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Stock Market not a Free Market

Molly Scott Cato | 30.11.2005 09:18 | Analysis | World

Small investors in the stock market are under the illusion that they can make money by watching market trends and developing expertise in the future value of stocks. In reality, their money is bound to be extracted by the large investors, whose investment decisions determine the value of the various stocks. The stock market is a mechanism for extracting capital from small investors.

It is no longer original or even surprising to suggest that investing in the stock-market is no different from playing on-line poker or taking a punt on the horses. The traditional moral unease that was felt towards gambling has been eroded and it is now considered an industry like any other. The assumption behind gambling, whether in the casino or in the stock-market, is that it is a game of chance, that while the organizers of the racket may be bound to profit some of us can win at the expenses of others. But just as horse-racing and other forms of sport-related gambling are increasingly being fixed by the big players, so on the stock-market there is really no chance of our benefiting because the market is in no sense free but rather controlled by those with enough money to rig it in their favour.
The myth of the stock-market is that, as with watching the form of the horses, we can become informed about the performance of different companies and can make wise decisions about which ones are likely to perform better or worse, and hence whose stock is likely to increase or decrease in value. The financial pages of newspapers and the burgeoning number of TV programmes quoting stock values—including the Bloomberg Channel which does nothing else—reinforce this myth by relating the value of shares to such events as Hurricane Katrina or the climate in the Colombia coffee fields. This creates our view that while investing in the stock-market involves risk, it also involves skill and increasing our knowledge, with the help of financial advisors, can help us make better gains with our money.
The reality of the stock-market is that it is one of many mechanisms in a capitalist society to siphon money from those who work to earn it to those who want to control an unfair share of money and power without working. Here is how the game works.
First, the big players lure the smaller investors into the market by creating the myth of equality and the idea that there is money to be made. Such capitalist mantras as ‘Make your money work harder for you’ or worrying questions like ‘Are you investing enough for your old age’ encourage us to feel that we are at risk if we have no stake in the investment market, whereas in reality the risk is as soon as we become involved.
Stage two is about creating the bubble. Here the large number of TV shows mentioned above are very useful. Earnest presenters describe the rise in a certain type of stock creating a bandwagon effect. Market watchers predict the trajectory of certain large publicly quoted companies. Gullible and greedy private investors rush to follow these trends, inflating the value of the stock, which the large investors have bought up in advance.
Stage three is the interesting stage when the bubble bursts. These releases of value are the point where nominal value created by the credibility imbued in the stocks during the second stage is translated into real value, at least for the large investors. If you are controlling enough money then simply moving it from one stock or from one sector to another will cause the value in the stock you leave to dissipate. The large investor now leaves with real value, represented by money, which he can use to buy real things or in a broad sense to exercise power in the wider economy. The small investor is left with a nearly worthless piece of paper and a sinking feeling of having been had.
Small explosions of value happen every day on the various markets for so-called financial products but there are also the periodic collapses when whole sectors that have been artificially inflated in value thanks to commentators’ hot air come crashing down, the last spectacular example being the dot.com bubble. A brief glance over the history of capitalism shows that the boom-and-bust cycle that is the real economic result of these stock-market games is its most consistent feature. But two factors are not so well known. First, that the large investors themselves create the crashes, and that the larger the size of the investment funds at their disposal the more power they have to do this. And secondly, that the large investors can deliberately create crashes and in order to extract real value from the investment markets.
For those who control enough money in the market, the hedge fund managers, speculation is not about reading the market but about making the market. If they invest sufficient money in a stock it is bound to rise in value, while the one you have invested in is similarly bound to fall. You can exercise all the intelligence you have in trying to work out how a cold winter might affect the value of Centrica; they can simply create the effect they want to maximize their return by either buying or selling enough Centrica stock.
On a personal level your response to this should obviously be to put your money in a sock or your mattress rather than in the stock-market, where reduction in value is virtually guaranteed. But the system is also disastrous for the economy as a whole. It generates all the inefficiency that typifies a capitalist economy, with viable and well-managed businesses being destroyed when they become the target of negative speculation as part of a game that only benefits investors. To guarantee the our economy can work in a stable way to the benefit of producers and consumers we need to rely on companies that are not publicly traded, and rethink the whole ownership structure in favour of mutual and cooperative models.

Molly Scott Cato
- e-mail: molly@gaianeconomics.org
- Homepage: http://www.gaianeconomics.org

Comments

Hide the following 9 comments

Its all momentum

30.11.2005 12:07

There is truth in what has been said but any half astute trader can avoid these typical problems. With a Level 2 direct market connection can watch the frequncy of trades brought or sold. Logic dictates that if something is being brought buy many traders the value rises, with the opposite for selling. It is quite feasable to make money trading with momentum, when there is none, dont go there.
Obviously there wont be much to be had from some 'hot' tip or a peice of corprate propa, most would probably lose money on like this. But there are logical ways of beating stocks.

momentum man


Empirical evidence

30.11.2005 15:04

Where is the empirical evidence for this theory?

Paul Edwards


It is a rigged Market

02.12.2005 00:26

Smart operators will make money as long as the market is moving. Small smart operators will make money from more stupid operators. But the entire market is rigged, when a market correction approached in the USA, their Government flooded the Financial institutions with money so the collapse was averted - back in the 80s. More recently when world capitalism was crashing and the dominoes went down the Chinese Communist Giovernment stepped into the market and bought on such a massive scale they stopped the crash right there in Hong Kong.

Capitalism saved by Communism. You might like to work out why for yourselves.

With things in such a precarious and perilous state the smartest operators are quietly getting out of the market and investing elsewhere.

Somewhere there is "The Negative Outcome of Economics" if you want some idea of what is going on.

Meanwhile, you can discard the idea that George Soros paid the Chinese to save Capitalism.

Ilyan


DECEPTION IS THE ENGINE

28.01.2006 17:31

Yet the equity markets never crash. In the ninties markets were on the ascent because they were powered by the hi-tech goldmine frontier. There was a good reason then. Nowadays hi-tech has become a commodity just like TV sets, microwaves and cars. Yet equity markets are stubbornly refusing to descend,,, why?, because we feel like keeping them high.
How on earth we may have an economy that is based on "we feel like'', or "feelings" for that matter ? Economy = approx. GDP + Equity markets (the latter part is feelings).
The structure mechanism that is keeping the bullish equity stock markets high is the element of DECEPTION. Remove this deception and they are a 'gonner'.
Money indeed grows on trees, doesn't it?
The stock market will do excellent as long as you are not in it.
What goes up... must be going higher.
And they lived happily ever after...
The light at the end of the tunnel is the headlight of an oncoming train.
Why do we need to work if the stock market is generating incomes & earnings for us.
What really is work, jobs. employment, business, etc. These are not needed in the new world order economy of today. Let us redefine incomes.
We all should hold hands together, in the global village, all over the world and collectively believe that the DJIA is 25,000, then 50,000, etc.
Let's just believe in that day and night, rain or shine.
The belief shall bring us earnings... why to go to work to a job, that may pay minimal.
More to come.
George K.

George Kassabian
mail e-mail: ecd41l1@verizon.net


How far the bullish conspirators may go?

02.04.2006 22:09

After 18 years in supreme power, the reign of Mr. Alan Greenspan ended (early 1987 to early 2006) and his humble successor, Mr. Bernanke, who is just an ardent student of the former has already sworn in office.
From mid October 2005, until mid March 2006 (at least 5 months), the bulls of New York took this opportunity to their favour and the DJIA added 1000 points onto their initial values.
I mention DJIA, because it is the mother market of all other markets; even though NASDAQ, S&P-500, S&P-300, etc. all added values too.
Yes indeed they added values just like that and out of the blue, without any rhyme and reason to it.
Amazing...huh...? How money does grow on trees?
Their reasoning, or rather shall I say the bullish conspirator's brainwashing of the nation and the entire world is as such:
Mr. Bernanke shall do a better job than Mr. Greenspan (even though it is not clear the definition of "a better job".
He shall not raise the interest rates.
He shall eventually slash down the interest rates to 0%, enabling corrupt corporations to borrow and play and party more.
He shall keep the value of the dollar cheap internationally.
He shall participate in keeping energy costs very low.
He shall be very pro equity stock markets (bullish, or anti-bearish).
He shall make sure regular savings accounts, money market accounts, certificate of deposits are for loosers and are not rewarded; but on the contrary taxed and punished.
He shall make sure that corporate corruption, welfare and deception is rewarded and blessed.
He is younger, more handsome, more energetic than his predecessor.
He has a brand new era of a solid 18 years dedicated to stock market bullish causes.
AND MANY OTHER MORE WISHFUL THINKINGS.....

SO FAR IT WORKED, LET'S SEE WHAT THE NEAR FUTURE SHALL BRING.

WHAT IF BERNANKE IS NONE OF THE ABOVE.

GEORGE D. KASSABIAN
LOS ANGELES, CALIFORNIA.

GEORGE
mail e-mail: ecd41la@verizon.net


El Toro (The Bull)

26.04.2006 19:10

Have you ever seen a Spanish bull show, with dozens upon dozens of daggers, knives and swords in its heart and elsewhere in the body, and yet still kicking, jumping in the stadium arena and throwing Matadores in the air?
Then it gets out of there into the streets, bleeding, but stempeding people on its way?

OLE... OLE... VIVA EL TORERO!

The interest rates go down... the stock market goes up
The interest rates go up... the stock market goes up
Oil goes up, or down... the stock market goes up
Political changes (no matter what)... the stock market goes up
World security, insecurity, uncertainties... the stock market goes up
No matter what GDP, economy... the stock market goes up
Employment:
Low unemployment, the economy is robust and almost everybody has jobs, good news... the stock market goes up
High unemployment, means corporations are saving on salaries that they otherwise would have had paid to ex-employees, more in their coffres, thus less expense...
the stock market goes up.
Nuclear uncertainties... the stock market goes up
High or low US dollar Internationally... the stock market goes up
No matter what the energy situation is... the stock market goes up
All the sciences, probabilities, maths, superstitions, good/bad karma...
the stock market goes up
Mr. George Bush appears on the screen... the stock market goes up
Mr Bernanke Speaks (even against the stock market)... the stock market goes up

Only if I buy into stocks for the first time in my life at 47...

THAT IS WHEN THE STOCK MARKET INCLUDING ME SHALL CRASH !

THE STOCK MARKET SHALL DO EXCELLENT AS LONG AS YOU ARE NOT IN IT !

A question/message to NYSE, DJIA, etc.

Why do you waste your daily time on the ticker (up or down) ?

Go ahead and assign DJIA = 25,000 for this week and
40,000 to 50,000 within a month or so?
Shall we make it 100,000 by the end iof the year?

George D. Kassabian.


George D Kassabian
mail e-mail: ecd41la@verizon.net


El Toro (The Bull)

26.04.2006 19:11

Have you ever seen a Spanish bull show, with dozens upon dozens of daggers, knives and swords in its heart and elsewhere in the body, and yet still kicking, jumping in the stadium arena and throwing Matadores in the air?
Then it gets out of there into the streets, bleeding, but stempeding people on its way?

OLE... OLE... VIVA EL TORERO!

The interest rates go down... the stock market goes up
The interest rates go up... the stock market goes up
Oil goes up, or down... the stock market goes up
Political changes (no matter what)... the stock market goes up
World security, insecurity, uncertainties... the stock market goes up
No matter what GDP, economy... the stock market goes up
Employment:
Low unemployment, the economy is robust and almost everybody has jobs, good news... the stock market goes up
High unemployment, means corporations are saving on salaries that they otherwise would have had paid to ex-employees, more in their coffres, thus less expense...
the stock market goes up.
Nuclear uncertainties... the stock market goes up
High or low US dollar Internationally... the stock market goes up
No matter what the energy situation is... the stock market goes up
All the sciences, probabilities, maths, superstitions, good/bad karma...
the stock market goes up
Mr. George Bush appears on the screen... the stock market goes up
Mr Bernanke Speaks (even against the stock market)... the stock market goes up

Only if I buy into stocks for the first time in my life at 47...

THAT IS WHEN THE STOCK MARKET INCLUDING ME SHALL CRASH !

THE STOCK MARKET SHALL DO EXCELLENT AS LONG AS YOU ARE NOT IN IT !

A question/message to NYSE, DJIA, etc.

Why do you waste your daily time on the ticker (up or down) ?

Go ahead and assign DJIA = 25,000 for this week and
40,000 to 50,000 within a month or so?
Shall we make it 100,000 by the end iof the year?

George D. Kassabian.


George D Kassabian
mail e-mail: ecd41la@verizon.net


False Advertisement Charges.

13.05.2006 22:58

CNBC, Bloomberg, FOX-STOX, MSNBC, etc. should be tried in a court of law for false advertisements, misleading the public and misrepresenting facts on a day-by-day-clockwork basis.

They focus the spotlight on that one particular Big-Shot whose 200 million added an extra million within a month to $201 million.

They do not mention the tens of thousands of poor and idioticTom, Dick and Harrys who by transfering their life-savings from regular bank accounts into these corrupt NYSE "equity markets of deception" had their assets slashed from let's say $10,0000 at the start of the month to 7, or 6, or $5,000 at the end of the month and declining further into coming months. That is not good news to be mentioned.
These media are culprits and part of the conspirators that should be held liable in a court of law, for brainwashing the public at large and worldwide.

It would be much better an economy and for the Main street too if "monies" that otherwise belonged to Los Angeles, stayed and circulated within the Big Orange and not transferred onto the Big Apple.
Likewise "monies" belonging to Santa Monica, Pasadena, Paris, Madrid, Houston, etc. let them stay within those communities, circulate there and prosper their citizens, rather than crooks at the "NYSE" and affilites fill-up their coffres by selling us more of "Enron" style empty stocks and keeping us in destitute.
Wake up USA, wake up world and sell, dump, reject these stocks of deception.

Equally I blame us; greed has blinded us, unabling to see that the 90's hi-tech goldmine, that was NASDAQ the prime engine of all other markets. THE GOLDMINE:(11000010000101011111111100000101110101010101010000000110101010101010101010101010010000000000000000001111111111110101011111011111)

has ended with the ninties, and today at the wake of the past decade is nothing but a turbulence gambling casino, enabling NY charlatans to fill-up their pockets on behalf of every hard working citizen of the world.

George D. Kassabian
Los Angeles.

George D. Kassabian


Until when the bleeding bull?

17.05.2006 05:46

From 1929 to 1979 the DJIA was oscillating modesly tilted upwards at most between the 2300 and 3300 range.
Then from the early eighties until the end of 1999 came a genuine secular bull market (where numerous cyclical bull markets outnumbered the cyclical bears). This was fueled by the Nasdaq of hi-tech (high technology; i.e. a technology that is higher than the mental capacity of of the average Joe. It contains patterns of ones and zeroes).
It was an era where the bond market assisted the stock market. That is co-creditors of emerging public corporations assisted their co-owners.
A genuine hitech goldmine was established from (let's say theoretically) January 1, 1980, till December 31, 1999 (exactly 20 years).
The first decade of this secular bull market was rather conservative and skeptical, it had a major cyclical bearish period in 1987 (the so called crash, or correction). The second decade was confident, no doubts and no ambiguities about the hi-tech and consequebtly all markets posted peaks after peaks. The DJIA (mother of all markets) posted new peak after new peak, until the first week of 2000, a Mount Everest of around 11,750 was reached.

The last year (1999) of this secular bull market was characterized by two major camps of charlatans:
A) The dot-com-er crooks and
B) The Y2K-er crooks.
Both were trying to sell ice and snow to the eskimos...

These camps were the final two nails on the coffin that broke the camel's back.
And NASDAQ (the main engine), by March 2000 had already crashed from 5000 plus to 2000, as investors sensed the crooks.
Dark clouds gathered above for the bulls, immediately the background changed from a secular bull market to secular bear market.
A genuine secular bear market started.
A phony bull market started parallel with it.

From early 2000 until today it is a secular bear market, whether the conspirators like it or not.
The bond does not assist the stock anymore like it used to during the secular bull market.
Public company co-creditors (corporate bond owners) are now even against their co-owners (corporate stock holders).

The hitech goldmine has long since been depleted.
The bull has already been stabbed by dozens of daggars since early 2000.
For instance one of those major daggars is the "Enron" scandal.
How many, if not all, more Enrons are out there lurking in investors portfolios.

Computers, cell-phones, etc. have become commodity gadgets, just like television sets, cars and microwaves. If TV sets cannot bring in a new secular bull market, so do hi-tech gadgets and computers NOT bring in a new secular bull market.
The glitz and the glamour of the hitech has vanished, vaporized. There is no more anticipation and expectation of the NEXT BIG THING hitech anymore, the way it used to be during the ninties.
During the ninties we distinctly knew the difference between Microsoft 1995 and 1996. Today it is quite like Taco Bell versus Del Taco (one is rolled left to right and the other one from top to bottom). Microsoft (and the like) has become a commodity to be used in and by every household, one way or another. It does not have the momentum anymore to set new records and horizons of hi-tech frontiers to propp-up the markets, unlike the ninties.

Thus if we remove this element of hitech impact on the markets, the DJIA must come down to the modest 3300, or atmost 4000 level I mentioned above at the beginning of this article.
It has no excuse and reason to stay at 11,300.
A crash of 8000 points on the DJIA is very logical.
The only and only reason it is not crashing is the New York conspirator's brainwashing the nation and the world, and our inability to say:"THE EMPEROR IS WEARING NO CLOTHES".
And unlike personal relationships (love, marriage, etc. where logic does not apply), money follows a very strict pattern of logic and reasoning.
The 8000 points that is embedded today within the DJIA is the artwork deception of the New York conspirators brainwashing the world, that it indeed is secular bull market forever. They say that what goes up, must come up. They say that there indeed is light at the end of the tunnel. They say that money indeed does grow on trees.

AND I STILL SAY: THE STOCK MARKET SHALL DO EXCELLENT, AS LONG AS YOU ARE NOT IN IT!

There is a law within the animal kingdom. When one of them is bleeding, the others finish him off!

Until when the bleeding bull?


George Kassabian/LA, Calif.

George D. Kassabian


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