The Rose vs. The Bull
January 31, 2019 7:07 AM Subscribe
My spouse would like to invest some of our savings in the stock market. I'm a card-carrying socialist who is very uncomfortable with this idea. What do we both need to know?
Relevant points:
1. I've already requested absolutely no fossil fuel or weapons dealers.
2. I am uncomfortable with the idea of taking profit from capitalist labor relationships, but I'm willing to admit I don't fully understand how the stock market works. There is a difference between what an investor gets as profit dividends and what one makes on stock price fluctuations (basically gambling on what people will be willing to pay for the stock at some later date), correct?
3. He tends to believe that supporting "good" businesses is possible. I'm much more skeptical that there can be such a thing.
4. What can I read about how the markets work that isn't written from a Rah-Rah-Capitalism point-of-view?
5. What should he read to understand the relationship between profit and labor? It should be something fairly free of academic jargon. I could give him all my Marxist books, but I feel like something with a more contemporary point-of-view would be more persuasive.
Important note: The amount of $ we're talking about isn't much. It's part of a house downpayment we will need to access in about a year, so bonds and other long-term yield things are out. He is concerned that if we just sit on it and do nothing, inflation and other cost-of-living factors in our area will just nibble away at it. (For ex. I work in a field where it is extremely rare to receive even annual cost-of-living raises. My salary has been stagnant for 4 years, but expenses in our area have gone up a lot.)
Relevant points:
1. I've already requested absolutely no fossil fuel or weapons dealers.
2. I am uncomfortable with the idea of taking profit from capitalist labor relationships, but I'm willing to admit I don't fully understand how the stock market works. There is a difference between what an investor gets as profit dividends and what one makes on stock price fluctuations (basically gambling on what people will be willing to pay for the stock at some later date), correct?
3. He tends to believe that supporting "good" businesses is possible. I'm much more skeptical that there can be such a thing.
4. What can I read about how the markets work that isn't written from a Rah-Rah-Capitalism point-of-view?
5. What should he read to understand the relationship between profit and labor? It should be something fairly free of academic jargon. I could give him all my Marxist books, but I feel like something with a more contemporary point-of-view would be more persuasive.
Important note: The amount of $ we're talking about isn't much. It's part of a house downpayment we will need to access in about a year, so bonds and other long-term yield things are out. He is concerned that if we just sit on it and do nothing, inflation and other cost-of-living factors in our area will just nibble away at it. (For ex. I work in a field where it is extremely rare to receive even annual cost-of-living raises. My salary has been stagnant for 4 years, but expenses in our area have gone up a lot.)
And I should add that, while I am much closer to your own ethical beliefs than your partner's, there is nothing particularly moral, and probably a lot that is immoral, about the banking system where your money is now, the government that is backing your money, or the land that you will buy with it. There is no way to be in this world that does not at some level compromise us with evil and oppression and exclusion.
People can hold contradictory ideas in their heads at the same time, and one thing that has helped me when I have a lot of moral feelings about how I am participating in capitalism, is to hold both of these ideas with a lot of self-compassion: I am doing the best that I can right now, and also, I am not doing enough. Both of these things are true.
posted by gauche at 7:29 AM on January 31, 2019 [29 favorites]
People can hold contradictory ideas in their heads at the same time, and one thing that has helped me when I have a lot of moral feelings about how I am participating in capitalism, is to hold both of these ideas with a lot of self-compassion: I am doing the best that I can right now, and also, I am not doing enough. Both of these things are true.
posted by gauche at 7:29 AM on January 31, 2019 [29 favorites]
Others have given the only right answer regarding your short-term savings, but I’d add that this should prompt a discussion with your spouse about how any retirement funds or college/savings for your kid that you might have (or might have in the future) are invested. In those longer-term contexts, it’s really hard to recommend being completely cut off from the market — if that were something important to you, it warrants a deeper dive.
posted by LadyInWaiting at 8:05 AM on January 31, 2019 [2 favorites]
posted by LadyInWaiting at 8:05 AM on January 31, 2019 [2 favorites]
The amount of $ we're talking about isn't much. It's part of a house downpayment we will need to access in about a year, so bonds and other long-term yield things are out.
As others have said, now is not a good time. A few reasons
- the market may be due for a major correction soon (it's been a "up" market for longer than is reasonable) and you could actually lose all of that money, or a lot of it
- you pay taxes on money you make on stocks when you sell them further diminishing your gains
- the stock market is basically nothing BUT extracting surplus value from the labor market
- if your spouse thinks this is a good plan for a one-year investment he is not someone who understands money particularly well. No shame in it, most people don't, but maybe the two of you should sit down and get a little more on the same page
- concurring with everyone else, high yield savings is a better bet for you
I wish I had better advice on stuff to read. All basic finance types of stuff that I've read really are geared towards "Yes, investing in the market is smart" because they equate intelligence with making money which is what the market has (basically) been doing more or less since 2009. It's pretty impossible, as gauche says, to be moral about your money under capitalism. My compromise is keeping money in stocks (I have more money and I have a longer timeframe) and then doing good works and contributing to charities (including direct aid) with the income that helps me. Everyone's got to make their compromises.
posted by jessamyn at 8:10 AM on January 31, 2019 [6 favorites]
As others have said, now is not a good time. A few reasons
- the market may be due for a major correction soon (it's been a "up" market for longer than is reasonable) and you could actually lose all of that money, or a lot of it
- you pay taxes on money you make on stocks when you sell them further diminishing your gains
- the stock market is basically nothing BUT extracting surplus value from the labor market
- if your spouse thinks this is a good plan for a one-year investment he is not someone who understands money particularly well. No shame in it, most people don't, but maybe the two of you should sit down and get a little more on the same page
- concurring with everyone else, high yield savings is a better bet for you
I wish I had better advice on stuff to read. All basic finance types of stuff that I've read really are geared towards "Yes, investing in the market is smart" because they equate intelligence with making money which is what the market has (basically) been doing more or less since 2009. It's pretty impossible, as gauche says, to be moral about your money under capitalism. My compromise is keeping money in stocks (I have more money and I have a longer timeframe) and then doing good works and contributing to charities (including direct aid) with the income that helps me. Everyone's got to make their compromises.
posted by jessamyn at 8:10 AM on January 31, 2019 [6 favorites]
Mod note: Folks, I know the "should we invest now or not" question is the easy one to answer, but it is not actually the question. Please focus on the ethics of investing and non-capitalist reading material on that subject. Thanks.
posted by restless_nomad (staff) at 8:19 AM on January 31, 2019
posted by restless_nomad (staff) at 8:19 AM on January 31, 2019
reprint of an article from the wall street journal on some of the problems with 'ethical investing' (original is behind paywall linked at end of article).
posted by noloveforned at 8:32 AM on January 31, 2019
posted by noloveforned at 8:32 AM on January 31, 2019
Just to think broadly about the moral frame, I think it’s basically true that there is no way to own stocks that does not mean hoping to benefit from capital’s extraction of value from labor. On the other hand you’re saving to buy private property. Presumably you have jobs dependent on capitalist enterprise (even indirectly). You probably keep your savings in banks that extract surplus value via interest on loaned capital. In other words, in real life terms, just participating in the economy as a consumer and worker implicates you in the replication of the capitalist political economy. So becoming a shareholder is incremental — you are essentially becoming an owner of the means of production at the margin.
Shareholders can have a lot of power to shape the ways their investments are used. Shareholder activism is a thing (I own several individual stocks just so I have a proxy vote). You can invest in companies that are “socially responsible” and in whole sectors and industries (like alternative energy sources) that need to win in a capitalist market to have any hope of making a difference. A key question (not for the short run but the long run) is “what else would I do with this money?” (And by extension: what good could I do with the hoped-for but morally troublesome gains of investing it in capitalist enterprise down the road?)
These all come alongside or after “what I need to do to live my life with the necessary resources,” unless you’re a true moral altruist and take a vow of asceticism (like someone I know who is a radical socialist for religious reasons and lives this way, and who basically gives away much of her well-invested savings from decades of living extremely frugally while working full time). You can fund revolutionary causes with capitalist profits you may be uniquely situated to earn compared to more oppressed classes of people, and thus disrupt the system from inside (my favorite test case of this: could you conceive leaving your private property to the nearest Native American sovereign nation when you die?).
Ethical investment is a whole movement. There are brokerages and funds and websites and gurus and charlatans (and a whole lot of greenwashing bullshit) to study. But in the end your question is philosophical, and political, and not simply financial. And it isn’t binary, it involves compromising with living in a capitalist hegemony like every other economic decision you make. You buy toothpaste. It all comes in packaging. You get the one that’s recyclable. You use every last drop. But you still brush your teeth twice a day.
posted by spitbull at 9:06 AM on January 31, 2019 [7 favorites]
Shareholders can have a lot of power to shape the ways their investments are used. Shareholder activism is a thing (I own several individual stocks just so I have a proxy vote). You can invest in companies that are “socially responsible” and in whole sectors and industries (like alternative energy sources) that need to win in a capitalist market to have any hope of making a difference. A key question (not for the short run but the long run) is “what else would I do with this money?” (And by extension: what good could I do with the hoped-for but morally troublesome gains of investing it in capitalist enterprise down the road?)
These all come alongside or after “what I need to do to live my life with the necessary resources,” unless you’re a true moral altruist and take a vow of asceticism (like someone I know who is a radical socialist for religious reasons and lives this way, and who basically gives away much of her well-invested savings from decades of living extremely frugally while working full time). You can fund revolutionary causes with capitalist profits you may be uniquely situated to earn compared to more oppressed classes of people, and thus disrupt the system from inside (my favorite test case of this: could you conceive leaving your private property to the nearest Native American sovereign nation when you die?).
Ethical investment is a whole movement. There are brokerages and funds and websites and gurus and charlatans (and a whole lot of greenwashing bullshit) to study. But in the end your question is philosophical, and political, and not simply financial. And it isn’t binary, it involves compromising with living in a capitalist hegemony like every other economic decision you make. You buy toothpaste. It all comes in packaging. You get the one that’s recyclable. You use every last drop. But you still brush your teeth twice a day.
posted by spitbull at 9:06 AM on January 31, 2019 [7 favorites]
Coming back in to say that, setting aside the question of what you should do with your down payment, you might find that you are comfortable with a form of investing called "microlending" which is a more direct and personal way to use your surplus income.
It might appeal to you to form, for example, a microlending investor's club for the purpose of making loans to, let's say, minority-owned small businesses in your city. That is an area in which you might be able to be sure that you were using your money to make beneficial changes to your own community in line with your values, while also realizing a return on your money. To be sure, this is more work than just putting your money in a fund that doesn't invest in sectors you don't approve of, but that is true of a lot of ethical behavior.
posted by gauche at 9:43 AM on January 31, 2019 [1 favorite]
It might appeal to you to form, for example, a microlending investor's club for the purpose of making loans to, let's say, minority-owned small businesses in your city. That is an area in which you might be able to be sure that you were using your money to make beneficial changes to your own community in line with your values, while also realizing a return on your money. To be sure, this is more work than just putting your money in a fund that doesn't invest in sectors you don't approve of, but that is true of a lot of ethical behavior.
posted by gauche at 9:43 AM on January 31, 2019 [1 favorite]
1. Over that short term frame, you shouldn't be in the market in any case, put it in a money market or buy a CD. Your time horizon is way too short.
2.This effectively negates your other concerns, unless you're opposed to banking and the concept of interest entirely. I suspect you still have a checking and savings account.
3. On that same note, if you want to "own the means of production," so to speak, put the money in a credit union! It's a cooperative nonprofit for the benefit of its membership. They also often have better rates, because there's no middleman to pay.
posted by leotrotsky at 9:53 AM on January 31, 2019 [8 favorites]
2.This effectively negates your other concerns, unless you're opposed to banking and the concept of interest entirely. I suspect you still have a checking and savings account.
3. On that same note, if you want to "own the means of production," so to speak, put the money in a credit union! It's a cooperative nonprofit for the benefit of its membership. They also often have better rates, because there's no middleman to pay.
posted by leotrotsky at 9:53 AM on January 31, 2019 [8 favorites]
There is a difference between what an investor gets as profit dividends and what one makes on stock price fluctuations (basically gambling on what people will be willing to pay for the stock at some later date), correct?
If you believe some of the fundamental theories of stock market value, no, not really. The stock price, in (crude) theory, reflects the value of the stream of future dividends. If your goal is just to launder the money you make through the secondary market (the strangers who will buy your shares when you want to sell them) rather than receive money directly from the company, I suppose you could rely on secondary market price fluctuations and donate the dividends or something. But if your goal is to avoid providing incentive for excessively coercive profit-making, it won't work. Not only are dividends and stock price linked, as I said, but the desire to keep the stock price high is what drives a lot of terrible corporate behavior.
posted by praemunire at 11:13 AM on January 31, 2019
If you believe some of the fundamental theories of stock market value, no, not really. The stock price, in (crude) theory, reflects the value of the stream of future dividends. If your goal is just to launder the money you make through the secondary market (the strangers who will buy your shares when you want to sell them) rather than receive money directly from the company, I suppose you could rely on secondary market price fluctuations and donate the dividends or something. But if your goal is to avoid providing incentive for excessively coercive profit-making, it won't work. Not only are dividends and stock price linked, as I said, but the desire to keep the stock price high is what drives a lot of terrible corporate behavior.
posted by praemunire at 11:13 AM on January 31, 2019
(But, as others have said--if your money's in a bank you are already well-enmeshed in this system.)
posted by praemunire at 11:14 AM on January 31, 2019
posted by praemunire at 11:14 AM on January 31, 2019
While it doesn't directly answer the questions you posed about how the markets work and the relationship between profit and labor, I recommend this thought-provoking piece on "unshaming money in social justice culture" by Tada Hozumi. It's definitely not "rah-rah capitalism," and it addresses some of the philosophical, political, and emotional territory you mention in non-blaming, non-shaming ways. Maybe it will help you and your spouse bridge the gap with decisions on investing, or at least give you some food for fruitful discussion on financial matters. Here's a quote:
"I believe capitalism is to money, as rape-culture is to sex. One of the most abhorrent ways in which capitalism violates us is by severing us from our natural desire for exchange by equating it with violence."
posted by velvet winter at 11:52 AM on January 31, 2019 [3 favorites]
"I believe capitalism is to money, as rape-culture is to sex. One of the most abhorrent ways in which capitalism violates us is by severing us from our natural desire for exchange by equating it with violence."
posted by velvet winter at 11:52 AM on January 31, 2019 [3 favorites]
There is a difference between what an investor gets as profit dividends and what one makes on stock price fluctuations (basically gambling on what people will be willing to pay for the stock at some later date), correct?
To say “no” in a different way to praemunire, above... my simplistic understanding is that dividends are “surplus” money that the company has, which it decides to give out to shareholders. Some companies don’t pay dividends, or they’ll pay smaller dividends, and they instead spend this “surplus” money on other things... new factories, R&D, marketing, bigger bonuses for execs... At least some of that spending will generate better sales (or whatever) and grow the business and increase profit and make the business look more attractive and increase the share price.
All of which in my, again, simplistic view means there’s no ethical difference between money you get from dividends versus money gained by selling your shares after the price goes up. You could maybe even make a case that dividends are a bad thing because they’re extracting money from the business that could be used for more worthwhile and practical and long-term purposes than lining the pockets of capitalist shareholders.
posted by fabius at 1:45 PM on January 31, 2019
To say “no” in a different way to praemunire, above... my simplistic understanding is that dividends are “surplus” money that the company has, which it decides to give out to shareholders. Some companies don’t pay dividends, or they’ll pay smaller dividends, and they instead spend this “surplus” money on other things... new factories, R&D, marketing, bigger bonuses for execs... At least some of that spending will generate better sales (or whatever) and grow the business and increase profit and make the business look more attractive and increase the share price.
All of which in my, again, simplistic view means there’s no ethical difference between money you get from dividends versus money gained by selling your shares after the price goes up. You could maybe even make a case that dividends are a bad thing because they’re extracting money from the business that could be used for more worthwhile and practical and long-term purposes than lining the pockets of capitalist shareholders.
posted by fabius at 1:45 PM on January 31, 2019
Ride Free Fearless Money is for you. She's got a ton of great resources on her website and does events and coaching. I recommend her Hacking Capitalism posts in particular.
posted by gingerbeer at 1:54 PM on January 31, 2019 [3 favorites]
posted by gingerbeer at 1:54 PM on January 31, 2019 [3 favorites]
The following is not suitable for a one-year investment, but you may be interested in learning about cooperative investment clubs for some future, long-term investing. Basically, there are worker-owned or customer-owned cooperatives all over the country that you can invest in, but it's often prohibitively expensive and complicated to do so as an individual. Joining with a group of like-minded investors can make these investments possible.
You don't even need a club if there happen to be (1.) cooperatives in your state, (2.) which are currently selling shares, and (3.) at a cost that you can safely afford to invest. But when that's not all possible, a club can broaden your cooperative investment options considerably.
The returns on investing in cooperatives are typically much lower than, for example, stock market index funds, but you get to support a cooperative system that may be more closely aligned with your social goals. I've also found direct investments like this to be more concrete and easy to understand than things like stock trading: the cooperative business wants some cash to make improvements (renovations, new equipment, or whatever), you loan them some money (by purchasing shares), they pay interest on it for a while (as dividends), and eventually pay you back (if all goes well; as in all investments, they may fail and you would be out the money with little or nothing to show for it).
The biggest obstacle to participating in a cooperative investment club is that they... simply aren't very common, so unless you are lucky enough to find one in your area, you will probably have to organize it yourself.
posted by Lirp at 10:10 PM on January 31, 2019 [1 favorite]
You don't even need a club if there happen to be (1.) cooperatives in your state, (2.) which are currently selling shares, and (3.) at a cost that you can safely afford to invest. But when that's not all possible, a club can broaden your cooperative investment options considerably.
The returns on investing in cooperatives are typically much lower than, for example, stock market index funds, but you get to support a cooperative system that may be more closely aligned with your social goals. I've also found direct investments like this to be more concrete and easy to understand than things like stock trading: the cooperative business wants some cash to make improvements (renovations, new equipment, or whatever), you loan them some money (by purchasing shares), they pay interest on it for a while (as dividends), and eventually pay you back (if all goes well; as in all investments, they may fail and you would be out the money with little or nothing to show for it).
The biggest obstacle to participating in a cooperative investment club is that they... simply aren't very common, so unless you are lucky enough to find one in your area, you will probably have to organize it yourself.
posted by Lirp at 10:10 PM on January 31, 2019 [1 favorite]
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BUT! Your actual circumstances make this question easy! If you need this money to be liquid and in roughly its current amount in a short while (a year being a short while) you should probably not put it into the stock market at all, especially right now. Timing the market is very hard in general, and I am not a financial advisor but just a stranger on the internet, but I am hearing some indications that we are looking at another recession in the near future. If you were investing on a longer-term basis where you might weather a downturn and still come out okay, I'd say to put in into a low-fee ETF that invests according to your ethical principles and then don't worry too much about the day-to-day changes in the market, but you are parking your money on the short term and want to get back at least as much as you put in, and that is a trickier proposition.
If you will need this money in a year, I think you should keep it in a savings account. The inflation is not nothing but it is the price you pay to have a down payment that is liquid at its current dollar value. The money that you invest might go up, might go down, and that uncertainty is not what you want if you have a specific purpose in mind for the money.
posted by gauche at 7:21 AM on January 31, 2019 [28 favorites]