How bad are the stock markets when you have to start selling stock market “gift cards” at the local grocery store or home improvement center? Pretty bad, say financial experts who believe that the economic system continues to move towards critical mass.
As reported by Zero Hedge, in the “New Normal” world we currently live in, only central banks are marginal buyers of Index futures; when it comes to buying individual stocks, the companies themselves have become the largest purchasers.
That’s because long ago, after seeing 40 percent of their 401ks and other investments vanish into virtual air, retail “dumb money” folks bailed on the heels of the 2008–2009 financial meltdown characterized by the dramatic plunge of the U.S. homeowner market, “which, thanks to the Fed and Wall Street, had been supercharged and securitized,” Zero Hedge reported.
“To the extent the turmoil in September and October of 2008 didn’t drive the individual investor permanently onto the sidelines, the subsequent realization that the entire ‘market’ is nothing but a giant casino being manipulated at every turn by greedy cabals with names like ‘The Cartel’ finished the job,” he continued.
Magazines, gum, a candy bar – oh, and some stock
Since then, the investment world has come to a realization about central bankers, and with Hillary Clinton’s new effort to bring an end to the “tyranny of the next earnings report” and, thus, the practice of leveraging the firm’s balance sheet while artificially inflating the bottom line, soon the stock buyback bid may also be in trouble.
And so, unless Congress and the president – or the Fed – want to make selling stocks illegal, it’s likely that the financial powers that be will have to find more creative ways to sell, in order to get Mainstreet Americans back into the stock market.
And someone has already thought of that, as The Wall Street Journal (WSJ) reports:
Now selling at the checkout counter: breath mints, hand sanitizer and…$25 of Berkshire Hathaway stock?
In a new twist on the bustling gift-card business, retailers such as Kmart and Office Depot this week are starting to roll out cards that give the recipients small amounts of stock in some of the country’s best-known companies. The cards will be available ahead of the holiday shopping season at other retailers, including Safeway Inc., Toys “R” Us and Lowe’s Cos.
The concept “is taking something complicated and expensive and making it accessible to everyone,” said Avi Lele, a former patent attorney and founder of Stockpile Inc., a Palo Alto, Calif.-based startup which came up with the idea.
‘What could go wrong?’
It could be a hard sell, no matter how uncomplicated Lele is attempting to make purchasing stock. Before the bottom fell out of real estate in the throes of the Great Recession, about 18 percent of ordinary Americans owned stock, largely through various retirement vehicles. That figure has since dropped to 13.8 percent, according to a study released by the Federal Reserve last year, the WSJ reported.
The paper said the Stockpile cards sell for a total of $29.95 (not including tax) for $25 worth of stock. The cards say “stock” across the top of them and carry the company’s logo. Each buy and sell transaction using these cards carries a $0.99 fee.
But how smart of an investment is buying stock like you would buy a magazine, candy bar or breath mints – on an impulse? Isn’t more studying of the company, more due diligence, necessary? Despite the low cost, how is a buyer supposed to know whether or not the stock is even worth the cost?
“The first group of Stockpile cards to hit the racks will offer shares of 20 companies, including Coca-Cola Co., Facebook Inc., Apple Inc. and Berkshire Hathaway Inc., as well as products that follow the S&P 500 index and precious metals such as gold and silver,” says the WSJ.
Shirley Motyka, a 37-year-old biology teacher who gave a comment to WSJ, summed up the ignorance – and inherent risk – of this notion when she said, “I have always wanted to get into the stock market business, but I honestly don’t have the time to explore what’s going on in the market trends of the day.” She also said she would invest in companies she considers “pretty cool.”
What could go wrong?