Comments on: Is Financial Media Aiding Wall Street Collapse? http://www.prblognews.com/2008/09/17/financial-media/ Communication in the Digital Age Fri, 09 Jan 2009 13:16:22 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Al Sutherland http://www.prblognews.com/2008/09/17/financial-media/comment-page-1/#comment-2324 Al Sutherland Thu, 09 Oct 2008 17:34:28 +0000 http://www.prblognews.com/?p=570#comment-2324 My wife and I are among those retirees who are watching their relatively inconsequential and conservative investments in retirement savings accounts drop in value on an hourly basis. Our own - and very modest - portfolio is widely diversified; mining, health, financial, transportation, communications, energy, etc. Our portfolio, while not large, is intended to provide a cushion from which we could eventually begin to draw as inflation reduced the value of our (fixed) pension income. We never anticipated making a "killing" on these stocks. Rather we had hoped to - in the aggregate - realize a few percentage points more than CD interest over the next 6 to 10 years... at which point we would begin "cashing and spending" in order to maintain our (most definitely not lavish) standard of living. Our frustration with the system comes, I suspect, from our overly simplistic view of "the mess." Our perception is, I must admit, based upon our personal view of finance: we own what we have paid for and we borrow only to the extent that we can reasonably anticipate paying off that debt with reliable income (no borrowing against the rising "market value" of our home, for example.) The exotic world of derivatives, covered calls, short selling, debt swaps, leveraged buyouts and similar financial sleights-of-hand are beyond our ability to comprehend. Most of these 'paper bets' appear to be simply that: gambles... no better than playing Bingo or craps. The "gamble" that bothers me the most, however, is short selling. Short selling ought to simply be outlawed in every respect... nada, no more, no how, no way, none, never again. Many investment funds are now large enough that they can easily move the market down simply by putting up a large block, thus directly creating the oversupply that drives the price down - surprise! surprise! In the penny and OTC markets such manipulation is common place and is practiced by people who would, if they were not traders, be sellling used cars or running for public office. It seems, however, that if a major financial institution participates in a successful short-sell then the traders and executives in that firm get handsomely rewarded (while those of us who hold those stocks take a bath even though we have have done nothing more than buy the stocks at some point in the past and are holding them in anticipation of selling them - honestly selling what we own - at some point in the future.) My wife and I are among those retirees who are watching their relatively inconsequential and conservative investments in retirement savings accounts drop in value on an hourly basis.

Our own - and very modest - portfolio is widely diversified; mining, health, financial, transportation, communications, energy, etc. Our portfolio, while not large, is intended to provide a cushion from which we could eventually begin to draw as inflation reduced the value of our (fixed) pension income. We never anticipated making a “killing” on these stocks. Rather we had hoped to - in the aggregate - realize a few percentage points more than CD interest over the next 6 to 10 years… at which point we would begin “cashing and spending” in order to maintain our (most definitely not lavish) standard of living.

Our frustration with the system comes, I suspect, from our overly simplistic view of “the mess.” Our perception is, I must admit, based upon our personal view of finance: we own what we have paid for and we borrow only to the extent that we can reasonably anticipate paying off that debt with reliable income (no borrowing against the rising “market value” of our home, for example.)

The exotic world of derivatives, covered calls, short selling, debt swaps, leveraged buyouts and similar financial sleights-of-hand are beyond our ability to comprehend. Most of these ‘paper bets’ appear to be simply that: gambles… no better than playing Bingo or craps. The “gamble” that bothers me the most, however, is short selling. Short selling ought to simply be outlawed in every respect… nada, no more, no how, no way, none, never again. Many investment funds are now large enough that they can easily move the market down simply by putting up a large block, thus directly creating the oversupply that drives the price down - surprise! surprise! In the penny and OTC markets such manipulation is common place and is practiced by people who would, if they were not traders, be sellling used cars or running for public office. It seems, however, that if a major financial institution participates in a successful short-sell then the traders and executives in that firm get handsomely rewarded (while those of us who hold those stocks take a bath even though we have have done nothing more than buy the stocks at some point in the past and are holding them in anticipation of selling them - honestly selling what we own - at some point in the future.)

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