The headlines in today's paper fairly screamed 'DOW in a STAMPEDE!', as the DOW Jones average closed at 12,040.16 on Tuesday, advancing nearly 148 points after "strong corporate earnings reports".
The story went on to assert:
"The rebound could bring small investors back to the stock market"
Well, uh ...yeah,...if they are really sheep waiting to be fleeced again. I mean, how many times do we have to go down this road and beat the false optimism from people's neurons before they get it: that in the parlance of the Wall Street Traders quoted in The Wall Street Journal four years ago small fry investors are "dumb order flow" and "chickens to be plucked".
But to read the hack stories originating in the business press one would think any common investor (never mind he may have lost most of his 401k savings) is safe to just walk back in. Think again! As Michael Lewis, author of The Big Short, noted this morning on MSNBC's Morning Joe, it is all "built on quicksand". First, the unemployment is still near 10% and don't buy for minute that a falling rate signifies improvement. Since the Bureau of Labor Statistics is forced to cook stats (by virtue of a Republican House ruling from 1994 defining the unemployed) the rate is always lowballed since anyone still unemployed after 6 months is re-classed as "discouraged". As Lewis observed, the real rate with all those dropouts is closer to 17-18%.
That is nearly one-fifth of the nation's putative labor force unable to use discretionary income to pay off mortgages, far less consume and prop up retail or other businesses. Indeed, the largest sector of ongoing consumption now is being fed by the luxury buying richest! And why not, after just being handed a monster $140 billion tax cut over the next two years - which has also dug us into a massive deficit.
And that's the next thing! Because of the dumbass-deficit ravaging Bush tax cut extension (which ought to never have been passed last December if Obama's Deficit Commission warnings were taken seriously) our deficit will reach nearly 50% of GDP by 2012, according to the Congressional Budget Office. If Obama punts again, and under election year pressure allows a 2-year renewal of those tax cuts, the deficit metastasizes to 93% of GDP! At that point, the bond pirates and rating agencies like Standard and Poor's, Moody's will step in and force austerity down our collective throats, Greek style. Does any genius think at that stage the DOW will still be around 12,000 or higher? If so, I'd give anything to know what kind of rope you're smoking!
Lastly, there is the parlous increase in commodities prices which I already wrote about and which shows no signs of abating:
http://brane-space.blogspot.com/2011/01/commodities-surges-harbinger-of.html
Oil, in particular (and based on past experience) is likely to soar to stratospheric record highs - maybe more than $150 a barrel - especially if the Egyptian refining capacity grinds to a halt amidst the current crisis - or the Suez Canal (which allows 12% of oil tankers through) is shut down. In that case, watch stocks plummet ten times faster than they've risen.
And amid all of this, we're still leaving out all the smoke and mirrors tricks and tactics used on small investors- from market timing, to the use of hyper-rapid trade algorithms that can buy a stock or mutual fund back ten times over (or sell it) and dump a redemption price five-hold before a small fry can reach for his phone, or trade on his own home computer. Then there are still the many stories of insider trading exposed, plus the ones we don't even know about. (And thank the Goopers and the GOP-controlled House for pushing more legislation to stymie increased SEC oversight!)
The stock market's sole purpose, as E. Brockway observes in his The End of Economic Man, 1990, is to steal capital from the poor or middle class (that can least afford losses) and give it to the rich. The technique hardly varies: Pundits, wags and paid shills hype the various stocks, funds or instigate a "buzz" about them - to get suckers to buy in. The increasing buy-in inflates the price-to -earnings ratio (P-E ratio) and produces a bubble of high profits. The "Big boys" (flash traders, hedge fund operators, large, institutional investors) get tipped 1-2 days in advance and cash out, leaving the little guys to sink.
If they're lucky they may earn a few bucks on redemptions. Not much. The thievery works eventually because most manjacks are conditioned to "buy and hold" rather than fold when the share price dives below a certain threshold. (Which ought to be the tip off). Thus, there are always ample marks left at the end game to be properly fleeced. Amazingly, they're always ready to play the game again, and pile their newly saved up money in.
The first news of big boys getting tip offs before small fry that I beheld appeared in The Baltimore Sun - far back (page 9) of the business pages on January 27, 1997 with a piece that bore the header: ‘Investors Complain of Uneven Disclosure – Firms Give Select Few Data in Advance’. The article, originally out of Bloomberg Business News, noted that GM gave top brokerage firms an early ‘heads up’ to the effect that fourth quarter (1996) costs would be higher than expected. The early warning gave the big boys time to cash out, while the ordinary investing mortals who so trusted the system had to wait an entire extra day – losing lots of money in the process. A coincidental echo of Enron? Hardly. This sort of thing is engineered into the system – though Wall Street will deny it vigorously.
In the meantime, its mavens will continue to try to brainwash and "PR" Americans into believing the small investor is the guy who can "save the economy" and that the current "lack of confidence acts as a sedative across the economy" in the immortal words of one David Kelly, chief market strategist of J.P. Morgan.
But this is horse pockey! It isn't a realistic "lack of confidence of small investors" that is acting as a sedative on the economy, but the balless wonder Big Business and Corporate bunch who continue to sit on nearly $1 trillion in cash instead of plowing it into job formation and business expansion. If those cowardly clowns would plow money in, then hire people, the unemployment rate could be halved overnight (especially if the federal government also regulated and inhibited moving jobs overseas, to India, China).
In that case, twice as many people would be able to spend actual earned income on both needs and luxuries - as opposed to the spurious alternative of depending on small fry investors to use their phantom money gains from the stock market - to do so! Beyond all this, any nation that bases economic good standing on an artificial market marker while it's infrastructure is crumbling all around, is as deranged and stupid as a homeowner who rejoices in winning a $10,000 lotto to spend frivolously, while his basement is infested with the stachybotrys mold!
The story went on to assert:
"The rebound could bring small investors back to the stock market"
Well, uh ...yeah,...if they are really sheep waiting to be fleeced again. I mean, how many times do we have to go down this road and beat the false optimism from people's neurons before they get it: that in the parlance of the Wall Street Traders quoted in The Wall Street Journal four years ago small fry investors are "dumb order flow" and "chickens to be plucked".
But to read the hack stories originating in the business press one would think any common investor (never mind he may have lost most of his 401k savings) is safe to just walk back in. Think again! As Michael Lewis, author of The Big Short, noted this morning on MSNBC's Morning Joe, it is all "built on quicksand". First, the unemployment is still near 10% and don't buy for minute that a falling rate signifies improvement. Since the Bureau of Labor Statistics is forced to cook stats (by virtue of a Republican House ruling from 1994 defining the unemployed) the rate is always lowballed since anyone still unemployed after 6 months is re-classed as "discouraged". As Lewis observed, the real rate with all those dropouts is closer to 17-18%.
That is nearly one-fifth of the nation's putative labor force unable to use discretionary income to pay off mortgages, far less consume and prop up retail or other businesses. Indeed, the largest sector of ongoing consumption now is being fed by the luxury buying richest! And why not, after just being handed a monster $140 billion tax cut over the next two years - which has also dug us into a massive deficit.
And that's the next thing! Because of the dumbass-deficit ravaging Bush tax cut extension (which ought to never have been passed last December if Obama's Deficit Commission warnings were taken seriously) our deficit will reach nearly 50% of GDP by 2012, according to the Congressional Budget Office. If Obama punts again, and under election year pressure allows a 2-year renewal of those tax cuts, the deficit metastasizes to 93% of GDP! At that point, the bond pirates and rating agencies like Standard and Poor's, Moody's will step in and force austerity down our collective throats, Greek style. Does any genius think at that stage the DOW will still be around 12,000 or higher? If so, I'd give anything to know what kind of rope you're smoking!
Lastly, there is the parlous increase in commodities prices which I already wrote about and which shows no signs of abating:
http://brane-space.blogspot.com/2011/01/commodities-surges-harbinger-of.html
Oil, in particular (and based on past experience) is likely to soar to stratospheric record highs - maybe more than $150 a barrel - especially if the Egyptian refining capacity grinds to a halt amidst the current crisis - or the Suez Canal (which allows 12% of oil tankers through) is shut down. In that case, watch stocks plummet ten times faster than they've risen.
And amid all of this, we're still leaving out all the smoke and mirrors tricks and tactics used on small investors- from market timing, to the use of hyper-rapid trade algorithms that can buy a stock or mutual fund back ten times over (or sell it) and dump a redemption price five-hold before a small fry can reach for his phone, or trade on his own home computer. Then there are still the many stories of insider trading exposed, plus the ones we don't even know about. (And thank the Goopers and the GOP-controlled House for pushing more legislation to stymie increased SEC oversight!)
The stock market's sole purpose, as E. Brockway observes in his The End of Economic Man, 1990, is to steal capital from the poor or middle class (that can least afford losses) and give it to the rich. The technique hardly varies: Pundits, wags and paid shills hype the various stocks, funds or instigate a "buzz" about them - to get suckers to buy in. The increasing buy-in inflates the price-to -earnings ratio (P-E ratio) and produces a bubble of high profits. The "Big boys" (flash traders, hedge fund operators, large, institutional investors) get tipped 1-2 days in advance and cash out, leaving the little guys to sink.
If they're lucky they may earn a few bucks on redemptions. Not much. The thievery works eventually because most manjacks are conditioned to "buy and hold" rather than fold when the share price dives below a certain threshold. (Which ought to be the tip off). Thus, there are always ample marks left at the end game to be properly fleeced. Amazingly, they're always ready to play the game again, and pile their newly saved up money in.
The first news of big boys getting tip offs before small fry that I beheld appeared in The Baltimore Sun - far back (page 9) of the business pages on January 27, 1997 with a piece that bore the header: ‘Investors Complain of Uneven Disclosure – Firms Give Select Few Data in Advance’. The article, originally out of Bloomberg Business News, noted that GM gave top brokerage firms an early ‘heads up’ to the effect that fourth quarter (1996) costs would be higher than expected. The early warning gave the big boys time to cash out, while the ordinary investing mortals who so trusted the system had to wait an entire extra day – losing lots of money in the process. A coincidental echo of Enron? Hardly. This sort of thing is engineered into the system – though Wall Street will deny it vigorously.
In the meantime, its mavens will continue to try to brainwash and "PR" Americans into believing the small investor is the guy who can "save the economy" and that the current "lack of confidence acts as a sedative across the economy" in the immortal words of one David Kelly, chief market strategist of J.P. Morgan.
But this is horse pockey! It isn't a realistic "lack of confidence of small investors" that is acting as a sedative on the economy, but the balless wonder Big Business and Corporate bunch who continue to sit on nearly $1 trillion in cash instead of plowing it into job formation and business expansion. If those cowardly clowns would plow money in, then hire people, the unemployment rate could be halved overnight (especially if the federal government also regulated and inhibited moving jobs overseas, to India, China).
In that case, twice as many people would be able to spend actual earned income on both needs and luxuries - as opposed to the spurious alternative of depending on small fry investors to use their phantom money gains from the stock market - to do so! Beyond all this, any nation that bases economic good standing on an artificial market marker while it's infrastructure is crumbling all around, is as deranged and stupid as a homeowner who rejoices in winning a $10,000 lotto to spend frivolously, while his basement is infested with the stachybotrys mold!
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