Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

The Risk of Investing in a Markets Full of Conmen

Stock-Markets / Market Manipulation Apr 30, 2012 - 06:58 AM GMT

By: Bill_Bonner

Stock-Markets

Best Financial Markets Analysis ArticleDow up more than 100 points yesterday. Gold up $18.

Google…Apple…what more do you need to know?

“Blah, blah, blah…don’t you feel you’re wasting your time?”


Our friend was being sympathetic. She gave us a look of pity, tightly controlling her face muscles; as if it might slide into contempt at any moment. After spending so much time with rocks, dirt, cement…cattle, grapes…doing such real things, we admitted that writing about economics and finance seemed a little light. As if there is nothing real there.

“I mean, you were building things…changing the landscape…and improving people’s lives. Putting water in their houses…digging reservoirs…setting up solar power systems.”

Yes, it was true. There is the world of real things…real work and real results. And there is a whole phony world of economists…commentators…speculators…blowhards and show-offs…hustlers and conmen…fools and knaves. Wall Street…and its victims.

But while the real world is more satisfying…the phony world makes us laugh.

It shouldn’t come as a surprise that the insiders are taking advantage of the “crisis” they caused. But the scale of the rip-off…and the audacity and subtlety of it…are breathtaking.

Yes, it is fun to watch a good flimflam artist at work. And those managing the US financial system are among the best.

One day, years ago, when our office was still in the slums of Baltimore, we got a knock on the door. It was after 7pm, but we were still at our desk…

Standing in the doorway was a slender white man in blue working clothes…he looked like a mechanic or a dishwasher repairman.

“I’m so sorry to bother you,” he said with a slight Pennsylvania Dutch clip to his words. “But I saw your light on…and well, I just didn’t know what else to do.

“You see, I’m a neighbor…I work at Dunbar’s (an air-conditioning contractor) down the street.

“I hate to bother you. It’s embarrassing for me. But you see, I was working late too…everybody had gone. I realized I was the last one in the shop. So, I locked up at Dunbar’s. I was in a bit of a hurry, I guess. And so, I…I locked my own car keys and my wallet in the shop.

“I’d just call another of the employees. But I’m the only one with keys, except the boss and he’s down the ocean (a local expression for having gone to Ocean City, MD). So I didn’t quite know what to do.

“What a mess. I’m really embarrassed to be bothering you with this. But here’s the problem. It’s my wife. She’s deaf. So, I can’t call her and tell her I won’t be home tonight. I’ve got to get home or she’ll worry herself silly about it.

“I could take a bus…I live up in Pennsylvania…not too far over the line. But I locked up my wallet. I don’t have any way to pay for a ticket…”

He went on to explain that he hated to borrow money. That he’d never borrowed money before in his life.

Your editor had no money on him. So, he went to borrow it from a co-worker.

“Sounds like a lot of BS,” she said, pulling a $20 bill from her wallet.

“Oh no…he seems completely sincere,” we replied.

We gave the man the money. He added that his wife made the best apple strudel in Pennsylvania, and solemnly pledged to come back tomorrow morning with a pie as well as our money.

The next morning, we watched our watch. 8AM…not yet. 9AM…he must be waiting to take a break. 10AM…guess he’ll come over at lunchtime. At 12:30 we gave up. We repaid the co-worker, who laughed out an “I told you so.”

“Yes, I’ve been had. But you know something, it was worth it.”

A gentleman lets himself be rolled from time to time. Suspicion and cynicism are unflattering. Besides, he will spend $20 on lunch and forget it immediately. A good hustle, on the other hand, is memorable. And a good flimflam is rare and elegant.

So it is that we look on the Fed, the Treasury, and their Wall Street accomplices with admiration. They have flimflammed the entire nation… Almost 100 million households in America…and not one in 1,000 has any idea what is really going on.

And more thoughts on the greatest flimflam ever…

Pushing its key rate down to zero…the Fed gives its insider friends money for nothing. Trillions of dollars’ worth.

The outsiders reach for their wallets. They know they are being robbed, but they have no idea how…or by whom.

Instead of getting a fair return on their savings, they get practically nothing.

The idea is to force them into riskier investments. The Fed admits its strategy without shame or remorse. And it works. The poor Mom & Pop saver takes his money to Wall Street. And then, Barry Dyke author of The Pirates of Manhattan II: Highway to Serfdom explains what happens. He calls it “a biblical transfer of wealth…from Main Street to Wall Street.”

Wall Street, the mutual fund industry and corporate America has hijacked America’s savings through 401(k) retirement plans. It uses workers’ savings in 401(k)s funded with mutual funds to fuel outrageous compensation packages, fund shaky companies going public, accelerate speculation and to finance the corrupt Wall Street business model. It is an unprecedented biblical transfer of wealth from Main Street to Wall Street and corporate America. It is an unprecedented transfer of economic and investment risk onto the little guy. Main Street America has been taken to the cleaners with 401(k)s. It is a biblical transfer of wealth which will take most Americans years to recover from.

The major problem today is that there is no savings or patient capital for regular Americans. The US Commerce Department found savings to be around 1% of earnings during the 2007 housing bust, up to 8% in 2008, down to 5.8% in September 2010 and slid to 3.6% in September 2011. There is a major difference between saving and investing, but to Wall Street and the mutual fund industry the only way to save according to them is to put it into volatile highly-complex no-guarantee stock mutual funds.

Putting money into a 401(k) is NOT SAVING. It is speculating. Here’s the proof. According to the Investment Company Institute 2011 Fact Book, Americans’ have 77.4% exposure to volatile equities in their retirement accounts. That is horrific. The Federal Reserve is at the heart of this savings debacle. By dropping interest rates next to zero, The Fed has forced Americans into volatile markets in search of yield. The only winners in this tragedy are the mutual fund giants, Wall Street and corporate executives with pay packages which would make King Solomon blush. In many respects this wealth transfer is worse than the Great Depression when people were more self-reliant and had a stronger family unit.

The Fed, the federal government, bankers, government workers and highly paid executives rarely speculate with their own fortunes the way Americans are forced to speculate in their 401(k)s.

Mr. Dyke might have added that pushing money into Wall Street also pushes up prices on stocks, bonds, and other Wall Street products. At first, this makes the small investor feel smart. His ‘investments’ go up. Of course, not as much as the rich ‘1%,’ who own far more of America’s capital structure than he does.

But negative interest rates create bubbles. The Fed is now inflating its third major bubble in the last 15 years. This time, in US Treasury bonds. When it blows up, a good portion of the savings of American households – locked in pensions, mutual funds and insurance programs – gets blown to smithereens.

Then, there is consumer price inflation too. You can’t add $2 trillion to the nation’s base money supply without some effect on prices. It could take a while to show up, but it would take a doubling of consumer prices just to bring the current base money supply per person back to normal levels. And that assumes the Fed straightens up…and does no more money printing.

And who will bear the hurt? The clever elite? Those who understand the hustle? Those who own gold…houses…offices and apartment buildings? Or those whose wealth is counted out in drips and drabs…from wages and meager savings?

Oh Dear Reader…watch out!

Bill Bonner
The Daily Reckoning

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).

http://www.lewrockwell.com

    © 2012 Copyright The Daily Reckoning, Bill Bonner - All Rights Reserved
    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules