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.
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,
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.