Almost every day I read or hear about a longstanding truth discovered to be false. Things like “X substance once thought to be healthy, now found to cause cancer,” or “X substance once feared as cancer risk now found to reduce heart disease by 80%.” It is with this lens that I look at today’s economy and wonder if the stock market is worth having at all.
After all, it was once accepted wisdom that buying a house is superior to renting, that putting money in banks was secure and that holding onto too much cash was not a sound strategy. There is still some truth to these things, but the buckets that hold them have several major leaks and don’t hold water as well as they used to.
Is the stock market obsolete? To say it is necessary because we don’t have a better alternative is not a sufficient raison d’etre. This week’s yo yo activity of the indexes is a clear demonstration that our entire financial backbone is no more stable than an “emo” teenager with poor self esteem and absentee parents. It acts “hormonally” and with no seeming intelligence or relation to facts. It jumps to judgment faster than Nancy Grace on a suspected child kidnapper that merely “looks” guilty. This is what we pin our entire financial hopes on? It seems quite preposterous and foolhardy, doesn’t it?
The function and purpose of stock markets is for companies to create capital by opening up to investors. The tradeoff of recessions and long lasting economic malaise induced by stock market activity, to me at least, no longer seems worth the benefits. The current way the market operates seems very much out of sync with its original intent.
If you want examples of the absurd nature and twisted logic of the investment world, you don’t have to look very far. As Groupon recently proved, you can’t even rely on what Wall St. says something is worth or any of their valuation claims. Evidence that the stock market is a positive force in our world is far less available than evidence that it is just a ridiculous thing that we’d be better off ignoring.