Stock Market Meltdown

Stock Market Meltdown

Watching Rome Burn

Both presidential candidates want to crucify SEC Chairman Cox for failing to control our formative financial institutions. But anecdote has it that Congress exclusively excluded the devilish derivatives from SEC purview. Let ' s fire the right conglomerate of " poips " for a change! Fairy markets are brought about by lousy with factors, some normal, and some not so normal. It ' s often helpful to look backwards before receipt hugely paranoid about the present. The S & L crisis of the premier 80s endowment be an appropriate starting point. Later that decade, a multi - year rally had its head lopped off by high diversion rates, high inflation, and a computer loop. Ten years later, supplementary soaring market was toppled by economic factors. The turn of the century observed the bloody termination of the no - value - at - all dot - com false impression. A profit taking strategy during the energize days was all that was necessary to cash in on " The Crash of ' 87 ". In 2000, the route to immunity could be summarized as: " no IPOs, no reciprocal funds, no dot - coms, no problem ". The common historical ( frenzied ) thread is clear. Rally begets decree; legality spawns rally. This time around, ironically, conservative investors had no woe avoiding the derivatives that eventually sunk the markets. But, the products were so " out there ", and the regulators so peripheral - flanked, that the unwinding has unglued several investment world icons. This constitutionality is different - - - but not in the ways you might think: The scope of media coverage, analysis, and sensationalism; masses of inexperienced, non - professional, speculators; and the popularity of investment products are new phenomena. Millions of clearly nameless non - credentialed Internet investment experts and economic bloggers add to the pandemonium. Similarly, the proliferation of passive investment mediums ( index specie ); regulatory humanity of speculations of all forms, shapes, and sizes; and the relaxation of the trading safeguards that have protected investors for decades encourage a reckless, gambling approach toward what was once investing. We ' ve heuristic what conscienceless item speculators have accomplished in world markets. We have experienced a major movement away from plain untroublesome stocks and bonds, and have popularized the electrify ride of speculative activities. 401 ( k ) fund selections include short - long specie, currency trading strategies, and commodity futures. IRA investors seek out the most exotic forms of speculation, convinced that, with a Blackberry and a lunch break, they can skilled the complexities of high finance. Regulators have allowed funds of hedge funds into small investor portfolios; brokerage firms short shares that don ' t exist multiple times; the once hallowed up - tick rule has been abandoned when shorting itself should be a banned substance; and CDOs make it difficult to determine just who owes money to whom. Enough? There ' s more and many, but you get the recent idea. Today ' s problems are very more visible than yesterday ' s. Today ' s worries involve bigger numbers. Tomorrow ' s solutions will of course bring creative MBAs to discover new financial WMDs. The investment gods are also fuming. We need to bring back that old time rock and roll, and an investment sphere upbeat with individual stocks and bonds. In fewer complicated times, the dissimilarity was in only fixing. Speculators experienced, but safer investment styles were less exposed. Sublet ' s elect a Congress that will regulate the speculations and allow us to get bring to the basic, fundamental, shift of castle and protecting our lair eggs. Think bring, unbiased a few cycles ago - - - familiar? The Market was breezing along during the summer of ' 87, enjoying one of the broadest rallies totally appreciative on Wall Street. From the very start, litigation prices seemed incapable of alertness down. The esoteric DJIA 2000 hindrance was shattered early in the year and upward the market soared. On through 2100 it rumbled, then 2200, and 2300 - - - even the ludicrous strip, dartboard approach legit successful, and lousy with subscribed to it. The securities markets were simple, with fewer labyrinthine products, and only the dark cloud of swiftly rising interest rates in an otherwise clear sky. 2400 on the DJIA at July and on it went. No end in this sight. The institutions introduced hundreds of contemporary mutual scratch, pumped up their marketing efforts, and pushed the rally skyward - - - 2500, 2600, 2700, just sensational. None of the salivating mutual fund fraction holders saw it coming; Wall Street didn ' t care. The Dow topped out at 2722 that Gratifying - - - about the same character of points heterogeneous in a swinging September 2008. Only the names and the products have changed - - - The parallels to today ' s markets are interesting. Value stocks and bonds were operative lower stint IPOs and other speculations were bubbling higher. As prices enervated, analysts began to mumble. The economy certainly didn ' t gun like a doom and witching hour plot - - - just those pesky interest rates. And then it hit the seed. Technology bombed the market when programmed - trading sell signals ran fast and unrestrained down the cables, resetting themselves lower, and lower, and lower - - - but the stock being sold actually existed! Wall Street panicked! Rise fears, higher interest rates, anxiety in Europe, foreign oil, war in The Middle East, and so on. All of the usual expects were touted by the media as the perpetrators that caused " The Crash of ' 87 ". It just doesn ' t take a whole pack of Wall Street manipulation ( or arrogance ) to turn speculative greed into investment bugbear. The wizards had done it again, sucking the franklins from uneducated individual investor portfolios, just as they would two cycles later when their dot - coms sealed the providence of another generation of speculators. Yes, the similarities are sterling - - - one meltdown to the next. But this time is slightly different. This time the Masters of the Universe were helped by Congress and the SEC to draw in our collective pockets, and a few of them have in truth, and appropriately, drowned in their own rubbish. I ' ll shed no jeremiad for the fallen giants, but sublet ' s all cry foreign loudly about the problem - - - a problem that both Barack and John were a part of. It ' s Congress that gets to chastise and formulate regulations for the bad guys. This year, and in those that follow, let ' s fire the DC fat cats that caused the crunch, and find some regulators with the guts to label speculations as thoroughly as they do medications.