Tuesday, September 15, 2009

The disconnect between Wall Street and Main Street

Yes I believe the U.S. stock market is being manipulated by a few trading firms and I believe that it will be impossible to keep this up indefinitely. The Government has used all its tools to print money and throw it at the banking and financial system in order to keep it afloat. It has also done a lot to keep the auto industry from total collapse. It has bailed out Freddie Mac and Fannie Mae, Citi and Bank of America. But there are many other industries still facing collapse such as the Airline industry, which has been on life support for over a decade as well as the entire travel industry after 9/11/01.

We hear talk of regulation coming for the banks and insurance industry, but is has been a full year now since the collapse of Lehman and there are no new regulations in place. As recently as yesterday, President Obama called for new regulations on both and said that Wall Street hadn't learned its lessons from the crisis as he claimed that they were repeating some of the same things that got us in trouble in the first place.

So if markets are being manipulated and so far it seems to be working, does this mean we will survive this going forward. The answer is a simple No! I was asked yesterday what I thought might be a trigger to take us down again. I said that while we are able to control and manipulate our markets here in the U.S. as well as banking and financial institutions here, we can't manage and manipulate the world. I fear it will be a country in significant trouble financially that will start the next drop down. I do not believe it will be in the EU, but I do believe it will be either a country in Asia, the Middle East or Eastern Europe or Russia or one its satellite neighbors. I do not have any data or indicators other than conjecture and a strong hunch. But one thing I do really believe, the U.S. government will not be able to stop it. I fear we are in for a long struggle and a widening divide between the far right of the Republican Party and the rest of America..Eventually Wall Street must reflect what's really happening on Main Street. Right now they are totally disconnected and the stock market in my view is very over bought.

By this time in October we will know if the two differing views get reconciled, as Oct. 16th is Options expiration. This coming Friday is Quadruple Witching Options expiration for September.

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