How the stock market is a sham for the working and middle class. 53 percent of Americans have no money in the stock market, including retirement accounts. 62 percent of all US wealth owned by top 5 percent.

The growing wealth divide in this country is devouring every piece of the middle class that is currently left.  The stock market is largely a sham for most Americans.  Why?  Many hedge funds and other large Wall Street firms are in the business of making quick profits even if it means destabilizing the underlying economy.  Many large companies have made larger profits since the recession ended by slashing wages and benefits.  More importantly however, is that this dramatic bull market in stocks since 2009 has been one big sideshow for most Americans.  A Pew Research survey found that 53 percent of Americans own no stocks, including in their retirement accounts.  And the fact that only 10 percent of Americans have pensions, many (most) are going to rely on Social Security as they enter old age.  Why is the stock market a sham for working and middle class Americans?

A decade of no real gains

The buy and hold idea hasn’t really worked for nearly 14 years.  Take a look at S&P 500 returns going back to 2000:


Adjusting for inflation, if you invested $1,000 in the S&P 500 in 2000 you would have $1,010 today, nearly 14 years later.  You would have been better off with savings bonds or even with a low rate savings account.  Beyond that, look at the incredible volatility.  At one point in 2009, it would have been down to $417.  Of course the mantra is “buy and hold!” but that assumption assumes most Americans own stocks in any meaningful amount.  Which they clearly do not:

stock market us ownership

“(Pew) This factor is also made clear in Pew Research Center surveys and analyses that show which Americans do or don’t own stocks, and how this dividing line has widened the wealth gap in the period since the recovery began to take hold in 2009.

A Pew Research survey in March found that 53% of Americans say they have no money at all invested in the stock market, including retirement accounts.”

Most Americans don’t have any stocks to their name.  In fact, many Americans don’t even have any savings to their name.  Those 25 to 34 have a median amount saved for retirement in the sum of zero dollars.  So this incredible amount of volatility has largely produced nothing for most American families.  And we have recently seen that household incomes adjusting for inflation are back to levels last seen in 1989:


Beyond the more obvious reasons that Americans are not participating in the stock market, you have the more apparent reason that the stock market is gamed and largely operates like a casino.  Think about the big banks.  These banks created financial products that brought the global economy to the brink of implosion.  Packaging junk and selling it off to unsuspecting investors and many times, even betting on this toxic waste since they knew it was merely time before these products went bust.  Instead of protecting regular investors, global governments and central banks rallied around the banks to save their own skin.  In the mean time, the rest of the public is getting proportionately poorer.  These aren’t titans of industry trying to help improve the economy.  These aren’t the job creators that are glamorized in the media.  These are merely glorified bucket shops hiding behind Bloomberg terminals itching to find the next company to sink and the next segment of the country and world to exploit.

So is it any wonder that Wall Street has been deep in cahoots with the for-profit college industry?  Of course not.  It is also no surprise that the Fed’s low rates have spurred on another real estate mania but the gains are largely going to big time investors (many that helped implode the market to begin with).  So like the stock market, these new real estate gains are going to a small portion of the population:

snp 500 and case shiller

Isn’t it great that real estate is going up?  Not really given that banks are buying up those 5,000,000 foreclosures that have hit since the crisis began (a crisis they created).  They are buying it cheap and the nation is adding a fleet of renters.  Oh, and rents are going up faster than overall inflation.  As we mentioned earlier, incomes are back to 1989 levels adjusting for inflation so more money is going into real estate (a sector that is now largely being pulled away from Americans).  Do you see a pattern here?

The stock market has become even a larger sham because of other things like High Frequency Trading (HFT) and derivatives.  They try to sell it to the public that stocks are easy to understand but only a few years ago, these same banks were selling toxic junk to the public laughing all the way to the bank as the bets imploded and their options boomed in profits.  These investments were sold as easy to understand as well.  Those that failed didn’t really fail either.  They got bailed out.  The public was largely left holding the bag and the end result is a massive wealth disparity in the country:

The top 5 percent control 62 percent of all the wealth in the US.  Wealth is the true measure of power in the current economy.  If you make $50,000 a year and spend all $50,000 then you are left with zero dollars at the end of the year (which seems to be the common path for most Americans).  Yet more and more wealth is being aggregated in the hands of a few.

Part of the sham isn’t the idea of stocks or real estate.  In fact, real estate has been the most common form of wealth building for average Americans for a couple of generations.  The problem is the market now favors short-term booms and busts and casino like economics.  The slow growth model is out the window.  How can a regular investor compete with banks that essentially control the government and also have HFT machinery that is completely out of reach for most?  The fact that the S&P 500 adjusting for inflation has returned virtually zero dollars for 14 years should tell you something (forget about the most volatile time since the Great Depression).  The market is a sham for most because there has been zero substantive reforms since the crash happened.  Yet they expect the public to dive in and gamble again on the next repackaged toxic waste?  This is assuming most of the public is even investing which they are not.

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6 Comments on this post


  1. Shirley said:

    I was lucky to have been in the stock market for over thirty
    years. I have profits for about ten years. I started over-
    selling and trading much too fast. That resulted in many
    lost opportunities and loss of profits and cash.
    Now I am a senior citizen and need cash and realized
    the the bull about great investing and gains this is only
    for the wealthy. I wish I had realized this much sooner.
    I did invest in mutual funds but with that crud about less
    cash and more investing I reinvested. I lost over three
    thousand dollars in my IRA.!. Before investing in my IRA
    I left the money without investing my IRA savings.
    People including my husband felt money left in my IRA
    was losing money. After taking their awful advice I have
    lost about three thousand dollars!. DO NOT INVEST ANY
    conservative investing or just save your money in use
    a CD or just if you have savings create a plan with your
    savings or checking to withdraw a monthly amount and place
    the cash in another saving account or have the good
    luck of using a brokerage for some suggestions in you
    savings for the future. I was in denial that I would find
    a stock to increase my earnings.
    Stay away from the stock market if you only have an
    average income and are trying to increase your savings.
    This stock market is a total manipulation geared for
    only the wealthy. Not the one I started with that allowed
    average incomes to possibly increase their savings.
    That stock market today is not a stock market but
    another tool for the rich to become richer!.

    February 3rd, 2018 at 9:42 am
  2. gin said:

    here’s what i think. the most evil of the 1% got together last week and decided to do a sell off to create panic and then they bought back in when everyone dumped their stocks. There is no way that millions of people last week just all decided to sell their stocks near the same time.
    the 1% are trying to control everyone.

    February 9th, 2018 at 9:17 pm
  3. Kyle Watson said:

    I mean no disrespect, but the stock market is not a sham. I turned I turned $1,000 into $2000 this month through using my brain. These following 30 days I will be able to make $2,000 whith the same percentage gain as last month. These gains keep on duplicating every time. That is the theroy.

    I do not mean to say the bit about the brain as an insult, but rather to exemplify the notion that anybody can achieve success in the markets with some knowledgable planning.

    It takes time, and wealth won’t come fast. You have to work your way up intelegently. Anybody can do that.

    April 19th, 2018 at 7:34 pm
  4. Neal said:

    You can cherry pick any date range to manipulate the data to suit just about any argument. My wife and I only purchase Index Funds (for example VTSAX) and ETFs (for example: SPY or VTI) and in just a handful of years our portfolio has already doubled. It’s very true if you put 100% of your money into individual stocks or expensive mutual funds it’s not worth the risk but if you invest wisely, using a sound long term buy & hold strategy you are going to come out very well for yourself.

    July 28th, 2018 at 7:06 pm
  5. Stef said:

    We seemingly have varying ideologies on economic theory, investing, and capitalism…No one saving long term is only going to have their money in the market for 14 years. I mean even your own graph shows if you put $417 “real” dollars in at 2009, by 2014 it’d be more than double at $1,010.

    What exactly are you implying we should do, take money from the rich and give it to the poor? That seems moral. Or, just moan about not having what someone else has? What is the goal here…it’s unfair unless everyone has absurd amounts of money?

    Here is the reality, poverty has a relatively easy way to be avoided in the US. Only 2% will remain impoverished if they: 1) graduate high school, 2) have a full time job, 3) get married and have kids after age 21. That’s from the Brookings Institute, a very centrist organization.

    Not to mention, that top 1%, 5%, 20% changes all of the time…

    Maybe the question should be, why aren’t people saving more money…maybe it’s cultural…Dual incomes with or without kids can cause generational changes in one’s circumstances…Yeah, you and I probably will never be 1%’ers or maybe even 5%’ers…but you can definitely save money.

    Nobody is saying life is fair, but you definitely have ways to change your circumstances. Nevertheless, your life choices will also influence your outcome…

    August 11th, 2018 at 7:44 am
  6. Tim Chambers said:

    Worked 30 years in Corp American and 35 years in Army National Guard. Never made more than $70,000 per year yet at age 60 looking at $6000 per month for life. Not even close to rich I was frugal and responsible.

    September 20th, 2018 at 9:25 pm


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