dam1953 |
03-10-2012 09:09 AM |
In my opinion Wall Street (actually the New York Stock Exchange, NASDAQ, etc) is broken. Once upon a time (a phrase used to begin many a fairy tale) Wall Street was created as a place for businesses to raise capital. If you had a new idea for a business or needed to expand your business you sold a piece of the company as stock to private investors. Investors bought and sold stock in companies based upon their long-term perfornace, market trends, etc.
For nearly 200 years this worked really well.
Today, the whole system looks more like Vegas-east where money is bet not invested. Day traders buy and sell, flipping stocks so fast that the actual performance of a company is often not the issue at all. You make short term bets on stock, commonidites, etc and if you're a big enough player your bet moves the market. In short the game is fixed.
So, when traders, hedge fund managers, etc take positions on oil they have no intent on ever taking delivery. They are only betting the price will go up or down. This creates a false "demand" driving the price up or down and the traders win. Unfortunatley, for every winner there is also a looser and in this case it is us, the consumers.
Will the problem get fixed, highly unlikely. Wall Street money actually fixes two games. First, the trading process itself, as described above. Second, a chunk of the "profits" from the trades flow back to Washington in the form of campaign contributions, in short, protection money.
If you have a problem with low blood pressure I suggest reading Throw Them All Out by Peter Schweizer.
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