Capital Actually Gains...

The Ponzi Factor” by Tan Liu, 2019

This excellent short book asks the basic questions about stock markets which are never asked in corporate-controlled ‘economics’ classes.  The first question is if the only way to make a ‘profit’ off of common stocks is to sell them to someone else later for a higher price, why is that not the same logic as a Ponzi scheme?  In a Ponzi scheme, the earliest investors are paid with money from later investors.

You Knew It All Along

Liu was trained in ‘economics’ and worked at several trading firms and hedge funds.  In the process he wondered about this and other very basic issues, but figured he was just ignorant of the real facts.  He accepted the evasive answers of proponents of the market.  But no longer.  Liu starts with the example of Tesla, whose shares are now worth ~$300, while losing $6.3+B as a corporation up to 2018.  Yet Tesla shares do not constitute ownership – that is a myth.  The ~$300 is only a figure on a computer screen.  But for Tesla your payment for their stock is real money.

Liu details his somewhat humorous experiences working at two hedge funds, which both went belly-up.  One was involved in buying life insurance policies, of all things.  He began to question the logic of what was happening, which resembled a Ponzi scheme to him. 

In the book he looks into the fraudulent nature of ‘accrual accounting;’ the data-deficient inaccuracy of ‘positive sum’ market assumptions; the discrepancy between market ‘values’ and the actual amount of cash in existence; the very real nature of fees; the collusion between universities and Wall Street; the bogus idea of ‘shareholder’s rights’; even the symbols used to describe cash, real estate and stocks.   

Bonds that pay interest and the very few stocks that still accrue dividends are exceptions, but they are not the heart of the common stock markets.  Most mutual funds contain these misnamed ‘equities’ to varying degrees, and only some pay dividends, usually 'balanced' or 'bond' funds.  If you 'reinvest' your mutual fund proceeds, you never get that money, only more shares.  So few workers are immune if they have IRAs or 401k/403bs. 

In essence, you are paying-to-play in a casino for capital gains.  But it is Capital that really gains.  Liu concludes that markets in stocks must be ended. The book reveals that Wall Street is an emperor dressed in underwear.

Liu appeared on Lee Camp’s show on RT.  Look up his appearance and BUY THIS BOOK! - which is available locally right now only at  May Day.

P.S. - Here is a YouTube video from Liu on 'investment junkies.' 

https://youtu.be/UvusBl42Gs0

Other blog reviews on Wall Street below:  “Flash Boys,” “The Big Short,” “The Great Crash,” “Debt & Capital,” “Retirement and Wall Street,” “Liar’s Poker,” “Liquidated - An Ethnography of Wall Street,” “The Wolf of Wall Street,” “House of Cards,” “Griftopia,” “Den of Thieves.”  Use blog search box, upper left.

And I bought it at May Day Books for a very low price!

Red Frog

January 22, 2019