On Monday night, I had the pleasure of watching the 1939 film classic, “Mr. Smith Goes to Washington.” The movie starred Jimmy Stewart, and was one of the most popular films about American government ever made. After its release, the film was nominated for 11 Academy Awards.
Jimmy Stewart plays Mr. Smith, a man who was probably no different than you and I. After the death of the current Senator, the governor of an unnamed state had to pick someone to fill the spot until the next election.
The film showed how big money political bosses (big business) basically tell politicians what to do. In this case, the big money wanted the Governor to pick a stooge who had an honest background, but basically would do what he was told to do. They chose Mr. Jefferson Smith, who was the head of the Boy Rangers.
Once Mr. Smith found out that his fellow Senators did not actually represent the people who elected them, he tried to make a difference by standing up to big business and the crooked politicians. When he did, they tried to destroy him. Big business used the power of the press to twist the facts and turn his supporters at home against him.
Unlike today, Mr. Smith actually succeeded.
According to Wikipedia, when Mr. Smith Goes to Washington was first released, the movie “was attacked by the Washington press, and politicians in the U. S. Congress as anti-American and pro-Communist for its portrayal of corruption in the American government.”
In addition, Wikipedia says; “When a ban on American films was imposed in German-occupied France in 1942, some theaters chose to show Mr. Smith Goes to Washington as the last movie before the ban went into effect. One theater owner in Paris reportedly screened the film nonstop for thirty days prior to the ban.”
My point in bringing this movie to your attention is the hate that is growing around the world for America. Why do they hate us? What did you or I do to foster this hate? After watching Mr. Smith Goes to Washington, I quickly realized that foreigners do not hate you and I as individuals, they hate the people who we elected, and the big money who tell them what to do. You and I have done nothing to foster this hate.
As the widening between the haves and the have-nots grows larger, hate continues to build here at home. As the “have-nots” continue to read about how the “haves” acquire their wealth, the steel worker in Pittsburgh who just had his job outsourced to another country grows angrier and angrier. So, where are some of the “haves” getting all of their money? Well that’s a simple one, the stock market ATM machine.
Take for example all of the scandals surrounding the backdating of stock options. This morning I read where “Home Depot backdated stock options for executives and employees for nearly 20 years.” Now excuse me for being naïve, but why did it take 20 years to uncover something that has been going on that long?
You can’t tell me that corporate executives actually earn the money they receive from stock grants and options. This form of compensation does not remotely resemble what you and I classify as earnings.
On Wednesday, Fannie Mae restated $6.3 billion in profits from 2001-2004.
Why are politicians not jumping up and down on the backs of big business to stop this legalized form of thievery? Well that’s a simple one too, who do you think owns our politicians? How many former investment bankers have you seen over the past 20 years take jobs heading up important positions within various administrations?
Unless I am way off base, it looks to me like the stock market is nothing more than the “Robin hood” theory in reverse. Take from the poor and give to the rich. As I think back to the landmark $1.7 billion dollar securities fraud settlement that involved 10 of our largest Wall Street investment banks, I have to conclude that’s they way the system works.
Prior to the $1.7 billion securities fraud settlement, analysts who were issuing bogus research reports collected handsome bonuses when they captured investment banking business for their firms. Laura Unger, former SEC chairperson, reported that in many cases an analyst’s compensation is increasingly tied to the profits of the firm’s investment banking business. It looks to me that the investment banks and their clients (big business and their executives) benefited from bogus research, while the small investors crashed and burned- Hence, “Robin hood” in reverse.
I follow insider buying and selling very closely. And while corporations are using some of their cash to buyback stock, insiders are using the buybacks as an opportunity to cash out.
In spite of the Perma-Bull attitude of our current market, I would be very careful buying into a market that insiders are selling.
The one theory that has helped me well in the past was a very simple one. Buy when insiders buy, sell when they sell, and do nothing in-between.
