News

The Great Gamblers

The piece is about how stocks and share brokers have impacted the operations of corporations across the world. Investment firms and brokers have such large stakes in corporations, that they try to impact every aspect ofÿthe latter. At times, this takes the focus of the company away fromÿits basic goals.

The piece also covers how the desire to grow rich quickly, by investors across the world, is now impacting commodity markets. Many investment brokers do advise that commodities should form a part of an investment portfolio due to rising prices. Is this right? How will it impact the prices of food for the common man?

“You must add some commodities to your investment portfolio,” advised the MBA working with an investment firm. Flabbergasted, I asked “Why?” “You must lock some money in future commodities; the market is buoyant,” he replied.

I reflected. There is a worldwide shortage of food grains and prices have escalated by 50%. Oil prices have been menacing! Some of these increases must be due to speculator-investors, like my advisor.

When I was young, I learned, “If wishes are horses, then beggars are riders.” Now, working in the corporate sector, I learned that corporations are horses and corporate gamblers are riders. There was a time when companies made products i.e. tea, soft drinks, biscuits, soaps, etc. They also provided livelihood. Now, corporations are frequently condensed to manufacturing returns for shareholders and brokers!

Hundreds of years ago, these companies were accused of using people as industrial slave labor. They made workers slog long hours, on mingy money. Some construction companies in the Gulf are a modern hangover of that bygone era. Marxism, came as an antidote to industrial exploitation. Socialism emerged. Finally, enlightened self-interest sensitized company-owners towards human beings. Labor laws took birth with annual leave, casual leave, sick leave, medical leave, refreshments, lunch etc.

Thus, parts of the world grew richer. The Rockefellers, Fords, Gates, etc., have money for their next 2-3 generations. They do not need to work at all. These people invested their surplus money in properties, companies, lands in villages and cities, built buildings and offices for rentals. Many of them also invested in metals, viz. gold, silver, etc. But, they had surplus moneys, even after investing in properties, metals. Money, allures more money. Then, they discovered corporate stocks.

They started buying stocks of corporations to park their excess moneys. A few days ago, I attended the Dubai World Cup horse race at Nadal Sheba. As the magnificent horses whizzed past, I pondered how similar corporate stocks and racehorses are! The bookies track the pedigree of the horse before they bet on it. Corporate investors also do the same before they buy its shares. Corporate bookies track and study top managers of the corporate minutely and debate who will be the best Managing Director or chairperson of the company, just as bookies scrutinize jockeys! They know when a director is bypassed, in favor of another, months in advance! A robust horse and a mature jockey, are brilliant investments. However, a healthy horse with a pedestrian jockey, is not alluring. A mediocre company, with a new brilliant Managing director, could be a worthwhile investment!

Money, can bamboozle anyone. Even the middle and lower-middle-class people around the world, e.g. retired clerks, bureaucrats, etc., are lured to invest in shares, through marketing hype, hoping to become millionaires overnight. It does not always happen. Many middle class investors become victims of the greed and manipulations of large investors. Large investment firms, proliferate their risk among other investment fraternities. They even try to manipulate the operations of companies, influencing the boards of companies, to boost their wealth. When a large company fails to deliver the expected results, thousands of middle class citizens, who have invested their lives’ earnings in shares, are rubbled. Many individuals invest their savings in blue-chip companies in the hope of leading peaceful retired lives. Then, they loose everything. And, at 6o years of age, they begin life afresh. Sad and broken. Perhaps, wiser.

As external pressures mount on corporations to deliver the expected results and stock prices, managers compromise on product quality, customer service, employee welfare. The primary task of any company is to produce quality goods and ensure customer and employee satisfaction. This goal is simply jettisoned, to achieve a targeted market share price. So, beware of the Great Gamblers who degrade corporations, and even the food grains we eat to mere pawns on their chessboards in their aggrandizement of fortune and glory.

October 20, 2008
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