Lest it seem a bit too conspiratorial, my alarms went off on Friday when suddenly the newest convert to my position that the markets are so badly bent as to be unsuitable for investing, was.....the mighty Jim.
Here's a little flavor of his diatribe:
"Manipulation. Cheating. Phony numbers. No specialists. No break in the action. A fast market in the last 15 minutes where you couldn't keep up with the prices.
A 15-minute break where the prices were wrong on your screen when it was going down and looked like it was going up.
Sorry. This is about as phony a market as I have ever seen. If there were any refs, they would have stopped play and thrown people out.
Now, look, I understand, if I were short, it would be nirvana. If I were short I would say "Look, we got there by hook or by crook." I am telling you that much of it was the latter."
My observation isn't that he is incorrect, or even overblown. If anything, this is the tame version. When you have stocks on the SHO list for two years or more, it's obvious that the market is badly screwed up. When you have the SEC doing everything short of hanging a "Going Out Of Business" sign up whenever it appears they might actually have to do something about the grandfather clause, or the abysmal failure of Reg SHO, and of their complete indifference to the integrity of the markets beyond what will help the big banks make more money...it isn't rocket science to say things are really bad.
How bad? Read this latest absolutely stellar piece by Alan Newman of Crosscurrents. It spells out how bad rather nicely. Very, very bad.
But back to Cramer. Or rather, back to what stinks here.
Everyone with a brain on Wall Street understands that the game is horribly rigged. They get it. The markets are there so Wall Street can make money. If you do, too, that's an artifact, and many would argue, an anomaly.
So why suddenly does it seem that the agenda of big media, including Diamond Jim, is to breathlessly proclaim that there does, in fact, appear to be a really big problem in the markets, and that they are out of control bent?
Historically, one would have to look to the short interest, and what the smart money is doing, not what the talking heads are saying. The short interest is at all time highs. And yet the market was going up, up, up. Who was doing all the buying if the smart money was selling short?
A really ugly suspicion? Uncle Sam, using the taxpayer dollar to create a hand-off of Wall Street's long positions, at the top, so they could get out of them and go short. That's also how it has usually worked - Wall Street and the crooks (if one wants to differentiate) lay their bomb on the taxpayer when the jig is up, as in 1929, as in the S&L's, and as in now. I've been predicting just that for several years - and I think that is what we might be seeing.
Here's a scenario: Plunge protection team buys as Wall Street sells, allowing them to get liquid and go short. The the team stops buying, and the talking heads all start shouting fire in the theater, stampeding the market to make maximum dollars from the downward run. It's called crashing the system to be able to clear the worst of the liabilities from NSS, and make money all the way down as investors run for the hills. It also helps that the subprime meltdown and virtual abandonment of the CDO market by the banks creates a scenario where the latest casino - real estate - gets the lights turned off, conveniently creating a crisis and leaving those short the home sector winning huge, as well as inevitably, those buying assets at deeply discounted prices. Who loses? Anyone that has debt, and got suckered into the real estate easy money 100-200% increase in valuation scam.
In 1929, the way it worked was you convinced everyone in the country that they were morons if they weren't making the easy money from the market. Interest rates were lowered, and margin was a giveaway. There was no uptick rule to stop bear raids of ugly proportion, but all the press focused on was stories of how everyone was getting rich from the market.
And then, Bam. The Fed raises rates a bunch of times, margin lending rates are tightened at the worst possible time, and the markets go into freefall as the bear raiders go to work, effectively redistributing the wealth that was built in the first 30 years of the century. Very nice. The resulting turmoil allows massive social engineering that transforms a republic into a democracy, the federal government becomes everyone's Daddy, and the ownership of much of the nation's hard assets changes hands - a handy redistribution.
Or how about a more recent one - the dot com thing? Again, everyone is told that they are morons if they aren't riding that gravy train and getting rich overnight. The press is all atitter about grandma and her friends making millions because they thought a company's name was cute. Stories of instant riches abound. Wall Street is very accommodative, and then one day, the bottom drops out. Party over, and another generation's wealth is redistributed.
And here we are. The uptick rule has been eliminated. Most of the safeguards of the 1934 Act are ignored, or considered horse and buggy era anachronisms. But many are still leery of the market post dot com, so what to do?
Real estate was the surefire winner this time, with the Fed happily dropping rates to unseen lows while everyone and their brother gets easy money loans to buy houses at ever increasing prices, and parrots the wisdom that real estate is a great way to get rich. Then the Fed starts increasing rates, the market sours, the CDO market that was created by Wall Street sours, and inevitably, the government will step in and pass the banks' bad bets on to the taxpayer. But it gets better - if my ruminations are correct, as the NSS crisis starts to unfold and it becomes inevitable that the truth is finally known as to how criminally the big banks have behaved, and how perverted the system has become, those big banks understand there is no way out this time - so they create one more run, and then having taken their positions, crash the system to the degree that it requires crashing so they can benefit from the volatility, as well as creating for the country a larger problem than their larceny to focus on.
People don't much have a stomach for who did what to whom when they are in bread lines, or petrified with fear over terrorist attacks, or going to war based on a big fat lie.
My prediction is that Wall Street and the banks who run the country will create a big enough stinky so that their prior stinky pales in comparison. Then it will be crisis mode time, with little leeway to consider ancient history - hell, we got ourselves an emergency to deal with! What does it matter what happened before - we gotta deal with this now, not dwell on past transgressions!
There will be heartfelt speeches, a la, "Mistakes were made, unfortunate events we aren't proud of took place, but in this time of crisis we need to come together and put all that behind us, and ensure it never happens again, so we can grow stronger as a nation..." Sort of the government and financial system equivalent of OJ declaring that he would spend his remaining days (when not on the golf course or partying) hunting down his wife's killer.
Actually, here's today's example of this sort of speech, right down to the mention of moving on for the good of.....the children!!! By none other than Jimbo's buddy Spitzer. Save it, and see if you think this is just a template they circulate, or whether they actually pay a new speechwriter each time they need one.
This is a timeworn and cynical way to brush off past guilt when exposed, and demand that we press on to the future, for the good of the country and of course, the kids. Ironically, it seems to work really well to get countries full of media-created "patriots" to want to go to war and send their kids off as bullet catchers without questioning why - apparently the good of the kids doesn't include the ones being shot or bombed. It's an awesome ploy to get people to forget about the relatively smaller things, like stealing grandpas retirement. The formula is simple - create or capitalize on a larger crisis, and then declare it necessary to either, A) rewrite or ignore the constitution; B) forget about the looting of the financial system as we have bigger fish to fry/a genuine financial emergency; C) act as though baldfaced lies created to escalate events are true, and then long after the fact, admit that mistakes were made, blah blah blah, usually after either A or B is a fait accompli.
If I sound cynical, it's because I've watched as a regulator lies, cheats, and actively assists the theft of our retirements. I've watched us ignore international law and most civilized behavior and invade a country under false pretenses after a questionable crisis event. I've watched as the entire free press dances to the tune of the big banks and top swindlers on Wall Street. I've watched as politicians ignore the destruction of their constituents' savings, while mouthing platitudes. I've seen mountains of data corrupted by agenda-driven media hacks. I've watched as online venues for information like Wiki have been taken over and converted into propaganda spin machines for whatever the agenda of the power base is.
I don't trust Wall Street, our regulators, or our systems anymore. They have failed us at every level. Want to see who agrees? Try googling Lee Iacocca's astoundingly simple summary excerpted from, "Where have all the leaders gone?"
That's not a guy known for fringe looniness or Easter Bunnyesque ribaldry. That's one of the icons of American capitalism, saying, bluntly, that this train has run off the tracks.
But back to our current topic.
Folks, when Jim starts talking about how obviously bent the system is, after ignoring naked short selling and mocking Byrne for years, I automatically ask, "What's he really doing - are all his cronies now massively short and ready for the big takedown?"
Or as another buddy said to me, "You know they're lying because their lips are moving." I rest my case. And I hope I'm wrong, because the ensuing misery will be pretty monumental if I'm correct.