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The Casino on Wall Street

by Barnabas
July 24, 2002

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The Casino on Wall Street_Barnabas- SUBMITTED FRIDAY MORNING, JULY 19:

"The worst thing now," said R.L. Butler, a retired clergyman in Denver, "is you can't even trust the earnings reports. When you find the auditors in bed with the managers, there is nobody to believe,” quotes David Leonhardt in the New York Times on July 18.

Since the discernible moral content of American free enterprise is now hovering at zero percent, it’s time to be realistic about the stock market. Along with tens of millions of other pensioners, I am a silent, but helpless, partner in it--bound by the decisions of the managers of my Pension Fund. Mine got rid of WorldCom stock in time, with just a minor hit; as a head of household I guess I’m glad, but as an ethicist I can’t help feeling for the poor suckers who bought the stock we sold them. We sold, not in order to take advantage of them-- that was just a side-effect of conserving our fund—but we took advantage of them just the same. Of course, they were hoping to take advantage of us, but we won the crapshoot. Our guys were smarter or luckier than their guys. Let somebody else’s pension take the hit.

Realism is our only hope. The only way to retain our sanity is to pretend that our managers are taking our money to a casino. That way we’ll expect nothing, and be surprised and gratified if they hit the jackpot. They will still say they are trading on the market, but that will be a figure of speech; we know that they’re waging bets. Like other gamblers, they are confident in their ability to pick winners.

That’s why it was funny last week when a TV financial reporter was surprised at how active the market was in spite of bad economic news. What’s the surprise? Of course the market will be active. It is an industry in itself. Buying and selling are what its people do. No stock is worthless as long as someone is dumb enough to buy it. This reality causes entrepreneurs to wonder why they should actually produce anything, since people are so willing to buy into the prospect that they may produce something sometime.

It finally occurs to the buyers that nothing will be produced, but that’s okay as long as they can sell the stock to some other poor fish who believe in that future production.

Eventually, the pool will either run out of fish, or the fish will run out of money (or put it in government bonds. The government can always service its bonds, because money is one of its products). That’s when the market will crash and take the economy with it. The market goes on from day to day because “eventually” is not today.

Maybe “eventually” will be in the past before this is posted on The Partial Observer five days from now. But maybe not; it is, after all, a crapshoot.


CNNMONEY, JULY 20: "While investors were selling stocks, they were buying Treasury bonds and gold as they sought safer investments."

When it comes to predictions, dates matter.

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