My Beautiful Wickedness


A good point, and one that bears elaboration.
October 14, 2008, 12:40 pm
Filed under: Uncategorized

Slarti wisely pointed out that I need to be more careful about breaking down who I’m talking about when I’m talking about people in the stock market.

Yes, anywhere from 46-58% of Americans have some sort of stock investments — depends on who you ask, what day, which sources you trust. That is, indeed, up from the 1987 (32% average) or 1997 (44%). Anyone who has a 401k plan at work is technically an investor, since the money they are socking away is invested by a third-party firm on their behalf with the intention of increasing their earnings. Mutual funds, same thing. Even though we chronically under-save, even though jobs with these sort of benefits are becoming increasingly rare, even though we’ve seen the greatest shedding of middle-management jobs in the last two years that we’ve seen since the 1970s, conservative tax wonks are likely to go on and on about how big the investor class is. What’s big, however, is not the investor class, per se — what was growing ever-larger was the investment firms, who were using Americans’ tax-deferred income to pay for spa vacations and the like.

To put this in perspective, one-quarter of indirect stockholders own less than $5000 in stocks. 65% own less than $15,000 in stocks. In other words, even among these indirect investors, the majority couldn’t buy a sub-compact car with their stock holdings. These are not the people who are taking it in the butt on the stock market. That’s the good news, I guess. The bad news, though, is that providing tax relief to people who lost a bundle in the stock market pretty much bypasses these folks as well. They didn’t have doodley-squat to start with, so under McCain’s plan, this sector of investors get nothing.

But here’s the bigger point. Historically speaking, the “investor class” refers to direct investors — those people who are not forced into a particular type of holding by their employer (speaking from experience, here…I have three options on my investment strategy ranging from risky to suicidally risky and no option to take my money directly as a raise and invest it myself, which would be my preferred option). Direct investors select and manage their stocks voluntarily and are the people who take the tax hit when their investments tank. (The 401k folks do not, at least not immediately. Someone with more stock than I’ve got, pipe up if you’re getting bitten, as I just don’t know anyone who has that high-class a problem.) Direct stock-holding hovers right around 19% and has increased only around 6% in the last thirty years. The overwhelming majority of direct stock-owning households are in a high-income bracket (greater than $150k per year per person), so that right there tells you that we’re not talking about a large group of Americans.

Indirect stock holding has no effect on political viewpoint, probably because most people have about as much control over their indirect investments as they do on the outcome of the next NASCAR race. It’s absurd to try to lump me (with my pitiful couple thou in stocks) in the same class as Warren Buffett just because we both are shareholders of some corporations.

Direct stock holders, however, break decidedly Republican. So, that 19% of wealthy men and women who were probably going to vote for McCain anyhow…they get a little sumpin’ sumpin’ from his plan. I don’t. You won’t. But hey, a feller’s got to go down swingin’, I guess.

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1 Comment so far
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bridgett:

When I worked for Verizon, the 401k plan was sort of “cafeteria” didn’t really matter, it was “mystery meat” to almost all of the people I knew who were in it. The ones who spent a lot of company time looking at stock tickers and IM’ing each other about ways to move money around (instead of doing something useful, like downloading porn) had, possibly, a little more control over the stock market than the rest of us but not much.

My puny little nest egg sat in a government indexed money market until I moved into a similar IRA vehicle. It has earned virtually no money, nor has it lost any. McCain’s plan will do nothing for me. Why am I not surprised?

Comment by democommie




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