Random Thoughts

Fraudulent Markets, Foolish Investors & Conniving Regulators

Whether one looks at developed countries like the US or developing countries like India, one finds that the playing field is not level and the odds are stacked against the common person, be it an investor or consumer, the markets are manipulated or fraudulent and those who are supposed to regulate or referee the game are captured by those whom they are supposed to regulate, or even worse they are the bribed lackeys of the rich powerful elite.

On May 6th, 2010, the Dow Jones, S&P 500 and Nasdaq averages dropped precipitously and recovered much of their loss by the day’s end. The stock price of Accenture went down from 42 to single digits and the SEC initiated an investigation to determine the cause of this irregularity and prevent its future recurrence. Three months later, the whole thing has been swept under the rug and no market maker has been faulted or prosecuted.

The real truth is that the blame was assigned to faulty computers and like Reagan’s confession after Iran Contra, the public was snookered by “Mistakes were made” without assigning blame to any individual. Ineffective remedies like potential future circuit breakers were put in and commissions were appointed to study the problem.

The truth meantime was staring us in the face and was conveniently ignored.

There is a leveraged (double) inverse ETF which moves twice as much in the opposite direction as the Nasdaq 100 and trades under the ticker QID. If the Nasdaq 100 drops by one unit, QID generally rises by double (two) equivalent units. The two move in diametrically opposite directions like the two pans on a weighing scale. If one puts a weight in one pan, it goes down and the other pan of the weighing scale goes up because of its connection at the fulcrum. There is no way that by putting a weight in one pan which is going down, can result in the other un-weighted pan of the scale can simultaneously go down. They invariably move in opposite directions.

Yet on May 6th trading, the Nasdaq 100 dropped from 1948 to 1752 and thus QID should have gone up in value at twice the rate, but instead at the time that the Nasdaq was dropping, QID also dropped simultaneously from 16 dollars to 7 dollars. This is like both pans dropping simultaneously and denotes a rigged balance, but the blind SEC in collusion with Wall Street never saw it. Truly there is none as blind as one who does not wish to see. Geithner, Summers, Bernanke, Paulson, Bush, Obama and similar stooges of Wall Street used TARP, TALF and other four letter shenanigans to make Wall Street whole at the public expense, while abandoning the people. No executive responsible for the meltdown has been indicted, fired or jailed but millions have lost their homes and retirement accounts. Automobile dealers and check cashing outlets have been exempted from oversight by a consumer protection agency castrated at birth. These and other credit card issuers are allowed to charge usurious interest rates to consumers while sucking dollars at zero interest rates from the teats of Bernanke’s Fed. 

The Volcker ban on proprietary trading has been made toothless. Market makers and investment banks are allowed to legally accumulate stock in a company and then upgrading it to a strong buy. The share price then shoots up and their inventory is dumped on foolish investors at obscene profits. The share price of Tesla (electric car maker) which has not yet produced or sold significant number of cars rises to a premium of more than 30% and after the foolish public has been used to distribute the accumulation by the big boys, collapses below offering price in less than a week.

WHEN IT COMES TO PAYING Goldman Sachs for AIG’s credit default swaps, contractual obligations become sacrosanct and haircuts or negotiations are forbidden. The creditors have to be paid in full at public expense but when it comes to the debt of GM or Chrysler and the contracts of the United Automobile Workers, those can be torn up, abrogated and the creditors and workers threatened to accept haircuts and publicly maligned by a shameless president who accepts the Nobel Peace Prize for making wars.

In India, Telecom licenses are given out for a song to favored companies in return for unknown favors, causing a loss of billions of rupees to the treasury. The lust for power of an incompetent puppet prime minister, literally a slave of his Italian mistress, prevents any criticism or dismissal of any corrupt minister, lest the fragile coalition government fall. A former prime minister of the same party and the husband of the current real power is alleged to have been complicit in allowing Anderson, the former CEO of Union Carbide, the company whose shoddy criminal practices led to the death of nearly 15,000 Indian citizens, to be whisked out of India by skipping bail to avoid prosecution.

The verdict of the legal case takes twenty-five years and the legal punishment is a joke, two years of jail.

Innumerable cases of premeditated food contamination causing death and disability of innocent consumers including children from spurious ice cream leads to no conviction or punishment of the culprits. Faulty construction of high rises with substandard materials which collapsed because of a distant earthquake and caused hundreds of deaths led to no conviction of any builders responsible for the crime. 

The supreme irony of these tragic facts is that they are the norm in the two most religion obsessed countries of the world full of so-called born again Christians and the other obsessed with Dharma.

A recent storm in a teacup was in the primary election of an Indian contender for the Republican nomination for governor. She, like another Governor of Indian origin had to reaffirm her conversion to a different religion and the confederate flag. It reminded me of the earlier words of Judge James Petigru, who after Fort Sumter, secession and the onset of the Civil War said, “The problem with South Carolina is that it is too small to be a nation and too large to be a lunatic asylum”. Did it not elect as Governor that chap Sanford who walked to Argentina via the Appalachians to see his mistress or so he told his wife. How about the other Strom in a teacup, the rabid segregationist windbag who seduced his black maid. It might be better for South Carolina, the US and India to elect the Devil for a change. At least she is not a hypocrite. 


More by :  Gaurang Bhatt, MD

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Views: 3357      Comments: 1

Comment Corruption in various forms is the order of the day. While the simple small businesses today are being subjucated to pressures, the "big" corporates are passing along with "murder". And this is shame and disgrace.

Roy D'Costa
11-Jul-2010 22:24 PM

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