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The problem is the way the system is rigged.
Kroger is a publicly traded company, their stock price right now is 46.71 / share.
You can see their most recent earnings report here:
https://ir.kroger.com/news/news-details/2023/Kroger-Reports-Third-Quarter-2023-Results-and-Updates-Guidance/default.aspx
Operating Profit of $912 million; EPS of $0.88
Now then... for NEXT quarter... It doesn't matter if they are profitable or not. Because they are publicly traded, they are going to be expected to make MORE profit than they did this quarter.
Let's say next quarter they "only" have $890 million in profit... Most of us would KILL to be that profitable.
The stock market analysts will look at it and go "yeah, but you 'lost' $22 million from last quarter..." and they will punish Kroger for failing.
Even worse...
Let's say Kroger raised their prices and pulls in a profit of $915 million next quarter... they can STILL get punished if the market goes "Yeah, but our analysts expected you to bring in $921 million in profit."
Failing to meet or beat "expectations" is just as bad as raking in less of a profit than last time.
So prices go up, because they have to make more money than the same time last month, last quarter, last year.
abolish the stock market. put these hogs on a fucking island with no natural resources but sand and salt water. set up a camera and let us watch.
It's interesting how recent the stock market really is:
https://www.sofi.com/learn/content/history-of-the-stock-market/
"The first modern stock trading market was created in Amsterdam when the Dutch East India Company was the first publicly traded company. To raise capital, the company decided to sell stock and pay dividends of the shares to investors. Then in 1611, the Amsterdam stock exchange was created. For many years, the only trading activity on the exchange was trading shares of the Dutch East India Company.
At this point, other countries began creating similar companies, and buying shares of stock was popular for investors. The excitement blinded most investors and they bought into any company that began available without investigating the organization. This resulted in financial instability, and eventually in 1720, investors became fearful and tried to sell all their shares in a hurry. No one was buying however, so the market crashed.
. . .
Although the first stock market began in Amsterdam in 1611, the U.S. didn’t get into the stock market game until the late 1700s. It was then that a small group of merchants made the Buttonwood Tree Agreement. This group of men met daily to buy and sell stocks and bonds, which became the origin of what we know today as the New York Stock Exchange (NYSE).
Although the Buttonwood traders are considered the inventors of the largest stock exchange in America, the Philadelphia Stock Exchange was America’s first stock exchange. Founded in 1790, the Philadelphia Stock Exchange had a profound impact on the city’s place in the global economy, including helping spur the development of the U.S.’s financial sectors and its expansion west."
I don't know if my highschool education is failing me, but the US declared independence in 1776, so I feel like the US not having a stock market until the late 1700s makes a lot of sense.
Old enough to be the "tradition" of the united states of america, and thus never be legally challenged by the SC.
That's not the interesting part. The interesting part is that the Dutch East India Company was under a legal charter where they could make war with and enslave whoever they wanted to as a quasi-independent entity.
That's what the stock market concept is based upon. Slavery and murder.
That's what anything is based upon. Murder and the threat of it.*
I mean, that's a bit unfair. The stock market is a concept that's based on expected annual growth paid out in a steady return on investment. Slavery and murder just happen to be incredibly lucrative industries, such that you could confidently invest in firms like Dutch East India and expect more than you put in.
Pick up a copy of Picketty's "Capitalism In the 21st Century" and you can see how this played out over the long term. Prior to Capitalist market mechanics, you'd have these feudal estates that would levy rents with a steady-state expectation of returns. You had 10,000 acres being worked by 100 farmers and they tithed you their surplus in food. You warehoused that food and traded it back to them for their labor, with which you built churches and castles and recruited soldiers for your next war. But the real economy was stagnant, outside fluctuations in population from plague or invasion or natural disaster.
Then you get this idea of cumulative return on investment, and there's this sudden rapid expansion of commerce and capital that simply had no historical parallel. This didn't need to be predicated on bloodshed or occupation. The textile industry boom in the UK, for instance, was this more-or-less bloodless conflagration of productive forces. Huge industrial looms turned a desperately scare resource into a cheap consumer commodity within a span of a few decades. And a big part of that was the feedback loop of investment -> capital production -> lucrative returns -> re-investment.
Similarly, the boom in agricultural productivity thanks to the advent of modern fertilizers has functionally ended natural famines. This was, incidentally, a knock on effect of the Loom Boom, as the first industrial fertilizers were derived from pesticides which were derived from clothing dyes.
The pain and suffering that followed the Dutch East India Company was not a consequence of the market mechanic nearly so much as it was the consequence of an aristocracy with no countervailing force among the proles. It was consistent with the behavior of lords and kings going back thousands of years, just industrialized.
How old are you that 500 years is still recent?
Well, when you consider that humans go back 300,000 years or so, and "civilization", such as it is, goes back 10,000 - 12,000 years, 500 years is really not much at all.
Anything in relation to humans can be called recent if you’re playing in those timelines.
The problem is that a bunch of the hogs are our retirement funds.
We need to remove the middle-men from the equation and institute guaranteed basic income before we can change it.
It did serve a purpose. But like all money and corporation things we've let the wealthy run away with it.
You should absolutely not abolish the stock market because it's the single way most average people have to becoming wealthy. What you should do is change how it operates. Here's a novel idea I've had for a long time.
Make more and more companies worker co-ops going forward by incentivizing them the attacks credits and local government health in getting them started. Preserve 75% of the company for the people who actually work there which is what makes it a worker's co-op.
Reserve 25% of the company for speculation on Wall Street and to raise capital if they need to.
This way you can have sort of a socialist economy that avoids abuses and a stock market at the same time that provides liquidity and efficiency.
It's all so dumb. I'm sorry for the language, but it's just really, really dang dumb. There, I said it.
Try working for a publicly traded company and having stock shares.
I had a decent chunk of stock. One quarter we failed to meet expectations by 0.23%. The stock price went down 30%. Grrr!
I worked for awhile at a private investment firm. Still can't muster much more than it's all so, so dumb.
The shit part is even with private companies if they're run by a bunch of fucking idiot owners, they do not want to back off their bottom line, so they'll just let people go vs having savings to weather a down turn. Very few of our companies that employee everyone are run by intelligent people... it's mostly fucking idiots driving the ship like crack heads looking for their next fix.
You must have joined the work force in 2021. Stock drops like that are extremely not normal.
This happened to the company I'm in. We had record profits, were positive for the first time in years, and beat our goals by a decent bit. Stock prices tanked anyway because "the best we've ever done" wasn't good enough for the shareholders.
The "expectations" aspect became especially apparent when Tesla was valued higher than the next top 10 auto manufacturers combined.
It was literally that Tesla is new shit that we can bet on. It has nothing to do with Tesla's actual value.
It's also the issue with buying stocks based on a company's performance. If you do that, you're already too late because investors with more information have already bought based on a prediction of that performance (or insider information).
That was just people chasing fomo and the "greater fool". Basically some people are dumb and don't want to miss out. Other people know the company is crappy but think they can sell to a dummy at a higher price. Eventually people think "it's different this time" and pay way too much money. Last dummies are left holding the bag.
Exactly what's happening with Bitcoin and all other cryptocurrencies. There's no value attached to the currency besides hype, which eventually fades. The USD is reliable because the US government only accepts it as payment for taxes. You need it. No one important accepts only Bitcoin. So you don't need it.
No one important accepts only venmo, yet it is a popular platform for payments. Nobody outside of the US has to pay taxes to the US govt yet they still choose USD. The value of the currency come from the same things that bring value to all currencies: people's faith in its monetary policy and network effect (how many places you can spend it). All currencies are speculated on by traders, this is not unique to Bitcoin.
Bitcoin has maintained it's monetary policy in a stable state and worked 365 days a year, 24 hours a day for 15 years without a single day of downtime and without being hacked. And for reasons of math and physics, it will continue to do so. Nobody, no matter how powerful you are, can print Bitcoin that isn't meant to be printed or spend money you don't have the private key to.
With Bitcoin lightning, you can send a transaction across the globe in under a second with pennies in transaction fees. This can be accessed by anybody with a cell phone and halfway reliable internet access, regardless of whether they have access to stable banking infrastructure, which Billions of people, with a B, do not.
Bitcoin's total market cap is over 800 billion which puts it in the top 25 countries by GDP. Higher than Sweden. Higher than Israel. Higher than Vietnam. On average, adoption and market cap grows every year no matter which metric you use to measure it.
Every day, every single block on the bitcoin blockchain is full of transactions. People pay for that space, there is no empty space left in any of the blocks. People are sending money from A to B with it. It secures those transactions. That is its use case and value.
I always imagine the stockholder that trades off quarterly expectations to be someone sitting in an overly large home getting all bent out of shape because someone else's labor didn't make them enough money RIGHT NOW!
It isn't one guy adjusting one portfolio relative to a single quarterly change in profits. You have to look at this as thousands of hedge funds with tens of billions of dollars in investor cash comparing Kroger to Safeway and Walmart and saying "I want 8% exposure to the cyclical consumer retail sector and I have $X-Billion to invest, how much of that do I want to distribute across these three companies?" And then if Kroger underperforms Safeway and Walmart, my algorithm tells me to sell Kroger stock and use the proceeds to buy up Safeway/Walmart.
This gives Safeway/Walmart a lower rate of effective borrowing, which means they can build new stores in territory adjacent to Kroger locations or expand into territory none of them dominate. It sets off a cascading effect in which Safeway gets to grow while Krogers treads water. Eventually, Safeway can start installing stores directly adjacent to Kroger and selling everything in this one storefront at 10% under cost-of-purchase until Krogers goes out of business from cut-rate competition. Then Safeway jacks up their prices at this one store and returns to rising profitability.
That's the market mechanism in effect. Low lending rates mean you can drive your competitors out of business. So everyone needs to run a competitive profit margin in order to avoid getting swallowed up by their neighbors. And the folks who decide if you're "competitive" are a handful of mega-investment banks that decide how much of your stock they're going to buy.
This one statement says a lot about the American economy
And thank you for the explanation
And disregarding those expectations can carry personal liability for anyone in a position to do it, because the executive leadership of the company has a legal responsibility to act in the interest of the shareholders above all else.
So like, I'm no stock broker, but if I understand right, a company doesn't directly benefit in any way from a higher stock price, right? They could split it, but for the most part, once their shares are bought up, the only people benefiting from the stock are rando shareholders and the handful of employees with stock options.
The stock price determines the overall value of the company and has all kinds of ramifications, purchase ability, loan agreements, etc. etc.
Ah, I see. Interesting.
Adding to this:
Executives are often paid in stock so they're invested in seeing the price go up.
A corporation's board of directors (who lead the company and can fire/hire executives) are also paid in stock or have very large stock holdings already.
All the people at the top benefit from seeing that stock price go higher. They care more about stock price than whether or not customers are happy, or if they're doing right by their employees.
As someone that has worked on Wall Street as a professional trader I can agree with what you're saying and I agree that it needs to change. We need to get rid of this idea of endless growth. It's just not reasonable to expect that from every industry considering that industries have cycles and eventually they mature.
You hit a point of maximum (Pareto) efficiency where people are actually driving the most possible benefit from a business and there's a good healthy return financially. And then businesses feel the need to overshoot that and water down the quality of the product until people stop buying it entirely.
Then they just blame changing consumer demand rather than taking responsibility.
It's a real problem and it's going to impact our lives going forward much more aggressively as corporations win the culture war.
I remember back in the day Exxon set some kind of quarterly record, not just for them but for ANY company. Everyone was going "Wooo!" and I was like "Yeah, but now they have to beat that..." Nobody seemed to get it.