Is this image the secret to unlimited financial wealth? Someone is sure it is, to the tune of $14 million.

A recent post by Peter Grant ties together several of the malignant problems in our economy. Asking how it affects you should prompt you to action before it is too late.

The day after my previous post on finance, I saw this excellent post by Peter Grant which, while unrelated, does much to expand my points.

While the whole post is definitely great food for thought and I recommend reading it, here is the short version.

  • Politicians and investors combined are what you might call, “The Political Class.”
  • The political class is failing because it focuses on things instead of people, when people have a bigger effect on outcomes than the things the political class is so focused on.
  • A dozen or so links to news headlines illustrating how the average American is less and less able to support himself in our current economy
  • While most Americans are financially suffering, the political class lives life in a bubble where they make big $$.
  • Illustrating article in which a company pays ridiculous millions to buy a vacant field to put up an antenna closer to the stock exchange and shave microseconds off their transactions.
  • Point that we ordinary Americans are largely irrelevant to the business going on at these astronomical price levels.
  • Cynically humorous movie clip about how ridiculously rich people pay ridiculous prices for stuff that’s nowhere near worth it, and how that is true capitalism.
  • Counter-point that while the ordinary majority don’t seem to matter, we do because the system depends on us going along as we always have.
  • Supporting evidence from the mortgage crisis.
  • Call to exit the game of the political class in which they profit off us going along with the current financial system.
  • Warning of debt and the inevitable collapse of our debt-driven economy.
  • Tip to get food stores now.

Here’s a key quote I want to pull out for your attention:

The article illustrates a financial ecosystem that ignores people, or ‘boots on the ground’, or ‘brick-and-mortar stores’, or any of the traditional measures of an economy.  Instead, it measures success in terms of microseconds, computers guided by artificial intelligence systems and a few experts making trading decisions on stocks and bonds so fast, and responding so quickly to one another, that small investors like you and I have virtually no chance of duplicating their successes.  If you hold shares in an IRA, or 401(k), or mutual funds, you’re basically irrelevant to the stock market as a whole.  You and I simply don’t count in these terms.  A few players make millions . . . the rest of us just sit on the sidelines, hoping to catch some of the crumbs as they fall from the players’ tables.

Expanding the Point

Taking a look at the linked article about the antenna (pictured at the top), here’s what I want our readers to ask themselves. A small investing company bought a field and paid $14 million, double what it was worth, just to set up an antenna to shave microseconds off their trade actions.

Many of our readers have typical retirement plans, are invested to at least a minor degree in stocks or mutual funds or 401k’s, or maybe received shares of your corporation’s stock as part of your benefits package.

But have you ever operated at a level where microseconds mattered to your investment decisions?

Have you ever lived at a level in our economy where it would be cost effective for you to spend millions of dollars just to shave microseconds of your trade transactions?

Do you even know anybody who lives like that?

No?

Then I’m betting you’ve not seen much of that “financial recovery” that’s apparently been going on since early on in Obama’s term.

The closest I come is having had a roommate in college, son of a professional stock broker, who liked to watch the real time market changes because he was able to profit off the “lunch-break” buying and selling spikes, in which human traders were trying to get all their trades done before taking a break to eat. He offered to multiply my money for me if I’d put $10k under his management. Sounded good…if only I had $10k back then.

How Much Do Those Guys Make?

Did you know you can look up the exact salary benefits of any CEO of a publicly traded company?

It’s easy, when you know what you’re looking for. Search for the company name with “10k Filing” or “10k report.” This is the annual report required by law to be publicly filed with the SEC for any publicly traded company. These reports are typically about 70 pages long, but its easy to scroll through until you find the tables on executive compensation. After all, stock holders are the real “owners” of the company and they want to know exactly how much they’re paying the Executives for the performance they get.

But bring it back to reality by taking a look at this recent article on how the CEO of Target is doing. Apparently Target’s stock performance has been in the dump since their announcement of transgender bathroom policy. (Score one for ordinary Americans! We can make a difference.) Apparently, the “diversity department” had enough power to just force this policy without the CEO’s approval, and he had to just go along with it. Now he took about a $22 million dollar pay cut!

Yikes! What kind of adjustments do you have to make to your lifestyle to absorb a $22 million dollar pay cut? But hey, he still pocketed just over $11 million, so no biggie, right?

But what do you matter? If you added up the net worth of your entire family tree for as far back as you can trace it, does your clan combined across history have $11 million of buying power? There’s a few readers who can say yes, but most would say no.

So if our economy depends on spending, and you will never spend $11 million in all your life, your kids’ lives, and your parents’ lives, do you really matter to the economy?

Peter Grant is Right

He’s right on two counts.

First, the focus on things instead of people when people actually make the difference. I’ve observed this behavior in corporations, and it was a big part of my choice to redirect to a homestead business with debt-free capital assets. But Grant is right for reasons other than he mentions. The focus on things instead of people is what is leading to collapse of many of these huge companies. What was Enron worth? What was Anderson Consulting worth? What was Lehman Brothers worth? What about MF Global? Where are they today?

Problem was, everyone was so focused on the widgets of the business or their daily tasks, they didn’t notice how many unethical people had crept into key positions. And eventually, the enormous company collapsed like a car driven in salty winters until nothing was left but rust underneath that pretty exterior. Turned out, people did matter more, because it was the behavior of several who brought the millions and billions of dollars to be worth $0.

Second, Grant is right that the economy will come crashing down. Not because we all unite and decide to stop playing the game of the political class by enslaving ourselves in debt so they can benefit. Rather, the debt market is hitting saturation point. A man much wiser than me observed, you can print more money but you can’t print more borrowers.

And when all these ordinary Americans are maxed out in debt, the bottom of the pyramid explodes and everything above will come crashing down. As just one example, Millennials are so up-to-the-eyeballs deep in debt from their college loans that they can’t qualify for a mortgage until after a decade or more of work. What does that do the housing market and the mortgage market?

Banks wouldn’t be pushing to offer unreliable “liar loans” as they did recently in Canada and in the 2007 mortgage crisis in the USA unless they had already used up the pool of reliable borrowers. This is one point of many which makes me so certain the economic crash is on our doorstep.

Are you ready? Are you going to ride the corporate and Wall Street Russian Roulette for a few more years, or are you going to Flee The City and start building your secure homestead where you can ignore the crash?