Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (57152)	10/21/2002 12:52:05 AM
From: UnBelievable	Read Replies (1) \| Respond to of 209892

The Fact That The Fed Can Significantly Influence The Direction Of The Market does not mean there are not consequences associated with its doing so, particularly over an extended period of time. The most troublesome of these is a decline in the value of the dollar, increased interest rates, and significant inflation. If such were not the case I'm sure that more could have been done to keep the market up. Having said this there is a long history of central banks causing periodic panics by witholding liquidity and thereby lowering the price of assets enabling them to buy those assets at depressed prices. This is one of a number of articles available that describe the process and its history. matriots.com The House of Rothchild was particularly effective at this although it did not make them many friends, particularly in England. It is a long and twisted tale but ultimately J P Morgan spent some of his formative years in England learning the banking business and helping to correct their public relations problem. They were also instrumental in sending Paul Warburg to the United States to establish a central bank - which Mr. Warbug chose to call The Federal Reserve because the idea of a central bank didn't sit well with most Americans. "Is it somehow immoral to sell stock that you know is over-priced or the company's financials are questionable to naive investors who you nothing about, who you don't know the first thing about their investment objectives, who make the mistake of thinking it will be worth more in the future based on past price performance? If so that makes what a short seller does immoral because it pretty accurately describes what they do." Perhaps - but it is probably much more immoral to artificially inflate the price of the stock so that you can do so. But morality aside, doing so wrecks havoc on capital formation and significantly reduces the wealth of the nation to benefit the few. "I never buy expecting price to be higher within my chosen time frame and I always sell expecting the price to be lower and I certainly don't expect anyone else to act differently." I think you should revisit this policy since it does not tend to result in profits for the investor. But for a mutual fund, since the buying is being done with OPM and their profits are not related to the profitability of the investments but rather the perception of the opportunity for profits on the part of those people who may give them their money to invest it works much better. The revenues of the mutual fund are unrelated to the performance of the fund rather they are dependent on the amount of assets under management. When it appears that potential customers may be losing faith in the opportunity which investing in the stock market through mutual funds may provide it is well worth their while to bid up the price of stocks - knowing full well that the increased price levels are not sustainable. Again the fact that this is all done with OPM makes it that much better. "The stock the dealers have accumulated will be distributed higher, it always is." Usually yes, always no. Someone said about the depression in 1929 - 1931 that in the first year the dumb money was taken out, in the second year the smart money was taken out, and in the third year the very smart money was taken out. What happens then. You have banks and other major financial institutions holding a lot of stock and other paper which is worth much less than the amount that they paid for it. While in the short term this is not a big problem since banks do not mark to market like everyone else ultimately it does limit the banks ability to perform necessary lending. That when the bank of last resort steps in and bails them out, and when then doesn't work, well, I guess the government could go ahead and buy the stock as is currently proposed in Japan. "If one knows these things, what is it that keeps you from benefiting from that knowledge yourself?" Nothing - although they have done as much as they can to make it as difficult as possible to do so. Most of the work in applied game theory over the last decade has been has been done by the major investment houses doing just that. But I wouldn't want you to get the idea that I only sell things short. I buy and sell, generally both more than once a day. I also only trade futures and options on the indices since doing so eliminates all but market risk. And I hate risk - particularly unecessary risk. "If you feel that the market is inherently crooked and weighted against you, why participate at all? Because it is not worth while for them, or perhaps possible for them, to make it so difficult that it is impossible to make money at it. And unlike the casinos they have not been able to establish rules which allow them to kink the card counters out. This is all in good fun but it is not my objective to make you believe what I believe. Perhaps you are right and I am wrong - it is a possibility. Things are what they are regardless of whatever you and I may decide.