Before you celebrate the success of the stock market and the spin that the economy is recovering ...
Sometimes I hate financial analysts in the media who are little more than story-telling shills for the financial industry; providing the news that ostensibly affects the consumer confidence that drives the stock market or excuses the poor performance of those who professionally manage investments. Which is bull pucky when you consider that a corporation whose stock drops today and rises tomorrow is fundamentally the very same company on both days. So before we jump up and down for the stock market and celebrate the spin that our economy is recovering, let’s consider a few issues …
One, much of the trading on the market exchanges is automated trading on factors relating to price, trends and velocities – some of which is actually divorced from the real activities of the underlying corporations. We have seen large hedge funds deliberately sell short and drive a security downward, only to re-purchase the same security for an artificial profit.
Two, much of the trading is done by aggregated owners in mutual funds, pension funds and investment vehicles rather than individuals acting individually. One need only look at the trading as a reporting period comes to a close and the traders scramble to get rid of securities that have fallen out of favor to see how artificial depressions of the market occur.
Three, individuals and especially senior citizens living on a fixed income have been artificially forced into the stock market and mutual funds because of the abysmal rate of return on bank deposits. All caused by the Federal Reserve’s plan to re-capitalize secretly insolvent financial institutions with their ZIRP (Zero Interest Rate Program) policy which allows banks to borrow good funds collateralized with their dodgy paper.
Four, most of the yields today are less than the actual rate of inflation – which is grossly understated by government reporting.
And five, there are still those who are securitizing underlying assets (mortgages, car loans, credit card debt, leasing obligations, etc.) and forming companies to hold these assets. Since some of these securities have been classified by the ratings agencies as triple-A investment grade securities, mutual funds, pension funds and companies who invest their short-term capital remain vulnerable to significant fluctuations in the underlying market.
Record-Smashing Quarter: S&P 500 Ends Above 2007’s Record Close, Dow Posts Best Q1 Since 1998
Stocks closed out the first quarter on a high note with the S&P 500 piercing through levels last seen in 2007 to end at a record high near 1,570 and the Dow logging its strongest quarter in 15 years. Source: Record-Smashing Quarter: S&P 500 Ends Above 2007’s Record Close, Dow Posts Best Q1 Since 1998
Bottom line …
For the conspiracy theorists among you, I would like to note that taxing financial transaction involving stocks and securities appears to be more palatable than putting a tax on bank deposits which is likely to produce a public outcry and political backlash. This is an important area as the United Nations and various international organizations are proposing a tax on all financial transactions no matter how they occur and without any exemptions.
So before you jump up and down about the recover, state all costs and yields in constant dollars and subtract inflation from any yields earned on your investments.
-- steve
“Nullius in verba”-- take nobody's word for it!
"Acta non verba" -- actions not words
“Beware of false knowledge; it is more dangerous than ignorance.”-- George Bernard Shaw
“Progressive, liberal, Socialist, Marxist, Democratic Socialist -- they are all COMMUNISTS.”
“The key to fighting the craziness of the progressives is to hold them responsible for their actions, not their intentions.” – OCS "The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius “A people that elect corrupt politicians, imposters, thieves, and traitors are not victims... but accomplices” -- George Orwell “Fere libenter homines id quod volunt credunt." (The people gladly believe what they wish to.) ~Julius Caesar “Describing the problem is quite different from knowing the solution. Except in politics." ~ OCS