The Cranky Media Guy

weekly commentaries and editorials
   Editorial Page
   Weasel Of The Week
   News Talk
   Cranky Music Man
   Editorial Cartoon
   CMG-TV

monthly feature columns    Fast Food Critic
   Who Is 'Blue Collar'?

The Crank Tank    Previous Columns
   Weasels Hall of Shame

editorial page

It's the (Lopsided) Economy, Stupid!

by The Cranky Media Guy

You can't swing a cat today without hitting some "analyst" telling you how good the national economy is. Hell, CNBC is infested with 'em, all day long. Things just couldn't be better! Nope, we've just never seen a better economy than this. Nosiree!

At the risk of developing a reputation for being a nay-sayer, let me respectfully disagree. The U.S. economy sucks! Yeah, I know, I know--how dare I, some fat goofball who dropped out of two colleges say the economy sucks when every expert is saying that it's just hunky-dory? Well, let's pick this bad boy apart, shall we?

What are the big indicators they always use to "prove" that the economy is in great health? The Dow Jones Industrial Average, the incredible growth of Internet stocks and the unemployment rate, right?

Okay, let's start with Numero Uno, the Dow Jones. Didja know that the DJIA only represents 20 stocks? Thousands and thousands of stocks floating around out there and you're telling me that 20 friggin' stocks accurately represent the state of the entire market? Uh, don't think so, Sparky. Even Arbitron and Nielson are more representative than that. Fact of the matter is, while the market was going through the roof (according to the guys who get paid to know these things), the majority of stocks LOST money! Read that last sentence again if you had trouble getting the message. Yes, it's true, sports fans. During a period in which we were told that investors were making money hand over greedy fist, the average stock holder's investment lost value. Didn't hear much about THAT on CNBC, didja?

Want my guess as to why? Of course you do! Do you remember a sketch on Saturday Night Live (a "comedy" show that NBC insists on producing to this very day) from back in the Bush era in which a bunch of George's boys are debating what constitutes "poor"? Someone mentions an income level below $200,000 per year. Another character scoffs at the notion that there are such people in America. Another agrees, saying, "Everyone we know makes $200,000 a year!" I think that's what's happening with financial reporting on TV (actually just TV reporting in general). It's gotta be pretty hard to relate to the average viewer when everyone you know is making six figures. Kinda skews your perspective, dontcha think? If everyone you know made a killing in the market, it's just possible that you don't even realize that there are those unfortunates out there who didn't make out quite as well. You know, those poor chumps who don't get to eat lunch with CEO's and maybe even occasionally get a little advance notice about something big about to hit the market. The Dow Jones don't mean doodly if your portfolio consists entirely of International Buggy Whip shares. Besides which, less than one-third of adult Americans own any significant stock portfolio anyway. Two-thirds of us didn't get squat out of the stock boom.

OK, Internet stocks. These are the biggest scam since Ponzi hit Boston. (If you don't know who Charles Ponzi was, hit the library and find any good book on financial fraud. Basically, a "Ponzi scheme" is pretty similar to a pyramid scheme, although usually on a much larger scale) Damn near everyone is aware of the amazing rise of the price of the major Internet stock issues--Amazon and Yahoo, for example.

There's an interesting thing you find out when you take the time to look past the surface with these Wunderkinder, though. Most of 'em have never made one dime in profit--ever. Amazon actually LOSES money on every sale it makes, because of their heavy discounting and cost of shipping on each order. It ain't much, mind you, about a buck or so per order, but it adds up.

Yahoo's core business, a free search engine, has no way to make any real money. Oh, you wanna bring up those "click-through" ads? Well, statistically, they have about a one or two percent click- through rate. That means that only about one or two people out of every hundred who see 'em ever clicks on 'em. That ain't too great. How much could you possibly charge for ads with that low a response rate? Enough to justify Yahoo's stock valuation, higher than that of J.C. Penney, a company with hundreds of stores that's actually been around, selling actual, physical stuff for about a century? Trust me, Yahoo ain't living on click bucks. The same story applies at e-business after e-business. Dozens of "companies" that have never earned one dollar in profit, with stock valuations in the billions.

So, Mr. Smart Ass, how does this little racket work? Well, first you have to find some investors. It helps if you have a business plan that includes the Internet in it. It doesn't really matter how you're connected to the 'Net, just that you are, in some nebulous way that sounds "cutting edge". You run your business for a couple of years on the specu-dollars you raised with your lovely, glossy business plan. After you've been around for a while and had some articles written about you in Wired, you set up your IPO (initial public offering). Now it gets interesting!

Since everybody and their mother has heard about how "hot" Internet stocks are, the sharks start circling. It doesn't matter that you've never made a dime or that you might never make a dime. Nobody really gives a shit what your company actually does on-line. The whole thing is based on the "greater fool" theory. This says, simply, "If I buy this stock for $20, chances are there's an even bigger asshole out there who will buy it off me for $40!" Yes, that's really what it's all about. That's why it doesn't matter what the company does or makes and why it doesn't matter that it has never had a profitable quarter. All that matters is the stock price, period.

Trouble with a game like this, is that it can't go on forever. Eventually, you have to at least pretend that you're interested in making money, which is why you're now seeing some of these companies buy other companies that actually make things. Funny thing, though--just when the Internet companies started to act like traditional operations was when their stocks started to tumble. Once you start to play by the traditional rules, you can't expect the stock market to carry you anymore. Suddenly, you have to show some income. You know, just like J.C. Penney. When you have zero cash flow, you can have a price-to-earnings ratio that approaches infinity. Once you have to show some income, you can't pull that off anymore. You go from being a magic trick to running a real business. Apparently, the subscribers to the "greater fool" theory of business don't like that. They kinda liked it when it was smoke and mirrors.

Okay, the unemployment numbers. This one's easy. The unemployment statistics are a bunch of bullshit. The government lies to you. I suppose you're not gonna take my word for that, right? You're gonna want some kind of evidence, right? Damn you.

I could tell you about how, during the Reagan administration, they started counting military personnel as "employed" when they had never been counted in the labor statistics before, making things look much rosier than they really were for Ol' Wrinkled Butt's economy, but that's ancient history.

Let's talk about something more recent but just as sleazy. A couple of years ago, the Labor Department announced that it wanted to save the taxpayers some money by reducing the size of the sampling they used to compile employment statistics. Well, you ought to smell a rat right there! When have you ever seen a government agency worry about saving the taxpayers money??

Let's assume for a moment, though, that we've been hit on the head with a lead pipe and we actually believe that load of manure. How would you reduce the size of the sampling? You'd probably just use a smaller number of people from each state, right? Assuming that the number was still reasonably high and fairly distributed, it would still be a statistically accurate sampling, right? Well, YOU might do it that way, but the Labor Department doesn't. They just eliminated whole states from the unemployment statistics. Yes, you read that right. Entire states are left out of the unemployment numbers. Not real important ones, mind you, just states like New York, Pennsylvania and Michigan. You know, insignificant places like that.

If you're wondering why those particular states might have been chosen, I have two words for you: Rust Belt. Gee, do ya think if those states were added back into the count, the unemployment stats might look a li'l bit worse?

So, through the incredible force of my logic and facts, I've now convinced you that the economy really isn't quite as rosy as the Feds want you to think. Right now, you're cleaning your hunting rifle and thinking about heading for Capitol Hill. Don't go all Columbine on me. All I wanna do here is demonstrate to you how you have to be ever-vigilant against bullshit. Don't take things at face value. Ask questions, yell at the TV when it tells you thing your brain tells you are wrong. If that doesn't alleviate your anger, remember what Elvis did when he saw Robert Goulet on TV. Pick up the gun and put the bullet right into the forehead of the image of that lying "financial expert" you're watching on CNBC. It might cost you a TV, but hey, buying a new one will stimulate the economy.

 

 

HOME | ARCHIVE | EDITORIAL | WEASEL| CARTOON | NEWS/TALK | ADVERTISE
TERMS OF SERVICE & PRIVACY

web design Chriss Hight