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The Wall Street Cartel

As most readers of this blog know, most of my posts are opinion pieces that are usually supported by documentation that validates my arguments. The subject of today’s blog will involve speculation on my part, but if you follow my thought process, it will be apparent there’s more than a conspiracy theory at play here.

On July 26, 2009 I wrote a blog entitled “The Mutual Funds Con” where I professed a massive distrust for the movers and shakers on Wall Street. Recent developments in the stock market have done nothing to reverse my position, but rather have fueled my mistrust to yet another level.

Since 2016 began (actually it started on December 28th), the markets collectively have lost over 10% of its value. It’s not unusual for a 10% decline to occur over a period of months but this has happened in just sixteen trading days. This is the worst calendar year start in our history! The financial talking heads primarily blame this aberration on the extreme decline in the price of crude oil, which went from a high of over $110 in 2012 to under $30 per barrel as of today.

It’s understandable to me that companies in the energy and oil sectors would suffer losses and their share prices would nosedive to reflect these losses. You don’t have to be an economist to conclude that.

However, I submit that a vast majority of companies would actually derive a financial benefit from these falling prices of fuels. The airline industry in 2008 immediately increased ticket prices and began charging for checked baggage to offset the higher cost of jet fuel. Ticket prices have not declined and the surcharge for baggage has continued to be a profit center for them, despite the lower cost of operation today. At the same point in time, the auto industry scrambled to rush hybrid vehicles to market as dealer inventories were exploding resulting from a bad economy and high prices at the pump. However 2015 was the best sales year ever so automakers are again awash in profits. Why have their stock values also plummeted?

Sectors such as pharmaceuticals, health care, retail, municipal, commercial, and residential construction, transportation, technology, electronics, software, and many other businesses should be either unaffected or positively affected by lower gas prices. The low price of crude oil should be financially damaging to a select few industries and therefore NOT negatively influence share price of most other stocks.

But that has not been the case. There is no single company that has been immune to this bloodbath on Wall Street. Apple, Google, Amazon, facebook, and many other blue chip stocks that consistently pay dividends have been victims of this historically quick devaluation. Americans’ IRAs, 401k’s, 403B’s and entire portfolios have now lost over $2 trillion dollars…All this in sixteen days! Do you smell a foul odor somewhere here, folks. Maybe the smell of collusion and corruption?

My financial advisor, who I trust implicitly, has told me that the markets are influenced by two basic emotions, greed and fear. These factors often override companies’ forecasts, sales, and even profits.

I will now reveal what I believe (albeit I can’t prove it) is Wall Street’s dirty little secret. There exists a band of traders, insiders, Hedge Fund managers, and high level executives who conspire and deliberately manipulate the markets. I believe they collectively decide and advise key clients with large stock holdings when to simultaneously sell, (always at a high point in values) thereby creating massive drops in stock prices. The average investor reacts to this selloff by selling at a loss, from the fear of losing everything. When these ‘experts’ agree we have hit the bottom, they induce their clients to buy back what they sold at a fraction of what they sold it for, creating a ‘recovery’ from what they term a ‘market correction’. I have been told a market correction results from an artificially high value of the price of shares of common stock, and we should expect these ‘natural’ corrections to occur periodically to essentially adjust to the real value. Really??? Do you actually buy this BS?  The average investor’s portfolio is hammered in a short time and it generally takes years to get back to even!

More often than not I tend to be cynical and suspicious when people tell me I should be more trusting and agreeable. Maybe so, but it’s hard to ignore the elephant in this room full of smelly crap!

Oh yes, lest I forget the myriad of answers we hear from financial analysts on a daily basis to the question of why the markets react so sporadically and unpredictably. Lately it’s been the quick decline in China’s economy. This resulted in the DOW losing a 1,000 points in a week. The following day it rose over 200 points. China’s chaos did not change overnight so why the one-day spike? We are fed all kinds of speculative theories. The struggling European social democracies that beg for bailouts, the monthly jobs reports, the maniac in North Korea flexing his flab, the Iranians detaining and incarcerating ten American sailors, and the constant struggle to contain Iran’s quest for nuclear weapons (which has been an abysmal failure). And the beat goes on…All of these and hundreds more ‘explanations’ for this ever-present roller coaster ride we are on!

I will say, as with any industry, the majority of investment counselors are probably ethical. I actually believe they know what they are told in their morning conference call. Then they parrot it back to us because as clients, we need guidance and explanations. The guidance usually sounds like this: “Hang in there, this too shall pass. The market always comes back and over the long haul it’s your best investment choice…Keep the faith”. The explanation is simply the excuse du jour, take your pick from the aforementioned.

I’ll close now. If you read all this, you are a person of endurance and loyalty to this blog. Thank you for that. One last note…The election of any President will have no effect on any of this. So no, I am not endorsing, nor would I ever vote for Bernie Sanders. Although I will give Bernie props for honesty, as opposed to the other Democrat front-runner.

I'm hoping for reader feedback on this one folks (I worked double time since I inadvertently permanently deleted the original and had to start from scratch all over again - not fun for me!)

Straight Ahead, (and more than ever, guide yourself accordingly!)

johntheblogger

Comments

( 27 comments — Leave a comment )
(Anonymous)
Jan. 21st, 2016 10:37 pm (UTC)
Right on John.
I am almost completely on the same page as you with this John!!

Your racquetball friend,
Dale
johntheblogger
Jan. 21st, 2016 10:42 pm (UTC)
Re: Right on John.
Thanks Dale, good to know I'm not alone or crazy!

John
Tony Said
Jan. 21st, 2016 11:00 pm (UTC)
Walled Streets
I have to say I agree with you and feel like I may sell all stock I have left in humanity.

The game seems rigged and there are no rules to play by..
If you really want to get upset, look up the tax rate the Hedge Fund Managers pay.


johntheblogger
Jan. 22nd, 2016 04:33 am (UTC)
Re: Walled Streets
Biggest casino in the world, and no free drinks while you gamble. "Rigged" is an understatement!
Thanks, Tony!
John
(Anonymous)
Jan. 22nd, 2016 02:25 am (UTC)
The rise and free fall of the market
I cannot and will not forget 2008 and what happened to our 401K. It actually took about 3 1/2 years to recover to where we were!! When I saw the 1st 3 weeks of December 2015 hit a sour note with a roller coaster ride I thought it was time to move from the 4 funds we invest in and stick it in a protected non money making money market account. I'm extremely happy I did. We have an account with Vanguard and do everything from this laptop, the cost is just about nothing and we have control.
It is a rigged and nasty market driven by greed. The money is their drug of choice and manipulation is the rule. I don't trust money managers, counselors, financial advisors (these people are like fortune tellers, if they really know something they wouldn't need your money) and most especially television 'experts' like Jim Cramer, they are paid by a news corp, not his portfolio.
As you can tell I mostly agree with you other than trusting anyone.
BROTHER STEVE
johntheblogger
Jan. 22nd, 2016 04:28 am (UTC)
Re: The rise and free fall of the market
You did the right thing for your family, Steve. I am not invested near as much as I was prior to the 2008 debacle. And I am not as trusting as you think. This topic transcends politics...It's the same evil that Bernie Madoff exhibited but on a much larger scale, with not even a word uttered about how obvious this deception has become.
Thanks for your consistent input to this blog.
John
Stephen K. Trynosky
Jan. 22nd, 2016 02:26 am (UTC)
As the late Gary Cooper would have said, Yup!

To continue the movie analogies, They got the end of "It's A Wonderful Life" wrong. Potter won, George Bailey went to jail. His oldest son was adopted by Potter and became his successor. Zu-Zu became a stripper in one of Potter's nightclubs. Uncle Billy drowned himself, Ma and Bailey's wife moved away in disgrace and were last seen living in Anchorage under assumed names.

The bad guys are winning. I could go on and on but here are a few items which have piqued my interest over the past years and have now come to a head.

Goldman-Sachs settled. A non-being corporation pleaded guilty. It will pay 5.5 Billion but no human being is responsible for anything. As the Libs would say regarding guns, it is not the poor innocent potential brain surgeon-Altar boy person pulling the trigger, it is the thing, the inanimate object that did it. Now seems that for the past X years the Fed has loaned big banks money at 0% (ZERO) percent interest. The banks then lend it to us at 4 plus percent. So, after eight years who do you think is really paying that fine?

When gas hits $ 3.82 per gallon the oil companies testify to congress that they only get six cents per gallon. Well, even if oil goes under $ 20 per barrel, they will still get that six cents. So, what is the problem?

Righto on costs of everything. Oil drops, fertilizer is cheaper, Diesel running the combines and tractors is cheaper, transportation is cheaper, refrigeration is cheaper. The prices drop on everything. Stocks should be going up.

Logic dictates that when oil is cheap, cap the US wells and drain Saudi, Iranian, Russian,Venezuelan stocks. It's called husbanding the resource.

Seven years into the O'Bama Administration a Federal judge has ordered documents regarding "Fast and Furious" to be released. There are still appeals. At this rate, the Administration will finally be forced to "fess" up about 32 years after O'Bama and Holder die of old age. On a side note, at last one of the guns turned up in "El Chapo's" hideout was a F and F weapon.

Hillary is still not in handcuffs.

Sarah Palin has still not taken voice and elocution lessons.

For the first time in US History, the plebs on BOTH SIDES are so disgusted that they are going Populist. Ought to be an interesting political year.

johntheblogger
Jan. 22nd, 2016 04:13 am (UTC)
Stephen(Ken), we are finally in total agreement! If you're not already writing your own blog, then begin now...You are hilarious and hitting on all cylinders. Your comments on Sarah Palin were spot on. Who the hell would want her endorsement?
Whether we concur or not, I welcome the passion you deliver on every topic we cover!
Thanks again,
John
Stephen K. Trynosky
Jan. 22nd, 2016 04:39 pm (UTC)
Forgot. Goldman Sachs and Countrywide (Angelo Mozilo) are two of my favorite whipping boys. I believe four (4), Cuatro Governors of the Fed are former G-S execs. We know the rest of the Fed and the Treasury are full of them. These guys are the new Reichsbank. This is beyond nepotism and well into incest. As soon as they leave Government, they go right back to G-S. Something is wrong with this picture.

I upset Denise badly a few weeks back when I heard about the G-S settlement. I guess you as well as I know folks who perished on 9-11. Well, when the news came over the radio, I lost it and yelled out, "Why didn't those F------- have the top twenty floors of Tower two"!

Finding out Mrs. Cruz, was/is an employee kinda changed my opinion of him. I know it is guilt by association but that outfit is just so damned corrupt.

What exactly do Hedge Fund Managers do anyway? Always had a soft spot in my heart for anyone who produces anything. Shuffling paper around all day is not exactly my idea of a real job.
johntheblogger
Jan. 23rd, 2016 02:45 pm (UTC)
Ken, you are hitting it out of the park with these revelations and observations. I feel your angst, but the choices we have in this country are still better than third world living. (Although corruption and government have become synonyms).
I so often wish there was someone and something to believe in...As Rod Stewart sang , give me "a reason to believe".
Good hearing from you.
John
Stephen K. Trynosky
Jan. 23rd, 2016 04:57 pm (UTC)
Well, just returned Monday from a funeral in the "coal country" of Eastern Pennsylvania. The family came from there. Spent a lot of time back in my youth up that way when a working class vacation consisted of sponging off relatives for two weeks in the "country".

We are getting damned close to third world status.

It is so telling when the folks at "National Review" do what they just did. Are there no advocates for "the people" out there anymore? We are drowning in academicians and theorists. Yesterday on one of the call in shows someone remarked that the folks at NR are very good at theory but lousy at accomplishing anything. They're the morons that keep pushing McConnell, Bohner and Ryan on us as "principled" conservatives. I like to think that Barry G and WFBjr are spinning in their graves. I've taken a lot of flak over the years for being a huge fan of Teddy Roosevelt. Have had to re-think my position on him many times but I have to tell you, there are Progressives and there are Progressives. He and Wilson fell under the same banner yet they were night and day on almost any issue. We need a TR and we need him now. What exactly is the difference between the late 1890's and the present when it comes to spoiled rich folk who got that way mostly by being right place right time and suspending morality?
johntheblogger
Jan. 24th, 2016 01:05 am (UTC)
Didn't Wm. F Buckley start the National Review magazine? What's your opinion if Bloomberg runs third party? Whose votes would he take away. You are closer to this than I am and you have a history in politics. I know Bloomberg is a Lib so might it benefit the GOP candidate?
John
Stephen K. Trynosky
Jan. 25th, 2016 02:44 pm (UTC)
Buckley did start NR. The masthead used to say "To stand athwart history and yell stop! I was a subscriber for over 20 years and basically gave it up when Buckley stepped down as editor. I found that without him it lost the spark and the ability to laugh at itself (very important) and to explore new ideas.

I always liked to think that being a conservative basically meant that you looked at things and asked, "Is this change really necessary" or.... "If it ain't broken, don't fix it". I love to point out to the "experiments in education" we've been stuck with since the 1950's. The NYC School system was the envy of the world in the early 20th century. Think back, they dealt with thousands upon thousands of kids who spoke a veritable "tower of Babel" when it came to languages and they did a fantastic job! Then they started hiring "administrators" and listening to the wisdom from "schools of education". Need I say more? Ask Denise and the girls that taught in the Public School System.

Another definition of conservative thought was something like, Is the change necessary? Is this the best change possible? Will it work? All this requires that you "slow down" and study an issue. This is something the founders knew about better than us. I remember my High School History teacher, a goo Lasallian Christian Brother, explain just why the Constitutional Amendment process was so difficult. Today, the Courts and "executive orders/memo's" have short circuited the thinking process.

This is not anti-Semitic in any way. But Bloomberg, a smarmy NY Jew running for President? Gimmie a break. Ed Koch Yes! Hell Yes! but this guy who wants to cap your salt and sugar? Bloomie is obnoxious. He "bought" the third term and my Cop friends thought the city started backsliding under him. We were back to the City ends at 100th Street again! Hillary says that he will jump in if she does not make it as a counter to Bernie who wants to take all his money and shut down Goldman-Sachs. Probably be the perfect non-threatening candidate for "the Establishment". Just wait till he gets his hands on "executive orders". Hope you don't like butter too much. Like O'Bama, I think he really has no religion, is actually a secular humanist and those folks scare me. They are big on "situation ethics" with no belief in absolutes.
johntheblogger
Jan. 22nd, 2016 04:40 am (UTC)
via email from Jim Dwyer
AGAIN YOU DID AN EXCELLENT JOB ON THIS TOPIC. UNFORTUNATELY, WE AT OUR AGE, ARE IN THE FEAR CATEGORY. DO WE STOP THE BLEEDING AND SELL OR SUCK IT UP AND STAY TOUGH, IT IS A VERY DIFFICULT DECISION FOR OLDER PEOPLE TO MAKE. IN A YEAR AND A FEW MONTHS,I WILL START TO WITHDRAW MONEY FROM MY IRA AND HOPE MY MONEY OUT LASTS ME AND JOAN. FOR THE LAST COUPLE OF YEARS HALF MY IRA I OWN IS IN CD'S, NOT MUCH MONEY TO BE MADE BUT I KEPT MY PRICIPAL. THE OTHER HALF MUTUAL FUNDS AND PREFERRED STOCKS I HAVE NO INDIVIDUAL COMMON STOCKS. CHECK INTO PREFERRED STOCKS, SIMILARLY CORP BONDS AVG YLD 5 TO 6%. HEY JOHN IF IT GETS BAD AND I DECIDE TO JUMP OUT MY WINDOW. I WILL LIVE BECAUSE I AM AT GROUND LEVEL. THE ONLY DAMAGE WOULD BE BROKEN PLANTS OUTSIDE MY WINDOW. AFTER MY JUMP I WOULD HAVE TO MAKE A TRIP TO HOME DEPOT AND REPLACE THE BROKEN PLANTS.
THANK GOD I GET 10% DISCOUNT BECAUSE I AM A DISABLED VET. STAY WARM IT IS 50 DEGREES HERE IN FL

TAKE CARE, I ENJOY YOUR BLOG
JIM DWYER
johntheblogger
Jan. 22nd, 2016 04:45 am (UTC)
Re: via email from Jim Dwyer
Thanks Jim. It's always good to hear you have retained your sense of humor. Worst case scenario, you can hock your high-line golf clubs and start playing the muni courses instead of those Florida country clubs!
Take care and hit 'em straight and far!

Glad you enjoy the blog.
John
johntheblogger
Jan. 22nd, 2016 04:51 am (UTC)
via email from Gary Belinkoff


Hi John:

I agree with this blog.

I always said someone is sitting on a beach in Hawaii manipulating the markets with a laptop while drinking a cool Mai Tai drink.

Take care!

Gary

Edited at 2016-01-22 04:53 am (UTC)
johntheblogger
Jan. 22nd, 2016 04:56 am (UTC)
Re: via email from Gary Belinkoff
Gary,
Can I have a pina colada instead? Love the coconut and pineapple!
John
(Anonymous)
Jan. 22nd, 2016 06:51 am (UTC)
Wall St.
I agree with almost everything.
Your enduring and loyal wife
johntheblogger
Jan. 22nd, 2016 02:48 pm (UTC)
Re: Wall St.
"Almost" everything???
johntheblogger
Jan. 22nd, 2016 03:05 pm (UTC)
via email from Joey Vance
It's a casino.... Nobody knows what's going to happen.... Use your money and pay off your mortgage.... If your going to be in stock market use money you don't have to have....
Or play the lottery
johntheblogger
Jan. 22nd, 2016 03:06 pm (UTC)
Re: via email from Joey Vance
I'm going to take that as you also believe it's rigged...correct, Joey?
Thanks for commenting.
UJ
johntheblogger
Jan. 22nd, 2016 03:08 pm (UTC)
from John Higgins via email
Jack:

Another good one, Thanks!

John


johntheblogger
Jan. 22nd, 2016 11:16 pm (UTC)
via email from Jim Olson
Agree with every word. I had a fund that made 6K but it cost 9K to manage it....I told my guy, (who I also trust) if the fund manager was in the car business he would have been gone long before the cost hit 9K.

Jim
johntheblogger
Jan. 23rd, 2016 02:49 pm (UTC)
Re: via email from Jim Olson
No responsibility or accountability for these fund managers. They should be on a pay for performance commission. Instead they collect their cut regardless of their poor decisions, while we sit around like fools, fat, dump, and happy!
Thanks for your thoughts, Jim.

John
Tyler Hoffer
Jan. 27th, 2016 02:46 am (UTC)
Issues with Volatility
John:

Enjoyable read, nicely done. I do not have as complete of an understanding of the stock market as I would like, but under my current understanding it seems like an arbitrary and volatile mechanism for something as critical as the world economy to hinge on. The economic well being of society should not be determined by the emotions of greed and fear; it's simply irrational. And I think you're right, the ability of the average investor to be successful is so difficult when you have these private financial firms that can dictate the market unilaterally with little effort; these same firms are using algorithms and programs to conduct high speed trades unachievable by the average person. I know that a key purpose of the market is to create capital for companies, which supposedly creates jobs, right? And, of course, the investors stand to financially benefit. I may be missing other purposes because I'm not as well versed in this area, but I think there are other methods of wealth and job creation we could utilize that don't create systemic risk. I really just don't see why we place so much of our monetary and societal futures into something so unpredictable that's purposes seem limited and flawed. I understand it could be economically devastating, but if the stock market is a system people are truly against, they should elect not to invest and make their choice as free economic actors not to participate; then the system would have to change.

Tyler Hoffer
johntheblogger
Jan. 27th, 2016 01:57 pm (UTC)
Re: Issues with Volatility
Thanks for your usual thoughtful reply, Tyler. In a capitalist system, investing in the market should be an option but it must perform based on real values, not some outside interference from a select few. America needs a strong Attorney General, an honest Sec. of Treasury, and a Fed chairperson who work together to ensure Americans are not being hosed. There are life savings at stake. But there is little hope for this because the political will is missing. Your guy Bernie has it but he wants to blow it all up and we will all be subjects of the state. I've seen the flats in Moscow where people lived from the Communist days and also the pensioners that are starving at the end of their lives. That system does compute either! So we'll all make out own choices and tough it out.
Thanks again,
John
Tyler Hoffer
Jan. 27th, 2016 09:48 pm (UTC)
Re: Issues with Volatility
I agree the market should be based on real values as opposed to greed and fear; I also believe there should be no outside intervention, however I would not know how to effectuate that plan without serious intervention. Maybe the intervention could come from the people in the positions you mentioned, however it could take a lot more. One of my biggest complaints with Bernie is he does not speak about the specifics of his plans when he says that he will bring down Wall Street. I don't think there is much political will for that as you mentioned so I really don't know who would be his allies; obviously a huge issue. The characterization that Bernie would make us subjects or create a government similar to the Soviet Union is a misnomer. The Soviet Union was a product of Leninism and Stalinism, to name a few, which are essentially authoritarian bastardizations of Marxism. To compare social democracy to those systems is like equating a person favoring financial/business deregulation to a devout anarchist. And I read that review of your book, I think it was a little harsh, haha.

Tyler
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