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”.