The Wall Street Casino isn’t playing with a full deck

Yesterday the market went into a wild tailspin- pulled out- then is back to swinging like a pendulum.

This isn’t anything about “investing” in companies- this is all about betting on horses- and that’s a stupid way to manage an economy.

Really- horses and stocks aren’t connected to a predictable financial reality- the one that’s supposed to guide investment. Company A- for Apple- has this product portfolio, this cost structure, a balance sheet, and a  track record and this customer base (I can’t say “market potential” because it would confuse the gamblers on the Street). That’s what I was taught to use to value a company stock.

Not anymore. How else do you explain that yesterday morning- the stock was worth $270 a share and today it’s at $240 (and at one point was at $200 a share). Figure out how many shares there are- and we’re talking billions vanishing in a day. Did Apple change the way they do business- do people not want an iPad today as much as they wanted one yesterday? Absolutely not.

This isn’t business- this isn’t even the weather in Dayton Ohio- this is larceny at a grand scale- driven by computer driven program trading and more arcane financial “instruments” than one can shake a stick at. It’s not investment- especially when we have people betting against companies- by “shorting” stock.

From the NYT:

The market volatility that marked the financial crisis of 2008 returned to Wall Street again on Friday.

After being down almost 180 points, the Dow Jones industrial average regained almost all of the ground it lost only to slip again. In late morning trading, the Dow was down 40.13 points, or 0.38 percent, while the Standard & Poor’s 500 stock-index declined 6.13 points, or 0.54 percent. The Nasdaq declined 23.28 points, or 1 percent.

The wild swings came as policy makers have sought to calm nervous investors who fear that Greece’s debt crisis will spread within Europe and beyond. The CAC-40 was down by 5 percent in late trading in Paris Wall Street took in a stronger-than-expected report on United States jobs growth, and all but pushed it aside. The Labor Department reported Friday that the economy added 290,000 jobs, much more than forecast.

via Wall Street Swings and Then Turns Lower – NYTimes.com.

All this while Rome fiddles. No calls from Congress to end this charade once and for all. No questioning the methods- these fools we elect are perfectly OK with sitting down to play poker with a partial deck.

It’s time to put an end to complex financial instruments. The only people who should be able to create “paper” is the Fed- or banks that have assets to back up their loans. It’s time to end program trading- put a halt to day trading, end options all together on stock- leave them in the commodities market where they are actually supposed to smooth things out- but- require actual possession of goods- to force “speculators” to have real skin in the game.

It’s also time to reel in the compensation of executives who fail- clawbacks, prison time, real responsibility. In fact- maybe it’s time to end all mutual funds, forcing the hand back to the single investors. Accountability is the only thing that will bring sanity back to the system.

These swings should be a rude awakening for some. And even if some of these measures are only put in place temporarily as a result of market swings- so be it.

Unless of course, you’re not playing with a full deck either.

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