Tuesday, June 15, 2010

New economic model?

So here goes post number 2 for The Randster.

Another little insight into the author's life: I am a Land Surveyor by profession. I measure and analyze and consult to help people resolve property boundary locations and disputes. I also spent just short of 10 years in the Army National Guard. I like to refer to Mt. Rushmore as 3 surveyors and a soldier!

Here at the Miller household we do our family and small business banking with 2 credit unions. And I have been wondering for a while now how wise retirement investing with mutual funds is. I'm no economist, that is why I gave you a little bit of my background. With the steady monthly deductions of worker's wages going towards a retirement plan that is invested largely in mutual fund aggregations of global companies, something seems unsustainable about that to me. The money keeps pouring into these products, but the companies are not demonstrating the kind of growth to justify the escalating share prices. Where does the cash go? I can't realistically say about that, but I can guess that it goes in a cash account somewhere and is listed as an asset for any number of companies. Consequently the share price goes up or the cash is spent. What I suspect (and as a non-economist, let me emphasize S U S P E C T) happens is that there is little protection from a grand pump and dump scheme. Cash goes in, share price goes up well beyond a book index of 1, so far in fact that it is not believable, share price goes down and excess cash is skimmed off. It appears to me that the inflow of investment capital would be hard to distinguish from a revenue stream from actual returns on operations.

Google has a motto that I had not heard until recently;

Don't be evil


So maybe it's the sub-amateur economist in me wondering, what if somebody came along with an economic model and said,
look, no need for a 700 page prospectus, you will always know where you stand with us. We buy X and Y for you and when your monthly contribution comes in, if we can't buy shares for a reasonable price, your money will have to wait in a low yield money market account. That's the way it works. We have other investment ideas naturally, but our favorite is

Don't be evil


Now to bring it back to independent politics. Companies that stick to this mantra of 'don't be evil' thrive. Companies that don't must spend gratuitously on campaigns and favorable legislation as a cost of doing business expense just to keep from going under. Now that is a wide sweeping generalization, but there are no shortage of examples that would support it.
So, is there a community based credit union style 'end run' on not just Wall Street excesses where they exist, but an end run on unsustainable economics as well?

I'll sign off tonight and leave you with this democracynow.org story on the Big 2 and what at least some corporate campaign contributions are used for: http://www.democracynow.org/2010/4/16/ubs

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