by John M. Curtis
(310) 204-8700

Copyright July 15, 2007
All Rights Reserved.

ooking for any excuse to take profits, Wall Street continues its relentless roller coaster, where programmed trading completes its endless cycle of “buying low” and “selling high.” Strict Security and Exchange Commission rules prevent insider trading, scapegoating individuals like Martha Stewart for gaming the system. Yet the system itself is the biggest game where a coordinated effort by the nation's biggest funds decide when to sell and when to buy. Wholesale sell-offs by the nation's biggest investment funds cause the market to plummet, leaving enticing buying opportunities. Frenzied buy-backs by the big funds cause the market to rocket ahead, the same pattern witnessed in recent months. Wall Street's spin machine wants you to believe frenzied buying or selling is linked to real events, like inflation, “the Fed,” the price of oil, the weather or any other lame excuse.

      Wall Street's journalists, whether in broadcast or print, talk about “investors,” referring to anyone who buys and sells stocks, to discuss upward or downward trends in the market. They never explain how small investors know when it's time to unload or swoop up stocks. Very few small investors decide to time the market or day-trade, making profits by selling high and buying low. Stock gurus like Warren Buffet, the wizard from Omaha, urge investors to engage in only long-term investing, while, Wall Street regards long-term as minute-to-minute, hour-to-hour. While buying trends designate a “bull market” or selling signal a “bear market,” only carefully orchestrated programmed buying and selling determine trends in the market. Small investors can only watch while profits either soar or nosedive, depending on the direction large fund managers take the market.

      When the Dow Jones Industrial Average, composed of the nation's top 30 companies, rocketed 284 points Friday, July 13 to another record in the biggest one-day point-gain in four years, Wall Street attributed it to renewed consumer confidence. Analysts point to Wal-Mart's—the nation's biggest retailer—2.4% gain, in stores open at least one year, suggesting retail sales were on the rebound, something accounting for over two-thirds of the nation's Gross Domestic Product. “It's a relief that things weren't as bad as people expected,” said Bill Schultz, chief investment officer at McQueen, Bail and Associates, believing that Wall Street insiders expected more sluggish retail activity. “We're maybe getting slower growth but no fall-off-the-cliff economic scenarios,” hardly the reason to go into a buying frenzy. Schultz points out how Wall Street uses economic news to justify buying or selling frenzies.

      Only last week, the same “investors,” drove the market down 300 points, only to watch this week's feeding frenzy cause the market to rise 400 points, calling attention to the sideways or seesaw movement in the market. “I think it is, over the near term, a little bit overdone, certainly on a two-day basis,” said Schultz, suggesting, the same large funds, might take profits this week, driving the market down again. Unlike private investors who ride out Wall Street's ups or downs, large fund managers make short-term profits by buying low and selling high. When analysts say the market is “overdone,” they mean there's more profit-taking ahead, driving the market back down. There's no buying opportunity for large fund managers to buy inflated share prices. Rapid run ups are hard to sustain. Selling off massive amounts of stock helps the market regain equilibrium for the next buying opportunity.

      When the Dow hit a new record Friday of 13, 676, it should be noted that that figure must be compared to the 12,000 hit in Feb. 2001, before the market slid nearly 5,000 points to 7,286 Oct. 9, 2002. If you calculate the percentage gain from Feb. 2001, or only 1,676 points in more than six years, it's only about two percent a year. What you can't calculate or see are the devastation to investors who bailed out over the last six years since the Dow hit its last bottom in Oct. 2002. If large fund managers decide to short the market, making profit off the market downturn, long-term investors can only wait and pray for buyers to come back. Fund managers are currently exempted from insider trading rules when deciding to liquidate or buy back massive blocks of stocks. Small investors can only listen to Warren Buffet talk about long-term investing when large funds play it day-by-day.

      Before small investors can trust Wall Street with the family estate, large fund managers must publish openly when they're planning to buy or sell massive blocks of stocks. Federal agencies like the SEC and the House and Senate Banking Committees must insist on more transparency from large funds that routinely take the market up or down. When individuals inside companies get tips about earnings, new products or bad news, it's against the law to buy or sell stock. Yet fund managers routinely decide and coordinate when it's time to take profits or swoop up large blocks of bargain stocks. Small investors can't survive when the nation's biggest funds play the insider game, deciding when to buy or sell huge blocks of stock. Everyone wants to invest in America and cheer Wall Street but they don't want to lose their shirts because of greedy fund managers.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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