The World’s Stock markets are a house of cards. When you want to build a robust house of cards you begin with a rock solid, steady and level table, so too with the stock market. Sound finance and economics begins with a foundation of company stocks that are making real products and supplying real customers who are happy to go on buying those products.
Mutual funds are the first tier of the stock market house of cards on the tabletop of solid stocks. Take a look at the website of any mutual fund and the first thing you will see on the home page, in big flashing numbers is their performance rating. These are very tough economic circumstances and mutual funds like all finance products are showing zero returns. Should you be discouraged? After all mutual funds performance follows closely that of the stock market and stock markets the World over are in economic dire straits.
You should be discouraged if all your retirement eggs were dependant upon the mutual fund house of cards. What is it about mutual funds that make them more like the cards than the table? Mutual funds are like big baskets full of a variety of finance products but predominantly stocks. Stocks are certificates of ownership of shares in all the limited companies on the stock market. So mutual funds, while they rely on the table they are not actually part of the table and are therefore more prone to being blown about by economic ill wind.
The most solid of the mutual funds, those in the ground floor of our house of cards will be fine and their fortunes will come about with the stock market as Whole. These mutual funds have an economic and finance strength. The economic strength is that they are in the business for the long term. The managers of these funds have real money invested in these funds along with their other investors. They have a vested interest and are not interested in the short-term speculative gains.
The finance strength of the ground floor mutual fund cards is that they will have a diversified portfolio of stocks and are not overloaded with finance stocks like Bear Stearns, Citgroup, AIG and Bank of America. I’m afraid termites are eating this leg of our table.
The first floor of our mutual fund house of cards is a very shaky prospect indeed. These are the mutual funds that have attracted depositors with eye-catching returns. But those returns have been earned through the boom years of easy credit and speculation. Professionally managed funds that merely reflect one or other of the stock market indices will collapse in a heap along with the S&P 500.
The cash value of all the stocks in the mutual fund stock market baskets has shrunk immensely with credit crisis and Wall Street crash of 2008. But those baskets were so large and there are so many varied mutuals, that the trading of mutuals has become a big nest egg of finance for many individual retirement funds. The stock market trading of mutual funds is entirely on the Internet and you can watch the whole house of cards come tumbling down on your own computer.
Sunday, March 22, 2009
Thursday, March 19, 2009
Stock Market: “Heads I win, Tails you lose!”
The global stock market has cancer and it is infecting every stock exchange from the NYSE to Tokyo. The specific type of cancer that is eating up the organs of the stock market is called speculation. The Oxford English Dictionary defines speculation as “Investment involving high risk but also possible high profits”. The speculation that is killing the stock market is a mutation on this definition because there is no high risk anymore; at least not for the speculating classes of the banks, the hedge funds and mutual funds.
Cancer is a mutation of the healthy cells in the body just like stock market speculation is a mutation of healthy investment. The link between risk and profit has been removed for the financial leadership of the stock market. We have seen with AIG that the fund managers who promised high profits simply are not involved in the high risks and consequences of failure. They speculated with other people’s money and continue to reap the outrageous rewards.
AIG or American International Group had a stock value of over $73 per share and an AAA credit rating just over 2 years ago. Currently the stock value is less than $1 per share. A good buy? Image with the public is important when it comes to stock value and the 6-figure bonus payouts made to the incompetent leadership of AIG may be enough to make stock market suspension the only way out for AIG. Out of private ownership and into government hands.
Do you think there are other speculators in the stock market still placing high-risk investments in stocks like AIG or Citi in the full and certain knowledge that they will get their inflated salaries whether those investments yield either a profit or a loss?
Citi a.k.a Citigroup inc. is one of America’s biggest banking corporations. Speculation on this faded financial stock market star should not be allowed when it is by people and organizations who do not have skin in the game. Citigroup and Bank of America Corp, the very cornerstones of the stock market received $90 billion in U.S. bailout money in just four months. Their stock market values have plummeted by around 36 percent in a single day because of worries that the Federal Reserve may take over the banks. The Obama administration still hopes to leave the banking system in the stock exchange and at the mercy of speculation.
The stock market cancer of speculation divorced from risk is given a boost by two other groups and one behavior. Hedge funds, mutual funds and short selling. The Madoff Ponzi scheme was a confidence trick of epic proportions but just the most high profile example of speculation funded by the money of others. Hedge funds and mutual funds are horses from the same stable. They promise big returns and minimize the risks and pay bonuses regardless of performance.
Short selling is the most obvious action of speculation that does nothing more than turbo charge the stock market drive away from investment based in real World products and services. The stock market is crowded with speculators who are tossing double headed coins or saying to their clients “heads I win, tails you lose”.
Cancer is a mutation of the healthy cells in the body just like stock market speculation is a mutation of healthy investment. The link between risk and profit has been removed for the financial leadership of the stock market. We have seen with AIG that the fund managers who promised high profits simply are not involved in the high risks and consequences of failure. They speculated with other people’s money and continue to reap the outrageous rewards.
AIG or American International Group had a stock value of over $73 per share and an AAA credit rating just over 2 years ago. Currently the stock value is less than $1 per share. A good buy? Image with the public is important when it comes to stock value and the 6-figure bonus payouts made to the incompetent leadership of AIG may be enough to make stock market suspension the only way out for AIG. Out of private ownership and into government hands.
Do you think there are other speculators in the stock market still placing high-risk investments in stocks like AIG or Citi in the full and certain knowledge that they will get their inflated salaries whether those investments yield either a profit or a loss?
Citi a.k.a Citigroup inc. is one of America’s biggest banking corporations. Speculation on this faded financial stock market star should not be allowed when it is by people and organizations who do not have skin in the game. Citigroup and Bank of America Corp, the very cornerstones of the stock market received $90 billion in U.S. bailout money in just four months. Their stock market values have plummeted by around 36 percent in a single day because of worries that the Federal Reserve may take over the banks. The Obama administration still hopes to leave the banking system in the stock exchange and at the mercy of speculation.
The stock market cancer of speculation divorced from risk is given a boost by two other groups and one behavior. Hedge funds, mutual funds and short selling. The Madoff Ponzi scheme was a confidence trick of epic proportions but just the most high profile example of speculation funded by the money of others. Hedge funds and mutual funds are horses from the same stable. They promise big returns and minimize the risks and pay bonuses regardless of performance.
Short selling is the most obvious action of speculation that does nothing more than turbo charge the stock market drive away from investment based in real World products and services. The stock market is crowded with speculators who are tossing double headed coins or saying to their clients “heads I win, tails you lose”.
The Four Horsemen Of the Stock Market Apocalypse!
Stock market financial regulators the World over are pulling their hair out in frustration over methods to rein in the four horsemen of the stock market apocalypse; Promises, Exclusivity, Secrets and Bubbles. These four horsemen lead the charge in the devil’s brigade and the stock market devil is called speculation.
The stock market is not the real World! It is the center of the symbolic World of money. The biblical horsemen of the apocalypse were symbols based on real physical phenomena; War, Pestilence, Famine and Death. The stock market is under threat from four symbolic horsemen that ride with every financial scam ever dreamed up by the speculation devil.
Take for example the Bernard Madoff stock market scam or Ponzi scheme. This was the mother of all stock market scams but basically a simple confidence trick. All stock market scams can be picked out because of the four horsemen. Leading the charge are Promises. ‘Get rich quick’, ‘above market gains guaranteed’, ‘fully hedged against loss no matter the market conditions’. The Madoff scam promised, no, guaranteed big 8 to 13% returns on investment, no matter if the stock market was ‘bull’ or ‘bear’. Now hindsight is a wonderful thing but there were thousands of really smart people who didn’t hear this horseman’s charging hooves.
Stock market high finance confidence tricks all surround themselves with Exclusivity and draw victims in by invitation only. The essence of Madoff was all exclusivity. New York Jewish financiers, like Madoff himself were at the center. Madoff was very picky about the money he would take to finance his Ponzi scheme. The less he actually courted the finance people the more desperate they became to throw money into his exclusive club. The scheme sucked in finance from around the World including hedge funds like the Fairfield Greenwich Group, who surely owed their depositors more due diligence on their $7 billion. All the time the select finance was busy introducing their finance network into the Madoff Ponzi scheme. Those few who cried out warnings about this approaching Exclusivity horseman were drowned out by applause for Madoff.
All of the large finance cons are shrouded in mystery and pray on people’s desire to believe in Secrets and super heroes. All of the Madoff believers felt that the man himself was gifted with special stock market knowledge or incredible finance strength or could fly on wings of economic insight. There is something in us all that needs to believe in the supernatural and it afflicts even the guard dogs of the Securities and Exchange Commission.
The Madoff Ponsi scam was like all other finance scams in that it had the fourth horseman of the stock market apocalypse and that was called Bubbles. The investment pot, or in these cases ‘black hole’ would be a better description, inflated to unimaginable proportions and burst. Leaving the bewildered investors in enormous distress and always considerably worse off than before they were run over by the horsemen.
What was truly amazing about the Madoff Ponzi finance balloon was how long it continued to grow. For more than 20 years the money flowed in, exponentially outstripping any necessary payouts that were made. In these economic bubbles there is never enough actual profit to make good on the Promises to everybody and so Bubbles had to pop and Secrets revealed as nothing more than smoke and mirrors.
The stock market is not the real World! It is the center of the symbolic World of money. The biblical horsemen of the apocalypse were symbols based on real physical phenomena; War, Pestilence, Famine and Death. The stock market is under threat from four symbolic horsemen that ride with every financial scam ever dreamed up by the speculation devil.
Take for example the Bernard Madoff stock market scam or Ponzi scheme. This was the mother of all stock market scams but basically a simple confidence trick. All stock market scams can be picked out because of the four horsemen. Leading the charge are Promises. ‘Get rich quick’, ‘above market gains guaranteed’, ‘fully hedged against loss no matter the market conditions’. The Madoff scam promised, no, guaranteed big 8 to 13% returns on investment, no matter if the stock market was ‘bull’ or ‘bear’. Now hindsight is a wonderful thing but there were thousands of really smart people who didn’t hear this horseman’s charging hooves.
Stock market high finance confidence tricks all surround themselves with Exclusivity and draw victims in by invitation only. The essence of Madoff was all exclusivity. New York Jewish financiers, like Madoff himself were at the center. Madoff was very picky about the money he would take to finance his Ponzi scheme. The less he actually courted the finance people the more desperate they became to throw money into his exclusive club. The scheme sucked in finance from around the World including hedge funds like the Fairfield Greenwich Group, who surely owed their depositors more due diligence on their $7 billion. All the time the select finance was busy introducing their finance network into the Madoff Ponzi scheme. Those few who cried out warnings about this approaching Exclusivity horseman were drowned out by applause for Madoff.
All of the large finance cons are shrouded in mystery and pray on people’s desire to believe in Secrets and super heroes. All of the Madoff believers felt that the man himself was gifted with special stock market knowledge or incredible finance strength or could fly on wings of economic insight. There is something in us all that needs to believe in the supernatural and it afflicts even the guard dogs of the Securities and Exchange Commission.
The Madoff Ponsi scam was like all other finance scams in that it had the fourth horseman of the stock market apocalypse and that was called Bubbles. The investment pot, or in these cases ‘black hole’ would be a better description, inflated to unimaginable proportions and burst. Leaving the bewildered investors in enormous distress and always considerably worse off than before they were run over by the horsemen.
What was truly amazing about the Madoff Ponzi finance balloon was how long it continued to grow. For more than 20 years the money flowed in, exponentially outstripping any necessary payouts that were made. In these economic bubbles there is never enough actual profit to make good on the Promises to everybody and so Bubbles had to pop and Secrets revealed as nothing more than smoke and mirrors.
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