Wall Street Is Broken, Making Two Problems Instead of Just One

Yes, this blog continues to be proven right about Wall Street. Wall Street is badly broken. The "system" is broken as to almost all kinds of "trades". Momentum, computer trading rules. I summarize the guiding "principle" as follows: "There is no "top", and there is no "bottom". In other words, the way Wall Street momentum trading now works, zero is not a bottom and infinity is not a top.

I am the only one telling you that Wall Street is totally broken, and needs to be fixed. In other words, I am the only one telling you that we have two problems right now. One is that the economy is in considerable trouble--trouble initially created by the bursting of the housing bubble, and compounded by the way Wall Street had packaged financial instruments to make more money.

That economic problem was then really accelerated by the way Wall Street presently workds--the momentum, computer "trading" in all kinds of instruments where up moves and down moves are accelerated beyond belief by the system itself--rather than any fundamentals behind the trades. This was becoming a serious problem before the bursting of the housing bubble, and had been a major factor in the dot.com debacle, and the magnitude of the Enron/WorldCom stock market decline thereafter (in 2002). This lack of any checks on treating the stock market as a computer gaming casino is what has led to these constant 500, and even 1,000, point moves in the Dow in a single day--plus what used to be called "bull" and "bear" markets" in a matter of a few days or a week (a 20% move being previously considered a "bear" market, or a bull markte).

It is this breakdown of the Wall Street "markets" into computer casinos that pushed the economic slowdown from the bursting of the housing "bubble" into a financial "crisis". This was then further compounded by the panic reaction of Hank Paulson (worst failure in the history of world finance), which spread panic and fear throughout world markets, even as the computer trading games removed all confidence in the financial markets themselves.

We have addressed the problems being created in the economy, even if we have done it about as badly as it could be done. No one is even addressing trying to "fix" Wall Street, even though I think the systemic problems there are much the greater problems, and threaten to make real world economic progress impossible.

Yes, there is that old saying about the tail wagging the dog. Wall Street, and its computer games, momentum "trading", and "technical analysis", has become a tail wagging the dog. Wall Street should not be able to affect the real world economy drastically with computer games, but that is exactly what is happening. And those communists on Wall Street are perfectly willing to accept socialism, so long as their precious "free market" in compurter trading games is not affected. Talk about the "tail wagging the dog".

You should be scared to death that you are only hearing this from me. Yet, if you look at my blog entries since the financial "crisis" began, you cannot point out a single instance where I have been proven wrong (something you cannot say about Congress, Paulson, or CNBC--not to mention the truly stupid people on Wall Street killing the goose that laid the golden egg). Thus it was me that told you how stupid it was for the Dow to go UP 1,000 points in a single day, and how it was not a good thing. Rather, it proved that the market was sick unto death (my title for one of those entries). I asked, correctly, how stupid you have to be to buy stocks when they are moving up without apparent limit, or down without apparent limit. In other words, you are reveling yourself as one of the most stupid people on Earth if you buy stocks after the Dow has already moved up 200 points in a day (which is about do to happen after the recent close to 1,000 point decline in two days), or sell stocks in similar fictional declines.

Now there is an overall down bias, because the economy has deteriorated badly since Paulson panicked, but these big moves in very small amounts of time are fictional They are computer generated by program trading, and all of this solemn analysis of "investors" being "afraid" of this or that is truly stupid--really beyond stupid. It is the broken system that is creating these wild moves, and not the "news" each day (bad as that may be and it has never been that good lately to cause anything like the extreme one day up moves, or several day up moves, we have gotten).

Just remember this in the days and weeks to come: If you buy stocks, or put yourself in the computer gaming position of having to do it, on a day (which may happen tomorrow--some of the signs being there, such as the extreme declines the past few days). you are labeling yourself as one of the stupidest people ever to exist on this Earth--lumping yourself with the total idiots on Wall Street who were buying stocks even as the Dow was up 400 points. I was correct when I labeled those up moves fictioni (in foresight--not hindsight). I am correct when I label Wall Street as sick and broken. You should worry that few other people are talking about how badly Wall Street needs fixing--something that has little or nothing to do with "h9ousing" or "lending" or any of thes rest of those economic problems.

If someone besides me does not start worrying about the Wall Street system of trading being broken, then we are in desperate trouble. Again, look at my previous entries. I dare you so show where I have been wrong. Then cnsider how few people you can say that about in the past 6 weeks or so. But I have no influence. That is what should scare the Hell out of you.