume? I agree. Very spoiled.
The advice to buy an indexed, low fee, low turn over mutual fund and contribute a fixed amount per time period over the long rung still holds for most. Take a small percentage of your money and pick individual stocks just to keep you on your toes. Stop whining.
7
Not to worry folks! Your congress persons pension will do just fine because you pay for it no matter what the market does.
I mean thats what most important right?
3
It doesn't matter whether I own 10% or a trillionth of a percent of the stock market's total wealth. If it is a meaningful amount of my personal retirement savings, then it counts a great deal. This is the only math that matters. If I have been duped by putting for now tax-free retirement savings into the stock market, then shame on me and shame on the thieves who have taken my money and sold me an empty bill of goods.
4
This is very disingenuous. Of course the rich own most of the stocks. They own most of the wealth and disposable income. Middle class and poor don’t own stocks because they don’t have disposable income to save. However there are millions of middle class people who save through personal or employer based 401K, 457, or 403B plans. This may not account for the majority of the market but their savings and retirements depend on it.
7
Yup, are retirements depend on it, but, WE do not control the market. The filthy rich do. They get to play with our savings/investment money, & if it tanks, no skin off their noses. But, the rest of us can’t retire, maybe ever. Now, my brother worked in a low level Fed job for 30 years, living in a high expense city. He lived in a small studio apartment with a hot plate. Didn’t go out for any kind of entertainment (used to walk around street fairs, buying nothing). He invested in mutual finds, with most of the interest & dividends reinvested, till recently. He has been investing for 50+ years. Even losing half the worth during the ‘08 depression, his worth is now back up over $1 million dollars. He just kept putting money in different companies’ mutual funds. And left them. Didn’t worry. I find it amazing that I can, telling the truth, say my brother is a millionaire. Without the ‘08 depression, I probably could say multi millionaire. Is this a great country or what? Most regular working stiffs around the world could never hope in a million years to be able to say that.
Time to buy.
6
Don't you love it when everyone tries to tell you it is okay? I love the charts and graphs. Here is what is not said. Corporate executives often receive stock options as an incentive. I suspect a lot of stock options were exercised (hazarding a guess) after the first drop of 665 points, taking a large sum of liquid assets off the books. Corporations fund pension funds with their own stock. The government allows corporations to raid pension funds if the fund exceeds a certain threshold. So the question becomes, how is operating cash quickly replaced to bolster stock prices which is very important to corporate executives? Payrolls continue to be the number one expense item...I believe. Bottom line, there is reason for "main street" to be concerned. By the way, how much of the stocks are held by financial institutions that manage retirement accounts?
3
It's ironic the people with low and medium salaries who don't invest in equities, are the people would stand to gain the most by a lifetime of regular investing in equities. We place a lot of emphasis on STEM education in school which is fine. However starting in high school, and perhaps earlier, we need required classes that cover personal finance, credit cards, loans, saving, and low-fee investing. The math is certainly within the grasp of high school students and it's compelling.
18
I agree that personal finance should be part of the public school curriculum.
Somehow I ended up taking a home economics class my senior year of high school, having run out of advanced placement courses. While the class was dominated by non-college bound students, the lessons were invaluable for college bound as well.
Absolutely! My Dad was the Auditor of a bank. School taught us nothing about personal finance. Dad tried. Obviously my brother picked it up easily. Me. No matter how hard he tried, Dad couldn’t even get me to a point where I could balance my checkbook. He’d show me, then the next month watch as I did it. Exactly right he said, getting exactly the wrong answer. Drove him crazy. With online banking, I have no problem. But, now I am in charge of my brother’s investments. Oh woe is him. I’m so far out of my depth I’m drowning. Just found out my bank has financial planning services. Think I will be seeing them a lot.
As I understand it the 401.k was created for top level executives as a way to defer part of their large salaries from taxes until retirement when their salaries would be lower. That was when many larger corporation had designated benefit retirement plans for most all employees. Politicians then got the bright idea that it would be useful for corporations to eliminate the corporate designated benefit retirement plans completely and make all employees have a 401.k type plans. It had nothing to do with being more democratic and everything to do with corporations getting out of retirement obligations. We are seeing the results now .
7
It was because too many companies were going under & leaving ALL their employees, both working & retired, with nothing for a pension. They had spent it all. A friend in the family had it happen & suddenly he had no pension, just SS. Small house. His kids paid off the mortgage & paid the taxes every year. His wife worked as the church secretary, so far beyond retirement age it wasn’t funny. He worked a few years for a residential rental company, not easy as he was almost blind from detached retinas (back before they could be repaired easily). In fact he got my husband a job there, he’s had for 45 years. This situation was far more common back then, than now, & is why both SS (during the depression) & then 401Ks came to be. Good idea if you come into them in your 20’s, not so if you were in your 40’s. But, better than nothing, which is what the company had before. Now, most at risk are municipal employees, hired with the promise of a pension, though lower pay. Then wham! Pension gone. Bait & switch. Not pretty in the consumer market, deadly in the retirement market.
Aren't many pensions and employer retirement accounts invested in the market. That would impact many who don't have individual investments.
3
Very true - direct ownership of stocks (or mutual funds) paints an incomplete picture. There has been a decline in private pensions, but public sector pensions, many of which are underfunded, are very dependent on the stock market's success. That benefits state and local taxpayers, who are on the hook to make up underfunding shortfalls, as well.
1
Anyone with an employer based defined contribution plan, as opposed to a defined benefit plan (pension) depends on the market.
1
Not so on the hook. Municipalities are well known to lower pension payouts, even for retirees, who have based their retirement on those pensions & SS. The taxpayers jump for joy, while the retired workers sink not so slowly into the shark infested ocean. If you promise a pension to someone you hire, public or private, you should BY LAW, have to invest, or put in a bank account, the money necessary to pay that pension. 100% funded pensions should be the law. Fed Gov does by buying annuities (paid for by the employee) with monthly payouts. When the person dies, the original money goes back to the Feds).
It's not the ups and downs or even "major" corrections that hurt normal Americans, it's when the top 10% of people that have all the money in the market demand and ALWAYS get redress when things go south like for them, leading to the bailouts, layoffs. mergers that everyone else is forced to suffer through or cast off by.
5
When reporters asked J.P. Morgan how the stock market would perform in the coming year, he answered, “It will fluctuate.” If the market didn't fluctuate, there would be no market.
4
Does it matter that 16% of stocks are owned by the bottom 90%? Absolutely! That money is their savings, and if their savings goes down by 10% is a big deal for those individuals. This article is dismissive of the meager "crumbs" that the bulk of the (middle class) population has put in the market. How tone-deaf can you be?
11
I was looking for a way to express this and QED has done it well. If you are renter class in a large city your only wealth is your savings. If you've looked at cash savings in the past 25 years it is next to worthless. Hence, mutual funds and perhaps a few shares of one or two favored companies. Its not much, but its all we have.
2
I live in Silicon Valley and "survived" the dot.com disaster as well as the financial crisis. What bothers me about all this press coverage is that - in my experience - the stock market has been a very good predictor of recessions. It seems that when the market starts to really fall, and becomes a bear market, the economy tends to falter soon after. At the market top, the press touts the "strengths" of the economy - as they are doing now, while the market starts to fall apart (because the market looks towards the FUTURE - it is a "leading" indicator). Ironically, the market then recovers (because it looks to the FUTURE) while the press complains about how bad the economy is. Unemployment, for example, is a lagging (not a leading) indicator. So, the fact that the market is beginning to tumble is a VERY bad sign for the average America as a recession may soon follow. Not always. But don't confuse a lagging indicator (e.g., unemployment) with a leading indicator (the stock market). The stupidity of the mainstream media is the only constant in America.
6
Indeed, the press has rarely tagged the Valley phenom as runaway inflation, but it is, and has been, for thirty years. I would not call it stupidity though, its just myopic.
Poppycock. Everybody in the US has a significant stake in how the stock market does. Right off the top of my head -- state pension plans. Stock market slides, they have to raise taxes to cover the shortfall. Just because a household doesn't own shares or have an IRA does not mean they are not affected by the markets.
On top of that, a 5% or 10% drop in income, or increase in taxes, is much more impactful to a low income household than it is further up the scale.
9
I don't own any stocks. What affects me is that when the stock market goes up, so do gas prices, heating oil and diesel tractor fuel. Then, by virtue of the commodity trading system, feed and hay prices rise.
"One's loss is another's gain" is an over-simplification. These analyses never take into account the higher effort-cost of productive activities vs financial juggling and churning.
2
Wall Street never thinks about biting the hand that feeds it.
1
I worked 46 years as a technician and later as professional salaryman for a large corporation. I set aside any raises I got in a 401 (k) until I was saving 10% of my earnings. It pinched at the time: I did not buy the boats or other extras my co-workers were enjoying, and the kids' college tuition was a real budget buster.
As a result of market growth over the decades, I am able to live on the 401 (k) earnings and half my Social Security (the remainder being taxed back).
The market's growth IS important to ordinary middle-class workers and retirees.
24
Absolutely.
Wall Street does affect the retirement incomes of Americans with varous types of 401k and other pension plans. If that's not a majority it is certainly a very large plurality of Americans and their children who might have to support their parents in old age and taxpayers who will probably not want to see homeless old folks dying of starvation on their streets.
9
The stock market theoretically is supposed to mirror the economy. Ours does not, too much influence to trades regardless of value, the cut of the dealer and the continued mix with hedge funds and deals which should be out of the banking business mainstream. We are our own worst enemies and the chief protagonist is the Congress which preys on re-election funds for unwarranted influence.
4
If you have a pension and your pension fund has equity investments, you are not a stock owner. The plan sponsor has elected to place some of the assets of the plan in equities. But if the shares in that plan go to zero value, you haven't lost a penny. The plan sponsor (your current or past employer) now has to come up with additional monies in order to meet the legal obligation to pay your pension (if it's a 401(k), that's an entirely different matter).
Unfortunately, there is a decreasing percentage of Americans covered by such plans. And it appears that an increasing share of those covered by pensions are in the public sector. That means that plan asset shortfalls due to lowered investment returns would have to be funded by higher taxes. Given the magnitude of the shortfalls even with high market levels (this means you, NJ), further share price declines from these levels would likely generate a world of hurt.
Oh, and some of the largest net buyers of shares during this protracted run-up? The companies themselves, who apparently never got the 'buy low/sell high' memo. They continue to grant options to their executives at low prices and then go into the market to repurchase the shares at high prices in order to offset the earnings per share dilution created by the additional shares. Legal? Yes. Justifiable? Not in a fiduciary sense.
We're worried about the Russians mucking up our political system. But the economy? That's on ourselves.
5
As I remember, the 401s were designed to encourage people to save. Anyone and everyone should have been able to access the 401 plans. The banks can offer 401 facility to everyone and the savings will be tax deferred and build up. They don;t have t be in stocks, they could strictly in the money market fund or a mutual fund. The tax deferred aspect may not attract many who do not earn enough to have taxable income. That is true, but at least some more than now will. The employers can offer a "matching" plan and offer raises in the form of 401 contributions to all. Also, people should be able to withdraw some amount, say 1 to2 pecent without penalty. Provide incentive to people to save. Just like the old "Uncle Sam savings bond campaign, the govenrment should run a 401 campaign and also offere to ensure some minimal amount , say $10000 or so. This may be peanuts to many but an important incentive to many others.
1
One important point that this article tip-toes around but doesn't touch, is the rapidly disappearing defined-benefit pension. More and more of us have only defined-asset retirement accounts (401(k), e.g.); a god chunk of those assets are comprised of equities. While defined-benefit plans are also invested in stocks, the risk is spread around to all retirees in the plan -- present, those near retirement, and those whose retirement is farther off. However, those of us with defined-asset accounts have to each bear all of the risk ourselves. Those stock prices hence make it a very big deal to us!
15
While the author is correct. I think this highlights why wee all must work to protect our Social Security, Medicare, and Medicade programs from the likes of Paul Ryan. Since guaranteed pension programs have gone the way of the Dodo bird and 401Ks are the thing (if you are fortunate enough to even have that) we are living on the edge of financial uncertainty. Why, in the wealthiest, most powerful country in the history of the world, are we having to worry about growing old in poverty and with no affordable health care? Greed seems to be the root cause. Keep Paul Ryan away from our social safety nets.
15
Our Social Security system has many problems, most centering on the choice to have fewer children coupled with longer lifespans and shorter working careers. One cannot expect to fund a forty-year retirement based on the FICA paid during a thirty year working life.
That is not Paul Ryan's fault.
3
It's Medicaid, not Medicade.
This article's dismissal of the importance of the stock market misses an important point. Yes, the vast majority of stocks are owned by the 1% and yes only about 40% of Americans have significant stock funds. But who are these 40%? They're mostly moderate income suburbanites with 401-K's, and those people are the swing voters in most elections. So any political party that seems to preside over a stock market decline will be seen as robbing these crucial voters of their retirement. Not a good idea.
12
Let's not forget pensions funds tether folks to the stock market and huge dips frighten retirees on a fixed income. Huge drops would lower govt collection of rmd's. A large pebble causes large ripples.
Also one would like to believe wall street bonus's trickle down.
4
OK so its not 2007-2008. Just the rumblings of an overheated stock market.
Lets hope you’re right. But then given the elemental capriciousness of those markets — how could you be anything like sure?
The 08 crash emanated largely out of Wall Street (the market) and devastated tens of millions who had no direct stock investments. Many never recovered their losses.
2
The author's argument isn't quite accurate. Many people are invested in the market, but not not just in stocks. If you have a public or private pension, a 401k, SEP IRA, IRA, or other retirement vehicle, you are very much "invested" in the market. If your financial adviser is doing her or his job, you should spread out your asset allocation - and that includes bonds.
I haven't owned individual stocks for years and never will. My funds are invested in mutual and index funds, both with domestic and international holdings. I have done well over time, even since the 2008-2009 recession, but by no means am I a member of the 1%, or maybe even the 2, 3, or 5%.
This diversification has protected my family's accounts from wild market swings. Even though the overall market just underwent a 10% correction, I figure my valuations are down about 6 to 7% at most. I can live with it as I see profit-taking and some correction of overvalued equities as the cause. Things will turn around in short order.
Another comment said the real problem is not setting aside enough money for investment at an younger age so that you have the time for it to grow, compound, and provide a real nest egg when you need it.
Do you REALLY need the latest OLED 4K TV, a leased $50,000 SUV, or a bigger house right now? Or should you salt away more $$$ into the retirement plans?
9
Thanks for the advice
No stake?
Well, like many here, I'm watching retirement drift further away this month.
I'm down about $36,000. Maybe small peanuts to some, but on my $87,500 salary, it's a huge chunk.
Turning 60 this year. It's a lot different than turning 55 under Obama.
Healthcare and Social Security? The prospects of both are dwindling, even though I have worked and paid into them since I was 18.
Trump's solution will be war with N. Korea.
A man who can't absorb a 10 page memo - too much reading - has no clue what to do or how to lead here. A big shiny war will distract.
Trump's "winning" now includes the largest 1 day drop in the history of the stock exchange. Look for him to break even more records.
I guess I'm lucky I like my job. Won't be leaving anytime soon. Or later.
7
At 60, your portfolio, of whatever size, should be diversified and include bonds and money markets (plus cash under the pillow for natural emergencies) and perhaps more stocks that pay dividends, such as utility companies. And don't leave your job unless you hate it.
1
I hope no one is confusing the Dow or the GDP with "happiness."
2
Thanks for only 1/2 the answer. "Roughly half of all households don’t have a cent invested in stocks"......ok....so where do they put their retirement funds? I get that some cannot afford to save but 1/2? Really? That is more scary than I realized.
5
No. Everybody is aware that our government is unstable. Our billionaires also appear to have poor judgement. We know that we may kill our Golden Goose. I'm not going to pay attention to a falling stock market if it stays above 20,000. It's the only game in town and I will go down with ship unless I think of some way to get off it. The government managed to stabilize the market after the recession so the market didn't relapse below 12,000. If it does as well this time, keeping some of the gain after the election. I'll be content.
I'm not getting something here. Sure, a 10% "correction" isn't going to kill the real economy. But if there's a really big dip - for whatever reason - it would have an effect on the real economy, which would affect real people's lives. Maybe the author is implicitly arguing that you can't have a giant dip when the economy's fundamentals are so good, but stranger things have happened.
1
More people would own shares of businesses directly or indirectly if the financial industry hadn't turned itself into a pariah. And when politicians and administration officials aid and abet that kind of malfeasance to advance themselves or line their own pockets, that just adds to the distrust and suspicion of that industry. Fed chairpersons' admissions, pundits lies/mistakes, stalling of the fiduciary rule, defunding of the Consumer Financial Protection Bureau, talking-head day traders on the business channels, govt. agency heads with conflicts of interest, banks cheating customers, SEC failures, rotation between govt and financial jobs, Citizens United, failure to pay a fair share of taxes etc. reinforce the notion that Wall Street and its fellow travelers are corrupt or at least part of a casino with dice loaded in favor of the financial industry house.
1
I'm sympathetic to what this article is trying to do, but there are two mistakes that should have been caught by editors.
First, the article opens in the second person, telling *readers* they should relax, on the grounds that rich people own most of the stocks, and half of Americans own none. But this is the wrong sort of evidence for the claim that *readers* should relax, unless one thinks the demographics of the NY Times readers match those of America at large.
Second, the fact that the wealthiest 10 percent own 84 percent of stocks is just not relevant. Suppose they owned 84 percent of the income or assets. Would that be good reason for ordinary people not to worry if, say, inflation shot up, reducing the value of each dollar? Obviously not. What the 84 percent bit shows is that rich people have more to lose from stock market falls, in absolute dollars. But that tells us nothing about whether ordinary people have a lot to lose, relative to their condition.
These points might read as pedantic, but really, this is the sort of stuff that shouldn't happen in a newspaper of record.
3
This ignores the 'wealth effect' - if stockholders (albeit a minority) feel less wealthy as their portfolios dip, they will curtail discretionary spending somewhat ... which will, sooner or later, impact 'Main Street.'
4
Missing data alerts: roughly 79% of workers have access to a 401k but less than half actually contribute. Among small business, the number of workers with access to 401k's drop precipitously and is less than one third. Yes, wages have gone up recently but for the bottom 80% they have been stagnant since Reagan. The real issue is the bottom 50% of America can't or won't save and many are living paycheck to paycheck.
9
"living paycheck to paycheck" yet paying a $100/m cell phone, $200/m for entertainment, $300/m for luxury transportation, etc ...
it is a simple matter of priorities. don't worry though, there is a wealthy taxpayer that will bail them out.
1
Ah, the false canard of cell phone, etc. etc. etc backed up by no data. Try to come up with something new.
3
The trend in 401ks is toward an opt-out approach, where employees are signed up for the 401K automatically, and have to consciously decide not to participate. When coupled with automatic enrollment in low cost index or target date funds, it guides people into doing what is in their own best interests instead of procrastinating making a decision.
1
Gas went up 30 cents a gallon in the last couple weeks because of the stock market. YES IT DOES affect poor people who have no stocks.
9
I'm 56 and I've been "investing" for about 20 years, mostly through my 401(k) plans. So, I've lived through two major crashed, one in 2000-2002, the next in 2007-2009.
During the crash of 2000-2002, as a novice investor, I heeded the sage advice "Don't sell when the market goes down." And then I watched my 401(k) dwindle from 100k to 50k. If I"d gotten out at 100k as my gut instructed, it would have been much better for me.
In 2007, I read a number of articles warning about the housing market, and I allocated my 401(k) dollars to cash. This time, I saved myself from losing at least 30%. (And remember, if you have a 33% loss, to make it up, you need 50% returns on what remains.)
At this point, I'm back into 90% cash because the stock market is, like our President, divorced from reality and has become a mania with sky-high valuations. Bitcoin is a symptom.
As an individual, I feel the stock market has been sold to us for the benefit of Fidelity Corp. and Wall Street banks, who make money off the fees. Stocks can be a good thing, but like the housing market, big financials get involved and the end result is to capture a lot of money from little guys like me.
The US government can and should improve regulation of the ffinancial markets to prevent the high frequency bubble-bust cycles that we're seeing.
23
If you are invested in the market, I believe your view depends upon if you are retired (selling) or still currently working (buying). Putting aside my kids' college accounts, I'm working and therefore still buying, so I welcome the current correction. This is a sale on Wall St, and since I want to "buy low", I hope the correction continues, or, better yet, continues to go down.
7
I was attempting to explain exactly this point to someone just the other day. Let the market plummet. I'm planning to cash-in at the trough. The labor market is still tight and wage growth has just started to tick up. If bankruptcy, unemployment, and foreclosures start to rise again, I'll be concerned. Until then, I don't mind ten dollars off a Proctor and Gamble share.
7
Excel 'quick n' dirty':
US gov't funds every citizen $50/mo. for 120 months of the SP500 index from the age of birth or citizenship - for recent immigrants; cost about $200 Billion per year or $2 Trillion spread over 10-years for each newborn or new citizen cohort (Trump tax reform funding Gap = $1.4T over 10 years).
IF the gov't legislated that the funds are locked-in before age 65, assuming a born American for simplicity, the average real rate of return on the SP500 would be ~ 10 per cent per year less average long-term inflation ~ 3.2 % per year: about 6.8 percent net. And the original $600/yr. funding for 10-years only at age 65 at 6.8% would be worth $306,000. Think about tax reform, healthcare waste/costs and foreign war costs. Do you think the United States can reallocate some mis-spent tax dollars to funding every American's retirement supplement - perhaps rolling Social Security into one Big Pension fund based on the SP500 with a cycle of communtation into individual pensions at age 65? I think the US economy can easily muster the funds to invest in citizens pensions at age 65 "without much reallocation of strategic budget funds from elsewhere. One area ripe for funds now being wasted are Trump "Tax Reform savings" that mainly favor the wealthiest citizens and largest corporations.
4
When corporations got out of the pension benefit for employees, folks who still wanted to invest, had to take on that responsibility, with scant if any qualifications to invest. Most ran out and joined the herd mentality to hire a so called financial advisor. Eventually folks with common sense, who were trying to plan for retirement, came to understand, individuals don't hold much sway investing in vehicles they don't understand, all done by advice, that itself is hard to understand. The market is obviously manipulated and managed with algorithms, trying to beat it , is like trying to beat Vegas. The house always wins. For those of us who employ so called wealth management firms , they require a large portfolio if you want any attention and the best most do is 3 to 4 % pre tax. Big gamble.
5
I notice that when the stock market goes up, the price of food commodities goes up as well. I use butter as an indicator. Yet, when the stock market fluctuates downward, the price of food commodities are still up. Food prices tied to stock market holding does effect everyone.
11
CNBC analysts following the collapse of the market in 2008, constant refrain was were are the mom and pop investors. The markets were flat because there was no one to rob. The top 1% can read a balance sheet and do not overpay for stocks. The top 1% do not need the money to live. so they do not sell in down markets. The top 1% sells overpriced stock to mom and pop investors and their pension funds. Corrections are just resets so they can do it again.
13
Not mentioned much in last Friday's job number was a small rise in the work week hours, been flat for months. That slightly offsets the small wage rise.
"After all, one of those indicators — a January jobs report that showed healthy payroll expansion and a jump in yearly wage growth "
2
This is a plausible point of view and one that is widely held, but unfortunately it is wrong. Gyrations or declines of stock values are a signal of uncertainties and potential crises in the economy, which have been adversely affecting workers and middle class people for decades. For many of us the economy has not been working very well for years anyway, due to anemic wage increases and reductions in the social wage that have left our standard of living lower than it was in the 1970s. As for wealth, we are not relying too heavily on our modest savings or investments or the equity in our house if we are lucky enough to own one. We are relying on wages and income. That means our weekly or monthly paycheck and our Social Security or pension -- those few of us that still have a pension. In this perspective, the current market or business cycle trends are blips in a general downward trend, and the current downward move in the market is just one more sign of the sort of problems that have been long accumulating, which we have been living with every day. The market is a leading indicator for at least one thing, namely the profit expectations of investors. When investors worried, we can expect them to take steps to preserve their own wealth and income streams, and to make demands upon government for measures to protect their interests and entrench their property. In the current political climate, the outcome will not be pretty. So you see, there is plenty to worry about.
11
Very well said. Socialism or barbarism!
1
I have no problems with people buying stocks but the terminology "investing" is misleading. It should be called "gambling". Especially since the "risk" word is always pointed out.
17
You simply don't understand. If you put in a dollar, the average payoff for gambling is less than $1.00.
In contrast, the average payoff for a dollar invested in the stock market is about $1.10 over the course of a year, and over the long-term. That is why one is gambling and the other investing.
13
I suppose you're citing recent records for investments -- an average of $1.10 over the course of one year. I don't know where that figure comes from but I'll take it on faith. Yet Better Markets estimated that the crisis cost $12.8 trillion in lost output. Last year, the Government Accountability Office estimated that the price tag could range from a few trillion dollars to over $10 trillion.
Assume that both rich and middle-class lost the same percentage of their investments. (The poor lost nothing but jobs.) Marginal utility tells us that 20% of Bill Gates' income is less painful than 20% for a guy who is barely hanging on to his mortgage and auto payments.
Not that the wealthy lost that much. When you live off dividends the actual price of the shares or bonds doesn't matter that much.
2
We've heard a lot of this before, for example in October 1929 (or our ancestors did). Crashes of the stock market or other asset bubbles can have a highly disruptive effect because they represent loss of perceived wealth. Such loss tends to cause people to cut back in both investment and consumption, which obviously slows the economy. The perception of increasing wealth is in fact one of the reasons that some types of bubbles grow. Crashes often also expose flaws in the banking and financials system, especially those that lead to excessive leverage.
There was nothing in the basic US economy in 1929 that led anyone at the time or would lead anyone now to predict the horrible Depression years 1929-1933 that the US experienced. People with much more authority than NY Times reporters issued reassuring statements at the time of the crash but it did no good. What is needed to prevent major recessions - or depressions - is not reassurance that everything is really OK, but recognition that unregulated financial markets are not OK. There must be mechanisms that prevent dangerous bubbles from developing.
22
You sound like one of Trump's PR persons.
While what you say is technically true. You left out one big item. While the market crashes so usually does the economy at least in the short term.
That is what happened in 2007. Many people lost their houses and jobs and if it wasn't for safeguards built in over time (Fed, unemployment insurance, SS etc.) and Obama's careful stewardship of the economy with stimulus, we could have had another Great Depression.
22
That's very, very unfair. The article calmly describes reality. The Trump crowd spouts fiction at every turn.
The market is not the economy, and for 90% of Americans the machinations of the market should, rationally concern them not at all. That fact alone should make you wonder why WNYC devotes 10 minutes of every hour of its news programming to Marketplace. Why does something of such slender interest deserve 16% of the time budget? Nothing else comes close!
The association with 2008 is inapt. We might indeed see the market fall further this year. We probably should, if the Fed continues to raise rates, making bonds competitive with stocks again for the first time in over a decade. Would that lead to a financial crisis? No.
The collapse in 2008 was caused by too much leverage. Banks were undercapitalized, subprime mortgages were overvalued and misrated, AIG was selling insurance (in effect) far in excess of its ability to insure. (Not my opinion. They were utterly insolvent when called on.)
So far, at least, those factors are not true today. Dodd-Frank, which Republicans so love to vilify, has not put a single bank out of business, but has forced them to recapitalize. The AIG and subprime scams are history. There is no reason to believe a fall n stock prices should precipitate a recession.
Watch the economy, not the market. That's what the article is saying, correctly.
Even if you don't have a pension, there's a good chance you live in a state, county or municipality with a significantly under-funded public worker pension plan. If a bull market turns into a bear market, those under-funding problems are likely to grow - and any taxpayer in one of the affected government units has a stake in that.
16
Agree Gary. Best example is my home state of Illinois, and the City of Chicago. Doesn't sound terribly feasible, they will ever fully meet their pension liabilities . People will just get less than was promised.
1
For the wealthy, it is all about the stock market. For the middle class, it is all about wages. For the poor, it is all about government benefits. The group who elects the president is the middle class. The ones who care about wages. They elected Trump and are so far, doing well. Although there is far more progress to be made getting rid of illegal labor and illegal employers on behalf of American families.
8
Most of the poor earn wages. If you want a government that cares about the middle class, don't denigrate the poor. If you want a government that supports the renters and holds real wages flat for decades -- the government we've had since 1979 -- then side with the wealthy. You won't live any better, but you'll be able to smugly look down your nose with them at the moochers.
1
wall street is where you invest money that you don't have a better use for.
10
Am I the only one who agrees with the author's assessment of the market? A correction is not a bear market and it does not signal a recession. The majority of companies' financials remain sound and continue to earn money. My IRA continues to produce a 7% annual return on dividends and income even if my portfolio value dropped 4% on paper from last Friday. You only lose real dollars and cents when you sell every dime of your holding for LESS than what you paid for. If one doesn't understand this about the market then one shouldn't be in the stock market. If you are in the stock market with the objective of making money off the rising Dow rather than the financial strength of the companies, then you are gambling. And gambling means you agree to take on the risk of losing. Whether it's the stock market or the casino, you don't gamble if you can't afford to lose. You gotta learn when to place a bet, with which equity to place the bet, and when to walk away. So, no, the sky isn't falling. I've prepared for this correction by selling shares last year in companies whose stock value were more than what their worth, even tho the market was going gangbusters. I could have made more, but I was being prudent. I've made some profit off those shares and now I'm going shopping for cheap stock in companies that are making money but for no reason is being punished by the market. This article is spot on.
19
"You only lose real dollars and cents when you sell every dime of your holding for LESS than what you paid for"..
Correct. More importantly, had many people heeded that advice and not let go of their homes simply because they were somewhat "underwater", (that is, worked a little harder to protect their investment) the whole real estate crisis would never have happened.
I have been investing in a 401k for 30 years and some stocks in a private account. I started with $300 making steady increasing amounts.
Fast forward I’m rich and did it by investing every pay check in good times and bad. The main point is to continue to invest in the NYSE stock and someday you can be rich too.
19
“Investing part of every pay check in good times and bad” is the key. Thank you for sharing that story. If only everybody would learn from your self discipline we would have a far different world. It can happen from doing such things as drinking a good cup of coffee rather than splurging on an expensive latte!
4
Well Pete, I'm glad you're rich and as a result of that I hope you do things to help the plight of those in need.
2
Good for you, pete. Now, just think how rich you would be if the Robber Barons didn't constantly manipulate the market to tank and steal your money every few months/years.
I do not believe you believe what you wrote. Are you part of the Robber Baron cartel?
1
It annoys me that we have a Greenspan put, a Bernanke put, a Yellen put, etc. to support the securities markets, in exchange for which I must suffer the debasement of my cold hard cash savings account, my nest egg, all for the greater good of banks and the leisure class, and you stock investors. What ever happened to "risk" and individual responsibility. At this rate, the dollar will lose its reserve currency status, and we'll be at the mercy of global finance.
9
Speak for yourself. Being a 58 year old contractor, devastated by the 2008 downturn, and three others in the new century, with a pensionless job, I am pouring money into a 401k hoping to build some protection for the time when society kicks me to the curb because I am old. I have paid over a million over my lifetime into Social Security, and am terrified that Paul Ryan and crew will steal it.
28
I would be interested in seeing your math behind how you paid over a million dollars into Social Security over your lifetime. Today at 6.2% for a max of $128,000 that is $7,936 a year max withholding. Multiply this by 40 years if you started maxing out at 18 years old and that is $317,000. Actual would be much lower than this. Am I missing something? Are you putting a time value o it?
2
When you have a president whose multiple bankruptcies devastated Atlantic City and put him in hock to the Russians, a Treasury Secretary who bilked millions in the housing crash, a House speaker who never got over his college crush on Ayn Rand and a Republican Party whose tax cuts bankrupted at least two states -- see Kansas and Oklahoma -- and now threaten to bankrupt the entire country, what could go wrong?
2
There is NO way you have paid in over one million in your lifetime to Social Security - not even close.
2
I wish I didn't believe people are making a lot of money when the market is volatile and when it tanks. Me and My IRA don't have the same chance.
10
agree
how does the Johnson family of Fidelity end up with over 50 billion $ ?
talk about rigged !!!!
We should immediately repeal the Trump tax cut. The government is going to need that money as a safety net for the 99%. We have been fleeced, but this time it may be a disaster.
15
Fleecing is as fleecing does. And this country has been fleeced by democratic tax and spend policies far too long. How about an economy like the one we have now: full employment. That is more of the secret than taxing.
GOP now has instituted spend and reduce tax!!
do the math...
1
Those of us silly enough to be in the stock market, capricious and volatile, like a weather vane, are indeed 'suffering' the loss on some money. Luckily, the majority can't afford being in the market, a rare case of being safe in this upside-down world.
8
One big hole in your theory. Millions of American workers are invested in the market through their 401(k). Even though its a small slice of the total investors for each of those employees it's their retirement savings that is subject to these fluctuations. My advice is don't look. Pick an investment strategy and stick with it.
4
I stand corrected. Perhaps a fools errand in trying to stay ahead and count on the means for a no-doubt deserved retirement.
Now that stock prices are for the most part not connected to dividends, buying public stock has nothing to do with investing, it is speculating. The bet is that if you hold the stock for the right amount of time, a bigger fool will buy you out.
If you really want to invest, help a friend fund his/her business.
9
Yes, it sure was a good thing that the Great Depression and the Great Recession caused no damage what-so-ever to anyone outside the wealthy investor class.
12
So you apparently DO believe in trickle down economics
Please elaborate on how this does not affect millions of pensioners? I think you are being dismissive of the actual pension funding crisis we have in this country.
18
Sally: The pension fund crisis is due to allowing Wall Street to get their hands on your money. Were there consistently normalized rates and pensions held their money in only government guaranteed products we would not have a pension funding crisis, the various fleecing of funds whether here at Calpers or Britain when Sir Phillip Greene walked off with the money its always the same. Big Government is the ONLY one you can trust and only when our elected officials are honest, which is to say not at all since the sixties and financiers entered the mix.
4
The vast majority of Americans working for large corporations have 401 k plans invested in the stock market.
7
And the majority of government workers have pension funds invested in the market as well.
2
Keep believing it. Or, read the article again, and ask yourself if they're lying to you.
Half of all Americans own no stock at all, not one share. 90% own a bare just 15% collectively, in all forms. As Bernie Sanders never tires of pointing out, the top 0.1% of the population owns as much as the bottom 90%.
Warren Buffett has said there's been a class war, and his class won. He's right. The rich have collected all gains from globalization and automation, a trend that shows no sign of abating. Unless we want to be owned by them in some kind of Blade Runner future, we need a much steeper income tax, confiscatory at levels over $10 million a year. It might not raise much money, but it would at least rein in the malefactors of great wealth.
1
I mean't far more (what you said). It seems to be a glaring and shared failure of an ability to think unless I'm missing some meaning.
Amen!
But even this is only half the story.
Think of it this way. The capacity of the economy to produce goods and services is not dramatically impacted by the stock market.
When the stock market goes down in value, this effectively creates a partial redistribution of wealth from the top 10% to the rest of us - we don't get more dollars, but each dollar is a slightly higher fraction of the total spending power available.
The article explains the rest perfectly. If the economy itself is hurt, if production decreases and people lose their jobs, that is a real problem. But if it's just the prices of the stocks that fall, that can actually be a good thing for most Americans.
Unfortunately, the people who form our opinions about this are invariably either bankers, investors or people closely connected to these.
Imagine that tomorrow all NFL salaries were cut by 10%. Would that impact most of us? But now imagine that all our news outlets were run by NFL players, ex NFL players, NFL Analysts, etc. .. suddenly we'd start reading that it was the start of an economic disaster! It's not!
3
In November 2018 let’s see what the Boomer vote does. How many do you think owns stocks in this group, and with this volatility it is sabotaging their retirement.
2
Speaking for a Boomer and a 1%er.... I have ZERO in the stock market. What fool plays poker when the dealer has marked cards?
The Little People, the middle class, has been stuck in neutral since Reagan pompously bellowed "I paid for this mike," as thought anything that can be paid for was moral, and any tax cut to the rich would trickle down to the rest. Most of us do not have much stake in the market, except to wonder what our masters are doing in the Big Houses. We need to give massive tax breaks to the middle class and take away from the rich the forty plus years they stole from us by rigging the tax code. It's called a CLAW BACK.
13
envy is a green eyed monster with a Smally mindset
1
When i send 1,000.00 dollars to a Go Fund Me in Mississippi as i have done for NYC, and checks to many other places, maybe you might forgive me for having a little extra.
Time for those in charge to finally separate absurd gambling with exchange approved derivatives from investing in our retirement.
4
“The stock market is the only place I’ve ever seen where when something goes on sale, no one will touch it. But if the price is going up, that is when everyone wants to buy it.”
- Scot Lance
5
How about the housing market?
How about tulips?
How about alpacas?
Is she arguing that it is a good thing that most American's have no "wealth" to speak of and therefore don't have to worry about losing it in the stock market?
6
No. The economist quoted says clearly it's too bad more people don't have money in the market for long-term investments. On the bright side, because they don't, they need not worry about the state of the market. It's like living in New York worrying about the weather in Peru.
What these reporters failed to do in an otherwise fine article is to find out exactly how many stock holders live off their stock holdings.
I believe, but do not know that even retired people lived mostly on pensions, Social Security and funds they transferred from stocks to fixed income instruments.
Given our expanded life spans, even stock holders in their sixties can ride out this downturn, with stocks recovering from corrections within five years.
I assume people still in workforce don't sell stock monthly for living expenses.
Yes, people who panic and sell during a correction are hurt, but it is an unnecessary loss.
Again, what the article lacks in how many people are directly hurt because they're day to day living expenses come from selling stock every month. I suspect but again don't know that the numbers are very small.
3
A lot supplement income with dividends and interest.
Of course we don’t all have a stake in this game of make-believe valuation, of lottery-style success and failure, of social inertia. In a world filled with desperately needy people, this shell-game is the American Dream gone rogue - a culturally useless, wealth-hoarding income funnel to those who service the casino-goers dutifully playing the slots, hoping for economic absolution.
Or something like that.
5
How dare you! Of course this effects us and I for one will not stand for the rich losing their money. After all, why did we just give them a huge tax break.
If the rich lose their money then there won't be anything to trickle down.
They need theirs so we can get ours.
That is how it works. Haven't you heard?
10
It's clear you are not a job creator or business operator. Probably not a taxpayer either. Thanks for not doing your part to pitch in and help... instead just complaining
1
Gee, do you think our the idiotic GOP Congress who rammed their massive tax cuts for the wealthy could have anticipated it would just overheat the economy and fuel inflation and tight money fears? Of course not. By far the majority of economists, even conservative ones, said the tax giveaway was a trillion-dollar boondoggle. Now the economy is sure to slow down, digging us even further into debt and putting the working man and woman at risk. Thank you, GOP!
4
Using this logic, The stock market collapse in 1929, when even less of the American public owned stocks, did not cause a depression.
I guess all those history books were wrong? There was no wide spread unemployment? People did not go hungry?
Does the author of this piece have any training in economics?
3
This article is a little twisted. It really ought to be in the paper when the market is going well, not correcting, and the fact that most people don't own stock should conveyed as a lament, rather than the "aren't they lucky!" tone this piece expresses. Despite corrections and bear markets, the stock market goes up over time; that's why people who have money buy stocks. People who don't have money don't have the opportunity to, and that's an unfortunate disparity.
3
From reports in the media it appears that a large proportion of the “average investor”...individuals...are just sitting tight...not buying or selling. It is quite obvious that the huge swings in the market are computer buying and selling. Have the Russians or North Korea invaded the financial markets? It would seem like an obvious way to attack the US and the Western world. Is anyone investigating the cause, besides just guessing at it? Whose really behind these massive buys and sells?
5
Worth looking into.
Aren’t stock market wealth gains the biggest source of money for charitable giving in this country? And doesn’t the bulk of charitable giving go towards helping the less well-off?
If the answer to both questions is ‘yes,’ isn’t the premise of the entire article misleading at best, and plainly wrong, at worst?
3
Are they? Stock Market gains the source for charity that is. You might be right but I for one am not sure of that. Perhaps you could site a source or two.
1
No. The vast majority of big money's "charitable" giving goes to their churches which generally never do enough, to health-related research, and to prop us business schools in their over-priced alma maters. Some goes to museums. Very small proportion of people's "wealth-without-work-investments" go to the poor. Someone else in these threads alluded to that when she/he said that if the wealthy spent more time with the poor & outcasts (as Jesus did), they would understand much better why people are poor. It's the greed of the greediest that keeps them away from the majority of people who struggle. It's an "American" value, but it is not a moral value.
1
This really isn’t news to anyone with exposure to the non-wealthy.
3
I beg to differ with two points in this article. The stock market does have an impact on the lives f millions of working class people even if they do not own stocks; directly or indirectly. The top 5% of the global population that manipulates stock prices for their benefit are the same people who buy, sell and merge companies then abolish thousands of jobs. On point two, the new found raises and bonuses will be, for the most part, a one time dog & pony show for Trump's benefit. Don't rely on this government's stats and tweets for those figures. You will recall one of Trump's priorities upon taking office was to gag any department that dealt with economic statistics.
3
Stocks are in a massive bubble. This bubble must pop. It needs to come down at least 30% to be reasonable. 50% would be still OK relative to earnings. The Fed must NOT do QE again to reinflate it. If they do then this will be the clearest sign yet they are just the political lackeys and servants of Wall street at the expense of working ex-upper middle, middle class and retiree Americans for whom their low interest rates have destroyed their income from savings.
7
This article claims that the stock market's gyrations are relatively meaningless because most "ordinary" Americans don't own stock. Ms. Cohen then claims that there is nothing to worry about because the economy is doing fine. I find it amazing that this nonsense makes it to the front page of the NYT. The stock market is a leading indicator - this means what happens in the stock market usually precedes the economy. If Ms. Cohen had any knowledge of economic history, she would know that recessions always have a corresponding stock market meltdowns at some point. While it is certainly true that not every dip in the stock market translates to an economic effect, prolonged market downturns will proceed an economic downturn. The average American may not own stock, but the lack of available capital in a recession may cause him/her to lose their job. I would say that is a significant effect,
9
So...is it time to let Wall Street handle Social Security yet?
It's a casino. And the House always wins.
3
To quote standup comic Eddie Pepitone: "I've got thirty dollars in the bank! It doesn't affect me!"
2
Shame on the New York Times for such a specious analysis of the capital markets and its impact on all Americans. Equities are owned by pension funds paying benefits to policemen and firefighters and teachers as well as insurance companies providing life insurance and long-term care insurance policies. These funds are significantly underfunded - just ask the Teamsters union - because of the intervention of the fed on interest rates and sub-standard returns in the equity market. Think this does not impact the average American. When there is no pension monies available, long term care insurance is unaffordable, and no one will underwrite life insurance, think again.
4
The “democratization” of the stock market is just another scam. It went a long way to convince workers that they had a stake but of course they didn’t and they don’t. The stock market is a casino and we know who wins in a casino.
1
Thanks to the chicanery of our financial industry and its government-given protections, we are all tied up in the same ball that Wall Street is. We can't help it because we've been convinced to accept pensions in lieu of better salaries we might use to fund our own retirement. And all that corporate pension money is invested in...well, investments. Equities, bonds, real estate trusts, you name it. Our corporate employers pay a fortune to financial planners and tax analysts who tell them where to put OUR pension $$$. We are all in this sad, sick game together.
1
Sorry but anyone with a retirement savings account that is an IRA or 401K has money in the market, even if you are a public service employee, that is where your pension funds are deposited...You must be mistaken.
3
50 percent of all American households own stocks.
A majority own real estate, the value of which is tied in part to the value of the stock market.
Of course the stock market has a bearing on the finances of most Americans. To suggest otherwise is simply slanting and massaging the facts so the comport with your political bias.
3
Some convincing points in here, especially the fact that 10% corrections only reduce wealth by 1-2% for 90% of households.
Beyond that, though, this article is full of some pretty unfortunate math. The fact that foreign multinationals own 35% of all US corporate stock has absolutely nothing to do with whether or not they would feel more of a pinch than those households experiencing a 1-2% slide. It all depends what proportion of the multinationals' total assets is represented by the US stock they own, which the article doesn't address. This is basic math NYT. Slightly disappointing.
Similar flaws all over the article, while the stats that prove your point, like the one I mentioned, are buried about 12 paragraphs in.
This event is a reminder to diversify and invest with an appropriate asset allocation, as well as making a plan that takes market declines into account. My wife and I are retired and are currently delaying SS. We isolated enough money in our IRA's outside of stocks and bonds to allow the delay until I turn 70 in 4 years.
This allows us to not sell any stocks or bonds until I turn 70.5 and RMD's begin, which makes declines in the market less impactful. Historically, the S&P 500 has gained 10% a year, but even if it remains flat or has a long term lasting decline our plan will ensure we can still meet our expense and discretionary spending needs.
We have three legs in our stool of retirement income, with investments being only one. We both worked blue collar jobs and raised 3 successful children who went to college. Index funds saved our portfolio.
A plan that considers the worst case scenario may result in lower gains, but will provide an assurance of success. We have a 60/40 stocks to bonds ratio and have no plans to change it. Stay the course. Live below your means and save, save, save.
3
I do not understand why people continue to insist that the stock market is connected to the real economy that 90% of Americans live in.
The idea that a rise in stock prices means that money will be invested in producing jobs is ridiculous on its face.
There is not a single beneficiary of stock price increases on the planet earth that would hire additional workers or raise salaries or open a new plant based on a stock price increase. Jobs are created because there is money to be made. That is the only reason. It has nothing to do with "share holder wealth."
If anything, stock prices rising is a signal to do nothing for the wealthy. Why in the heck would you create new jobs when you're getting richer by sitting on your hands? It's preposterous.
108
This is nonsense - increasing perceived wealth is correlated with both increased investment and increased consumption. People whose businesses are doing increasingly well do not cut back - they expand to take advantage of what they perceive to be increased opportunity. Asset crashes reverse this, and perhaps more importantly change the overall mood from contraction to expansion.
It does no good to argue that business cycles are not strictly logical - people are not logical. Those who do not recognize this are themselves deficient of the logic that is required to understand economics.
3
someone has ZERO experience operating a business.
my former employer effectively used the stock markets to expand the business from a few hundred employees to thousands. stock was used to recruit and pay many employees in lieu of salaries with the company regularly buying back stock as an effective way to share profits with both employee and non-employee share owners. the stock market was also used to generate additional capital through buying/selling options on the company's stock allowing for expansion with minimal debt.
4
This article by Patricia Cohen has been just about the most informative and useful, I have read in a very long time. Clear, precise, evaluative information. Thank you.
1
Far fewer people today have regular employment of the type typical 30 years ago and even among those with wage or salary jobs, a much lower percentage of employers offer any kind of savings plan, let alone a pension.
5
The defensiveness in some of the comments countering the main thrust of the article that most of the stocks are held by the top 10% are amusing. The article isn't saying you or your grandmother don't hold stocks but that they are a few crumbs compared to the vast holdings of the corporate elite, the families of inherited wealth and the new young hit the jackpot billionaires.
People simply do not comprehend the incredible nature of the vast wealth of the investment class which consists of most of the wealth from the stock market.
The heirs of Sam Walton are wealthier than the bottom 40 million people economically.
The ultra rich continue to enjoy the fact that the scale of their taking of the spoils from our system of capitalism never quite registers among the struggling masses.
28
But it is definitional that wealth is held by the wealthy. To re-state that is actually a vacuous activity, perhaps implying the speakers confusion or surprise. If a poor person makes a good living and invests prudently, suddenly you will criticize that person for being top 10 percent. Instead might I suggest you criticize others who live less responsibly and ethically?
2
It's a question of how we want our economic system to work.
1
No Protestant preaching to me, thank you.
1
When the market falls enough we enter a recession and when it falls more we enter a depression. This is what people forget. We were saved 10 years ago so in another 10 years we can have a major crisis again (it's called a bubble).
6
Right you are and that impacts everyone, even those not invested directly in the market.
It’s nearly a cliche of the left that the stock market serves only the wealthy. Problem is, the stock market’s performance is both a reflection of underlying fundamentals (interest rates) and an influence on fundamentals (fiscal expense). Prior to 2007, most of us thought that the derivatives market served only rich hedge fund managers, but of course, we were drastically wrong. What we really learned from that experience is that markets are highly inter- connected. So, if the equities markets crash, yes, we can get the satisfaction of seeing rich people lose loads of paper wealth. But there is a ripple effect, and the rest of us will feel is through higher credit card bills, higher state and municipal taxes, higher insurance premiums, and other things that add up into circumstances we would do better without. All of us.
13
The majority of Americans have less than 1000.00 in the bank, and less than 7000.00 in a 401k.
12
@MWR Ny
Basically true but it's also a cliché of the right that deficits are important until they are in office and throw fiscal responsibility to the winds. The current sell off has been occasioned at least in part by the prospect of trillion dollar plus deficits at a time when the economy is at or close to optimum and therefore they should be coming down.
11
I teach in a community college system. All of our retirement--except for a few who started in the state public schools--is in 403b retirement accounts. I remember 2008 when some people moved money into savings accounts and never recovered their losses. I know nothing about any of it except what I read as a lay person, but I guess I have to trust Warren Buffet, who stayed the course, and my own experience. I knew this upward trend wasn't going to last. But I do think the idea that it's only really wealthy people who are invested in the stock market is not quite true. Lots of people borrow from their retirement accounts, but we have never touched ours. Now I hope it will last long enough to cover assisted living when the time comes.
15
One advantage that he ultra rich enjoy is that Americans of ordinary means are never quite clued in as to just how astronomical the wealth of the ultra rich is. Your post, no offense intended, serves as a perfect illustration of that.
4
"it's only really wealthy people who are invested in the stock market''....that's not what the article says...please read the whole thing again...
Not “only.” Mostly. Words mean things.
And low likelihood doesn’t mean “never.”
It's important to have a diversified portfolio. Last week my wife and I had net worth of about $1.81 million. Today it's about $1.7 million. But about $250 thousand of that is cash that we had sidelined for opportunities to buy equities in some real good companies if their shares went on sale. Which is happening. So yes, on one hand we feel poorer than we were last week. On the other hand, I love a sale.
11
It's nothing until you sell. And, sometime you will have to sell. Right now, you have a plan to buy. Do you have a plan to sell?
1
Hard to diversify on 7.25 an hour.
1
Mr. Moore: gee, it must be wonderful to be a MULTI MILLIONAIRE.
But the average US family has an income of $49,500 a year -- 2 adults, 2 kids -- and can't come up with $400 cash in an EMERGENCY.
What is your advice for THEM? they don't have $1.8 million or $1.7 million. They'd be thrilled to win $1000 in the Lotto!
Whoa! Your statistical approach serves to minimize the impact of market slides on the small number of seniors who DID do all the right things at the time they had an opportunity: invest in a home, invest in conservative mutual funds, and then suffer from corporate greed's effects on their retirement funds in the 2008 debacle. It's fine to point out that dollar cost averaging works perfectly well for those younger, but you brush aside the fact that a market slide eats already meager retirement funds for those trying to live in their retirement years.
64
@Faction - Also no mention of what happened to those (disagree as to a 'small number') who were wiped out by the '08 bankster crisis. What about those folks who were either already 69 1/2, or soon turned 69 1/2, and were consequently forced to make withdrawals from their suddenly depleted savings, drawing down the account balance that could stay in the market and 'bounce back' during the Obama years ?
No 'buy and hold' strategy was available to them - they had to eat the losses -
and the value of their homes declined at the same time. People who mostly had no realistic options of going back to work if they'd already retired, or who would soon lose their jobs as a result of the bankster crisis.
People who were at pretty much their most economically vulnerable moments to the vicissitudes of the system and who "did do all the right things" ?
This portion of investors was never covered in press reports following the bankster crisis, and is always left out of glowing coverage about the fabulous run-up since March 2009.
Must be too embarrassing an indictment, and not very good poster kids for boosters of 'the system'; their experiences make the system look like a crap-shoot.
56
Denying the rise of the global economy -- stocks -- over time is similar to those who deny global warming, by pointing to emotion and anecdotes. Emotions are very real but they must be appreciated in the context of facts and data. The stock market has appreciated immensely over time, leading to untold wealth that was accessible to all people, no matter their race, creed or gender. Yes, cold days still happen, and people still freeze to death. But since 1918, the SP500 index has returned 7.3 percent with dividend reinvestment for an entire century, adjusted for inflation. Without inflation, in raw numbers there was a 10.4 percent annual return for 100 years. That is a mind-boggling return. To deny the growth of the American economy over time can be a dangerous miscalculation for anyone.
5
I wasn't alive in 1918. This is pretzel logic. That 10 percent did nothing to the millions starving during the great depression.
2
Caramba. The floundering stock market is the driver of perhaps the biggest bubble in history--i.e the public pension crisis. The biggest investors are institutional public pension funds. Pension funds like CalPERS are assuming Madoff returns of 7% annually. If those returns don't happen the result will be municipal bankruptcies, higher taxes, crumbling schools, and pension promises broken. The recent episode of frozen classrooms in Baltimore had something to do with pension costs. So reassure me that an unpredictable stock market doesn't amount to a hill of beans. I won't have to care if schools crumble and retirees stop getting their pension checks.
28
The fact that 84% of stocks are held by a few does not mean that the other 16% are of no importance to the rest, as Dr. Adjunct below also stated. If you have not much, a devaluation of this small amount still hurts you, maybe more so than some rich investor who can still easily live off his now smaller packet. And any measures taken in consequence of a crash will hurt many who are not investing in those stocks but working for stock-owners.
23
I think the author of the article would agree
People who don't own stocks directly or thru their 401k may still be financially tied to the stock market. Think of all the pension funds, mostly pension funds held by state and local government. If the state or local government pension fund can't meet its obligations either the retirees take a hit or the tax payers and citizens take a hit as government services are cut or taxes raised to meet the shortfall. Thus I argue that a broader section of the public is affected by the stock market than the article states.
35
I've been an executive at four publicly traded companies and dealt with investors my entire career. Here is what I have concluded:
--Actively managed hedge funds and private equity mostly want the public companies they invest in to cut costs, often by firing people and/or cutting their benefits, and to use extra cash to buy back stock to juice the price. They generally don't trust management to use cash invest in growth or do acquisitions, which are more risky endeavors. Plus, growth takes time and they want their returns in a relatively short period--hence the focus on buy backs, which build no long term shareholder value according to multiple studies.
--The same folks often try to buy non-core assets from public companies or other hedge funds and private equity shops. A similar result often ensues--cut costs, fire people, cut employee benefits and make the P&L look good. And their strategy is mostly to raise prices. Then they flip the business to the next guy in 3-5 years--so he can do the same.
So there is virtually zero connection between the American worker and the stock market, other than those who have invested in stocks through their relatively modest 401k accounts.
That's my 1,500-word summary of American business management over the past 15-20 years. It has been very good for activist hedge funds, private equity and Wall Street generally. Judge for yourself whether this model has been good for the average American or the country as a whole.
163
Thank you for addressing this. The practice of seeking quick gain without adding value.
1
Question? Who does make money when the Dow goes down? The money surely doe not evaporate? Some one made mega bucks selling, we know that it was not the lower 60%.
1
Many comments focus on the number of investors per class of US citizen and the amount invested or securities/401k held. The spirit of the article is that the vast majority of securities are held by a small, relatively wealthy individuals/shareholders.
If you're 65 and sitting on a 401k worth somewhere between 50k-250k, you're lucky. Tens of millions US citizens are sitting in a far more economically precarious position that you are now.
The more fundamental question that Trump's focus on the market, this article's focus on the market, and the general US fetishization of markets as they exist today is this: Should we live in a society where there is little to no net if the bottom falls out of these unpredictable markets?
Common sense answer is no. Now, if you're in the top 10% of earners, you might, at this moment in history, be sitting in an economically superior position to those around you and those around country, but ask yourself, what if I lost it all tomorrow? Where would my healthcare come from? Who or what would I turn to?
The simple answer is this: the US needs a stronger social safety net. Medicare for all. Some form of a universal basic income. Some form of a work relocation program at the federal level.
Essentially, today you just have to answer a simple question: who's your master? A faceless, self-interested group of multinational corporations or a (quasi)elected US Congress. Congress all the way. Just need better reps come 2018, 2020, 2022, 2024.
77
It may turn out that the stock market needs a stronger safety net, including reining in insane and destructive derivative products controlled by errant algorithms.
4
If the choices are: 1) work really hard and keep half of what you earn from that effort versus 2) take the day off and get free stuff because you happened to be born here, how many people are going to choose option one? Something for nothing sounds great until we all opt for that strategy and then are shocked to discover that nobody did the heavy lifting (mental and physical) to produce the goods and services we expected to miraculously arrive.
2
pure ideology. if you think these are the consequences of moderate government intervention on into "the markets" on behalf of workers/citizens, rather than owners/corps, then you really need to reevaluate your worldview.
1
my calculator won't compute 16% of $23 trillion (value of US stock market), but it sure seems like that's a significant amount of money for those of us holding it in pensions or retirement savings. A $20K per year pension is $400k over 20 years...chump change to that 10% but groceries for the 16% relying on it.
24
$3,680,000,000.00.
Or, in scientific notation: 3.68 x 10^9.
Plenty for you, me and the majority other Americans. Sixteen percent is a day-dream; a 1%-er's hope for tomorrow.
I have a sense that stock valuations could be more predictable with a new set of accounting rules and more honest appraisals of company values.
Maybe state planned economies were not efficient-- but I have to wonder how efficient all of the games we play with "market valuations" are? Is economics a science any longer or simply logarithmic games to justify irrational winnings that destroy economic goals and rational allocation of resources?
2
I think the stock markets are the only place where valuations can be goosed higher than fundamentals warrant. When interest rates are low, the stock market is easier and more liquid than real estate or other investment vehicles to cause a frothy rise.
Half of American households own stocks.
It is false to suggest that the other half do not own stocks because they cannot afford to
That is the case for some people for sure but not all. Some people waste their money on material possessions and disposable junk instead of investing it
People can choose to spend $130 on a brand new pair of sneakers or they can open a brokerage account online and put that $130 in an index fund. They can spend $800 on a huge flat screen TV or put $800 in a tax deductible IRA.
What we need is financial education in high school. Kids need to know early on the value of investing, the power of compounding, the massive tax advantages of investing in an IRA or 401k. If taught properly it could very well be the most important class they take in high school.
77
I agree 100%. And it’s a crime that high school kids are taught the power of living below your means, and how debt limits your life and enslaves you to your job.
The bottom line is if you spend every dime you make you will never be free, but if you save aggressively and spend consciously only on things that truly bring you happiness, you can be free.
I’m only 33 but have been dollar cost averaging into index stock ETFs since my first job - at $7.25 an hour. Watching the money grow year by year is more satisfying that nearly anything I could buy with it. And I’ll keep buying shares each month no matter what the market does. And I sleep just fine at night - I have no idea where the S&P 500 will be a month or year from now, but I do know 30 years from now it will be much higher, all I’ll be collecting dividends the whole way.
27
I agree. People think it is a miracle to live a modest middle class lifestyle and end up with 1-2 million in the bank. It is anything but a miracle. The miracle is that other people can sleep at night who refuse to save a penny. Every non-disabled person can live below their means and save money. Every single one.
13
Some people struggle to divide their money between the essentials of food, medicine, heat, shelter, and transportation to work instead of investing it.
While the business owners lecture them on prudence they have held their inflation-adjusted wages stagnate for a generation while raising prices on many of the daily needs of life to those who the criticize so they can direct ever more money to themselves. These are not just poor people since the wage stagnation is also a middle class phenomenon. If everyone were wasting their money on material possessions all the time, like $130 sneakers, there would not be a preponderance of Payless or even DSW shoe stores, or WalMarts or Market Basket (in my area) supermarkets.
Oh, and relatively speaking, that "$800" flat screen is dirt cheap compared the tube-type color TVs we bought for $800 - $1000 a generation ago when you look the prices adjusted for inflation.
8
I have watched the economy with a reasonable amount of attention for about 50 years now, and I have found that there are sound reasons for considering the health of the markets 'a leading economic indicator.'
This phrase suggests a general consensus that, if the stock market crashes, the rest of the economy is very likely to become less confidence-inspiring in the not-distant future.
So goes the reality. Now as for the psychological effect of a plunging market, for many people it feels decisive, decisive enough to make them throttle back on their spending. The knock-on effects of all these private cutbacks can become distressingly significant.
The psychological effect won't necessary lead to stockbroker suicides, but it can become a specter haunting the entire world economy. During this current downturn, though I have long since lost my former enthusiasm for investing in stocks, I have nevertheless been typing 'djia' in the search window of my browser recently, and I feel unease if I see that the Dow Jones is down 4% on a given day.
I do not mean to demean, but Ms. Cohen's analysis might be taken to suggest why economists tend to be considered not only 'dismal' but also clueless 'scientists.'
4
Remember this too...all those suits and savants on TV breathlessly remarking on the stock market and investing are in fact...stock SALESMAN. The message is always BUY! BUY! BUY!
2
I care greatly about my meager savings in the markets, especially since I’m a wage earner without a guaranteed pension to fall back on.
In fact, I’m pretty darned sure that ~10 percent “correction” will affect my future lifestyle a lot more than the 10 percent - that own most (87%) of the stock market, since they aren’t retiring on 5-10% draw downs plus guaranteed interest Tiaa accounts. They are net wealth ahead, easily, even with living/yacht/club expenses even if they made just 1% return on parked money.
Rich capitalist investors get richer, while workers keep on working - for less and less crumbs every generation, since 1970. Pickety was right, guess he should have wrote a pamphlet instead oh his 1000 page book, some more of us might have read it and voted.
28
I have ZERO sympathy. As a financial advisor who is also a CFP, I am reminded that being a "successful" financial advisor comes down to how good you are at having connections to people who can feed you clients who have north of $500,000. Since I had no connections, I cold called and would offer to sit down with anyone regardless of how much they had and offer to help them pick their 401k plan investments and make sure they were saving enough to retire. Most people said NO and that a second opinion would not be beneficial. some would even agree to an appointment and then no show me. For the people that didn't have 401k plans, I offered to set up an IRA with for them or show them how to do it through a low cost provider. Newton's first law is a body at rest stays at rest. But people can sure spend money on smart phones and picking the best vacation package. NO SYMPATHY!
33
No sympathy for whom? I have no idea what you're talking about.
I can see why no connections... need some sugar there.
I STRONGLY disagree with this narrative. Yes, it's true that most Americans don't own any (or much) stock, whereas a few Americans own a lot of stock. And no, the stock market isn't the economy. But those few stock-owning Americans control the levers of American power -- and therein lies the rub. A stock crash might not affect the average American's wealth directly, but it WILL affect legislation, and not necessarily in ways that are designed to protect average American wealth.
Consider that our Republican-controlled federal government recently tried very hard to deny medical insurance to over 20 million Americans...WHY? To free up funding to pay for tax-cuts for the stock-owning class! Can anybody expect that same government to work in the best interests of most Americans when the stock-owning class is threatened with major hits in the markets?
Consider also that our government's response to the market crash of the Great Recession, while generally considered a "success," ended up INCREASING wealth inequality in America -- the stock-owing rich got richer. Who thinks that increased wealth inequality doesn't hurt most (non-stock-owning) Americans? Hint: Only the wealthy.
And keep considering -- you'll find plenty of examples.
18
The market DOES affect people who aren't directly invested. If the volatility continues and threatens to become a bear market, I'll probably postpone or scale back the landscaping I was planning for spring. I won't buy the new truck I've been eyeing or hire a contractor to turn my laundry room into a "butler's pantry." We'll eat out less and perhaps travel less, too. Seems to me that impacts a lot of people who may not be directly invested in the market. I doubt I'm the only one who'll spend less if my net worth takes a 20% hit.
32
while most do not own stocks, the effect on 401K, pensions, etc represent a large change in the limited asserts. the amount that the wealth of the few experience will be barely felt.
7
I have never owned one share of stock, or care about the ups and downs of the stock market. I'll leave that to people far wealthier than I.
7
So do you think this fall in the market affects you indirectly or not?
Great information. The bottom 80% own about 8% of the value of the stock market, and are expected to get about 35% of the benefit of the Trump tax cuts. So as usual Republicans are focused on what they can do for the rich and how the rich are faring.
All those voters who vote Republican because they're into the brand or hope to be rich someday would be much better off with higher taxes on the rich used to pay for healthcare and a college education.
36
Unless things have changed drastically since I studied economics, the stock market is one of the lead indicators in predicting where we are headed in the business cycle -- which means in jobs and earnings.
13
The market has been behaving with irrational exuberance for some time, fueled by the fact that historically low interest rates have prevented a decent return on conservative investments. Many retired people have invested in the market against their better judgement because they want to to keep up a decent standard of living that would have been possible in more normal times.. Banks and businesses have profited from pump-priming that continued far too long when the economy was well into recovery. A correction was long overdue. Let's hope it doesn't take all of us with it.
14
Might be pretty important to the baby boomer who is on the cusp of deciding to retire. Shaving 10% off of their 401k might give them seconds thoughts and decide instead to work another year or so.
46
If you're about to retire and you have 100% in stocks (only way you'd get a 10% correction), then you need a course on asset allocation.
But the point still remains. A person may have 60% of investments in the market because that’s typical of target fund allocation near retirement, and consistent with investment advice. Besides, putting money in bonds has been a losing proposition for a long time because of below-inflation returns. So a conservative, savvy investor has a substantial, if not 100%, loss.
" ... decide instead to work another year or so." Or to have a post-retirement second career. I have a full-time, part-time teaching job. Keeps me busy, and pays for the "extras" that my regular retirement income does not. I believe that the proportion of retirees (or not retired, but over 65) who are still in the labor market is at an all-time high. And growing.
When a business cannot raise capital at affordable costs, it does not expand. That affects payrolls off into the future, and the opportunities for career advancement. When the market crashed in 1929, it helped to bring on the Great Depression. I am sure a lot of people were thrown out of work who didn't have a penny in the market.
13
Many large, publicly owned companies measure success by how lean their organizations are. To satisfy stockholders, they eliminate jobs to make their organizations look efficient. My husband's company, which I won't name, has been downsizing for years to appear lean. It's a gimmick that will come back to bite them.
I recently started a 401k with my employer and started investing at another online discount brokerage. I had a 15% return on my 401k for the first year and I knew it was too good to be true. But I increased my 401k contribution thinking I can buy more shares since the prices are lower, and I doubled my brokerage account and bought more shares of ETFs. The ETF prices decreased again and I'm thinking about putting more to invest again. If those rich people with 80% of wealth are also nice people though, I think the future can be bright. Most of my peers are nice from the average people's perspective but not all that nice. If the really rich people became more nicer than average folks and provided for us, life for everyone may not be so bad. I work in low pay retail and old timers are complaining that new comers like me get higher starting wage than when they started all the time. So these poor peers of mine actually want other people to suffer through super low wages without even thinking about inflation and cost of living increase. Even these poor people want others to be poorer than them. So can we blame rich people for wanting to be even richer? Investing allows someone poor like to learn the world of finance instead of having too many material possessions than they can afford like any poor consumer in the world.
5
Nice is not how you get rich, unfortunately.
What?
This analysis can’t see the forest for the trees. Even if many individuals do not hold equities, their economic fates and well being are tied to it nonetheless. Low income and increasingly middle class individuals rely on the generosity of philanthropy and government for basic human services. Anyone who lived through 2008 knows that when equities drop 40%, foundation and college endowments drop in kind, grants dry up, food banks, college scholarships, workforce training programs, and cultural institutions shutter. Declines in state budgets due to underperforming pension and other fund investments lead to reductions in services or larger deficits that ultimately lead to further service reductions or tax increases. And stock valuations impact the confidence of publicly traded companies to hire, expand or pursue growth strategies such as acquisitions. Consumer confidence declines, leading to less demand for goods and services and a real recession. My undergrad macro econ professor said to me upon observing my fascination with the dot com era, “Don’t romanticize the markets. When they decline, people will be hurt.” It’s a lesson that the authors still need to learn.
189
This analysis correctly comes to the conclusion though that the stock market does not equal the economy. And that is something that too many people are obviously not aware of.
1
I'm betting many of the hundreds of thousands that lost their homes in the 2008 Great Recession didn't have much money in the stock market. Therefore the recklessness of Wall Street that lead to the crash couldn't possibly have affected them. Right?
3
It may be true that not everyone owns stocks. However when the market drops it is felt in everywhere in the economy. Some companies can't raise capital for growth, other companies need to cut expenses (you) to stay solvent. The housing market (bubble) drops and people find themselves underwater and without a job. Governments lose tax revenue, cut services and jobs. Etc., etc.
16
The stock market is legalized gambling manipulated by the very wealthy, the foreign investors you cited, insider trading and the nanosecond traders. Many of us are in it through our retirement accounts which were put in place instead of pensions as we continue to move toward privatizing everything. That put a lot more money into the markets for the wealthy to play with. The well-connected use these peaks and valleys as money pumps to fill their already glutted vaults.
121
@mickm - Very nice; please post more often :)
2
Pensions -- both private and public -- are also vested in the stock market.
First, there is nothing wrong with gambling, muchless gambling where the edge is in your favor as a long term participant. If there were a casino with games where you could systematically win over time by following an effortless strategy, you would be foolish not to plow as many resources into them as you possibly could.
Second, the idea that the market is meaningfully manipulated outside of a few select cases (low liquidity, very tiny, niche markets), is unsubstantiated. Are there insiders aware of opportunities you aren't: sure, are there anomalous arbitrage opportunities to be captured by high flying hedge funds: sure. They are irrelevant, and their behavior actually improves market quality rather than diminishes it. The real scams in investing are found in the trade of fringe books offering schemes to get rich quick, the sale of unnecessary tools / subscriptions, and high fee mutual funds funds.
Third, the migration away from pensions was a good thing for many people. Pensions, like employer base and healthcare today, provide a benefit that incentivizes employees to remain captive to their employer rather than exploit the labor market for their full gain. Portable benefits like 401ks provide considerably more control to the investor than the pensions they replaced and offer you the opportunity to efficiently take them with you when you leave.
The saddest fact in this article is that normal people barely invest at all. They are leaving money on the table.
I am someone financially well off enough to be invested in the stock market, both in a growing 401k and a modest personal investment. I don't consider myself wealthy, have worked my whole life, and have saved diligently since my 20's, making many sacrifices to do so. And I scoff at the wealthy like many others. Yet at the same time I recognize what I've come to recognize as the "Shareholder Class", which I'm a part of.
I live in NY, a blue state, and will not benefit from the tax reform. Yet at the same time I've watched many of my investments gain some 30-40% since Trump entered office. The dollar figure is immense to me, recent growth comparable to half a year's income perhaps. Many liberals like to thank Obama for this, and blame Trump for other things, but I'm sure he's inspired some confidence in the market.
What does it mean to have a "Shareholder Class" in society? I think about medieval Serfdom, where countless peasants work hard labor to support wealthy lords, never to move up in society. What once seemed like a thing of the historical past, oddly resembles the many workers of big companies today.
13
It has been profoundly conflicting, to both gain so much by and yet disapprove fairly strongly of the policies and behavior of this administration.
This is a great point though, there is a degree of shared experience among those for whom the largest share of their assets is invested in the market compared to those where this is not the case.
3
The market was up quite nicely under Obama too. The president has very little impact on the stock market. Are you crediting Trump for the recent rise but not blaming him for the recent fall?
As an investor, I can see that Trump's policies will help companies. They will increase earnings and profit, and allow huge sums of money to be repatriated. This is directly tied to stock value in the long term. Will it help employees? This is yet to be determined. Do the wealthy deserve more tax breaks? Probably not.
The recent market fall has been long coming, and is no surprise.
The stock market goes up, and it goes down. What makes this time different is Donald Trump's big, fat mouth.
Donald Trump used the roaring stock market as "proof" of his superior policies, if he had any. So right there you have conservatives rubbing peoples' noses in each new high, and liberals actually cheering for the eventual fall...to the detriment of their own retirement plans, probably.
I would bet cash money that in all of history, we've never seen widespread cheering for a major market tumble. It's another Donald Trump first. What's next, celebrating terrorism, enjoying a pandemic, or laughing at global thermonuclear war? By slashing research dollars, undermining science, having no foreign policy, and prodding America's presidential twin brother, North Korea, we might get all three.
104
So true--I am one of those whom the market fall will personally hurt --but I have been cheering that this "correction" will actually last, and hopefully help the Democrats in the 2018 midterms. It is pretty backward logic, but logic nonetheless. I admit that I have hopefully 20 years before retirement, so can afford to cheer a little bit more for the current fall than someone who is closer.
In our Orwellian world, bad is good and good is bad. Trump, if you tout the highs then you own the lows. Yeah, right.
I disagree that most Dems are cheering this crash or a long, slow, continued decline. Not only are many losing money, they know it is not good for other Americans.
"What makes this time different is Donald Trump's big, fat mouth." - Steve Acho
I disagree. A major contributor to this week's crash is the fact that 'free money' has dried up. This was the decade-long artificial stimulus provided by the Federal Reserve under the leadership of Bernanke and Yellen. It was historically unprecedented and Its withdrawal has sent shock waves through the financial industry. It was only a band-aid solution Wall Street's woes. Some real regulation of this corrupt industry would have been more effective.
Trump did not originate 'TARP'- the big cover-up.
2
In 1929, only 2% of Americans owned stocks, as there was great wealth inequality. Put all the treasure on the starboard gunnel and the mighty Ship of State capsizes and the rich go down to Dave Jones’s locker with the poor.
20
one could use the same logic and say that newspapers don't matter to most Americans because few read them. If they all go bankrupt the majority would not care.
9
They might not think they care, but they would surely feel the effects. We have all paid a price for the demise of carefully reported daily journalism.
This just in... News for Ms. Cohen and all other experts. The Dow Jones has a direct impact on freelance translators, like me. Like clockwork, every time the Dow Jones falls, freelance translation work demand dries up, immediately, and I go further into debt. The general premise makes sense, why should you care if you don't own stock? Well, if you are a freelance translator, your paycheck drops down to a trickle. Riddle me that.
42
Trump’s tax reform was a scam against wage earners in the middle class. It’s ironic that it’s becoming obvious so soon. Shame on the GOP for helping Trump pass this SCAM legislation. Go BLUE in 2018!!!
29
The stock market reflects our human weakness for wishful thinking. The suckers rush in when prices are going up, fueling a bubble. When the bubble bursts, the suckers panic and sell. The smart money sells when prices are nearing the top and waits to buy again when prices hit bottom.
Clearly, Trump was one of the suckers.
5
I must be deaf, because I didn't hear them ring the bell when it was at the top, nor did I hear anyone say "We'll peak out in two days."
1
Great news! I just got off the phone with my peeps at Vanguard. They confirmed that anyone can open a brokerage account at Vanguard with zero dollars. It is NOT like purchasing a mutual fund, which typically requires a $3,000 minimum. And Vanguard brokerage investors can purchase as little as one share of stock to start.
There is no commission charge for investors purchasing Vanguard ETFs. This means anyone can purchase a share of Vanguard’s S&P 500 ETF, VOO, for about $240. OR...one could pay a commission charge of $7 to purchase a much lless expensive blue chip stock. But even if buying a share of VOO, one could put away $5/week and ‘do this thing’ in less than a year.
Let’s PLEASE stop the class warfare nonsense at every possible moment and instead provide more informed guidance to empower folks of almost all economic stripes to purchase equities and increase their net worth? Think I’m hopelessly out of touch? That’s fine. Conduct a web search on the late RONALD READ.
28
What are you smokin', Patricia?
"Middle-class investors" are in the market lock, stock, and barrel. Not as individual investors, but as fully vested and long time contributors to employer sponsored retirement plans. Sound familiar? You may have one of those at the NY Times.
95
Regarding the 10% figure, the article states: "And that includes everyone’s stakes in pension plans, 401(k)’s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans."
It seems to point out how many people don't have retirement plans.
13
As of September, 2017 there was $27.2 trillion in U.S. retirement assets. $5.3 trillion in 401k's the rest in IRA's, defined benefit plans, Treasuries. employer retirement plans, annuities, etc. And most of these plans are invested in the market, and ultimately benefit John Q Public or not.
That's "Trillions", not a few nickels and dimes. Something does not compute with your article. The DOW and NASDAQ combined market caps is $25 trillion.
96
Forgot the Wilshire 5000 and S&P 500.
@cherrylog754,
The bond market is 10 times bigger than the stock market.
Retirement money is in the bond market also.
1
According to this, I shouldn't have any stocks. But I do. I also have bonds and other stuff. And yet my income is so low I haven't paid federal income tax in a dozen years.
Which means either I'm an abberation, or the author really doesn't know what they're talking about.
71
Sure, there are people who don't have stock holdings.
They'll be insulated from market crashes (and rises) only as long as their customers are!
8
In other words, we can't trust any of our lawmakers. Gee...whiz...Wally. Who knew?
4
I should not be concerned about my little shred of the stock market since the majority of it is controlled by 10% of Americans???
I do not find this reassuring in any way whatsoever. Actually I'll probably do a lot of staring at the dark bedroom ceiling tonight contemplating the ridiculousness of our situation.
Those in the steerage class were probably the greatest victims of the hubris that destroyed the Titanic.
115
Take a deep breath and relax.
Unless you currently need to liquidate recent investments for a large expenditure, like a down payment or a medical emergency.
And hold your breath and turn blue if you believed in Trump, decided to recently (re-) enter the market at his pumping, and now find themselves down a considerable percentage.
10
don.t understand this analysis,,, as a retired federal civil servant and my wife as retired Ca teacher our retirement savings through the feds TSP and CA,s Teachers 401 program are heavily into equities?
16
Investments in general affect ALL people because our institutions invest in the stock market. Stop trying to divide us.
48
99% don't share in market-profits, only its losses.
44
Where in the world are you getting your data from?
3
I am nowhere near being one of the 1%, however even with the recent down turn in the markets, my retirement savings is still mostly made up from gains in the markets compared to the amount money I contributed and employer matching, so which indicates the average person does share a bit of the profits.
Tell this to people retired or retiring and counting on their 401(k) or IRA accounts for income.
47
How about the millions of people with modest sums in their savings, IRAs, or money market funds....who counted on a couple percent interest, to give them a few thousand a year to supplement Social Security.
If you have $100,000 and get 3.5% interest on it (historically low!), that's $3500 a year -- enough to pay your Medigap permiums or groceries all year.
If the interest rate instead is 0.1%....you get a measly $100. Enough to eat out. Ounce.
ZIRP is killing the incomes/lifestyles of seniors .... many of whom planned retirement on having a little interest income.
1
When the market goes down enough, like in 2008, people lost jobs. A significantly down market does affect the working class.
54
Absolutely. A woodworking shop owner was telling me today that several customers have put off projects until they see where this settles. Whether you have stocks or bonds, you've taken a hit.
2
"“If all that happens is the stock market decreases or increases in value, but no real fundamentals change,” C. Eugene Steuerle, an economist at the Urban Institute who served in the Reagan administration, said, “then there are actually a lot of winners, not just losers.”
Only an economist could say this. It completely ignores those who have holdings that have declined in value.
13
such a poorly written article. It starts off stating that only 10% of Americans are invested in the markets and then it becomes 50% and somehow it is still an insignificant number of Americans.
25
He did not change the numbers: "A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households." Meaning the other 16 percent belongs to the 40 percent of households.
10
No, that’s not what she says. Ten percent of the population own 84% of the stock; the other 90% (really only 40%) own the remaining 16%. While I agree with other commentators that this discounts the secondary effect of sudden loss of wealth in society — when university endowments decline in value, fewer students receive scholarships — this analysis really emphasizes the outsized wealth as well as income disparity in this country. So yes, I am concerned by the declines, but I am more angry about the inequities in modern American capitalism.
14
WRONG!!! More slant from this leftist publication. Everyone with a pension is an institutional investor; actually 55% of people are in the stock market. People who do not contribute to society are not in the stock market.
9
Why would you say that? If an individual walks into a store and makes a purchase that is a contribution to whomever owns the product. Unless you work in the public sector you probably don't have a pension. Most workers today have a 401K, 403B, IRA, or 457 deferred compensation. If you are about to retire it is a big deal. I know, I was there in 2008. If the stock market goes down enough companies will use it as an excuse to lay off people just like in 2008.
10
Still hurts to see money evaporate.
2
Why is the New York Times continuing to try to convince the average American that this stock market correction won't hurt them. Sure, it probably won't. But Trump has been using the success of the stock market to tout his agenda. By extension, the Times should hang this failure around Trump's neck and scream loud and wide that the market's failure will rob average Americans of their savings and destroy the economy. This midterm election could go further blue if the media would try to push back against Trumpism when it comes to the economy.
15
@Josh,
Ditch the politics. Why should anyone pay any attention to what Trump says? Think for yourself. The sky is not falling and you should stay invested.
2
Thank God for Social Security. Touch it and you're a dead man.
15
When the market crashed in 2008 -- GW Bush was still President -- and it was glaringly obvious that we had taken him up on his "reform" of Social Security (i.e., letting people invest in the market with their payroll taxes, vs. waiting for an SS check).....millions would have lost everything, just as they retired....AND likely the whole SS system would have collapsed.
The amazing thing about people, to me, is their staggeringly short memories.....
1
Wrong.
Individual retirement accounts.
Public and private pension funds.
University endowments.
Individual investments.
Taxes paid on dividends, interest, capital gains.
I'm middle class, making I'm sure far less that the author, and I own mutual funds both inside and outside of retirement saving as do all of my coworkers.
207
IRAs can be invested in almost anything -- I'd guess most people simply have them in an savings account of money market fund.
The logic in this opinion piece is really confusing. The stock slide has only been a week old and there is already supposed to be an expectation of rising unemployment, declining output and business confidence? Sorry, but the stock market is a leading indicator of a good economy and you cannot have a continuous declining stock market and continue to have a good economy. In fact this article does reflect in graph how a declining stock market that devalues the value of a company and takes money away from the pockets of many people will eventually have a serious impact on the economy. Companies will contract and consumers will spend less resulting in a recession. Look at GE as an example of a company whose stock value has depreciated.
8
According to the Federal Reserve Survey, 49.2% of households headed by someone aged 65-74 have stock holdings. Median value of stock holdings for the 65-74 cohort that have stock holdings is $117,000 (2013 data). Hence, 25% of households headed by someone aged 65-74 have more than $117,000 invested in stocks.
The stock market is important to a very large number of retirees who are not rich.
311
Many of the 25% of individuals age 65-74 with stock holdings that exceed $117,000 likely fall into the top 25% of income distribution. If this is true, they had (or perhaps still have) a household income between $100,000-$150,000. By definition, they are wealthy - at least compared to the majority of Americans.
5
Just why do people close to retirement have money in stocks again? If they are fools, and they are fools, they will lose that money anyway. Stop defending stupidity and greed like they are somehow being victimized.
1
@Chris,
Even people in retirement need some of their assets in stocks for growth. How much money would you have to amass to live on 1% interest in savings accounts or 2.5% interest on 10 year Treasury Notes???
1
The political consequences of a stock market tumble may be more important than the economic impact. The investor class has been holding its nose and supporting Trump largely based on the myth that he somehow deserves credit for an economic upswing that started long before he took office. Now that myth may seem less compelling. The market is falling in response to expectations that interest rates will rise. In addition to the effects of full employment, inflationary pressure will be augmented by the Republican deficit-financed tax cut.
14
Markets go up or down -- based mostly on world-wide events -- regardless of who is President.
I think the kerfluffle with Trump is that people like Economist Paul Krugman CLAIMED FALSELY that Trump's election would cause the market to crash and a depression to ensue.
1
When the Greed Over People party and businesses eliminated unions, and pensions, they created the "replacement" of 401k's. Not every business offers them or matches contributions.
They have essentially created a worse retirement for millions, and then they want to reduce Social Security benefits we have been contributing just to make it even worse.
The fact that so many are making money outside of the 401k holders, at our expense, just adds grief to the result.
The greatest generation left baby boomers some inheritance, and we baby boomers can hopefully leave something to our millennial children. This is the middle class. We hope we can leave something after we are gone. but healthcare costs and prescription drugs have had rocketing costs, and we are no longer sure.
Instead of building wealth with good paying jobs, the gig economy and part time employment means there will be less to invest and the only investors and corporate officers will be the wealthy at some point.
Gut the middle class and who could the wealthy possibly prey against next? Each other? We won't be able to buy your stuff because we can't afford it.
220
Thank you for saying what needs to be said.
Wake up America you have been sold a bad bill of goods.
5
My parents led a modest but decent life, and owned their own home -- but their prolonged illnesses at end of life -- nursing home costs and hospice, etc. -- wiped out most of what was left. We children inherited a pittance (*under $4000 each).
And we were lucky. I have friends who parent's illness at the end completely wiped out every asset -- the house, cash, stocks, personal effects -- and the parents had to be put into miserable Medicaid nursing homes (3rd to 5th rate care) because there were no alternatives.
This is actually THE NORM today in the US. Only a few lucky, rich or crafty people manage to inherit anything.
4
How many of the folks without these investments own the latest iPhone, computer and lease a brand new car? There are trading accounts with absolutely minimum fees and asset requirements. I know that would require some introspection as to personal responsibility and choices rather than the blame the rich game.
18
Ahem, amateurs playing the market on iPhones might as well be in Las Vegas. They are never going to be ahead of the market, and their added heat will simply build up prices so that institutional investors can profit strip like we see here.
10
Wait a second. Are you seriously criticizing people for not being invested in the stock market because they are irresponsible or make poor choices? You do know that investing with those minimum asset requirements would result in minimum returns (if not net losses), right? And the last time I checked it was the rich that tanked our economy in 2008.
15
the poor do make bad choices as well as the rich. One could have accumulated shares in mutual funds while the market went sideways during George W. Bush. They could have also not sold low in March of 2009. They could have stayed invested. They could have also added to their investments by cutting out HD channels on their cable bill like I did and redirecting the money once their car was paid off like I did.
2
There are many different ways to categorize households as between those that are middle class and those that are rich. Likewise, there are a number of ways to measure how a change in the tax code impacts various sectors in the economy. There are also different methodologies used to calculate what percentage of federal taxes is paid by middle class households as compared to the rich. However, by any conceivable way of delineating the middle class from the rich, and measuring the impact of changes in the tax code, the tax bill enacted will be the most massive shift ever, in the tax burden away from the rich and thus onto the middle class.
While critics of the Republican bills correctly call it war on the middle class, a more accurate critique would be to call it war on wage earners. Middle-class households that do not primarily live on wages or pensions but rather derive their income from dividends, profits or inheritances will come out ahead.
Likewise, those whose very high incomes come solely from wages will do worse. It is likely that many of those who now are paid salaries will try to reorganize themselves so that their salaries are now pass-through business income, which is to be taxed at a much lower rate than wages, salaries or pensions.
Whether it is labeled a war on the middle class or a war on wage earners, it will be a mostly a massive shift of the tax burden from the wealthy and on to everyone else. .."
https://seekingalpha.com/article/4127862
65
37 percent of stock ownership, as I understand it, is pensions and IRAs. Dismissing that as insignificant seems foolish to me. That is unfortunately the retirement monies of far more than 37 percent of the population.
319
Except it is under 50% *including* the pensions and IRAs. As noted in the article.
5
Your math is wrong. 37% owned by pensions and IRAs does not equate to 37% of the population. Think about it.
This points to another problem, though. The awful financial knowledge most Americans posess.
13
Try reading the second paragraph of the article: all that is included in the calculations being discused.
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This is akin to the concepts of 'job creators' and 'investors'. All monikers for the ultra wealthy, corporate executives whose pay is based on stock valuation, and Wall street bankers.
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