The Atlanta massacre in July neatly summed up all of the ills facing the US in one brutal swathe of carnage, as a distressed victim of stock market hype discovered that stocks can go down as well as up, without him being tipped off first. So exactly how did this macabre event become to typify the malaise of the US?
are easily obtained in the US. Forget controlling them
now, with more than one for every US citizen, the chance
of recalling them is non-existent – ask Tony Blair about
decommissioning a “tiny minority” if you don’t
believe. The only answer the US can come up with is asking
every citizen carry one all the time so that the
chances would be that the loonies would be taken out
before they got too far. And after 10 years of prcatise on
Doom-like games, the upcoming Playstation, Nintendo and PC
owning generation probably now has fast enough reactions
to take out the entire James Gang before their trusty 45s
are two inches out of their holsters.
stock market is a double victim of technology – firstly
the companies developing and marketing (old fashioned
“selling” for money and profit is hardly an issue at
present) technology has become the subject of unbelievable
ratings in terms of traditional price/earnings terms.
secondly, the emergence of electronic share trading for
the masses has taken the once revered process of managing
the Capital Markets from the hands of brokers and bankers
- their traditionally well heeled clients, and put it in
the hands of many of the same punters that play the
lottery. These are the so-called “day traders” because
they don’t buy stocks for long term growth, they buy
frequently for hours in case they thing that they can play
a trend and make a fast buck.
being rich in irony (and thus sailing over the heads of the
average US citizen) this means that thanks mostly to the level
playing field of the internet, the US has transformed itself
in the space of 24 months into the nearest thing to a
genuinely communist country where information is shared
equally, there is no class struggle, but absolutely everything
has become a function of money. Even the failure to remove
their philandering president for perjury was a function of the
needs of the economy, nothing much to do with ethics. Jonathan
Aitken was in the wrong party and in the wrong country.
Once upon a
time, a business was rated as being worth around 10-15 times
it’s projected annual earnings (after tax) for the next
year. So a business that was going to make £1m net would be
worth – yes, you got it - £10m. Added to which, crusty old
bankers sitting in their oak-paneled boardrooms would expect
see something called a track record of the business
performance over the past 3 years at least. Times change.
The rise of the US stock market accelerated from its already
brisk pace between the start of the year and May, and this was
attributed the awakening of the US financial scene to the
reality that over the preceding Christmas period, people did
indeed buy things over the internet. Up to then, many of the
out-of-touch the bankers still believed their patent old
nonsense about insecurity of credit card fraud etc.
So then the
issue became one of audience eyeballs, and the thus the
potential to corral customers in the long run, because there
is no time in these days of frenetic change to wait for track
record to emerge. In the philosophy of legendary currency
speculator George Soros, a bandwagon identified, is no longer
And now even the Brits are going mad. Dixon’s FreeServe made
no money in 9 months, and immediately after it’s public
share offering, the market rating suggested that the business
was worth £2bn. Which means that each fickle user is
regarded as a potential £1500 asset, since to be frank, there
are no other “assets” of such a business.
don’t imagine this means that this is the same as people and
institutions paying £2bn cash for FreeServe. It comes about
because as little at 20% of FreeServe was offered for sale, so
people have actually paid only (only?) £400m thus far. If
Dixons was pop down to its local share shop tomorrow and
attempt to unload the other 80%, the market price would
collapse, such are subtleties of High Finance.
If you suspect this is all a Confidence Trick on a massive
scale, you are right. In Threadneedle Street and around the
City, they prefer terms like “sentiment” to “con
trick”, but the net result is the same. Stock prices are
buoyed on rumours, and rumours are – by definition –
insider information, that legally ought not to be leaked. In
the days before photocopiers, email and floppy disks, this was
containable. Now it simply is not.
technology that exists in any US (and many) UK high tech
businesses means that the preservation of secrecy is now down
to nil-minus. Day Traders in the US are sufficiently outraged
when they can’t get inside information in time to make many
or avoid losses, they shoot people. So just as some brave
sports administrator suggested calling off the unequal
struggle between the governing body, drugs and cheats, it may
be time to accept that there is no such thing as “insider
information” and then maybe fewer naïve traders will get
reamed, and fewer US citizens murdered.