Volatility was the name of the game today as fear returned to the casino on Wall Street. At one point the Dow was down nearly 1000 points--and then pulled an immediate about face and staged a 600 point rally. The suddenness of the move had the blogosphere whispering "plunge protection team" as the mainstream media tried to sort out the reason for the precipitous selloff. A few stocks, like mainstay Proctor & Gamble lost nearly 50% of their value and then rallied to gain most back. One stock Accenture, (and eight other stocks), fell from over $40 per share to just one cent--a single penny--then rallied to the $40 dollar mark again.
Marketwatch.com suggested that a trader had entered $16 billion on a trade instead of $16 million, and that the chaos was simple human error. But a look at charts on the day casts doubt on that story. The selloff started well before any big move to the downside on those suspect stocks. "Officials" huddled in a conference call to see if trades should be canceled or revalued. Whatever happened, you can bet that someone was making some big bucks on the rollercoaster today, but the fact that the market broke through several technical support levels and 50 day moving average lines made professionals nervous.
In the background, oil began to reach the Louisiana shoreline from the Deepwater Horizon spill, and the rioting continued in Greece over the cutbacks to services and pensions that will be imposed for the bailout the country receives. The news that US mortgage guarantor Freddie Mac wanted yet another $10.6 billion to cover recent losses seems to have been lost in the other bad news of the day. The Dow finished down 350+ points, and in the last three days the S&P has lost over 6% of its worth.
Why did the market drop? Because the smart money knows what I and many other astute bloggers have been writing about for months--that the so called "recovery" is sleight of hand manipulation of numbers and reports, and has no real basis in the main street economy. It is a recovery entirely bought and paid for by government dollars and Fed shenanigans. Take government out of housing, for example, and that market would collapse to near nothing in a few weeks time. (Government agencies now underwrite over 95% of all mortgages!) Even with that kind of support housing continues in decline. Take the BLS "Birth and death" algorithm and all those temporary census jobs out of unemployment statistics. Now put back the people who have lost jobs and given up looking. Then the real image of joblessness in this country would be seen approaching 20%. Unemployment is not improving as advertised. Now take the hundreds of thousands who have defaulted on their mortgage, still sitting in the homes but not paying that rent. That's the money that has driven "consumer spending." People pulled it out of their homes before the crash in home equity loans, now they just default and spend the mortgage payment money on goods and services. This is no recovery in consumer spending. And behind it all, the unsustainable debt remains on the books of the banks, no matter where they choose to hide it or how they choose to value it.
Think 1930 here. Everyone thought things were fine and that the economy had stabilized. The fact was that we had more pain and ten years of depression ahead of us. And until and unless we address our debt problem, (at every level of our society), and see real financial reform, we will have no real solution to the financial crisis that began with Bear Stearns so long ago, and continues to manifest in situations like the 1000 point ping pong game in the Dow. Anyone who saw that deep dip and immediate recovery has to know that big players were behind it with big money, and that the market is as manipulated as a puppet. Tired of seeing your "portfolio" and retirement being jerked around like this because of big institutional traders and their computer algorithms? Get the hell out of this market while you still can. As the fat cat investors yelled in the popular Eddie Murphy movie Trading Places, "Sell, Winthorpe. Sell!"
P.S. The above is not "investment advice." I'm not a trader or investor, just an observer.
