I am presently reading Tom McCarthy's Remainder— a brilliantly complex novel that will merit its own post once I complete the book. But in the meantime, I thought I'd share a passage from the beginning of the novel that today is eerily poignant. The book's narrator, recently recovered from an accident and awarded generous compensation by those responsible (it's all very vague), meets with a stockbroker named Matthew Younger to discuss investment strategies for this newfound fortune. Younger begins by explaining the workings of the stock market to his new client:
"Over the last century the stock market has outperformed cash in every decade apart from the thirties. Far outperformed. As a rule of thumb, you can expect your capital to double over five years. In the current market conditions, you can reduce that figure to three, perhaps even two."I should also mention that this book was published in 2005.
"How does it work?" I asked him. "I invest in companies and they let me share in their profits?"
"No," he said. "Well, yes, that's a small aspect of it. They give you a dividend. But what really propels your investment upwards is speculation."
"Speculation?" I repeated. "What's that?"
"Shares are constantly being bought and sold," he said. "The prices aren't fixed: they change depending on what people are prepared to pay for them. When people buy shares, they don't value them bu what they actually represent in terms of goods or services: they value them by what they might be worth, in an imaginary future."
"But what if that future comes an they're not worth what people thought they would be?" I asked.
"It never does," said Matthew Younger. "By the time one future's there, there's another one being imagined. The collective imagination of all the investors keeps projecting futures, keeping the shares buoyant. Of course, sometimes a particular set of shares stop catching people's imagination, so they fall. It's our job to get you out of a particular one before it falls—and, conversely, to get you into another when it's just about to shoot up."
"What if everyone stops imagining futures for all of them at the same time?" I asked him.
"Ah!" Younger's eyebrows dipped into a frown, and his voice became quieter, withdrawing from the room back to his small mouth and chest. "That throws the switch on the whole system, and the market crashes. That's what happened in '29. In theory it could happen again." He looked sombre for a moment; then his hearty look came back—and, with it, his booming voice as he resumed: "But if no one thinks it will, it won't."
"And do they think it will?"
"Cool," I said. "Let's buy some shares."