Corporatization - Why we forgive and forget

Corporatization - Why we forgive and forget

I still remember when gold was worth something. These days though the focus is on shares, not gold or silver. The value of silver, once a major asset, is now set at little more than a junk material. An ounce of silver is today worth a little over $20. Silver hit its peak in March 2011 with a price over $46 an ounce but since then the fall has been relatively steady. Gold prices in 2011 were at $1,800 an ounce for a period in July. Since then the value has been in steady decline and today an ounce of gold is worth around $1,300. The prices in 2011 represented investors wariness of investing in anything other than tangible, real assets. So where is the money going now if not to the normally solid investment of gold and silver? Back into shares of course.

The performance of shares since the depths of the so called Global Financial Crisis, is easily highlighted using the Dow Jones Index. The Dow, as it is called, is a price-weighted average of 30 actively traded blue-chip stocks and is used as a barometer of how US shares are performing. The Dow value in early 2009 was 6,547. Today, a little over 5 years later, the value is around 16,750. That is a growth of over 2 1/2 times its value or 155%!

We may draw the conclusion that investors have short term memories. But is that really the reason?

If we look at the way the US has changed in the last few decades, it has been a transformation to a "Corporatized" America. Corporations have been steadily growing in both size and value by taking over smaller companies and merging with larger ones. Corporations now have a huge impact on who is elected, what laws are in place and what policies Governments should adopt. The CEOs and executives of these Corporations are rewarded for increasing the share price rather than other indicators of success. The share price is used as the scorecard in today's corporate world and it is constantly on the screens on CNN, BBC, Bloomberg and all news channels. It is flashed up during morning program's and often hits the headlines in newspapers. A multitude of magazines, newspapers, books and shows dedicate their stories to forecasting share prices and explanations of how shares will rise and fall. It is an investors world and the preferred investment is shares. The promise of quick wealth draws the players in and keeps them playing. "Mum and Dad" investors are tempted into the market to play the game. Websites sprout up with "easy to use" systems to make the game available to more and more players. The Shares Game is THE game to play - the best game in town.

Most middle class (despite their shrinking numbers) and above are now owners of shares - they are in the game. They watch their favorite Corporate machines grow their share price and they anxiously look for signs that their teams are performing well. They applaud when their Corporation scores a goal and moan when they have a goal scored against them. They have picked their teams and now they root for victory. Statistics are examined, competition is scrutinized, expert opinions are considered and bets are laid. Indicators are invented and pointed to as they tell us to "double down" on investments. The Bloomberg Consumer Comfort Index, we are informed, "rose to 37.6 in the week ended July 6, the third-strongest reading since the start of 2008..." Investors are constantly given reassuring news so the money continues to pour in. A Portuguese bank delays some payments against short term debt and for a few hours the markets start to remember 2008. Some encouraging words from various experts though and the market is back into positive ground. 2008 is conveniently forgotten again. The never ending gains continue.

The very Corporations responsible for the crash of 2008 that resulted in the loss of trillions of dollars of investors’ money and the cost of trillions of dollars of tax payer funded bailouts are again cheered on as heroes in the new game of the 21st century.

Ladies and gentlemen, place your bets. You just can't loose.

So how fair is this new game of Corporatized America?

Share prices, it seems, can be manipulated relatively easily. CEOs and CFOs know the levers to push and pull to impact their share price. Redundancies, for example, are a commonly used lever to raise the share price. The "market" always reacts positively to a company reducing its workforce. Restructures are the tool to use to rearrange losses and hide non performance. Rumors, lies and propaganda are also useful tools to manage share prices because individual investors may be savvy but the "market" is easily kept fat, dumb and happy.

The economy, now primarily driven by Wall Street speculators and investors looking for fast, easy wealth and driven by the promise of huge bonuses, watches every corporate move in the hope of discovering its secrets. Statements by the Federal Reserve or reports on employment rates and the like are carefully considered along with previous form, weight and odds so investors can bet on the rise or fall of the competition. It is an all consuming game with players addicted to winning and now, with interest rates at zero, borrowing money to place a "sure fire" bet is easy.

We have been convinced. The Corporations that caused the economy to have a near fatal stroke is now well recovered after its period on bailout life support. It is healthy and strong and everyone who has money is betting on a never ending period of huge growth. Share prices are rising and there is no visible sign of them ever going backward. We now see the new Corporatized America as our savior and lifeblood. What caused the suffering of millions as their savings and investments disappeared overnight in 2008 are now our new heroes. We now cheer them on like our favorite sporting team. Gordon Gekko, the character from the 1987 movie Wall Street, was once held up as a symbol of what was wrong with America. Today he would be hailed as a hero, lifted onto our shoulders and paraded around the playing field while we chanted "Greed is Good!"

Crisis looming? What crisis? What could possibly go wrong go wrong?