Tuesday, July 27, 2010

It's Just Worthless Paper

The Plunge Protection Team. A secret society of elite bankers/investors who come in and buy stocks to keep the stock market propped up.

Complete bullshit. Maybe. Here's a link.


I'd like to believe this urban myth. But I can't. For two reasons, both of which make sense.

There is simply no place to put your money- anywhere and make anything close to a decent return. Thus the stock market has become the default investment vehicle. The businesses and people still working are doing quite well in a zero interest rate business and lending environment and they gotta park their dough somewhere. It's not that the stock market is such a great and choice vehicle for saving- it's just that everything and everywhere else sucks so bad, the market just sucks a little less.

The other reason. Good old fashioned greed. People do not waste money buying stocks with their own money if they think they are going to be essentially worthless.

Now the good news. We have to believe in the stock market fairy tale and the PPT whether we want to or not.

People may in fact spend someone else's money. Isn't that what fund managers, including hedge fund managers do? What about the Fed? Whose money do they spend?

Oh that's right. We can't audit them. Never mind. So in fact, the Fed could spend money on the market without anyone knowing, keep the market propped up, while they work out an exit strategy of their own.

In Holland 500 years ago, they had a tulip bulb craze that drove the price of tulips through the stratosphere. That is, until someone figured out that tulips were actually non essential and you really don't need them to live.

Stock certificates only have value because the buyer believes he will be able to sell them to someone else for more money. That's true until everyone figures out that stock certificates are just worthless paper. Non essential. Unfortunately, we have an entire nations retirement plans absolutely hinged to the stock market through 401k plans. Including mine.

Here's a toast to Santa Claus. May you actually exist in the form of the PPT. At least another 30 years or so.

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