Monday, 29 November 2010

Keiser Report №98: Markets! Finance! Scandal!

This time Max Keiser and co-host, Stacy Herbert, look at the scandals of no exits and no jubilees. At least for the bottom 99.9%. In the second half of the show Max talks to Nicole Foss of the Automatic Earth blog about energy and peak credit.



Max and Stacy also cover issues about the legalised insider trading allowed by members of Congress and the connections between the corporate elite and US & UK lawmakers.

[Posted at the SpookyWeather blog, November 29th, 2010.]

2 comments:

steven andresen said...

spook,

Is Max saying that investors as a whole, and not just 'speculators,' act like these guys who go into oil, say, or any thing that they 'invest' in, suck out profits, and leave, and thereafter leave that thing, be it a commodity industry or any other kind of company, with less to use to create new products or to repair or upgrade infrastructure?

Is the financial sector a parasite in a real sense, so that investment is a problem, not just speculation?

And is he saying, whereas before there might have been real investment that created stronger companies, now all investment tends toward parasitical speculation...?

s.

SpookyPunkos said...

Steve,

I think there are good and bad points about the investment system.

It's good for companies to raise money to fund long term developments but the flip side is that the money going into such projects can be drawn out and stock prices can crash due to a lack of support (lack of confidence in the project).

Low stock prices often mean difficulty in raising money if the business is not producing a large enough profit that would allow them to do this on their own. A crashed stock price can lead to downsizing and/or bankruptcy (which may happen anyway if the business model/business environment is poor).

I don't have a problem with "genuine" investing, buying issued stock to help a company expand its operations. However, I can see a problem with large sums of fast money rushing into a stock (or housing for that matter) over inflating the price that later leads to a crash when the bubble deflates.

The speculators, with their vast amounts of money, rather than helping the company or purposefully buying up a commodity, tend to push up the prices for a short term financial gain and then bail.

Other investors who have been suckered into buying after the price rise can find the prices dropping as the big money leaves. Less buyers mean a return to the old level of demand.

The speculators only have relatively short term goals in mind- driving up prices, getting other investors to buy into the rise and then getting out with the money they have made.

Many of these big time speculators are parasites or market manipulators. That is what Max is against. They manipulate things beyond the "fair value" of the stock, asset or commodity.

These days, with the big money from the investment banks, the hedge funds and the Central Banks (governments helping to sustain bubbles) we have an ever greater threat from the speculators market manipulators. The fact that there is a derivatives (casino betting) market helps drive unsustainable/harmful behaviours.

Reform is needed.

Spook