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I have a rule of thumb when it comes to conspiracy theories. If the theory involves aliens or government competence - such as keeping a secret for years - I don't believe the story. But if the conspiracy involves money, I generally believe it.

Here I'm using the term "conspiracy" loosely. For example, I don't think phone companies had meetings with their competitors in which they all agreed to be part of a confusopoly to avoid competing on price. I think everyone simply understands that price wars are bad for business, and they act rationally to avoid them. It's a conspiracy in effect, without the secret meetings.

This brings me to the question of banks. When I was a kid, we could put our money in savings accounts and earn 5% a year. That's how average citizens saved. Today, with interest rates so low, your bank doesn't really pay you anything. You simply give them your money and they use it to make more money for themselves. Arguably, they aren't even keeping your money especially safe, given the risk of bank default.

And so the average citizen has looked around in recent years for a better deal. Thanks to falling real estate values, discount stock brokers, and company 401K plans, the average person waded into the stock market. That allowed the titans of the investment world to grab the little investor by his ankles and shake until his pockets were half empty. How did they do that?

The conspiracy theory is that most of the market-wide gyrations we've seen in recent years are engineered by powerful investors. Stocks run up 10%, and the little investors pile in, buying stocks at high prices from the market movers who are getting out at the top. At that point, the titans of the finance world engineer a 10-20% drop in the market, thus giving the rich another buying opportunity. Repeat.

Here again, the conspiracy doesn't require anyone to hold secret meetings and decide who will do what. All you need for this system to work is for the big guys to be able to execute their trades faster than small investors, which we know is the case, and for the big investors to have faster communication with each other than small investors have with any other investors, which I assume is also the case.  In other words, JPMorgan Chase knows what Goldman Sachs is doing, and vice versa, before CNBC reports it to you.

Some big investors also have the advantage of illegal insider information, and better/faster information about the business world in general, but that's not what I'm talking about here. That sort of information helps forecast legitimate moves in stock prices. I'm talking about the totally artificial gyrations we have seen all summer. I believe those are mostly the result of a system rigged against small investors.

And don't forget the financial advisors and brokers who take commissions from the small investors and benefit from the churn. And don't forget the media that needs to fan small fires into bigger ones to attract eyeballs. The entire system is designed to create small and continuous scares along with the occasional fear of missing out on big moves to the upside.

Let me put this to you another way: If the giants of finance thought they were personally better off with a stock market that didn't gyrate wildly, they would figure out a way to calm it down. Do you doubt that?

Notice also that small investors have moved away from investing in individual companies and toward ETFs and index funds. That means big investors need to manipulate entire markets to scare investors as opposed to manipulating individual companies. That's consistent with what we're seeing.

I think the rich were safe when the average citizen had a clear path to upward mobility. He could get a nice job with a pension, buy a home that appreciated, put some cash in a savings account and wait for compound interest to do its thing. The little guy didn't hate the rich so much when he thought he had a chance of joining the club, or at least moving in that direction. That all changed. Today, there's even a debate about whether it makes financial sense to go to college.

Notice that the rich have cleverly shifted the blame to Congress. The problem, they hope you believe, is all of the danged government spending and taxing! Focus on that hand, not the one that's holding you by the ankle and shaking.

If you want to screw the rich, buy stocks in the broad market indexes and just hold them forever. They hate that.

[Warning: It's a good idea to ignore financial, medical, and legal advice from cartoonists.]
 
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0 Rank Up Rank Down
Aug 30, 2011
Here is some info on the unfair advantage the trading companies have with computer-based trading:

http://www.kiplinger.com/columns/value/archive/could-computerized-trading-cause-market-crash.html
 
 
0 Rank Up Rank Down
Aug 30, 2011
If the HFT crowd wants to provide liquidity so bad just force them to have a quote in for 10k shares at all times, within a certain range from the last trade...
 
 
Aug 29, 2011
Very funny. I don't know why you do this kind of thing. Jeez.

To quote you: "Notice that the rich have cleverly shifted the blame to Congress. The problem, they hope you believe, is all of the danged government spending and taxing!"

Well, wait a minute, Scott! YOU'RE one of those rich guys!!! So you want us to believe YOU are responsible for real estate, stocks, et. al. going down??? It's YOU who are making small investors make stupid investments in individual stocks??? Gosh, if ONLY I'd realized before!!!

OK, folks, it's time to get out the torches and pitchforks and converge on Scott's house!!! It's time for that rich SOB Scott Adams to pay for !$%*!$%* all of us over!!!!!! ARGGGGHHHH!!!

If I thought you were doing anything other than being your usual, sarcastic, contrarian self, I'd be really pissed off and blame you, instead of Congress, for all the problems of my decreasing real estate portfolio.

But instead, I want to blame the only person actually responsible for my decisions: me.

Sure, I wish that the government wouldn't keep changing the rules so I can't figure out the best investments to minimize my taxes. But as my financial advisor says, "Never make a financial decision based on the tax implications."

Here's my advice: if you don't understand multiplication and division, don't try to balance your checkbook. If you don't understand investing, don't try to outguess the experts.

Take responsibility for yourself. As Scott's well-hidden message here is, if you screw up, you only have yourself to blame.
 
 
Aug 28, 2011
Scott,

Interest rates on savings accounts have always been several percentage points below the ambient level of inflation, and if anything, the difference is lower today than it used to be because banks are able to operate their savings accounts more efficiently.

Also, it isn't fair to say "Arguably, they aren't even keeping your money especially safe, given the risk of bank default" given that no depositor in a US bank has lost any funds up to the limits of deposit insurance since the FDIC was established in 1934. (I can't easily figure out how many people have lost funds over those limits, but it can't be many, and almost by definition all of them must have been fairly wealthy.)
 
 
+7 Rank Up Rank Down
Aug 27, 2011
But wait, maybe there is wisdom in a Chinese SPAM conspiracy?

IF all western techie efforts FAIL in the face of Chinese SPAM, do we have a poker-tell on who is going to win the game?

If western governments money is increasingly an IOU scrawled on a napkin, then how about hoarding Asian currency?

Chaos, grasshoppers, brings opprotunity. Just todays opprotunity is different from where your money was yesterday.

Don't tell me your PHBs havent made you read The Art of War at least once........
 
 
+5 Rank Up Rank Down
Aug 27, 2011
JOB ONE - Chinese SPAM conspiracy....

For a cartoonist of techie subject matter, Scott acually has interesting ideas, but, Techie Credibility?

Nice concepts about the web saving the worlds infastructure, ONCE we page through all the SPAM?

FAIL - FAIL - FAIL !!!



 
 
Aug 27, 2011
This is all fine Scott. But I think its the people (common) of the US of A that are ruining the economy. Look at their spending habits. They use their credit cards without any credit in the banks.


And you always warn about the opinions of cartoonists being irrelevant. But you know as well as me that its exactly opinions of artists that have more relevance than those of scientists/academicians throughout the history in deciding fates of nations. Why contribute towards this kind of misgivings? The current state of the US economy is a result of not only manipulation of the market by "big business" but also by laziness and the spend-thrift nature of Americans. Who will blame for it? Will they ever learn from their mistakes? Please do a blog article for that purpose as well.
 
 
Aug 26, 2011
Well, long term, common stocks still have the best return of any investment. So if you put your money in diversified (or index) stock funds and -leave it there- for a decade or more, you'll do better than anywhere else.

So if they're grabbing our ankles and shaking all our money loose, they're not doing a very good job. They have a lot to learn from the commodities dealers, where what you suggest is actually true.
 
 
Aug 26, 2011
I thought you were a libertarian, now I hear you're a liberal. I see your point though.
 
 
Aug 26, 2011
I think it's the retirees andespecially the Boomers who are the target. That's who will haveto sell stocks or live on the interest from CDs and bonds. And the Boomers have socked away all that 401(k) money.

There have been lots of stories about crooked brokers & advisors preying on individuals as they retire and take lump sum payments from pensions & other funds. Now the larger world is playing the game more systematically.
 
 
+2 Rank Up Rank Down
Aug 26, 2011
I'm thinking guns & ammunition is the new stock market.
 
 
+1 Rank Up Rank Down
Aug 26, 2011
I opened savings accounts for my kids with a vague idea to teach them about the value of saving and compounded interest. Maybe a failure on my part, but with interest payments of $.01 I think the lesson fails.

You didn't mention that the institutions use automated computer-based trades with predictive modeling to execute ?thousands? of small buy/sell transactions each day. As long as their algorithm can model the general pattern of movement, they make tons of money on this. Of course the downside is if there is enough bad news happening at the same time the computers all go into massive sell mode which triggers other sell rules to kick off which spirals out of control.

In general, the idea of individual-based retirement savings has some merits. However, not everyone is equipped or cares to make rational decisions. And some get greedy and take unfounded risks, which is its own type of irrational thinking. The government can't do it right and we can't do it right ourselves. And since game theory is in play, the next guy's opportunity for "the dream" is to separate you from your money. We're doomed.

 
 
Aug 26, 2011
You do realize now that they will have to silence you!?!?
 
 
Aug 26, 2011
After my try at investing in Bank of America yesterday I have to agree with your comments. My father-in-law worked for them for 40 years and through him I've always followed the stock. When Buffett bought in to the bank yesterday I smelled opportunity and after the market opened I bought shares in the company.
If you look at a chart of the stock's price action yesterday you will see it open higher then go up for a few minutes and then start a steep and steady descent. I bought at the highest tick on the chart. A few hours later and I'm down 10 percent.
It's amazes me how I consistantly do this.
I'm buying into your theory and I'm either going to stop investing in financial markets... OR... now that I think about it, I'm going to do the opposite of whatever my next investing idea is and see how that works.
I feel like I have strings attached to me from above whenever I try to buy a stock.
 
 
+2 Rank Up Rank Down
Aug 26, 2011
I definitely agree that in most cases where the paranoid are suggesting a conspiracy, this is not really the case. Rather they are "converged interests" of those in power. It can be with or without meetings, and if it concerns a meeting, it is simply because it is likely to meet other people in power on golf courses. It's all self-interest, but sometimes the self-interest of others accelerates your own. Since all our systems are designed to serve and grow those already in power, this works effectively. So effectively that the theory of a conspiracy theory is not surprising.
 
 
+1 Rank Up Rank Down
Aug 26, 2011
The thing that's a fact is that companies will always do what they think is in their own best interest as long as they don't worry about the law or getting bad press. Ethical thinking don't exist other than as a bug in the toilet. And that's natural. Companies are about earning money in a particular field, and they will of course manipulate the market, and to whatever it takes to earn more. Don't expect companies to behave "properly".
 
 
Aug 26, 2011
Why does the 'little guy' have to equal stupid? Because you would need to be stupid to not understand the very simple concept of buy low sell high.

Little guys are free to take advantage of these market fluctuations as well. When I saw the UK market fell over 15% in a month I stuck a couple of grand into a tracker fund. When the market goes back up, whether that’s in a month or a year, I’ll sell then wait for the next drop.
 
 
Aug 26, 2011
Whoa there, Scott!

Buying the index will only work when the index is not gamed. Warren Buffet's purchase of BOA stock is not the regular stocks that you and I buy, but preferential stocks with guaranteed return & priority for payment over regular stock. Plus he got in a two for one price, attached warrants at 7.00 per share. Try to get this kind of deal from your stock broker. The market is always rigged against the small guy. Note that just by pulling this deal, in one day Buffet made over 1 billion in paper profits, which he probably will turn over in less that 90 days into another investment and pay no profit tax. Anyone holding the Index long run will never get these gains, and depending on when they bought into the market, may very well be sitting on a loss.

The only road to happiness for most people is to accept that the game is rigged, and that you should focus on what more practical. Besides, I can brag that I'm richer that Warren Buffet when it comes to viewing sunrises over mountain peaks or long uninterrupted walks & talks with my children.

 
 
Aug 26, 2011
You can't really blame the bankers and stock market titans for being greedy pigs. It's the millions of little guys that need to grow a brain and use it. You can say all you want about the banking system and the stock market being rigged and it will not stop millions of dumped ashes from doing dump stuff.

Speaking of conspiracies, now would be a good time to get rid of your hidden drug habits. Yes, most people in the world are covertly drugged in some form or another. Three of these covert drugs are monosodium glutamate, aspartame (these two are excitotoxins that affect the brain) and fluoride. Monosodium glutamate (MSG) has some 25 different names and it kills brain cells. Many people experience headaches from eating too much MSG. Chips laced with MSG taste devilishly wonderful and are addictive (betcha can't eat just one chip!) Aspartame is in almost all diet drinks and "zero calories" products. Aspartame becomes nasty when under high temperatures it breaks down into diketopiperizine, formaldehyde and formic acid. These chemicals cause brain tumors, breast tumors and tumors of the testes, thyroid, and prostate. Beside killing your brain cells, aspartame may cause migraine headaches, insomnia and weight gain. Fluoride is extremely corrosive and extremely toxic. Studies have demonstrated that flouride is associated with dental fluorosis, skeletal fluorosis, osteoporosis, cancer, and dizziness. Good luck trying to think clearly when you are dizzy. Perhaps this is why Europeans are smarter than Americans?

The challenge facing the millions of little guys is actually themselves. They're not aware of the toxic chemicals entering into their bodies. Remember the Romans and lead? How did it turn out for them?. The sheeple don't recognize the same old swindle in progress, and they have no thirst for knowledge. I once thought it was a ridiculous statement to say that humanity is under the destiny of a few thousand brave and knowledgeable individuals to liberate the human race from tyranny. Now I see that the sheeple are hopelessly drugged out of their minds (stupid) and ignorant and apathetic (not knowing a rat's ash what the dell is going on and not giving a dam about any rat's ash.) Think about how to think. Where are the goat days? All we're having are sheep days.
 
 
+2 Rank Up Rank Down
Aug 25, 2011
You don't need to buy and hold broad indexes as a group to screw the rich. You don't even need to screw anybody. Just buy products that the computers can't cause volatility in because the electronic market to support it doesn't exist yet. Sacrafice a little liquidity and buy some foreign debt and munis. The volatility just isn't there yet.
 
 
 
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