As someone said:
The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. "Jeeze, 230 pounds!" But you can’t pass a law making yourself weigh 185. Liberals think you can.
Thus with investments. You invest in a business as a vote of confidence in its ability to do well. If it fails to do well, that tells you something about that business – and something about your judgement.
Big heavy household name corporations ought to be a safe enough option over time?
A dollar invested in GM shares twenty years ago would today have a face value of about 7 cents. There is no five year period that I could find in the last thirty years for which GM’s stock price outperformed the S&P 500.
The market capitalization of GM is now under $2 billion, which is substantially less than that of such icons of our economy as Cognizant Technology Solutions, DaVita, Inc., Freeport-McMoRan Copper & Gold, and the Potash Corporation of Saskatchewan.
A good idea to invest gabillions of US taxpayers’ money in this one?
The main argument is that even if these firms are going nowhere, the new ‘investment’ saves jobs.
That reminds me of the value-subtracting industries in the USSR, ‘enterpises’ which sold products where the final market value of the products was less than the market value of the raw materials which had gone into making them.
The point is that investing in old bad jobs steers huge resources away from new good ones.
The problem is that the workers in the bad old jobs exist in organised fashion – and make a noise.
The workers in the good new jobs by definition do not yet exist and are silent, unorganised.
So politicians grab money from Sucess to subsidise Failure. They invest in the past, not the future. They ignore the opportunity cost issues.
Another brisk step down the road to ruin.
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