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Bob Barney – Why the Stock Market is a Loser to most small investors
Hi, Bob Barney for The Plain Truth Today, brought to you by theplaintruth.com, and the subject I want to talk about today, we’ve been doing kind of a different kind of show for the last few days and I think it’s very important for the average person listening to this program, because this is geared towards the average working middle-class American. I doubt very many billionaires would ever want to listen to what I have to say, especially because I tell people what they are all about, which is inflation, but I wanted to talk today about the stock market and why, you know, it’s going up and up and up and up, and yet the average American can’t feel it. First of all, most Americans, about 52 or 54 percent of Americans are not even in the stocks.
They don’t have IRAs or 401ks even at work. Most people in America, and this is a fact that I think a lot of people are not aware of, most workers in America work for very small businesses. I believe, and this is off the top of my head, I didn’t research this, but I think about 65 to 70 percent of all employees in America work for companies under 30 or 40 people, and in that case, the people you think of that work for the big companies that get, you know, pensions and 401ks and things like that, and health insurance, that’s about 25 percent of the population.
Most of the population doesn’t. Now, some of the smaller employees do offer some sort of 401ks for their employers, some match part of it, some do not, but it’s still quite rare, and that is whyabout 52 to 55 percent of the American public, of adult public, I should say, do not have any form of retirement, other than their social security, if they ever get it. So they’re always not really that concerned that Wall Street keeps going up, the Dow keeps having record closes, they’re up around 50,000, it was 51,000 and change, and now it’s back to 50,000, three or four hundred.
I would say by today, because of the news that there’s supposedly going to be a peace treaty that with Iran, that it’s going to go over 51,000 again, but I would be very skeptic about this peace treaty, but that’s another story. Always look for war in the Middle East, as long as mankind is in control of this world, there is not going to be peace in the Middle East until Jesus Christ returns. That’s what the Bible says, and you can take that to the bank, and you can take that to the stock market, and the stock market, in my humble opinion, like I said, I’m not a financial advisor, but the stock market, to my opinion, and I’m going to play a few excerpts from shows that I got onYouTube that kind of explain where I want to go to, but sometimes it’s a little more interesting than me to listen to it professionally explained.
The stock market is actually fraudulent. Now, a lot of people in 401ks over the years have made a lot more money in the stock market than their social security is ever going to go up. I don’t disagree with that, but at the same time, if you look at the crashes that happen in the stock market, and they are 10 to 15 year events.
I mean, there was a pretty good crash in 80, what was it, 88. There was one again in 2008. There was another one in COVID 2020, and we have been booming along ever since then, which, and everybody, this reminds you of the 1920s, by the way, everybody is booming along, and no one is reading the tea leaves of things going wrong.
Like, for example, in the gay 20s, when everything was really going on in the roaring 20s, I guess it was really called, no one paid attention. There was a dust bowl going on in the Midwest, and farmers were absolutely losing all the topsoil because they, because the wind blew it all away, and they, and hundreds and hundreds of family farms shut down. They became the famous Okies from Muskogee that made it to California.
They had to go west to make another living because the Midwest became a dust bowl. Believe it or not, and you can look this up for yourself and see pictures of this, the dust bowl went across the eastern part of the United States, and there was even times in Washington, D.C., believe it or not, in Washington, D.C., when the dust bowl, big clouds of dirt that you couldn’t see through,looked like a wall of dirt coming to you, actually covered Washington, D.C., and that’s how bad this was, and yet everybody in New York City and Chicago and the major cities and in the suburbsthat were doing quite well, the stock market kept going up. In fact, it kept going up so much that people borrowed money to buy stocks that they did not even have, and that’s how sure they werethat you could borrow.
Let’s say you borrowed $10,000, and that was a lot of money that those days is probably the same as $200,000 today. They would borrow like $10,000 at a very low interest rate, 2 or 3 percent, and there was very little inflation back then, and the Fed hasn’t really done its job yet, even though they were in existence for the first 10 years, but the point being is they would borrow money that they did not have and put it into a stock, assuming it was going to keep growing, and for a lot of the 20s, that happened. They borrowed $10,000, they had to pay back $10,200 by the end of the year, and believe it or not, the stock doubled in value, so they made $20,000, and they thought they were rich, and so they kept reinvesting the winnings, so now they had $20,000 the next year.
It only cost them $200,000, so they really had what? $19,800, and they rolled it, and this time they didn’t have to pay any interest, and if it paid another 10% or whatever, now they’re at $30,000, and they rolled it, and some people didn’t just roll it, they were so sure the stock wasn’t going to collapse that they actually borrowed even more. Then came October of 1929 when the stock market crashed, and thousands, I think even maybe millions of people not only lost about everything they had in the stock market, the worst thing was the people who had stocks that they owed the bank on now lost all the value of their stock, so they did not have enough money if they sold all their stocks even to pay off their bank loans, and then you started having two things happening. You had people selling off everything, so the stock market kept going down, number one, and number two, you had banks collapsing because they could not collect debts of people who borrowed from them off because of stocks, and so banks started closing down.
As a matter of fact, in the 1930s, bank closures were so bad that they used to have bank holidays where FDR shut down banks for sometimes a week or more at a time so people couldn’t get their money, and then in 1933, to make things even worse, FDR, trying to save the banks, made it illegal to own gold, and I’ve done shows on this, and I know I tell this to people all the time, and they cannot believe that an executive action by a president, I mean, we’re living in the Donald Trump days where we see nonsensical executive actions. Well, my friends, they’ve been around for a long time. FDR did an executive action which should be unconstitutional, I think it is if it was ever tried, but I guess they did, and it didn’t go nowhere, but he made it illegal to own more than $100 worth of gold.
That was about five ounces. Gold was $20 an ounce, and so if you had a few, you could keep some gold jewelry, you could keep your gold wedding band, you keep one or two gold coins, but for the most part, you had to turn all the gold in. He melted all the gold coins down that they could get.
That is why some of these gold coins today are so valuable because they’re so rare because so many of them, tens and tens of thousands of these gold coins got melted down into gold bricks that was placed in Fort Knox. That’s where a lot of the gold in Fort Knox came from, and what it did twofold. What it did was it made Americans very suspicious about the Fed, about the federal government, and about inflation because now inflation started.
Once we got off and we could not turn our money in for gold, the government no longer had to have a gold coin for every $20 bill or $10 bill, a $10 coin, or that much in gold reserves. Once that went away, inflation became rampant, and I always use this example, and I’ll finish this and we’ll get back to what we’re talking about, about the stock market, but I always tell this, and I told thisto my accountant now, he’s my CFO of my company. In 1925, a upper middle class worker made $20 a week.
An ounce of gold was worth $20 a week. Let’s go fast forward to 2026, where the average worker,if he’s lucky, makes $1,500 to $2,000 a week, and that’s $100,000 a year, and most upper even, that’s for one person, that’s a very hard income. Now, you have households with incomes of $150,000 and $200,000, but that’s the man and the woman working.
We’re talking about just a man working in 1920 off of one ounce of gold. One ounce of gold was $20, and a week’s pay was $20. Today, an ounce of gold is worth, as of right now, $4,200, and the average guy gets $2,000.
That shows you what inflation’s all about. I’ll be right back. Hi, Bob Barney for theplaintruth.com.It’s the one site to go to to know what’s going on in today’s news, and if God has anything to dowith it, what God is doing about it, or predicted in the words of the Bible.
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Thank you, and we’re back, and I’m going to play this thing about get back into the Ponzi schemeof the stock market. I’m going to play this, and then we’ll be right back to talk about it. When we think about the stock market, we think about money, the finance industry, businesses, and making money from investing in successful businesses.
The belief is investing in successful businesses is what leads to investment profits, and there’s a direct connection between the success of the underlying company and the profits investors experience. This is a reasonable idea, which is why it’s in textbooks and recited by finance professionals who sell stocks and stock-related services. However, this is not how stocks actually work.
Most finance professionals have no idea where profits from stocks come from. They just assume it gets magically generated from the complexities of the market. The myth is profits from stocks are generated from the earnings and growth of the underlying companies, and when a company makes money, they share the profits with their investors.
But in practice, most public companies never pay dividends on their stocks, and when they make money, which can be billions or even billions, they keep everything. The reality is profits from stocks come from other investors who are buying and selling stocks. When an investor buys a stock for $10 and sells it for $11, that $11 comes from another investor, someone who will then start hunting for yet another investor who will give him $12, and so on.
This is technically a negative-sum scenario for investors because they are contributing all themoney, and there are fees attached to every transaction. The company that issued the stock isn’t involved in these transactions, so whether the business is making or losing money is irrelevant.This is why companies like Tesla Motors, who has lost billions since they became a public company, can still have stocks that appreciate in value.
But in a situation where investors’ profits are strictly dependent on money from other investors, investors can make or lose money regardless of whether the company they invested in is making or losing money. In reality, the stock market is a system that shuffles money between investors. It is a system where current investors’ profits are directly dependent on the inflow of money from new investors.
And such a system is also known as a Ponzi scheme. But what most people don’t realize is that a Ponzi scheme can also produce a lot of winners. It’s not a scam where everyone loses money, even with the presence of middlemen and fiends.
A lot of investors who are involved and unaware of the scam can make money too. The fraudulent aspect of a Ponzi scheme is not its inability to produce a few winners. The issue is in the mechanics and where that money comes from, and how investors who make money are taking it from other investors who also want to make money.
But if the stock market is a giant Ponzi scheme, and it’s as obvious as tracing the cash flow of a typical stock transaction, then why is it legal? If stocks are Ponzi assets, why are finance professionals allowed to sell them to investors? And why are there so many university classes and textbooks on stock analysis, but not one of them mentions the existence of this Ponzi factor?Finance professionals do not see the stock market as a Ponzi scheme because they believe in several fallacies. These are ideas that people assume are true because they heard it from someone else. But the credibility for these ideas come from repetition, tradition, and people who recite it, rather than proof, logic, or facts.
The first fallacy, and the most fundamental falsehood that leads to other false ideas, is the notion that stocks are equity instruments that represent ownership in a company, and the value of the stock is connected to the value of the company. This idea is false because the values of stocks have no legitimacy. A real estate transaction has legitimacy because the value of the property is backed by the intrinsic physical value of the property itself.
The value of a bond is also legitimate because there is a defined entity that is responsible forrepaying the face value. But stocks have no legitimacy because no one has any obligations to repay the shareholders anything. A share of Google might trade for $900, but Google explicitly states in writing that the share has no voting rights, they don’t share business profits with their investors, and Google is only obligated to pay the shareholder the par value of 0.001 cent for that $900 share.
Finance professionals confuse stocks with ownership instruments because they ignore history. Before the 1900s, stocks paid dividends, so at one point stocks were legitimate ownership instruments because there was a profit-sharing agreement between the shareholders and the companies they owned. That’s how stocks used to work, and that is how stocks are supposed to work.
But that is not how stocks work now. The second fallacy, which is a product of the first fallacy, is the idea that the asset value of a stock is the same thing as cash. When people see a share of Google that is trading at $900, they will just assume that is $900 in real money.
But the value of a stock is just an idea. It is just a thought, something completely imaginary, which is why the price can rise and fall sharply at any given moment. On the other hand, money is an instrument for trade that is designed to serve as a medium of exchange for goods and services.
It is in both physical and electronic form, and for the most part, it is finite and traceable. It is legal tender that is issued and backed by the government, and it is what investors ultimately care about. Investors do not buy stocks for the sake of having stocks.
They buy stocks because they want more money. As of September 2017, the New York Stock Exchange and NASDAQ had a combined value of over $30 trillion. However, there is only $1.6 trillion of real money in circulation in the entire U.S. economy.
The investors who are holding $30 trillion in stocks will never receive the $30 trillion in real money they feel entitled to because that amount of money simply does not exist. The third fallacy is the assumption that the stock market is a positive sum for investors, and the system produces more wins than losses. This is why finance firms label their products and services as investing rather than gambling, and why 18-year-old kids can open online trading accounts.
However, the positive sum assumption has never been proven. To show if the stock market is positive sum, all we have to do is add up all the money investors have won and lost over the years and see if that adds up to something positive. The problem is, no one knows how much money people have lost.
There is no database that tracks investor losses, and no one knows how much investors have been winning or losing over the years. The reason why people think the stock market is positive sum is that they believe in the second fallacy and think people must have made money because the stock market has grown to $30 trillion. But a real positive sum situation needs to consider the wins and losses of all the investors that are involved, which includes the last investors holding $30 trillion of imaginary money that doesn’t exist.
The idea that the stock market is a giant Ponzi scheme isn’t new. As repulsive as this idea is to finance professionals, it’s not an idea they can properly deny or refute. They cannot explain how investors can make money without taking it from other investors, or shed any light on how much money the investment finance industry has lost for investors over the years.
The typical way finance professionals defend the Ponzi factor accusation is by bringing up hypothetical scenarios, such as what a company can or might do in the future. They’ll say things like, Google can start paying dividends, or Tesla might start making money. Hypothetically speaking, anything could happen.
The world of the hypothetical is only limited by our imagination. The problem is, those events are unforeseeable and don’t happen in practice. But on the other hand, the Ponzi scenario where investors are feeding off each other while the companies they own hoard profits? This is not a hypothetical situation.
It is what is happening in practice. This is a very real scenario, something we can observe every single day. And I’ll be right back with a brief message after a brief message.
Theplaintruth.com is the place to go to every day to find out what’s going on with your health. It’s called Your Health Today where you get to it from going to the main page, theplaintruth.com. And up top, you’ll see a little button that you push to go to Your Health Today and find out, first of all, the recent studies about certain health topics, as well as what the Bible tells you you should do to maintain a very good health. That’s Your Health Today.
You find that by going to theplaintruth.com. Thank you. And we’re back for the final few minutes here of the stock market and why I believe, personally, I believe it’s a problem coming. I think we’re going to have a major, major crash.
And I actually think it could be bigger than the 1929 crash. The problem is you’ve got people that say, well, the stock market goes up every year. Well, so does inflation.
Do you realize the Fed wants a 2% per year inflation? That’s their target. We haven’t been 2% inflation probably in the last seven years, at least, that I can think of, probably since 2019. And so 2% inflation is 200% inflation every 100 years.
200% inflation every 100 years. Now figure, we’re probably, over 100 years time, have averaged probably 300% inflation. Then, therefore, the stock market’s going to go up 300% over 100 years, if it didn’t even grow.
I always get a laugh at when companies report their earnings for the stock markets, of course, and these business shows who just want to hawk the stock markets, if you don’t realize that. If you listen to these business shows, you’re going to go broke. But anyway, they’ll say, well, the Walmart report is out tomorrow, and they beat estimates for the last quarter.
The estimate was $1.72 billion in sales, and they got $1.74 billion in sales, and the estimate was half a billion dollars in revenue, and they ended up with $502 billion in revenue, or million dollars, whatever it’s going to be. And you think, oh, that sounds great. They beat estimates.
Well, whose estimates were they? It was the only estimates they put out months before. The estimates come from the company and investors, but mainly the company putting out their reports about what’s going to happen, how sales are going. So, first of all, beating estimates is not that hard to do, unless you’re really in a negative economy.
And here’s another thing, if you’re in a, right now, we’re in, in my opinion, a 4% to 5% totalinflation. I think in some areas, you’re looking at 10, 15% inflation, but let’s say 4% inflation. So, if you did a billion dollars last year, just by inflation, you’re going to beat your estimates, because you’re going to do about a billion, 40 million, a billion, 40 million.
So, you’re going to have 40 million more revenue, which is by inflation. Then you’re opened up 10 new stores, you know, in each town and stuff like that. And they get new business, but it’s not same stores.
That’s why it’s always important to see what same store sales are. And usually, if you dig down, you can find that information, but most people don’t even know that exists. And that’s a problem.
And it’s especially a problem if you’re a small investor, because the stock market is rigged against small investors. You realize many stock trades are milliseconds long. A AI computer now goes in and buys, you know, $20 billion worth of stocks and a fraction, 1 10th of a millisecond, it sells it again.
And because all of these trades are going on at the same time, the stock market fluctuates just a dollar or two times 20 billion or whatever. And there’s a huge investment made and a huge profit made by a very small group of people. They’re called billionaires, by the way, if you want to know.
But here’s Clark Howard, who’s a very good guy about trying to help you save your money and look out for scams. He’s got a radio show for many years now. I listen to him from time to time.
But listen to what he has to say about the stock market and about small investors. Because if you’re a small investor, you’re probably never going to win in the stock market. This is Clark Howard.
There’s absolute turmoil right now in the stock market. There’s been a lot of decline in values lately with a lot of stocks and added on top of it, a lot of media reports, a new book about it, a 60 minute story about how the small investor is getting absolutely rooked, getting cheated because of what’s called HFT, high frequency trading, which is where insiders use special computer models to essentially steal from you pennies or dollars at a time when you go to buy or sell stocks.Charles Schwab has said that it is a cancer on the brokerage and investing industry.
And it’s something that the law does not cover, apparently, doing something about people cheating you. And that’s the problem. It’s like if you are a gambler and you go into a casino and you think you’re going to beat the house, well, you’re going to beat statistics.
It’s probably going to happen from time to time. But for the most part, you’re going to always go out with less money than you want in with. You play the slot machines, by the way, they pay back 98 percent of what you put in.
What does that mean? You start with a hundred dollars, at the end of the day, you get 98 back.That’s a loss of two dollars. They always say you have a casino only makes five or seven percent.
That means you’re losing five or seven percent per night or per hour, whatever how much you’rebetting. And that’s the same with the stock market. You’re going to go up and you’re going to see your 401k go up if you’re lucky to have that 401k or your IRA.
You’re going to see it go up and it’s going up now pretty good. And all of a sudden there’s going to be a crash and it’s going to go down 10, 20 and it could go down as much as 30 or 40 percent. Then that always seems to happen when people decide it’s time for them to retire.
And then what happened in 2019? A whole group of people came due from 2019 to 2025. A whole group of people came into their 60s planning on retirement. And what happened? They saw their 401k go down and plummet for a long time and it started coming back.
But when they needed it, it wasn’t there and they stopped working. So now they’re not adding to their 401k. So it’s just like they’re retired now.
They’ve lost this money and it’s going to take them six, seven, eight years to get it all back where they were. But now they’re taking money out of it and every dime they take out of it, it’s snowballing where they have less and less return because they’re taking money out of it. Then if they didn’t plan right and they have to take too much out to pay medical bills or other bills for their house, then all of a sudden their Medicare premium in two years goes up drastically because it goes by your income two years previous.
So there’s all kinds of traps to this and the trap of Wall Street is a trap for middle-class Americans who think they’re Donald Trump or they think they’re Elon Musk or another billionaire out there and they’re not. They’re there to be hosed and your money is going to eventually end up in their pockets. And that’s the plain truth for today about the economy and the stock market.
This is Bob Barney for The Plain Truth today. Thanking everyone who listens every day. We have shows from Monday to Friday three times a day, 7-11 a.m., p.m., 7-11 p.m. that is, and noontime it’s usually me.
But we also put other points of view up. That’s theplaintruth.com. Go there every day. Thank you for listening.
Until tomorrow, Bob Barney saying bye-bye.