Punchinello’s Chronicles

September 11, 2009

Nonexistent Investors Gain Confidence

Filed under: Moron Speak — Punchinello @ 12:50 am
Tags: , , ,

The financial headlines and top-of-the-hour news today all speak about the wondrous rally on Wall Street. A week ago, the DOW closed at around 9200. Today, it closed at around 9600, the largest comeback over the year so far. And we’re told the reason is “investors” must be gaining confidence. “They” hear that unemployment numbers (for the week) were less than expected. The recession is over, the world is in great shape, and so “we” (investors), the little guys, are driving this rally.

Toro poo-poo!

There are very few individual investors doing much of anything nowadays. In fact, most of those individual investors have had their head handed to them, along with their butt and whatever other parts of their anatomy. People have had their entire pension funds and retirement portfolios wiped out. Foreclosures are at a record high, banks are failing left and right, and only the high-end Wall Street investment banks are making money.

The truth is that modern investment is often handled by computers. Massive software programs, which give rise to the term “program trading,” examine all sorts of minutiae. Those applications can make instantaneous trades, moving vast sums of money back and forth without really involving human beings much at all. The software can take advantage of price changes taking place over minutes or hours, all automatically.

It’s like automatic bidding on eBay, which in my opinion, helped wipe out the whole concept. You see an item and decide you’re willing to pay $19 for that item. So you set your computer to automatically bid in increments of say, 50-cents. Someone else has set their computer to go to $19.50.

In less than 10 seconds, the two computers bid, up the bid, re-bid, and zoom through the entire set of permutations. What’s the difference if you and another person take 10 minutes to make the same bids, or 10 seconds? Well, suppose that ten seconds takes place at the very last minute of the auction? A human being wouldn’t be able to respond in time, but a computer can do it all in those few seconds. You might as well have flat-rate pricing, which is what eventually happened.

Same with price fluctuations over a single trading day. Some set events drives speculation on a stock that raises the price 50-cents per share. Institutional traders, handling billions of dollars in pension funds, government funds, corporate funds or whatever make a trade for 100,000 shares. That’s a sale producing $50,000 right there.

Then consider that General Motors was performing so badly, the company was removed from the overall index. So how many other failing companies have been removed? I could prove to you that I’m a wealthy person, simply by reporting only what I’ve gained over the past 40 years and never reporting what I’ve lost. Or what I might lose.

Yet every day we hear idiots in 30-second sound bytes telling us that because the DOW has moved up 100 points, therefore the entire set of historic events taking place…doesn’t exist. There’s no collapse in the US dollar, nobody’s worried about the price of gold, housing and employment are immediately fixed, and life is perfect!

Until tomorrow, or the next day when the DOW suddenly drops 100 points. Then the world “suddenly” is concerned about whatever nonsense the AP Wire suggests.

If you really and truly believe that when the stock market these days goes up or down, it’s “investors” making those decisions, then you’re in for a massive and rude awakening. Wall Street has become the world’s largest gambling casino, and it’s entirely fixed. You, the individual, haven’t got the slightest chance of making any real money in that casino. It’s very similar to Las Vegas or Atlantic City. Yes, you could possibly make a bit of money, but the odds of walking out with a major win are very, very small.

Wall Street gained for the fourth straight day, as investors gained confidence over signs that the recession is coming to an end. Yah, right. Anyone interested in buying a bridge I happen to have?

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