Dear Wall Street: You should be ashamed for encouraging the fallacy that you offer something of inherent value. Wall Street was founded on the principle of investment in companies. That principle has given way to bidding on paper stocks rather than what they represent. Your problem is a limited number of products to sell and an enormous number of people who need an investment. At some point you must pave the road back to Main Street because pure speculation is a recipe for disaster.
Venture capitalists provide money to businesses in return for a portion of earnings. The process sounds a lot like the theory of buying a company's stock and getting dividends based on the company's profit. The process could be similar if there were a sufficient number of stocks available. With the limited number of stocks traded on Wall Street, people buy and sell based completely on what they think others are willing to pay. As wise investors realize that their stocks are going nowhere they will use the benefits of the “Information Age” to find true business investments.
Wall Street is nothing without investors. The historically steady increase in stock prices over time does not represent company returns on investments for those people who own stocks. Instead it is indicative of the added money in the system as people continue to buy into the stock market. As confidence in the stock market erodes this steady climb will disappear and we’ll see a very flat or down market.
Wall Street must re-establish itself a viable means of investing in real companies or risk being overcome by those opportunities which can. This will require making sure that there are sufficient supplies of stocks available to satisfy the demands of customers. When this balance of supply and demand exists, stock values will be determined by the real earnings potential of companies, not the value of the paper stock.
What does this mean as you save for your retirement? It means when you run across a business opportunity which can’t lose…you should let me know too!