7 ms·

This trend, imo, is connected up with the deeper issue of ever-widening rift between the (shrinking) middle class and the calcifying wealth of the upper classes

• 2trill2spill 8y ago
  > -- there isn't a lot of opportunity for folks in the middle class to invest in quality stocks today relative to, say, a couple decades ago -- the barrier of entry has become unbelievably steep. Just what barrier to investing in the stock market is there, besides for having money to invest? It's easy to setup an IRA or 401K or just setup your own brokerage account.
  • abhiminator 8y ago
    > besides for having money to invest That is the exact barrier of entry I'm referring to. Ballooning stock prices of well-performing stocks and shrinkage of the number of listed companies in a stock market narrow the opportunities for middle-class investors.
  • charlesdm 8y ago
    He means there are fewer stocks at an early stage in their lifecycle where you can book a 1000x return by investing well.
    • 2trill2spill 8y ago
      Don't need 1000X return to retire. Index funds and income stocks are all that's needed. Edit: Got to like the down voters who think individual investors should be out picking stocks. Even though experts and basic investing advice tells people they should not be picking individual stocks.
      • physguy1123 8y ago
        Individual investors don't need to pick single stocks to benefit from growth. These companies also don't have a presence in various etfs and mutual funds that people can invest in, and it's not unreasonable to think that a wider selection of say small-cap growth companies might make for a better selection of small-cap stocks to put in an index.
      • HashThis 8y ago
        Historically, the stock market would return 10% YoY (after averaging out). The problem is that that number has dropped. Decades ago, companies IPOed with $50m to $100m in revenue and citizens could enjoy the growth from there (like MSFT). But now, they tend to have to IPO with $1b+ in revenue (like Facebook). Many unhealthy economic factors drive down the public stock growth rate. That is the core problem. 10% YoY for index funds = healthy. Far lower for rigged economy reasons = a large scale societal problem.
        • mrep 8y ago
          A better explanation is that stock market growth has slowed because real GDP growth has slowed [0], which it should match [1]. Why has it slowed? Well, economists have hotly debated this so you'll have to read into the dozens of theories but not once have I heard it is related startup IPO time. [0]: https://en.wikipedia.org/wiki/Economy_of_the_United_States#GDP https://en.wikipedia.org/wiki/Economy_of_the_United_States#G... [1]: https://www.wise-owl.com/investment-education/is-there-a-correlation-between-gdp-growth-and-stock-market-returns https://www.wise-owl.com/investment-education/is-there-a-cor...
        • kgwgk 8y ago
  • paulpauper 8y ago
    Fewer but higher-quality companies helps retail investors.
  • chrisco255 8y ago
    It's not investing in the currently public companies that's the issue...it's all the private companies that never go public...or go public so much later than they would have in the past that all the value has already been extracted by VCs.
    • barrkel 8y ago
      It's not just VCs (who will be looking for an IPO eventually); it's also growth equity, which has a more moderate payout expectation, more easily achievable with acquisition, or even straight up sale to private equity. (Yes, growth equity is a category of private equity, but it's a developing middle ground between VCs and more traditional PE which is usually focused on cost cutting and loading up on debt to juice returns from mature companies.)
    • trocadero 8y ago
      I think what has changed is the shocking amount of money that recent start ups are burning. Snap burns more in a year (~$1 billion) than Facebook did in it's entire life. Uber has burned ~$10 billion during its existence. It's hard for me to picture a company raising that amount of money on the stock market.
      • zaius 8y ago
        Tesla has raised billions of capital from the public markets
      • kgwgk 8y ago
        It's not that hard to picture Snap raising billions in the stock market: the company got $2.7bn at the $3.6bn IPO last year. Twitter raised $1.8bn in 2013. Their problem is not lack of financing.
      • sgerenser 8y ago
        Tesla has lost several billion dollars since its IPO in 2010, and that hasn't seemed to have slowed the stock down at all.
  • barrkel 8y ago
    The barrier is that the valuable growth stocks aren't actually stocks, they're privately held, due to fewer IPOs and more private capital available without recourse to public markets.
    • 2trill2spill 8y ago
      You don't need Growth stock to retire, index funds and income/dividend stocks are all that's needed to retire comfortably. Individual investors should not be trying to pick individual growth stocks because it's highly risky.
      • gameswithgo 8y ago
        what income ranges are you imagining is the middle class?
        • jbapple 8y ago
          Over a 40-year career, assuming 4% real capital growth after inflation and a 3% safe withdrawal rate in retirement, a worker has to invest 25% of their gross income every year to have the same net income in retirement (assuming identical taxation rates). The median annual household income in the US is around $60k.
          • gameswithgo 8y ago
            That doesn't leave much left to eat and cover up from the rain with.
      • uiri 8y ago
        You're assuming nothing like the Nikkei index from 1989 - present will ever happen to a US stock index. I agree with you but stock market growth is not a law of nature. Other tactics (e.g. dollar cost averaging) are also needed to ensure a secure retirement.
      • prostoalex 8y ago
        > You don't need Growth stock to retire The returns in those index funds are driven primarily by growth stocks.
  • deleted 8y ago
    [deleted]
  • ianai 8y ago
    Agreed. Clearly what’s been done for the last 40-50 years hasn’t led to more companies spreading more wealth. It’s led to fewer companies spreading the wealth more narrowly. The answer is not to do the same thing that’s been done for the last several decades. That’s insanity. The solution is to empower the individuals.
    • pas 8y ago
      That requires education. What's investing, how to invest, how to look for investment opportunities, fundamental analysis, risk management, counterparty risk ("invest in housing, because it'll always go up!"), etc. People don't want that, they want to get rich quick. See the recent (bit)coin hype train(s). And to top that off most of the people are absolutely without disposable money. They don't even have rainy day savings, and talking about investment portfolios is laughable. Again, millions are without basic health care and we want to make empower the individual. Yeah, let's do that, but before turning everybody into an junior investment banker on coke let's educate folks. (That'd help with having a middle class again too.)
      • ianai 8y ago
        That’s the most shocking part of the other commenters for me. Just having the ability to own stock moves someone well beyond the median - When I say “empower individuals” I mean everyone from the homeless to the families with kids and a mortgage. We need an approach that can’t be robbed or is directly given to the few.
      • jandrewrogers 8y ago
        The median US household has $12k/year in disposable income. That is income after all other taxes and living expenses -- housing, transportation, healthcare, food, clothing, etc -- are paid for. In other words, beer (or investment) money. You can build a real investment portfolio from that basis. The assertion that Americans do not, on average, have money to invest is a false one.
        • pas 8y ago
• chiefalchemist 8y ago
  > "This trend, imo, is connected up with the deeper issue of ever-widening rift between the (shrinking) middle class and the calcifying wealth of the upper classes -- there isn't a lot of opportunity for folks in the middle class to invest in quality 'fast-rising upstart' stocks (like the article talks about) today" Agreed. Kinda. The question is: which is causing which? Or is there something else for which these are symptoms?
• excalibur 8y ago
  A better solution would be to require companies to prioritize employee compensation above shareholder profits. There has been a trend since the '80s for executives and investors to team up and line one another's pockets at the expense of the rank-and-file workers, and it's the biggest and most direct contributing factor to the decline of the middle class.
• sonnyblarney 8y ago
  I don't think for a moment that the centralization or decentralization of exchanges themselves has anything to do with the problem. I don't see any reason why the current exchanges pose in any way some kind of problem to the creation of smaller, more healthy, competitive and robust firms. Yes, there are regulations, and each exchange has a bunch of rules, but that's generally for the benefit of everyone involved. Any kind of decentralized system would have to have rules. The exchanges do make money, but it's trivial relative to the underlying financial transactions. I suggest 'the problem' has more to do with globalization and the consolidation of mature industries, and the availability of large, private funds. Both activities have advantage and disadvantages.
• mancerayder 8y ago
  This trend, imo, is connected up with the deeper issue of ever-widening rift between the (shrinking) middle class and the calcifying wealth of the upper classes -- there isn't a lot of opportunity for folks in the middle class to invest in quality 'fast-rising upstart' stocks (like the article talks about) today relative to, say, a couple decades ago -- the barrier of entry has become unbelievably steep. How about the "accredited investor" limitation? In order to invest in something that can generate great wealth (eg., a startup, I believe futures, a number of securities), you need the accreditation, which means either making 200K+ US two years in a row, or having 1 mil US in non-primary-household wealth. Now, one could argue that it's intended to protect people from themselves - the guy or gal mortgaging their house because a snake oil salesman convinced them to invest in something shady. But doesn't it also block off a whole set of possibilities to a select few in the name of protecting the little guy?
  • prostoalex 8y ago
    Not really. Private market valuations depend on the scarcity of funding sources. If everybody suddenly has a chance to invest in a round, investors will compete on price, bidding up those early-stage valuations and compressing future returns.
    • chrisco255 8y ago
      Some of this can be attributed to the relatively few opportunities raising money last year. Some of it is due to uncapped raises, which should not be done, in my opinion.
  • pembrook 8y ago
    Laws and regulations are intended to create a greater good. Sometimes we have to stifle a few exceptional people for the good of everyone else. Preventing small time retail investors from buying into high risk startups is a good thing. Unfortunately the general public has proven over and over again that they lack the financial sophistication to comprehend the difference between a scam and an investment opportunity. Remember even VCs lose money on a vast majority of deals. The ICO mania over the last year provided an excellent reminder of why these regulations exist and why they are important.
• briandear 8y ago
  Are there more poor people in America percentage wise than there was 80 years ago? Are standards of living higher today than they were 40 years ago? The classist argument that the middle class is disappearing fails to address where those middle class people actually went. One less person in the middle class does not represent one person “losing” but just as much of a likelihood as that person winning. Here is an alternate viewpoint on the “shrinking” middle class: http://www.aei.org/publication/yes-the-us-middle-class-is-shrinking-but-its-because-americans-are-moving-up-and-no-americans-are-not-struggling-to-afford-a-home/ http://www.aei.org/publication/yes-the-us-middle-class-is-sh...
• adventured 8y ago
  The middle class + upper classes have expanded, not shrank. [1][2] That means there should be more potential buyers, not fewer. The premise of a shrinking middle class isn't strictly a myth, however it ignores the fact that what is actually happening is that the middle class is moving up faster than the bottom economic tier is expanding. That process is contracting the middle class - it's not contracting due to eg increased poverty, as poverty in the US has gone down over time. The sole reason there has been any net expansion in the bottom economic tier, is due to extreme low skill / low wage labor importation since the late 1970s. [1] https://www.washingtonpost.com/opinions/is-the-middle-class-moving-up/2016/06/24/214dc04a-3a28-11e6-8f7c-d4c723a2becb_story.html?utm_term=.326ac0bc4ece https://www.washingtonpost.com/opinions/is-the-middle-class-... [2] https://i.imgur.com/TwQhMaT.png https://i.imgur.com/TwQhMaT.png