. . . . If We Do Not Learn From History. . . .
Hey Rock! How's biz? You know....you could have written your post back in 1931 and it would have been historically accurate. I keep asking myself why we were so bent on repeating the mistakes of the late 20's....and now are in the same quandary as the early 30's. Didn't anyone learn from history? Washington? Wall Street? Investors? Hello?
I saw a few minutes of an amazing documentary on PBS about the crash/depression era. I kept thinking they were talking about today, then I'd look up at the TV and they were referring to back then. It was spooky, actually. Market manipulation ran rampant. $10,000 cash bought you $100,000 margin. The media was paid off (under the table of course), to write hype articles on stocks that were set for pump and dump. The fat cats were loading up on the backs of the small investors, who just kept pouring their hard-earned monies into the markets....thinking all along that they were doing what was prudent for their families and themselves.....when in back rooms along Wall Street, they were being laughed at and scorned for their stubborn stupidity and naivety. The working class were the suckers. It was a well-known fact. Then, when the markets tumbled, the working class simply stopped investing altogether, (partly due to the fact that without jobs, they had no money to invest), and that was how the SEC was born....to instill confidence in the little guy that the markets were safe to go back into...a "lie" that has held true to today.
So then how has the small investor EVER been able to make a profit from investing?
1. They played a buy and hold with a company run by people of integrity, who truly wanted to improve shareholder value. Yes, these sort of corporations really did exist at one time!!
2. They figured out the game and resisted the hype, going the way of the contrarian: buying the selloff and selling the rallies.
3. They had the insight to buy and hold a new technology, when nobody wanted it.
4. Dumb luck. (it happens)
So then...where does strategy come into play?
As I've posted so often here, it comes in properly "reading the greed"...in being disciplined against the herd mentality...against the hype or fear doled out by the still paid-off media. It comes in doing due diligence and finding something nobody has looked at, while at such a low price that downside barely matters. Strategy is in finding plays that CAN work, despite the markets (such as the foreign ETFs that have faithfully paid out in dividends at or above their share price). It comes through sweat.
There is no question that this game is rigged beyond belief.... now, more than at any time I have ever before seen. We have discussed the super-computers which keep tabs on every stock you look to trade...when you seek a quote....when you place a limit buy/sell....then mathematically place strategic trades against you. These new systems were designed to recognize mass moves on a stock, as is done in trading rooms....so they can react with massive opposing trades before a rally can even get going. This is why, since 2000, we have not seen low float stocks double, triple, quad or more (18x!!) in a single day. It just can't happen anymore, without a fundamental reason. I called them "lids" placed on stocks, to keep them from boiling over.
It wasn't just that the bubble burst. There was a new dynamic in the system, that took all advantage away from the small investor. The markets were simply never meant to allow small investors to win. What happened in 1998-2000 was a fluke. Small investors were given too much power (the ability to get instant quotes and make instant trades), and the fat cats were simply caught with their pants down. It took them several years to adjust and write the sort of algorithms that could keep up with the fast pace of the internet investor. But they did exactly that.
Remember how hard it was to get quotes without the 15 minute delay? And why was there a delay at all? Why should those who could afford it get the price of what a stock is selling at long before a small investor? It never made practical sense. Same with news. Pay money to the media and get your news a day before it is released to the general public?!? This concept alone smacks of insider information and should never have been legal.
Oh, don't even start me on legalities. Looking the other way has become a national pastime among govenment regulatory agencies and politicians. And so we've come full circle with the concept of capitalism run amok. As I have said here many times, capitalism requires a level of integrity among the corporations, institutions and governments which practice it. Once greed infects those three entities, then the entire system is brought to its knees. Socialism is the by-product of capitalism run amok.
America is staring down the barrel of socialism as I write this. We will need solutions. I highly doubt that "everyone be less greedy" will be suggested. Can we afford to allow the markets to go to zero, so that we can start over with true value? I doubt it. It is a far more complicated economy than it was in the early 30's. So socialism will likely be the successor...like it or not.
My only suggestion and hope and prayer, should this be the case, is that each state be allowed to make its own laws and governance, according to the wishes of their respective citizens....that the federal government will not mandate their new idea. California already has free state run college and has had it for many decades. Want it? Move there. No problem! Another state may have free healthcare....or state run utilities. Hey! Who knows? North Dakota or Idaho could see a boom by making their states more attractive to citizens. So long as another state may defend its constitution tooth and nail, reject federal suggestions and go its own way as an independent state - united by the federal constitution "AS IS"- then I would be fine with it.
I sincerely hope we build quickly on this triple bottom....and that the skies are sunny and Happy Days Are Here Again (after taking our medicine). I shudder the thought of what life will be like, should we slice through this level and begin to freefall to 4k, then 2k. Whatever the outcome of the markets at this dangerous precipice, I am certain that we will see great "change" in the years ahead. "Sometimes you get what you asked for."
Best wishes...
Rande Is |
