Wall Street Insiders: The Conning of America

Thursday, October 16, 2008

Com’on. Admit it. Who among us doesn’t get a certain kick out of a good crisis now and then – as long as it doesn’t affect us personally. Other than for the beer and barbeque, people go to NASCAR races for the danger in which the drivers put themselves, and for the occasional times when they overdo it. Hurricanes are big news, not just to warn the people who may need to evacuate, but because the rest of us find it interesting. Did you see the dramatic pictures of the southern California fires on all the cable news websites? Oh, and then there’s the new reality series, “Celebrity Rehab.” Google it if you think I’m kidding.

Unfortunately, the current economic crisis is adversely impacting most, if not all of us in one way or another. It’s not funny, not at all, and yet there are some who would take advantage of the situation. Sure, there are always jerks and career criminals out there who will scam whatever they can. To them, I offer my apologies for implying any relationship to the people I’m really talking about, the scale of whose selfish deceit is infinitely more grand and despicable.

Everyone lately has been fixating on the stock market, wildly fluctuating up and down hundreds of points a day. The stock market has a real and a speculative component. The real component moves the prices of stocks based on the actual performance of their companies. The speculative component is driven by expectations which are usually based on more or less reasoned guesses about individual company and economic conditions – but not always. Right now the speculative component of the market has taken charge, fueled, in part, by irresponsibly negative rhetoric from our Administration, by Henry Paulson and Ben Bernanke in particular, by Congressional leaders and Presidential candidates, and by the media for whom all this drama is good for its bottom line. Some of these players don’t fully understand what’s happening, others do, but what they all have in common is the adrenaline rush, power trip and ratings these times afford them.

The stock market is not moving this radically because of day to day changes in the performance of corporate America – whose financial statements are only published on a quarterly basis. Nor is it behaving so radically because of the lightening fast, en mass reactions of ordinary Americans and traditionally conservative institutional investors who hold stock. So who does that leave? Who, not what, but who is propelling all this movement?

Unquestionably, our economy, more so in some sectors than others, is having problems, serious long-term problems we’ve been discussing, but doing nothing about for years and, in some cases, decades. The wild and erratic fluctuations in the stock market just isn’t one of them. How can I be so cold, so harsh when the life savings of so many ordinary people are in jeopardy? Because they’re not. Because the speculative panic we’re watching will subside and stock prices will return, eventually and probably sooner than you think, to where they should have been, all things considered.

Real or not, we focus on daily movements in the Dow and other market statistics because they’re more dramatic, more exciting than droll, monthly employment statistics. The thing is, while we’ve all been distracted by these market fluctuations, astute Wall Street insiders are taking advantage of these swings, and no doubt doing their best, within the law of course, to encourage them. Just today, the Dow Jones Industrial Average opened at 8,577, went as low as 8,198 (down 379 points), and then as high as 9,013 (815 points above today’s low), to close at 8,979 in, as they like to say, “positive territory,” finishing up 402 points. Breathtaking, isn’t it. And these are only the Dow Jones Industrials. Can you imagine what’s happening to other, less prominent stocks?

Certainly some of this volatility is the natural and unsuspicious behavior of an anxious and confused speculative market. But the rest of it, particularly the wild in-day and day-to-day swings, smacks of having been engineered, not by one person in particular, but by various and hopefully independent specialists who do all this for a living, and a very good living at that. Academicians please, there’s no need for any sophisticated mathematical model of speculative behavior, fodder for a future episode of “NUMB3RS.” Look to the obvious. Odds are that specific people are making this happen – our government leaders, their unwitting accomplices.

If only you had money, tons of money, so much money and expertise that you could leverage these swings to your advantage. Imagine if you were so good, you could see them coming. Think of the billions you’d stand to make, literally overnight or within a single day’s trading, by buying and selling at opposite ends of multi-hundred point swings. Somebody’s got to ask, which is what I’m doing here and encouraging you to do the same, who stands to benefit from speculative swings in stock prices this radical?

Hold on now. I not suggesting any conspiracy, any secret organization that is to blame. No. Not even close. What I’m talking about is a flaw in the system – more like a tear in the time-space continuum from the size of it – which allows for the triggering and support of dramatic, across the board shifts in stock prices having no foundation other than the leveraging of other stockholder anxiety for personal gain – without regard for the consequences. What do we know about the pattern, timing and sources of selling and buying initiatives? Who’s making money at the expense of the American psyche, without regard its real consequences for consumer confidence and business investment, and the effect on our economy?

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