American retirees have lost $2 trillion in retirement funds (of the total of $9 trillion in late 2007) due to the fall in the stock market beginning in 2001. American workers have lost $6 trillion of housing wealth and another $8 trillion in stock wealth because they invested in the con-game called Wall Street.
American investors lost $600 Billion--in the February 27, 2007 "China Sell-off," so-called. Worldwide, investors lost $1.5 trillion. What did the American stockbrokers and financial advisors tell the investors who lost those billions? "Don't play the Wall Street game if you can't take the heat." Some of the con artists pretended to be more courteous, trying to defraud the suckers with the same scam they use whenever there's a sell-off: "Since the prices are down, now's the time to buy."
This and all the other contrived down-turns in stock prices I refer to in this essay are proof positive that Wall Street is a huge swindle, bilking American and world investors out of billions of dollars each year.
"The immediate cause for the China slump appears to have been concerns that financial authorities were about to take action to curb speculation, including a lift in interest rates and a capital gains tax. The rumoured action has sparked fears that riskier financial trades and investments around the world could now be in danger.
“'What we’re looking at here is a big move away from risk,' David Durrant, a currency analyst with a New York investment management firm, told Reuters. 'The big fall in Chinese stocks especially has got some people nervous about the carry trade.'
"The carry trade refers to the process in which financial investors borrow money in one currency at a low interest rate and then place it in high-risk assets in other markets. This process causes what are considered distortions in currency exchange rates. For example, while the Japanese currency should be strengthening because of increased economic growth, the carry trade has seen a fall in the value of the yen as investors transfer yen holdings elsewhere.
"Large profits can be made from these transactions but they depend on market stability. Once that comes into question, with an event like the China sell-off, there can be a rush for the exits." 1
As is often the case, the Wall Street hustlers gave the game away by signalling the drop in prices before it occurred. The Monday before the Tuesday $600 Billion loss, the former head of the "Federal" Reserve System Alan Greenspan spoke via satellite link to a business conference in Hong Kong, warning of a possible recession. Using one of their most reliable of swindles--the dogma that the economy automatically and uncontrollably goes through ups and downs: the so-called Bull and Bear markets--Greenspan pontificated that we could expect a recession by the end of 2007. The US economy, Greenspan said, had been expanding since 2001 and now there were signs that the cycle was coming to an end.The worldwide stockmarket con game becomes more evident at times like these, when the overheated Chinese economy begins to affect all the other economies in the world. China's economy is only a fifth the size of the American economy, but it's growing five times as fast and therefore contributes as much as the US to the growth of the world economy as a whole. China's 2006 fixed asset investment has been estimated at more than 45 percent of Chinese gross domestic product (GDP). Investment on this scale has never been seen before. Even at the height of the post-World War II expansion, when its economy was growing at 10 percent per year, Japan's investment ratio never exceeded 34 percent of GDP. In other words, China is moving into the situation that most of the other world economies are already facing: saturated markets leading to decreased profits and investment opportunities.
"When you get this far away from a recession, invariably forces build up for the next recession and indeed we are beginning to see that sign. For example in the US, profit margins . . . have begun to stabilize, which is an early sign we are in the later stages of a cycle," he said.
The History of Continuous Fraud
|From 1998 through March, 2000, when Nasdaq crested at 5,000, the Wall Street scam artists raised the price of selected stocks--primarily the technology stocks--and duped a huge number of American and foreign investors into believing they could become instant millionaires. In 2000-2001, an estimated 52% of American households owned stocks in some form. Cash flowing into stock mutual funds hit a record $53 billion in February 2000.|
A New Way to Lose: Stock Options
Let's take the horrible example of former Cisco engineer Jeffrey Chou. As a Cisco employee, he purchased 100,000 Cisco shares last year, using the employee stock option provision. He purchased the shares at about 5 to 10 cents per share. At the time he purchased the shares, they were worth $60 to $70 per share. The taxes he has to pay in 2001 are computed on the difference between what he paid for the shares and what they were worth when he purchased them: approximately $6.9 million. Chou never sold the shares and they have since plummeted in value. Even if he sold all his shares and his 3-bedroom home in Foster City, California, he'd still owe the IRS about $700,000.
The globalist corporations made
out like bandits on Wall Street in
- America OnLine - up 586%
- Microsoft - up 115%
- Wall Mart - up 106%
- IBM - up 76%
- McDonalds - up 61%
- General Electric - up 39%
But the April, 2000 stockmarket crash resulted in:
- E-toys losing 94% of its value
- Amazon.com losing 70% of its value
- Priceline.com losing 75% of its value
- Visx losing 75% of its value
- Ebay losing 61% of its value
- E-Trade losing 60% of its value
- Microsoft losing 40% of its value
The corporation executives somehow managed to know just when to sell ther own private stock--before the crash:
- Microsoft's co-founder, Paul Allen, dumped 36 million shares of Microsoft worth $3 billion
- Dell chairman, Michael S. Dell, dumped 6.2 million shares worth $308 million
- Steve Case, president of America Online, dumped 36 million shares worth $3 billion
- Jeffrey Mallet, senior vice president of Yahoo! Inc., dumped 110,000 shares at $180 a share--netting him a cool $20 million
- Gary Bloom, executive VP of Oracle Corp. dumped 125,535 shares for $5.7 million
Surely the brokerage companies and the stock evaluation services warned the lowly investors of bad stocks so they could sell before the crash? Fuhgeddaboudid! Stock analysis publications such as Moody's, Standard & Poor's, Duff & Phelps, Fitch, and A. M. Best charge from $30,000 to $50,000 for each yearly rating. Do you think a large corporation is going to keep paying if it gets a bad rating? Right!
A Security and Exchange Commission study found that Wall Street analysts gave a "sell" rating only 1% of the time. In Merrill Lynch's evaluation of 2,000 U.S. stocks there was not a single "sell" recommendation. In 1999 when all major stock analysts were rating Compaq stock as "buy" quality, the stock lost 54% of its value, resulting in a loss to investors of $9 billion. The moral of this story: unless you're a corporate executive or a stock broker, and somehow mysteriously know just when to buy and sell your stock, you'd best be wary of Wall Street.
The Scam Continued in 2001 On July 31, 2001, Security and Exchange Commission (SEC) regulators said that one-quarter of the 57 analysts they surveyed had purchased shares of companies at low prices (unavailable to the public) before recommending the stocks to investors. In three cases, analysts sold their shares even while recommending them publicly, earning from $100,000 to $3.5 million. Investment bankers handle the lucrative business of underwriting new companies' initial public stock offerings (IPOs). There's supposed to be a "Chinese Wall" separating the banks' investment departments and the research departments that suggest stocks to investors. The SEC's acting chairwoman, Laura Unger, revealed that analysts at some brokerages and banks report, at least indirectly, to the investment banking divisions of their firms in addition to the research units. Unger reported that in many cases the analysts' compensation is increasingly tied to the profitability of their brokerage firms' investment banking units.
This is the Stock Market con game Dubya and and now Obama are trying to get Social Security investors to play into. In this journal we have described many kinds of fraud which Wall Street insiders perpetrate on hapless investors; now here's a new one. In August, 2001, Bush appointed Harvey Pitt as Chairman of the SEC, a prominent securities lawyer who had represented the accounting industry in its push for tort-reform legislation. During his tenure, Pitt made sure that as many illegal corporate actions as possible were swept under the rug (such as offshore accounts used for money laundering) and he made it clear that he did not plan to create reforms to clean up Wall Street. Now even the SEC has become a new kind of fraud in the Wall Street scam.
The Enron Syndrome
An accompanying article exposes the entire phenomenon of corporate criminal behavior perpetrated by Enron and a number of large corporations. In reference to Wall Street manipulations, Enron, Waste Management, Sunbeam, Global Crossing, Rite-Aid, and many other corporations carried out such criminal acts as:
- Paying stock options to high executives and not reporting it on the company books
- Hiring personnel from the accounting firm responsible for auditing their books as consultants (working for a corporation as both auditor and consultant is a clear conflict of interest)
- Paying senior executives huge sums just prior to bankruptcy, as in the case of Enron:
- In the year prior to its December 2001 bankruptcy filing, Enron handed out $745 million in payments and stock awards to 144 of its senior executives.
- The company disclosed that these executives received $310 million in salary, bonuses, loan advances and other income, while $435 million came in the form of exercised stock options and restricted stock packages (including the $54.6 million in retention bonuses that were given to 200 executives in the days immediately preceding the declaration of bankruptcy)
- Among those receiving the biggest windfalls was:
- Kenneth Lay, former chairman of the company, who raked in $150 million in income, bonuses and stock packages
- Former chief executive Jeffrey Skilling took in $25 million
- Former chief financial officer Andrew Fastow received over $10 million
- Thomas White, the current army secretary in the Bush administration who was a top executive in the company’s energy-services sector, received $17 million
Throughout 2009 the stock market has been said to be surging ("40% increase on the S&P over 3 months"), creating a bull market with easily manipulated American investors. What is actually happening is that the Fed is pumping currency into the market through the banks, causing stock prices to escalate and--most important--the increase is an illusion caused by "high-frequency trading." See the video to the right for an explanation of this scam.
In August, 2009, Goldman Sachs surprised Wall Street by reporting second-quarter earnings of US$3.44 billion! Goldman's report of gigantic earnings was particularly curious in that two of its main Wall Street competitors, Bank of America and Citigroup, were unable to report such huge profits.
I've maintained in this series of essays on Wall Street that the "insiders" manipulate the market crap shoot to realize obscene profits. It appears evident that Goldman Sachs is doing precisely that with its new "very low latency (microseconds) event-driven market data processing, strategy, and order submission engine." For a full report on how Goldman Sachs is doing this, go here.
"While the rest of the financial world struggles, it might seem strange that four of the largest US banks have made record profits this past quarter—and not just on average, but every single trading day. Too good to be true? Indeed. No one can do this consistently unless they are part of the special group of insiders that are allowed access to market information at the exchanges that no one else has. In fact, normal people get sent to jail for trading on inside information, but not these guys. They are even able to execute trades after hours. Even during regular exchange hours they are given priority to execute trades based on foreknowledge of what others are about to do, which allows them to go short or long in the markets to take advantage of known future trading volumes. With access to almost unlimited low or zero interest money from the FED, or using naked shorts (illegal for others) and naked hedges they can also drive the markets in either direction and profit from those predictable moves. The financial world is starting to wake up to this rigged system, but can do nothing about it. The manipulators collude with high level regulators, the Treasury and the FED. It is also doubtful that a controlled Congress and judiciary will do anything to stop it. Predictably, even the new Supreme Court nominee, Elena Kagan, has a history of playing along with establishment powers, both financial and political. That’s why she is being groomed for the high court."
Paul Martin, "Rigging the Markets--How They Do It, 5/15/2010
1 Nick Beams, "Global markets slide after China sell-off," World Socialist Web Site (www.wsws.org), 28 February 2007Reference: Updates
- 5/20/2010: Goldman Sachs Profits While Clients Lose Money
- 5/15/2010: Rigging the Markets
- 8/4/09: Bernanke's Shell Game
- 7/31/09: Mainstream Media Economic Recovery Propaganda
- 6/09/05: Highest Wall Street pay tops $1 billion a year
- 1/30/05:The Genealogy of Wall Street Crime
- 8/5/04:Vice President Cheney's Criminal Behavior Covered Up by Securities and Exchange Commission
- 4/2/04: The financial markets are leveraged for a crash
- 3/29/04: The JPM Derivatives Monster
- 7/6/02: Part 3: JPM Derivatives Monster Crashes
- 1/4/02: Part 2: JPM Derivatives Monster Grows
- 9/7/01: Part 1: The JPM Derivatives Monster
- 12/23/02: The Dark Side of Wall Street
- June, 2002: PBS: More than Enron
- 5/26/02: Merrill Lynch Fined Over Tainted Stock Advice
- 4/11/02: Brokerage firms were simply too blinded by conflicts of interest to deliver objective analysis
- Wall Street Treachery, by Paul Podvin:
- 2/4/02: Crime in the Suites by William Greider, The Nation
- 10/12/01: "We Lost Our Shirts; He 'Looked Back',"
- by John Balzar, Los Angeles Times Opinion