Greeks Riot, Home Prices Plunge, Confidence Drops – Dow Rises!

We’ve got Greece shut down by a general strike as the Greek government debates an austerity plan to avoid default (a plan which cannot work no matter what they do).  Consumer confidence is dropping because of increased job worries (me, too:  I guess I’ve got a 50/50 shot of being employed on January 1st).  Home prices are continuing to drop like a rock.  So, with all this bad news, what happens to stocks?  They rise, of course.

There is no good economic news out there – today’s rise in stock prices is being attributed to euphoria over the Greek bail out – but anyone with sense knows that the Greek bail out is, at best, a stop gap to prevent immediate default.  Greece will have to default at some point – and so, in fact, will Ireland, Portugal and Spain, and maybe Italy as well.  A host of much smaller players in Europe are probably also doomed to default.  So, why are they rising?  I can only figure that it is a pure gamble…people are snatching up stocks which were beat down for a few weeks and hoping that once they crest, they’ll be able to sell before the big crash.

And that, in turn, brings me to something we should be paying attention to – the way Wall Street has become a casino rather than a place of investment.  Investors don’t buy and sell with such rapidity – gamblers do.  An investor carefully looks over a company’s prospects and calculates what sort of return he’ll get over the long term.  A gambler is betting that a particular stock will in the short term go up or down.  Gamblers are now in control – with today’s news, the best stocks should be able to do is hold steady as investors wait to see if the Greek bail out happens and then what its effect is over a period of time.  That it is rising very fast shows that something other than economic sense is at play.

My view is that the best means to kick the gamblers out is to tax heavily any profits made on securities held for a short period of time.  Something along the lines of a 90% tax on capital gains for stocks held for 24 hours or less; 80% for a week or less; 70% for a month or less; 60% for three months or less, etc.  Dropping to maybe 5% for stocks held for five years or longer.  You get the picture.  The idea is to punish heavily those who are trying to make a quick killing in stocks and rewarding those who are in it for the long haul.

Our whole economy is skewed by corruption, greed, cronyism and shortsightedness – we, the people, need to take the steps necessary to ensure a genuinely free market while at the same time ensuring that the benefits of the economy accrue to those who work the hardest, save the most and invest with the greatest care.  Only thus can we ensure both a free and prosperous future for ourselves.

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