The Stock Market Fly Trap

By: Barry_M_Ferguson

June 3, 2011. The Dow Jones Industrial Average has just lost over 400 points in the last 3 days. A lot of investors are wondering what has happened. The bulls have started to wonder why the bears have started up their grills. Why did the markets suddenly take a dive? I have the answer. Come close so you can read this information accurately. Closer. Please, come on in real close. Use a magnifying glass if you need to. Ready? Hear it is. It’s a scam!

There you go. The stock market is a scam run by the government to keep the population fooled into thinking the economy is swell. The stock market is a scam propped up by the Federal Reserve to make the idiots of the world think that the Fed has a clue. It is the distraction to make the idiots of the world think that the Fed has a benevolent purpose rather than one of a sinister goal of big banker wealth confiscation. The stock market is nothing more than a big fly trap. And, investors are the flies.

Here in the Piedmont of North Carolina, the month of June has begun as it usually does. It is hot and humid. Flies and gnats are swarming as the humidity draws them like a ‘Steve Jobs is still alive‘ alert draws investors to Apple Computer stock. The best way to combat the pesky flies is to hang a fly strip in the garage. Yes, it is low technology but it works better than anything. The strips have been around forever. They are a piece of plastic that is coated with a gooey substance. You pull the plastic out of a canister and leave it hanging from the ceiling. The flies  cannot resist the strip as they come in for a landing and then find themselves stuck. Death soon follows. On my first strip, there had to be several hundred of the pests taken out of commission. There were so many flies stuck on this one strip of plastic that I could hardly see the strip anymore. I even watched as one fly buzzed around a few times, landed on the string securing the strip to the ceiling, and then hopped on to the strip joining the multitudes of deceased that lay before him. He struggled momentarily and then went still. Didn’t this fly see the hundreds of other flies trapped and expired on the sticky plastic strip? Why did the fly think his experience would be any different?

The stock market is the fly strip that investors cannot resist. Surely the stock market will rise to infinity. The floor of the exchange might be strewn with carcasses of broken investors but they are there because they didn’t have the proper skill. We all think we are different. We all think we have the skill. We all think we have teflon on each of our six feet. We cannot resist. It looks like such easy money. We fly in for a look. We noodle around. Everyone looks happy. The nice folks on the teevee set keep egging us on. There is a daily parade of well dressed men and women appearing on our favorite financial channels and all have the same story. Everything is great! There is no way to lose money. It’s easy. The bull market is eternal. Come on in! We fly in for a closer look. We never see failure - only success. All the other flies aren’t really stuck. They are probably just counting their profits while they rest on the exchange floor. We have to join them. We make our move and put our money to work. Damn!!! We’re stuck!!!

I tried to tell the flies that the stock market had become a scam. But no one wants to hear it. That doesn’t play well on the teevee. The last week of May was wondrous. Every day was a positive day in the face of increasingly dour economic news. Yes, the ECB was giving Greece another bailout. Pow! Up went the Dow. Yes, the Fed would no doubt supply another stimulus with a QE3 if needed. Pow! Up went the Dow. Yes, the US Congress met to forge a deal on the debt ceiling. Pow! Up went the Dow. Yes, Steve Jobs is still alive. Pow! Up went Apple and the Nasdaq. Yes, housing prices had made a new low. Pow! Up went the Dow. Yes, the Dow was rising in the face of depressing economic news. Pow! We closed out May with a triple digit rally! We turned the calendar to June.  P...P...P...phew! Down went the Dow. 400 points-plus in three days. What happened to the ebullient rally? Did I mention the market was a scam?

Oh yeah, we covered that. We are now living in the era of the ‘calendarization‘ of the stock market. Readers may use that term but upon doing so need to send me a payment of $10 dollars as I have unofficially copyrighted its use. The way the scam works is this. May was a bad month. Lower highs and lower lows had turned the Dow into a down trend and un-arrested, threatened to leave the Dow with something close to a quadruple digit loss for the month. And you know what happens at the end of the month? Investment statements are tabulated and issued to investors. Surely the Fed would not want investors to begin to worry about the incompetence of their government. They might begin to question the economic recovery. An ugly monthly statement will do that. So, the solution was to engineer a wondrous end of the month rally that muted the monthly losses incurred in May. In other words, the Fed just thumped a bunch of flies off of the fly strip and acted like there wasn’t a problem of infestation. Investors should have been ready because when the calendar flipped to the month of June, the Fed would stand down from manipulating the market as investors would not receive another statement for 30 days. Down went the markets in the first three days of June. Me? I just took down the old fly strip and put up a new one. The remaining flies will no doubt find themselves irresistibly drawn to the fresh strip and suffer the same fate as their fellow witless associates. In other words, I shorted the infestation.

To further the nature of the stock market scam, I would like to turn the reader’s attention to the chart below. It is a two-month chart of the Dow Jones Greece Stock Index. I have circled in green the gains made on Wednesday (June 1, 2011) and Friday (June 3, 2011). That’s right - I said, ‘Gains’. Yes, that’s right - I said ‘Greece’. For perspective, the Dow Jones Industrial Average lost over 250 points on Wednesday and 97 points on Friday. Yet with the Dow down .8% on Friday, the Greece Index was up over 5%. Yes, that’s right - up over 5%. Now, don’t we all feel stupid because we weren’t invested in Greece? Any yes, I am talking about the same sovereign state that is insolvent. Greece cannot pay its debts nor can it repay the first installments of the original ECB bailout package imposed upon her a year ago. The solution was the same solution that ‘fixes‘ everything today. The ECB gave them more loans in another bailout. No, Greece will not be able to repay those loans either but did I mention that the stock market was a scam? Reality does not matter. All that matters today is who is getting a bailout or a stimulus. Greece is getting another bailout. Yippee!! Up go their stock markets. The US central bank is winding down its QE2 bailout. Uh-oh! Down go their markets.

What do we take from all this? One, investing money in the stock market is participation in the biggest scam ever perpetrated. Of course, this is fine as long as the participants realize it is indeed nothing more than a scam. Two, the markets are a function of bailouts and stimulus from the hands of the central banks. The central banks will decide who gets cash, when, and how much. Three, the markets are now ‘calendarized’. When investing, pay close attention to where we are in the calendar. Come Monday, we might as well put our money on ‘red - 42’. Wait a minute, there aren’t that many pockets on a roulette wheel. Make that ‘black - 21’!  

Psst! I saw Bernanke holding his finger on the spinning wheel at about black - 21! As you put your money down, don’t mind that gooey stuff. Besides, it smells so good!

Past 2 months: Dow Jones Greece Stock Index
Chart courtesy StockCharts.com

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

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