On Monday, February 24, 2020, the stock market lost 1,031.61 points. On Tuesday, the stock market dropped 879.44 points. On Wednesday, the Dow Jones dropped 123.77 points. On Thursday, it dropped another 1,190.95 points. Finally, on Friday, the stock market dropped just 347 points. The stock market has been a roller coaster ride since Monday, February 24th. After each new low is achieved, people who have been conditioned to buy stocks often ask if this is a buying opportunity. I have a more relevant question: Is the stock market a fraud?
Prior to answering that question, I must state that every venture has a degree of risk. With each investment, you can possibly lose some or all of the money invested. No business, no investment, not even US Treasuries are 100% fail proof. Investing in diversified mutual funds, index funds, publicly-traded equities and businesses in which you don’t own a controlling interest are no exception to the facts of risk. We get this, at least most of us do. What I’d like to clarify is a mistake that investors make which is causing millions to lose trillions. The error is the assumption that stocks are legitimate investments. Stocks shouldn’t even be mentioned in the same conversation with the FIVE INVESTMENT VEHICLES discussed in my second book. That is unless you are talking about the fact that they are frauds or the anti-thesis of legitimate investments.
My statement has nothing to do with the recent stock market volatility. I’ve been explaining this for over 15 years. On TV, radio, in books and seminars, I’ve elaborated on why stocks (which are also known as equities) are not the best place to put your money and haven’t averaged close to the advertised 10% return on investments. I’ve also detailed a fundamental fact. The rationale taught to stock market retail investors is a problem, and I have the cure.
The stock market is a Ponzi scheme
The stock market is a Ponzi scheme, stock prices are manipulated, and the game is rigged in favor of a few people and institutions winning. Understanding these facts is probably why Henry Ford went as far to state, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” This is not revelatory. This just may be the first time that you’ve heard:
- “The stock market is by definition a Ponzi scheme,” – Mark Cuban. The problem is that only a few retail investors correctly distinguish the facts from Wall Street’s fiction. The stock market is the largest and longest-running Ponzi scheme ever. That is just a fact. For instance, when retail investors pay $2,000 for a share of Amazon, how are they getting a return on investment when it clearly provides no dividend? The early investors are getting paid from the last investors in a classic first investor in, first investors out Ponzi scheme like manner. This same principle holds true for just about every publicly-traded investment (e.g., Facebook, Netflix, Tesla, Wal-Mart, etc.) The stock market, where businesses often pay little or no dividend, is a Ponzi scheme. In the stock market, the older investors get paid from the newest investors, and the moment the pool of new investors dries out or isn’t sufficient to meet selling pressures such as when there is a panic, the Ponzi scheme fails. This scheme just keeps going after numerous collapses because the government has legalized it and essentially given non-accredited investors no viable options to the fraud.
- In any other industry, the jobs that specialists and market makers do would be illegal price-fixing. Tuna giants, Bumble Bee and Starkist, were charged and plead guilty to price-fixing. The generic pharmaceutical company, Rising Pharmaceuticals, was charged with and admitted to price-fixing. There are numerous examples of how the US Justice Department has convicted various businesses for price-fixing, but the government has turned a blind eye to Wall Street’s stock price manipulation. When you understand the nature of the function of specialist traders on the NYSE and market makers on NASDAQ, you can see that stock prices trend up because they are largely being fixed. For instance, logically-thinking investors would want prices to decline because of the inverse relationship that the price has to the rate of return on investment. So, why do specialists and market makers step in with their own money to make sure that prices tend to rise over time? You witness their visible hand in the marketplace each day such as Friday, February 28, 2020, and Friday, March 6, 2020, when the stock market was down thousands of points, only to come roaring back in the last minutes of trading. In any other industry doing what they do is illegal price-fixing; however, this sort of fraud is legal and rampant in banking.
- The stock market “game” is rigged in favor of accredited investors and institutions. Not only are the largest institutions treated as too big to fail who get bailed out with public funds when they are about to collapse, but unlike other industries, they are also able to gain access to almost unlimited amounts of the cheapest capital from retail investors and central banks. That is just institutions. Individuals and institutions that are classified as accredited investors are able to get into pre-IPO deals at wholesale prices. This privileged class of investors with unconstitutional rights is eventually able to sell the same shares for often 1,000 times more than they paid to retail investors when the business goes public. The stock market game is rigged. See the article on my website conduitadvisors.com for a detailed explanation of accredited investors.
Idealism doesn’t trump practicality
I could recite one fact after the next. I won’t bother. Not only is this article, not an expose’, but I’ve also learned that it is a mistake to talk about problems alone. After authoring three books that have been right on every financial, investment, and governmental topic, I was on a high horse, but after 15 years I realized something crucial. As ethical as most people are, and no matter how much they hate fraud, unfairness and injustice, the fact is…for most…that idealism doesn’t trump practicality. This means that the principle does matter, but it doesn’t if you are not providing an alternative to the problem.
This is why I could explain everything that is wrong with stocks, dollar-cost averaging, etc, and it’s inevitable that someone would mention, “But Eric … people are making money off it.” Beliefs like this, whether people are making money or not, are often the only justification people need before investing in large and small frauds.
As idealistic as I am, I understand that you can’t just talk about the problem without providing a solution that is a practical alternative. I have such an alternative. With it when the stock market dropped over 2,000 points on Monday, March 9, your portfolio wouldn’t have been phased. I’m not saying that you would have timed the market. I TEACH YOU HOW TO BEAT IT. In other words, don’t assume that you should dollar-cost average because you can’t predict when the market will hit its peak or bottom, that the return on investment that stocks provide can’t be beaten.
Stocks are madness
Although you are free to try the latest stock options–momentum trading or buy and hold strategies—don’t waste your time or money. Just like the old, unstable Microsoft operating systems that never really seemed to improve, only the numbers changed. The latest stock trading strategies are just the 3.0 versions of what time has proven repeatedly doesn’t work. Isaac Newton in the 1700s recognized this, which is why after losing a significant portion of his wealth during the South Sea bubble, he stated, “I can calculate the motion of heavenly bodies, but not the [financial] madness of people.” Newton, who is called the Father of the Scientific Method among Europeans, never invested in stocks again. He may have resorted to alchemy, but Newton wasn’t crazy. Insanity is defined as doing the same thing repeatedly expecting a different result.
Learn what works
Rather than continuing to gamble with your money, hoping to hit your numbers, ISN’T IT TIME TO DO WHAT ACTUALLY WORKS? Change how you think. Having the correct rationale is the core of my alternative. I HAD TO LEARN TO IGNORE KEY PRINCIPLES THAT I WAS TAUGHT AS A REGISTERED FINANCIAL ADVISOR, CERTIFIED PUBLIC ACCOUNTANT, AND PLANNER BEFORE I COULD REALLY HELP MY CLIENTS TO CONSISTENTLY MAKE MONEY INVESTING. Using my easy to understand methodology has allowed me to be correct on housing, banking and so many investment and economic subjects over 15 years that I’ve been called the Einstein of Finance. In seven logical, easy to grasp steps you’ll learn how to value any investment. After a few minutes of reading, you learn what the five investment vehicles are. In one chapter you’ll learn the facts of risk. In three chapters you’ll learn what defines the roles of investors, speculators, and lenders. Unless you like bouncing around in the stock market, you need to learn what the system doesn’t want you to know.
You need to know what YOUR FIVE INVESTMENTS ALTERNATIVES ARE, HOW TO VALUE THEM, AND MANAGE RISK CORRECTLY. If you continue to rely on the same justifications for buying stocks, bonds, and mutual funds, you will continue to get the same results, which is little, nothing, eventual losses, and volatility. Don’t be the next victim of the regulated Ponzi scheme. Be the next investment victor!
Learn everything that you need to know to beat the stock market and live in peace and economic security without the fear of running out of money during retirement because the stock market crashed again.